SECOND SUPPLEMENTAL AGREEMENT


                SECOND SUPPLEMENTAL  AGREEMENT  ("Agreement") made as of October
____ , 1996 between CHRYSLER PROPERTIES INC, a California  corporation having an
office at 405 Lexington Avenue,  New York New York 10174  ("Landlord") and MERIT
BEHAVIORAL  CARE  CORPORATION,  a Delaware  corporation  having an office at One
Maynard Drive Park Ridge, New Jersey 07656 ("Tenant").

                            W I T N E S S E T H

                WHEREAS:

                A. Landlord and Tenant  heretofore  entered into a certain lease
dated as of August 14,  1991 and a First  Supplemental  Agreement  dated May 31,
1996  ("Lease") with respect to the entire 5th floor and the entire 6th floor as
more  particularly  described in the Lease ("Demised  Premises") in the building
known  as The Kent  Building,  666  Third  Avenue,  New  York,  New  York  10017
("Building"); and

                B. The parties hereto desire to modify the Lease to provide for,
among  other  things,  an  addition  to the  Demised  Premises  on the terms and
conditions hereinafter set forth.
                NOW,  THEREFORE,  in  consideration  of the  premises and mutual
covenants hereinafter contained, the parties hereto agree as follows:

                1. All  terms  contained  in this  Agreement,  unless  otherwise
defined herein,  shall, for the purposes hereof,  have the same meaning ascribed
to them in the Lease.

                2. All of the terms,  covenants and provisions of this Agreement
shall be effective October 1, 1996 ("Effective Date").

                3.  Section 1.2 of the Lease is hereby  modified to provide that
the  Demised  Premises  shall  include  the  following  additional  space in the
building known as the Chrysler  Building,  405 Lexington  Avenue,  New York, New
York 10174 ("Chrysler Building"):

                A  portion  of the  47th  floor  containing  approximately  four
                thousand  four hundred  (4,400)  square feet,  substantially  as
                shown  hatched on the floor plan  annexed  hereto as Exhibit "A"
                ("Second Added Space").

                Tenant  acknowledges  that Tenant has  examined the Second Added
Space and accepts the Second Added Space "as is", in the  condition and state of
repair  existing  on the date  hereof  subject to normal  wear and tear.  Tenant
acknowledges that no work is to be performed,  or materials supplied by Landlord
in connection therewith,  except for (i) the "Tenant's Second Construction Work"
as hereinafter  defined) and (ii) that Landlord shall provide to Tenant an ACP-5
form for filing with  respect to the  Tenant's  Construction  Work to the Second
Added Space.

                4.  Section  1.4 (a) of the Lease is hereby  modified to provide
that the annual fixed rent  payable for the Second  Added Space  pursuant to the
Lease shall be as follows:

                      a) for the period October 1, 1996 through  October 31,
                      2002,  one hundred  twenty five  thousand four hundred
                      dollars and no cents ($125,400.00) per annum; and

                      b) for the period from  November  1, 2002  through the
                      Expiration  Date,  one hundred  thirty eight  thousand
                      six  hundred  dollars and no cents  ($138,600.00)  per
                      annum.

                5.  Article 5 of the Lease is hereby  modified  to  provide  the
following with respect to the Second Added Space only:

                a) Tenant's  Proportionate  Share as set forth in subsection
                5.1 (c) shall mean .00469.

                b) the following  shall be added as subsection 5.1 (d); "Area of
                the  Premises"  shall mean the rentable  square foot area of the
                Demised  Premises  (which  the  parties  have  agreed,  for  the
                purposes of this Article 5 shall be 4,400 rentable squre feet).

                c) the  following  shall  be added  as  subsection  5.1 (h);
                "Hourly Wage Rate" as respects any Operation Year shall mean

                (A) as to porters, the minimum hourly wage rate prescribed to be
                paid to porters appropriately by applicable labor agreements and
                computed  on  an  hourly  basis,   in  major  office   buildings
                (hereinafter called "Class A Office Buildings") and in effect as
                of  January 1 in such  Operation  Year (or if such rate shall be
                subject  to change  during an  Operation  Year then the  average
                thereof  for such  Operation  Year as  reasonably  estimated  or
                calculated  by Landlord)  pursuant to an  agreement  between the
                Realty Advisory Board on Labor  Relations,  Incorporated (or any
                successor  thereto)  and  Local  32B  of the  Service  Employees
                International Union, AFL-CIO (or any successor thereto) covering
                the wage rates of porters in Class A Office Buildings, and

               (B) as to female cleaners,  the minimum hourly wage prescribed to
               be paid to female  cleaners by applicable  labor  agreements  and
               computed on an hourly basis,  in Class A Office  Buildings and in
               effect as of  January 1 in such  Operation  Year (or if such rate
               shall be  subject  to change  during an  Operation  Year then the
               average  thereof for such Operation Year as reasonably  estimated
               or calculated by Landlord)  pursuant to an agreement between said
               Board (or any successor  thereto) and Local 32J of said Union (or
               any successor thereto) covering the wage rates of female cleaners
               in Class A Office Buildings;

                      which said minimum  hourly wage rates shall be computed on
               the basis of the total weekly amount  required to be paid to said
               porters and female  cleaners  in the  Building  for regular  work
               weeks with respect to porters and with respect to female cleaners
               (exclusive  of any  overtime or premium pay work in such  regular
               work weeks).  Such total weekly amounts shall be exclusive of all
               payments or benefits of every  nature and kind  (including  those
               required  to be  paid  by the  employer  directly  to the  taxing
               authorities or others on account of the employment)  such as, but
               without   limiting  the  generality  of  the  foregoing,   social
               security,  unemployment and all other similar taxes,  holiday and
               vacation  pay,  incentive  pay,  accident,   health  and  welfare
               insurance  programs,  pension  plans,  guarantee  pay  plans  and
               supplemental  unemployment benefit programs, and fringe benefits,
               payments,  plans or programs of a similar or  dissimilar  nature,
               irrespective  of whether  they may be required or provided for in
               any  applicable  law or regulation  or otherwise.  If there is no
               such  agreement  in effect as of any such  January 1 by which the
               Hourly  Wage  Rate  for   porters  or  for  female   cleaners  is
               determinable,  computations  and payments shall thereupon be made
               upon the basis of the Hourly  Wage Rate being paid by Landlord or
               by the contractor  performing the cleaning  services for Landlord
               on such  January 1 for said  porters or female  cleaners,  as the
               case  may  be,  and  appropriate   retroactive  adjustment  shall
               thereafter be made when the Hourly Wage Rate paid on such January
               1 pursuant to such  agreement for porters or for female  cleaners
               is finally determined and provided further that if as of the last
               day of such Operation Year no such agreement covering the January
               1 occurring in such Operation Year shall have been in effect, the
               Hourly Wage Rate paid by Landlord or by the contractor performing
               the  cleaning  services  for  Landlord on such January 1 for said
               porters and female cleaners, as the case may be, shall be for all
               purposes  hereof deemed to be such Hourly Wage Rate prescribed by
               such an  agreement  and in effect as of such  January  1. As used
               herein,  the term  "porters"  shall mean that  classification  of
               employee  engaged in the general  maintenance  and  operation  of
               office  buildings most nearly  comparable to that  classification
               now  applicable  to porters in the  current  agreement  with said
               Local 32B (which  classification  is presently termed "others" in
               said agreement).

                      d) the  following  shall be added as  subsection  5.1 (i);
               "Labor  Rate" for any  Operation  Year  shall mean the sum of the
               Hourly  Wage Rate for the  category of  employees  defined in the
               contract above as "others".

                      e) the  following  shall be added  as  subsection  5.1
               (j);  "Base  Labor  Rate" shall mean the Labor Rate in effect
               on December 31, 1997.

                      f) the  following  shall be added as  subsection  5.1 (l);
               "Ground  Rent"  shall mean any ground  rent  payable by  Landlord
               pursuant  to any ground  lease or ground  leases or  modification
               thereof affecting the Land and/or the Chrysler Building.

                      g) the  following  shall be added  as  subsection  5.1
               (m);  "Ground  Rent Base Year" shall mean the  calendar  year
               1997.

               5.2. If the Real  Estate  Taxes for any Tax Year shall be greater
               than the Real Estate Tax Base,  then Tenant shall pay to Landlord
               as  additional  rent for such Tax Year,  an  amount  equal to the
               Tenant's  Proportionate  Share  of  such  excess.  Tenant  hereby
               acknowledges  that Landlord is obligated to make a tax equivalent
               payment or payments in lieu of Real Estate  Taxes  pursuant to an
               existing ground lease affecting the Land and/or Chrysler Building
               (or  any  modifications  or  amendments  thereof)  or new  ground
               lease(s). Tenant shall make payment of additional rent on account
               of   Real   Estate   Taxes   pursuant   to  this   Section   5.2,
               notwithstanding  the  amount  or  amounts  Landlord  pays  or  is
               obligated to pay pursuant to the aforesaid ground lease or ground
               leases except that if the tax  equivalent  payment or payments in
               lieu of Real Estate  Taxes for any Tax Year shall exceed the Real
               Estate Taxes for such Tax Year such payment or payments  shall be
               deemed to be Real Estate Taxes for the purpose of determining any
               excess  thereof  over the Real  Estate Tax Base  pursuant to this
               Section 5.2.

               5.3.  If the Labor Rate for any  Operation  Year shall be greater
               (resulting  in an excess)  than the Base Labor Rate,  then Tenant
               shall pay to Landlord as additional  rent for such Operation Year
               an amount equal to the product  obtained by  multiplying  (a) the
               Area of the  Premises,  times (b) 1.0,  times  (c) the  number of
               cents  (including any fraction of a cent) by which the Labor Rate
               for such Operation Year exceeds the Base Labor Rate.

               5.12.  If the Ground Rent for any  calendar  year in which occurs
               any part of the term of this Lease  shall be more than the Ground
               Rent  for  the  Ground  Rent  Base  Year,  Tenant  shall  pay  as
               additional  rent  for  such  calendar  year an  amount  equal  to
               Tenant's  Proportionate  Share of the  amount by which the Ground
               Rent for such  calendar  year is greater than the Ground Rent for
               the Ground Rent Base Year (such amount is hereinafter  called the
               "Ground Rent Payment").  The Ground Rent Payment shall be payable
               by Tenant to  Landlord  within ten (10) days  after  receipt of a
               demand from Landlord therefor,  which demand shall be accompanied
               by a statement showing Landlord's  computation of the Ground Rent
               Payment."

        6.     The amount in  Section  16.3(a)  and in Section  16.4 for the
Electric Charge shall be $11,000.00 per annum for the Second Added Space.

        7. Provided that Tenant shall not then be in default of any of the terms
and  conditions  of the  Lease,  Tenant  shall  receive  a rental  credit of (i)
$9,533.33 per month for the period  October 1, 1996 through  September 30, 1997;
(ii) a rental  credit of $9,533.33 per month for the months of December of 1997,
January and February of 1998;  and (iii) a rental credit of $10,633.33 per month
for the months of November and December of 2002 and for the period of January 1,
2003 thru October 31, 2003.

               Tenant  acknowledges  that  Landlord's  agreement  to  provide to
Tenant the rent credit  provided in this  paragraph 7 has been granted to Tenant
as a  material  part  of the  consideration  for  Tenant's  entering  into  this
Agreement,  timely paying the rentals reserved in the Lease and otherwise timely
performing  and observing the terms and  conditions to be performed and observed
by Tenant under the Lease. Accordingly,  if after having received the benefit of
all or any part of this rent credit,  Tenant  shall  default in  performing  and
observing the terms and  conditions to be performed and observed by Tenant under
the Lease,  Landlord  may, in addition to any other  remedies  Landlord may have
under this Lease,  at its option,  elect that Tenant  shall  immediately  become
obligated to pay to Landlord all rent theretofore credited to Tenant pursuant to
this paragraph 7. In addition, if this Lease shall be terminated pursuant to the
provisions of Article 25 or Article 26, all rent credited to Tenant  pursuant to
this  paragraph 7 and including the date of  termination,  shall,  at Landlord's
option, be deemed immediately due and payable.
        8. Tenant  acknowledges that Landlord has entered into an agreement with
McBride  Corporate  Real Estate  ("McBride"),  one of the brokers  identified in
paragraph 17 of this Agreement,  which provides, among other things, that at the
request of Landlord  and  McBride,  one or more  installments  of the  brokerage
commission  payable  by  Landlord  to  McBride  shall  be  paid  by  Tenant,  in
consideration  of which Tenant shall  receive a rent credit in the amount of the
payment made by Tenant to McBride on  Landlord's  behalf.  Tenant agrees that if
Landlord and McBride shall so request  payment by Tenant of commissions  payable
by Landlord to McBride,  Tenant shall make the  requested  payment and upon such
payment shall be entitled to an unconditional and automatic rent credit equal to
the amount of such payment, such credit to be provided to Tenant with respect to
the rent  installment  payable  for the month in which the  payment by Tenant to
McBride shall have been made.

        9. Landlord  agrees that it shall cause the  improvements  to the Second
Added  Space  to  be   constructed   in  accordance   with  detailed  plans  and
specifications   (walls,   doors,  ceiling,   lighting,   paint,  carpet,  HVAC,
electrical,   millwork,   class  E  devices,   etc.,  but  excluding  furniture,
furnishings, office equipment, telephone equipment, etc.) prepared by and at the
expense of Tenant in accordance  with Article 13 of the Lease (the  construction
of such improvements herein, the "Tenant's Second Construction Work"); provided,
however,  that  Landlord  shall not be obligated to fund any part of the cost of
the Tenant's Second  Construction Work in excess of two hundred thousand dollars
and no cents  ($200,000.00)("Tenant  Improvement  Allowance Two").  Tenant shall
submit  complete,  detailed  architectural  and mechanical  drawings to Landlord
within thirty (30) days of the execution of this Agreement for Landlord's review
and comment as provided in Section 13.1.  Tenant's architect shall be subject to
Landlord's  reasonable approval.  Upon Landlord's approval of the detailed plans
and specifications,  Landlord shall seek competitive bids on the Tenant's Second
Construction  Work from  reputable,  responsible  general  contractors who shall
comply with the  requirements of the Lease,  including the provisions of Section
13.3. Within five (5) days after receipt of the bids,  Landlord and Tenant shall
select for the  performance  of Tenant's  Second  Construction  Work, the single
qualified  contractor which shall have submitted the lowest bid ("Bid").  If the
total cost of the Tenant's Second Construction Work, based upon the accepted Bid
exceeds the amount of the Tenant Improvement  Allowance Two, then in such event,
Tenant shall,  within five (5) days of receipt of the bid, either pay the amount
of the overage to Landlord  ("Tenant  Improvement  Payment Two"),  or revise the
scope of the Tenant's Second  Construction  Work to achieve a cost less than the
Tenant   Improvement   Allowance   Two  by  revising  the  detailed   plans  and
specifications  so that  Landlord may seek revised  pricing from the  acceptable
contractor,  which will be presented once more to Tenant for Tenant's reasonable
acceptance of price. Notwithstanding that the amount of the Bid may be less than
the amount of the  Tenant  Improvement  Allowance  Two,  the Tenant  Improvement
Allowance Two shall remain at the amount of two hundred  thousand dollars and no
cents ($200,000.00). The difference between the amount of the Bid and the Tenant
Improvement  Allowance Two shall be deemed to be a fund which shall be the first
sums used to pay for any additional Tenant Improvements requested by Tenant.

        Upon final acceptance of the Bid either at a price which does not exceed
the Tenant  Improvement  Allowance Two, or upon revision of the scope of work or
the payment of the Tenant Improvement Payment Two, as appropriate, Landlord will
enter in to a contract or contracts with the  contractor or contractors  awarded
the Tenant's Second Construction Work. Thereafter,  work will commence under the
direction of Landlord and Tenant's  architect.  Tenant agrees to cooperate  with
Landlord  in causing  the  Tenant's  Second  Construction  Work to be  completed
expeditiously.

        Landlord and Tenant  recognize that during the course of construction of
the Tenant's Second  Construction Work, Tenant may desire to amend or revise the
plans and  specifications and scope of the work. If such amendments or revisions
cause an  increase  in the  project  cost in  excess of the  Tenant  Improvement
Allowance  Two (as same may have been  supplemented  by the  Tenant  Improvement
Payment  Two),  then the  increase  shall be payable by Tenant to Landlord  upon
Tenant's  request to Landlord to issue a change order to the  contractor for the
revised scope of work.  Landlord  shall not be obligated to issue a change order
until the payment for the cost thereof is received by Landlord.

        Upon the completion of Tenant's Second  Construction  Work, in the event
the cost is less than the Tenant Improvement Allowance Two, Landlord will credit
the  difference to Tenant in the form of a rent credit,  in a monthly amount not
exceeding  the monthly  rent due  hereunder,  until the  difference  between the
actual cost of the Tenant's Second  Construction Work and the Tenant Improvement
Allowance Two is met, once all invoices have been submitted to Landlord and paid
and Landlord  has been  provided  general  releases and waivers of lien from all
contractors,  subcontractors  and  materialmen  involved in the  performance  of
Tenant's  Second  Construction  Work and the  materials  furnished in connection
therewith,  and a certificate from Tenant's architect certifying that (i) in his
or her opinion,  Tenant's Second  Construction Work has been completed in a good
and workmanlike manner and completed in accordance with the final detailed plans
and   specifications  as  approved  by  Landlord,   and  (ii)  all  contractors,
subcontractors and materialmen have been paid in full.

        10.  Simultaneously  with the execution of this Agreement,  Tenant shall
pay to Landlord as additional  rent, two hundred  thousand  dollars and no cents
($200,000.00).

        11.  Tenant  covenants,  represents  and warrants that Tenant has had no
dealings  or  negotiations  with  any  broker  or agent  other  than  Cushman  &
Wakefield,  Inc and  McBride  Corporate  Real  Estate,  in  connection  with the
consummation  of this  Agreement  and Tenant  covenants  and agrees to pay, hold
harmless and indemnify  Landlord and Cushman & Wakefield,  Inc, from and against
any and all cost,  expense (including  reasonable  attorneys' fees) or liability
for any  compensation,  commissions  or charges  claimed by any other  broker or
agent other than Cushman &  Wakefield,  Inc and McBride  Corporate  Real Estate,
with respect to this Agreement or the negotiation thereof.

        12. This Agreement may not be changed  orally,  but only by an agreement
in writing signed by the party against which enforcement of any waiver,  change,
modification or discharge is sought.

        13. Except as modified by this  Agreement,  the Lease and all covenants,
agreements,  terms and conditions  thereof shall remain in full force and effect
and are hereby in all respects ratified and confirmed.

                14. The covenants, agreements, terms and conditions contained in
this  Agreement  shall bind and inure to the benefit of the  parties  hereto and
their  respective  successors and, except as otherwise  provided in the Lease as
hereby supplemented, their respective assigns.
   IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.


                LANDLORD:
                CHRYSLER PROPERTIES INC


                By:   /s/ Michael R. Dillow
                Michael R. Dillow, Vice President


                TENANT:
                MERIT BEHAVIORAL CARE CORPORATION


                By:   /s/ Louis T. Haggis
                Louis T. Haggis, Vice President - Treasury Operations





<PAGE>







                                 EXHIBIT A

                                 Floor Plan

            All areas, dimensions and conditions are approximate

                           [Diagram- Floor Plan]