CREDIT AGREEMENT

          This CREDIT AGREEMENT,  dated as of October 24, 2001, between NATIONAL
HOME HEALTH CARE CORP., a Delaware corporation ("National"),  HEALTH ACQUISITION
CORP.,  a New York  corporation,  NEW ENGLAND  HOME CARE,  INC.,  a  Connecticut
corporation,  ACCREDITED HEALTH SERVICES,  INC., a New Jersey  corporation,  AND
CONNECTICUT  STAFFING WORKS CORP., a Connecticut  corporation  (collectively the
"Operating   Subsidiaries")   (National  and  the  Operating   Subsidiaries  are
collectively  referred to herein as the  "Borrowers"),  and HSBC BANK USA, a New
York banking corporation (the "Bank"),

                              W I T N E S S E T H :

          WHEREAS,  the Borrowers  have requested that the Bank establish in the
Borrowers' favor a revolving credit facility in the maximum  principal amount of
$7,500,000.00; and

          WHEREAS, the Bank is willing to extend such credit to the Borrowers on
and subject to the terms and conditions hereinafter set forth;

          NOW, THEREFORE, in consideration of the premises and the covenants and
agreements  hereinafter  set forth,  the  Borrowers and the Bank hereby agree as
follows:

                             ARTICLE 1. DEFINITIONS

     Section 1.01. Defined Terms: As used in this Agreement, the following terms
shall have the following meanings:

          "Account  Debtor"  shall mean and  include  each  debtor,  customer or
obligor in any way obligated on or in connection with any Account Receivable.

          "Account  Receivable"  shall  mean  any and all  rights  of any of the
Borrowers  to  payment  for  goods  sold or  leased  or for  services  rendered,
including accounts, contract rights,  Health-Care-Insurance Receivables, general
intangibles  and any such right  evidenced  by  chattel  paper,  instruments  or
documents,  whether  due or to become  due and  whether or not the same has been
earned by performance,  and whether now owned or existing or hereafter  acquired
or arising in the future and any proceeds arising therefrom or relating thereto.

          "Aged Accounts  Receivable  Report" shall mean a report that shows and
classifies  all  Accounts  Receivable  by the  time  elapsed  after  the date of
billing.

          "Affiliate" shall mean as to any referenced  Person,  any other Person
(other than a Subsidiary)  which,  directly or indirectly,  is in control of, is
controlled  by, or is under common control with,  such  referenced  Person.  For
purposes of this definition,  "control" of a Person means the power, directly or
indirectly,  to direct or cause the direction of the  management and policies of
such Person, whether by contract or otherwise.

<PAGE>

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

          "Applicable  Rate" shall mean the rate of interest then payable on the
principal  of any Loan,  which may be either a  Revolving  LIBOR  Rate Loan or a
Revolving Prime Rate Loan.

          "Approved  Subordinated  Indebtedness"  shall mean any Indebtedness of
any of the Borrowers  which is  subordinated  to the Obligations and approved by
the Bank pursuant to subordination  agreement in form and substance satisfactory
to the Bank.

          "Assignment of Claims Act" shall mean the Federal Assignment of Claims
Act (31 U.S.C.ss.3727; 41 U.S.C.ss.15), as amended.

          "Borrowing  Base"  shall  mean,  as of any  Borrowing  Date  or  other
applicable  day, an amount  equal to Eighty  (80%)  percent of the net amount of
Eligible Accounts, less the amount of any reserves required by the Bank.

          "Borrowing Base Certificate" shall mean the Borrowing Base Certificate
to be delivered by National  pursuant to this  Agreement,  substantially  in the
form thereof attached hereto as Exhibit C.

          "Borrowing  Date" shall mean,  with  respect to any  Revolving  Credit
Loan, the date on which such Loan is disbursed by the Bank to the Borrowers.

          "Business  Day" shall mean any day other  than a  Saturday,  Sunday or
legal holiday on which banks in New York City are open for business.

          "Capital   Stock"   shall   mean  any  and  all   shares,   interests,
participations or other equivalents  (however  designated) of capital stock of a
corporation,  any and all equivalent  ownership or equity  interests in a Person
(other than a  corporation)  and any and all warrants or options to purchase any
of the foregoing.

          "Capitalized Lease Obligation" shall mean an obligation to pay rent or
other  amounts under any lease of (or other  arrangement  conveying the right to
use) real and/or personal property which obligation is required to be classified
and  accounted  for as a  capitalized  lease  on a  balance  sheet  prepared  in
accordance  with GAAP, and, for purposes  hereof,  the amount of such obligation
shall be the  capitalized  amount  thereof  determined in  accordance  with such
principles.

          "Chief Financial  Officer" shall mean, the Chief Financial  Officer of
National.

          "Closing Date" shall mean October 24, 2001.

          "Code" shall mean the Internal  Revenue Code of 1986,  as amended from
time to time.

          "Collateral"  shall  have the  meaning  ascribed  to that  term in the
Security Agreement.


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<PAGE>

          "Commitment" shall mean the Revolving Credit Loan Commitment.

          "Commitment  Period"  shall mean the  period  from and  including  the
Closing Date to but not  including the  Expiration  Date or such earlier date on
which the Commitment shall terminate as provided herein.

          "Commonly  Controlled  Entity"  shall mean an  entity,  whether or not
incorporated,  which is under  common  control  with the  Borrowers  within  the
meaning  of  Section  4001 of ERISA  or is part of a group  which  includes  the
Borrowers  and which is treated as a single  employer  under  Section 414 of the
Code.

          "Consolidated  Assets"  shall mean at a particular  date,  all amounts
which would, in conformity with GAAP, be included under assets on a consolidated
balance sheet of National and its Subsidiaries as at such date.

          "Consolidated  Liabilities"  shall  mean  at a  particular  date,  all
amounts which would, in conformity with GAAP, be included under liabilities on a
consolidated balance sheet of National and its Subsidiaries as at such date.

          "Contractual  Obligation" shall mean, as to any Person,  any provision
of any security  issued by such Person or of any agreement,  instrument or other
legally  binding  undertaking  to which such Person is a party or by which it or
any material part of its property is bound.

          "Corporate Guarantor" shall mean National HMO (N.Y.) Inc.

          "Default"  shall mean the happening of any of the events  specified in
Section 7.01 hereof,  whether or not any  requirement  for the giving of notice,
the lapse of time, or both, has been satisfied.

          "Default  Rate" as to each Loan shall have the  meanings  ascribed  to
that term in the respective Notes.

          "Dollars" and "$" shall mean, dollars in lawful currency of the United
States of America.

          "Eligible  Account  Receivable"  or  "Eligible  Account" or  "Eligible
Receivable" shall mean an Account Receivable:

               (a) which is not  outstanding  more than one hundred twenty (120)
days past the original invoice date therefor;

               (b) which has arisen in the  ordinary  course of the  originating
Borrower's  business  for  goods  sold or leased or  services  rendered  by such
originating Borrower;


                                       3
<PAGE>

               (c) which was created in compliance in all material respects with
all Requirements of Law applicable to such originating Borrower;

               (d)  with  respect  to which  all  material  consents,  licenses,
approvals or  authorizations  of, or  registrations  or  declarations  with, any
Governmental  Authority  required  to be  obtained,  effected  or  given by such
originating  Borrower in connection with the creation of such Account Receivable
have been duly  obtained,  effected or given and are in full force and effect at
such time;

               (e) which is the legal,  valid and binding payment  obligation of
the Account Debtor  enforceable  against such Account Debtor in accordance  with
its terms;

               (f) which is not  subject  to any right of  rescission,  set-off,
counterclaim  or any other  defense  (including,  without  limitation,  defenses
arising out of violations of usury laws) of the Account Debtor;

               (g) as to which the Account Debtor of such Account  Receivable is
not more than one hundred  twenty (120) days past due in payment  after the date
of the creation of the original invoice related thereto on more than fifty (50%)
percent of the aggregate  amount of such Account  Debtor's  Accounts  Receivable
obligations owed to the Borrowers;

               (h) which is  denominated  in Dollars and payable only in Dollars
and only in the United States of America or which is  denominated  in such other
form of foreign currency as approved by the Bank;

               (i)  which,  if the  Account  Debtor  is a foreign  Person,  such
Person's  obligations under such Account Receivable to the Borrowers are secured
by a letter of credit issued by a financial  institution  acceptable to the Bank
or upon such other acceptance terms approved by the Bank;

               (j) as to which  the  Account  Debtor  is not an  Affiliate  or a
creditor of any of the Borrowers;

               (k) as to which,  to the  Knowledge  of  Borrowers,  the  Account
Debtor  has not taken any of the  actions or  suffered  any of the events of the
kind described in Section 7.01(g);

               (l) which is owned solely by the Borrowers  free and clear of all
Liens or other  rights or claims of any other Person  (except  liens in favor of
the Bank under the Loan Documents and also liens allowed under Section 6.03);

               (m)  which,  subject  to the  Federal  Anti-Assignment  Laws  and
similar state  Requirements of Law and the UCC, are subject to a perfected first
priority  security  interest  in  favor  of the Bank  pursuant  to the  Security
Agreement;


                                       4
<PAGE>

               (n) which, subject to the Federal  Anti-Assignment Laws and other
similar state  Requirements of Law, is freely assignable by the Borrowers to the
Bank; and

               (o) which has not been billed in advance or repaid.

          "Environmental Laws" shall mean any and all applicable Federal, state,
local or municipal  laws,  rules,  orders,  regulations,  statutes,  ordinances,
codes, decrees, requirements of any Governmental Authority or other Requirements
of Law (including common law) regulating,  relating to or imposing  liability or
standards of conduct  concerning  protection of human health or the environment,
as now or may at any time hereafter be in effect.

          "ERISA"  shall mean the  Employee  Retirement  Income  Security Act of
1974, as amended from time to time.

          "Event of Default"  shall mean any of the events  specified in Section
7.01, provided that any requirement for the giving of notice, the lapse of time,
or both, or any other condition, has been satisfied.

          "Expiration Date" as to Revolving LIBOR Rate Loans and Revolving Prime
Rate Loans shall mean  Twenty-Four (24) months from the Closing Date which shall
be the date on which the Commitment expires.

          "Federal   Anti-Assignment   Laws"  shall  mean,   collectively,   the
Assignment  of Claims Act and each other United  States law,  rule or regulation
(including,  without limitation,  the Medicare Act, the social Security Act, the
Civilian Health and Medical  Program of the Uniformed  Services and the Civilian
Health and Medical Program of the Veterans'  Administration  ) applicable to the
effectiveness  and   enforceability   of  collateral   assignments  of  Accounts
Receivable payable, directly or indirectly, by a Governmental Authority.

          "Fiscal Year" shall mean the fiscal year of the Borrowers  ending July
31.

          "GAAP" shall mean  generally  accepted  accounting  principles  in the
United States of America in effect from time to time, as more fully described in
Section 1.02.

          "Governmental  Authority"  shall mean, any nation or  government,  any
state  or  other  political   subdivision  thereof  and  any  entity  exercising
executive,  legislative,  judicial, regulatory or administrative functions of or
pertaining to government.

          "Guarantee Obligation" shall mean, as to any Person (the "guaranteeing
person"),  any obligation of (a) the  guaranteeing  person or (b) another Person
(including,  without limitation,  any bank under any letter of credit) to induce
the  creation  of which the  guaranteeing  person  has  issued a  reimbursement,
counterindemnity or similar obligation, in either case guaranteeing or in effect
guaranteeing  any  Indebtedness,  leases,  dividends or other  obligations  (the
"primary  obligations") of any other third Person (the "primary obligor") in any
manner,  whether  directly or indirectly,  including,  without  limitation,  any
obligation of the guaranteeing person, whether or not contingent (i) to purchase


                                       5
<PAGE>

any such  primary  obligation  or any property  constituting  direct or indirect
security  therefor,  (ii) to advance  or supply  funds (1) for the  purchase  or
payment of any such primary  obligation  or (2) to maintain  working  capital or
equity capital of the primary  obligor or otherwise to maintain the net worth or
solvency  of the primary  obligor,  (iii) to purchase  property,  securities  or
services  primarily  for the purpose of assuring  the owner of any such  primary
obligation of the ability of the primary obligor to make payment of such primary
obligation  other than in the  ordinary  course of  Borrowers'  business or (iv)
otherwise to assure or hold  harmless  the owner of any such primary  obligation
against loss in respect  thereof;  provided,  however,  that the term  Guarantee
Obligation  shall  not  include  endorsements  of  instruments  for  deposit  or
collection  in the  ordinary  course of  business.  The amount of any  Guarantee
Obligation of any  guaranteeing  person shall be deemed to be the greater of (a)
an amount equal to the stated or determinable  amount of the primary  obligation
in respect of which such Guarantee  Obligation is made or (b) the maximum amount
for which such  guaranteeing  person may be liable  pursuant to the terms of the
instrument embodying such Guarantee  Obligation,  unless such primary obligation
and the maximum amount for which such guaranteeing  person may be liable are not
stated or  determinable,  in which case the amount of such Guarantee  Obligation
shall be such guaranteeing person's maximum reasonably  anticipated liability in
respect thereof as determined by the Chief Financial Officer in good faith.

          "Health-Care-Insurance  Receivables"  shall  mean any  interest  in or
claim  under a policy of  insurance  that is a right in favor of National or any
Operating  Subsidiary to payment of a monetary  obligation for health-care goods
or services provided.

          "Indebtedness"  of  any  Person  at  any  date,  shall  mean  (a)  all
indebtedness  of such Person for  borrowed  money or for the  deferred  purchase
price of  property or services  (other  than trade  liabilities  incurred in the
ordinary  course of  business  and  payable in  accordance  with the  Borrowers'
customary practices as currently conducted),  (b) any other indebtedness of such
Person which is evidenced by a note, bond, debenture or similar instrument,  (c)
all  obligations of such Person under  Capitalized  Lease  Obligations,  (d) all
obligations of such Person in respect of bank acceptances  issued or created for
the  account of such Person and (e) all  liabilities  secured by any Lien on any
property  owned by such  Person  even  though  such  Person  has not  assumed or
otherwise become liable for the payment thereof.

          "Insolvency"  shall mean, with respect to any Multiemployer  Plan, the
condition  that such Plan is  insolvent  within the  meaning of Section  4245 of
ERISA.

          "Insolvent" shall pertain to a condition of Insolvency.

          "Interest  Payment  Date" shall  mean,  as to any Loan,  the  interest
payment dates as indicated on the Notes.

          "Interest  Period"  shall  mean  the  applicable  interest  period  as
indicated on the Revolving LIBOR Rate Note(s), except as modified herein. If any
Interest  Period  would end on a day which  shall not be a  Business  Day,  such
Interest  Period  shall be extended to the next  succeeding  Business Day unless
such next  succeeding  Business Day would fall in the next  calendar  month,  in
which case such Interest Period shall end on the first  preceding  Business Day.
No Interest  Period with respect to any


                                       6
<PAGE>

Loan shall end later than the  Expiration  Date.  Interest shall accrue from and
including  the first day of an Interest  Period to but excluding the last day of
such Interest Period or, if earlier, the date of payment.

          "Knowledge  of  Borrowers"  shall  mean the  actual  knowledge  of any
principal  officer  of  National  and of  any  principal  officer  of any of the
Operating Subsidiaries, without conducting or requiring any agents of any of the
Borrowers to conduct an  independent  review,  examination or  investigation  in
order to  establish  the basis for or the  accuracy  of the  representation  and
warranty made by the Borrowers.

          "LIBOR" shall have the  definition  set forth in the  Revolving  LIBOR
Rate Note as to Revolving LIBOR Rate Loans.

          "Lien" shall mean any  mortgage,  pledge,  hypothecation,  assignment,
deposit  arrangement,  encumbrance,  lien (statutory or other),  charge or other
security  interest or any  preference,  priority or other security  agreement or
preferential  arrangement of any kind or nature whatsoever  (including,  without
limitation,  any  conditional  sale or other title  retention  agreement and any
Capitalized  Lease Obligation  having  substantially the same economic effect as
any of the foregoing).

          "Loan  Documents"  shall mean this Agreement,  the Notes, the Security
Agreement  and  any  and all  other  agreements  or  documents  executed  by the
Borrowers and/or any other Person and by or in favor of the Bank which evidence,
guarantee or secure, in whole or in part, the Obligations.

          "Loans" shall mean the Revolving Credit Loans.

          "Material  Adverse Effect" shall mean a material adverse effect on (a)
the  business,  operations,  property,  or financial  condition of the Borrowers
taken as a whole,  (b) the  ability of the  Borrowers  to  perform  any of their
payment  obligations  under any Loan Document or to perform their other material
obligations under this Agreement,  the Notes, or any of the other Loan Documents
or (c) the validity or  enforceability  of this Agreement,  the Notes, or any of
the other Loan  Documents  or the rights or  remedies of the Bank  hereunder  or
thereunder.

          "Materials  of  Environmental  Concern"  shall  mean any  gasoline  or
petroleum (including crude oil or any fraction thereof) or petroleum products or
any hazardous or toxic substances,  materials or wastes, defined or regulated as
such in or under any Environmental Law, including, without limitation, asbestos,
polychlorinated biphenyls and urea-formaldehyde insulation.

          "Multiemployer  Plan" shall mean a Plan which is a multiemployer  plan
as defined in Section 4001(a)(3) of ERISA.

          "Net Income"  shall mean the  consolidated  net income of National and
its  Subsidiaries as determined in accordance with GAAP. "Net Loss" shall have a
correlative meaning.

          "Notes" shall mean any Revolving Credit Loan Note.


                                       7
<PAGE>

          "Obligations"  shall  have the  meaning  ascribed  to that term in the
Security Agreement.

          "Operating  Leases"  shall  mean  operating  leases as  determined  in
accordance with GAAP.

          "PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA, or any successor thereto.

          "Person"  shall  mean (i) any  individual,  corporation,  partnership,
limited liability company, joint venture, trust,  unincorporated organization or
any other judicial entity or (ii) any other entity, body, organization or group.

          "Plan" shall mean at a  particular  time,  any  employee  benefit plan
which is covered by ERISA and in  respect of which the  Borrowers  or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an  "employer" as defined in Section 3(5)
of ERISA.

          "Prime  Rate"  shall  mean the rate of  interest  per  annum  publicly
announced  from time to time by the Bank as its prime rate  (each  change in the
Prime Rate to be effective on the date such change is publicly announced).

          "Regulation  U" shall mean  Regulation  U of the Board of Governors of
the Federal Reserve System as in effect from time to time.

          "Reorganization"  shall mean, with respect to any Multiemployer  Plan,
the condition that such plan is in reorganization  within the meaning of Section
4241 of ERISA.

          "Reportable  Event"  shall mean any of the events set forth in Section
4043(b)  of ERISA,  other  than  those  events as to which the thirty day notice
period is waived under  subsections  .13, .14, .16, .18, .19 or .20 of PBGC Reg.
ss.2615.

          "Reporting   Accountants"  shall  mean  a  firm  of  certified  public
accountants retained by the Borrowers and reasonably  acceptable to the Bank. As
of the Closing Date, Bank confirms the  acceptability of BDO Seidman,  LLP. Bank
reserves the right to require, in its reasonable discretion, a different firm of
certified public accountants in the future.

          "Requirements of Law" shall mean, as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of such
Person,  and  any  law,  treaty,  rule  or  regulation  or  determination  of an
arbitrator or a court or other Governmental  Authority,  in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.

          "Responsible  Officer" shall mean the chief  executive  officer or the
president or the Chief Financial Officer of National.


                                       8
<PAGE>

          "Revolving  Credit Loan" shall mean any  Revolving  LIBOR Rate Loan or
Revolving Prime Rate Loan to the Borrowers made pursuant to Section 2.01.

          "Revolving  Credit Loan Commitment" shall have the meaning ascribed to
said term in Section 2.01 herein.

          "Revolving  Credit Loan Note" shall mean any Revolving LIBOR Rate Note
or any Revolving Prime Rate Note.

          "Revolving  LIBOR Rate" shall mean for any day, a rate per annum equal
to, at the Borrowers' option, one (1), two (2) or three (3) month LIBOR plus Two
Hundred Twenty Five (225) basis points.

          "Revolving LIBOR Rate Loans" shall mean Loans for which the Applicable
Rate is the Revolving LIBOR Rate.

          "Revolving LIBOR Rate Note" shall mean the promissory note in the form
thereof  attached  hereto as Exhibit A1,  made and  delivered  by the  Borrowers
pursuant to Section 2.02(b).

          "Revolving Prime Rate" shall mean the rate announced by Bank from time
to time as its Prime Rate as is in effect on such day for  Revolving  Prime Rate
Loans.

          "Revolving Prime Rate Loans" shall mean Loans for which the Applicable
Rate is the Revolving Prime Rate.

          "Revolving Prime Rate Note" shall mean the promissory note in the form
thereof  attached  hereto as  Exhibit  A, made and  delivered  by the  Borrowers
pursuant to Section 2.02(b).

          "Security  Agreement"  shall mean the  Security  Agreement in the form
thereof attached hereto as Exhibit B, executed and delivered by the Borrowers in
favor of the Bank with respect to the Collateral pursuant to Section 4.01(f).

          "Single  Employer  Plan" shall mean any Plan which is covered by Title
IV of ERISA, but which is not a Multiemployer Plan.

          "Subsidiary"  shall mean, with respect to any Person, any other Person
(a) of which the shares of stock or other  ownership  interests  having ordinary
voting power  (other than stock or such other  ownership  interests  having such
power only by reason of the happening of a  contingency)  to elect a majority of
the board of  directors  or other  managers of such other Person are at the time
owned,  or  the  management  of  which  is  otherwise  controlled,  directly  or
indirectly through one or more intermediaries,  or both, by such Person, and (b)
whose accounts are or are required to be  consolidated  with the accounts of the
Borrowers in accordance with GAAP. Unless otherwise qualified, all references to
a  "Subsidiary"  or  to  "Subsidiaries"  in  this  Agreement  shall  refer  to a
Subsidiary or Subsidiaries of one or more of the Borrowers.


                                       9
<PAGE>

          "SunStar Litigation" shall mean that certain litigation encaptioned In
Re SunStar Healthcare Securities Litigation,  presently pending in Federal court
in Florida, and related litigation, all as described in the National's Form 10-Q
for its fiscal quarter ended April 30, 2001.

          "Tangible  Stockholders' Equity" shall mean Total Stockholders' Equity
less total intangible Consolidated Assets.

          "Total Senior Liabilities" shall mean all liabilities  excluding those
subordinated to the Bank.

          "Total  Stockholders'  Equity" shall mean the difference between total
Consolidated Assets and total Consolidated Liabilities.

          "UCC" shall mean the Uniform Commercial Code as in effect from time to
time in the  State of  Connecticut,  the  State of New York or the  State of New
Jersey, as applicable.

     Section 1.02. Other Definitional Provisions: (a) Unless otherwise specified
therein,  all terms defined in this Agreement  shall have such defined  meanings
when used in the Notes,  or any  certificate or other document made or delivered
pursuant hereto.

          (b) Except as otherwise herein specifically provided,  each accounting
term used herein  shall have the meaning  given to it under GAAP.  "GAAP"  shall
mean those  generally  accepted  accounting  principles and practices  which are
recognized  as such by the American  Institute of Certified  Public  Accountants
acting  through the Financial  Accounting  Standards  Board  ("FASB") or through
other  appropriate  boards or  committees  thereof  and  which are  consistently
applied for all periods so as to properly reflect the financial  condition,  and
the results of operations and changes in financial  position,  of the Borrowers,
except that any accounting  principle or practice  required to be changed by the
FASB (or other  appropriate board or committee of the FASB) in order to continue
as a GAAP principle or practice may be so changed.  Any dispute or  disagreement
between  the  Borrowers  and the  Bank  relating  to the  determination  of GAAP
principles shall, in the absence of manifest error, be conclusively resolved for
all purposes hereof by the written opinion with respect thereto delivered to the
Bank by the Reporting Accountants.

          (c) The words "hereof",  "herein" and "hereunder" and words of similar
import when used in this Agreement  shall refer to this Agreement as a whole and
not to any  particular  provision  of  this  Agreement,  and  Article,  Section,
Subsection,  Schedule  and  Exhibit  references  are to  this  Agreement  unless
otherwise specified.

          (d) The  meanings  given  to terms  defined  herein  shall be  equally
applicable to both the singular and plural forms of such terms.

          (e) For purposes of this  Agreement,  each of the following  terms has
the meaning given it for purposes of Article 9 of the Uniform Commercial Code of
the State of New York as in effect on the date of this Agreement:


                                       10
<PAGE>

                    (i) Chattel Paper;
                    (ii) Consumer Goods;
                    (iii) Deposit Account;
                    (iv) Document;
                    (v) Farm Product;
                    (vi) Fixture;
                    (vii) Instrument;
                    (viii) Proceeds; and
                    (ix) Products.


                                       11
<PAGE>

                           ARTICLE 2. CREDIT FACILITY

          Section 2.01. Commitment:

          Revolving  Credit  Loan  Commitment:  During  the  Commitment  Period,
subject to the terms and  conditions  hereof,  the Bank agrees to make Revolving
Credit Loans to the Borrowers in U.S. Dollars from time to time for the purposes
hereinafter set forth;  provided that the aggregate principal amount of Loans of
the Bank  outstanding  at any time  shall  not  exceed  the  lesser of (i) SEVEN
MILLION  FIVE  HUNDRED  THOUSAND  U.S.  DOLLARS  (US  $7,500,000),  or (ii)  the
Borrowing Base (the "Revolving Credit Loan Commitment").  Revolving Credit Loans
in each case may consist of either Revolving Prime Rate Loans or Revolving LIBOR
Rate Loans,  as the Borrowers may request,  and may be repaid and re-borrowed in
accordance with the provisions hereof.

          Section 2.02. Method of Borrowing Revolving Credit Loans:

          (a) Borrowing Base for Revolving  Credit Loans: In order to permit the
Bank to determine the Borrowing  Base in connection  with any proposed loan, and
to monitor compliance with subsection (c) and (e) below,  National shall deliver
Borrowing Base Certificates to the Bank as follows:

               (i) at least three (3) Business  Days prior to the Closing  Date,
if any loan is to be made on the Closing Date;

               (ii) as required under Section 5.01(a); and

               (iii) at least (3) Business Days prior to the making if any other
Loan,  unless a  Borrowing  Base  Certificate  applicable  for use at that  time
already has been delivered to the Bank.

Each Borrowing Base Certificate delivered under clause (i) or (ii) shall certify
the Eligible Accounts as of the last day of the immediately  preceding  calendar
month. If delivered  under clause (iii), it shall certify the Eligible  Accounts
as of the last day of the immediately preceding month to the extent practicable;
otherwise,  as of the  last day of the  second  immediately  preceding  calendar
month.   Notwithstanding  the  foregoing,  Bank  may  accept  a  Borrowing  Base
Certificate  for the second  immediately  calendar  month only if the  requested
borrowing occurs within the first nineteen (19) days of the month. Any borrowing
requested  on or after the  twentieth  (20th)  day of any month  will  require a
Borrowing  Base  Certificate  certified  to the  last  day  of  the  immediately
preceding  month. . Each Borrowing  Base  Certificate  shall be certified by the
Chief Financial Officer or another  Responsible Officer and shall be in the form
thereof attached hereto as Exhibit C.

          (b)  Notes  for  Revolving  Credit  Loans:  The  Indebtedness  of  the
Borrowers to the Bank under the  Revolving  Credit Loans shall be evidenced by a
promissory  note of the  Borrowers  substantially  in the form thereof  attached
hereto as Exhibit A in the case of Revolving  Prime Rate Loans, or Exhibit A1 in
the case of Revolving  LIBOR Rate Loans,  payable to the order of the Bank.


                                       12
<PAGE>

The aggregate amount of Revolving Credit Loans  outstanding shall not exceed the
Revolving Loan Commitment.  The Bank is hereby authorized to record the date and
amount  of each  Revolving  Credit  Loan  made by the  Bank,  each  continuation
thereof,  and the date and amount of each  payment or  prepayment  of  principal
thereof,  on the schedule  annexed to and  constituting a part of the applicable
Revolving  Credit Loan Note and/or recorded in the Bank's internal  system,  and
any such  recordation,  absent  manifest  error,  shall  constitute  prima facie
evidence of the accuracy of the information so recorded.

          (c) Procedure for Borrowing  Revolving Credit Loans: The Borrowers may
borrow under the  Commitment  during the  Commitment  Period on any Business Day
loan  amounts  bearing  interest  based on the  Revolving  LIBOR Rate in minimum
amounts of $250,000.00 and in integral  multiples of $100,000.00 for advances in
excess  thereof and for loan amounts  bearing  interest  based on the  Revolving
Prime Rate in minimum  amounts  of  $100,000.00  and in  integral  multiples  of
$100,000.00 for advances in excess thereof.

               (i) With  respect to any  Revolving  Prime Rate Loans,  Borrowers
shall give irrevocable notice to the Bank via facsimile  transmission,  by 11 am
New York City time on the same Business Day of the requested Loan.

               (ii) With respect to any  Revolving  LIBOR Rate Loans,  Borrowers
shall give  irrevocable  notice to the Bank via facsimile  transmission by 11 am
New York City time on the Business  Day which is at least two (2) Business  Days
prior to the requested  borrowing date specifying (A) the amount of the Loan (B)
the LIBOR Interest Period and (C) the requested borrowing date.

               (iii)  Borrowers  may change any  Revolving  Prime Rate Loan to a
Revolving  LIBOR  Rate Loan by giving  Bank  irrevocable  notice  via  facsimile
transmission  by 11 am New York City time,  at least two (2) Business Days prior
to the requested interest rate change date specifying the LIBOR Interest Period.
Borrowers may change the LIBOR Interest Period for any Revolving LIBOR Rate Loan
by giving irrevocable notice via facsimile transmission to the Bank by 11 am New
York City  time,  at lease two (2)  Business  Days  prior to the end of the then
applicable LIBOR Interest Period specifying the new LIBOR Interest Period.

               (iv)  Notices  under  this  subsection  (c ) shall  be  given  by
National on behalf of the Borrowers,  and shall be given by the Chief  Financial
Officer or another Responsible Officer.

          (d) Optional Prepayments of Revolving Credit Loans: The Borrowers may,
at any time and from time to time,  prepay the Revolving  Credit Loans, in whole
or in part, in accordance with the Notes.

          (e) Mandatory  Prepayments of Revolving Credit Loans: In the event the
aggregate  outstanding  principal  amount of all Revolving Credit Loans shall at
any time be in excess of the Borrowing Base at such time,  which  Borrowing Base
shall be calculated by reference to the then-current Borrowing Base Certificate,
the Borrowers  shall (a) within two (2) Business Days of the Borrowers  becoming
aware of such  event or (b) upon  demand  by the  Bank in  writing,  prepay  the


                                       13
<PAGE>

principal  amount of the Revolving  Credit Loans in an aggregate amount at least
equal to such excess, together with accrued interest on the amount so prepaid to
the date of such prepayment.

          (f) Prepayment/Accrued Interest on Revolving Credit Loans:

          If the Borrowers shall make an optional or mandatory prepayment of any
Revolving Credit Loan in whole or in part, the following shall apply:

               (i) in connection with prepayments of Revolving Prime Rate Loans,
the Borrowers shall not be required to pay any prepayment fee or penalty;

               (ii) in  connection  with  prepayments  of  Revolving  LIBOR Rate
Loans,  the  Borrowers  shall  not be  required  to pay any  prepayment  fees or
penalties other than as set forth in the Revolving LIBOR Rate Note; and

               (iii) the Borrowers shall pay interest accrued on the amount paid
at the Applicable Rate to the date payment is received by the Bank.

          (g) Interest Rates and Payment Dates for Revolving Credit Loans:

               (i) Each Revolving  Prime Rate Loan shall bear interest at a rate
per annum equal to the  Revolving  Prime Rate.  Each  Revolving  LIBOR Rate Loan
shall bear interest at a rate per annum equal to the Revolving LIBOR Rate.

               (ii)  Interest on all  Revolving  Prime Rate Loans and  Revolving
LIBOR Rate Loans shall be payable in arrears on each Interest  Payment Date, and
on the Expiration  Date, if the same is not an Interest Payment Date, or if said
dates are not Business  Days, on the next Business Day  immediately  thereafter.
The principal of all Revolving  Prime Rate Loans and Revolving  LIBOR Rate Loans
shall be  payable  on the  Expiration  Date or on the next  Business  Day if the
Expiration Date is not a Business Day.

          (h) Nature of Borrowings as to Revolving  Credit Loans:  The Borrowers
and the Bank agree that the  Revolving  Credit  Loans  shall be  categorized  in
accordance with GAAP and the Borrowers shall cause the Revolving Credit Loans to
be so characterized on the financial statements of the Borrowers.


                                       14
<PAGE>

          Section 2.03. Terms Applicable to all Loans:

          (a) Interest Rate: Each  determination of an interest rate by the Bank
pursuant to any provision of this  Agreement  shall be conclusive and binding on
the Borrowers in the absence of manifest error.

          (b) Requirements of Law:

               (i)  Increased  Costs:  If the  adoption  of or any change in any
Requirement of Law or in the interpretation or application thereof or compliance
by the Bank with any  request or  directive  (whether or not having the force of
law) from any central bank or other  Governmental  Authority made  subsequent to
the date hereof shall  subject the Bank to any tax of any kind  whatsoever  with
respect  to this  Agreement,  the  Notes,  or change  the basis of  taxation  of
payments to the Bank in respect  thereof  (except for changes in the rate of tax
on the overall net income of the Bank), or shall impose any other condition upon
the Bank;  and the result of any of the foregoing is to increase the cost to the
Bank, by an amount which the Bank deems to be material,  then, in any such case,
the Borrowers shall pay to the Bank, within five (5) Business Days after written
demand  (and  receipt  of the  certificate  described  below)  and to the extent
permitted by applicable law, any additional  amounts necessary to compensate the
Bank for such increased cost or reduced amount  receivable.  If the Bank becomes
entitled to claim any additional  amounts pursuant to this subsection,  it shall
promptly  notify the  Borrowers of the event by reason of which it has become so
entitled.  A  certificate  providing  reasonable  detail of the  amount  due and
reasons  therefor  as  to  any  additional  amounts  payable  pursuant  to  this
subsection  submitted by the Bank to the  Borrowers,  shall be conclusive in the
absence of manifest  error.  This covenant shall survive the termination of this
Agreement and the payment of the Notes and all other amounts payable hereunder.

               (ii) Capital Adequacy: If the Bank shall have determined that the
adoption of or any change in any Requirement of Law regarding  capital  adequacy
or in the interpretation or application thereof or compliance by the Bank or any
corporation controlling the Bank with any request or directive regarding capital
adequacy  (whether  or not  having  the  force  of law)  from  any  Governmental
Authority  made  subsequent  to the date hereof does or shall have the effect of
reducing  the rate of return on the  Bank's or such  corporation's  capital as a
consequence of its obligations hereunder to a level below that which the Bank or
such corporation  could have achieved but for such change or compliance  (taking
into  consideration  the Bank's or such  corporation's  policies with respect to
capital  adequacy) by an amount deemed by the Bank in its reasonable  discretion
to be  material,  then from time to time,  after  submission  by the Bank to the
Borrowers of a written request therefor together with a certificate providing in
reasonable detail the amount due and the reasons  therefor,  the Borrowers shall
pay to the Bank such  additional  amount or amounts as will  compensate the Bank
for  such  reduction.  This  covenant  shall  survive  the  termination  of this
Agreement and the payment of the Notes and all other amounts payable hereunder.

          (c) Funds/Manner of Payment:  (i) Unless otherwise  specified  herein,
each payment and prepayment of principal and interest on the Notes shall be made
by the Borrowers  not later than 12:00 noon,  New York City time, on the date on
which it is  payable  in  Federal or other


                                       15
<PAGE>

immediately  available funds. Said payment will be automatically  charged by the
Bank from the operating account described in Section 5.13 herein.

          (d) Prepayment Defined:  For purposes of this Agreement,  a prepayment
shall include any payment or other reduction of the balance due under the Notes,
regardless  of whether  such  payment or other  reduction  (a) is  voluntary  or
involuntary,  (b) results from the  acceleration of the Obligations  pursuant to
the Loan  Documents,  (c) is made by the  Borrowers  or any  other  Person,  (d)
results from the Bank's  receipt or  collection  of proceeds of the  Collateral,
including insurance proceeds or condemnation awards, (e) results from the Bank's
exercise  of any right of  setoff,  and/or (f) is made  during  any  bankruptcy,
insolvency or similar proceeding under federal or state law, or is made pursuant
to any plan of reorganization or liquidation.

          (e) Late  Charge:  Should any  installment  due under the Notes not be
paid on its due date,  the Borrowers  shall pay to the Bank a late charge as set
forth in the applicable Note.

          (f) Default Rate: Upon the occurrence and during the continuance of an
Event of  Default,  the Loans shall bear  interest at the Default  Rate from the
date of such Event of Default until the same shall be cured, and both before and
after the entry of any judgment hereon.

          (g)  Availability  Fee:  Borrowers shall pay to the Bank, on the first
day of each calendar  quarter,  an availability fee equal to one quarter percent
(0.25%) per annum on the average daily committed  available  principal under the
Commitment for the preceding calendar quarter or portion thereof.

                   ARTICLE 3. REPRESENTATIONS AND WARRANTIES.

     To induce the Bank to enter into this Agreement and to make the Loans,  the
Borrowers hereby represent and warrant to the Bank that:

          Section 3.01. Financial Condition:  The annual consolidated  financial
statements  of National and its  Subsidiaries  as of July 31, 2000,  prepared by
National,  copies of which have heretofore  been furnished to the Bank,  present
fairly the  financial  condition  of National  and its  Subsidiaries  as at such
dates, and the results of their  consolidated  operations and their consolidated
cash flows for the periods then ended. All such financial statements,  including
any related  schedules and notes thereto,  have been prepared in accordance with
GAAP applied consistently throughout the periods involved (except as approved by
the  accountants who audited such  financials or a Responsible  Officer,  as the
case may be, and as disclosed  therein).  Except as set forth in Schedule  6.04,
the Borrowers did not have, at the date of the most recent  financial  statement
referred to above, any material Guarantee  Obligation,  contingent  liability or
liability for taxes, or any material  long-term  lease or long-term  commitment,
which is not  reflected in the  foregoing  statements  or in the notes  thereto.
During the period from July 31, 2000 to and including the Closing Date there has
been no sale,  transfer or other  disposition  by the  Borrowers of any material
part of their  business or property and no purchase or other  acquisition of any
business or property  (including any Capital Stock of any other Person) material
in relation to the financial condition of the Borrowers at July 31, 2000, except
as disclosed in National's  Quarterly  Report on Form 10-Q for the quarter ended
April 30, 2001.


                                       16
<PAGE>

          Section  3.02.  No  Change:  Except  to the  extent  disclosed  by the
Borrowers to the Bank on or before the date hereof,  since July,  2000 there has
been no  development  or event which has had or is  reasonably  likely to have a
Material Adverse Effect.

          Section 3.03. Corporate  Existence/Compliance  with Law: The Borrowers
(a) are duly organized,  validly existing and in good standing under the laws of
the respective states of their  incorporation,  (b) have the corporate power and
authority,  and the legal right, to own and operate their property, to lease the
property  they  operate as lessee and to conduct the  business in which they are
currently engaged,  (c) are duly qualified as a foreign  corporation and in good
standing  under the laws of each  jurisdiction  where the  failure to so qualify
would  have a  Material  Adverse  Effect,  and (d) are in  compliance  with  all
Requirements  of Law except to the extent that the  failure to comply  therewith
would not, in the aggregate, have a Material Adverse Effect.

          Section 3.04. Corporate  Power/Authorization/Enforceable  Obligations:
The Borrowers have the corporate  power and authority,  and the legal right,  to
make,  deliver and perform the Loan Documents,  to borrow hereunder and to grant
the Liens on the Collateral as provided in the Security Agreement. The Borrowers
have taken all necessary  corporate  action to authorize  the  borrowings on the
terms and conditions of this Agreement,  the Notes and the other Loan Documents.
The  Borrowers  have  taken all  necessary  corporate  action to  authorize  the
execution, delivery and performance of the Loan Documents and to grant the Liens
provided  for in the  Security  Agreement.  Other than  pursuant  to the Federal
Anti-Assignment  Laws and similar state Requirements of Law, no other consent or
authorization  of, filing with,  notice to or other act by or in respect of, any
Governmental Authority or any other Person (including,  without limitation,  any
stockholder or creditor of any of the Borrowers) is required in connection  with
the borrowings hereunder or with the execution, delivery, performance,  validity
or enforceability  of this Agreement,  or the Notes, or the other Loan Documents
executed by the Borrowers (other than the filing of financing  statements in the
jurisdictions  set forth on  Schedule  3.17  necessary  to  perfect  the  Bank's
security  interest in the  Collateral).  This Agreement has been, and the Notes,
and  other  Loan  Documents,  have  been or will be,  as the  case may be,  duly
executed and delivered on behalf of the Borrowers.  This Agreement  constitutes,
and the Notes,  and the other Loan  Documents  constitute  or when  executed and
delivered  will  constitute,  as the case may be, the legal,  valid and  binding
obligation  of the  Borrowers,  enforceable  against the Borrowers in accordance
with  their  respective  terms,  except  as  enforceability  may be  limited  by
applicable bankruptcy,  insolvency,  reorganization,  moratorium or similar laws
affecting  the  enforcement  of  creditors'  rights  generally  and  by  general
equitable  principles (whether enforcement is sought by proceedings in equity or
at law) and the Federal  Anti-Assignment  Laws and similar state Requirements of
Law.

          Section 3.05. No Legal Bar: The execution, delivery and performance of
this Agreement,  the Notes,  and the other Loan Documents by the Borrowers,  the
borrowings  hereunder  and the use of the proceeds  thereof will not violate any
Requirements of Law or any Contractual  Obligation of the Borrowers and will not
result in, or require,  the creation or imposition of any Lien (other than under
the Security  Agreement) on any of their properties or revenues  pursuant to any
such Requirements of Law or Contractual Obligation that is reasonably likely to,
in the aggregate, have a Material Adverse Effect.


                                       17
<PAGE>

          Section 3.06. No Material Litigation: No litigation,  investigation or
proceeding of or before any arbitrator or Governmental  Authority is pending or,
to the Knowledge of Borrowers, threatened by or against the Borrowers or against
any of their  properties  or  revenues  which  is  reasonably  likely  to have a
Material Adverse Effect, except as set forth on Schedule 3.06.

          Section  3.07.  No Default:  The Borrowers are not in default under or
with respect to any of their  Contractual  Obligations  in any respect  which is
reasonably  likely to have a  Material  Adverse  Effect.  No Default or Event of
Default has occurred and is continuing.

          Section 3.08.  Ownership of  Property/Liens:  The Borrowers  have good
record and marketable title in fee simple to, or a valid leasehold  interest in,
all their real property,  and good title to, or a valid  leasehold  interest in,
all their  other  property,  and none of such  property  is  subject to any Lien
except as permitted by Section 6.03. No financing  statement or other instrument
or  recordation  covering  all of any  part of the  Collateral  which  has  been
executed  by,  or  with  the  permission  of,  the  Borrowers  is on file in any
recording  office,  except  such as have  been  filed in favor of the  Bank,  or
terminated,  released or assigned in connection herewith or permitted by Section
6.03.

          Section 3.09.  Taxes:  The Borrowers  have filed or caused to be filed
all tax returns which, to the Knowledge of Borrowers,  are required to have been
filed and have  paid all taxes  shown to be due and  payable  beyond  applicable
grace periods on said returns or on any assessments  made against them or any of
their property and all other taxes, fees or other charges imposed on them or any
of their  property  by any  Governmental  Authority  (other  than any amount the
validity of which is  currently  being  contested  in good faith by  appropriate
proceedings and with respect to which reserves in conformity with GAAP have been
provided on the books of the Borrowers); no tax Lien has been filed, and, to the
Knowledge of  Borrowers,  no claim is being  asserted,  with respect to any such
tax, fee or other charge.

          Section  3.10.  Federal  Regulations:  No part of the  proceeds of any
Loans will be used for  "purchasing" or "carrying" any "margin stock" within the
respective  meanings of each of the quoted  terms under  Regulation U or for any
purpose which violates the provisions of any of the Regulations of such Board of
Governors including,  but not limited to, Regulations T, U or X. If requested by
the Bank,  the  Borrowers  will furnish to the Bank a statement to the foregoing
effect in conformity  with the  requirements  of FR Form U-1 referred to in said
Regulation U.

          Section 3.11.  ERISA:  Neither a Reportable  Event nor an "accumulated
funding  deficiency"  (within  the meaning of Section 412 of the Code or Section
302 of ERISA) has  occurred  during the  five-year  period  prior to the date on
which this  representation  is made or deemed made with respect to any Plan, and
each Plan has complied in all material  respects with the applicable  provisions
of ERISA and the Code. No  termination  of a Single  Employer Plan has occurred,
and no Lien in favor of the PBGC or a Plan has  arisen,  during  such  five-year
period.  The present value of all accrued  benefits  under each Single  Employer
Plan  (based on those  assumptions  used to fund such  Plans) did not, as of the
last annual  valuation  date prior to the date on which this  representation  is
made or deemed  made,  exceed the value of the assets of such Plan  allocable to
such accrued  benefits.  The present value (determined using actuarial and other
assumptions,  which are  reasonable in respect of the


                                       18
<PAGE>

benefits  provided  and the  employees  participating)  of the  liability of the
Borrowers and each Commonly Controlled Entity for post retirement benefits to be
provided  to their  current and former  employees  under Plans which are welfare
benefit plans (as defined in Section 3(1) of ERISA) does not, in the  aggregate,
exceed the assets under all such Plans allocable to such benefits.

          Section 3.12. Investment Company Act/Other Regulations:  The Borrowers
are not an  "investment  company," or a company  "controlled"  by an "investment
company," within the meaning of the Investment  Company Act of 1940, as amended.
Other than any  applicable  usury  statutes,  the  Borrowers  are not subject to
regulation  under any Federal or state statute or regulation  which limits their
ability to incur Indebtedness.

          Section  3.13.  Subsidiaries:  Set forth on Schedule  3.13 are all the
Subsidiaries  of the Borrowers at the Closing Date,  the  jurisdiction  of their
incorporation and the direct or indirect ownership thereof .

          Section  3.14.  Purpose of Loans:  The  proceeds of the Loans shall be
used by the Borrowers for general corporate purposes, including acquisitions.

          Section 3.15.  Environmental Matters:  Except as set forth in Schedule
3.15,  the  Borrowers  hereby  represent  and warrant  that,  to the best of the
Knowledge of the  Borrowers,  (a) no property owned or occupied by the Borrowers
is in violation of any  Environmental  Laws,  (b) no such property is subject to
any private or governmental lien or judicial or administrative  notice or action
relating  to  Materials  of  Environmental  Concern,  and  (c) no  Materials  of
Environmental Concern are or have been discharged,  generated, treated, disposed
of or stored on,  incorporated  in, or removed or transported from such property
by the Borrowers  other than in compliance  with all  Environmental  Laws to the
extent that any item listed in this Section  3.15 would have a Material  Adverse
Effect  pursuant  to the  terms  of  this  Agreement  or any of the  other  Loan
Documents.

          Section 3.16.  Security  Interest:  Upon the execution and delivery by
the  Borrowers  of the  Security  Agreement,  and the filing of UCC-1  financing
statements in the appropriate  public offices in the  jurisdictions set forth in
Schedule 3.17, and subject to the next sentence, the Bank will have a perfected,
first priority security interest in and lien upon the Collateral,  subject to no
Liens other than as  permitted by Section  6.03.  No UCC-1  financing  statement
filings,  other than in the  jurisdictions set forth on Schedule 3.17 (and other
than compliance pursuant to the Federal  Anti-Assignment  Laws and similar state
Requirements  of Law) are  necessary  and  appropriate  in order to perfect  the
Bank's lien upon and security interest in the Collateral.

          Section  3.17.  Principal  Place  of  Business:   Except  for  changes
subsequent  to the Closing Date and as to which  sufficient  advance  notice has
been given to the Bank: (a) the principal  place of business and chief executive
office  (as  such  terms  are used in  Article  9 of the UCC in  effect  in such
location) of the National and the Operating Subsidiaries , and the offices where
the Borrowers' books and records with respect to the Collateral are kept, are at
the addresses set forth in Schedule  3.17;  (b) the Borrowers  have no places of
business  (within  the meaning of the UCC in effect  therein)  at any  locations
other  than as set forth on  Schedule  3.17;  and (c) other than as set forth on
Schedule  3.17, the Borrowers do not now do, nor within the preceding five years
have they done,  any business


                                       19
<PAGE>

under any name other than the names  National  Home Health  Care  Corp.,  Health
Acquisition Corp., New England Home Care, Inc., Accredited Health Services, Inc.
and Connecticut Staffing Work Corp.

          Section 3.18.  Eligible  Accounts  Receivable:  The Eligible  Accounts
Receivable  are,  to the best  Knowledge  of  Borrowers,  accurately  and fairly
reflected as of the date thereof in the most recent financial  statements of the
Borrowers  referred  to in Section  3.01 or, with  respect to Eligible  Accounts
Receivable  created  or  acquired  on  or  after  the  date  of  such  financial
statements,  are accurately and fairly reflected on the books and records of the
Borrowers.  Based  on the  Borrowers'  experience,  the  reserves  for  doubtful
Accounts Receivable  reflected on such financial  statements are adequate in all
material respects,  and, since the date of such financial statements,  there has
been no material change  concerning the collection  policies,  collectibility or
enforceability of the Eligible Accounts  Receivable,  taken as a whole,  against
the relevant Account Debtors.

          Section  3.19.  Investments:  Set forth on Schedule 3.19 is a complete
list of all  investments  by the Borrowers in the Capital Stock of any Person as
of the Closing Date.

          Section  3.20.  Disclosure:   All  financial,   accounting  and  other
information  concerning the Borrowers and the Collateral provided to the Bank by
the  Borrowers,   any  appraiser  or  any  accountant  in  connection  with  the
transactions  contemplated hereby did not to the best Knowledge of Borrowers, at
the time provided,  contain any material  misstatement  of fact or omit to state
any fact that would cause such  information,  taken as a whole, to be materially
misleading.

                         ARTICLE 4. CONDITIONS PRECEDENT

     Section 4.01. Conditions to Loans: The agreement of the Bank to advance the
initial  Revolving  Credit  Loan,  whether  to  made  on  the  Closing  Date  or
thereafter,  is subject to the satisfaction on the Closing Date of the following
conditions precedent:

          (a) Loan  Documents.  The Bank shall have received (i) this Agreement,
executed  and  delivered  by a duly  authorized  officer  of  National  and  the
Operating  Subsidiaries,  with a  counterpart  for the Bank,  (ii) the Revolving
Credit  Notes  conforming  to the  requirements  hereof and  executed  by a duly
authorized  officer of National and the  Operating  Subsidiaries,  and (iii) the
other Loan Documents, in each case executed by a duly authorized officer of each
party thereto and in each case conforming to the requirements of this Agreement.

          (b)  Corporate  Proceedings  of the  Borrowers.  The Bank  shall  have
received a  Certificate  of the  Secretary  from  National  and from each of the
Operating  Subsidiaries in the form thereof  attached hereto as Exhibit D, dated
as of the  Closing  Date,  certifying  the  adoption of the  resolutions  of the
respective   Boards  of  Directors  of  National  and  each  of  the   Operating
Subsidiaries authorizing (i) the execution,  delivery and performance of each of
the Loan  Documents,  and (ii) the  borrowings  contemplated  hereunder  and the
granting of the  security  interest in the  Collateral  pursuant to the Security
Agreement. Such certificate shall further (A) state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded, (B) specify the
names and titles of the officers authorized to sign the Loan Documents,  and (C)
contain specimens of the signatures of such officers.


                                       20
<PAGE>

          (c)  Corporate  Documents.  The  Bank  shall  have  received  true and
complete copies of the certificate of incorporation  and by-laws of National and
the  Operating  Subsidiaries,  certified  as of the Closing Date as complete and
correct  copies  thereof by the  respective  Secretary  of said  entity,  a good
standing certificate and, if available, franchise tax clearance certificate from
the respective  states of their  incorporation,  and good standing  certificates
from any other  jurisdiction  in which  said  entity  presently  conducts  or is
qualified to conduct business.

          (d) Absence of Legal  Proceedings.  The  absence of any action,  suit,
investigation  or  proceeding  pending in any court or before any  arbitrator or
governmental  instrumentality  which  could  reasonably  be  expected  to have a
Material Adverse Effect except for the Sunstar Litigation.

          (e) Legal  Opinion.  The Bank shall have  received an  executed  legal
opinion of counsel to the Borrowers,  substantially in the form thereof attached
hereto as Exhibit E;

          (f)  Security  Agreement.  The Bank shall have  received  the Security
Agreement,  executed and delivered by a duly authorized  officer of National and
of each of the Operating  Subsidiaries,  together  with such Uniform  Commercial
Code  financing  statements  and  other  documents  and  instruments  as  may be
necessary to perfect,  upon the filing of such financing  statements  and/or the
possession of such documents and instruments,  the Bank's lien upon and security
interest in the Collateral.

          (g) Audit of Records.  The Bank shall have  received  (i) a collateral
audit of the  Borrowers'  books and records to verify,  among other things,  the
accuracy  and  sufficiency  of  the  Borrowers'  Accounts  Receivable,  (ii)  an
operational audit to review the Borrowers' practices and compliance with respect
to various  regulatory and  administrative  matters and (iii) a review by Bank's
counsel of the documents in connection with the Sunstar Litigation.

          (h)  Evidence  of  Insurance.  The Bank shall have  received  evidence
satisfactory  to it that  the  Borrowers  obtained  all  policies  of  insurance
required pursuant to Section 5.05 and pursuant to the Security Agreement.

          (i) Lien  Searches.  The Bank shall have  received a copy, in form and
substance  reasonably  satisfactory to it, of lien searches in all jurisdictions
in which the Borrowers do business or in which any Collateral may be located.

          (j) Borrowing Base  Certificate.  To the extent the initial Loan is to
be made on the Closing Date, the Bank shall have received the initial  Borrowing
Base  Certificate  referred to in Section  2.02,  together with an Aged Accounts
Receivable  Report,  each certified by the Chief  Financial  Officer and each in
form and detail satisfactory to the Bank.

          (k)   Non-Default   Certificate.   The  Bank  shall  have  received  a
Non-Default  Certificate  signed  by a  Responsible  Officer  stating  that  the
Representations  and  Warranties set forth in Article 3 are true in all material
respects  on the Closing  Date and that no Default has  occurred as of such date
and that no Default or Event of Default would result from any borrowing  made on
the Closing Date.


                                       21
<PAGE>

          (l) Other Loan  Documents.  The Borrowers shall execute and/or deliver
such other Loan Documents, schedules, undertakings, certificates and disclosures
as the Bank shall reasonably require.

     Section 4.02.  Conditions to All Extensions of Credit: The agreement of the
Bank  to  make  any  Revolving  Credit  Loan  requested  to be made by it on any
Borrowing  Date is  subject  to the  satisfaction  of the  following  conditions
precedent:

          (a)  Representations  and Warranties.  Each of the representations and
warranties  made by the Borrowers in or pursuant to the Loan Documents  shall be
true and correct in all  material  respects on and as of such date as if made on
and as of such date.

          (b) No Default. No Default or Event of Default shall have occurred and
be continuing  on such date or after giving effect to the Revolving  Credit Loan
requested to be made on such date.

          (c)  Borrowing  Base  Certificate.  As to requested  Revolving  Credit
Loans, the Bank shall have received a current  Borrowing Base Certificate at the
time of such  request and in  accordance  with  Section  2.02(a),  executed  and
certified by the Chief Financial Officer or another Responsible Officer.

          (d) Additional Matters.  All corporate and other proceedings,  and all
documents,   instruments   and  other  legal  matters  in  connection  with  the
transactions  contemplated  by this Agreement and the other Loan Documents shall
be reasonably satisfactory in form and substance to the Bank, and the Bank shall
have received such other  documents and legal  opinions in respect of any aspect
or consequence of the  transactions  contemplated  hereby or thereby as it shall
reasonably request.

          (e) Additional  Conditions.  If a Revolving Loan is requested pursuant
to Section 2.01, all  applicable  conditions set forth in Sections 2.02 and 2.03
shall have been satisfied.

                        ARTICLE 5. AFFIRMATIVE COVENANTS

     National  hereby  agrees that,  so long as the  Commitment  shall remain in
effect, any Loans remain outstanding and unpaid, or any other amount is owing to
the Bank hereunder, National shall or shall cause the Operating Subsidiaries to:

     Section 5.01. Financial Statements: Furnish to the Bank:

          (a) as soon as available,  but in any event not later than twenty (20)
Business  Days after the end of each  calendar  month but only if any Loans were
outstanding  during that month, (i) a Borrowing Base  Certificate,  certified by
the Chief Financial Officer,  setting forth in detail reasonably satisfactory to
the  Bank  the  calculations   necessary  to  determine  the  Eligible  Accounts
Receivable as of the last day of the  immediately  preceding  calendar month and
(ii) an Accounts  Receivable  Aging


                                       22
<PAGE>

Report,  certified  by the Chief  Financial  Officer  and in form and  substance
reasonably   satisfactory  to  the  Bank,  it  being   understood  that  reports
substantially  in the form of the Accounts  Receivable Aging Reports provided by
National to the Bank prior to the Closing Date shall be considered  satisfactory
to the Bank;

          (b) as soon as  available,  but in any event  within  ninety (90) days
after the close of each Fiscal Year, an audited  consolidated  annual  financial
statement  of  National,  as part of its  Form  10K  prepared  by the  Reporting
Accountant or prepared by another independent  accounting firm acceptable to the
Bank,  which  shall  reflect the  consolidated  operations  of National  and its
Subsidiaries  during such Fiscal  Year and which  shall  contain all  supporting
schedules including consolidating financial statements at that time; and

          (c) within  forty  five (45) days after the end of each of  National's
first  three  fiscal  quarters  of  each  Fiscal  Year,  consolidated  financial
statements of National for the previous fiscal quarter,  as part of its Form 10Q
which shall be certified as to their correctness by the Chief Financial Officer.

     Section 5.02. Certificates/Other Information: Furnish to the Bank:

          (a)  concurrently  with  the  delivery  of  the  financial  statements
referred to in subsection  5.01(b), a certificate of the Chief Financial Officer
stating  that in making the  examination  necessary  therefor no  knowledge  was
obtained  of any  Default  or  Event  of  Default,  insofar  as same  relate  to
accounting matters, except as specified in such certificate;

          (b)  concurrently  with  the  delivery  of  the  financial  statements
referred to in subsection  5.01(b),  a schedule,  in form and detail  reasonably
satisfactory to the Bank,  certified by the Chief Financial Officer,  containing
the calculations necessary to determine compliance with Section 6.01;

          (c) within ten (10) Business Days after the same are filed,  copies of
all reports and forms filed with  respect to employee  pension or benefit  plans
under  ERISA which would be  expected  to have a Material  Adverse  Effect,  and
within  five  (5)  Business  Days  after,  to the  Knowledge  of  Borrowers  any
Reportable  Event with  respect to any Plan  occurs,  a statement  executed by a
Responsible Officer setting forth details respecting such event and the actions,
if any, that the Borrowers propose to take with respect thereto;

          (d) within ten (10) Business Days after the sending or filing thereof,
copies of all proxy statements,  financial statements and similar reports, which
National  sends to its  stockholders,  and copies of any  regular,  periodic and
special  reports,  and  all  registration   statements  which  National  or  any
Subsidiary  files with any  Governmental  Authority  which  would be  reasonably
expected  to  cause  a   Governmental   Authority  to  institute  a  proceeding,
investigation or litigation that would have a Material Adverse Effect; and


                                       23
<PAGE>

          (e) within ten (10) Business Days after receipt thereof, copies of all
substantive  adverse  communications  to  National  or to any  of the  Operating
Subsidiaries from any licensing agency or accreditation entity.

     Section 5.03.  Payment of Obligations:  Pay, discharge or otherwise satisfy
in the ordinary course of the Borrowers' business as currently conducted,  their
obligations of whatever  nature,  except where the amount or validity thereof is
currently being contested in good faith by appropriate  proceedings and reserves
in conformity  with GAAP with respect thereto have been provided on the books of
the Borrowers.

     Section 5.04. Conduct of Business and Maintenance of Existence: Continue to
engage in business of the same general type as now conducted by it and preserve,
renew and keep in full  force and effect its  corporate  existence  and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable  in the  normal  conduct  of its  business,  in each  case  except  as
otherwise   permitted  pursuant  to  Section  6.05  or  6.08;  comply  with  all
Contractual  Obligations  and  Requirements  of Law  except to the  extent  that
failure to comply  therewith in such respect would not be reasonably  likely to,
in the aggregate, have a Material Adverse Effect.

     Section 5.05. Maintenance of  Property/Insurance:  (a) Except to the extent
replaced, keep all property then useful and necessary in the Borrowers' business
in good working order and condition, reasonable wear and tear excepted; maintain
with financially sound and reputable  insurance  companies  insurance on all its
property in at least such amounts and against at least such risks (but including
in any event public liability and business  interruption) as are usually insured
against in the same general  area by companies  engaged in the same or a similar
business;  and furnish to the Bank on demand,  certificates as to such insurance
being in force.

          (b) Cause all  insurance  policies  of the  Borrowers  referred  to in
paragraph (a) of this Section 5.05  insuring  against risks of liability to name
the Bank as an additional insured.

     Section 5.06.  Inspection of  Property/Books  and  Records/Discussions:  At
Borrowers'  expense (a) keep proper  books of records and account in  conformity
with  GAAP and all  Requirements  of Law of all  dealings  and  transactions  in
relation to its business and activities;  (b) permit representatives of the Bank
to visit and inspect any of its  properties  and examine and make abstracts from
any  of  its  financial  books  and  records,  upon  reasonable  notice,  at any
reasonable  time during normal business hours and as may reasonably be necessary
and to discuss the  business,  operations,  properties  and  financial and other
condition of the Borrowers with officers and employees of the Borrowers and with
the Reporting  Accountants;  and (c) permit  representatives  of the Bank, on an
annual  basis,  to  conduct  a  field  examination  consisting  of  an  Accounts
Receivable and operational audit of the Borrowers;  provided,  however; that the
Bank shall, and shall use reasonable  efforts to cause its  representatives  to,
keep all such information confidential, except: (i) any such information that is
or becomes  publicly  available or generally known otherwise than as a result of
any breach of the  provisions  of this  Section  5.06,  (ii) as  required by any
Requirement  of Law,  (iii)  as may be  necessary  to  protect  as  against  the
Borrowers  the interests of the Bank under this  Agreement,  (iv) to disclose to
its attorneys,  accountants and similar advisors such information solely for the
purpose of administering the Loans  contemplated by this Agreement,  or (v) with
the written consent of the Borrowers.


                                       24
<PAGE>

     Section 5.07. Notices: Promptly give notice to the Bank of:

          (a) the occurrence of any Default or Event of Default;

          (b)  any (i)  default  or  event  of  default  under  any  Contractual
Obligation of National or any of the Operating Subsidiaries, or (ii) litigation,
investigation  or proceeding which may exist at any time between National or any
of the Operating  Subsidiaries and any Governmental  Authority,  which in either
case,  if not  cured or if  adversely  determined,  as the  case  may be,  would
reasonably be likely to have a Material Adverse Effect;

          (c)  any  litigation  or  proceeding  against  National  or any of the
Operating  Subsidiaries in which the amount involved is $100,000 or more and not
covered by insurance or in which  injunctive or similar  relief is sought.  Bank
acknowledges that the Sunstar Litigation is pending;

          (d) the following  events, as soon as possible and in any event within
30 days after there is Knowledge of  Borrowers:  (i) the  occurrence or expected
occurrence of any  Reportable  Event with respect to any Plan, a failure to make
any required  contribution  to a Plan,  the creation of any Lien in favor of the
PBGC or a Plan or any withdrawal  from, or the  termination,  Reorganization  or
Insolvency of, any  Multiemployer  Plan or (ii) the institution of proceeding or
the taking of any other  action by the PBGC or National or any of the  Operating
Subsidiaries or any Commonly  Controlled Entity or any  Multiemployer  Plan with
respect to the withdrawal from, or the terminating, Reorganization or Insolvency
of, any Plan; and

          (e) any development or event which would  reasonably be likely to have
a Material Adverse Effect.

     Each  notice  pursuant  to this  Section  5.07  shall be  accompanied  by a
statement of the Chief Financial Officer setting forth details of the occurrence
referred to therein and stating what action National or the applicable Operating
Subsidiary proposes to take with respect thereto.

     Section 5.08. Environmental Laws:

          (a) Except as disclosed on Schedule  3.15,  comply with, and engage in
reasonable  efforts to obtain compliance by all tenants and subtenants,  if any,
with, all applicable Environmental Laws and obtain and comply with and maintain,
and engage in reasonable  efforts to cause all tenants and  subtenants to obtain
and comply with and maintain,  any and all licenses,  approvals,  notifications,
registrations or permits required by applicable  Environmental  Laws,  except to
the  extent  that such  failure  to  comply,  maintain  or  obtain  would not be
reasonably likely in the aggregate to have a Material Adverse Effect;

          (b) Conduct and complete  all  investigations,  studies,  sampling and
testing,   and  all  remedial,   removal  and  other  actions   required   under
Environmental  Laws and promptly comply with all lawful orders and directives of
all Governmental  Authorities regarding  Environmental Laws except to


                                       25
<PAGE>

the  extent  that the same are  being  contested  in good  faith by  appropriate
proceedings  and  the  pendency  of such  proceedings  could  not be  reasonably
expected to have a Material Adverse Effect;

          (c)  Defend,  indemnify  and hold  harmless  the  Bank and the  Bank's
respective employees,  agents, officers and directors,  from and against any and
all claims, demands, penalties, fines, liabilities,  settlements, damages, costs
and  expenses  of  whatever  kind or  nature  known or  unknown,  contingent  or
otherwise, which the Bank may sustain or incur, by reason of, or arising out of,
or in any way  relating to the  violation  of,  noncompliance  with or liability
under, any  Environmental  Law applicable to the operations of any Borrower,  or
its  properties,  or  any  orders,   requirements  or  demands  of  Governmental
Authorities  related  thereto,   including,   without   limitation,   reasonable
attorney's,  consultant's  investigation  and laboratory  fees,  response costs,
court  costs  and  litigation  expenses,  except to the  extent  that any of the
foregoing arise out of the gross  negligence or willful  misconduct of the party
seeking  indemnification  therefor.  The agreements of the Borrowers  under this
subsection  shall survive the termination of the Commitment and repayment of the
Revolving Credit Notes, and all other amounts payable hereunder; and

          (d) Keep or cause  such  property  to be kept free from  Materials  of
Environmental  Concern  (other  than  those used in the  ordinary  course of the
Borrowers'  business,  provided the same are used,  stored and/or disposed of in
compliance with all Environmental Laws) and in compliance with all Environmental
Laws,  shall promptly notify the Bank if the Borrowers shall become aware of the
presence of any Materials of Environmental Concern in violation of Environmental
Laws  and/or  cure such  violations,  as  applicable  to the  Borrowers  or such
Materials,  as required by applicable  Environmental  Laws,  promptly  after the
Borrowers  becomes aware of same, at the  Borrowers'  sole cost and expense,  if
such violation  would have a Material  Adverse  Effect  pursuant to the terms of
this Agreement.

     Section  5.09.  Subsidiaries:  Promptly,  after any Person  shall  become a
Subsidiary,  notify the Bank that such Person has become a  Subsidiary,  and, at
the Borrowers' expense, cause such Subsidiary to execute and deliver to the Bank
a guaranty,  in form and  substance  reasonably  acceptable  to the Bank, of the
obligations of the Borrowers  hereunder and, in each case, such other documents,
instruments,  legal  opinions and  financing  statements  and to take such other
related action as the Bank may reasonably require.  Bank acknowledges receipt of
guaranty  executed on even date herewith by the Corporate  Guarantor in favor of
Bank, and confirms its acceptability.

     Section 5.10.  Compliance with Laws:  Comply, in all material respects with
all applicable laws, rules,  regulations and orders, such compliance to include,
without  limitation,  paying  before  the same  becomes  delinquent,  all taxes,
assessments and governmental charges imposed upon it or upon its property.

     Section 5.11.  Compliance with ERISA: Comply, in all material respects with
applicable provisions of ERISA.

     Section  5.12.  Borrowing  Base:  Maintain  all  Revolving  Credit Loans in
compliance with the then current Borrowing Base.


                                       26
<PAGE>

     Section 5.13.  Commercial  Checking Accounts:  The Borrowers shall maintain
throughout  the term of the Loans a commercial  checking  account in the name of
National,  any of the Operating  Subsidiaries or the Corporate  Guarantor at the
Bank.  Said  account  shall  constitute  the main  operating  account from which
payments of principal  and interest  shall be taken in  accordance  with Section
2.03(c).

                          ARTICLE 6. NEGATIVE COVENANTS

     National  hereby agrees that, so long as the Commitment  remains in effect,
any of the Notes remain  outstanding and unpaid, or any other amount is owing to
the Bank hereunder, National shall not, directly or indirectly:

     Section 6.01. Financial Condition Covenants:

          (a) Maintenance of Stockholder  Equity. Have a Net Loss of One Million
Dollars  ($1,000,000.00)  in any one fiscal quarter or a Net Loss of One Million
Dollars  ($1,000,000.00),  in the aggregate in any series of consecutive  fiscal
quarters,  except  that the after tax effect of any  payment  arising out of the
Sunstar Litigation shall not count toward the One Million Dollar ($1,000,000.00)
quarterly  loss  limitation.   Notwithstanding  any  of  the  foregoing,   total
consolidated stockholders' equity of National and its Subsidiaries, after giving
effect to operating results and all capital  transactions,  such as dividends or
stock buybacks, shall not be less than:

             From 06/06/01    Through 07/30/01     $25,000,000
             From 07/31/01    Through 07/30/02     $28,000,000
             From 07/31/02     and thereafter      $31,000,000

          (b)  Total   Senior   Liabilities   to  Total   Stockholders'   Equity
Ratio.Permit the ratio of Total Senior Liabilities to Total Stockholders' Equity
to be greater than 0.50.

          (c) Total Senior Liabilities to Tangible  Stockholders' Equity. Permit
the ratio of Total Senior  Liabilities  to Tangible  Stockholders'  Equity to be
greater than 1.0.

          (d) EBIT to Interest Expense Ratio. Permit the ratio of EBIT (Earnings
Before Interest and Taxes) to interest expense,  computed quarterly on a rolling
12-month basis, to be less than 7.0.

     Section  6.02.  Limitation  on  Indebtedness:   Create,  incur,  assume  or
otherwise  become  liable  for  or  suffer  to  exist,  or  permit  any  of  its
Subsidiaries to, create,  incur, assume or otherwise become liable for or suffer
to exist any  Indebtedness  in the  aggregate in excess of $250,000  without the
prior written consent of the Bank, other than:

          (a)  Indebtedness of the Borrowers to the Bank under this Agreement or
otherwise;

          (b) Intentionally Omitted.


                                       27
<PAGE>

          (c)  Indebtedness  outstanding  on the date hereof  listed on Schedule
6.02;

          (d) Approved Subordinated Indebtedness;

          (e)  Purchase  money  Indebtedness  secured  by  a  mortgage  on  real
property;

          (f) Capitalized Lease Obligations up to $250,000.00, in the aggregate;

          (g) Intercompany Indebtedness; and

          (h) Indebtedness assumed in connection with acquisitions allowed under
Section  6.05 to the  extent  such  assumption  of debt does not  violate  other
conditions of this Agreement.

     Section 6.03. Limitation on Liens: Create, incur, assume or suffer to exist
any Lien upon any of its  property,  assets or  revenues,  whether  now owned or
hereafter acquired, except for:

          (a) Liens for taxes not yet due or which are being  contested  in good
faith by appropriate  proceedings,  provided that adequate reserves with respect
thereto are  maintained on the books of the  Borrowers in conformity  with GAAP;
provided,  further,  that upon the commencement of proceedings to foreclose such
Lien, the Borrowers  shall cause (i) the obligation  giving rise to such Lien to
be paid,  (ii) cause an order  staying  such  enforcement  to be issued or (iii)
cause a surety bond  reasonably  satisfactory to the Bank to be delivered to the
Bank;

          (b) carriers', warehousemen's,  mechanics', materialmen's, repairmen's
or other like Liens  arising in the  ordinary  course of business  which are not
overdue  for a period of more than sixty (60) days or which are being  contested
in good faith by appropriate  proceedings  and which,  in the aggregate,  do not
have a Material Adverse Effect;

          (c) pledges or  deposits in  connection  with  workers'  compensation,
unemployment insurance and other social security legislation;

          (d)   easements,   rights-of-way,   restrictions   and  other  similar
encumbrances  incurred  in  the  ordinary  course  of  business  which,  in  the
aggregate, are not substantial in amount and which do not in any case materially
detract from the value of the property  subject thereto or materially  interfere
with the ordinary conduct of the business of the Borrowers;

          (e) Liens in  existence  on the date hereof  listed on Schedule  6.03,
securing  Indebtedness  permitted by subsection  6.02(c),  provided that no such
Lien is extended  or spread to cover any  additional  property of the  Borrowers
after the Closing Date and that the amount of  Indebtedness  secured  thereby is
not increased;

          (f) Operating Leases;

          (g) Liens created pursuant to the Security Agreement;


                                       28
<PAGE>

          (h) Liens in respect to Approved Subordinated Indebtedness;

          (i) Liens in respect to purchase money indebtedness; and

          (j) Liens relating to Capitalized  Lease  Obligations  permitted under
Section 6.02.

     Section 6.04. Limitation on Guarantee Obligations: Create, incur, assume or
suffer to exist any Guarantee Obligation except:

          (a) Guarantee  Obligations  in existence on the date hereof and listed
on Schedule 6.04, which shall not be increased; and

          (b) Intentionally Omitted;

          (c) Guarantee Obligations of Indebtedness to the Bank hereunder or any
other Indebtedness to the Bank;

          (d)  Guarantee   Obligations  in  respect  to  Approved   Subordinated
Indebtedness;

          (e) Guarantee Obligations in respect to purchase money indebtedness;

          (f) Guarantee  Obligations in respect to Capitalized Lease Obligations
permitted under Section 6.02;

          (g) Guarantee Obligations in respect to intercompany Indebtedness;

          (h)  Guarantee  Obligations  in  respect  to  Indebtedness  assumed in
connection with acquisitions  allowed under Section 6.05 to the extent that such
assumption of debt does not violate other conditions of this Agreement; and

          (i)  Guarantee  Obligation  with  respect  to  Indebtedness  or  other
liabilities  of any  Operating  Subsidiaries  to the  extent  that same does not
violate any condition of this Agreement or any other Loan Documents.

     Section  6.05.   Limitations  on  Fundamental   Changes:   Acquire  all  or
substantially  all of the assets of any Person  for  consideration  in excess of
$7,500,000.00  or in a business not directly  comparable to the current business
of the  Borrowers  without the prior written  consent of the Bank.  Furthermore,
prior to making any acquisition of all or substantially all of the assets of any
Person,  National shall demonstrate to the Bank, by way of proforma calculations
of the  financial  covenants  as of the proposed  dated of any such  acquisition
that, after giving effect to the acquisition and any financing  related thereto,
National shall be in compliance with the financial  covenants  contained herein.
Proforma  calculations shall not be required if the consideration being paid for
such  acquisition  is less  than  Two  Million  Dollars  ($2,000,000.00)  and no
borrowings  under this  Agreement  will be used to accomplish


                                       29
<PAGE>

the  acquisition.   Liquidate,  wind  up  or  dissolve  itself  (or  suffer  any
liquidation  or  dissolution),  or convey,  sell,  lease,  assign,  transfer  or
otherwise  dispose of, all or  substantially  all of its  property,  business or
assets, or make any material change in its present method of conducting business
without the prior written consent of the Bank.

     Section 6.06.  Limitation  on  Investments,  Loans and  Advances:  Make any
advance,  loan,  extension of credit or capital contribution to, or purchase any
stock,  bonds,  notes,  debentures or other securities or indebtedness of or any
assets  constituting  a business unit of, or make any other  investment  in, any
other Person, except:

          (a) extensions of trade credit in the ordinary course of business;

          (b) other  investments  in prime  (A-1 or P-1 or  comparable  ratings)
rated commercial paper, investments in readily marketable, direct obligations of
the United States of America or  obligations  guaranteed by the United States of
America,  none of which shall mature later than one year after  investment,  and
investments  in dollar  denominated  Certificates  of Deposit issued by domestic
commercial  banks  having  capital and surplus in excess of  $50,000,000  either
directly or through a mutual fund and which are rated investment grade or better
by Moody's or Standard and Poor's;

          (c) investments in time deposits, savings accounts,  checking accounts
and  other  accounts  with  banks  having  capital  and  surplus  in  excess  of
$50,000,000.00; and

          (d) formation of an operating  Subsidiary  provided that  concurrently
with such  formation,  the new  Subsidiary  becomes  a  co-borrower  under  this
Agreement and the other Loan Documents.

          (e) existing investments in the Capital Stock of the Persons listed on
Schedules 3.13 and 3.19.

     Section 6.07.  Limitation on Changes in Fiscal Year: Permit the Fiscal Year
of the  Borrowers to end on a day other than July 31,  without the prior written
consent of the Bank.

     Section 6.08. Limitation on Lines of Business:  Materially alter the nature
of, or method of conducting,  its business  without the prior written consent of
the Bank.

     Section 6.09. Federal Reserve Regulations:  Permit any Loan or the proceeds
thereof to be used for any purpose which  violates or is  inconsistent  with the
provisions  of  Regulations  T, U or X of the Board of  Governors of the Federal
Reserve System.


                                       30
<PAGE>

                          ARTICLE 7. EVENTS OF DEFAULT

     Section 7.01.  Events of  Default/Remedies:  If any of the following events
shall occur and be continuing:

          (a) The  Borrowers  shall fail to pay any  principal of or interest on
the Notes  when due in  accordance  with the terms  thereof  or  hereof;  or the
Borrowers  shall fail to pay any other  amount  payable  hereunder  or under the
other Loan  Documents  within five (5) Business Days after any such other amount
becomes due in accordance with the terms thereof or hereof; or

          (b)  Any  representation  or  warranty  made  or  deemed  made  by the
Borrowers or the  Corporate  Guarantor  herein or in any other Loan  Document or
which is contained in any certificate,  document or financial or other statement
furnished at any time under or in connection  with this Agreement shall prove to
have been incorrect in any material  respect on or as of the date made or deemed
made; or

          (c) The Borrowers  shall default in the  observance or  performance of
any  agreement or  requirement  contained  in Article 5, and such default  shall
continue unremedied for a period of twenty (20) days; or

          (d) The Borrowers  shall default in the  observance or  performance of
any agreement or requirement contained in Article 6; or

          (e) The  Borrowers or the  Corporate  Guarantor  shall  default in the
observance  or  performance  of  any  other  covenant,  condition  or  agreement
contained in this Agreement,  the Security  Agreement or any other Loan Document
(other than as provided in paragraphs (a) through (d) of this Section), and such
default shall continue unremedied for a period of thirty (30) days; or

          (f) The Borrowers  shall (i) default in any payment of principal of or
interest on any Indebtedness to any Person other than the Bank or in the payment
of any Guarantee Obligation beyond the period of grace (not to exceed sixty (60)
days),  if any,  provided  in the  instrument  or  agreement  under  which  such
Indebtedness  or Guarantee  Obligation was created,  which  aggregate  amount is
$100,000.00  or more; or (ii) default in the  observance or  performance  of any
other  agreement or  condition  relating to any such  Indebtedness  or Guarantee
Obligation or contained in any instrument or agreement  evidencing,  securing or
relating thereto,  or any other event shall occur or condition exist, the effect
of which  default  or other  event or  condition  is to cause,  or to permit the
holder or holders of such  Indebtedness or beneficiary or  beneficiaries of such
Guarantee  Obligation (or a trustee or agent on behalf of such holder or holders
or  beneficiary  or  beneficiaries)  to  cause,  with the  giving  of  notice if
required,  such  Indebtedness to become due prior to its stated maturity or such
Guarantee Obligation to become payable, which aggregate amount is $100,000.00 or
more; or

          (g) (i) Any of the Borrowers  shall  commence any case,  proceeding or
other action (A) under any existing or future law of any jurisdiction,  domestic
or foreign,  relating to  bankruptcy,  insolvency,  reorganization  or relief of
debtors,  seeking to have an order for  relief  entered  with  respect to it, or
seeking to  adjudicate it a bankrupt or  insolvent,  or seeking  reorganization,
arrangement,


                                       31
<PAGE>

adjustment, winding-up,  liquidation,  dissolution,  composition or other relief
with  respect to it or its debts,  or (B)  seeking  appointment  of a  receiver,
trustee,  custodian,  conservator or other similar official for it or for all or
any  substantial  part of its assets,  or (ii) any of the Borrowers shall make a
general  assignment  for the benefit of its  creditors;  or (iii) there shall be
commenced against any of the Borrowers any case, proceeding or other action of a
nature  referred  to in clause  (i) above  which (A)  results in the entry of an
order  for  relief  or any  such  adjudication  or  appointment  or (B)  remains
undismissed,  undischarged  or unbonded for a period of sixty (60) days; or (iv)
there shall be commenced  against any of the Borrowers  any case,  proceeding or
other action seeking issuance of a warrant of attachment,  execution,  distraint
or similar  process  against  all or any  substantial  part of its assets  which
results in the entry of an order for any such  relief  which shall not have been
vacated,  discharged,  or stayed or bonded pending appeal within sixty (60) days
from the entry  thereof;  or (v) any of the  Borrowers  shall take any action in
furtherance of, or indicating its consent to,  approval of, or acquiescence  in,
any of the acts set forth in clause (i),  (ii),  or (iii) above;  or (vi) any of
the  Borrowers  shall  generally  not,  or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due; or

          (h) (i) Any Person shall engage in any  "prohibited  transaction"  (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(ii) any "accumulated  funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to any Plan or any Lien in favor
of the PBGC or a Plan shall arise on the assets of any of the  Borrowers  or any
Commonly  Controlled  Entity,  (iii) a Reportable Event shall occur with respect
to, or  proceedings  shall  commence to have a trustee  appointed,  or a trustee
shall be appointed,  to administer or to terminate,  any Single  Employer  Plan,
which  Reportable  Event or  commencement  of  proceedings  or  appointment of a
trustee  is, in the  reasonable  opinion  of the  Bank,  likely to result in the
termination  of such Plan for purposes of Title IV of ERISA and such  Reportable
Event shall not have been rectified to the reasonable  satisfaction  of the Bank
within 20 days of the  occurrence  of such  Reportable  Event,  (iv) any  Single
Employer Plan that is not fully funded shall  terminate for purposes of Title IV
of ERISA, (v) any of the Borrowers or any Commonly  Controlled  Entity shall, or
in the  reasonable  opinion of the Bank is likely  to,  incur any  liability  in
connection  with a withdrawal  from, or the Insolvency or  Reorganization  of, a
Multiemployer  Plan or (vi) any other  event or  condition  shall occur or exist
with respect to a Plan; and in each case in clauses (i) through (vi) above, such
event or condition,  together with all other such events or conditions,  if any,
would have a Material Adverse Effect; or

          (i) One or more  judgments  or decrees  shall be entered  against  the
Borrowers  involving in the aggregate a liability  (not paid or fully covered by
insurance) of $100,000 or more, and all such judgments or decrees shall not have
been  satisfied,  vacated,  discharged,  stayed or bonded  pending appeal within
sixty (60) days from the entry thereof, except for payments made on any judgment
in the Sunstar Litigation  provided that the Borrowers remain in compliance with
all financial covenants; or

          (j) (i) The Security  Agreement shall cease, for any reason,  to be in
full force and  effect,  or any of the  Borrowers  shall so assert,  or (ii) the
security  interests  created  by  the  Security  Agreement  shall  cease  to  be
enforceable and of the same effect and priority purported to be created thereby;


                                       32
<PAGE>

          (k)  Loss  by any  of the  Operating  Subsidiaries  of its  regulatory
approval and/or licensing; or

          (l) Loss by any of the Operating  Subsidiaries of its accreditation by
an applicable accrediting agency.

then, at any time thereafter  during the continuance of any such event, the Bank
may,  without  notice to the Borrowers (i)  terminate  the  Commitment  and (ii)
declare the Notes to be  forthwith  due and payable,  both as to  principal  and
interest, without presentment,  demand, protest or other notice of any kind, all
of which are hereby expressly waived,  anything contained herein or in the Notes
to the  contrary  notwithstanding,  (iii)  exercise any or all of the rights and
remedies  afforded  to the Bank in the  Security  Agreement  or the  other  Loan
Documents,  by the UCC or  otherwise  possessed  by the Bank and  realize  upon,
dispose of, or sell, all or any part of the Collateral given by the Borrowers to
the Bank, and the Bank may apply the net proceeds of such realization,  disposal
or sale to the payment of any  liabilities  of the Borrowers  under the Notes or
this  Agreement  in the  order set forth in the  Security  Agreement,  provided,
however,  that if an event specified in subsection (g) shall have occurred,  the
Loans shall  automatically  accelerate  and the Commitment  shall  automatically
terminate.

     In addition to and not in  limitation of all rights of offset that the Bank
may have under applicable law, the Bank shall,  upon the occurrence of any Event
of Default  and  whether or not the Bank has made any demand or the  Obligations
are  matured,  have the right to  appropriate  and apply to the  payment  of the
Obligations,  all deposits (general or special,  time or demand,  provisional or
final)  of the  Borrowers  then  or  thereafter  held  by  the  Bank  and  other
indebtedness or property then or thereafter  owing to the Borrowers by the Bank,
whether or not related to this Agreement or any transaction hereunder.

                            ARTICLE 8. MISCELLANEOUS

     Section 8.01.  Modification  of Agreement:  No  modification,  amendment or
waiver of any  provision  of this  Agreement  or the Notes,  nor  consent to any
departure by the Borrowers  therefrom shall in any event be effective unless the
same shall be in writing and signed by the Bank,  and, as to  modifications  and
amendments,  the  Borrowers,  and then such waiver or consent shall be effective
only in the specific  instance and for the purpose for which given. No notice to
or demand on the  Borrowers in any case shall entitle the Borrowers to any other
or further notice or demand in the same, similar or other circumstance.

     Section  8.02.  Notices:  All notices,  requests and demands to or upon the
respective parties hereto to be effective under this Agreement or any other Loan
Document,  shall be in writing  (including by telecopy),  and, unless  otherwise
expressly provided herein,  shall be deemed to have been duly given or made when
delivered by hand, or three (3) days after being deposited in the mail,  postage
prepaid,  registered  mail, or, in the case of telecopy  notice,  when received,
addressed as follows,  or to such other address as may be hereafter  notified by
the respective parties hereto and any future holders of the Notes:


                                       33
<PAGE>

         The Borrowers:             c/o National Home Health Care Corp.
                                    700 White Plains Road, Suite 275
                                    Scarsdale, New York 10583
                                    Attention: Steven Fialkow, President & CEO
                                    Telecopy: (914) 722-9239

         Copy of Notices:           Jenkens & Gilchrist Parker Chapin LLP
         Relating to Defaults To:   The Chrysler Building
                                    405 Lexington Avenue
                                    New York, New York  10174
                                    Attention:  Mitchell P. Portnoy, Esq.
                                    Telecopy: (212) 704-6288

         The Bank:                  HSBC Bank USA
                                    17 South Broadway
                                    Nyack, New York 10960
                                    Attention:  William L. Meli, A.V.P.
                                    Telecopy:  (845) 353-7425

provided  that any  notice,  request or demand to or upon the Bank  pursuant  to
Sections 2.02 or 2.03 shall not be effective until received.

     Section 8.03. No Waiver/Cumulative  Remedies: No failure to exercise and no
delay in  exercising,  on the part of the  Bank,  any  right,  remedy,  power or
privilege  hereunder shall operate as a waiver thereof;  nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further  exercise  thereof or the exercise of any other right,  remedy,
power or privilege. The rights, remedies,  powers and privileges herein provided
are cumulative and not exclusive of any rights, remedies,  powers and privileges
provided by law.

     Section   8.04.   Survival   of   Representations   and   Warranties:   All
representations  and warranties made herein and in any document,  certificate or
statement  delivered pursuant hereto or in connection herewith shall survive the
execution and delivery of this Agreement and the Notes.

     Section 8.05. Payment of Expenses and Taxes: The Borrowers agree (a) to pay
or reimburse the Bank for all its  reasonable  out-of-pocket  costs and expenses
incurred in connection with the  development,  preparation and execution of, and
any amendment,  supplement or modification to, this Agreement, the Notes and the
other Loan Documents and any other documents prepared in connection  herewith or
therewith,   and  the  consummation  and   administration  of  the  transactions
contemplated hereby and thereby,  including,  without limitation, the reasonable
fees and  disbursements of counsel to the Bank, (b) to pay or reimburse the Bank
for all its costs and expenses  incurred in connection  with the  enforcement or
preservation  of any rights  under  this  Agreement,  the Notes,  the other Loan
Documents  and any such other  documents,  including,  without  limitation,  the
reasonable  fees and  disbursements  of  counsel  to the  Bank,  and (c) to pay,
indemnify,  and hold the Bank  harmless  from,  any and all recording and filing
fees and any and all liabilities with respect to, or resulting from any delay in
paying,  stamp,  excise  and  other  taxes,  if any,  which  may be  payable  or
determined  to be payable in


                                       34
<PAGE>

connection with the execution and delivery of, or consummation or administration
of any of the  transactions  contemplated  by, or any  amendment,  supplement or
modification  of,  or any  waiver  or  consent  under  or in  respect  of,  this
Agreement, the Notes, the other Loan Documents and any such other documents, (d)
to pay, indemnify, and hold the Bank harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,  expenses or disbursements of any kind or nature  whatsoever with respect
to the execution, delivery, enforcement,  performance and administration of this
Agreement, the Notes, the other Loan Documents and any such other documents (all
the foregoing in this clause (d), collectively,  the "Indemnified Liabilities"),
and (e) to pay,  indemnify,  and hold the Bank  harmless  from and  against  all
Indemnified Liabilities (except counsel fees and expenses) arising out of, or in
connection  with any litigation or  administrative  proceeding or arbitration in
which the Bank is not a named  party,  but which relate to the Loans and/or this
transaction.  The agreements in this Section 8.05 shall survive repayment of the
Notes and all other amounts payable hereunder.

     Section 8.06.  Successors and Assigns: This Agreement shall be binding upon
and inure to the benefit of each of the Borrowers,  the Bank, all future holders
of the  Notes and their  respective  successors  and  assigns,  except  that the
Borrowers  may not assign or transfer any of their rights or  obligations  under
this Agreement without the prior written consent of the Bank.

     Section  8.07.  Sale/Participations:  The Bank  reserves  the right to sell
participations  in or to sell and assign its rights,  duties or obligations with
respect to the Loans or the Commitment to such banks,  lending  institutions  or
other parties as it may choose and without the consent of the  Borrowers,  which
consent is deemed to be granted.

     Section  8.08.  Setoff:  In addition to any rights and remedies of the Bank
provided  by law,  the Bank shall have the right,  without  prior  notice to the
Borrowers, any such notice being expressly waived by the Borrowers to the extent
permitted by  applicable  law,  upon any amount  becoming due and payable by the
Borrowers  hereunder  or under the Notes  (whether  at the stated  maturity,  by
acceleration  or  otherwise),  and any grace periods  therefor have expired,  to
set-off and  appropriate  and apply  against  such  amount any and all  deposits
(general or special, time or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect,  absolute or contingent,  matured or unmatured,  at any time
held or owing by the Bank or any  branch or agency  thereof to or for the credit
or the account of any of the Borrowers.  The Bank agrees  promptly to notify the
Borrowers after any such set-off and application made by the Bank, provided that
the failure to give such notice  shall not affect the  validity of such  set-off
and application.

     Section 8.09.  Counterparts:  This Agreement may be executed by one or more
of the parties to this Agreement on any number of separate counterparts, each of
which  shall be  deemed to be an  original  and all of said  counterparts  taken
together shall be deemed to constitute one and the same agreement.  A set of the
copies  of  this  Agreement  signed  by all  the  parties  shall  be sent to the
Borrowers and the Bank.

     Section  8.10.  Severability:  Any  provision  of this  Agreement  which is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such


                                       35
<PAGE>

prohibition or unenforceability  without  invalidating the remaining  provisions
hereof, and any such prohibition or  unenforceability  in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.

     Section 8.11.  Integration:  This  Agreement  and the other Loan  Documents
represent the entire agreement of the Borrowers and the Bank with respect to the
subject  hereof,  and there are no promises,  undertakings,  representations  or
warranties by the Borrowers or the Bank relative to subject hereof not expressly
set forth or referred to herein or in the other Loan Documents.

     Section 8.12.  Governing  Law: THIS  AGREEMENT AND THE NOTES AND THE RIGHTS
AND  OBLIGATIONS  OF THE  PARTIES  UNDER THIS  AGREEMENT  AND THE NOTES SHALL BE
GOVERNED BY, AND CONSTRUED AND  INTERPRETED IN ACCORDANCE  WITH, THE LAWS OF THE
STATE OF NEW YORK  WITHOUT  REGARD TO THE  CONFLICTS OF LAW  PROVISIONS  THEREOF
(OTHER THAN SECTION 5-1401 OF NEW YORK'S GENERAL OBLIGATIONS LAW).

     Section 8.13.  Submission  To  Jurisdiction/Waivers:  The Borrowers  hereby
irrevocably and unconditionally:

          (a)  submits  for  itself  and its  property  in any  legal  action or
proceeding  relating to this  Agreement and the other Loan Documents to which it
is a party,  or for  recognition  and  enforcement  of any  judgment  in respect
thereof, to the non-exclusive general jurisdiction of the Courts of the State of
New York (for New York,  Rockland and Westchester  Counties only), the courts of
the  United  States of  America  for the  Southern  District  of New  York,  and
appellate courts from any thereof;

          (b) consents that any such action or proceeding may be brought in such
courts and waives any objection  that it may now or hereafter  have to the venue
of any such  action or  proceeding  in which such  court or that such  action or
proceeding was brought in an inconvenient forum and agrees not to plead or claim
the same;

          (c) agrees that  service of process in any such  action or  proceeding
may be effected by mailing a copy thereof by  registered  or certified  mail (or
any substantially  similar form of mail),  postage prepaid,  to the Borrowers at
their  address set forth in Section  8.02 or at such other  address of which the
Bank shall have been notified pursuant thereto; and

          (d)  agrees  that  nothing  herein  shall  affect  the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction.

     Section 8.14. Acknowledgments: The Borrowers hereby acknowledge that:

          (a) they have been  advised by counsel in the  negotiation,  execution
and delivery of this Agreement, the Notes and the other Loan Documents;


                                       36
<PAGE>

          (b) except for its depository  relationship  with the  Borrowers,  the
Bank has no fiduciary  relationship with or duty to the Borrowers arising out of
or in connection with this Agreement or any of the other Loan Documents, and the
relationship between Bank, on one hand, and the Borrowers, on the other hand, in
connection herewith or therewith is solely that of debtor and creditor; and

          (c) no  partnership  or joint venture exists between the Borrowers and
the Bank.

     Section  8.15.  Waiver Of Jury  Trial:  THE  BORROWERS  AND THE BANK HEREBY
IRREVOCABLY  AND  UNCONDITIONALLY  WAIVE  TRIAL BY JURY IN ANY  LEGAL  ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT, THE NOTES, OR ANY OTHER LOAN DOCUMENT AND
FOR ANY COUNTERCLAIM THEREIN.

     Section 8.16.  Revised Article 9 of the UCC:  Borrowers will cooperate with
Bank to execute all documents  reasonably  necessary to preserve and protect the
Bank's  security  interest in Collateral  and to  effectuate  the intent of this
Agreement as may be affected by the adoption of Revised  Article 9 of the UCC in
the various  jurisdictions  where Collateral  exists and to implement  necessary
transition  rules with respect  thereto.  Borrowers will agree to pay reasonable
costs in connection  therewith  including  filing fees and  reasonable  attorney
fees.

     Section 8.17. Temporary Waiver from Bank:  Notwithstanding anything in this
Credit  Agreement  or any other Loan  Documents  to the  contrary,  Bank  hereby
consents to the  continuation of the  pre-existing  lien in favor of The Bank of
New York  ("BNY") on the assets of  National  and its  Subsidiaries,  and to the
continued  reimbursement  obligations and  guarantees,  but only insofar as they
relate to one  continuing  standby  letter  of credit  issued by BNY in the face
amount of $175,000. National agrees to cause that standby letter of credit to be
returned to BNY for  cancellation,  undrawn,  promptly after Bank issues its own
standby letter of credit in the same face amount as a replacement  therefor.  It
is anticipated  that such  substitution  would occur within ten (10) days of the
Closing Date. Once the BNY standby letter of credit is so cancelled,  Bank shall
be authorized to file appropriate UCC termination statements pertaining thereto,
in accordance with a certain letter  agreement among National,  its Subsidiaries
and BNY dated of even date herewith.


              [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]


                                       37
<PAGE>

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

                                      NATIONAL HOME HEALTH CARE CORP.

                                      By:____________________________________
                                            Name:  Robert P. Heller
                                            Title: Chief Financial Officer

                                      HEALTH ACQUISITION CORP.

                                      By:____________________________________
                                            Name:  Robert P. Heller
                                            Title: Chief Financial Officer

                                      NEW ENGLAND HOME CARE, INC.

                                      By:____________________________________
                                             Name:  Robert P. Heller
                                             Title: Chief Financial Officer

                                      ACCREDITED HEALTH SERVICES, INC.

                                      By:_____________________________________
                                             Name:  Robert P. Heller
                                             Title: Chief Financial Officer

                                      CONNECTICUT STAFFING WORKS CORP.

                                      By:____________________________________
                                             Name:  Robert P. Heller
                                             Title: Chief Financial Officer

                                      HSBC BANK USA

                                      By:_____________________________________
                                             Name:  William L. Meli
                                             Title: Assistant Vice President


                                       38
<PAGE>

STATE OF NEW YORK          )
                            ss.:
COUNTY OF WESTCHESTER      )

     On the 24th day of  October,  2001,  before me, the  undersigned,  a Notary
Public in and for said State,  personally  appeared ROBERT P. HELLER  personally
known to me or  proved  to me on the basis of  satisfactory  evidence  to be the
individual whose name is subscribed to the within instrument and he acknowledged
to me that he executed the same in his capacities,  and that by his signature on
the  instrument,  the  individual,  or the  persons  upon  behalf  of which  the
individual acted, executed the instrument.


                                  ------------------------------
                                  Notary Public


STATE OF NEW YORK          )
                            ss.:
COUNTY OF WESTCHESTER      )

     On the 24th day of  October,  2001,  before me, the  undersigned,  a Notary
Public in and for said  State,  personally  appeared  WILLIAM L MELI  personally
known to me or  proved  to me on the basis of  satisfactory  evidence  to be the
individual whose name is subscribed to the within instrument and he acknowledged
to me that he executed the same in his  capacity,  and that by his  signature on
the  instrument,  the  individual,  or the  person  upon  behalf  of  which  the
individual acted, executed the instrument.


                                  ------------------------------
                                  Notary Public


                                       39
<PAGE>

                                    EXHIBIT A
                                    ---------

                            REVOLVING PRIME RATE NOTE


                                       40
<PAGE>

                                   EXHIBIT A1
                                   ----------

                            REVOLVING LIBOR RATE NOTE


                                       41
<PAGE>

                                    EXHIBIT B
                                    ---------

                               SECURITY AGREEMENT


                                       42
<PAGE>

                                    EXHIBIT C
                                    ---------

                           BORROWING BASE CERTIFICATE


                                       43
<PAGE>

                                    EXHIBIT D
                                    ---------

                       BORROWERS' SECRETARY'S CERTIFICATES


                                       44
<PAGE>

                                    EXHIBIT E
                                    ---------

                         OPINION OF COUNSEL TO BORROWERS




                                       45
<PAGE>

                                  SCHEDULE 3.06
                                  -------------

                                   LITIGATION


           None, other than Sunstar litigation (previously disclosed).


                                       46
<PAGE>

                                  SCHEDULE 3.13
                                  -------------

<TABLE>
<CAPTION>

                                  SUBSIDIARIES


      Name of Subsidiary                   State of Incorporation                      Owned By

<S>                                             <C>                        <C>
Accredited Health Services, Inc.                New Jersey                 National Home Health Care Corp.

Connecticut Staffing Works Corp.                Connecticut                National Home Health Care Corp.

Health Acquisition Corp.                         New York                  National Home Health Care Corp.

National HMO (N.Y.) Inc.                         Delaware                  National Home Health Care Corp.

New England Home Care, Inc.                     Connecticut                National Home Health Care Corp.

</TABLE>


                                       47
<PAGE>

                                  SCHEDULE 3.15
                                  -------------

                              ENVIRONMENTAL MATTERS


                                      NONE



                                       48
<PAGE>

                                  SCHEDULE 3.17
                                  -------------

                               PLACES OF BUSINESS

<TABLE>
<CAPTION>

     Name              UCC Filing        Chief Exec. Office & Principal          Other               Other Names
                         Office                Place of Business*              Locations            Within Past 5
                                                                                                        Years

<S>                    <C>             <C>                                    <C>                <C>
   National              Delaware           700 White Plains Rd.,                 None                  None
                                            Scarsdale, NY  10583

  Accredited            New Jersey        235 Moore St., Hackensack,          Elsewhere in              None
                                                       NJ                          NJ

Conn. Staffing         Connecticut       57 Plains Rd., Milford, CT               None                  None
                                                    06460

 Health Acquis.          New York       175-20 Hillside Ave., Jamaica,        Elsewhere in       d/b/a Allen Health
                                                   NY 11432                        NY              Care Services

New Engl. Home         Connecticut       57 Plains Rd., Milford, CT           Elsewhere in              None
                                                    06460                          CT

</TABLE>


                                       49
<PAGE>

                                  SCHEDULE 3.19
                                  -------------

                              EXISTING INVESTMENTS


                 Investments in Subsidiaries (per Schedule 3.13)


                                       50
<PAGE>

                                  SCHEDULE 6.02
                                  -------------

                              EXISTING INDEBTEDNESS


               $175,000 Bank of New York Standby Letter of Credit


                                       51
<PAGE>

                                  SCHEDULE 6.03
                                  -------------

                                 EXISTING LIENS


        Liens securing $175,000 Bank of New York Standby Letter of Credit


                                       52
<PAGE>

                                  SCHEDULE 6.04
                                  -------------

                                   GUARANTEES


Guarantees supporting  reimbursement obligation in connection with $175,000 Bank
of New York Standby Letter of Credit



                                       53
<PAGE>

                                TABLE OF CONTENTS


ARTICLE 1.        DEFINITIONS.................................................1
Section 1.01.  Defined Terms:.................................................1
Section 1.02.  Other Definitional Provisions:................................10
ARTICLE 2.        CREDIT FACILITY............................................12
Section 2.01.  Commitments:..................................................12
(a)   Revolving Credit Loan Commitment:......................................12
Section 2.02.  Method of Borrowing Revolving Credit Loans:...................12
(a)   Borrowing Base for Revolving Credit Loans:.............................12
(b)   Notes for Revolving Credit Loans:......................................12
(c)   Procedure for Borrowing Revolving Credit Loans:........................13
(d)   Optional Prepayments of Revolving Credit Loans:........................13
(e)   Mandatory Prepayments of Revolving Credit Loans:.......................13
(f)   Prepayment/Accrued Interest on Revolving Credit Loans:.................14
(g)   Interest Rates and Payment Dates for Revolving Credit Loans:...........14
(h)   Nature of Borrowings as to Revolving Credit Loans:.....................14
Section 2.03.  Terms Applicable to all Loans:................................15
(a)   Interest Rate:.........................................................15
(b)   Requirements of Law:...................................................15
(c)   Funds/Manner of Payment:...............................................15
(d)   Prepayment Defined:....................................................16
(e)   Late Charge:...........................................................16
(f)   Default Rate:..........................................................16
(g)   Availability Fee:......................................................16
ARTICLE 3.  REPRESENTATIONS AND WARRANTIES...................................16
Section 3.01.  Financial Condition:..........................................16
Section 3.02.  No Change:....................................................17
Section 3.03.  Corporate Existence/Compliance with Law:......................17
Section 3.04.  Corporate Power/Authorization/Enforceable Obligations:........17
Section 3.05.  No Legal Bar:.................................................17
Section 3.06.  No Material Litigation:.......................................18
Section 3.07.  No Default:...................................................18
Section 3.08.  Ownership of Property/Liens:..................................18
Section 3.09.  Taxes:........................................................18
Section 3.10.  Federal Regulations:..........................................18
Section 3.11.  ERISA:........................................................18
Section 3.12.  Investment Company Act/Other Regulations:.....................19
Section 3.13.  Subsidiaries:.................................................19
Section 3.14.  Purpose of Loans:.............................................19
Section 3.15.  Environmental Matters:........................................19
Section 3.16.  Security Interest:............................................19
Section 3.17.  Principal Place of Business:..................................19
Section 3.18.  Eligible Accounts Receivable:.................................20

<PAGE>

Section 3.19.  Investments:...................................................20
Section 3.20.  Disclosure:....................................................20
ARTICLE 4.  CONDITIONS PRECEDENT..............................................20
Section 4.01.  Conditions to Loans:...........................................20
(a)   Loan Documents..........................................................20
(b)   Corporate Proceedings of the Borrower...................................20
(c)   Corporate Documents.....................................................21
(d)   Absence of Legal Proceedings............................................21
(e)   Legal Opinion...........................................................21
(f)   Security Agreement......................................................21
(g)   Audit of Records:.......................................................21
(h)   Evidence of Insurance...................................................21
(i)   Lien Searches...........................................................21
(j)   Borrowing Base Certificate..............................................21
(k)   Non-Default Certificate.................................................21
(l)   Other Loan Documents....................................................22
Section 4.02.  Conditions to All Extensions of Credit:........................22
(a)   Representations and Warranties..........................................22
(b)   No Default..............................................................22
(c)   Borrowing Base Certificate..............................................22
(d)   Additional Matters......................................................22
(e)   Additional Conditions...................................................22
ARTICLE 5.  AFFIRMATIVE COVENANTS.............................................22
Section 5.01. Financial Statements:...........................................22
Section 5.02.  Certificates/Other Information:................................23
Section 5.03.  Payment of Obligations:........................................24
Section 5.04.  Conduct of Business and Maintenance of Existence:..............24
Section 5.05.  Maintenance of Property/Insurance:.............................24
Section 5.06.  Inspection of Property/Books and Records/Discussions:..........24
Section 5.07.  Notices:.......................................................25
Section 5.08.  Environmental Laws:............................................25
Section 5.09.  Subsidiaries:..................................................26
Section 5.10.  Compliance with Laws:..........................................26
Section 5.11.  Compliance with ERISA:.........................................26
Section 5.12.  Borrowing Base:................................................26
Section 5.13.  Commercial Checking Accounts:..................................27
ARTICLE 6.  NEGATIVE COVENANTS................................................27
Section 6.01.  Financial Condition Covenants:.................................27
(a)   Maintenance of Stockholder Equity.......................................27
(b)   Total Senior Liabilities to Total Stockholders' Equity Ratio............27
(c)   Total Senior Liabilities to Tangible Stockholders' Equity...............27
(d)   EBIT to Interest Expense Ratio:.........................................27
Section 6.02.  Limitation on Indebtedness:....................................27
Section 6.03.  Limitation on Liens:...........................................28
Section 6.04.  Limitation on Guarantee Obligations:...........................29


<PAGE>

Section 6.05. Limitations on Fundamental Changes:.............................29
Section 6.06. Limitation on Investments, Loans and Advances:..................30
Section 6.07.  Limitation on Changes in Fiscal Year:..........................30
Section 6.08.  Limitation on Lines of Business:...............................30
Section 6.09. Federal Reserve Regulations:....................................30
ARTICLE 7.  EVENTS OF DEFAULT.................................................31
Section 7.01.  Events of Default/Remedies:....................................31
ARTICLE 8.  MISCELLANEOUS.....................................................33
Section 8.01.  Modification of Agreement:.....................................33
Section 8.02.  Notices:.......................................................33
Section 8.03.  No Waiver/Cumulative Remedies:.................................34
Section 8.04. Survival of Representations and Warranties:.....................34
Section 8.05.  Payment of Expenses and Taxes:.................................34
Section 8.06.  Successors and Assigns:........................................35
Section 8.07.  Sale/Participations:...........................................35
Section 8.08.  Setoff:........................................................35
Section 8.09.  Counterparts:..................................................35
Section 8.10.  Severability:..................................................35
Section 8.11. Integration:....................................................36
Section 8.12. Governing Law:..................................................36
Section 8.13.  Submission To Jurisdiction/Waivers:............................36
Section 8.14.  Acknowledgments:...............................................36
Section 8.15.  Waiver Of Jury Trial:..........................................37
Section 8.16.  Revised Article 9 of the UCC...................................37
Section 8.17.  Temporary Waiver from Bank ....................................37

                                    EXHIBITS

Revolving Prime Rate Note..............................................Exhibit A
Revolving Libor Rate Note.............................................Exhibit A1
Security Agreement.....................................................Exhibit B
Borrowing Base Certificate.............................................Exhibit C
Borrowers's Secretary's Certificate....................................Exhibit D
Opinion of Counsel to Borrowers........................................Exhibit E

                                    SCHEDULES

Litigation.........................................................Schedule 3.06
Subsidiaries.......................................................Schedule 3.13
Environmental Matters..............................................Schedule 3.15
Places of Business.................................................Schedule 3.17
Existing Investments...............................................Schedule 3.17
Existing Indebtedness..............................................Schedule 6.02
Existing Liens.....................................................Schedule 6.03
Existing Guarantees................................................Schedule 6.04

<PAGE>

================================================================================

                                CREDIT AGREEMENT


                                  By and Among

                        NATIONAL HOME HEALTH CARE CORP.,
                            HEALTH ACQUISITION CORP.,
                          NEW ENGLAND HOME CARE, INC.,
                      ACCREDITED HEALTH SERVICES, INC., and
                 CONNECTICUT STAFFING WORKS CORP., as Borrowers


                                       and

                            HSBC BANK USA, as Lender



                          Dated as of October 24, 2001


                     $7,500,000.00 Revolving Credit Facility


                                  Prepared By:


         DELBELLO DONNELLAN WEINGARTEN TARTAGLIA WISE & WIEDERKEHR, LLP
                           One North Lexington Avenue
                          White Plains, New York 10601

================================================================================