<PAGE>

List of Attached Exhibits

10.74            Employee Stock Purchase Plan

10.75            Non-Employee Stock Purchase Plan

10.76            Loan and Security  Agreement by and between PHC of Nevada, Inc.
                 and Linc Anthem Corp.

10.77            Secured  Promissory  Note for $7,500,000 by and between PHC of
                 Nevada, Inc. and Linc Anthem Corp.

10.78            Loan and Security Agreement for $1,000,000 by and between PHC 
                 of Utah, Inc. and HealthPartners Funding LP

10.79            HealthPartners Revolving Credit Note

10.80            Guaranty of HealthPartners Revolving Credit Note

10.81            Stock Pledge by and between PHC, Inc.and Linc Anthem 
                 Corporation

10.82            Asset Purchase Agreement by and between Harmony Counseling, 
                 Inc. and PHC, Inc.

10.83            Asset  Purchase  Agreement by and between Total Concept  
                 Employee Assistance Program, Inc.


27               Current Financial Data Schedule

99.1             Cautionary Statement  for   Purposes  of  the  "Safe   Harbor"
                 Provisions  of the Private  Securities  Litigation  Reform Act
                 of 1995


<PAGE>

EXHIBIT 10.77

                              SECURED PROMISSORY NOTE

$750,000.00
Chicago, Illinois
                                                            November 7, 1995


The undersigned, PHC OF NEVADA, INC. ("Maker"),  promises to pay to the order of
LINC ANTHEM CORPORATION ("LINC") or any holder of this note the principal sum of
SEVEN HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS  ($750,000.00)  in United States
currency at its office at 303 East Wacker Drive,  Chicago,  IL 60601, or at such
other place as the holder hereof may appoint,  plus  interest  thereon at a rate
equal to Ten and 75 One Hundredths  percent  (I0.75%) per annum payable in Forty
Eight (48) consecutive monthly  installments  commencing on December 8, 1995 and
continuing  on the same day of each month  thereafter  as follows in  accordance
with the following schedule:  Six (6) consecutive  monthly  installments each in
the  amount  of  $6,718.75  followed  by  Forty  Two  (42)  consecutive  monthly
installments  each in the amount of $21,505.62 until the entire principal amount
plus all accrued interest and other charges due LINC have been paid in full.

Interest shall accrue from the date of initial  disbursement  hereof computed on
the basis of a 360-day year provided further that the aggregate interest payable
hereunder shall not exceed the maximum rate permitted by law.  Provided that all
payments  required to be made under this Note have been made in a timely manner,
Maker may voluntarily  prepay not less than all of the unpaid principal  balance
remaining  plus all accrued and unpaid  interest  due  thereon  together  with a
prepayment fee equal to a percentage of the then unpaid principal balance of the
Note. The prepayment fee percentage  shall be (a) 4% if prepayment  occurs after
the date hereof but prior to November  30,  1996;  (b) 3% if  prepayment  occurs
after  November 30, 1996 but prior to November 30,  1997;  (c) 2% if  prepayment
occurs  after  November  30, 1997 but prior to  November  30, 1998 and (d) 2% if
prepayment occurs after November 30, 1998.

In the event the entire  principal  amount is not  advanced by LINC to the Maker
hereof, principal payments will be reduced on a pro rata basis.

If any payment of principal or interest to be made  hereunder  shall become past
due for a period in excess of five (5) days,  Maker  shall pay a late  charge of
two percent  (2%) of such  overdue  payment for each month or portion of a month
for which such  payment  shall  remain  unpaid  plus LINC's  expenses  resulting
therefrom  together with collection  expenses and reasonable  attorneys' fees if
placed with an attorney for collection.

Demand,  presentment  for payment,  notice of non-payment and protest are hereby
waived by the undersigned.

     This Note is  secured  by and  entitled  to (i) the  benefits  of a certain
Security Agreement dated as of


<PAGE>


November 7, 1995, and (ii) any other  agreements under which the holder has been
granted a lien and  security  interest  in  property  to secure the  payment and
performance  by Maker of this Note (all of the foregoing  hereinafter  sometimes
collectively  referred to as the  "Security  Agreement")  to which  reference is
hereby  made for a  statement  of the nature and  extent of the  protection  and
security  afforded  and the  rights  of the  payee  hereof  and the  rights  and
obligations  of the  undersigned.  LINC's books and records shall be dispositive
evidence of the amount disbursed under this Note. Upon an "Event of Default," as
defined in the  Security  Agreement,  this Note may become or be declared due in
the manner and with the effect provided in the Loan Agreement. The holder hereof
shall not be  required to look to any  collateral  for the payment of this Note,
but may proceed  against  Maker,  or any  guarantor  hereof in such manner as it
deems desirable. None of the rights or remedies of the holder hereunder or under
the  Security  Agreement  are to be deemed  waived or affected by any failure to
exercise same. All remedies conferred upon the holder of this Note, the Security
Agreement or any other  instrument or agreement to which the  undersigned or any
guarantor  hereof  is a party or  under  any or all of them is  bound,  shall be
cumulative and not exclusive, and such remedies may be exercised concurrently or
consecutively at the holder's option.

THIS NOTE SHALL BE GOVERNED BY AND  CONSTRUED  IN  ACCORDANCE  WITH THE LAWS AND
DECISIONS OF THE STATE OF ILLINOIS.  AT HOLDER'S  ELECTION AND WITHOUT  LIMITING
HOLDER'S RIGHT TO COMMENCE AN ACTION IN OTHER JURISDICTION, MAKER HEREBY SUBMITS
TO THE EXCLUSIVE  JURISDICTION AND VENUE OF ANY COURT (FEDERAL,  STATE OR LOCAL)
HAVING SITUS WITHIN THE STATE OF ILLINOIS,  EXPRESSLY WAIVES PERSONAL SERVICE OF
PROCESS AND CONSENTS TO SERVICE BY CERTIFIED MAIL, POSTAGE PREPAID,  DIRECTED TO
THE LAST KNOWN ADDRESS OF MAKER,  WHICH SERVICE SHALL BE DEEMED COMPLETED WITHIN
TEN (10)  DAYS  AFTER  THE DATE OF  MAILING  HEREOF.  MAKER  HEREBY  WAIVES  ANY
OBJECTION TO IMPROPER VENUE, FORUM NON CONVENIENS AND TRIAL BY JURY.

IN WITNESS  WHEREOF,  the undersigned  hereunto sets its hand and seal as of the
date first set forth above.


                               PHC OF NEVADA, INC.
                                       Maker

                                BY____/S/ BRUCE A. SHEAR___________

                                  Title: _______PRESIDENT ___________


note. mas

11/6/95


<PAGE>


Exhibit 10.76

                            LOAN AND SECURITY AGREEMENT,

          THIS LOAN AND SECURITY  AGREEMENT (this  "Agreement") is made November
7, 1995, by and between PHC OF NEVADA, INC. , a Massachusetts corporation,  with
its principal place of business at 200 Lake Street, Peabody, Massachusetts 01960
("Debtor") and LINC ANTHEM CORPORATION , a Delaware corporation,  located at 303
East Wacker Drive, Chicago, IL 60601 ("Secured Party").

                                    WITNESSETH:

     WHEREAS,  Secured  Party wishes to make and Debtor  wishes to receive loans
(hereinafter  individually and collectively referred to as the "Loan") evidenced
by one or more of Debtor's  Promissory  Notes  delivered in connection  herewith
from  time to time  (hereinafter  individually  referred  to as the  "Note"  and
collectively referred to as the "Notes"); and

     WHEREAS,  the Note and all principal  thereof and interest  thereon and all
additional  amounts and other sums at any time due and owing from or required to
be paid by  Debtor  under  the  terms  of  each  Note  and  this  Agreement  are
hereinafter sometimes referred to as the "Indebtedness"; and

     WHEREAS,  in exchange for  receiving  the Loan Debtor will grant to Secured
Party a security  interest in the tangible and  intangible  assets of Debtor and
all proceeds thereof; and

     Whereas,  all of the  requirements of law have been fully complied with and
all other acts and things necessary to make this Agreement a valid,  binding and
legal instrument for the security of each Note have been done and performed;

     NOW, THEREFORE,  in consideration of the covenants and conditions stated in
this Agreement, the parties agree as follows:

           1.  THE, LOAN- ASSIGNMENT, SECURITY INTEREST.

      1.01 Loan Amount-  Subject to the terms and conditions of this  Agreement,
Secured Party agrees to make a Loan to Debtor in the aggregate  principal amount
of the lesser of $750,000 on or before November 7, 1995 with an interest rate of
10. 75 % per annum.  The proceeds of the Loan shall be directed by Secured Party
to those persons identified by Debtor in writing at the time the Loan is made.

     1.02 The Note Each Note  shall:  (a) be dated the date on which the Loan is
made;  (b) be in the  principal  amount of the Loan;  (c) bear  interest  on the
unpaid principal amount thereof at the Discount Rate; and (d) be transferable by
the holder thereof. The form of the Note is attached as Exhibit A.

     1.03 Loan  Deliveries.  In connection  with the initial Loan,  Debtor shall
deliver or cause to be  delivered  to  Secured  Party the  following  documents,
certificates, opinions of counsel, and

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11/6/95



<PAGE>


     agreements, in form and substance satisfactory to Secured Party:

                 (a)   A certified copy of the Articles of Incorporation and By
Laws of
           Debtor as amended and restated through November 7, 1995;

     (b) Certificates of authority and incumbency to enter into this transaction
in a form acceptable to Secured Party ;

     (c) Opinion of Debtor's counsel in a form acceptable to Secured Party;

     (d) A Corporate Guaranty issued by PHC, Inc., PHC of Rhode Island, Inc. and
PHC of Virginia,  Inc. in favor of Secured Party in a form acceptable to Secured
Party ("Corporate Guaranty");

                 (e) A  Security  Agreement  issued by PHC,  Inc.,  PHC of Rhode
Island,  Inc.  and PHC of  Virginia,  Inc.  in  favor of  Secured  Party in form
acceptable  to Secured  Party  granting  Secured  Party a security  interest and
collateral  assignment of all accounts  receivables  and related  rights of PHC,
Inc. now owned or hereafter created by PHC, Inc., PHC of Rhode Island,  Inc. and
PHC of  Virginia,  Inc.  ("PHC  Security  Agreement')  except  for any  accounts
receivable sold to and purchased by LINC Finance  Corporation  VIII under either
(i) that  certain  Sale and  Purchase  Agreement  dated as of January  20,  1995
between PHC of Rhode Island, Inc. and LINC FINANCE CORPORATION VIII or (ii) that
certain  Sale and  Purchase  Agreement  dated as of March 6, 1995 between PHC of
Virginia,  Inc. and LINC FINANCE CORPORATION VIII (collectively the "Receivables
Agreement")  and  subject  only  to  the  security   interest  of  LINC  Finance
Corporation VIII granted to LINC Finance  Corporation VIII under the Receivables
Agreement;

                 (f) UCC-1 financing  statements naming the Debtor as debtor and
Secured Party as secured  party,  executed by Debtor for filing by Secured Party
for acknowledgment by the appropriate recording offices where the Collateral, as
hereafter defined, is located;

     (g) UCC-1 financing  statements  naming the PHC, Inc. as debtor and Secured
Party as secured  party,  executed by PHC,  Inc. for filing by Secured Party for
acknowledgment  by the appropriate  recording offices where the collateral under
the PHC Security Agreement is located;

     (h) UCC-1  financing  statements  naming the PHC of Rhode  Island,  Inc. as
debtor and Secured Party as secured party, executed by PHC of Rhode Island, Inc.
for filing by Secured Party for acknowledgment by the appropriate recording
offices where the collateral under the PHC Security Agreement is located;

     (i) UCC-1 financing  statements naming the PHC of Virginia,  Inc. as debtor
and Secured Party as secured party, executed by PHC of Virginia, Inc. for

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11/1/95
2


<PAGE>


filing by Secured Party for acknowledgment by the appropriate  recording Offices
where the collateral under the PHC Security Agreement is located; and

                 (j) Such other instruments and documents as required by Secured
Party  including  a direction  to LINC  Finance  Corporation  VIII to remit sums
otherwise  payable to PHC, Inc., PHC of Rhode Island,  Inc. and PHC of Virginia,
Inc. under the Receivables  Agreement to I-lender upon the occurrence of certain
events.

     I.      DEFINED  TERMS.  Capitalized  terms not otherwise  defined  herein
     shall have the meanings given such terms in the Note.

     2.    COLLATERAL.

     (a)  GRANT OF  SECURITY  - To  secure  the  prompt  and  complete  payment,
     observance and  performance of all of the  obligations  and  liabilities of
     Debtor  under  the  Note and the  payment  of sums  due and to  become  due
     thereunder and all other  obligations  and liabilities of Debtor to Secured
     Party  (whether or not evidenced by a note or other  instrument or document
     and whether or not for the payment of money)  direct or indirect,  absolute
     or  contingent,  due or to  become  due,  now  existing  or  hereafter  and
     howsoever  arising,  including without  limitation,  Costs and Expenses (as
     defined  in  Section  6)  in  connection   therewith   (collectively,   the
     "Liabilities"), Debtor hereby assigns and pledges to the Secured Party, and
     hereby grants to Secured Party, a security  interest in all of the Debtor's
     right,  title and  interest in and to the  following,  whether now owned or
     existing or  hereafter  arising or acquired  and  wheresoever  located (the
     "Collateral"):

                 ACCOUNT.  All present and future accounts,  accounts receivable
     and other  rights of the Debtor to payment  for goods sold or leased or for
     services rendered (except those evidenced by instruments or chattel paper),
     whether now existing or hereafter arising and wherever arising, and whether
     or not they have been earned by performance (collectively, "Accounts");

                 EQUIPMENT.  All  machinery,  all  manufacturing,  distribution,
     selling, data processing and office equipment, all furniture,  furnishings,
     appliances,  fixtures and trade  fixtures,  tools,  tooling,  molds,  dies,
     vehicles  and all other  goods of every type and  description  (other  than
     inventory),  in each  instance  whether now owned or hereafter  acquired by
     Debtor and located at the Debtor's Location (collectively, "Equipment");

                 GENERAL INTANGIBLES.  All rights, interests, chooses in action,
     causes of action,  claims and all other  intangible  property  of Debtor of
     every kind and nature related to or arising in connection with Accounts, or
     Equipment,  in each  instance  whether now owned or  hereafter  acquired by
     Debtor, and however and whenever arising,  including,  without  limitation,
     all customer  contracts,  firm orders,  rights under provider contracts and
     all other contracts and contract rights;  all deposit accounts  (general or
     special) with any bank or other financial institution,  including,  without
     limitation,  any  deposits or other sums at any time  credited by or due to
     Debtor from any affiliate of Secured Party with the same rights  therein as
     if the deposits or other sums were  credited by or due from  Secured  Party
     thereunder;  all  rights to  indemnification;  and all  letters  of credit,
     guaranties, liens, security interests and other security

11/1/95
                                             3


<PAGE>


      held by or granted to Debtor; and all other intangible  property,  whether
      or not similar to the foregoing  related to or arising in connection  with
      the Accounts or Equipment; and

                  CHATTEL PAPER,  INSTRUMENTS AND DOCUMENTS.  All chattel paper,
      leases,  all instruments  and all payments  thereunder and instruments and
      other  property  from time to time  delivered  in thereof  or in  exchange
      therefor,  and other  documents of title and  documents,  in each instance
      whether now owned or hereafter  acquired by Debtor  relating to or arising
      in connection with the Accounts or Equipment.

                  OTHER  PROPERTY..  All other tangible and intangible  real and
      personal property now or hereafter  acquired by Debtor including all money
      and proceeds of Accounts and Equipment  and  insurance  proceeds and books
      and records  relating to any of the Accounts and Equipment;  together,  in
      each instance,  with all accessions and additions  thereto,  substitutions
      therefor, and replacements, proceeds and products thereof.

      (b)   DEBTOR   REMAINS   LIABLE.   Anything   herein   to   the   contrary
      notwithstanding, (i) Debtor shall remain solely liable under the contracts
      and agreements  included in the Collateral to the extent set forth therein
      to perform all of its duties and obligations thereunder to the same extent
      as  if  this  Agreement  and  any  other  security  document  executed  in
      connection with the Note or this Agreement ("Security  Documents") had not
      been  executed,  (ii) the  exercise by Secured  Party of any of its rights
      hereunder or under any other Security  Documents  shall not release Debtor
      from any of its duties or  obligations  under the contracts and agreements
      included  in the  Collateral  and (iii)  Secured  Party shall not have any
      responsibility, obligation or liability under the contracts and agreements
      included  in the  Collateral  by  reason  of this  Agreement  or any other
      Security Documents,  nor shall Secured Party be required or obligated,  in
      any manner,  to (A) perform or fulfill any of the obligations or duties of
      Debtor  thereunder,  (B) make any  payment,  or make any inquiry as to the
      nature or sufficiency of any payment received by Debtor or the sufficiency
      of any  performance  by any party under any such  contract or agreement or
      (C)  present or file any  claim,  or take any action to collect or enforce
      any claim for payment assigned hereunder.

      (c) REPRESENTATIONS AND WARRANTIES REGARDING COLLATERAL. Debtor represents
      and  warrants,  as of the  date of  this  Agreement  and as of  each  date
      hereafter (except for changes permitted or contemplated by this Agreement)
      until termination of this Agreement:

            (i) The correct  name of Debtor is set forth in the first  paragraph
      of this Agreement.  The chief place of business, chief executive office of
      Debtor and all Inventory and Equipment of Debtor is located at the address
      specified as the notice address for Debtor (the "Premises") and Debtor has
      exclusive  possession  and control of the  Equipment  and  Inventory.  All
      records  concerning  any Accounts and all  originals of all chattel  paper
      which  evidence  any Account are located at the  Premises  and none of the
      Accounts is evidenced by a promissory note or other instrument  except for
      such notes and other instruments delivered to Secured Party.

            (ii) Debtor is the legal and beneficial owner of the Collateral free
      and clear of all liens except for liens of Secured Party. Debtor currently
      conducts business under the name: KIDSPEACE CORPORATION.


11/1/95                                4



<PAGE>


            (iii) This  Agreement  creates  in favor of  Secured  Party a legal,
      valid and enforceable security interest in the Collateral.  When financing
      statements  have been  filed in the office of the  Secretary  of States of
      Massachusetts  and Nevada or delivery of Collateral made to Secured Party,
      Secured  Party will have a fully  perfected  first  priority  lien on, and
      security  interest in, the Collateral in which a security  interest may be
      perfected by filing or delivery.

            (iv) No authorization, approval or other action by, and no notice to
      or filing  with,  any  governmental  authority  that have not already been
      taken or made and which are in full force and effect,  is required (A) for
      the grant by Debtor of the  security  interest in the  Collateral  granted
      hereby;  (B) for  performance of this Agreement by Debtor;  or (C) for the
      exercise  by  Secured  Party  of any  of  its  other  rights  or  remedies
      hereunder.

      (d)  PERFECTION  AND  MAINTENANCE  OF SECURITY  INTEREST AND LIEN.  Debtor
      agrees that until all  liabilities  have been fully satisfied and the Note
      has been canceled,  Secured Party's security interests in and liens on and
      against the  Collateral,  and all  proceeds and  products  thereof,  shall
      continue in full force and effect.  Debtor shall perform any and all steps
      reasonably  requested  by Secured  Party to perfect,  maintain and protect
      Secured  Party's  security  interests  in and  liens  on and  against  the
      Collateral  granted or  purported  to be  granted  hereby and by the other
      Security  Documents or to enable  Secured Party to exercise its rights and
      remedies  hereunder and under the other Security Documents with respect to
      any Collateral,  including,  without limitation,  (i) executing and filing
      financing or continuation  statements,  or amendments thereof, in form and
      substance  reasonably  satisfactory  to Secured Party,  (ii) executing and
      recording  mortgages,  deeds of trust and other Security Documents in form
      and substance  reasonably  satisfactory to Secured Party, (iii) delivering
      to Secured Party all certificates, notes and other instruments (including,
      without  limitation,  all letters of credit on which  Debtor is named as a
      beneficiary)  representing  or  evidencing  Collateral  duly  endorsed and
      accompanied  by duly  executed  instruments  of  transfer  or  assignment,
      including,  but not  limited to, note  powers,  all in form and  substance
      satisfactory to Secured Party, (iv) placing notations on Debtor's books of
      account to disclose Secured Party's security  interest therein and marking
      conspicuously  each  document,  contract,  chattel  paper and all  records
      pertaining  to the  Collateral  with  a  legend,  in  form  and  substance
      satisfactory to Secured Party,  indicating  that such document,  contract,
      chattel paper or Collateral  is subject to the security  interest  granted
      herein and (v)  executing  and  delivering  all  further  instruments  and
      documents,  and taking all further action, as Secured Party may reasonably
      request.

      (e)  FINANCING  STATEMENTS.  To the extent  permitted by  applicable  law,
      Debtor hereby  authorizes  Secured Party to file one or more  financing or
      continuation  statements and amendments  thereto,  disclosing the security
      interest  granted to Secured Party under this Agreement  without  Debtor's
      signature appearing thereon and Secured Party agrees to notify Debtor when
      such a filing has been made.  Debtor  agrees that a carbon,  photographic,
      photostatic  or other  reproduction  of this  Agreement  or of a financing
      statement is sufficient as a financing statement.

     (f) FILING  COSTS.  Debtor  shall pay the costs of, or  incidental  to, all
recordings or filings of all financing statements and other Security
      Documents.

      (g)   SCHEDULE OF COLLATERAL.   Debtor shall furnish to Secured Party from
            time to time statements

11/1/1995                            5



<PAGE>


and schedules  further  identifying and describing the Collateral and such other
reports  in  connection  with the  Collateral  as Secured  Party may  reasonably
request, all in reasonable detail.

(h) EQUIPMENT AND INVENTORY.  Debtor  covenants and agrees with lessor that from
and after the date of this  Agreement and until  termination  of this  Agreement
Debtor shall:

     (i) Keep the  Equipment  and Inventory  (other than  Inventory  sold in the
ordinary course of business) on the Premises;

      (ii) Maintain or cause to be maintained in good repair,  working order and
condition,  excepting ordinary wear and tear and damage due to casualty,  all of
the Equipment,  and make or cause to be made all appropriate  repairs,  renewals
and replacements  thereof, as quickly as practicable after the occurrence of any
loss or damage thereto which are necessary or desirable to such end.

(i) ACCOUNTS. Debtor covenants and agrees with Secured Party that from and after
the date of this Agreement and until termination of this Agreement that:

      (i) Debtor  shall keep its chief  place of  business  and chief  executive
office and the office where it keeps its records  concerning  the Accounts,  and
the offices  where it keeps all  originals of all chattel  paper which  evidence
Accounts,  at the  Premises.  Debtor  will hold and  preserve  such  records (in
accordance with Secured Party's usual document retention  practices) and chattel
paper and will permit representatives of Secured Party at any time during normal
business hours to inspect, copy and make abstracts from such records and chattel
paper;

(ii) Except as otherwise provided in this subsection (ii), Debtor shall continue
to collect,  at its own  expense,  all amounts due or to become due Debtor under
the Accounts. In connection with such collections, Debtor may, take (and, at the
Secured Party's  discretion,  shall take) such action as Debtor or Secured Party
may deem necessary of advisable to enforce collection of the Accounts;  PROVIDED
however, that Secured Party shall have the right at any time upon written notice
to Secured  Party of its  intention  to do so, to notify the account  debtors or
obligors  under any Account of the  assignment  of such Account to Secured Party
and to direct such  account  debtors or obligors to make  payment of all amounts
due or to become due to Debtor  thereunder  directly to Secured  Party and, upon
such  notification  and at the expense of Debtor,  to enforce  collection of any
such Account, and to adjust, settle or compromise the amount or payment thereof,
in the same  manner and to the same  extent as Debtor  might  have  done.  After
receipt by Debtor of the notice from Secured Party referred to in the proviso to
the proceeding  sentence,  (A) all amounts and proceeds (including  instruments)
received by Debtor in respect of the Accounts shall be received in trust for the
benefit of Secured  Party  hereunder,  shall be  segregated  from other funds of
Debtor and shall be forthwith  paid over to Secured Party in the same form as so
received  (with any necessary  endorsement)  to be held as cash  collateral  and
either ((i)) released to Debtor so long as no "Event of Default" (as hereinafter
defined) shall have occurred and be continuing or ((ii)) if any Event of Default
shall have occurred and be continuing, applied as provided herein and (B) Debtor
shall not adjust,  settle or compromise the amount or payment of any Account, or
release  wholly or partly any account  debtor or obligor  thereof,  or allow any
credit

                                         6



<PAGE>


      or discount thereon;

            (iii) In any suit,  Proceeding  or action  brought by Secured  Party
      under any Account  comprising  part of the  Collateral,  Debtor will save,
      indemnify and keep Secured Party,  harmless from and against all expenses,
      loss or damage  suffered by reason of any defense,  setoff,  counterclaim,
      recoupment or reduction of liability whatsoever of the obligor thereunder,
      arising out of a breach by Debtor of any  obligation or arising out of any
      other  agreement,  indebtedness  or  liability  at any time owing to or in
      favor  of such  obligor  or its  successors  from  Debtor,  and  all  such
      obligations  of Debtor shall be and shall remain  enforceable  against and
      only against Debtor and shall not be enforceable against Secured Party;

            (iv) At  Secured  Party's  request  in the  event  that  Debtor  has
      Accounts with respect to which the account  debtor is the United States of
      America or any  department,  agency or  instrumentality  thereof (all such
      Accounts  being  hereinafter  referred  to as  "Government  Receivables"),
      Debtor shall, with respect to such Government Receivables, promptly comply
      with the  Assignment of Claims Act of 1940, as amended (31 U.S. C. 3727 et
      seq.) and any other statute or regulation governing the collection of such
      Government  Receivables,  and shall  promptly  deliver  to  Secured  Party
      evidence of such compliance, which evidence shall be in form and substance
      satisfactory to Secured Party in its sole discretion;

            (v) Debtor  shall keep and maintain at Debtor's own cost and expense
      satisfactory  and  complete  records of  Debtor's  Collateral  in a manner
      consistent with reasonable and appropriate business practices,  including,
      without  limitation,  a record of all  payments  received  and all credits
      granted with respect to such  Collateral.  Debtor  shall,  for the Secured
      Party's  further  security,  deliver  and turn  over to  Secured  Party or
      Secured  Party's  designated  representatives  at any time  following  the
      occurrence  of an Event of  Default  and upon five (5) days'  notice  from
      Secured Party or Secured Party's designated representative, any such books
      and records  (including,  without  limitation,  the file cabinets in which
      paper  records are stored and any and all  computer  tapes,  programs  and
      source codes  relating to such  Collateral in which Debtor has an interest
      or any part or parts thereof);

            (vi)  Debtor will not  create,  permit or suffer to exist,  and will
      defend the Collateral against,  and take such other action as is necessary
      to remove,  any lien on such Collateral,  and will defend the right, title
      and  interest  of  Secured  Party  in  and  to  Debtor's  rights  to  such
      Collateral,  including,  without  limitation,  the  proceeds  and products
      thereof,  against  the claims  and  demands  of all  persons  or  entities
      whatsoever;

            (vii)  Debtor  will  not,  without  Secured  Party's  prior  written
      consent,  except in the ordinary  course of business and for amounts which
      are not material in the aggregate,  (A) grant any extension of the time of
      payment of any of the  Collateral  or  compromise,  compound or settle any
      Account  for less than the full amount  thereof;  (B)  release,  wholly or
      partly, any person liable for the payment thereof; or (C) allow any credit
      or discount  whatsoever  thereon other than trade discounts granted in the
      ordinary course of business; and

            (viii)   ebtor will advise  Secured  Party  promptly,  in reasonable
      detail , of (A) any material


11/1/95                             7



<PAGE>


      lien, security interest or claim made by or asserted against any or all of
      the Collateral, and (B) the occurrence of any other event which would have
      a material  adverse effect on the aggregate value of such Collateral or on
      the security  interest and liens with respect to such  Collateral  created
      hereunder or under any other Security Document.

(j)  SECURITY  PARTY  APPOINTED  ATTORNEY-IN-FACT.   Debtor  hereby  irrevocably
appoints Secured Party as Debtor's attorney-in-fact,  with full authority in the
place and stead of Debtor and in the name of the Debtor or otherwise,  from time
to time in Secured  Party's  discretion,  to take any action and to execute  any
instrument which the Secured Party may deem necessary or advisable to accomplish
the purposes of this Agreement, including, without limitation, (i) following the
occurrence and during the continuance of an Event of Default, to:

                  (A)  obtain and adjust insurance;

                  (B) ask, demand,  collect, sue for, recover,  compromise,  
receive and give acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral;

                  (C)   receive,   endorse  and  collect  any  drafts  or  other
                  instruments,  documents and chattel paper,  in connection with
                  clause (A) or (B) above; and

                  (D) file  any  claims  or take any  action  or  institute  any
                  proceedings   which  Secured  Party  may  deem   necessary  or
                  desirable  for  the  collection  of any of the  Collateral  or
                  otherwise to enforce the rights of Secured  Party with respect
                  to any of the Collateral;

      and (ii) at any time, to:

                  (A) obtain access to records maintained for Debtor by computer
                  services companies and other service companies or bureaus;

                  (B) send  requests  under  Debtor's  or a  fictitious  name to
                  Debtor's  customers  or account  debtors for  verification  of
                  Accounts; and

                  (C) do all things necessary to carry out this Agreement.

      (k) SECURED  PARTY MAY PERFORM.  If Debtor fails to perform any  agreement
      contained herein,  Secured Party may itself perform,  or cause performance
      of, such  agreement,  and the  reasonable  expenses  of the Secured  Party
      incurred in connection  therewith shall be payable by Debtor on demand and
      shall become part of the Liabilities secured hereunder.

      (1)  SECURED  PARTY'S  DUTIES.  The  powers  conferred  on  Secured  Party
      hereunder are solely to protect its interest in the  Collateral  and shall
      not impose any duty upon Secured Party to exercise any such powers. Except
      for  the  safe  custody  of any  Collateral  in  its  possession  and  the
      accounting  for moneys  actually  received by it hereunder,  Secured Party
      shall have no duty as to



11/1/95                                   8



<PAGE>


any Collateral.  Secured Party shall be deemed to have exercised reasonable care
in the custody and  preservation  of the  Collateral  in its  possession  if the
Collateral is accorded treatment substantially equal to that which Secured Party
accords its own property,  it being understood that Secured Party shall be under
no  obligation  to take any steps  necessary to preserve  rights  against  prior
parties or any other rights  pertaining to any Collateral,  but may do so at its
option,  and all reasonable  expenses incurred in connection  therewith shall be
for the sole account of Debtor and shall be added to the Liabilities.


3.    WARRANTIES AND REPRESENTATIONS.  Debtor hereby represents and warrants to
Secured Party, on each date indebtedness is incurred under the Note, that:

     (a) Debtor's  principal place of business is that shown at the beginning of
this  Security  Agreement and all other places of business of Debtor are located
as follows: 2340 Paseo Del Prado,Las Vegas,Nevada 89102; and .All     of    the
Collateral is kept as such place(s) of business.

      (b) Debtor is lawfully  possessed of and has good title to the Collateral,
free and clear of all liens, encumbrances, security interests and adverse claims
except only for the security  interest granted to Secured Party herein except as
otherwise provided herein;

      (c) (i) Debtor is legally organized and validly existing, in good standing
under the laws of its state of organization and is duly qualified to do business
and in good standing under the laws of each jurisdiction where the nature of its
business or the  character of its  properties  makes it  necessary  for it to so
qualify to do business;  (ii) Debtor has full power and authority to execute and
deliver this Security Agreement, together with all notes, leases, agreements and
instruments  evidencing  Indebtedness,  and to pay and perform  its  obligations
thereunder;  (iii) Debtor has full power and authority to own its properties and
carry on its business as now being conducted;  (iv) this Security  Agreement and
all documents evidencing  indebtedness under the Note have been duly authorized,
executed and  delivered by Debtor and  constitute  the valid,  legal and binding
obligations of Debtor enforceable in accordance with their terms.

      (d)  (i)  The  execution,  delivery  and  payment  of any  and  all of the
documents  and  instruments  evidencing  indebtedness  under  the  Note  and the
entering into by Debtor of this Security  Agreement and the  performance  of its
obligations hereunder will not violate or conflict with any of the provisions of
the Certificate of Incorporation  or By-Laws of Debtor (or Debtor's  Articles of
Partnership,  if applicable) and will not result in any breach of, or constitute
a default  under,  or  result in the  creation  of any  lien,  charge,  security
interest,  or other  encumbrance  in or upon any of Debtor's  property or assets
(except for the security  interest  created  hereby)  pursuant to any indenture,
mortgage,  deed of trust, bank loan or credit agreement, or any other instrument
to  which  Debtor  is a party  or by or under  which  it may be  bound;  (ii) no
approval  is  required  from any  public  regulatory  body nor from any  parent,
subsidiary or affiliate of Debtor or from any other person,  firm or corporation
with  respect  to  the  execution,  delivery  and  payment  upon  any  documents
evidencing  Indebtedness,  the entering into of this Security Agreement, and the
performance by Debtor of its obligations hereunder;  (iii) there are no suits or
proceedings  pending, or to the knowledge of Debtor threatened,  in any court or
before any regulatory


                                         9



<PAGE>


commission,  board  or  other  administrative  governmental  agency  against  or
affecting  Debtor  which will have a material  adverse  effect on the  financial
condition or business of
Debtor.


4.    COVENANTS.

(a)   FINANCIAL INFORMATION: On or prior to the tenth day of each month, Debtor
      shall deliver
to Secured Party:

      (i) a schedule of all  Accounts  created or acquired by Debtor  during the
preceding  month  together  with an aged trial balance of Accounts (an "Accounts
Trial Balance") for Debtor,  indicating which Accounts are 1 to 30, 31 to 60, 61
to 90, 91 to 120 and 120 or more days past the  original  invoice  date and,  if
requested  by Secured  Party,  listing  the names and  addresses  of all account
debtors;

      (ii) an accounts  payable aging,  showing which accounts payable are 10 to
30, 31 to 60, 61 to 90 and 91 days or more past due; and

      (iii) interim financial  statements,  consisting of balance sheets, income
statements,  cash flow  statements  for such month and for the  period  from the
beginning of the then current fiscal year to the end of such month.

     (b)  DISTRIBUTIONS:  From and after Secured Party gives notice to Debtor to
do so, Debtor shall not:

     (i)  make  any  distribution  of  dividends  or the  equivalent  (including
repurchases of interests in Debtor from any holder thereof); or

      (ii)  pay any management fees to any affiliate of Debtor.

     5 . TERM OF AGREEMENT.  This Agreement  shall become  effective as provided
herein,  and shall  remain in effect  until such time as all of the  Liabilities
shall  have been fully  performed  and paid in full and the Note shall have been
cancelled.

6. SECURED  PARTY'S  EXPENSES.  Debtor shall reimburse the Secured Party for all
fees, costs and expenses (including,  but not limited to, attorneys' fees, costs
and expenses)  incurred by the Secured Party,  in connection with this Agreement
including,  but not  limited  to,  such fees,  costs and  expenses  incurred  in
connection  with the  implementation,  administration  and  enforcement  of this
Agreement and the other agreements, documents and instruments referred to herein
or  contemplated  hereby and the auditing,  appraising,  evaluating or otherwise
monitoring the Collateral or other credit support for the Liabilities  (all such
costs and expenses, "Cost and Expenses").

7.    DEFAULT;  REMEDIES.










11/1/95                            10



<PAGE>


     (a) EVENTS OF DEFAULT.  Any one of the following  acts shall  constitute an
"Event of Default" under this Agreement:

           (i)  Failure by the Debtor to pay any of the Liabilities when due.

           (ii) Any  representation  or warranty  now or  hereafter  made by the
           Debtor  herein or by the  Debtor in  connection  with this  Agreement
           shall prove to have been incorrect in any material respect when made.

           (iii)  Failure by the Debtor to  perform  or  observe  any  covenant,
           condition or agreement contained in this Agreement.

     (b)  REMEDIES.  If any Event of Default  occurs,  in  addition to all other
remedies  Secured  Party  may have at law or in  equity,  Secured  Party may (i)
declare  all  Liabilities  to  be  forthwith  due  and  payable,  whereupon  the
Liabilities shall become and be forthwith due and payable,  without presentment,
demand,  protest,  or  further  notice  of any  kind,  all of which  are  hereby
expressly waived by the Debtor,  and (ii) exercise all or any of the rights of a
secured  party  under  the  Uniform  Commercial  Code  in the  State  where  the
Collateral is located or other applicable laws and any other rights and remedies
available  to  Secured  Party,  all  of  which  rights  and  remedies  shall  be
cumulative,  and none  exclusive,  to the  extent  permitted  by law;  provided,
however,  that if an Event of Default  involving  the  bankruptcy  of the Debtor
shall exist or occur, all of the Liabilities shall automatically, without notice
of any kind, be immediately  due and payable and Secured Party shall be entitled
to reclaim the Equipment.

     (c) ENTRY UPON PREMISES.  Upon the  occurrence of an Event of Default,  (i)
     Secured Party shall have the right to enter upon the premises of the Debtor
     where the Collateral is located (or is believed to be located)  without any
     obligation  to pay rent to the Debtor,  or any other place or places  where
     the  Collateral  is  believed  to be  located  and  kept,  and  render  the
     Collateral   unusable  or  remove  the  Collateral   therefrom,   in  order
     effectively to collect or liquidate the  Collateral,  or (ii) Secured Party
     may require the Debtor to assemble the  Collateral and make it available to
     Secured  Party at a place  reasonably  convenient to Secured Party or (iii)
     some combination thereof.

     (d) SALE OR OTHER  DISPOSITION OF COLLATERAL BY SECURITY PARTY.  Any notice
     required to be given by Secured Party of a sale, lease or other disposition
     or other  intended  action by  Secured  Party  with  respect  to any of the
     Collateral,  at least three (3) business days prior to such proposed action
     shall  constitute  fair and  reasonable  notice  to the  Debtor of any such
     action. If the Secured Party chooses to dispose of the Collateral, it shall
     dispose of the Collateral in a commercially  reasonable manner. Any sale of
     the  Collateral  conducted in  conformity  with the  reasonable  commercial
     practices of banks,  insurance  companies,  commercial finance companies or
     other  financial   institutions   disposing  of  property  similar  to  the
     Collateral shall be deemed to be commercially reasonable.  The net proceeds
     realized by Secured  Party upon any such sale or other  disposition,  after
     deduction for the expense of retaking, holding, preparing for sale, selling
     or the like and the reasonable  attorneys' fees and legal expenses incurred
     by  Secured  Party  in  connection  therewith,   shall  be  applied  toward
     satisfaction of the Liabilities.  Secured Party shall account to Debtor for
     any surplus realized upon such sale or other disposition,  and Debtor shall
     remain liable for any


11/1/95


<PAGE>


      deficiency.  The  commencement of any action,  legal or equitable,  or the
      rendering  of any judgment or decree for any  deficiency  shall not affect
      Secured Party's security  interest in the Collateral until the Liabilities
      are fully paid.  Debtor  agrees that Secured  Party has no  obligation  to
      preserve rights to the Collateral against any other parties.

      8.  AMENDMENTS.  No amendment  or  modification  of any  provision of this
      Agreement shall be effective  without the written agreement of the Secured
      Party and Debtor,  and no  termination  or waiver of any provision of this
      Agreement,  or consent to any departure by Debtor therefrom,  shall in any
      event be effective  without the written  concurrence of Secured Party. Any
      waiver or consent shall be effective only in the specific instance and for
      the specific  purpose for which it was given.  No notice to or demand upon
      Debtor or any  guarantor  of the  obligations  of Debtor in any case shall
      entitle such party to any other or further  notice or demand in similar or
      other circumstances.

      9. NO WAIVER. Secured Party's failure, at any time or times hereafter,  to
      require  strict  performance  by Debtor of any  provision  or term of this
      Agreement  shall not waive,  affect or diminish any right of Secured Party
      thereafter to demand strict  compliance  and  performance  therewith.  Any
      suspension  or waiver by Secured  Party of an Event of Default  shall not,
      except as may be expressly set forth herein,  suspend, waive or affect any
      other Event of Default,  whether the same is prior or  subsequent  thereto
      and whether of the same or of a different  kind or character.  None of the
      undertakings,  agreements,  warranties,  covenants and  representations of
      Debtor  contained  in this  Agreement,  and no Event of  Default  shall be
      deemed to have been  suspended  or waived by Secured  Party,  unless  such
      suspension  or waiver is (a) in writing and signed by Secured  Party,  and
      (b) delivered to Debtor.

     10. SOLE  BENEFIT OF PARTIES.  This  Agreement is solely for the benefit of
the parties hereto and their  respective  successors  and assigns,  and no other
person  shall  have any  right,  benefit  or  interest  under or  because of the
existence of this Agreement.

      11. LIMITATION ON RELATIONSHIP BETWEEN PARTIES The relationship of Secured
      Party on the one hand,  and Debtor,  on the other hand, has been and shall
      continue to be, at all times, that of lessor and lessee and, to the extent
      monies are owed to Secured Party by Debtor,  creditor and debtor.  Nothing
      contained  in  this  Agreement,  any  instrument,  document  or  agreement
      delivered  in  connection  therewith  or in the  Note or any of the  other
      documents shall be deemed or construed to create a fiduciary  relationship
      between the parties.

      12.      NO ASSIGNMENT. This Agreement shall not be assignable by Debtor
               without the
      written consent of Secured Party.  Secured Party may assign to one or more
               persons all or any
      part of, or any participation interest in, the Secured Party's rights and
               benefits hereunder.

     13. SECTION  TITLES.  The section and subsection  titles  contained in this
Agreement  are  included  for the sake of  convenience  only,  shall be  without
substantive meaning or content of any kind whatsoever, and are not a part of the
agreement between Debtor and Secured Party.

      14.   NOTICES.  Except as otherwise expressly provided herein, any notice
            required or desired

11/6/95                           12


<PAGE>



to be served,  given or delivered  hereunder  shall be in writing,  and shall be
deemed to have been validly  served,  given or delivered (a) four (4) days after
deposit in the United States mails,  with proper postage prepaid,  (b) when sent
after receipt of confirmation or answer back if sent by telecopy, telex or other
similar facsimile transmission,  (c) one (1) business day after deposited with a
reputable  overnight courier with all charges prepaid or (d) when delivered,  if
hand-delivered  by  messenger,  all of which shall be properly  addressed to the
party to be notified and sent, to the address or number indicated below:

(a) If to Secured Party at:   LINC ANTHEM CORPORATION
                        303 East Wacker Drive, Suite 1000
                        Chicago,  Illinois  60601
                        Attention:  Vice President - Operations

            Telecopy:                      (312) 938-4290
            Confirmation:               (312) 946-10W

            (b) If to Debtor, at:      PHC OF NEVADA, INC.
                                200 Lake Street,
                          Peabody, Massachusetts 01960
                                   Attention:

                           Telecopy:                 (508) 536 - 2677
                           Confirmation:              (508) 536 - 2777

or to such other address as each party may designate for itself by like notice.


     15.  COUNTERPARTS.  This  Agreement  may  be  executed  in  any  number  of
counterparts,  each of  which  shall  be  deemed  an  original  but all of which
together shall constitute one and the same instrument.

16.  GOVERNING LAW. SECURED PARTY AND DEBTOR EACH HEREBY AGREE THAT ALL DISPUTES
AMONG OR BETWEEN THEM, ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL
TO THE  RELATIONSHIP  ESTABLISHED  AMONG OR BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE,  SHALL BE
RESOLVED IN  ACCORDANCE  WITH THE  INTERNAL  LAWS AND NOT THE  CONFLICTS  OF LAW
PROVISIONS OF THE STATE OF ILLINOIS.








11/1/95                            13



<PAGE>


17.  WAIVER OF JURY TRIAL.  EACH OF DEBTOR AND SECURED PARTY WAIVES ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,  WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE,  BETWEEN DEBTOR AND SECURED PARTY OR ANY OF THEIR  RESPECTIVE
AFFILIATES  ARISING OUT OF,  CONNECTED  WITH,  RELATED TO OR  INCIDENTAL  TO THE
RELATIONSHIP  ESTABLISHED  BETWEEN  THEM  IN  CONNECTION  WITH  THIS  AGREEMENT.
INSTEAD,  ANY  DISPUTES  RESOLVED  IN COURT WILL BE  RESOLVED  IN A BENCH  TRIAL
WITHOUT A JURY.

18. WAIVER OF BOND. DEBTOR WAIVES THE POSTING OF ANY BOND OTHERWISE  REQUIRED OF
SECURED PARTY IN CONNECTION  WITH ANY JUDICIAL  PROCESS OR PROCEEDING TO ENFORCE
ANY  JUDGEMENT  OR OTHER  COURT  ORDER  ENTERED IN FAVOR OF SECURED  PARTY OR TO
ENFORCE THIS AGREEMENT BY SPECIFIC  PERFORMANCE,  TEMPORARY  RESTRAINING  ORDER,
PRELIMINARY OR PERMANENT INJUNCTION.

           IN WITNESS WHEREOF,  this Agreement has been duly executed as of this
           7TH day of November, 1995.

           PHC OF NEVADA, INC.                          LINC ANTHEM CORPORATION
           (Debtor)                                     (Secured Party)

           By:                                          By:
              Authorized Signature                        Authorized Signature

           Name:  Bruce A. Shear                        Name:
           Title:    President                          Title:








11/1/95                                    14


<PAGE>


EXHIBIT 10.78

                                 $1,000,000.00


                          LOAN AND SECURITY AGREEMENT

                                by and between

                               PHC OF UTAH, INC.
                               (the "Borrower")

                                      and

                         HEALTHPARTNERS FUNDING, L.P.
                                (the "Lender")

                               May       , 1996



<PAGE>



                          LOAN AND SECURITY AGREEMENT


      THIS LOAN AND SECURITY AGREEMENT (the "Agreement") is made as of this 19th
day of May, 1996, by and between PHC OF UTAH, Inc., a Massachusetts corporation,
(collectively,  the "Borrower")  and  HEALTHPARTNERS  FUNDING,  L.P., a Delaware
limited partnership ("Lender").

                                   RECITALS

      A. Borrower desires to establish certain  financing  arrangements with and
borrow funds from Lender,  and Lender is willing to establish such  arrangements
for and make  loans  and  extensions  of credit  to  Borrower,  on the terms and
conditions set forth below.

      B.  The parties desire to define the terms and conditions of their
relationship and to reduce their agreements to writing.

      NOW,  THEREFORE,  in consideration of the promises and covenants contained
in this Agreement,  and for other consideration,  the receipt and sufficiency of
which are acknowledged, the parties agree as follows:


                                   ARTICLE I

                                  DEFINITIONS

      As used in this  Agreement,  the following  terms shall have the following
meanings:

     SECTION  1.1.  ACCOUNT.ACCOUNT.  "Account"  means any right to payment  for
goods  sold or leased or  services  rendered,  whether  or not  evidenced  by an
instrument  or  chattel  paper,  and  whether  or  not  earned  by  performance,
including, without limitation, the right to payment of management fees.

     SECTION 1.2.  ACCOUNT  DEBTOR.ACCOUNT  DEBTOR.  "Account  Debtor" means any
Person obligated on any Account of Borrower,  including without limitation,  any
Insurer and any Medicaid/Medicare Account Debtor.

      SECTION 1.3.  AFFILIATE.AFFILIATE.  "Affiliate"  means,  with respect to a
specified Person, any Person directly or indirectly controlling,  controlled by,
or under common control with the specified Person,  including without limitation
their  stockholders  and any  Affiliates  thereof.  A Person  shall be deemed to
control a corporation if the Person possesses, directly or indirectly, the power
to  direct  or  cause  the  direction  of the  management  and  business  of the
corporation whether through the ownership of voting securities,  by contract, or
otherwise.

      SECTION 1.4.      AGREEMENT.AGREEMENT.  "Agreement" means this Loan and
Security Agreement, as it may be amended or supplemented from time to time.

     SECTION  1.5.  BASE  RATE.BASE  RATE.  "Base Rate" means a rate of interest
equal to two and  three  quarters  percent  (2.25%)  above  the  "Prime  Rate of
Interest".

      SECTION 1.6. BORROWED  MONEY.SECTION 1.6. BORROWED MONEY. "Borrowed Money"
means any obligation to repay money, any indebtedness evidenced by notes, bonds,
debentures or similar  obligations,  any obligation  under a conditional sale or
other title  retention  agreement and the net aggregate  rentals under any lease
which under GAAP would be  capitalized  on the books of the Borrower or which is
the substantial equivalent of the financing of the property so leased.

     SECTION 1.7. BORROWER.BORROWER. "Borrower" has the meaning set forth in the
Preamble.

      SECTION 1.8.      BORROWING BASE.BORROWING BASE.  "Borrowing Base" has the
meaning set forth in Section 2.1(d).

     SECTION 1.9.  BUSINESS  DAY.BUSINESS  DAY.  "Business Day" means any day on
which  financial  institutions  are open for  business in the State of Maryland,
excluding Saturdays and Sundays.

     SECTION 1.10. CLOSING; CLOSING DATE.CLOSING; CLOSING DATE. "Closing" and
"Closing Date" have the meanings set forth in Section 5.3.

      SECTION 1.11.     COMMITMENT FEE.COMMITMENT FEE.  "Commitment Fee" has the
meaning set forth in Section 2.4(a).

      SECTION 1.12.     COLLATERAL.COLLATERAL.  "Collateral" has the meaning set
forth in Section 3.1.

      SECTION 1.13.     CONTROLLED GROUP.CONTROLLED GROUP.  "Controlled Group"
means a "controlled group" within the meaning of Section 4001(b) of ERISA.

     SECTION  1.14.  COST REPORT  SETTLEMENT  ACCOUNT.  "Cost Report  Settlement
Account"  means an  "Account"  owed to Borrower by a  Medicaid/Medicare  Account
Debtor  pursuant to any cost report,  either interim,  filed or audited,  as the
context may
require.

      SECTION 1.15.     DEFAULT RATE.     "Default Rate" means a rate per annum
equal to two percent (2%) above the Base Rate.

     SECTION 1.16 DOMINION ACCOUNT. "Dominion Account" has the meaning set forth
in Section 2.3(a).

     SECTION  1.17.  ERISA.ERISA.  "ERISA"  has the meaning set forth in Section
4.12.

     SECTION 1.18.  EVENT OF  DEFAULT.EVENT  OF DEFAULT.  "Event of Default" and
"Events of Default" have the meanings set forth in Section 8.1.

     SECTION  1.19.  GAAP.GAAP.   "GAAP"  means  generally  accepted  accounting
principles applied in a matter consistent with the financial statements referred
to in Section 4.7.

      SECTION 1.20.     GOVERNMENTAL AUTHORITY.GOVERNMENTAL AUTHORITY.
"Governmental Authority" means and includes any federal, state, District of
Columbia, county, municipal, or other government and any department, commission,
board, bureau, agency or instrumentality thereof, whether domestic or foreign.

     SECTION 1.21. HAZARDOUS MATERIAL.HAZARDOUS  MATERIAL.  "Hazardous Material"
means  any  substances  defined  or  designated  as  hazardous  or toxic  waste,
hazardous or toxic material,  hazardous or toxic substance,  or similar term, by
any environmental statute, rule or regulation or any Governmental Authority.

     SECTION 1.22.  HIGHEST LAWFUL  RATE.HIGHEST  LAWFUL RATE.  "Highest  Lawful
Rate" means the maximum lawful rate of interest  referred to in Section 2.7 that
may accrue pursuant to this Agreement.

      SECTION 1.23.  INSURER. A Person that insures a Patient against certain of
the costs incurred in the receipt by such Patient of Medical  Services,  or that
has an agreement with Borrower to compensate  Borrower for providing services to
a Patient.

     SECTION  1.24.  LENDER.LENDER.  "Lender"  has the  meaning set forth in the
Preamble.

      SECTION 1.25.     LOAN.LOAN.  "Loan" has the meaning set forth in Section
2.1(a).

     SECTION 1.26. LOAN  DOCUMENTS.LOAN  DOCUMENTS.  "Loan  Documents" means and
includes  this  Agreement,  the Note,  and each and every other  document now or
hereafter  delivered  in  connection  therewith,  as any of them may be amended,
modified, or supplemented from time to time.

      SECTION 1.27.  LOAN MANAGEMENT FEE.  "Loan Management Fee" has the meaning
set forth in Section 2.4(c).

      SECTION 1.28.     LOCKBOX.LOCKBOX.  "Lockbox" has the meaning set forth in
Section 2.3(a).

     SECTION 1.29. LOCKBOX BANK.LOCKBOX BANK. "Lockbox Bank" has the meaning set
forth in Section 2.3(a).

      SECTION 1.30.     MAXIMUM LOAN AMOUNT.MAXIMUM LOAN AMOUNT.  "Maximum Loan
Amount" has the meaning set forth in Section 2.1(a).

      SECTION  1.31.   MEDICAID/MEDICARE  ACCOUNT  DEBTOR.  "Medicaid/  Medicare
Account  Debtor"  means any  Account  Debtor  which is (i) the United  States of
America acting under the  Medicaid/Medicare  program established pursuant to the
Social  Security Act, (ii) any state or the District of Columbia acting pursuant
to a health plan  adopted  pursuant to Title XIX of the Social  Security  Act or
(iii)  any  agent,  carrier,  administrator  or  intermediary  for  any  of  the
foregoing.

      SECTION 1.32. MEDICAL SERVICES.  Medical and health care services provided
to a Patient,  including,  but not limited to,  medical and health care services
provided to a Patient and performed by Borrower which are covered by a policy of
insurance  issued by an Insurer,  and  includes  physician  services,  nurse and
therapist services, dental services, hospital services, skilled nursing facility
services,  comprehensive  outpatient  rehabilitation  services, home health care
services,  residential  and  out-patient  behavioral  healthcare  services,  and
medicine  or health  care  equipment  provided  by  Borrower  to a Patient for a
necessary or specifically requested valid and proper medical or health purpose.

      SECTION 1.33.     NOTE.NOTE.  "Note" has the meaning set forth in Section
2.1(c).

      SECTION 1.34.     OBLIGATIONS.  "Obligations" has the meaning set forth in
Section 3.1.

     SECTION 1.35. PATIENT.  Any Person receiving Medical Services from Borrower
and all Persons  legally liable to pay Borrower for such Medical  Services other
than Insurers.

     SECTION 1.36. PERMITTED LIENS.PERMITTED LIENS. "Permitted Liens" means: (a)
liens for taxes not  delinquent,  or which are being contested in good faith and
by appropriate  proceedings which suspend the collection  thereof and in respect
of which adequate  reserves have been made  (provided  that such  proceedings do
not, in Lender's sole  discretion,  involve any substantial  danger of the sale,
loss or  forfeiture  of such  property or assets or any interest  therein);  (b)
deposits or pledges to secure obligations under workmen's  compensation,  social
security or similar  laws,  or under  unemployment  insurance;  (c)  deposits or
pledges to secure bids, tenders, contracts (other than contracts for the payment
of money),  leases,  statutory  obligations,  surety and appeal  bonds and other
obligations  of like nature  arising in the  ordinary  course of  business;  (d)
mechanic's, workmen's, materialmen's or other like liens arising in the ordinary
course of business with respect to  obligations  which are not due, or which are
being  contested  in good faith by  appropriate  proceedings  which  suspend the
collection  thereof  and in respect of which  adequate  reserves  have been made
(provided that such proceedings do not, in Lender's sole discretion, involve any
substantial danger of the sale, loss or forfeiture of such property or assets or
any interest therein);  (e) liens and encumbrances in favor of Lender; (f) liens
granted in connection  with the lease or purchase of property or assets financed
by  borrowings  permitted  by  Section  7.1  (provided,  however,  that  no such
borrowings  permitted  by  Section  7.1 may be  secured  by  liens on any of the
Collateral); and (g) liens set forth on SCHEDULE 1.36.

     SECTION 1.37.  PERSON.PERSON.  "Person" means an  individual,  partnership,
corporation,  trust,  joint  venture,  joint stock  company,  limited  liability
company,  association,  unincorporated organization,  Governmental Authority, or
any other entity.

      SECTION 1.38.     PLAN.PLAN.  "Plan" has the meaning set forth in Section
4.12.

     SECTION 1.39.  PREMISES.PREMISES.  "Premises"  has the meaning set forth in
Section 4.14.

     SECTION 1.40.  PRIME RATE OF INTEREST.  "Prime Rate of Interest" means that
rate of interest  publicly  announced by Shawmut  Bank,  N.A.,  or any successor
thereto, as the same may from time to time fluctuate.

     SECTION 1.41. PROHIBITED  TRANSACTION.PROHIBITED  TRANSACTION.  "Prohibited
Transaction" means a "prohibited  transaction" within the meaning of Section 406
of ERISA or Section 4975(c)(1) of the Internal Revenue Code.

      SECTION 1.42.  QUALIFIED  ACCOUNT.QUALIFIED  ACCOUNT.  "Qualified Account"
means an Account of Borrower  generated  in the  ordinary  course of  Borrower's
business from the sale of goods or rendition of medical  services  which Lender,
in its sole credit judgment,  deems to be a Qualified Account.  Without limiting
the generality of the foregoing, no Account shall be a Qualified Account if: (a)
it or any portion thereof is payable by an individual beneficiary,  recipient or
subscriber  individually  and not  directly to  Borrower by a  Medicaid/Medicare
Account Debtor or commercial  medical insurance carrier  acceptable to Lender in
its sole  discretion;  (b) it remains unpaid more than ninety (90) days past the
claim or invoice  date;  (c) the  Account is  subject to any  defense,  set-off,
counterclaim, deduction, discount, credit, chargeback, freight claim, allowance,
or  adjustment  of any kind  amounting in the  aggregate to at least one percent
(1%) of such Account; (d) any part of any goods the sale of which has given rise
to the Account has been returned,  rejected,  lost, or damaged; (e) if it arises
from the sale of goods by  Borrower,  such sale was not an  absolute  sale or on
consignment or on approval or on a sale-or-return  basis or subject to any other
repurchase  or return  agreement,  or such  goods  have not been  shipped to the
Account  Debtor  or its  designee;  (f) if it  arises  from the  performance  of
services, such services have not been actually been performed or were undertaken
in  violation  of any law;  (g) the  Account  is  subject to a lien other than a
Permitted  Lien; (h) the Borrower knows or should have known of the  bankruptcy,
receivership,  reorganization,  or  insolvency  of the Account  Debtor;  (i) the
Account is evidenced by chattel  paper or an instrument of any kind, or has been
reduced  to  judgment;  (j) it is an Account  of an  Account  Debtor  having its
principal place of business or executive  office outside the United States;  (k)
the Account Debtor is an Affiliate or Subsidiary of Borrower;  (l) more than ten
percent  (10%) of the aggregate  balance of all Accounts  owing from the Account
Debtor  obligated on the Account are  outstanding  more than one hundred  twenty
(120) days past  their  invoice  date;  (m) fifty  percent  (50%) or more of the
Accounts from the Account Debtor are not deemed  Qualified  Accounts  hereunder;
(n)  the  total   unpaid   Accounts  of  the  Account   Debtor,   except  for  a
Medicaid/Medicare  Account Debtor, exceed twenty percent (20%) of the net amount
of  all  Qualified  Accounts;  (o)  any  covenant,  representation  or  warranty
contained in the Loan  Documents  with respect to such Account has been breached
in  any  material  respect;  or  (p)  the  Account  fails  to  meet  such  other
specifications  and  requirements  which  may  from  time to time be  reasonably
established by Lender.

      SECTION 1.43.     REPORTABLE EVENT.REPORTABLE EVENT.  "Reportable Event"
means a "reportable event" as defined in Section 4043(b) of ERISA.

      SECTION 1.44.     REVOLVING CREDIT LOAN.  "Revolving Credit Loan" has the
meaning set forth in Section 2.1(b).

     SECTION 1.45. TERM.TERM. "Term" has the meaning set forth in Section 2.8.

                                  ARTICLE II

                                     LOAN

      SECTION 2.1.  TERMS.TERMS.

            (a) The maximum  aggregate  principal  amount of credit  extended by
Lender to Borrower  hereunder  (the "Loan") that will be outstanding at any time
is One Million and No/100 Dollars ($1,000,000.00) (the "Maximum Loan Amount").

            (b) The Loan shall be in the nature of a  revolving  line of credit,
and shall  include sums  advanced and other credit  extended by Lender to or for
the  benefit of the  Borrower  from time to time  under this  Article II (each a
"Revolving  Credit  Loan") up to the  Maximum  Loan  Amount  depending  upon the
availability  in the Borrowing  Base,  the requests of Borrower  pursuant to the
terms and conditions of Section 2.2 below, and on such other basis as Lender may
reasonably  determine.  The  outstanding  principal  balance  of  the  Loan  may
fluctuate from time to time, to be reduced by repayments made by Borrower (which
may be made without penalty or premium), and to be increased by future Revolving
Credit Loans,  advances and other  extensions of credit to or for the benefit of
Borrower,  and shall be due and payable in full upon the expiration of the Term.
For purposes of this Agreement, any determination as to whether there is ability
within the Borrowing  Base for advances or extensions of credit shall be made by
Lender in its reasonable discretion and is final and binding upon Borrower.

            (c) At  Closing,  Borrower  shall  execute  and  deliver to Lender a
promissory  note  evidencing  the Borrower's  unconditional  obligation to repay
Lender for Revolving Credit Loans, advances, and other extensions of credit made
under the Loan, in the form of EXHIBIT A to this Agreement  (the "Note"),  dated
the date  hereof,  payable to the order of Lender in  accordance  with the terms
thereof.  The Note shall bear interest from the dates of the respective advances
until repaid, with interest payable monthly in arrears on the first Business Day
of each  month,  at a rate per annum (on the basis of the actual  number of days
elapsed over a year of 360 days) equal to the Base Rate,  provided that after an
Event of Default such rate shall be equal to the Default  Rate.  Each  Revolving
Credit Loan,  advance and other extension of credit shall be deemed evidenced by
the Note,  which is deemed  incorporated  by  reference  herein  and made a part
hereof.

            (d) Subject to the terms and conditions of this Agreement,  advances
under  the Loan  shall be made  against a  borrowing  base  equal to (i)  eighty
percent  (80%) of  Qualified  Accounts  that  remain  unpaid  for fewer than one
hundred  twenty (120) days,  and (ii) sixty percent (60%) of Qualified  Accounts
that remain  unpaid for between one hundred  twenty (120) and one hundred  fifty
(150) days, in either case due and owing from any Medicaid/Medicare,  Insurer or
other Account Debtor, including,  without limitation,  Accounts payable pursuant
to Cost  Report  Settlement  Accounts  or in the form of  management  fees  (the
"Borrowing Base").

      SECTION 2.2.  LOAN ADMINISTRATION.  Borrowings under the Loan shall be as
follows:

            (a) A request for a Revolving Credit Loan shall be made, or shall be
deemed to be made, in the following manner: (i) Borrower, may give Lender notice
of its intention to borrow, in which notice Borrower shall specify the amount of
the proposed borrowing and the proposed borrowing date, not later than 2:00 p.m.
Eastern  time  one (1)  Business  Day  prior  to the  proposed  borrowing  date;
PROVIDED,  HOWEVER, that no such request may be made at a time when there exists
an Event of Default; and (ii) the becoming due of any amount required to be paid
under this Agreement,  whether as interest or for any other Obligation, shall be
deemed  irrevocably to be a request for a Revolving  Credit Loan on the due date
in the amount required to pay such interest or other Obligation.

            (b) Borrower hereby  irrevocably  authorizes  Lender to disburse the
proceeds of each Revolving Credit Loan requested,  or deemed to be requested, as
follows:  (i) the  proceeds  of  each  Revolving  Credit  Loan  requested  under
subsection  2.2(a)(i) shall be disbursed by Lender by wire transfer to such bank
account  as may be  agreed  upon by  Borrower  or  Lender  from  time to time or
elsewhere if pursuant to written direction from Borrower;  and (ii) the proceeds
of each Revolving  Credit Loan requested under  subsection  2.2(a)(ii)  shall be
disbursed by Lender by way of direct  payment of the relevant  interest or other
Obligation.

            (c) All  Revolving  Credit Loans,  advances and other  extensions of
credit to or for the benefit of Borrower shall constitute one general Obligation
of Borrower, and shall be secured by Lender's lien upon all of the Collateral.

            (d) Lender  shall enter all  Revolving  Credit  Loans as debits to a
loan  account in the name of Borrower and shall also record in said loan account
all payments made by Borrower on any  Obligations and all proceeds of Collateral
which are  indefeasibly  paid to Lender,  and may record therein,  in accordance
with customary accounting practice, other debits and credits, including interest
and all charges and expenses properly chargeable to Borrower.

            (e) Lender will  account to  Borrower  monthly  with a statement  of
Revolving  Credit Loans,  charges and payments made pursuant to this  Agreement,
and  such  account  rendered  by  Lender  shall be  deemed  final,  binding  and
conclusive upon Borrower unless Lender is notified by Borrower in writing to the
contrary  within  thirty  (30)  days of the date  each  accounting  is mailed to
Borrower.  Such notice shall be deemed an objection to those items  specifically
objected to therein.

      SECTION  2.3.  COLLECTIONS,  DISBURSEMENTS,  BORROWING  AVAILABILITY,  AND
LOCKBOX ACCOUNT.COLLECTIONS,  DISBURSEMENTS, BORROWING AVAILABILITY, AND LOCKBOX
ACCOUNT. Borrower shall maintain a lockbox account (the "Lockbox") with Bank One
Arizona, N.A. (the "Lockbox Bank"), subject to the provisions of this Agreement,
and shall execute with the Lockbox Bank a Lockbox Agreement in the form attached
as EXHIBIT B, and such other  agreements  related thereto as Lender may require.
Borrower  shall ensure that all  collections  of Accounts are paid directly from
Account  Debtors into the Lockbox,  and that all funds paid into the Lockbox are
immediately  transferred into a depository  account maintained by Lender at Bank
One Arizona,  N.A.  (the  "Dominion  Account").  Lender shall apply,  on a daily
basis, all funds  transferred into the Dominion Account pursuant to this Section
2.3 to reduce the outstanding  indebtedness under the Loan with future Revolving
Credit Loans, advances and other extensions of credit to be made by Lender under
the conditions set forth in this Article II. To the extent that any  collections
of Accounts or proceeds of other Collateral are not sent directly to the Lockbox
but are received by Borrower,  such  collections  shall be held in trust for the
benefit of Lender and immediately remitted, in the form received, to the Lockbox
Bank for transfer to the Dominion Account  immediately upon receipt by Borrower.
All funds  transferred  from the Dominion  Account for application to Borrower's
indebtedness  to Lender  shall be applied to reduce  the Loan  balance,  but for
purposes of calculating  interest,  shall be subject to a three (3) Business Day
clearance  period.  If as the result of collections of Accounts  pursuant to the
terms and conditions of this Section 2.3 a credit balance exists with respect to
the Dominion Account,  such credit balance shall not accrue interest in favor of
Borrower,  but shall at all times be  available to Borrower and shall be paid to
Borrower upon Borrower's written request for such payment.

      SECTION 2.4.  FEES.FEES.

            (a) At Closing and thereafter Borrower shall  unconditionally pay to
Lender,  in one or more  installments,  a commitment fee (the "Commitment  Fee")
equal  to one  percent  (1%) of  incremental  Revolving  Credit  Loans up to the
Maximum Loan Amount. For example,  if at Closing Lender makes a Revolving Credit
Loan in the amount of Five Hundred  Thousand and No/100  Dollars  ($500,000.00),
and ten (10) days after Closing  Lender makes an  additioanal  Revolving  Credit
Loan resulting in aggregate  outstanding principal of Eight Hundred Thousand and
No/100  Dollars  ($800,000.00),  Borrower  shall be  olligated  to pay an inital
installment   of  the  Commitment  Fee  of  Five  Thousand  and  No/100  Dollars
($5,000.00) at Closing,  and a second installment of the Commitment Fee of Three
Thounsand and No/100  Dollars  ($3,000.00)  ($800,000.00  - $500,000.00 x 1%) in
connection with the second advance.  Consistent with the foregoing,  the maximum
aggregate  Commitment  Fee payable by  Borrower  hereunder  shall be  $10,000.00
($1,000,000.00 x 1%).

            (b) INTENTIONALLY DELETED

            (c) For so  long as the  Loan is  available  to  Borrower,  Borrower
unconditionally  shall pay to Lender a monthly  loan  management  fee (the "Loan
Management  Fee") equal to  twenty-seven  and  one-half  one  hundredths  of one
percent (0.275%) of the average amount of the outstanding  principal  balance of
the Revolving  Credit Loans during the preceding  month. The Loan Management Fee
shall be payable monthly in arrears on the first day of each successive calendar
month.

            (d)  Borrower  shall  pay to  Lender  all  out-of-pocket  audit  and
appraisal fees in connection with audits and appraisals of Borrower's  books and
records and such other matters as Lender shall deem appropriate,  which shall be
due and payable on the first  Business  Day of the month  following  the date of
issuance by Lender of a request for payment thereof to Borrower. Notwithstanding
anything herein to the contrary, Lender acknowledges and agrees that, absent the
occurrence of an Event of Default  hereunder,  Borrower's maximum obligation for
the payment of out-of-pocket audit and appraisal fees in any calendar year shall
be Seven  Thousand Five Hundred and No/100  Dollars  ($7,500.00).  Following the
occurrence of an Event of Defaultl, such limitations shall not be applicable.

            (e) Borrower shall pay to Lender, on demand, any and all fees, costs
or expenses (exclusive of interest,  points and other finance charges payable by
Lender in connection with any of its borrowings from third parties) which Lender
pays to a bank or other  similar  institution  (so  long as the  payee is not an
Affiliate of Lender)  arising out of or in connection with (i) the forwarding to
Borrower or any other  Person on behalf of Borrower,  by Lender,  of proceeds of
Revolving  Credit Loans made by Lender to Borrower  pursuant to this  Agreement,
and (ii) the  depositing  for  collection,  by  Lender,  of any check or item of
payment received or delivered to Lender on account of Obligations.

      SECTION 2.5. PAYMENTS.PAYMENTS.  Principal payable on account of Revolving
Credit  Loans  shall be  payable  by  Borrower  to Lender  immediately  upon the
earliest  of  (i)  the  receipt  by  Borrower  of  any  proceeds  of  any of the
Collateral,  to the extent of such proceeds,  (ii) the occurrence of an Event of
Default in  consequence of which the Loan and the maturity of the payment of the
Obligations are accelerated, or (iii) the termination of this Agreement pursuant
to Section 2.8 hereof; PROVIDED,  HOWEVER, that if any advance made by Lender in
excess  of  the  Borrowing  Base  shall  exist  at  any  time,  Borrower  shall,
immediately  upon  demand,  repay  such  overadvance.  Interest  accrued  on the
Revolving  Credit Loans shall be due on the  earliest of (i) the first  Business
Day of each month (for the immediately  preceding  month),  computed on the last
calendar day of the preceding month,  (ii) the occurrence of an Event of Default
in  consequence  of which  the  Loan  and the  maturity  of the  payment  of the
Obligations are accelerated, or (iii) the termination of this Agreement pursuant
to  Section  2.8  hereof.  Except  to the  extent  otherwise  set  forth in this
Agreement,  all  payments of  principal  and of interest on the Loan,  all other
charges and any other obligations of Borrower hereunder, shall be made to Lender
to the Dominion Account, in immediately available funds.

      SECTION 2.6.  USE OF  PROCEEDS.USE  OF PROCEEDS.  The proceeds of Lender's
advances under the Loan shall be used solely for working  capital (in accordance
with generally accepted  accounting  principles) and for other costs of Borrower
arising in the ordinary course of Borrower's business.

      SECTION  2.7.  INTEREST  RATE  LIMITATION.INTEREST  RATE  LIMITATION.  The
parties intend to conform  strictly to the applicable  usury laws in effect from
time to time  during  the  term of the  Loan.  Accordingly,  if any  transaction
contemplated hereby would be usurious under such laws, then  notwithstanding any
other  provision  hereof:  (a) the  aggregate of all interest that is contracted
for, charged,  or received under this Agreement or under any other Loan Document
shall not exceed the maximum  amount of interest  allowed by applicable law (the
"Highest Lawful Rate"), and any excess shall be promptly credited to Borrower by
Lender  (or, to the extent that such  consideration  shall have been paid,  such
excess shall be promptly  refunded to Borrower by Lender);  (b) neither Borrower
nor any other Person now or hereafter liable hereunder shall be obligated to pay
the amount of such  interest  to the extent  that it is in excess of the Highest
Lawful  Rate;  and (c) the  effective  rate of interest  shall be reduced to the
Highest Lawful Rate. All sums paid, or agreed to be paid, to Lender for the use,
forbearance,  and  detention  of the debt of  Borrower to Lender  shall,  to the
extent permitted by applicable law, be allocated throughout the full term of the
Note until  payment is made in full so that the actual rate of interest does not
exceed the Highest Lawful Rate in effect at any particular  time during the full
term  thereof.  If at any time the rate of interest  under the Note  exceeds the
Highest Lawful Rate,  the rate of interest to accrue  pursuant to this Agreement
shall be  limited,  notwithstanding  anything  to the  contrary  herein,  to the
Highest Lawful Rate,  but any  subsequent  reductions in the Base Rate shall not
reduce the  interest  to accrue  pursuant  to this  Agreement  below the Highest
Lawful  Rate until the total  amount of  interest  accrued  equals the amount of
interest  that  would  have  accrued  if a varying  rate per annum  equal to the
interest  rate  under the Note had at all  times  been in  effect.  If the total
amount  of  interest  paid or  accrued  pursuant  to this  Agreement  under  the
foregoing  provisions  is less than the total amount of interest that would have
accrued if a varying  rate per annum equal to the  interest  rate under the Note
had been in effect, then Borrower agrees to pay to Lender an amount equal to the
difference  between (a) the lesser of (i) the amount of interest that would have
accrued if the Highest Lawful Rate had at all times been in effect,  or (ii) the
amount of interest  that would have accrued if a varying rate per annum equal to
the  interest  rate under the Note had at all times been in effect,  and (b) the
amount of  interest  accrued in  accordance  with the other  provisions  of this
Agreement.

      SECTION 2.8.  TERM.

            (a) Subject to Lender's right to cease making Revolving Credit Loans
to  Borrower  upon or after any Event of  Default,  this  Agreement  shall be in
effect for a period of two (2) years from the Closing Date,  and this  Agreement
shall  automatically  renew  itself  for  one-year  periods  thereafter,  unless
terminated as provided in this Section 2.8 (the "Term").

            (b) Upon at least thirty (30) days prior written notice to Borrower,
Lender  may  terminate  this  Agreement  as of the day of the  second  and  each
subsequent  annual  anniversary  of the Closing  Date,  and may  terminate  this
Agreement without notice upon or after the occurrence of an Event of Default.

            (c) Upon at least thirty (30) days prior  written  notice to Lender,
Borrower may terminate this  Agreement  effective as of the day of the second or
any  subsequent  annual  anniversary  of the Closing Date. In addition,  upon at
least thirty (30) days prior  written  notice to Lender,  Borrower may terminate
this Agreement prior to the second or any subsequent  annual  anniversary of the
Closing Date,  provided that, at the effective date of termination prior to such
second  anniversary,  Borrower  shall pay to  Lender  (in  addition  to the then
outstanding  principal,  accrued interest and other  Obligations owing under the
terms of this Agreement and any other Loan Documents) as liquidated  damages for
the loss of bargain and not as a penalty, an amount equal to two percent (2%) of
the Maximum Loan Amount.

            (d) All of the Obligations shall be immediately due and payable upon
the termination date stated in any notice of termination of this Agreement.  All
undertakings,   agreements,  covenants,  warranties,  and  representations,   of
Borrower  contained in the Loan Documents shall survive any such termination and
Lender  shall  retain  its liens in the  Collateral  and all of its  rights  and
remedies  under  the  Loan  Documents  notwithstanding  such  termination  until
Borrower has paid the Obligations to Lender,  in full, in immediately  available
funds.


                                  ARTICLE III

                                  COLLATERAL

      SECTION  3.1.  GENERALLY.GENERALLY.  As  security  for the  payment of all
liabilities  of  Borrower  to  Lender,   including   without   limitation:   (i)
indebtedness  evidenced  under the Note,  repayment of Revolving  Credit  Loans,
advances and other extensions of credit, all fees and charges owing by Borrower,
and all other  liabilities and obligations of every kind or nature whatsoever of
Borrower  to Lender,  whether  now  existing  or  hereafter  incurred,  joint or
several, matured or unmatured, direct or indirect, primary or secondary, related
or unrelated, due or to become due, including but not limited to any extensions,
modifications,  substitutions,  increases and renewals thereof, (ii) the payment
of all amounts advanced by Lender to preserve,  protect, defend, and enforce its
rights  hereunder and in the following  property in accordance with the terms of
this  Agreement,  and (iii) the  payment of all  expenses  incurred by Lender in
connection therewith (collectively, the "Obligations"),  Borrower hereby assigns
and grants to Lender a continuing  first priority lien on and security  interest
in, upon, and to the following property (the "Collateral"):

            (a) All of Borrower's  now-owned  and hereafter  acquired or arising
Accounts,   accounts  receivable  and  rights  to  payment  of  every  kind  and
description,  and any contract rights,  chattel paper, documents and instruments
with respect thereto;

            (b) All of Borrower's  now owned and  hereafter  acquired or arising
general  intangibles of every kind and  description  pertaining to its Accounts,
accounts receivable and other rights to payment,  including, but not limited to,
all  existing  and  future  customer  lists,  choses in action,  claims,  books,
records, contracts, licenses, formulae, tax and other types of refunds, returned
and unearned insurance premiums, rights and claims under insurance policies, and
computer information, software, records, and data;

     (c) All of Borrower's now or hereafter acquired deposit accounts into which
Accounts are deposited, including the Dominion Account;

            (d) All of  Borrower's  monies and other  property of every kind and
nature now or at any time or times  hereafter in the  possession of or under the
control of Lender or a bailee or Affiliate of Lender; and

     (e) The proceeds (including, without limitation, insurance proceeds) of all
of the foregoing.

      SECTION 3.2. LIEN DOCUMENTS.LIEN  DOCUMENTS.  At Closing and thereafter as
Lender  deems  necessary  in its sole  discretion,  Borrower  shall  execute and
deliver to Lender,  or have  executed and  delivered  (all in form and substance
satisfactory to Lender in its sole discretion):

            (a) UCC-1 Financing  statements  pursuant to the Uniform  Commercial
Code in effect in the  jurisdiction(s) in which Borrower operates,  which Lender
may file in any  jurisdiction  where any  Collateral is or may be located and in
any other  jurisdiction that Lender deems  appropriate;  PROVIDED that a carbon,
photographic,  or other  reproduction  or other copy of this  Agreement  or of a
financing  statement  is  sufficient  as and may be filed in lieu of a financing
statement;

            (b) A Dominion Account Agreement in the form of EXHIBIT C attached
hereto; and

            (c) Any  other  agreements,  documents,  instruments,  and  writings
deemed necessary by Lender or as Lender may otherwise  request from time to time
in its sole  discretion  to  evidence,  perfect,  or protect  Lender's  lien and
security interest in the Collateral required hereunder.

      SECTION 3.3.  COLLATERAL ADMINISTRATION.

            (a) All Collateral  (except  deposit  accounts) will at all times be
kept by Borrower at its principal office(s) as set forth on EXHIBIT D hereto and
shall not, without the prior written approval of Lender, be moved therefrom.

            (b)  Borrower  shall  keep  accurate  and  complete  records  of its
Accounts and all payments and collections  thereon and shall submit to Lender on
such periodic basis as Lender shall request a sales and  collections  report for
the preceding period, in form satisfactory to Lender. In addition,  if Qualified
Accounts in an aggregate face amount in excess of $50,000.00  become  ineligible
because they fall within one of the specified  categories of  ineligibility  set
forth in the  definition  of Qualified  Accounts or  otherwise,  Borrower  shall
notify  Lender of such  occurrence  on the first  Business  Day  following  such
occurrence  and the Borrowing  Base shall  thereupon be adjusted to reflect such
occurrence. If requested by Lender, Borrower shall execute and deliver to Lender
formal written  assignments of all of its Accounts weekly or daily,  which shall
include  all  Accounts  that  have  been  created  since  the  date of the  last
assignment,  together  with  copies of  claims,  invoices  or other  information
related thereto.

            (c) Whether or not an Event of Default has occurred, any of Lender's
officers,  employees  or  agents  shall  have  the  right,  at any time or times
hereafter,  in the name of Lender, any designee of Lender or Borrower, to verify
the  validity,  amount or any other  matter  relating  to any  Accounts by mail,
telephone, telegraph or otherwise. Borrower shall cooperate fully with Lender in
an effort to facilitate and promptly conclude such verification process.

            (d) To expedite  collection,  Borrower  shall  endeavor in the first
instance to make collection of its Accounts for Lender. Lender retains the right
at all times after the occurrence of an Event of Default,  subject to applicable
law regarding  Medicaid/Medicare Account Debtors, to notify Account Debtors that
Accounts  have been assigned to Lender and to collect  Accounts  directly in its
own name and to charge the collection costs and expenses,  including  reasonable
attorneys' fees to Borrower.

      SECTION 3.4. OTHER  ACTIONS.OTHER  ACTIONS.  In addition to the foregoing,
Borrower (i) shall  provide  prompt  written  notice to each private  indemnity,
managed  care or other  Insurer  who either is  currently  an Account  Debtor or
becomes an Account  Debtor at any time following the date hereof that the Lender
has been granted a first priority lien and security interest in, upon and to all
Accounts  applicable to such Insurer,  and hereby  authorizes Lender to send any
and all similar  notices to such Insurers by Lender,  and (ii) shall do anything
further that may be lawfully  required by Lender to secure Lender and effectuate
the intentions and objects of this  Agreement,  including but not limited to the
execution  and  delivery  of  lockbox   agreements,   continuation   statements,
amendments to financing statements,  and any other documents required hereunder.
At Lender's request, Borrower shall also immediately deliver to Lender all items
for  which  Lender  must  receive  possession  to  obtain a  perfected  security
interest.  Borrower  shall,  on  Lender's  demand,  deliver to Lender all notes,
certificates,  and  documents  of  title,  chattel  paper,  warehouse  receipts,
instruments, and any other similar instruments constituting Collateral.

      SECTION 3.5.  SEARCHES.SEARCHES.  Prior to Closing, and thereafter (as and
when  requested  by Lender in its sole  discretion),  Borrower  shall obtain and
deliver to Lender the following  searches against Borrower (the results of which
are to be consistent with Borrower's  representations  and warranties under this
Agreement), all at its own expense:

            (a) Uniform Commercial Code searches with the Secretary of State and
local filing offices of each jurisdiction where Borrower maintains its executive
offices, a place of business, or assets;

     (b) Judgment,  federal tax lien and corporate  tax lien  searches,  in each
jurisdiction searched under clause (a) above; and

            (c)  Good  standing  certificates  showing  Borrower  to be in  good
standing in its state of formation  and in each other state in which it is doing
and presently intends to do business for which qualification is required.

      SECTION 3.6. POWER OF ATTORNEY.POWER OF ATTORNEY.  Each of the officers of
Lender is hereby irrevocably made, constituted and appointed the true and lawful
attorney for Borrower  (without  requiring any of them to act as such) with full
power of substitution to do the following: (a) endorse the name of Borrower upon
any and all checks,  drafts, money orders, and other instruments for the payment
of money that are payable to Borrower and  constitute  collections on Borrower's
Accounts;  (b)  execute  in the  name  of  Borrower  any  financing  statements,
schedules, assignments,  instruments, documents, and statements that Borrower is
obligated to give Lender  hereunder;  and (c) do such other and further acts and
deeds in the name of Borrower  that Lender may deem  necessary  or  desirable to
enforce any Account or other Collateral or perfect Lender's security interest or
lien in any Collateral.

                                  ARTICLE IV

                        REPRESENTATIONS AND WARRANTIES

            Each entity  comprising  the  Borrower  represents  and  warrants to
Lender,  and shall be deemed to  represent  and warrant on each day on which any
Obligations shall be outstanding hereunder, that:

      SECTION 4.1.  SUBSIDIARIES.SUBSIDIARIES.  Except as set forth in SCHEDULE
4.1, Borrower has no subsidiaries.

      SECTION  4.2.  ORGANIZATION  AND  GOOD   STANDING.ORGANIZATION   AND  GOOD
STANDING.  Borrower is a corporation duly organized,  validly  existing,  and in
good standing under the laws of its state of incorporation,  is in good standing
as a foreign  corporation  in each  jurisdiction  in which the  character of the
properties  owned or leased by it therein or the  nature of its  business  makes
such  qualification  necessary,  except where such failure to qualify  would not
have a material  adverse  effect on the Borrower,  has the  corporate  power and
authority  to own its assets and  transact  the business in which it is engaged,
and has obtained all certificates,  licenses and  qualifications  required under
all laws, regulations, ordinances, or orders of public authorities necessary for
the ownership and operation of all of its properties  and  transaction of all of
its business.

      SECTION 4.3.  AUTHORITY.AUTHORITY.  Borrower has full corporate  power and
authority to enter into, execute,  and deliver this Agreement and to perform its
obligations hereunder,  to borrow the Loan, to execute and deliver the Note, and
to incur and perform the obligations provided for in the Loan Documents,  all of
which have been duly authorized by all necessary corporate action. No consent or
approval of shareholders  of, or lenders to, Borrower and no consent,  approval,
filing  or  registration  with  any  Governmental  Authority  is  required  as a
condition to the validity of the Loan  Documents or the  performance by Borrower
of its obligations thereunder.

      SECTION 4.4. BINDING  AGREEMENT.BINDING  AGREEMENT. This Agreement and all
other  Loan  Documents  constitute,  and the Note,  when  issued  and  delivered
pursuant  hereto for value  received,  will  constitute,  the valid and  legally
binding obligations of Borrower, enforceable against Borrower in accordance with
their  respective  terms,  subject to  bankruptcy,  insolvency,  reorganization,
fraudulent  conveyance,  moratorium,  and similar laws  affecting the rights and
remedies of secured parties and creditors generally.

      SECTION 4.5.  LITIGATION.LITIGATION.  Except as disclosed in SCHEDULE 4.5,
there are no actions,  suits,  proceedings or investigations  pending or, to the
best of Borrower's  knowledge,  threatened  against Borrower before any court or
arbitrator or before or by any Governmental  Authority which, in any one case or
in the  aggregate,  if  determined  adversely to the  interests of the Borrower,
could have a material  adverse  effect on the  business,  properties,  condition
(financial or otherwise) or operations,  present or prospective, of Borrower, or
upon its ability to perform its obligations  under the Loan Documents.  Borrower
is not in  default  with  respect  to any  order of any  court,  arbitrator,  or
Governmental Authority applicable to Borrower or its properties which would have
a material adverse effect on Borrower or its properties.

      SECTION 4.6. NO  CONFLICTS.NO  CONFLICTS.  The  execution  and delivery by
Borrower  of this  Agreement  and  the  other  Loan  Documents  do not,  and the
performance of its  obligations  thereunder  will not,  violate,  conflict with,
constitute a default  under,  or result in the creation of a lien or encumbrance
upon the property of Borrower under: (a) any provision of Borrower's articles of
incorporation  or its bylaws,  (b) any provision of any law, rule, or regulation
applicable to Borrower, or (c) any of the following:  (i) any indenture or other
material  agreement  or  instrument  to  which  Borrower  is a party or by which
Borrower or its property is bound; or (ii) any judgment,  order or decree of any
court,  arbitration tribunal, or Governmental Authority having jurisdiction over
Borrower which is applicable to Borrower.

      SECTION  4.7.  FINANCIAL   CONDITION.FINANCIAL   CONDITION.   The  audited
financial  statements of PHC, Inc. and its  subsidiaries  (including  the entity
comprising the Borrower)  (collectively,  the "Consolidated Company") as of June
30, 1995, certified by Richard A. Eisner & Co., LLP, and the unaudited financial
statements of the Consolidated Company as of December 31, 1995, certified by the
chief financial officer of the Consolidated  Company,  which have been delivered
to Lender, fairly present, in all material respects,  the financial condition of
the  Consolidated  Company  and the  results of its  operations  and  changes in
financial  condition  as of the dates and for the periods  referred to, and have
been  prepared in  accordance  with GAAP.  There are no material  unrealized  or
anticipated  liabilities,  direct  or  indirect,  fixed  or  contingent,  of the
Consolidated  Company as of the dates of such financial statements which are not
reflected  therein or in the notes thereto.  There has been no material  adverse
change in the  business,  properties,  condition  (financial  or  otherwise)  or
operations  (present or prospective) of any of the entities  comprising Borrower
since December 31, 1995. The Consolidated Company's fiscal year ends on June 30.
The federal tax identification  numbers for the entities comprising the Borrower
are listed on SCHEDULE 4.7.

      SECTION 4.8. NO  DEFAULT.NO  DEFAULT.  Borrower is not in default under or
with respect to any obligation in any respect which could be materially  adverse
to its business,  operations,  property or financial  condition,  or which could
materially,  adversely affect the ability of Borrower to perform its obligations
under the Loan Documents. No Event of Default or event which, with the giving of
notice or lapse of time, or both, could become an Event of Default, has occurred
and is continuing.

      SECTION 4.9. TITLE TO  PROPERTIES.TITLE  TO PROPERTIES.  Borrower has good
and marketable title to its properties and assets,  including the Collateral and
the properties  and assets  reflected in the financial  statements  described in
Section 4.7, subject to no lien, mortgage,  pledge, encumbrance or charge of any
kind, other than Permitted Liens.  Borrower has not agreed or consented to cause
any of its  properties or assets  whether owned now or hereafter  acquired to be
subject in the future (upon the happening of a contingency  or otherwise) to any
lien, mortgage,  pledge,  encumbrance or charge of any kind other than Permitted
Liens.

      SECTION 4.10. TAXES.TAXES.  Borrower has filed, or has obtained extensions
for the filing of, all federal,  state and other tax returns  which are required
to be  filed,  and has paid all  taxes  shown  as due on those  returns  and all
assessments,  fees  and  other  amounts  due  as of the  date  hereof.  All  tax
liabilities of Borrower  were, as of December 31, 1995, and are now,  adequately
provided for on  Borrower's  books.  No tax  liability  has been asserted by the
Internal Revenue Service or other taxing authority against Borrower for taxes in
excess of those already paid except as described in Schedule 4.10..

      SECTION 4.11.  SECURITIES AND BANKING LAWS AND REGULATIONS.SECURITIES AND
BANKING LAWS AND REGULATIONS.

            (a) The use of the proceeds of the Loan and  Borrower's  issuance of
the Note will not directly or indirectly violate or result in a violation of the
Securities  Act of 1933 or the Securities  Exchange Act of 1934, as amended,  or
any  regulations   issued  pursuant  thereto,   including   without   limitation
Regulations  U, T, G, or X of the  Board of  Governors  of the  Federal  Reserve
System.  Borrower is not engaged in the  business  of  extending  credit for the
purpose of the purchasing or carrying "margin stock" within the meaning of those
regulations.  No part of the  proceeds  of the  Loan  hereunder  will be used to
purchase  or carry  any  margin  stock or to extend  credit  to others  for such
purpose.

            (b) Borrower is not an investment  company within the meaning of the
Investment  Company Act of 1940, as amended,  nor is it, directly or indirectly,
controlled by or acting on behalf of any Person which is an  investment  company
within the meaning of that Act.

      SECTION 4.12. ERISA.ERISA.  No employee benefit plan (a "Plan") subject to
the Employee  Retirement  Income  Security Act of 1974 ("ERISA") and regulations
issued  pursuant  thereto that is maintained by Borrower or under which Borrower
could have any  liability  under  ERISA (a) has failed to meet  minimum  funding
standards established in Section 302 of ERISA, (b) has failed to comply with all
applicable requirements of ERISA and of the Internal Revenue Code, including all
applicable  rulings  and  regulations  thereunder,  (c) has  engaged  in or been
involved in a prohibited  transaction (as defined in ERISA) under ERISA or under
the Internal Revenue Code, or (d) has been terminated. Borrower has not assumed,
or  received  notice  of a  claim  asserted  against  Borrower  for,  withdrawal
liability (as defined in the Multi-Employer Pension Plan Amendments Act of 1980,
as amended) with respect to any multi-employer  pension plan and is not a member
of any Controlled Group (as defined in ERISA). Borrower has timely made when due
all contributions  with respect to any  multi-employer  pension plan in which it
participates  and no event has occurred  triggering a claim against Borrower for
withdrawal  liability with respect to any  multi-employer  pension plan in which
Borrower participates.

      SECTION 4.13. COMPLIANCE WITH LAW.COMPLIANCE WITH LAW. Except as described
in  SCHEDULE  4.13,  Borrower  has  received  no  written  notification  of  any
violation, and to the best of its knowledge is not in violation, in any material
respect,  of any  statute,  rule or  regulation  of any  Governmental  Authority
(including,  without  limitation,  any statute,  rule or regulation  relating to
employment practices or to environmental,  occupational and health standards and
controls).  Borrower has obtained all licenses,  permits,  franchises, and other
governmental  authorizations  necessary for the ownership of its  properties and
the conduct of its business. Borrower is current, in all material respects, with
all  reports  and  documents  required  to be filed  with any  state or  federal
securities commission or similar Governmental Authority and is in compliance, in
all  material  respects,  with all  applicable  rules  and  regulations  of such
commissions.

      SECTION 4.14. ENVIRONMENTAL  MATTERS.ENVIRONMENTAL MATTERS. To the best of
Borrower's  knowledge,  no  use,  exposure,  release,  generation,  manufacture,
storage,  treatment,  transportation  or  disposal  of  Hazardous  Material  has
occurred or is occurring on or from any real property on which the Collateral is
located  or which is owned,  leased  or  otherwise  occupied  by  Borrower  (the
"Premises"),  or off the Premises as a result of any action of Borrower,  except
as described in SCHEDULE 4.14. All Hazardous  Material  used,  treated,  stored,
transported  to or  from,  generated  or  handled  on the  Premises,  or off the
Premises  by  Borrower,  has been  disposed  of on or off the  Premises by or on
behalf of Borrower in a lawful manner.

      SECTION 4.15. PLACES OF  BUSINESS.PLACES  OF BUSINESS.  The only places of
business  of  Borrower,  and the places  where it keeps and  intends to keep the
Collateral and records concerning the Collateral, are at the addresses set forth
in SCHEDULE 4.15.

      SECTION 4.16. INTELLECTUAL  PROPERTY.INTELLECTUAL  PROPERTY.  Borrower has
received  no  written  challenges  to its  ownership  of, and to the best of its
knowledge  exclusively owns or possesses,  all the patents,  patent applications
trademarks  trademark  applications,  service  marks,  trade names,  copyrights,
franchises, licenses, and rights with respect to the foregoing necessary for the
present and planned  future  conduct of its business,  without any conflict with
the rights of others. A list of all such intellectual  property  (indicating the
nature  of  Borrower's  interest),  as well as all  outstanding  franchises  and
licenses given by or held by Borrower, is attached as SCHEDULE 4.16. Borrower is
not in default,  in any material respect,  of any obligation or undertaking with
respect to such intellectual property or rights.

      SECTION  4.17.  STOCK  OWNERSHIP.STOCK  OWNERSHIP.  The  identity  of  the
stockholders of all classes of the outstanding  stock of each entity  comprising
Borrower,  together  with  the  respective  ownership  percentages  held by such
stockholders, are as set forth on SCHEDULE 4.17.

      SECTION 4.18. MATERIAL  FACTS.MATERIAL  FACTS.  Neither this Agreement nor
any other Loan  Document  nor any other  agreement,  document,  certificate,  or
statement furnished to Lender by or on behalf of Borrower in connection with the
transactions  contemplated hereby contains any untrue statement of material fact
or omits to state a  material  fact  necessary  in order to make the  statements
contained  herein or therein not misleading.  There is no material fact known to
Borrower  that  materially  adversely  affects or in the  future may  materially
adversely  affect the business,  operations,  affairs or financial  condition of
Borrower, or any of its properties or assets.

      SECTION 4.19. INVESTMENTS,  GUARANTEES, AND CERTAIN CONTRACTS.INVESTMENTS,
GUARANTEES,  AND CERTAIN CONTRACTS.  Borrower does not own or hold any equity or
long-term  debt  investments  in,  have any  outstanding  advances  to, have any
outstanding   guarantees  for  the  obligations  of,  or  have  any  outstanding
borrowings from, any Person,  except as described on SCHEDULE 4.19.  Borrower is
not a party to any  contract  or  agreement,  or subject to any charter or other
corporate restriction, which materially adversely affects its business.

      SECTION 4.20. BUSINESS INTERRUPTIONS.BUSINESS  INTERRUPTIONS.  Within five
years prior to the date hereof,  neither the  business,  property or assets,  or
operations of Borrower has been  adversely  affected in any way by any casualty,
strike,  lockout,  combination  of  workers,  or order of the  United  States of
America or other Governmental Authority, directed against Borrower. There are no
pending or threatened labor disputes,  strikes, lockouts, or similar occurrences
or grievances against Borrower or its business.

      SECTION  4.21.  NAMES.NAMES.  Within five years prior to the date  hereof,
Borrower  has not  conducted  business  under or used any  other  name  (whether
corporate  or  assumed)  other than as shown on  SCHEDULE  4.21.  To the best of
Borrower's  knowledge  Borrower  is the sole  owner of all names  listed on that
Schedule  and any and all business  done and  invoices  issued in such names are
Borrower's sales, business, and invoices. Each trade name of Borrower represents
a division or trading style of Borrower and not a separate corporate  subsidiary
or independent Affiliate.

      SECTION 4.22 JOINT VENTURES.JOINT VENTURES. Borrower is not engaged in any
joint  venture  or  partnership  with any other  Person,  except as set forth on
SCHEDULE 4.22.

      SECTION 4.23 ACCOUNTS.  Lender may rely, in determining which Accounts are
Qualified Accounts,  on all statements and representations made by Borrower with
respect to any Account or  Accounts.  Unless  otherwise  indicated in writing to
Lender, with respect to each Account:

     (a) It is genuine and in all material  respects what it purports to be, and
is not evidenced by a judgment;

            (b) It arises out of a  completed,  BONA FIDE sale and  delivery  of
goods or  rendition  of  services  by  Borrower  in the  ordinary  course of its
business and in accordance with the terms and conditions of all purchase orders,
contracts, certification, participation, certificate of need, or other documents
relating  thereto and forming a part of the  contract  between  Borrower and the
Account Debtor;

            (c) It is for a liquidated  amount maturing as stated in a duplicate
claim or invoice  covering  such sale or rendition of services,  a copy of which
has been furnished or is available to Lender;

            (d) Such Account,  and Lender's security  interest therein,  is not,
and, to the best of Borrower's knowledge, will not (by voluntary act or omission
by Borrower), be in the future, subject to any offset, lien, deduction, defense,
dispute,  counterclaim or any other adverse condition,  and each such Account is
absolutely  owing to Borrower  and is not  contingent  in any respect or for any
reason;

            (e) There are no facts, events or occurences which in any way impair
the  validity  or  enforceability  of any  Accounts or tend to reduce the amount
apyable  threunder  from the face amount of the claim or invoice and  statements
delivered to Lender with respect thereto;

            (f) To the best of  Borrower's  knowledge,  (i) the  Account  Debtor
thereunder  had the  capacity  to  contract  at the time any  contract  or other
document giving rise to the Account was executed and (ii) such Account Debtor is
solvent;

            (g) To the best of Borrower's knowledge, there are no proceedings or
actions which are threatened or pending  against any Account  Debtor  thereunder
which might  result in any  material  adverse  change in such  Account  Debtor's
financial condition or the collectibility of such Account;

            (h) It has been  billed  and  forwarded  to the  Account  Debtor for
payment in accordance with  applicable laws and compliance and conformance  with
any and requisite procedures,  requirements and regulations governing payment by
such Account Debtor with respect to such Account, and such Account if due from a
Medicaid/Medicare Account Debtor is properly payable directly to Borrower; and

            (i)  Borrower  has   obtained   and   currently   has  all  material
certificates of need, Medicaid and Medicare provider numbers,  licenses, permits
and authorizations as necessary in the generation of such Accounts.



                                   ARTICLE V

                       CLOSING AND CONDITIONS OF LENDING

      SECTION 5.1.  CONDITIONS  PRECEDENT TO  AGREEMENT.CONDITIONS  PRECEDENT TO
AGREEMENT. The obligation of Lender to enter into and perform this Agreement and
to make Revolving Credit Loans is subject to the following conditions precedent:

            (a) Lender shall have received two (2)  originals of this  Agreement
and all other Loan  Documents  required to be executed and delivered at or prior
to Closing  (other than the Note,  as to which  Lender  shall  receive  only one
original), executed by Borrower and any other required Persons, as applicable.

            (b) Lender  shall  have  received  all  searches  and good  standing
certificates required by Section 3.5.

            (c) Borrower  shall have  complied,  in all material  respects,  and
shall  then be in  compliance,  in all  material  respects,  with all the terms,
covenants and conditions of the Loan Documents.

            (d) There  shall  have  occurred  no Event of  Default  and no event
which, with the giving of notice or the lapse of time, or both, could constitute
such an Event of Default.

     (e) The  representations  and  warranties  contained in Article IV shall be
true and correct.

            (f) Lender  shall  have  received  copies of all board of  directors
resolutions  and other  corporate  action  taken by  Borrower to  authorize  the
execution,  delivery and  performance of the Loan Documents and the borrowing of
the Loan  thereunder,  as well as the names and  signatures  of the  officers of
Borrower  authorized to execute documents on its behalf in connection  herewith,
all as also  certified  as of the date  hereof  by  Borrower's  chief  financial
officer, and such other papers as Lender may require.

            (g) Lender shall have received  copies,  certified as true,  correct
and  complete  by  a  corporate   officer  of  Borrower,   of  the  articles  of
incorporation and bylaws of Borrower, with any amendments thereto, and all other
documents  necessary for  performance of the  obligations of Borrower under this
Agreement and the other Loan Documents.

            (h) Lender  shall have  received  a written  opinion of counsel  for
Borrower, dated the date hereof, in the form of EXHIBIT E.

            (i) Lender shall have received such financial  statements,  reports,
certifications,  and other  operational  information  required  to be  delivered
hereunder,  including  without  limitation an initial borrowing base certificate
calculating the Borrowing Base.

            (j) Lender  shall have  received the portion of the  Commitment  Fee
payable at Closing in accordance with Section 2.4(a) of this Agreement.

     (k) The Lockbox and the Dominion Account shall have been established.

            (l) Lender shall have received an estoppel  certificate  in form and
substance  reasonably   satisfactory  to  Lender  from  Borrower's  landlord  or
sublandlord,  as the case may be, with  respect to the  facility  identified  on
Schedule 4.15.

            (m) Lender shall have  received a certificate  of  Borrower's  chief
financial officer, dated the Closing Date, certifying that all of the conditions
specified in this Section have been fulfilled.

      SECTION  5.2.  CONDITIONS  PRECEDENT TO  ADVANCES.CONDITIONS  PRECEDENT TO
ADVANCES.  Notwithstanding  any  other  provision  of  this  Agreement,  no Loan
proceeds,  Revolving Credit Loans,  advances or other extensions of credit under
the Loan shall be disbursed hereunder unless the following  conditions have been
satisfied or waived immediately prior to such disbursement:

            (a) The  representations  and  warranties  on the  part of  Borrower
contained  in  Article  IV of this  Agreement  shall be true and  correct in all
respects at and as of the date of disbursement or advance, as though made on and
as of such date (except to the extent that such  representations  and warranties
expressly  relate  solely to an earlier date and except that the  references  in
Section 4.7 to  financial  statements  shall be deemed to be a reference  to the
then most recent annual and interim financial  statements of Borrowers furnished
to Lender pursuant to Section 6.1 hereof).

            (b) No Event of Default or event which, with the giving of notice of
the lapse of time, or both, could become an Event of Default shall have occurred
and be  continuing  or would  result  from the  making  of the  disbursement  or
advance.

            (c) No adverse  change in the condition  (financial  or  otherwise),
properties,  business,  or  operations  of Borrower  shall have  occurred and be
continuing with respect to Borrower since the date hereof.

      SECTION 5.3. CLOSING.CLOSING. Subject to the conditions of this Article V,
the  Loan  shall be made  available  on the date as is  mutually  agreed  by the
parties (the  "Closing  Date") at such time as may by mutually  agreeable to the
parties  upon the  execution  hereof  (the  "Closing")  at such  place as may be
requested by Lender.

      SECTION 5.4. WAIVER OF RIGHTS.WAIVER OF RIGHTS.  By completing the Closing
hereunder,  or by making advances under the Loan, Lender does not waive a breach
of any  representation or warranty of Borrower hereunder or under any other Loan
Document,  and all of Lender's  claims and rights  resulting  from any breach or
misrepresentation by Borrower are specifically reserved by Lender.


                                  ARTICLE VI

                             AFFIRMATIVE COVENANTS

      Borrower  covenants  and agrees  that for so long as  Borrower  may borrow
hereunder  and until  payment in full of the Note and  performance  of all other
obligations of Borrower under the Loan Documents:

      SECTION  6.1.  FINANCIAL   STATEMENTS  AND  COLLATERAL   REPORTS.FINANCIAL
STATEMENTS AND COLLATERAL  REPORTS.  Borrower will furnish to Lender (a) a sales
and  collections  report  and  accounts  receivable  aging  schedule  on a  form
acceptable  to Lender  within  fifteen (15) days after the end of each  calendar
month,  which shall include,  but not be limited to, a report of sales,  credits
issued,  and collections  received;  (b) payable aging schedules  within fifteen
(15) days after the end of each calendar month; (c) internally  prepared monthly
financial  statements  for  Borrower,  certified by Borrower's  chief  financial
officer,  to be in  accordance  with  GAAP to the best of hir or her  knowledge,
within  forty-five  (45)  days  of the  end of each  calendar  month  (provided,
however,   that  Borrower  reserve  the  right  to  make  reasonable  accounting
adjustments to such monthly  financial  statements  within a resonable period of
time  following  the  delivery  thereof  to  Lender);  (d)  internally  prepared
quarterly  financial  statements for the  Consolidated  Company  (accompanied by
detailed financial information pertaining to Borrower, to be furnished to Lender
simultaneous with the filing by the Consolidated  Company with the US Securities
and Exchange Commission of quarterly  financial  statements on Form 10-Q; (e) to
the extent prepared by Borrower, annual projections, profit and loss statements,
balance  sheets,  and cash flow reports  (prepared  on a monthly  basis) for the
succeeding  fiscal  year  within  thirty  (30)  days  before  the end of each of
Borrower's  fiscal  years;  (f)  annual  audited  financial  statements  for the
Consolidated  Company  (as such term is  defined  in Section  4.7)  prepared  by
Richard  A.  Eisner  & Co.,  LLP or a firm  of  independent  public  accountants
satisfactory to Lender,  to be furnished to Lender  simultaneous with the filing
by the  Consolidated  Company with the US Securities and Exchange  Commission of
annual  financial  statement on Form 10-K;  (g) promptly  upon receipt  thereof,
copies of any  reports  submitted  to  Borrower by  independent  accountants  in
connection  with any interim  audit of the books of Borrower  and copies of each
management control letter provided to Borrower by independent  accountants;  (h)
as soon as available, copies of all financial statements and notices provided by
Borrower  to all of its  stockholders;  and  (i)  such  additional  information,
reports or statements as Lender may from time to time request.  Annual financial
statements  shall set forth in  comparative  form figures for the  corresponding
periods in the prior fiscal  year.  All  financial  statements  shall  include a
balance sheet and statement of earnings and shall be prepared in accordance with
GAAP.

      SECTION 6.2. PAYMENTS HEREUNDER.PAYMENTS HEREUNDER. Borrower will make all
payments  of  principal,   interest,  fees,  and  all  other  payments  required
hereunder,  under the Loan, and under any other  agreements with Lender to which
Borrower is a party, as and when due.

      SECTION  6.3.  EXISTENCE,   GOOD  STANDING,   AND  COMPLIANCE  WITH  LAWS.
EXISTENCE, GOOD STANDING, AND COMPLIANCE WITH LAWS. Borrower will do or cause to
be done all things necessary (a) to obtain and keep in full force and effect all
corporate existence,  rights, licenses,  privileges,  and franchises of Borrower
necessary to the ownership of its property or the conduct of its  business,  and
comply, in all material  respects,  with all applicable present and future laws,
ordinances, rules, regulations, orders and decrees of any Governmental Authority
having or claiming  jurisdiction over Borrower;  and (b) to maintain and protect
the properties used or useful in the conduct of the operations of Borrower, in a
prudent  manner,  including  without  limitation the maintenance at all times of
such insurance upon its insurable  property and operations as required by law or
by Section 6.7 hereof.

      SECTION  6.4.   LEGALITY.LEGALITY.   The  making  of  the  Loan  and  each
disbursement  or advance  under the Loan shall not be subject to any  penalty or
special tax,  shall not be  prohibited by any  governmental  order or regulation
applicable  to  Borrower,  and shall not violate any rule or  regulation  of any
Governmental Authority, and necessary consents,  approvals and authorizations of
any Governmental  Authority to or of any such disbursement or advance shall have
been obtained.

     SECTION 6.5. LENDER'S SATISFACTION.  LENDER'S SATISFACTION. All instruments
and  legal  documents  and  proceedings  in  connection  with  the  transactions
contemplated  by this Agreement  shall be  satisfactory in form and substance to
Lender and its counsel, and Lender shall have received all documents,  including
records of corporate proceedings and opinions of counsel,  which Lender may have
requested in connection therewith.

      SECTION 6.6.  TAXES AND CHARGES.  TAXES AND CHARGES.  Borrower will timely
file  all  tax  reports  and  pay  and  discharge  all  taxes,  assessments  and
governmental  charges or levies imposed upon Borrower,  or its income or profits
or upon its properties or any part thereof,  before the same shall be in default
and prior to the date on which penalties  attach thereto,  as well as all lawful
claims for labor, material, supplies or otherwise which, if unpaid, might become
a lien or charge upon the properties or any part thereof of Borrower;  PROVIDED,
HOWEVER,  that the Borrower  shall not be required to pay and discharge or cause
to be paid and discharged  any such tax,  assessment,  charge,  levy or claim so
long as the validity or amount  thereof  shall be contested in good faith and by
appropriate  proceedings  by Borrower,  and the Borrower shall have set aside on
their books adequate reserve therefor; and PROVIDED FURTHER, that such deferment
of payment is permissible  only so long as Borrower's title to, and its right to
use, the  Collateral  is not  adversely  affected  thereby and Lender's lien and
priority  on the  Collateral  are not  adversely  affected,  altered or impaired
thereby.

      SECTION 6.7.  INSURANCE.  INSURANCE.  Borrower will carry adequate public
liability and professional liability insurance with responsible companies
satisfactory to Lender in such amounts and against such risks as is customarily
maintained by similar businesses and by owners of similar property in the same
general area.

     SECTION  6.8.  GENERAL  INFORMATION.  GENERAL  INFORMATION.  Borrower  will
furnish to Lender such information as Lender may, from time to time,  reasonably
request with respect to the business or financial affairs of Borrower,  and upon
reasonable  prior  notice,  permit any  officer,  employee or agent of Lender to
visit  and  inspect  Borrower's  cororate  headquarters  or  any  of  Borrower's
facilities  at  which  Accounts  are  generated,   to  meet  with  President  or
Controller,  or any other person designated by either of them, an to examine the
minute books, books of account and other records,  including  management letters
prepared  by  Borrower's  auditors,  of  Borrower,  and make  copies  thereof or
extracts therefrom, and to discuss its and their business affairs,  finances and
accounts with, and be advised as to the same by, the accountants and officers of
Borrower, all at such times and as often as Lender may reasonably require.

      SECTION 6.9.  MAINTENANCE OF PROPERTY.  MAINTENANCE OF PROPERTY.  Borrower
will  maintain,  keep  and  preserve,  in  all  material  respects,  all  of its
properties  in good repair,  working  order and  condition and from time to time
make all needful and proper  repairs,  renewals,  replacements,  betterments and
improvements  thereto,  so that the business carried on in connection  therewith
may be properly and advantageously conducted at all times.

      SECTION 6.10.  NOTIFICATION OF EVENTS OF DEFAULT AND ADVERSE DEVELOPMENTS.
NOTIFICATION OF EVENTS OF DEFAULT AND ADVERSE  DEVELOPMENTS.  Borrower  promptly
will notify  Lender upon the  occurrence  of: (a) any Event of Default;  (b) any
event  which,  with the  giving  of  notice  or lapse  of time,  or both,  could
constitute  an Event of  Default;  (c) any event,  development  or  circumstance
whereby the  financial  statements  previously  furnished  to Lender fail in any
material  respect to present  fairly,  in  accordance  with GAAP,  the financial
condition and operational results of Borrower; (d) any judicial,  administrative
or  arbitration  proceeding  pending  against  Borrower,  and  any  judicial  or
administrative  proceeding known by Borrower to be threatened  against it which,
if adversely decided, could materially adversely affect its condition (financial
or  otherwise)  or  operations  (present  or  prospective)  or which may  expose
Borrower to uninsured liability of $25,000.00 or more; (e) any default,  subject
to applicable grace and cure periods, claimed by any other creditor for Borrowed
Money of  Borrower  other  than  Lender;  and (f) any other  development  in the
business or affairs of Borrower  which may be materially  adverse;  in each case
describing the nature thereof and (in the case of notification under clauses (a)
and (b)) the action Borrower proposes to take with respect thereto.

      SECTION 6.11.  EMPLOYEE BENEFIT PLANS.  EMPLOYEE  BENEFIT PLANS.  Borrower
will (a) comply with the funding requirements of ERISA with respect to the Plans
for its employees,  or will promptly satisfy any accumulated  funding deficiency
that arises  under  Section 302 of ERISA;  (b) furnish  Lender,  promptly  after
filing the same, with copies of all reports or other  statements  filed with the
United States Department of Labor, the Pension Benefit Guaranty Corporation,  or
the Internal  Revenue Service with respect to all Plans,  or which Borrower,  or
any member of a Controlled Group, may receive from such  Governmental  Authority
with respect to any such Plans, and (c) promptly advise Lender of the occurrence
of any Reportable Event or Prohibited  Transaction with respect to any such Plan
and the action which Borrower  proposes to take with respect  thereto.  Borrower
will make all contributions when due with respect to any multi-employer  pension
plan in which it  participates  and will promptly  advise  Lender:  (a) upon its
receipt of notice of the assertion  against  Borrower of a claim for  withdrawal
liability;  (b) upon  the  occurrence  of any  event  which  could  trigger  the
assertion of a claim for withdrawal liability against Borrower; and (c) upon the
occurrence  of any event which would place  Borrower in a Controlled  Group as a
result of which any  member  (including  Borrower)  thereof  may be subject to a
claim for withdrawal liability, whether liquidated or contingent.

      SECTION 6.12. FINANCING  STATEMENTS.FINANCING  STATEMENTS.  Borrower shall
provide to Lender  evidence  satisfactory  to Lender as to the due  recording of
termination statements, releases of collateral, and Forms UCC-3, and shall cause
to be recorded financing statements on Form UCC-1, duly executed by Borrower and
Lender, in all places necessary to release all existing  security  interests and
other liens in the  Collateral  (other than as permitted  hereby) and to perfect
and  protect  Lender's  first  priority  lien  and  security   interest  in  the
Collateral, as Lender may request.

      SECTION 6.13.  FINANCIAL  RECORDS.FINANCIAL  RECORDS.  Borrower shall keep
current and  accurate  books of records  and  accounts in which full and correct
entries  will be made of all of its business  transactions,  and will reflect in
its financial  statements adequate accruals and appropriations to reserves,  all
in accordance with GAAP.

     SECTION 6.14. COLLECTION OF ACCOUNTS.COLLECTION OF ACCOUNTS. Borrower shall
continue to collect its Accounts in the ordinary course of business.

      SECTION 6.15. PLACES OF BUSINESS.PLACES  OF BUSINESS.  Borrower shall give
thirty (30) days' prior  written  notice to Lender of any change in the location
of any of its places of business, of the places where its records concerning its
Accounts  are kept,  of the  places  where  the  Collateral  is kept,  or of the
establishment  of any new,  or the  discontinuance  of any  existing,  places of
business.

      SECTION  6.16.  BUSINESS  CONDUCTED.BUSINESS   CONDUCTED.  Borrower  shall
continue in the  business  presently  conducted  by it using its best efforts to
maintain its  customers  and goodwill.  Borrower  shall not engage,  directly or
indirectly,  in any line of business  substantially  different from the business
conducted by it immediately  prior to the Closing Date, or engage in business or
lines of business which are not reasonably related thereto.

      SECTION  6.17.  LITIGATION  AND  OTHER  PROCEEDINGS.LITIGATION  AND  OTHER
PROCEEDINGS.  Borrower  shall give  prompt  notice to Lender of any  litigation,
arbitration,  or other proceeding  before any Governmental  Authority against or
affecting Borrower if the amount claimed is more than $25,000.00

     SECTION 6.18. BANK ACCOUNTS.BANK ACCOUNTS.  Borrower shall assign to Lender
all of its  depository  and  disbursement  accounts  into which any  proceeds of
Accounts are deposited.

      SECTION 6.19. SUBMISSION OF COLLATERAL  DOCUMENTS.SUBMISSION OF COLLATERAL
DOCUMENTS.  Borrower will, on demand of Lender,  make available to Lender copies
of shipping and  delivery  receipts  evidencing  the shipment of goods that gave
rise to an Account, medical records, insurance verification forms, assignment of
benefits,  in-take  forms or  other  proof of the  satisfactory  performance  of
services  that gave rise to an Account,  a copy of the claim or invoice for each
Account  and copies of any  written  contract  or order  from which the  Account
arose.  Borrower shall promptly notify Lender if an Account becomes evidenced or
secured by an  instrument  or  chattel  paper and upon  request of Lender,  will
promptly deliver any such instrument or chattel paper to Lender.

      SECTION  6.20.  LICENSURE;   MEDICAID/MEDICARE   COST   REPORTS.LICENSURE;
MEDICAID/MEDICARE COST REPORTS. Borrower will maintain all certificates of need,
provider  numbers and licenses  materially  necessary to conduct its business as
presently conducted,  and take any steps required to comply with any such new or
additional requirements that may be imposed on providers of medical products and
services.  If  required,  all  Medicaid/Medicare  cost  reports will be properly
filed.

      SECTION 6.21. OFFICER'S CERTIFICATES.OFFICER'S CERTIFICATES. Together with
the monthly  financial  statements  delivered  pursuant to clause (c) of Section
6.1,  and  together  with the  audited  annual  financial  statements  delivered
pursuant  to clause  (g) of that  Section,  Borrower  shall  deliver to Lender a
certificate of its chief financial officer in form and substance satisfactory to
Lender setting forth:

            (a) The information  (including detailed  calculations)  required in
order to establish  whether  Borrower is in compliance with the  requirements of
Articles  VI and  VII as of the  end of  the  period  covered  by the  financial
statements then being furnished; and

            (b)  That  the  signer  has  reviewed  the  relevant  terms  of this
Agreement, and has made (or caused to be made under his supervision) a review of
the transactions and conditions of Borrower from the beginning of the accounting
period  covered  by the income  statements  being  delivered  to the date of the
certificate,  and that such review has not disclosed  the existence  during such
period of any condition or event which  constitutes an Event of Default or which
is then,  or with the passage of time or giving of notice or both,  could become
an Event of Default,  and if any such  condition  or event  existed  during such
period or now exists,  specifying the nature and period of existence thereof and
what action Borrower has taken or proposes to take with respect thereto.

      SECTION 6.22.  VISITS AND  INSPECTIONS.VISITS  AND  INSPECTIONS.  Borrower
shall permit  representatives  of Lender,  from time to time, as often as may be
reasonably  requested,  but only during normal business hours following at least
twenty-four  hours'  prior  notice,  to visit  and  inspect  the  properties  of
Borrower,  and to inspect,  audit and make  extracts from its books and records,
and discuss with its officers,  its employees and its  independent  accountants,
Borrower's  business,  assets,   liabilities,   financial  condition,   business
prospects and results of operations.


                                  ARTICLE VII

                              NEGATIVE COVENANTS

      Each entity  comprising the Borrower  covenants and agrees that so long as
Borrower  may  borrow  hereunder  and  until  payment  in full of the  Note  and
performance of all other  obligations of the Borrower under the Loan  Documents,
Borrower  shall  not do any of the  following  without  Lender's  prior  written
consent  (which  consent may be withheld in Lender's sole  discretion  except as
otherwise specified to the contrary in this Article VII):

      SECTION 7.1. BORROWING. BORROWING. Borrower will not create, incur, assume
or suffer to exist any liability for Borrowed Money except:  (a) indebtedness to
Lender; (b) indebtedness of Borrower secured by mortgages, encumbrances or liens
expressly  permitted  by  Section  7.3  hereof;  (c)  accounts  payable to trade
creditors and current  operating  expenses (other than for borrowed money) which
are not aged more than one hundred  twenty  (120) days from the billing  date or
more than  thirty  (30) days from the due  date,  in each case  incurred  in the
ordinary  course of business and paid within such time  period,  unless the same
are being contested in good faith and by appropriate and lawful proceedings, and
Borrower shall have set aside such reserves, if any, with respect thereto as are
required  by  GAAP  and  deemed   adequate  by  Borrower  and  its   independent
accountants;  (d) borrowings incurred in the ordinary course of its business and
not exceeding $150,000.00 in the aggregate outstanding at any one time. Borrower
will not make  prepayments on any existing or future  indebtedness  for Borrowed
Money  to any  Person  (other  than  Lender,  to the  extent  permitted  by this
Agreement or any subsequent agreement between Borrower and Lender).

     SECTION 7.2.  JOINT  VENTURES.  JOINT  VENTURES.  Borrower  will not invest
directly or indirectly  in any joint  venture for any purpose  without the prior
written notice to, and the express written consent of, Lender, which consent may
be withheld in Lender's sole discretion.

      SECTION 7.3. LIENS AND ENCUMBRANCES. LIENS AND ENCUMBRANCES. Borrower will
not create, incur, assume or suffer to exist any mortgage, pledge, lien or other
encumbrance of any kind  (including the charge upon property  purchased  under a
conditional  sale or other title  retention  agreement)  upon,  or any  security
interest in, any of its  Collateral,  whether now owned or  hereafter  acquired,
except for Permitted Liens.

      SECTION 7.4. MERGER,  ACQUISITION, OR SALE OF ASSETS. MERGER, ACQUISITION,
OR SALE OF ASSETS. Borrower will not enter into any merger or consolidation with
or acquire all or  substantially  all of the assets of any Person,  and will not
sell,  lease,  or otherwise  dispose of any of its assets except in the ordinary
course of its business.

      SECTION 7.5. SALE AND LEASEBACK.  SALE AND  LEASEBACK.  Borrower will not,
directly or indirectly,  enter into any  arrangement  whereby  Borrower sells or
transfers  all or any part of its  assets  and  thereupon  and  within  one year
thereafter  rents or leases the assets so sold or transferred  without the prior
written notice to, and the express written consent of, Lender, which consent may
be withheld in Lender's sole discretion;  provided,  however, that in any fiscal
year  Borrower  shall be permitted to enter into any  transactions  described in
this Section 7.5 without obtaiing  Lender's prior written consent to long as the
aggregate amount involved in such transactions  during such fiscal year is lower
than Fifty Thousand and No/100 Dollars ($50,000.00).

      SECTION 7.6. DIVIDENDS AND MANAGEMENT FEES. DIVIDENDS AND MANAGEMENT FEES.
Borrower will not declare or pay any  dividends,  purchase,  redeem or otherwise
acquire  for value any of its  outstanding  stock,  or return any capital of its
stockholders,  nor shall Borrower pay or become obligated to pay management fees
or fees of a similar nature to any Person;  provided,  however, jthat so long as
no Event of Default has occurred hereunder, Borrower may make any such dividends
or purchase, redeem or otherwise acquire such outstanding stock, return any such
capital,  or pay any such management fees, so long as doing so would not violate
any of the other terms and conditions of this Agreement.

     SECTION 7.7. LOANS. LOANS.  Borrower will not make loans or advances to any
Person,  other than (i) trade  credit  extended  in the  ordinary  course of its
business,  (ii) advances for business travel and similar  temporary  advances in
the  ordinary  course of  business to  officers,  stockholders,  directors,  and
employees.

     SECTION 7.8. CONTINGENT LIABILITIES.  CONTINGENT LIABILITIES. Borrower will
not assume,  guarantee,  endorse,  contingently  agree to purchase or  otherwise
become liable upon the  obligation of any Person,  except by the  endorsement of
negotiable  instruments for deposit or collection or similar transactions in the
ordinary course of business.

      SECTION 7.9.  SUBSIDIARIES.  SUBSIDIARIES.  Borrower will not form any
subsidiary, or make any investment in or any loan in the nature of an investment
to, any other Person.

      SECTION 7.10. COMPLIANCE WITH ERISA.  COMPLIANCE WITH ERISA. Borrower will
not permit with respect to any Plan covered by Title IV of ERISA any  Prohibited
Transaction or any Reportable Event.

     SECTION 7.11.  CERTIFICATES OF NEED.  CERTIFICATES OF NEED. Amend, alter or
suspend or terminate or make provisional in any material way, any certificate of
need or provider number without the prior written consent of Lender.

      SECTION 7.12. TRANSACTIONS WITH  AFFILIATES.TRANSACTIONS  WITH AFFILIATES.
Borrower will not enter into any transaction,  including without  limitation the
purchase,  sale,  or exchange of property,  or the loaning or giving of funds to
any  Affiliate  or  subsidiary,  except in the  ordinary  course of business and
pursuant to the reasonable  requirements  of Borrower's  business and upon terms
substantially the same and no less favorable to Borrower as it would obtain in a
comparable  arm's  length  transaction  with  any  Person  not an  Affiliate  or
subsidiary,  and  so  long  as  the  transaction  is  not  otherwise  prohibited
hereunder.  For purposes of the foregoing,  Lender consents to the  transactions
described on SCHEDULE 7.12.

      SECTION 7.13. USE OF LENDER'S NAME.USE OF LENDER'S NAME. Borrower will not
use Lender's name (or the name of any of Lender's affiliates) in connection with
any of its business  operations.  Borrower  may  disclose to third  parties that
Borrower has a borrowing  relationship with Lender.  Nothing herein contained is
intended  to permit or  authorize  Borrower  to make any  contract  on behalf of
Lender.

      SECTION 7.14.  CHANGE IN CAPITAL STRUCTURE.CHANGE IN CAPITAL STRUCTURE.
There shall occur no change in Borrower's capital structure as set forth in
SCHEDULE 4.17.

      SECTION 7.15. CONTRACTS AND AGREEMENTS.CONTRACTS AND AGREEMENTS.  Borrower
will not become or be a party to any  contract or  agreement  which would breach
this Agreement, or breach any other material instrument,  agreement, or document
to which Borrower is a party or by which it is or may be bound.

      SECTION  7.16.  MARGIN  STOCK.MARGIN  STOCK.  Borrower  will not  carry or
purchase any "margin security" within the meaning of Regulations U, G, T or X of
the Board of Governors of the Federal Reserve System.

      SECTION 7.17. TRUTH OF STATEMENTS AND CERTIFICATES.TRUTH OF STATEMENTS AND
CERTIFICATES.  Borrower  will not  furnish  to Lender any  certificate  or other
document that contains any untrue  statement of a material fact or that omits to
state a  material  fact  necessary  to make it not  misleading  in  light of the
circumstances under which it was furnished.


                                 ARTICLE VIII

                               EVENTS OF DEFAULT

     SECTION 8.1.  EVENTS OF DEFAULT.  EVENTS OF DEFAULT.  Each of the following
(individually,  an "Event of Default" and collectively, the "Events of Default")
shall constitute an Event of Default hereunder:

            (a) A default in the payment of any  installment of principal of, or
interest upon, the Note when due and payable,  whether at maturity or otherwise,
which  default  shall have  continued  unremedied  for a period of five (5) days
after written notice thereof from Lender to Borrower;

            (b) A default in the payment of any other  charges,  fees,  or other
monetary  obligations  owing to Lender  arising out of or incurred in connection
with this  Agreement  when such payment is due and payable,  which default shall
have  continued  unremedied  for a period of five (5) days after written  notice
from Lender;

            (c) A default in the due  observance or  performance  by Borrower of
any other term,  covenant or agreement  contained in any of the Loan  Documents,
which default shall have  continued  unremedied for a period of thirty (30) days
after written notice from Lender;

            (d) If any  representation or warranty made by Borrower herein or in
any of the other Loan Documents,  any financial  statement,  or any statement or
representation  made in any other  certificate,  report or opinion  delivered in
connection  herewith or therewith proves to have been incorrect or misleading in
any material  respect when made,  which default shall have continued  unremedied
for a period of ten (10) days after written notice from Lender;

            (e) If any  obligation  of  Borrower  (other  than  its  Obligations
hereunder)  for the payment of Borrowed Money is not paid when due or within any
applicable cure period, or such obligation  becomes or is declared to be due and
payable prior to the expressed maturity thereof, or there shall have occurred an
event which,  with the giving of notice or lapse of time,  or both,  would cause
any such  obligation to become,  or allow any such  obligation to be declared to
be, due and payable;

            (f) If Borrower  makes an  assignment  for the benefit of creditors,
offers a composition  or extension to creditors,  or makes or sends notice of an
intended  bulk sale of any  business  or assets now or  hereafter  conducted  by
Borrower;

            (g) If  Borrower  files a petition  in  bankruptcy,  is  adjudicated
insolvent or bankrupt,  petitions or applies to any tribunal for any receiver of
or any trustee for itself or any substantial part of its property, commences any
proceeding   relating   to  itself   under  any   reorganization,   arrangement,
readjustment  or  debt,  dissolution  or  liquidation  law  or  statute  of  any
jurisdiction,  whether now or hereafter in effect, or there is commenced against
Borrower any such  proceeding  which remains  undismissed  for a period of sixty
(60) days, or any Borrower by any act indicates its consent to,  approval of, or
acquiescence  in, any such  proceeding or the  appointment of any receiver of or
any trustee for a Borrower or any substantial  part of its property,  or suffers
any such  receivership or trusteeship to continue  undischarged  for a period of
sixty (60) days;

            (h) If one or more final judgments  against  Borrower or attachments
against its property not fully and unconditionally covered by insurance shall be
rendered  by a court of record  and shall  remain  unpaid,  unstayed  on appeal,
undischarged, unbonded and undismissed for a period of ten (10) days;

            (i)  A  Reportable   Event  which  might   constitute   grounds  for
termination  of any Plan covered by Title IV of ERISA or for the  appointment by
the appropriate United States District Court of a trustee to administer any such
Plan or for the entry of a lien or  encumbrance  to secure any  deficiency,  has
occurred and is continuing  thirty (30) days after its  occurrence,  or any such
Plan is terminated,  or a trustee is appointed by an  appropriate  United States
District  Court to  administer  any such Plan, or the Pension  Benefit  Guaranty
Corporation  institutes  proceedings  to terminate any such Plan or to appoint a
trustee to  administer  any such Plan,  or a lien or  encumbrance  is entered to
secure any deficiency or claim;

            (j) If any outstanding stock of Borrower is sold or otherwise
transferred by the Person owning such stock on the date hereof;

            (k) If there shall occur any uninsured damage to or loss, theft or
destruction of any portion of the Collateral;

            (l) If Borrower  breaches of violates  the terms of, or if a default
or an event which could,  whether  with notice or the passage of time,  or both,
constitute  a  default,  occurs  under any other  existing  or future  agreement
(related or unrelated) between Borrower and Lender;

            (m) Upon the issuance of any execution or distraint process against
Borrower or any of its property or assets;

     (n) If Borrower ceases any material  portion of its business  operations as
presently conducted;

            (o) If any  indication  or  evidence  is  received  by  Lender  that
Borrower may have  directly or  indirectly  been engaged in any type of activity
which, in Lender's discretion, might result in the forfeiture of any property of
Borrower to any  Governmental  Authority,  which  default  shall have  continued
unremedied for a period of ten (10) days after written notice from Lender;

            (p)  Borrower or any  Affiliate  of  Borrower,  shall  challenge  or
contest,  in any action,  suit or proceeding,  the validity or enforceability of
this  Agreement,  or  any of the  other  Loan  Documents,  the  legality  or the
enforceability  of any of the  Obligations  or the perfection or priority of any
Lien granted to Lender;

            (q) Borrower shall be criminally indicted or convicted under any law
that could lead to a forfeiture of any Collateral.

            (s) There shall  occur a material  adverse  change in the  financial
condition or business  prospects  of Borrower,  or if Lender in good faith deems
itself  insecure  as a result  of acts or  events  bearing  upon  the  financial
condition of Borrower or the  repayment of the Note,  which  default  shall have
continued  unremedied  for a period of ten (10) days after  written  notice from
Lender.

            (t) PHC, Inc. shall have breached any of its representations,
warranties or covenants contained in the Unconditional Guaranty of Payment and
Performance of even date herewith, executed in favor of Lender.

      SECTION 8.2. ACCELERATION.ACCELERATION.  Upon the occurrence of any of the
foregoing  Events of Default,  the Note shall become and be immediately  due and
payable  upon  declaration  to that  effect  delivered  by Lender  to  Borrower;
provided  that,  upon the  happening of any event  specified in Section  8.1.(g)
hereof,  the Note shall be immediately  due and payable  without  declaration or
other notice to Borrower.

      SECTION 8.3.  REMEDIES.REMEDIES.

            (a) In addition to all other rights,  options,  and remedies granted
to Lender  under  this  Agreement,  upon the  occurrence  of an Event of Default
Lender may (i) terminate the Loan,  whereupon all outstanding  Obligations shall
be  immediately  due and payable,  (ii) exercise all other rights  granted to it
hereunder  and all rights  under the  Uniform  Commercial  Code in effect in the
applicable  jurisdiction(s)  and  under  any  other  applicable  law,  and (iii)
exercise all rights and remedies  under all Loan  Documents  now or hereafter in
effect,  including the following rights and remedies (which list is given by way
of example and is not intended to be an  exhaustive  list of all such rights and
remedies):

                  (i) The right to take  possession of, send notices  regarding,
and collect directly the Collateral,  with or without judicial  process,  and to
exercise  all  rights  and  remedies  available  to Lender  with  respect to the
Collateral under the Uniform Commercial Code in effect in the jurisdiction(s) in
which such Collateral is located;

                  (ii)  The  right  to  (by  its  own  means  or  with  judicial
assistance)  enter  any  of  Borrower's  premises  and  take  possession  of the
Collateral, or render it unusable, or dispose of the Collateral on such premises
in compliance  with  subsection  (b),  without any liability for rent,  storage,
utilities,  or other sums,  and Borrower shall not resist or interfere with such
action;

                  (iii) The right to require  Borrower at Borrower's  expense to
assemble  all or any part of the  Collateral  and make it available to Lender at
any place designated by Lender;

                  (iv) The right to reduce the Maximum Loan Amount or to use the
Collateral  and/or  funds in the  Dominion  Account in amounts up to the Maximum
Loan Amount for any reason; and

                  (v) The right to relinquish or abandon any Collateral or any
security interest therein.

            (b) Borrower  agrees that a notice  received by it at least five (5)
days before the time of any intended  public  sale,  or the time after which any
private sale or other  disposition  of the  Collateral  is to be made,  shall be
deemed to be reasonable notice of such sale or other  disposition.  If permitted
by applicable law, any perishable Collateral which threatens to speedily decline
in value or which is sold on a  recognized  marked  may be sold  immediately  by
Lender  without  prior  notice  to  Borrower.  At any  sale  or  disposition  of
Collateral,  Lender may (to the extent permitted by applicable law) purchase all
or any part of the  Collateral,  free from any right of  redemption by Borrower,
which  right is  hereby  waived  and  released.  At any sale or  disposition  of
Collateral,  Lender may (to the extent permitted by applicable law) purchase all
or any part of the  Collateral,  free from any right of  redemption by Borrower,
which right is hereby waived and released.  Borrower covenants and agrees not to
interfere  with or impose any  obstacle to  Lender's  exercise of its rights and
remedies with respect to the Collateral.

      SECTION 8.4. NATURE OF REMEDIES.NATURE OF REMEDIES.  Lender shall have the
right to proceed  against  all or any portion of the  Collateral  to satisfy the
liabilities and  Obligations of Borrower to Lender in any order.  All rights and
remedies granted Lender hereunder and under any agreement referred to herein, or
otherwise  available  at  law or in  equity,  shall  be  deemed  concurrent  and
cumulative, and not alternative remedies, and Lender may proceed with any number
of remedies at the same time until the Loans,  and all other existing and future
liabilities  and  obligations of Borrower to Lender,  are satisfied in full. The
exercise  of any one right or remedy  shall not be deemed a waiver or release of
any other  right or  remedy,  and  Lender,  upon the  occurrence  of an Event of
Default, may proceed against Borrower, and/or the Collateral, at any time, under
any agreement, with any available remedy and in any order.



                                  ARTICLE IX

                                 MISCELLANEOUS

      SECTION 9.1.  EXPENSES AND TAXES.  EXPENSES AND TAXES.

            (a) Borrower agrees to pay,  whether or not the Closing occurs,  all
out-of-pocket  charges  and  expenses  incurred  by Lender  (including,  without
limitation,  the fees and expenses of Lender's  counsel) in connection  with the
negotiation,  preparation and execution of each of the Loan Documents; provided,
however,  that with respect to ther period  thorugh and  including  the Closing,
Borrrower  shall  in no  event  be  required  to pay  more  than  the sum of the
following  amounts  incurred  by Lender:  (i) Six  Thousand  and No/100  Dollars
($6,000) in legal fees,  plus (ii) out of pocket charges and expenses.  Borrower
also agrees to pay all  out-of-pocket  charges and  expenses  incurred by Lender
(including the reasonable  fees and expenses of Lender's  counsel) in connection
with the enforcement, protection or preservation of any right or claim of Lender
and the collection of any amounts due under the Loan Documents.

            (b)  Borrower  shall pay all taxes  (other  than taxes based upon or
measured by Lender's  income or revenues or any personal  property tax), if any,
in  connection  with the issuance of the Note and the  recording of the security
documents  therefor.  The  obligations  of Borrower  under this clause (b) shall
survive the payment of Borrower's  indebtedness hereunder and the termination of
this Agreement.

      SECTION 9.2. ENTIRE AGREEMENT;  AMENDMENTS.ENTIRE  AGREEMENT;  AMENDMENTS.
This  Agreement  and the other  Loan  Documents  constitute  the full and entire
understanding  and  agreement  among the parties  with  regard to their  subject
matter  and  supersede  all prior  written or oral  agreements,  understandings,
representations   and  warranties  made  with  respect  thereto.  No  amendment,
supplement  or  modification  of this  Agreement nor any waiver of any provision
thereof  shall be made  except in writing  executed  by the party  against  whom
enforcement is sought.

      SECTION 9.3. NO WAIVER; CUMULATIVE RIGHTS.NO WAIVER; CUMULATIVE RIGHTS. No
waiver by any party hereto of any one or more defaults by the other party in the
performance  of any of the  provisions  of this  Agreement  shall  operate or be
construed as a waiver of any future  default or  defaults,  whether of a like or
different nature. No failure or delay on the part of any party in exercising any
right,  power or remedy  hereunder shall operate as a waiver thereof,  nor shall
any single or partial  exercise of any such right,  power or remedy preclude any
other or further exercise  thereof or the exercise of any other right,  power or
remedy. The remedies provided for herein are cumulative and are not exclusive of
any  remedies  that may be  available  to any party  hereto at law, in equity or
otherwise.

     SECTION 9.4. NOTICES.  NOTICES. Any notice or other communication  required
or permitted hereunder shall be in writing and personally  delivered,  mailed by
registered or certified  mail (return  receipt  requested and postage  prepaid),
sent by telecopier  (with a confirming  copy sent by regular  mail),  or sent by
prepaid  overnight  courier service,  and addressed to the relevant party at its
address set forth below,  or at such other address as such party may, by written
notice, designate as its address for purposes of notice hereunder:

            (a) If to Lender, at:

                  HealthPartners Funding, L.P.
                  c/o HealthPartners Financial Corporation
                  Chevy Chase Metro Building
                  2 Wisconsin Circle, Suite 320
                  Chevy Chase MD 20815
                  Attn:  John K. Delaney, President

            (b)   If to Borrower, at:

                  200 Lake Street, Suite 102
                  Peabody MA 01960
                  ATTN: Ms. Paula Wurts, Chief Financial Officer
                  Telephone:  (508) 536-2777
                  Telecopier:  (508) 536-2677

                  With a copy to:

                  Willie J. Washington, Esq.
                  Choate, Hall& Stewart
                  53 State Street
                  Boston MA 02109
                  Telephone:  (617)248-5095
                  Telecopier: (617) 248-4000

If mailed, notice shall be deemed to be given five (5) days after being sent, if
sent by personal  delivery or telecopier,  followed by a  confirmatory  mailing,
notice  shall be  deemed  to be given  when  delivered,  and if sent by  prepaid
courier,  notice shall be deemed to be given on the next  Business Day following
deposit with the courier.

      SECTION  9.5.  SEVERABILITY.   SEVERABILITY.  If  any  term,  covenant  or
condition  of this  Agreement,  or the  application  of such term,  covenant  or
condition  to any party or  circumstance  shall be found by a court of competent
jurisdiction to be, to any extent,  invalid or  unenforceable,  the remainder of
this  Agreement  and the  application  of such term,  covenant,  or condition to
parties or  circumstances  other  than  those as to which it is held  invalid or
unenforceable,  shall  not be  affected  thereby,  and each  term,  covenant  or
condition  shall be valid and enforced to the fullest  extent  permitted by law.
Upon determination that any such term is invalid, illegal or unenforceable,  the
parties hereto shall amend this Agreement so as to effect the original intent of
the parties as closely as possible in an acceptable manner.

      SECTION  9.6.  SUCCESSORS  AND  ASSIGNS.   SUCCESSORS  AND  ASSIGNS.  This
Agreement,  the Note,  and the other Loan  Documents  shall be binding  upon and
inure to the benefit of Borrower and Lender and their respective  successors and
assigns.  Notwithstanding  the  foregoing,  Borrower  may not  assign any of its
rights or delegate any of its  obligations  hereunder  without the prior written
consent of Lender,  which may be  withheld  in its sole  discretion.  Lender may
sell, assign,  transfer,  or participate any or all of its rights or obligations
hereunder without notice to or consent of Borrower.

     SECTION 9.7. COUNTERPARTS.  COUNTERPARTS. This Agreement may be executed in
any number of counterparts,  each of which shall be deemed an original,  but all
of which together shall constitute but one instrument.

      SECTION 9.8. INTERPRETATION.INTERPRETATION. No provision of this Agreement
or any other Loan Document shall be  interpreted or construed  against any party
because  that party or its legal  representative  drafted  that  provision.  The
titles of the paragraphs of this Agreement are for convenience of reference only
and are not to be considered in construing this  Agreement.  Any pronoun used in
this  Agreement  shall be deemed to include  singular and plural and  masculine,
feminine and neuter gender as the case may be. The words "herein," "hereof," and
"hereunder"  shall be deemed to refer to this  entire  Agreement,  except as the
context otherwise requires.

      SECTION  9.9.  SURVIVAL  OF  TERMS.  SURVIVAL  OF  TERMS.  All  covenants,
agreements,  representations  and warranties made in this  Agreement,  any other
Loan  Document,  and in any  certificates  and other  instruments  delivered  in
connection  therewith shall be considered to have been relied upon by Lender and
shall  survive  the making by Lender of the Loans  herein  contemplated  and the
execution and delivery to Lender of the Note,  and shall  continue in full force
and effect  until all  liabilities  and  obligations  of  Borrower to Lender are
satisfied in full.

      SECTION  9.10.  RELEASE OF  LENDER.RELEASE  OF LENDER.  Borrower  releases
Lender, its officers,  employees, and agents, of and from any claims for loss or
damage  resulting  from acts or conduct of any or all of them,  unless caused by
Lender's recklessness, gross negligence, or willful misconduct.

      SECTION 9.11. TIME.TIME. Whenever Borrower is required to make any payment
or perform any act on a Saturday,  Sunday,  or a legal holiday under the laws of
the State of Maryland (or other  jurisdiction where Borrower is required to make
the payment or perform the act), the payment may be made or the act performed on
the next Business Day.  Time is of the essence in Borrower's  performance  under
this Agreement and all other Loan Documents.

      SECTION 9.12.  COMMISSIONS.COMMISSIONS.  The  transaction  contemplated by
this Agreement was brought about by Lender and Borrower acting as principals and
without any brokers,  agents,  or finders being the effective  procuring  cause.
Borrower  represents  that it has not  committed  Lender to the  payment  of any
brokerage fee, commission, or charge in connection with this transaction. If any
such claim is made on Lender by any broker,  finder,  or agent or other  person,
Borrower will indemnify,  defend,  and hold Lender harmless from and against the
claim and will defend any action to recover on that claim,  at  Borrower's  cost
and expense, including Lender's counsel fees. Borrower further agrees that until
any such claim or demand is adjudicated in Lender's  favor,  the amount demanded
will be deemed a liability  of  Borrower  under this  Agreement,  secured by the
Collateral.

      SECTION 9.13. THIRD  PARTIES.THIRD  PARTIES.  No rights are intended to be
created  hereunder or under any other Loan Document for the benefit of any third
party donee, creditor, or incidental beneficiary of Borrower.  Nothing contained
in this  Agreement  shall be construed as a delegation  to Lender of  Borrower's
duty of performance,  including without  limitation  Borrower's duties under any
account or contract in which Lender has a security interest.

      SECTION 9.14. DISCHARGE OF BORROWER'S  OBLIGATIONS.DISCHARGE OF BORROWER'S
OBLIGATIONS.  Lender, in its sole discretion,  shall have the right at any time,
and from time to time, without any additional notice to Borrower if Borrower has
failed  to do so  following  reasonable  notice  from  Lender,  to:  (a)  obtain
insurance covering any of the Collateral as required hereunder;  (b) pay for the
performance of any of Borrower's  obligations  hereunder;  (c) discharge  taxes,
liens, security interests, or other encumbrances at any time levied or placed on
any of the Collateral in violation of this Agreement  unless Borrower is in good
faith with due diligence by appropriate  proceedings contesting those items; and
(d) pay for the maintenance and preservation of any of the Collateral.  Expenses
and advances shall be added to the Loan, until reimbursed to Lender and shall be
secured by the  Collateral.  Such  payments  and advances by Lender shall not be
construed as a waiver by Lender of an Event of Default.

      SECTION 9.15.  INFORMATION TO  PARTICIPANTS.INFORMATION  TO  PARTICIPANTS.
Lender may divulge to any  participant it may obtain in the Loan, or any portion
thereof,  all information,  and furnish to such  participant  copies of reports,
financial statements,  certificates,  and documents obtained under any provision
of this Agreement or any other Loan Document.

      SECTION  9.16.  INDEMNITY.  Borrower  hereby  agrees to indemnify and hold
harmless Lender,  its partners,  officers,  agents and employees  (collectively,
"Indemnitee")  from and against  any  liability,  loss,  cost,  expense,  claim,
damage,  suit,  action  or  proceeding  ever  suffered  or  incurred  by  Lender
(including  reasonable  attorneys'  fees and expenses)  arising from  Borrower's
failure to observe,  perform or  discharge  any of its  covenants,  obligations,
agreements or duties hereunder, or from the breach of any of the representations
or warranties contained in Article IV hereof. In addition, Borrower shall defend
Indemnitee  against  and save it  harmless  from all claims of any  Person  with
respect  to the  Collateral.  Notwithstanding  any  contrary  provision  in this
Agreement,  the obligation of Borrower under this Section 9.16 shall survive the
payment in full of the Obligations and the termination of this Agreement.

      SECTION  9.17.  CHOICE  OF LAW;  CONSENT  TO  JURISDICTION.CHOICE  OF LAW;
CONSENT TO JURISDICTION.  THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF MARYLAND,  WITHOUT REGARD
TO ANY  OTHERWISE  APPLICABLE  PRINCIPLES  OF CONFLICTS  OF LAWS.  IF ANY ACTION
ARISING OUT OF THIS AGREEMENT OR THE NOTE IS COMMENCED BY LENDER IN THE STATE OF
MARYLAND OR FEDERAL  COURT  LOCATED IN THE STATE OF  MARYLAND,  BORROWER  HEREBY
CONSENTS  TO THE  JURISDICTION  OF ANY SUCH COURT IN ANY SUCH  ACTION AND TO THE
LAYING OF VENUE IN THE STATE OF  MARYLAND.  ANY PROCESS IN ANY SUCH ACTION SHALL
BE DULY SERVED IF MAILED BY REGISTERED MAIL, POSTAGE PREPAID, TO THE BORROWER AT
ITS ADDRESS DESCRIBED IN SECTION 9.4 HEREOF.

      SECTION 9.18.  WAIVER OF TRIAL BY JURY.WAIVER  OF TRIAL BY JURY.  BORROWER
HEREBY  (A)  COVENANTS  AND  AGREES  NOT TO ELECT A TRIAL  BY JURY OF ANY  ISSUE
TRIABLE  OF RIGHT BY A JURY,  AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO
THE EXTENT  THAT ANY SUCH RIGHT  SHALL NOW OR  HEREAFTER  EXIST.  THIS WAIVER OF
RIGHT  TO TRIAL BY JURY IS  SEPARATELY  GIVEN,  KNOWINGLY  AND  VOLUNTARILY,  BY
BORROWER,  AND THIS WAIVER IS INTENDED TO ENCOMPASS  INDIVIDUALLY  EACH INSTANCE
AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY  TRIAL  WOULD  OTHERWISE  ACCRUE.
LENDER IS HEREBY  AUTHORIZED AND REQUESTED TO SUBMIT THIS AGREEMENT TO ANY COURT
HAVING  JURISDICTION  OVER THE SUBJECT MATTER AND THE PARTIES  HERETO,  SO AS TO
SERVE AS CONCLUSIVE  EVIDENCE OF  BORROWER'S  WAIVER OF THE RIGHT TO JURY TRIAL.
FURTHER,  BORROWER HEREBY  CERTIFIES THAT NO  REPRESENTATIVE  OR AGENT OF LENDER
(INCLUDING  LENDER'S  COUNSEL)  HAS  REPRESENTED,  EXPRESSLY  OR  OTHERWISE,  TO
BORROWER THAT LENDER WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL
PROVISION.


<PAGE>



            IN WITNESS  WHEREOF,  the parties  have caused this  Agreement to be
executed as of the date first written above.

ATTEST:                             HEALTHPARTNERS FUNDING, L.P.
(Seal)
                          By: HealthPartners Financial
                                   Corporation

By:________________________   By:__________________________
   Edward P. Nordberg, Jr.,               John K. Delaney,
   Secretary                              President



     ATTEST: PHC OF UTAH, INC. (Seal) a Massachusetts corporation


By:________________________   By:________________________________
Name:                         Name:
Title:                              Title:




<PAGE>



                               LIST OF EXHIBITS


Exhibit A - Form of Revolving Credit Note

Exhibit B - Form of Lockbox Agreement

Exhibit C - Form of Dominion Account Agreement

Exhibit D - Locations of Collateral

Exhibit E - Form of Legal Opinion


<PAGE>




                               LIST OF SCHEDULES

Schedule 1.36     -     Permitted Liens

Schedule 4.1      -     Subsidiaries

Schedule 4.5      -     Litigation

Schedule 4.7      -     Tax Identification Numbers

Schedule 4.13     -     Non-Compliance with Law

Schedule 4.14     -     Environmental Matters

Schedule 4.15     -     Places of Business

Schedule 4.16     -     Licenses

Schedule 4.17     -     Stock Ownership

Schedule 4.19     -     Borrowings and Guarantees

Schedule 4.21     -     Trade Names

Schedule 4.22     -     Joint Ventures

Schedule 7.12     -     Transactions with Affiliates


                                    29374250.12C

<PAGE>


                                   SCHEDULE 1.36


PERMITTED LIENS:                     None


                                    SCHEDULE 4.1


SUBSIDIARIES:                             None


                                    SCHEDULE 4.5


LITIGATION:                         None


                                    SCHEDULE 4.7


TAX IDENTIFICATION NUMBERS:         87-0401574


                                   SCHEDULE 4.10


TAX LIABILITIES:                    None



                                   SCHEDULE 4.13


NON-COMPLIANCE WITH LAW:                  None


                                   SCHEDULE 4.14


ENVIRONMENTAL MATTERS:              None


<PAGE>


                                   SCHEDULE 4.15


PLACES OF BUSINESS:           4578 Highland Drive, Salt lake City, UT
-------------------
                        Record Owner:  Palmer Wells Enterprises

                        4616 Highland Drive, Salt lake City, UT
                        Record Owner: Scott Hopkinson

    *Additional records kept at Corporate Office at 200 Lake Street, Suite 102,
                                 Peabody, MA 10960

                                   SCHEDULE 4.16


LICENSES:               State of Utah Bureau of Health Facility Licensure


                                   SCHEDULE 4.17


STOCK OWNERSHIP:              PHC, Inc.         100%


                                   SCHEDULE 4.19


BORROWINGS AND GUARANTEES:

                  Alco Capital Resource, Inc. (printer lease)
                  Transnational Leasing Co. (computer lease)
                  Orix Credit Alliance, Co. (phone lease)
                  INAC (finance for insurance premium)
                  Premium Payment Company (finance for insurance premium)


                                   SCHEDULE 4.21


TRADE NAMES:            Highland Ridge Hospital



<PAGE>



                                   SCHEDULE 4.22


JOINT VENTURES:                     None


                                   SCHEDULE 7.12


TRANSACTIONS WITH AFFILIATES:

            PDS2 - A d/b/a of PHC, Inc. which operates an Employee Assistance
                  Program
                   out of Highland Ridge Hospital.



<PAGE>


EXHIBIT 10.79

                             REVOLVING CREDIT NOTE


$1,000,000.00                                         May  , 1996

       For value received,  the undersigned,  PHC OF UTAH, INC., a Massachusetts
corporation  (the  "Borrower"),  promises to pay, in lawful  money of the United
States,  to the  order of  HEALTHPARTNERS  FUNDING,  L.P.,  a  Delaware  limited
partnership  ("Lender"),  the  principal  sum of One Million and No/100  Dollars
($1,000,000.00), or so much thereof as shall be advanced or readvanced and shall
remain  unpaid  under the Loan  established  pursuant to that  certain  Loan and
Security Agreement of even date herewith by and among the undersigned and Lender
(the "Loan Agreement"), plus interest on the unpaid balance thereof, computed on
a 360-day basis,  at the rate per annum that is set forth in the Loan Agreement.
All capitalized terms used herein, unless otherwise specifically defined in this
Note, shall have the meanings ascribed to them in the Loan Agreement.

      This Note shall  evidence the  undersigned's  obligation to repay all sums
advanced by Lender  from time to time under and as part of the Loan.  The actual
amount due and owing from time to time hereunder  shall be evidenced by Lender's
records of receipts and  disbursements  with respect to the Loan, which shall be
conclusive evidence of that amount.

      Interest  hereon  shall be  payable  monthly,  in  arrears,  on the  first
Business  Day of each month  hereafter  (for the previous  month).  For purposes
hereof, a "Business Day" shall mean any day on which banks are open for business
in Maryland, excluding Saturdays and Sundays.

      This Note shall  become due and  payable  upon the earlier to occur of (i)
the  expiration  of the  Term,  or (ii) any  Event  of  Default  under  the Loan
Agreement,  or any other event under any other Loan Documents which would result
in this Note  becoming  due and  payable.  At such time,  the  entire  principal
balance hereof and all other fees, costs and expenses,  if any, shall be due and
payable in full.  Lender  shall  thereupon  have the option at any time and from
time to time to exercise  all of the rights and remedies set forth herein and in
the other Loan Documents, as well as all rights and remedies otherwise available
to Lender at law or in equity, to collect the unpaid indebtedness  hereunder and
thereunder.  This Note is secured by the Collateral, as defined in and described
in the Loan Agreement.

      Whenever any principal  and/or  interest and/or fee hereunder shall not be
paid when due,  whether at the stated maturity or by  acceleration,  interest on
such unpaid amounts shall thereafter be payable at a rate per annum equal to two
percentage  points  above the stated  rate of  interest  on this Note until such
amounts shall be paid.

      The  undersigned  and Lender intend to conform  strictly to the applicable
usury laws in effect from time to time during the term of the Loan. Accordingly,
if any transaction  contemplated  hereby would be usurious under such laws, then
notwithstanding  any other provision  hereof:  (a) the aggregate of all interest
that is contracted for, charged,  or received under this Note or under any other
Loan  Document  shall not  exceed  the  maximum  amount of  interest  allowed by
applicable law, and any excess shall be promptly  credited to the undersigned by
Lender  (or, to the extent that such  consideration  shall have been paid,  such
excess shall be promptly refunded to the undersigned by Lender); (b) neither the
undersigned  nor any other  Person  (as  defined in the Loan  Agreement)  now or
hereafter liable hereunder shall be obligated to pay the amount of such interest
to the  extent  that  it is in  excess  of the  maximum  interest  permitted  by
applicable  law; and (c) the effective  rate of interest shall be reduced to the
Highest Lawful Rate (as defined in the Loan Agreement). All sums paid, or agreed
to be paid,  to Lender for the use,  forbearance,  and  detention of the debt of
Borrower  to Lender  shall,  to the  extent  permitted  by  applicable  law,  be
allocated throughout the full term of this Note until payment is made in full so
that the actual  rate of  interest  does not exceed the  Highest  Lawful Rate in
effect at any particular  time during the full term thereof.  If at any time the
rate of interest  under the Note exceeds the Highest  Lawful  Rate,  the rate of
interest  to accrue  pursuant  to this Note  shall be  limited,  notwithstanding
anything to the contrary herein,  to the Highest Lawful Rate, but any subsequent
reductions in the Base Rate shall not reduce the interest to accrue  pursuant to
this Note  below the  Highest  Lawful  Rate until the total  amount of  interest
accrued  equals the amount of interest that would have accrued if a varying rate
per annum  equal to the  interest  rate  under the Note had at all times been in
effect.  If the total amount of interest  paid or accrued  pursuant to this Note
under the  foregoing  provisions  is less than the total amount of interest that
would have accrued if a varying rate per annum equal to the interest  rate under
this Note had been in effect,  then the  undersigned  agrees to pay to Lender an
amount  equal to the  difference  between  (a) the  lesser of (i) the  amount of
interest  that would have  accrued if the  Highest  Lawful Rate had at all times
been in effect,  or (ii) the  amount of  interest  that would have  accrued if a
varying  rate per annum  equal to the  interest  rate  under the Note had at all
times been in effect,  and (b) the amount of interest accrued in accordance with
the other provisions of this Note and the Loan Agreement.

      This Note is the "Note" referred to in the Loan  Agreement,  and is issued
pursuant thereto. Reference is made to the Loan Agreement for a statement of the
additional rights and obligations of the undersigned and Lender. In the event of
any conflict  between the terms hereof and the terms of the Loan Agreement,  the
terms  of the  Loan  Agreement  shall  prevail.  All of  the  terms,  covenants,
provisions, conditions,  stipulations,  promises and agreements contained in the
Loan Documents to be kept, observed and/or performed by the undersigned are made
a part of this Note and are  incorporated  herein by this  reference to the same
extent  and with the same  force  and  effect  as if they  were  fully set forth
herein,  and the  undersigned  promises and agrees to keep,  observe and perform
them or cause them to be kept,  observed and  performed,  strictly in accordance
with the terms and provisions thereof.

      Each party  liable  hereon in any  capacity,  whether as maker,  endorser,
surety,  guarantor or otherwise,  (i) waives  presentment  for payment,  demand,
protest and notice of presentment,  notice of protest, notice of non-payment and
notice of  dishonor  of this debt and each and  every  other  notice of any kind
respecting  this  Note and all lack of  diligence  or delays  in  collection  or
enforcement hereof, (ii) agrees that Lender and any subsequent holder hereof, at
any time or times,  without notice to the undersigned or its consent,  may grant
extensions of time,  without  limit as to the number of the aggregate  period of
such  extensions,  for the payment of any principal,  interest or other sums due
hereunder, (iii) to the extent permitted by law, waives all exemptions under the
laws of the State of  Maryland  and/or  any  state or  territory  of the  United
States,  (iv) to the extent  permitted by law,  waives the benefit of any law or
rule of law intended for its advantage or protection as an obligor  hereunder or
providing for its release or discharge  from  liability  hereon,  in whole or in
part,  on account  of any facts or  circumstances  other than full and  complete
payment of all amounts due hereunder,  and (v) agrees to pay, in addition to all
other sums of money due, all cost of collection  and  attorney's  fees,  whether
suit be  brought or not,  if this Note is not paid in full when due,  whether at
the stated maturity or by acceleration.

      No waiver by Lender  or any  subsequent  holder  hereof of any one or more
defaults  by the  undersigned  in  the  performance  of  any of its  obligations
hereunder  shall  operate or be construed  as a waiver of any future  default or
defaults, whether of a like or different nature. No failure or delay on the part
of Lender in exercising any right, power or remedy hereunder (including, without
limitation,  the right to declare this Note due and payable)  shall operate as a
waiver  thereof,  nor shall any single or partial  exercise  of any such  right,
power or remedy preclude any other or further  exercise  thereof or the exercise
of any other right, power or remedy.

      If any term,  covenant or condition of this Note,  or the  application  of
such term,  covenant or condition to any party or circumstance shall be found by
a  court  of  competent   jurisdiction   to  be,  to  any  extent,   invalid  or
unenforceable,  the  remainder  of this Note and the  application  of such term,
covenant,  or condition to parties or circumstances other than those as to which
it is held invalid or  unenforceable,  shall not be affected  thereby,  and each
term,  covenant or condition  shall be valid and enforced to the fullest  extent
permitted by law. Upon determination  that any such term is invalid,  illegal or
unenforceable, the undersigned shall cooperate with Lender to amend this Note so
as to effect the  original  intent of the  parties as closely as  possible in an
acceptable manner.

      No amendment,  supplement or  modification  of this Note nor any waiver of
any  provision  hereof  shall be made  except in writing  executed  by the party
against whom enforcement is sought.

      This Note shall be binding upon the  undersigned  and its  successors  and
assigns.  Notwithstanding  the foregoing,  the undersigned may not assign any of
its  rights or  delegate  any of its  obligations  hereunder  without  the prior
written consent of Lender, which may be withheld in its sole discretion.

      THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF MARYLAND,  WITHOUT REGARD TO ANY OTHERWISE APPLICABLE PRINCIPLES
OF  CONFLICTS  OF LAWS.  IF ANY ACTION  ARISING OUT OF THIS NOTE IS COMMENCED BY
LENDER  IN THE  STATE OF  MARYLAND  OR  FEDERAL  COURT  LOCATED  IN THE STATE OF
MARYLAND,  THE UNDERSIGNED HEREBY CONSENTS TO THE JURISDICTION OF ANY SUCH COURT
IN ANY SUCH  ACTION  AND TO THE  LAYING OF VENUE IN THE STATE OF  MARYLAND.  ANY
PROCESS IN ANY SUCH ACTION  SHALL BE DULY SERVED IF MAILED BY  REGISTERED  MAIL,
POSTAGE PREPAID,  TO THE UNDERSIGNED AT ITS ADDRESS  DESCRIBED IN SECTION 9.4 OF
THE LOAN AGREEMENT.

      THE  UNDERSIGNED  HEREBY (A)  COVENANTS AND AGREES NOT TO ELECT A TRIAL BY
JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY,  AND (B) WAIVES ANY RIGHT TO TRIAL
BY JURY FULLY TO THE EXTENT  THAT ANY SUCH RIGHT SHALL NOW OR  HEREAFTER  EXIST.
THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN  KNOWINGLY AND VOLUNTARILY BY THE
UNDERSIGNED, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE
AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY  TRIAL  WOULD  OTHERWISE  ACCRUE.
LENDER IS HEREBY  AUTHORIZED AND REQUESTED TO SUBMIT THIS AGREEMENT TO ANY COURT
HAVING  JURISDICTION  OVER THE SUBJECT MATTER AND THE PARTIES  HERETO,  SO AS TO
SERVE AS CONCLUSIVE  EVIDENCE OF THE  UNDERSIGNED'S  WAIVER OF THE RIGHT TO JURY
TRIAL. FURTHER, THE UNDERSIGNED HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT
OF LENDER (INCLUDING LENDER'S COUNSEL) HAS REPRESENTED,  EXPRESSLY OR OTHERWISE,
TO ANY  BORROWER  THAT LENDER  WILL NOT SEEK TO ENFORCE  THIS WAIVER OF RIGHT TO
JURY TRIAL PROVISION.



      IN WITNESS WHEREOF,  the undersigned have caused their authorized officers
to execute this Note as of the date first above written.




ATTEST:                             PHC OF UTAH, INC.
(Seal)                        a Massachusetts corporation


By:________________________   By:________________________________
Name:                         Name:
Title:                              Title:



29374251.12A


<PAGE>


EXHIBIT 10.80

                 THIS GUARANTY CONTAINS PROVISIONS FOR WAIVER
                                 OF JURY TRIAL


               UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE


      THIS  UNCONDITIONAL  GUARANTY OF PAYMENT AND PERFORMANCE  (the "Guaranty")
dated as of April 15, 1996 by PHC, INC., a  Massachusetts  corporation  with its
principal place of business at 200 Lake Street,  Suite 102,  Peabody,  MA 01960,
Attn: Ms. Paula Wurts,  Chief Financial Officer (the  "Guarantor"),  in favor of
HEALTHPARTNERS  FUNDING, L.P., a Delaware limited partnership with its principal
place of business at c/o HealthPartners  Financial  Corporation,  2001 L Street,
N.W., Suite 402, Washington,  D.C. 20036, Attn: John K. Delaney,  President (the
"Lender").

                              W I T N E S S E T H

      WHEREAS,  pursuant to a certain Loan and Security  Agreement,  dated as of
the date hereof (as such agreement may from time to time be amended, modified or
supplemented,  the "Loan  Agreement"),  by and between PHC of Utah,  Inc. d/b/a/
Highland Ridge Hospital (the  "Borrower") and Lender,  Lender has agreed to make
available  to  Borrower  a  revolving  line of credit in the  maximum  aggregate
principal amount of One Million and No/100 Dollars  ($1,000,000.00),  or so much
thereof as shall be advanced or  readvanced  from time to time and remain unpaid
(the "Loan"); and

      WHEREAS,  the Lender is willing to make the Loan under the Loan  Agreement
but only  upon the  condition,  among  others,  that the  Guarantor  shall  have
executed and delivered to Lender this Guaranty.

      NOW,  THEREFORE,  in  consideration  of the  premises  and  of the  mutual
covenants  herein contained and for other good and valuable  consideration,  the
receipt of which is hereby acknowledged, the parties agree as follows:

      1. Unless  otherwise  defined herein,  all capitalized  terms used in this
Guaranty shall have the respective meanings given them in the Loan Agreement.

      2. In order to induce Lender to execute and deliver the Loan Agreement and
to make the Loan upon the terms and conditions set forth in the Loan  Agreement,
and  in  consideration   thereof,  the  Guarantor  hereby   unconditionally  and
irrevocably guarantees to Lender and to its successors,  endorsees,  transferees
and assigns,  Borrower's  prompt and complete  payment when due,  whether at the
stated  maturity,  by  acceleration  or  otherwise,  of  the  Obligations,   and
Borrower's  prompt  and  complete  performance  of all of its  other  covenants,
obligations and agreements contained in the Loan Agreement.

      3. The Guarantor  hereby waives notice of the  acceptance of this Guaranty
and of the extending of credit as above  specified and the state of indebtedness
of Borrower  at any time,  and  expressly  agrees to any  extensions,  renewals,
accelerations or  modifications of such credit or any of the terms thereof,  and
waives diligence,  presentment, demand of payment, protest or notice, whether of
non-payment,  dishonor,  protest or otherwise  of any document or documents  and
notice of any  extension,  renewal,  modification  or default  and assent to the
release,  substitution  or variation of any collateral  which may at any time be
held as security for any credit extended to Borrower,  all without relieving the
Guarantor of any liability under this Guaranty. The obligations of the Guarantor
hereunder  shall be an  unconditional  obligation  to make  prompt  payment  and
performance to the Lender irrespective of the genuineness,  validity, regularity
or enforceability of any indebtedness or evidence of indebtedness of Borrower to
Lender or of other  circumstances  which might  otherwise  under the laws of any
jurisdiction  constitute  a  legal  or  equitable  discharge  of a  surety  or a
guarantor  or a bar  (in  the  nature  of a  moratorium  or  otherwise)  to  the
enforcement of Lender's rights either (i) against Borrower on all or any part of
its Obligations or (ii) under this Guaranty.

      4. Notwithstanding any payment or payments made by the Guarantor hereunder
or any  setoff or  application  of funds of the  Guarantor  by the  Lender,  the
Guarantor  shall not be  entitled to be  subrogated  to any of the rights of the
Lender against the Borrower or any collateral  security or guarantee or right of
offset held by Lender for the payment or  performance  of the  Obligations,  nor
shall the Guarantor seek any reimbursement  from Borrower in respect of payments
made  by the  Guarantor  hereunder,  until  all  amounts  owing  and  any  other
performance  due to Lender by Borrower for or on account of the  Obligations are
paid and  satisfied in full.  Upon such payment and  satisfaction  in full,  the
Guarantor  shall be subrogated to all rights of Lender  against  Borrower or any
collateral  security  or  guarantee  or right of offset  held by Lender  for the
payment and performance of the Obligations.

      5.  Any  indebtedness  of  Borrower  now or  hereafter  owed to or held by
Guarantor is hereby  subordinated to the indebtedness of Borrower to Lender; and
such  indebtedness  of Borrower  to  Guarantor  if Lender so  requests  shall be
collected,  enforced and received by Guarantor as trustee for Lender and be paid
over to Lender on account of the  indebtedness of Borrower to Lender but without
reducing or affecting in any manner the  liability of Guarantor  under the other
provisions of this Guaranty.

      6. This is intended to be and shall be construed as a continuing guarantee
and shall remain in full force and effect and can be binding in accordance  with
and to the  extent  of its  terms  upon the  Guarantor  and its  successors  and
assigns,  and shall  inure to the  benefit of the  Lender,  and its  successors,
endorsees, transferees and assigns.

      7. In the event that all or any part of the  Obligations  as  aforesaid of
Borrower to Lender are not paid when due, the Guarantor  hereby  guarantees that
it will pay to Lender, upon demand therefor, without set-off or counterclaim and
without  reduction  by  reason  of  any  taxes,  levies,  imposts,  charges  and
withholdings,  restrictions  or  conditions  of any nature  which are now or may
hereafter be imposed levied or assessed by any country, political subdivision or
taxing  authority,  all of  which  will be for the  account  of and  paid by the
Guarantor, and Lender need not first proceed to preserve, utilize or exhaust any
other  right or  remedy  against  the  Borrower  or any other  guarantor  or any
security  the Lender may have to obtain  payment.  Such  payment will be made in
immediately  available  funds  to the  Lender's  office  at  c/o  HealthPartners
Financial Corporation,  2001 L Street, N.W., Suite 402, Washington,  D.C. 20036,
Attn: John K. Delaney, President, or at such other place as Lender may designate
in writing.

      8. No failure to exercise and no delay in  exercising,  on the part of the
Lender,  any  right,  power or  privilege  hereunder  shall  operate as a waiver
thereof,  nor shall any  single  or  partial  exercise  of any  right,  power or
privilege preclude any other or further exercise thereof, or the exercise of any
other power or right. The rights and remedies herein provided are cumulative and
not exclusive of any rights or remedies provided by law.

      9. Notice or demand to the parties hereto shall be  sufficiently  given if
in writing and personally delivered,  or mailed by registered or certified first
class mail,  postage prepaid,  return receipt  requested,  or sent by commercial
courier  against  receipt,  or by  telecopier  (with a  confirming  copy sent by
regular mail) to the party intended and at the address or addresses specified in
the preamble to this Guaranty.  A copy any notice or demand sent to Lender shall
also be sent to Shulman,  Rogers,  Gandal,  Pordy & Ecker, P.A., 11921 Rockville
Pike, Third Floor,  Rockville,  Maryland 20852, Attn: Steven M. Curwin, Esq. Any
party may  designate  a change of  address  by  notice in  writing  to the other
parties,  such notice to be effective ten (10) days after mailing or delivery as
herein provided.

     10. The  Guarantor  hereby  represents,  warrants,  and covenants to Lender
that:

            (a) It is a corporation duly  incorporated,  validly existing and in
      good standing under the laws of the jurisdiction of its incorporation, and
      has the corporate  power and  authority to own its  property,  conduct its
      business as now being  conducted and to make and perform this Guaranty and
      the transactions contemplated hereby, and is duly qualified to do business
      and is in good  standing  as a foreign  corporation  in each  jurisdiction
      where the nature and extent of the  business  conducted by it, or property
      owned by it, and applicable law require such  qualification,  except where
      the failure so to qualify would not have a material  adverse effect on the
      business, operations or financial position of Guarantor.

            (b) The  extension,  delivery and  performance of this Guaranty have
      been  duly  authorized  by all  necessary  corporate  action  and will not
      violate  any  provision  of law or any order of any court or  governmental
      agency  or  the  certificate  of  incorporation  or  other   incorporating
      documents or bylaws of Guarantor,  or conflict with, or result in a breach
      of,  or  constitute  (with or  without  notice or lapse of time or both) a
      default under, or result in the creation of any security  interest,  lien,
      charge or encumbrance  upon any property or assets of Guarantor,  pursuant
      to any agreement,  indenture or other instrument to which it is a party or
      by which it may be bound.

            (c) Except as disclosed to Lender in writing  prior to the execution
      hereof, no action,  suit,  investigation or proceeding is pending or known
      to be  threatened  against or  affecting  Guarantor  which,  if  adversely
      determined,  would  have a  material  adverse  effect  upon its  financial
      condition or operations.

            (d) It is not in default under any provision of its  certificate  of
      incorporation  or  other   incorporating   documents,   by-laws  or  stock
      provisions or any amendment of any thereof or of any indenture relating to
      borrowed money or agreement to which it is a party or by which it is bound
      or of  any  other  indenture  or  of  any  order,  regulation,  ruling  or
      requirement  of a court or public body or  authority  by which it is bound
      which  default  would  have a  material  adverse  effect on the  business,
      operations or financial position of Guarantor.

            (e) No  license,  consent  or  approval  of,  or  filing  with,  any
      governmental body or other regulatory authority is required for the making
      and  performance  of  this  Guaranty  or  any  instrument  or  transaction
      contemplated  herein.  Guarantor holds all certificates and authorizations
      of all governmental  agencies and authorities required by law to enable it
      to  engage  in  the  business  currently  transacted  by it,  except  such
      certificates  and  authorizations  as to which the  failure  to do so hold
      would not, in the aggregate, have a material adverse effect on it.

      11. No provision of this Guaranty shall be waived, amended or supplemented
except by a written instrument executed by the Lender.
      12. The obligations of the Guarantor under this Guaranty shall continue in
full force and effect and shall remain in operation until all of the Obligations
shall have been paid in full or otherwise  fully  satisfied,  and continue to be
effective or be reinstated,  as the case may be, if at anytime  payment or other
satisfaction  of any of the  Obligations  is  rescinded  or  must  otherwise  be
restored or returned  upon the  bankruptcy,  insolvency,  or  reorganization  of
Borrower,  or  otherwise,  as  though  such  payment  had not been made or other
satisfaction occurred. No invalidity, irregularity or unenforceability by reason
of applicable  bankruptcy  laws or any other similar law, or any law or order of
any  government  or agency  thereof  purporting  to reduce,  amend or  otherwise
affect, the Obligations,  shall impair, affect, be a defense to or claim against
the obligations of the Guarantor under the Guaranty.

      13. In addition to its guarantee of Borrower's  payment of the Obligations
and  Borrower's  performance  of  all  covenants,   obligations  and  agreements
contained in the Loan Documents,  the Guarantor shall pay all costs and expenses
(including  reasonable  attorney's  fees)  paid or  incurred  by the  Lender  in
connection with the enforcement of this Guaranty.

      14. THE PARTIES  HERETO  WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING  TO ENFORCE OR DEFEND ANY RIGHTS  UNDER THIS  AGREEMENT  OR  RELATING
THERETO.

      15. The Guarantor hereby agrees to execute any and all further  documents,
agreements,  and  instruments,  and take all further  actions,  which the Lender
shall reasonably  request in order to effectuate the effect or further preserve,
evidence,  perfect or protect  the  rights  purported  to be created in favor of
Lender hereunder.

      16.  The  Guarantor  hereby  assumes  responsibility  for  keeping  itself
informed of the financial  condition of the Borrower,  and any and all endorsers
and/or other guarantors of any instrument or document evidencing all or any part
of the  Obligations  and of all  other  circumstances  bearing  upon the risk of
nonpayment of the  Obligations  or any part thereof that diligent  inquiry would
reveal,  and the  Guarantor  hereby agrees that the Lender shall have no duty to
advise the Guarantor of information known to the Lender regarding such condition
or any such  circumstances.  In the event the  Lender,  in its sole  discretion,
undertakes at any time or from time to time to provide any such  information  to
the  Guarantor,  the Lender shall be under no  obligation  (i) to undertake  any
investigation not a part of its regular business  routine,  (ii) to disclose any
information  which,  pursuant  to  accepted  or  reasonable  commercial  finance
practices,  the Lender  wishes to  maintain  confidential,  or (iii) to make any
other or future  disclosures of such information or any other information to the
undersigned.

      17. This Guaranty may be executed in one or more counterpart  copies, each
of which shall be an original and all of which together shall constitute one and
the same instrument, and it is not necessary that all parties' signatures appear
on each counterpart.
      18.  If  any  term,  covenant  or  condition  of  this  Guaranty,  or  the
application  of such term,  covenant or condition  to any party or  circumstance
shall be  found  by a court of  competent  jurisdiction  to be,  to any  extent,
invalid or unenforceable,  the remainder of this Guaranty and the application of
such term,  covenant,  or condition to parties or circumstances other than those
as to which it is held invalid or unenforceable,  shall not be affected thereby,
and each term,  covenant or condition shall be valid and enforced to the fullest
extent  permitted  by law.  Upon  determination  that any such term is  invalid,
illegal or unenforceable,  the parties hereto shall amend this Guaranty so as to
effect  the  original  intent  of the  parties  as  closely  as  possible  in an
acceptable manner.

      19. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE  WITH,
THE LAWS OF THE STATE OF MARYLAND,  WITHOUT  REGARD TO ANY OTHERWISE  APPLICABLE
PRINCIPLES OF CONFLICTS OF LAWS.  IF ANY ACTION  ARISING OUT OF THIS GUARANTY IS
COMMENCED  BY LENDER IN THE STATE OF  MARYLAND OR FEDERAL  COURT  LOCATED IN THE
STATE OF MARYLAND, THE GUARANTOR HEREBY CONSENTS TO THE JURISDICTION OF ANY SUCH
COURT IN ANY SUCH  ACTION AND TO THE  LAYING OF VENUE IN THE STATE OF  MARYLAND.
ANY  PROCESS IN ANY SUCH  ACTION  SHALL BE DULY  SERVED IF MAILED BY  REGISTERED
MAIL, POSTAGE PREPAID, TO THE GUARANTOR AT THE ADDRESS SET FORTH IN THE PREAMBLE
TO THIS GUARANTY.

      20. THE GUARANTOR  HEREBY (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY
JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY,  AND (B) WAIVES ANY RIGHT TO TRIAL
BY JURY FULLY TO THE EXTENT  THAT ANY SUCH RIGHT SHALL NOW OR  HEREAFTER  EXIST.
THIS  WAIVER  OF  RIGHT  TO TRIAL BY JURY IS  SEPARATELY  GIVEN,  KNOWINGLY  AND
VOLUNTARILY,  BY THE  GUARANTOR,  AND  THIS  WAIVER  IS  INTENDED  TO  ENCOMPASS
INDIVIDUALLY  EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL
WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT THIS
GUARANTY  TO ANY COURT  HAVING  JURISDICTION  OVER THE  SUBJECT  MATTER  AND THE
PARTIES HERETO, SO AS TO SERVE AS CONCLUSIVE  EVIDENCE OF THE GUARANTOR'S WAIVER
OF THE RIGHT TO JURY TRIAL.  FURTHER,  THE GUARANTOR  HEREBY  CERTIFIES  THAT NO
REPRESENTATIVE OR AGENT OF LENDER (INCLUDING  LENDER'S COUNSEL) HAS REPRESENTED,
EXPRESSLY OR OTHERWISE,  TO GUARANTOR  THAT LENDER WILL NOT SEEK TO ENFORCE THIS
WAIVER OF RIGHT TO JURY TRIAL PROVISION.


      IN WITNESS WHEREOF,  the Guarantor has caused this Guaranty to be executed
as of the date first written above.

ATTEST:                             PHC, INC., a Massachusetts
                                    corporation


                                                     (SEAL)
                                    Name:
                                     Title:


52\HEALTHPA\PHC.12B


<PAGE>


EXHIBIT 10.81



                        STOCK PLEDGE AND SECURITY AGREEMENT


Agreement  made and entered  into as of the 7th day of  November,  1995,  by and
between PHC,  INC., a  Massachusetts  corporation  with its  principal  place of
business at 200 Lake Street,  Peabody,  Massachusetts 01960 ("Pledgor") and LINC
ANTHEM CORPORATION, a Delaware corporation, with its principal place of business
at 303 East Wacker Drive, Chicago, Illinois 60601 ('Pledgee').

                                    WITNESSETH:

Whereas,  Pledgor  desires  to induce  Pledgee  to enter  into a leasing  and/or
financing  arrangement  (hereinafter  referred to as the "Financing  Agreement")
with PHC OF NEVADA, INC. , a Massachusetts  corporation (hereinafter referred to
as the 'Company' or, hereafter referred to both as 'Pledgor' and as 'Company' if
such parties are one and the same); and

Whereas,  Pledgor,  in order to induce  Pledgee  to enter  into  such  Financing
Arrangement,  and to secure the  payment  and  performance  of all of  Company's
obligations  under the Financing  Arrangement,  has agreed to pledge and grant a
lien and  security  interest in all of the  securities  listed and  described in
Section I hereof and Exhibit 'A' hereto.

NOW, THEREFORE, in consideration of the foregoing,  the covenants and conditions
herein  contained and the mutual  agreements of the parties hereto,  Pledgor and
Pledgee hereby agree as follows:

1.  COLLATERAL.   To  secure  the  payment  and  performance  of  all  Company's
obligations  and  liabilities  under  the  Financing  Arrangement  and all other
obligations  and  liabilities  of the Company  and/or the Pledgor to the Pledgee
absolute or contingent,  due or to become due,  direct or indirect,  and whether
now existing or hereafter  and howsoever  arising,  Pledgor  hereby  pledges and
assigns to Pledgee and grants unto Pledgee a security interest in:

      1.1 The securities  described in Exhibit 'A' attached  hereto,  with stock
powers  attached  thereto , all duly  endorsed in blank  herewith  delivered  to
Pledgee;

      1.2 Any and all other securities  deposited with Pledgee from time to time
in accordance with the provisions of Section 3 hereof;

      1.3 Any and all other or additional  securities to which Pledgor  (without
additional consideration) now is, or hereafter may be, entitled by virtue of his
ownership  of any of the  foregoing  securities  as the result of any  corporate
reorganization,   merger  or  consolidation,  stock  split,  stock  dividend  or
otherwise; and

      1.4 Any and all  dividends,  distributions  and  other  amounts  to  which
Pledgee is entitled pursuant to the provisions of Section 4 hereof;

                                       - 1 -


<PAGE>



Subsections  1.1I  through  1.4 above are  hereinafter  collectively  called the
"Collateral".

2.    REPRESENTATIONS AND WARRANTIES.  Pledgor hereby represents and warrants to
Pledgee
that:

      2.1 The  execution,  delivery  and  performance  by  Pledgor of this Stock
Pledge and Security  Agreement  will not violate any provision of law, any order
of any court or other agency of government,  or any indenture agreement or other
instrument  to which  Pledgor is a party or by which Pledgor or any of Pledgor's
property is bound or be in conflict  with,  result in a breach of or  constitute
(with due notice or lapse of time, or both) a default under any such  indenture,
agreement or other  instrument,  or result in the creation or  imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of his property or
assets,  except as  contemplated  by the  provisions  of this  Stock  Pledge and
Security Agreement;

      2.2 This Stock Pledge and Security  agreement  constitutes a legal,  valid
and binding obligation of Pledgor in accordance with its terms; and

      2.3 As to  such of the  Collateral  deposited  with  Pledgee  on the  date
hereof, (i) Pledgor is the legal and beneficial owner thereof;, (ii) the same is
validly  issued,  fully paid and  nonassessable  and is  registered in Pledgor's
name; (iii) the stock transfer foams attached to the  certificates  representing
such Collateral have duly executed and delivered by Pledgor to Pledgee; and (iv)
none of such  Collateral is subject to any security  interest,  pledge,  lien or
other  encumbrance,  or  adverse  claim of any kind  whatsoever,  except for the
interest therein granted to Pledgee hereby.

3.  VALUE of  Collateral.  It is the  intent of  Pledgor  and  Pledgee  that the
Collateral  shall  have,  at all  times,  a value  of not  less  than  the  then
outstanding unpaid balance due under that certain Secured Promissory Note issued
by PHC OF NEVADA,  INC. in favor of Pledgee in the original  principal amount of
$750,000.  Pledgor  agrees to maintain  such value by pledging from time to time
pursuant to this Stock Pledge and  Agreement  and,  upon the request of Pledgee,
additional cash or securities satisfactory to Pledgee.

4.    STOCK SPLITS, STOCK DIVIDENDS, ETC.

      4.1 In the event that  Pledgor,  by virtue of  Pledgor's  ownership of the
Collateral  now  is,  or  hereafter   becomes,   entitled  (without   additional
consideration) to other or additional securities as the result of any corporate
      reorganization,  merger or consolidation,  stock split, stock dividend, or
otherwise, Pledgor shall:

     4.1.1  Cause the Issuer  thereof to  deliver  to Pledgee  the  certificates
evidencing  Pledgor's  ownership  thereof  and hereby  authorizes  and  empowers
Pledgee to demand the same from such  insurer,  and agrees if such  certificates
are delivered to

                                       - 2 -


<PAGE>



                  Pledgor, to take possession thereof in trust for Pledgee and
forthwith deliver the same to Pledgee;

     4.1.2  Deliver  to  Pledgee  a stock  transfer  form with  respect  to such
securities,  executed in blank by Pledgor  and on which  shall be  endorsed  the
guarantee by a banking association  acceptable to Pledgee, that the signature on
such form is genuine;

     4.1.3 Deliver to Pledgee a  certificate,  executed by Pledgor and dated the
date of  such  pledge,  as to the  truth  and  correctness  on such  date of the
warranties set forth in Subsection 2.3 hereof; and

            4.1.4 Deliver to Pledgee such other certificates, forms and other
instruments as Pledgee may request in
                  connection with such pledge.

      4.2 Pledgor agrees that such securities  shall constitute a portion of the
Collateral  and be subject to this Stock  Pledge and  Security  Agreement in the
same manner and to the same extent as the securities pledged
            hereby to Pledgee on the date hereof.

5.    VOTING POWER, DIVIDENDS, SUBSTITUTIONS.   Unless and until an Event of
Default hereunder, shall have occurred    Pledgor shall be entitled to:

      5.1 Exercise all voting powers  pertaining to the  securities  included in
the,  Collateral for any purpose not inconsistent  with, or in violation of, the
provisions of this Stock Pledge and Security Agreement, in all corporate matters
(unless  Pledgee  consents  thereto)  except  those  which,  in  Pledgee's  sole
discretion  , may  affect the value of the  assets  owned by the  Company or the
value of the  Collateral  including,  but not limited to,  those  related to any
merger or  consolidation  of the  Company  with any other  firm or  corporation,
reorganization or liquidation of the Company, or mortgage,  hypothecation,  sale
or any other disposition whatsoever by the Company of any of its assets;

      5.2 Collect and receive all cash dividends with respect to such securities
paid out of the  retained  earnings  or the  current  net  profits of the issuer
thereof.

Pledgee  shall be  entitled  to collect  and  receive  all other  dividends  and
distributions  on such  securities  (whether in stock,  cash or other  property)
received in exchange or substitution  for or upon conversion of, such securities
and all amounts payable or distributable upon the liquidation, whether voluntary
or involuntary,  of any issuer thereof. Cash received by Pledgee pursuant to the
provisions  of this Section 5 may be commingled by Pledgee with its other funds,
and shall be  non-interest  bearing.  Pledgor  agrees that if it receives any of
such dividends, distributions,  securities and other amounts to which Pledgee is
entitled,  it shall take  possession  thereof in trust for Pledgee and forthwith
deliver the same to Pledgee, and agrees that the same shall constitute a portion
of the Collateral and be subject to this Stock Pledge and Security  Agreement in
the same

                                       - 3 -



<PAGE>



manner and to the same extent as the securities pledged to Pledgee on the date
hereof.

6.    DEFAULT AND REMEDIES.

      6.1   The occurrence of any of the following shall constitute an Event of
Default
hereunder:

     6. 1.1 Any representation or warranty made by Pledgor to Pledgee hereunder,
or in any certificate  delivered to Pledgee pursuant hereto,  or under any other
agreement  between and Pledgee,  shall prove to have been false or misleading in
any material respect as of the date on which the same was made; or

     6.1.2 Pledgor  shall fail to duly observe or perform any other  covenant or
agreement made by Pledgor hereunder or under any other agreement made by Pledgor
and Pledgee; or

     6.1.3 An Event of Default under the Financing  Arrangement  shall occur and
be continuing; or

     6.1.4 Bankruptcy, reorganization, receivership, insolvency or other similar
proceedings  shall be instituted by or against Pledgor or all or any part of his
property  under the Federal  Bankruptcy Act or other law of the United States or
of any state or other competent  jurisdiction and, if against Pledgor,  he shall
consent  thereto or shall fail to cause the same to be discharged  within thirty
(30) days.

      6.2 If an Event of Default shall occur and be continuing,  Pledgee may, at
its option:

            6.2.1 Upon giving notice to Pledgor thereof, cause the securities
included in the Collateral  to be
            registered in its name or in the name of its nominee;

            6.2.2 Upon giving  notice to Pledgor  thereof,  exercise  all voting
            powers  pertaining to such securities and otherwise act with respect
            thereto as though Pledgee were the outright  owner thereof  (Pledgor
            hereby irrevocably constituting and appointing Pledgee its proxy and
            attorney-in-fact with full power of substitution so to do);

            6.2.3       Receive all dividends and all other distributions of any
kind whatsoever on all or any of such
            securities;

     6.2.4  Exercise any and all rights of  collection,  conversion or exchange,
and  any and  all  other  rights,  privileges,  options  or  powers  of  Pledgor
pertaining  or  relating  to  such  securities   (Pledgor   hereby   irrevocably
constituting  and appointing  Pledgee its proxy and  attorney-in-fact  with full
power of substitution so to do);

                                       - 4 -


<PAGE>



            6.2.5 Sell,  assign and deliver the whole, or from time to time, any
      part of such securities at any broker's board or at any private sale or at
      public auction,  with or without demand for performance,  advertisement or
      notice of the time or place of sale or  adjournment  thereof or otherwise,
      and free from any right of  redemption  (all of which hereby are expressly
      waived)  for cash,  for credit or for other  property , for  immediate  or
      future delivery, and for such price or prices and on such terms as Pledgee
      in its uncontrolled discretion may determine; and

            6.2.6  Exercise any other  remedy  specifically  granted  under this
            Stock Pledge and Security  Agreement or now or hereafter existing in
            equity, at law, by virtue of statute or otherwise.

6.3 For the  purposes of this Section 6, an agreement to sell all or any part of
such securities  shall be treated as a sale thereof and Pledgee shall be free to
carry  out such  sale  pursuant  to such  agreement,  and  Pledgor  shall not be
entitled to the return of any of the same subject thereto,  notwithstanding that
after Pledgee  shall have entered into such an agreement,  all Events of Default
hereunder  may  have  been  remedied  or all  obligations  under  the  Financing
Arrangement may have been paid and performed in full.

6.4 At any  sale  made  pursuant  to  Subsection  6.2,  Pledgee  may bid for and
purchase,  free from any right or equity of  redemption  on the part of  Pledgor
(the same being  hereby  waived  and  released),  any part of or all  securities
included in the  Collateral  that are  offered for sale and may make  payment on
account thereof by using any claim then due and payable to Pledgee by Pledgor as
a credit against the purchase  price,  and Pledgee may, upon compliance with the
terms of sale,  hold,  retain and  dispose of such  securities  without  further
accountability therefor.

6.5  Pledgee  shall  apply the  proceeds of any sale of the whole or any part of
such securities and any part of such securities and any other monies at the time
held by Pledgee under the provisions of this Stock and Security Agreement, after
deducting all costs and expenses of  collection,  sale and delivery  (including,
without  limitation,  reasonable  attorney's  fees  and  other  legal  expenses)
incurred  by Pledgee in  connection  with such sale,  towards the payment of the
Company's  obligations,  accrued and executory,  under the Financing Arrangement
and any other  obligations  of the Company  and/or  Pledgor to Pledgee.  Pledgee
shall remit any surplus to Pledgor.









                                       - 5 -


<PAGE>






6.6 Pledgee  shall not have any duty to exercise any of the rights,  privileges,
options or powers or to sell or otherwise  realize upon any of such  securities,
as hereinbefore authorized, and Pledgee shall not be responsible for any failure
to do so or delay in so doing.

6.7 Any sale of, or the grant of options to purchase,  or any other  realization
upon, all or any portion of such securities,  under Subsection 6.2 shall operate
to divest all right,  title,  interest,  claim and  demand,  EITHER at law or in
equity, of Pledgor in and to such securities so sold, optioned or realized upon,
or any part thereof, from, through and under Pledgor.

6.8 Pledgor recognizes that Pledgee may be unable to effect a public sale of all
or a part of the Collateral by reason of certain  prohibitions  contained in the
Securities  Act of 1933 as amended  (the 'Act),  or that it may be able to do so
only after delay which might  adversely  affect the value that might be realized
upon the sale of the Collateral.  Accordingly,  Pledgor agrees that Pledgee may,
without the necessity of attempting to cause any  registration of the Collateral
to be effected  under the Act, sell the Collateral or any part thereof in one or
more private sales to a restricted  group of  purchasers  who may be required to
agree, among other things,  that they are acquiring the Collateral for their own
account  for  investment  and not  with a view to the,  distribution  or  resale
thereof.  Pledgor agrees that any such private sale may be at prices or on terms
less  favorable  to the owner of the  Collateral  than would be the case if they
were sold at public sale, and that any such private sale shall be deemed to have
been made in a commercially reasonable manner.

6.9  Pledgor  agrees  that  without  affecting  the  right  of  private  sale as
aforesaid,  it will,  upon  request of Pledgee,  if in the opinion of  Pledgee's
counsel registration of the Collateral or any part thereof is required under the
Act,  use its  best  efforts  to  complete  and  cause  to  become  effective  a
registration  of the  Collateral  under the Act,  and to take all other  actions
necessary,  in Pledgee's opinion,  to enable Pledgee to sell, within ninety (90)
days of the  commencement  of such best efforts,  the Collateral  pursuant to an
effective  registration  statement  under the Act.  Such best  efforts  shall be
commenced  promptly  after request by the Pledgee which may be given at any time
on or after  the  occurrence  of an  Event of  Default  hereunder  or under  the
Financing  Arrangement  and while the same is  continuing.  All expenses of such
registration,  including, without limitation, registration and filing fees, blue
sky fees,  printing expenses,  fees and disbursements of counsel for Pledgor and
Pledgee,  fees  and  expenses  of  auditors  of  Pledgor  and  Pledgee,  and all
underwriter,  broker  or  dealer  discounts,  and all  transfer  taxes  properly
attributable to the  Collateral,  shall be borne by Pledgor who agrees to do all
acts and things which are usual and  customary  in  connection  with  registered
offerings of securities, including entering into indemnification agreements with
Pledgee and any  underwriters.  The managing  underwriter of any public offering
for which  any said  registration  statement  is filed  shall  have the right to
impose such conditions on the sale of the Collateral as it shall reasonably

                                       - 6 -



<PAGE>


deem necessary to protect the  underwritten  offering,  provided such conditions
are similarly and proportionately  imposed on other shares which may be included
in said  registration  as the result of the exercise of piggyback  rights by the
holders of such other shares.

7.    PLEDGEE'S OBLIGATIONS, CUSTODIAL AGREEMENT.

      7.1     Pledgee shall  have no duty to protect, preserve or enforce rights
under any security
      included in the Collateral other than a duty of reasonable custodial care,
of any such security in its possession.

      7.2  Pledgor   understands  and  agrees  that  Pledgee  may  deposit  such
securities with a custodian and hereby agrees to pay reasonable fees of any such
custodian in connection with its acting as custodian.

8. TERMINATION OF STOCK PLEDGE AND SECURITY  AGREEMENT . Upon termination of the
Financing  Arrangement and the payment in full of all of the obligations secured
hereby,  Pledgee  shall  cause to be  transferred  to  Pledgor  all of the stock
pledged by Pledgor  herein and any rights  received by Pledgee  pursuant  hereto
(less any portion of same sold,  transferred  or  disposed  of pursuant  to, and
under the circumstances  specified in, Section 6 hereof),  and this Stock Pledge
and Security Agreement shall thereupon be terminated.

9.    Miscellaneous.

      9.1   Pledgor further unconditionally agrees that if Company is in Default
under the Financing Arrangement,
      Pledgee  may  exercise  its  rights  and  remedies   hereunder  prior  to,
concurrently  with, or subsequent  to, the exercise by Pledgee of its rights and
remedies against the Company under the Financing Arrangement,  or otherwise,  or
against any guarantor of the Company's  obligations  under same. The obligations
of Pledgor under this Stock
      Pledge and Security Agreement shall be absolute and    unconditional, and
shall remain in full force and effect
      without regard to, and shall not be released or discharged or in any way
affected by:


     9. 1. 1 The failure of Pledgee to give any  notices to which  Pledgor is or
may be entitled, all of which are hereby waived by Pledgor;

     9.1.2 Any  amendment or  modification  of or  supplement  to the  Financing
Arrangement;








                                       - 7 -



<PAGE>


            9.1.3 Any exercise or non-exercise of any right, remedy or privilege
under or in respect of this Stock Pledge and Security  Agreement,  the Financing
Arrangement or any other agreements,  instruments or documents,  or the granting
of any  postponements or extensions for time of payment or other  indulgences to
the Company or any other person, or the settlement or adjustment of any claim or
the  release  or  d  discharge  or  substitution  of  any  person  primarily  or
secondarily liable with respect to the Financing Arrangement;

     9.1.4 The institution of any bankruptcy, insolvency,  reorganization,  debt
arrangement, readjustment,  composition, receivership or liquidation proceedings
by or against the Company; or

     9.1.5 Any  assumption by any third party of the  obligations of the Company
under the Financing  Arrangement,  or any  assignment by Pledgee  referred to in
Subsection 9.2.

9.2 Should  Pledgee at any time  assign  any of its rights  under the  Financing
Arrangement,  Pledgee may assign its rights under this Stock Pledge and Security
Agreement, and may deliver the Collateral or any portion thereof to the assignee
who shall  thereupon,  to the extent  provided in the  instrument of assignment,
have all of the rights of Pledgee  hereunder  with respect to the Collateral and
Pledgee shall,  thereafter,  be fully  discharged from any  responsibility  with
respect to the  Collateral so delivered to such  assignee.  No such  assignment,
however,  shall relieve such assignee of those duties and obligations of Pledgee
specified hereunder.

9.3 Each and every right, remedy and power granted to Pledgee hereunder shall be
cumulative   and  in  addition  to  any  other  right  remedy  or  power  herein
specifically  granted or now or hereafter  existing in equity, at law, by virtue
of statute or  otherwise  and may be  exercised  by  Pledgee,  from time to time
concurrently or independently and as often and in such order as Pledgee may deem
expedient.  Any failure or delay on the part of Pledgee in  exercising  any such
right, remedy or power, or abandonment or discontinuance of steps to enforce the
same, shall not operate as a waiver thereof or affect Pledgee's right thereafter
to  exercise  the same,  and any single or partial  exercise  of any such right,
remedy or power shall not preclude any other or further  exercise thereof or the
exercise of any other right, remedy or power.

9.4 Any  modification  or waiver  of any  provision  of this  Stock  Pledge  and
Security Agreement, or any consent to any departure by Pledgee therefrom,  shall
not be  effective  in any event  unless  the same is in  writing  and  signed by
Pledgee,  and then such modification,  waiver or consent shall be effective only
in the specific  instance and for the specific  purpose given.  Any notice to or
demand on Pledgor in any event not  specifically  required of Pledgee  hereunder
not shall not  entitle  Pledgor to any other or further  notice or demand in the
same, similar or other circumstances unless specifically required hereunder.


<PAGE>



9.5 Pledgor agrees that at any time, and from time to time,  after the execution
and delivery of this Stock Pledge and Security Agreement,  Pledgor will upon the
request of Pledgee,  execute  and deliver  such  further  documents  and do such
further  acts and things as  Pledgee  may  reasonably  request in order to fully
effect the purpose of this Stock Pledge and Security Agreement and to subject to
the security  interest  created  hereby any property  intended by the provisions
hereof to be covered hereby.

9.6 Any  notice,  request,  demand,  consent,  approval  or other  communication
provided  or  permitted  hereunder  shall be in writing and be given by personal
delivery or sent by United States first-class mail,  postage prepaid,  addressed
to the party for
whom it is intended, at its address as follows:

      To Pledgor:       PHC, INC.
                        200 Lake Street,
                        Peabody, Massachusetts  01960
                        Attention:  Bruce A. Shear

      To Pledgee:                   LINC ANTHEM CORPORATION
                        303 East Wacker Drive, 10th Floor
                        Chicago, Illinois  60601
                        Attn: Treasurer

provided,  however,  that either  party may change its  address for  purposes of
receipt of any such  communication  by giving ten (10) days'  written  notice of
such chance to the other party in the manner above provided.

9.7 This Stock Pledge and Security  Agreement  shall be deemed to have been made
under,  and  shall be  governed  by,  the laws of the State of  Illinois  in all
respects, including matters of construction , validity and performance.

9.8 If any  provision of this Stock Pledge and Security  Agreement is prohibited
by,  or  is  unlawful  or  unenforceable   under,  any  applicable  law  of  any
jurisdiction,  such provision shall, as to such jurisdiction,  be ineffective to
the extent of such prohibition  without  invalidating  the remaining  provisions
hereof;  provided,  however, that any such prohibition in any jurisdiction shall
not invalidate such provision in any other  jurisdiction;  and, provided further
that where the provisions of any such applicable law may be waived,  they hereby
are waived by Pledgor to the full extent  permitted  by law to the end that this
Stock Pledge and Security  Agreement  shall be deemed to be valid and binding in
accordance with its terms.

9.9 This Stock Pledge and Security  Agreement  shall inure to the benefit of the
successors  and  assigns  of  Pledgee  and  shall be  binding  upon  the  heirs,
executors,  administrators,  legal  representatives,  successors  and assigns of
Pledgor.

                                       - 9 -


<PAGE>



INTENTIONALLY LEFT BLANK.
                                       - 10 -



<PAGE>



IN WITNESS  WHEREOF,  PLEDGOR AND  PLEDGEE  HAVE  CAUSED  THIS  AGREEMENT  TO BE
EXECUTED AS OF THE DATE FIRST ABOVE WRITTEN.


WITNESS OR ATTEST:      PHC, INC.
                  (PLEDGOR)


                  BY:

                  TITLE:


(PRINT NAME)

                             LINC ANTHEM CORPORATION
                                    (PLEDGEE)

                                    BY:

                                    TITLE:


<PAGE>




                                    EXHIBIT "A"


CAPITALIZATION AND STOCKHOLDERS OF: PHC OF NEVADA, INC.

AUTHORIZED:             200,000 SHARES

PAR VALUE: $.01

ISSUED AND OUTSTANDING:   100 SHARES

SHARES HELD BY PLEDGOR:   100 SHARES

STOCK CERTIFICATE NUMBER(S):  #1








PLEDGOR'S INITIALS                                         PLEDGEE'S INITIALS


<PAGE>



                                    STOCK POWER


      FOR VALUE RECEIVED,  PHC, INC., the undersigned hereby sells,  assigns and
transfers unto LINC ANTHEM  CORPORATION 100 Shares of the common stock of PHC OF
NEVADA,  INC.  (the  "Company")  represented  on the  books  of the  Company  by
Certificate  No. 1 herewith  and do hereby  irrevocably  constitute  and appoint
attorney to transfer the the said stock on the books of the within named Company
with full power of substitution in the premises.


Date:     Nov. 7, 1995                                    PHC, INC.

                              By:

                              Name: BRUCE A. SHEAR

                              Title:       PRESIDENT

A TTESTED IN PRESENCE OF



<PAGE>



Exhibit 10.82



                                 TABLE OF CONTENTS



SECTION 1.   SALE OF THE BUSINESS ASSETS...............................2


SECTION 2.  PURCHASE PRICE, ALLOCATION OF PURCHASE PRICE AND ADDITIONAL PAYMENTS
3


SECTION 3.  CLOSING....................................................3


SECTION 4.  REPRESENTATIONS AND WARRANTIES OF SELLER...................3

4.1   CORPORATE EXISTENCE..............................................3
4.2   CORPORATE AUTHORITY..............................................4
4.3   FINANCIAL STATEMENTS.............................................4
4.4   NO VIOLATION OF AGREEMENT........................................4
4.5   REGULATORY COMPLIANCE............................................4
4.6   NON-COMPETITION AND AMENDMENT OF ARTICLES........................4
4.7   LEASES...........................................................4
4.8   INDEBTEDNESS ....................................................5
4.9   CONTRACTS AND COMMITMENTS........................................5
4.10  TAX RETURNS AND PAYMENTS.........................................5
4.11  LITIGATION AND OTHER PROCEEDINGS.................................5
4.12  BROKER...........................................................6
4.13  INSURANCE........................................................6
4.14  NOTICES..........................................................6
4.15  EMPLOYEES........................................................7
4.16  EMPLOYMENT LAWS..................................................7
4.17  COST REPORTS.....................................................7
4.18  BANKRUPTCY, ETC..................................................7
4.19  INFORMATION NOT MISLEADING.......................................8
4.20  AUDITS...........................................................8
4.22  TRADE NAME.......................................................8
4.23  PROPERTY.........................................................8
4.24  PATIENT PAYMENTS.................................................8
4.25  SELLER'S RESPONSIBILITIES........................................8
4.26  CONSULTANTS......................................................9

SECTION 5.  COVENANTS OF SELLER........................................9

5.1   CONDITION OF PERSONAL PROPERTY...................................9
5.2   ACCESS AND PREPARATION OF LICENSE APPLICATION....................9
5.3   ORDINARY COURSE OF BUSINESS......................................9
5.4   COMPENSATION.....................................................9
5.5   INSURANCE........................................................9
5.6   REVIEW OF STAFF.................................................10
5.7   RIGHT OF INSPECTION.............................................10
5.8   DISCHARGE OF OBLIGATIONS........................................10
5.9   PUBLICITY.......................................................10
5.10  POST-CLOSING OPERATION OF CLINIC AND USE OF BUSINESS ASSETS.....10

SECTION 6.  REPRESENTATION AND WARRANTIES OF PURCHASER................10

6.1   ORGANIZATION OF PURCHASER.......................................11
6.2   CORPORATE ACTION BY PURCHASER...................................11
6.3   OPINION OF COUNSEL FOR PURCHASER................................11

SECTION 7.  CONDITIONS TO CLOSING.....................................11

7.1   REPRESENTATION, WARRANTIES AND COVENANTS........................12
7.2   LEASE FOR REAL PROPERTY.........................................12
7.3   THIRD PARTY PAYORS..............................................12
7.4   LICENSES AND APPROVALS..........................................12
7.5   SALE OF BUSINESS ASSETS.........................................12
7.6   INSURANCE.......................................................12
7.7   NO MATERIAL CHANGE..............................................13
7.8   NON-COMPETITION.................................................13
7. 9  PAYROLL.........................................................13
7.10  CONSENTS........................................................13
7.11  FINANCIAL DUE DILIGENCE.........................................13
7.12  CORPORATE AUTHORITY.............................................13
7.13  OPINION OF COUNSEL FOR SELLER...................................13
7.14  CERTIFICATE OF RELEASE..........................................14
7.15  EMPLOYMENT AGREEMENT............................................15

SECTION 8.  NO ASSUMPTION OF LIABILITIES..............................15


SECTION 9.  INDEMNIFICATION...........................................15

9.1   INDEMNIFICATION OF PURCHASER....................................15
9.2   INDEMNIFICATION OF SELLER.......................................15

SECTION 10.  RIGHTS OF TERMINATION AND REMEDIES FOR DEFAULT...........16

10.1  DEFAULT BY SELLER...............................................16
10.2  PURCHASER'S RIGHT TO TERMINATE..................................16
10.3  SELLER'S RIGHT TO TERMINATE.....................................16
10.4  DEFAULT BY PURCHASER............................................17

SECTION 11.  MISCELLANEOUS............................................17

11.1  SURVIVAL........................................................17
11.2  DISCLAIMER OF INTENT TO BECOME PARTNERS.........................17
11.3  ADDITIONAL DOCUMENTS............................................17
11.4  NOTICES.........................................................18
11.5  NON-ASSIGNMENT..................................................18
11.6  SOLE AGREEMENT..................................................18
11.7  SUCCESSORS......................................................19
11.8  CAPTIONS........................................................19
11.9  SEVERABILITY....................................................19
11.10 COUNTERPARTS....................................................19
11.11 NO WAIVER.......................................................19
11.12 ATTORNEY'S FEES AND COSTS.......................................19
11.13 APPLICABLE LAW, JURISDICTION AND VENUE..........................19



<PAGE>



                              ASSET PURCHASE AGREEMENT


This  Agreement is made as of this 28 day of October,  1995, by and among Norton
A. Roitman, M.D. ("Dr. Roitman"), an individual residing in the State of Nevada;
Clinical Services of Nevada, Inc., a Nevada corporation;  and Harmony Healthcare
Systems,  Inc., a Nevada  corporation  (collectively,  "Seller") located at 2340
Paseo Del Prado,  Las Vegas, NV 89102;  and PHC, Inc., doing business as Pioneer
Healthcare  ("Pioneer")  and PHC of Nevada,  Inc. a  wholly-owned  subsidiary of
Pioneer  (collectively  "Purchaser"),  both of which are Massachusetts  business
corporations  with  headquarters  at 200 Lake  Street,  Peabody,  Massachusetts.
Seller and Purchaser may hereinafter be referred to as the "Parties".

This Agreement is made with reference to the following facts:

      A. Seller owns a business which consists of the operation of an outpatient
      mental  health  services  facility  located at 2340  Paseo Del Prado,  Las
      Vegas, NV 89102, known as Harmony Counseling (the "Clinic"). This business
      and all of the assets of Seller owned by Seller and used in the  operation
      of the Clinic shall hereinafter be referred to as "the Business Assets";

     B. Seller wishes to sell the Business  Assets and  Purchaser  wishes to buy
the Business Assets subject to the conditions herein set forth;

      C. Upon  consummation of the transactions  contemplated by this Agreement,
      Purchaser  intends to utilize  the  Business  Assets in the  provision  of
      outpatient mental health services in Clark County, State of Nevada.

     D. Purchaser  wishes to employ Dr. Roitman as Chief Medical  Officer of the
Clinic,  PHC of Nevada,  Inc.  and as Chief  Medical  Officer of Pioneer and Dr.
Roitman wishes to be so employed;

      E.  Purchaser  wishes  to enter  into a lease for the  premises  presently
      occupied  by the Clinic at 2340 Paseo Del Prado,  Las Vegas,  Nevada  (the
      "Property") or to enter into a lease for alternative  premises  acceptable
      to  Purchaser  and  suitable  for  operation  of the Clinic  ("Alternative
      Premises");

NOW, THEREFORE for and in consideration of the recitals and the mutual covenants
herein contained, Seller and Purchaser agree as set forth below:

SECTION 1. SALE OF THE BUSINESS ASSETSSECTION 1. SALE OF THE BUSINESS ASSETS. On
the terms and  conditions  set forth herein,  Seller shall sell to Purchaser and
Purchaser  shall  purchase from Seller the Business  Assets  including,  but not
limited to, the following:

           1.1  All  machinery,  equipment,  furniture,  furnishings,  vehicles,
      computers,  telephones,  supplies, and all tangible assets (excluding cash
      or cash  equivalents  and  leased  assets),  used in  connection  with the
      operation of the Clinic,  wherever located, as more particularly described
      in Exhibit A attached hereto, and

           1.2 All of Seller's  right,  title and  interest in, to, or under the
      contracts,  agreements,  leases, licenses (excluding Dr. Roitman's medical
      licenses),  permits, approvals,  purchase orders and commitments,  and any
      other  intangible  assets used in  connection  with the  operation  of the
      Clinic,  through the Closing Date (as hereinafter defined),  which will be
      acquired by Purchaser as specifically  enumerated and more fully described
      in Exhibit B.

           1.3 All  leasehold  improvements  to the Property  which are owned by
      Seller,  as more fully described in Exhibit C, if Purchaser  enters into a
      Lease for the Property.

           1.4 All  Accounts  Receivable  of Seller as they exist on the Closing
      Date,  as more  fully  described  in  Exhibit  D,  subject to the terms of
      Section 2 (a) (iv).

           1.5 All Seller's books,  records,  files and correspondence,  display
      and  promotional  material  relating to or utilized in connection with the
      operation  of the Clinic,  wherever  located,  through  the Closing  Date,
      together  with all of the goodwill  throughout  the world  attached to the
      Clinic, and any other intangibles,  including trademarks, corporate names,
      trade  names,  all  customer  lists,  consent  to the  rights  to use  the
      telephone numbers and listings pertaining to same, the entire inventory of
      office,  housekeeping,  recreation and maintenance  supplies, if any. This
      does not  include  patient  records.  However,  Purchaser  shall be solely
      responsible  for the proper  safekeeping,  storage  and  retrieval  of all
      patient records after the Closing.

           1.6 Except as expressly  provided  herein to the contrary,  all other
      assets, tangible or intangible,  wherever located owned by Seller and held
      or used in connection with the ownership,  operation and management of the
      Clinic,  whether or not included in or reflected on the books of Seller or
      its financial statements.

           1.7  All rights and claims of Seller relating to the Business Assets.


<PAGE>



SECTION 2.  PURCHASE PRICE, AND ALLOCATION OF PURCHASE PRICE AND ADDITIONAL
Payments.

           (a) The  purchase  price  payable  by  Purchaser  to  Seller  for the
      Business  Assets shall be cash in the sum of Five Hundred and Seventy Five
      Thousand   ($575,000.00)   Dollars   plus   stock   as   described   below
      (collectively, the "Purchase Price"), which shall be paid as follows:

              (i)  Purchaser  has  deposited  in the  Client  Trust  Account  of
      Seller's  attorney  the  sum of Ten  Thousand  Dollars  ($10,000.00)  (the
      "Deposit"),  payable to Seller at the Closing  (or in other  circumstances
      described in this Agreement);

     (ii) Five  Hundred and Sixty Five  Thousand  ($565,000.00)  Dollars in cash
payable at the Closing;

              (iii) 75,000 shares of PHC, Inc. Class A Common Stock,  subject to
      the  restrictions  of  Rule  144 of the  Securities  Act of  1933,  at the
      Closing.  (A description of these  securities and applicable  restrictions
      have been provided to Seller's counsel).

              (iv)   Additional   payments   upon  the   collection  of  certain
      receivables will be paid to Dr. Roitman in accordance with Exhibit E..

     (b)  Allocation  of Purchase  Price.  It is agreed that the purchase  price
shall be allocated as shown on schedule 2 (b).


SECTION 3. CLOSING. Consummation of this Agreement (the "Closing") shall be held
at such place as the  Parties  may  mutually  agree  upon or through  the use of
escrow  agents,  as the  parties may agree.  The Closing  shall take place on or
before  October 31, 1995 (the "Closing  Date").  The Closing is subject to other
provisions of this Agreement. Disposition of Purchaser's Deposit is discussed in
Section 10. The Parties may agree in writing to extend the Closing  Date without
the forfeiture of the Deposit.

SECTION 4.  REPRESENTATIONS AND WARRANTIES OF SELLER.

As a  material  inducement  to  Purchaser  to  enter  into and  consummate  this
Agreement, Seller warrants and represents that:

     4.1  CORPORATE  EXISTENCE.  Clinical  Services of Nevada,  Inc. and Harmony
Healthcare  Systems,  Inc., are each corporations duly organized and existing in
good  standing  under the laws of the State of  Nevada.  Together  they have the
corporate  power to own the  Business  Assets and to  operate  the Clinic as now
conducted.


<PAGE>


                                     EXHIBIT A
           FURNITURE
2 Person Sofa                      2
7' Sofa                             1
Blue Group Chair                   6
Red Group Chair                    25
Green Group Chair                  3
Beige Group Chair                  4
Coffee Table-Oak & Glass           3
Coffee Table-Oak Octagon
Coffee Table-Cherry w/Drawer       1
Bookcase - Oak 4 shelves           2
Bookcase - Oak 5 Shelves           2
Bookcase - Oak 6 Shelves           2
Bookcase - Metal 4'                1
Credenza - Oak                     1
Desk - Oak 6' w/return             1
Desk - Oak 5' 2 Drawer             1
Desk - Oak 5' 4 Drawer             3
U Shape Work Station w/Raised Counter     1
Small Desk w/Shelf                 1
Exc. Desk Chair w/rollers          1
Exc.Desk Chair w/Rollers-Blue      1
Exc.Desk Chair w/rollers - Green   1
Exc.Desk Chair w/rollers - Grey    1
Exc.Desk Chair w/rollers - Red     1
Sec. Chair w/rollers- Beige        1
Sec. Chair w/rollers - Blue               1
Antique Table 23" X 24"            1
Chest                              1
Telephone Stand                    1
Protective Floor Mats              6
Rug- - 5' X 8'                     1
Fi le Cabinet - 2 Drawer Beige     5
File Cabinet - 5 Drawer Legal Beige 2
File Cabinet - 2 Drawer Lateral Beige     1
Storage Cabinet - 6' 2 Door Beige Metal   1 
Chair Stand - 5' X 1' X 4'         1
            AUDIO/VISUAL
Symphanic TV/VCR 20"               1
Audio/Visual Cart w/Rollers        1
Audio/Visual 910 w/Cart            1
Marpac sound screen                1
Sound Screen                       1
Easel, Metal Adjustable            1
Chalkboard 3'                 X 4' 1
Chalkboard 4'                 X 4' 2
Chalkboard 4'                 X 5' 2
Chalkboard 5'                 X 6' 1
Radio/Tape Player                  1




<PAGE>



           4.2  CORPORATE  AUTHORITY.  Seller is the sole owner of the  Business
      Assets,  and has the full power and authority to enter into and to perform
      this Agreement.  All corporate proceedings necessary to duly authorize the
      execution  and  delivery  of  this  Agreement  and all  related  documents
      (collectively,  "the Documents") by the officer or officers  executing the
      same on behalf of Clinical Services of Nevada, Inc. and Harmony Healthcare
      Systems,  Inc.  have been  taken.  The  Documents  are  legal and  binding
      obligations  of Seller,  enforceable  in  accordance  with their terms and
      conditions applicable to Seller.

           4.3 FINANCIAL  STATEMENTS.  Seller has delivered to Purchaser  Income
      Statements  and Balance  Sheets for the Business  for the  calendar  years
      ending  December  31, 1992  through  1994 and monthly from January 1, 1995
      through  August  31,  1995 (the  "Financial  Statements").  The  Financial
      Statements have been prepared on a consistent  basis and fairly  represent
      the  financial  condition of Seller at the stated dates and the results of
      operations  of the  Seller  for  such  periods.  If the  Closing  Date  is
      extended,  financial  statements  will be  provided  for the  most  recent
      month's end.

           4.4 NO VIOLATION OF  AGREEMENT.  The  execution  and delivery of this
      Agreement and/or the consummation of the transactions  contemplated herein
      will not violate or result in a breach of any condition of the Articles of
      Incorporation  or the  Bylaws,  or  violate  or  result in a breach of any
      condition of any agreement,  lease, contract,  judgment,  decree, statute,
      rule or  regulation  applicable  to Seller,  or result in the  creation or
      imposition of any security interest,  lien, charge or encumbrance upon the
      Business Assets.

           4.5  REGULATORY  COMPLIANCE.  To the best  knowledge  of Seller,  the
      Business  Assets  are,  have  been and  will be at the  Closing  Date,  in
      compliance with all applicable federal,  state and local laws, ordinances,
      codes, regulations and requirements.

     4.6  NON-COMPETITION  AND  AMENDMENT  OF ARTICLES.  Seller shall  execute a
Non-Competition  Agreement in favor of Purchaser in the form attached  hereto as
Exhibit P. Clinical  Services of Nevada,  Inc. and Harmony  Healthcare  Systems,
Inc.  shall  file  amended  Articles  of  Incorporation  with the  Office of the
Secretary of State of Nevada  concurrent with the Closing to effect name changes
for each of the  corporations.  Purchaser  shall have the right to approve these
new names; such approval shall not be unreasonably withheld.

           4.7  LEASES.  Except  for the  Property  and as  otherwise  listed on
      Exhibit F,  Seller  owns all assets  which are  necessary  to operate  the
      Clinic. Seller does not lease any personal property, equipment or fixtures
      used in the  conduct  of the  Clinic,  except  as  shown  in the  schedule
      attached  hereto as Exhibit F. Seller is not in default under any of those
      leases,  and the  same  are  fully  assignable  to  Purchaser,  except  as
      otherwise indicated in Exhibit F.

           4.8 INDEBTEDNESS.  To the best of Seller's  knowledge,  Seller has no
      indebtedness,  contingent or otherwise,  which is not set forth in Exhibit
      G, and in Section 4.11.

           4.9  CONTRACTS AND COMMITMENTS.

           (a) Seller has no purchase  commitments  extending beyond the Closing
      Date which are in excess of the normal,  ordinary,  and usual requirements
      of the operation of the Clinic or at any excessive price;

           (b) Seller has no collective bargaining or employment agreements, nor
      any agreements  that contain any severance or termination  pay liabilities
      or obligations, other than listed on Exhibit H.
            (c) Seller has no bonus, deferred  compensation,  profit sharing, or
      retirement  arrangement,  whether  legally  binding  or not,  nor  does it
      presently pay any pension, deferred compensation,  or retirement allowance
      to anyone other than those listed in Exhibit H;

           (d) Seller has no employees  except as shown in Seller's  most recent
      payroll record attached hereto as Exhibit I to whom it pays  compensation,
      and

           (e)  Seller  does  not  pay  any  compensation,  vacation,  sick  day
      allowances or other benefit  programs to any of its employees which is not
      disclosed in Exhibit I.

           4.10 TAX  RETURNS  AND  PAYMENTS.  All  federal,  state and local tax
      reports and returns required to have been filed by Seller have been filed.
      Seller has paid or withheld all federal,  state and local taxes which were
      due and payable or required by law to have been withheld, respectively, to
      the date hereof,  except those which are being  contested in good faith by
      an appropriate  proceeding.  There are no unpaid assessments of federal or
      state income taxes or other federal,  state or local taxes against Seller.
      To the best of Seller's knowledge, Seller has made adequate provisions for
      all  taxes,  assessments,   fees,  penalties,   interest,  and  all  other
      governmental charges which were, or may become, payable with respect to it
      at any time as a result of events occurring on or before the Closing Date,
      which will in any way affect the  licensure  or operation of the Clinic or
      ownership of the Business Assets by Purchaser.

           4.11 LITIGATION AND OTHER PROCEEDINGS.  Except as otherwise described
      herein,  to  the  best  of  Seller's  knowledge  there  is no  litigation,
      arbitration,  or  other  legal  proceeding  or  administrative  proceeding
      pending or threatened  against the Clinic, the Business Assets or Seller's
      leasehold interest in the Property, or the Property which might affect the
      operation of the Clinic or the Business  Assets,  or its  authorization to
      operate as an  outpatient  mental  health  clinic or  employee  assistance
      program  under  the  applicable  provisions  of  Nevada  or  federal  law.
      Purchaser  hereby  acknowledges  that a former employee of Seller filed an
      age-discrimination  claim against Seller with the EEOC, which investigated
      the claim and took no action  against  Seller.  That  employee  may file a
      wrongful  termination  action against  Seller,  which Seller would have to
      defend  at its  expense.  Seller  believes  there  is no merit to any such
      action.  Purchaser further acknowledges that there is one pending workers'
      compensation  claim  which  shall be the  responsibility  of Seller to the
      extent not paid by SIIS.  Seller is not in  default in any  respect of any
      order or any decree or rule of any court or  governmental  authority which
      may have  jurisdiction  over Seller,  the Property or the Business Assets.
      Seller  possesses all permits and licenses  necessary for the operation of
      the Clinic, and otherwise operates the Clinic in material  compliance with
      all applicable laws, regulations, and ordinances.

           4.12 BROKER. No broker, finder or agent has been engaged by Seller or
      Purchaser  in regard to the sale of the  Business  Assets,  and each Party
      hereby  indemnifies  the other and holds the other free and harmless  from
      and against any and all claim or liability for any such fee as well as any
      related, reasonable attorneys' fees and costs of litigation.

           4.13  Insurance.  Seller has  continuously  maintained  insurance for
      professional  liability for Dr. Roitman and several additional clinicians,
      and has  monitored  professional  liability  insurance  coverage for other
      clinical staff employees, and for general liability for the Clinic and for
      its interest in the Property, since 1990.

           4.14  NOTICES.   Seller is not aware of and has not received any
      communications from any insurance companies, governmental agencies or from
      any other parties of

           (1) any  conditions,  defects  or  inadequacies  with  respect to the
      Property or the Business Assets (including health hazards,  state or local
      notices relating to health care licensing,  certificate of need status, or
      dangers,  nuisance or waste,  which,  if not  corrected,  would  result in
      termination of insurance coverage or increase its cost)

           (2) any  violations  of building  codes and/or  zoning  ordinances or
      other  governmental  laws,  regulations  or  orders  with  respect  to the
      Property  or the  Business  Assets,  pending  or  threatened  condemnation
      proceedings with respect to the Property, or any other modification of the
      zoning   classification,   or  of  any  building  or  environmental   code
      requirements applicable to the Property or any part thereof.

           Seller  shall  immediately  notify  Purchaser  of any  violations  or
      conditions  of which  Seller  receives  notice  prior to Closing  (whether
      written or oral).

           4.15  EMPLOYEES.  Exhibit I lists all  employees  of Seller or of any
      affiliate of Seller currently employed in the operation and/or maintenance
      of the  Business  Assets.  Exhibit  J sets  forth  as of the  date of this
      Agreement  a  complete  list  and  description  of  all  fringe  benefits,
      including  hospitalization  insurance,   accident  and  health  insurance,
      disability  insurance,  death  insurance,  vacation  policies,  meals  and
      lodging  policies  and  parking  policies  along  with true,  correct  and
      complete copies of all contracts and disclosures related thereto.  Exhibit
      J also sets forth as of the date of this  Agreement  a  complete  list and
      description  of  all  pension,  retirement,  incentive  or  other  similar
      arrangements  or  properties  to which Seller is bound along with complete
      copies of such documents, arrangements or plans.

           4.16 EMPLOYMENT LAWS. To the best of Seller's  knowledge,  Seller has
      complied in all material  respects with all  applicable  state and federal
      laws and regulations respecting employment and employment practices, terms
      and  conditions  of  employment,  wages  and  hours  and  other  laws  and
      regulations  related to  employment  of employees and agents of the Seller
      and the  usage of the  Business  Assets.  There are no  arrearages  in the
      payment  of wages,  withholding  or social  security  taxes,  unemployment
      insurance premiums or other similar obligations other than in the ordinary
      course of business. There are no contractual impediments to termination of
      service  of  any  of  Seller's  employees,   except  that  certain  notice
      requirements may apply, as disclosed on Exhibit H.

           4.17 COST  REPORTS.  All rate  setting  forms or cost  reports  which
      Seller has been  required to file as of the Closing Date with any state or
      federal  authority  or other third party payor have been timely  filed and
      accurately  reflect the patient  census and costs of the  operation of the
      Clinic.

           4.18  BANKRUPTCY,  ETC.  No  bankruptcy,   insolvency,  petition  for
      dissolution,  rearrangement  or  similar  action  involving  the  Business
      Assets,  whether voluntary or involuntary,  is pending or threatened,  and
      Seller has not:

           (a)  filed a petition for dissolution;

           (b)  filed a voluntary petition in bankruptcy;

           (c) been  adjudicated as bankrupt or insolvent or filed a petition or
      action   seeking  any   reorganization,   arrangement,   recapitalization,
      readjustment, liquidation, dissolution or similar relief under any Federal
      bankruptcy act or any other laws;

     (d) sought or acquiesced  in the  appointment  of any trustee,  receiver or
liquidator of all or any substantial part of the Business Assets, or any portion
thereof; or

           (e) made an  assignment  for the benefit of  creditors or admitted in
      writing its inability to pay its debts generally as the same become due.

           Seller is not  anticipating or  contemplating  any of the actions set
      forth in (a) through (e) of this subsection prior to the Closing Date.

           4.19  INFORMATION NOT  MISLEADING67.  All the information  concerning
      Seller,  the Business Assets and the Property and all reports,  contracts,
      or  other   items   obtained   by   Purchaser   from  Seller  or  Seller's
      representatives  pursuant to this Agreement are true, complete and correct
      in all material respects and fairly present the information set forth in a
      manner that is not  misleading  and Seller has not  omitted  any  material
      information  required  to be  included  in order  to make the  information
      furnished by Seller not misleading.

           4.20  AUDITS.  There  have  been no  Medicaid,  Medicare  or  private
      insurance audits within the 36 months preceding the date of this Agreement
      and Seller has not been informed of any recoupment claims.

           4.22 TRADE NAME.  Seller  represents,  warrants,  and covenants  that
      Seller has taken the necessary legal and administrative  actions to obtain
      (and, to its best  knowledge  Seller has obtained and now  possesses)  the
      exclusive right in Clark County,  State of Nevada,  to use the trade names
      Harmony Counseling,  Harmony Healthcare Systems,  and Clinical Services of
      Nevada, and Seller has not granted and will not grant to any other person,
      firm,  or  corporation,  except  Purchaser,  the right to use those  trade
      names. Purchaser acknowledges that it will have to meet various fictitious
      business name filing requirements after Closing to use the trade names.

     4.23  PROPERTY.  Seller  leases the Property on a month to month basis with
the exception of Bldg. D Plazas Office Park, Suite 207,208, Las Vegas, NV 89102,
as previously disclosed to Purchaser.

     4.24 PATIENT PAYMENTS. There are no advances or pre-payments made by
      clients for services to be rendered after the Closing Date by Seller.

           4.25 SELLER'S RESPONSIBILITIES.  Except as otherwise provided in this
      Agreement Seller shall remain responsible for all pre-Closing liabilities,
      including but not limited to, the payment of compensation of the employees
      of the Clinic  including  any and all  accrued  benefits  and the  amounts
      payable for same,  for the period prior to the Closing Date.  The accounts
      receivable shall remain the property of Seller for the period prior to the
      Closing  Date.  Any  accounts  receivable  collected  by Seller  after the
      Closing Date will be the property of Purchaser  subject to the  provisions
      of Section 2 (a) (iv).

           4.26  CONSULTANTS.  There are no consultants  (including  therapists,
      counselors, attorneys and accountants) of Seller currently employed in the
      operation and/or  maintenance of the Business Assets,  other than as shown
      on Exhibit K attached  hereto.  Exhibit K contains an accurate list of the
      most recent payments to each of the consultants.

SECTION 5.  COVENANTS OF SELLER.

           5.1  CONDITION OF PERSONAL PROPERTY
           . Seller  represents and warrants that,  subject to ordinary wear and
      tear,  all  equipment,  appliances and machinery of the Clinic shall be in
      good working order and repair at the Closing Date.

           5.2 ACCESS AND PREPARATION OF LICENSE  APPLICATION.  Seller agrees to
      use its best  efforts to assist  Purchaser in making  application  for all
      necessary licenses and permits required for the operation of the Clinic by
      Purchaser as a treatment  program for outpatient  mental health  services.
      Seller will provide whatever access, materials,  expertise and information
      reasonably  requested  and  available  to  Seller in  connection  with any
      licensing or permitting  authority review.  Seller will cooperate with any
      efforts of  Purchaser to obtain  contracts  with or  certification  by any
      third party payor or insurer.  Until  Purchaser has obtained all necessary
      licenses,  contracts and  certifications,  Seller will allow  Purchaser to
      operate under Seller's license and  certifications to the extent allowable
      by law for six (6) months after the Closing Date.  In addition,  Purchaser
      shall be  entitled  to use Dr.  Roitman's  Nevada  medical  license in its
      operation of the Clinic as delineated in Exhibit P attached hereto. Seller
      makes no representation or warranty  whatsoever as to Purchaser's right or
      ability  to  operate  as  stated  and/or  to  obtain   contracts  with  or
      certification by any third-party payor or insurer.

           5.3 ORDINARY COURSE OF BUSINESS.  From the date hereof to the Closing
      Date,  Seller  shall  conduct  its  operation  of the  Clinic  only in the
      ordinary  course thereof,  will take all necessary  action to preserve the
      goodwill and operation of the Clinic,  and will make no material change in
      the operation of the Clinic nor enter into any material  contract creating
      an obligation  binding on Purchaser after the Closing in excess of $500.00
      or incur any material  liability without the written consent of Purchaser,
      which consent shall not be unreasonably withheld.

           5.4  COMPENSATION.  From the date hereof  through  the Closing  Date,
      except with prior written  consent of Purchaser,  Seller will not increase
      any salary or other form of compensation payable, or to become payable, to
      any of its employees or make any other severance or retirement arrangement
      with any such employees.

           5.5 INSURANCE.  From the date hereof through the Closing Date, Seller
      shall  maintain  insurance  on  the  Clinic  at  the  same  levels  as was
      maintained on the date hereof.

           5.6 REVIEW OF STAFF.  Seller shall allow  Purchaser an opportunity to
      review the  credentials  and employment  histories of all current staff of
      the Clinic upon execution of this Agreement.  This review shall be limited
      to the written  materials now within the  possession and control of Seller
      and shall not disrupt the normal business  operations of the Clinic.  With
      prior consent of Seller,  not to be unreasonably  withheld,  Purchaser may
      conduct interviews with all current staff of the Clinic.

           5.7  RIGHT  OF  INSPECTION.  Prior  to  Closing,  Purchaser  and  its
      officers, employees,  attorneys and agents shall be entitled during normal
      business hours, to inspect the  properties,  books,  documents and records
      relating  to the  Business  Assets,  and to make  copies of the same,  and
      Seller agrees to furnish such information  within Seller's  possession and
      control relating to Seller and the Business Assets as Purchaser reasonably
      may request and to permit  Purchaser  and such persons to consult with the
      officers,  employees,  attorneys  and agents of Seller for the  purpose of
      determining the accuracy of the covenants,  representations and warranties
      made  herein.  Seller shall  cooperate  with  Purchaser  as necessary  and
      reasonable to insure a smooth transition of ownership of the Clinic.

           5.8 DISCHARGE OF OBLIGATIONS.  On or before the Closing Date,  Seller
      shall  discharge  and obtain  releases  with  respect  to all  outstanding
      security  interests in the Business  Assets and any liens and mortgages on
      the tangible personal  property of the Clinic,  except that Purchaser will
      assume the liability for leased assets used in the operation of the Clinic
      as listed on  Exhibit B and  Seller  shall  have no  obligation  to obtain
      releases of the lessors' interests in such assets.

           5.9  PUBLICITY.  All press  releases,  filings  and  other  publicity
      concerning   the   transactions   contemplated   hereby  will  be  jointly
      coordinated  and will be subject to review and approval by both Seller and
      Purchaser,  such approval not to be unreasonably  withheld or delayed.  In
      addition, both parties have executed a Confidentiality Agreement, which is
      attached as Exhibit L.

           5.10  POST-CLOSING  OPERATION  OF CLINIC AND USE OF BUSINESS  ASSETS.
      Purchaser hereby  acknowledges  that Seller has not made and does not make
      any warranty or  representation  whatsoever as to  Purchaser's  success in
      Purchaser's operation of the Clinic and/or Purchaser's use of the Business
      Assets after the Closing  Date,  and  Purchaser is not relying on any such
      alleged warranty or representation by Seller (or any of them) in executing
      the Document or in consummating this purchase transaction.

SECTION 6. REPRESENTATION AND WARRANTIES OF PURCHASER.  As a material inducement
to Seller to enter into and consummate  this Agreement,  Purchaser  warrants and
represents that:

           6.1  ORGANIZATION  OF  PURCHASER.  Purchaser  is a  corporation  duly
      organized  and  existing  and in  good  standing  under  the  laws  of the
      Commonwealth of Massachusetts.

           6.2  CORPORATE  ACTION BY  PURCHASER.  Purchaser  has full  power and
      authority to enter into and perform its  obligations  under this Agreement
      and  the  Documents,  and  all  corporate  proceedings  necessary  to duly
      authorize  the  execution  and delivery of the Documents by the officer or
      officers  executing  the same on  Purchaser's  behalf  have been taken and
      these  Documents  are the  legal and  binding  obligations  of  Purchaser,
      enforceable in accordance  with their terms and  conditions  applicable to
      Purchaser.

           6.3 OPINION OF COUNSEL FOR PURCHASER.  Five days prior to the Closing
      Date,  Purchaser  shall  provide  to Seller an  opinion  from  counsel  to
      Purchaser, satisfactory to Seller's counsel, to the effect that;

           (a) Purchaser has the full  corporate  power and authority to execute
      and deliver the Documents to be executed by Purchaser.

           (b)  That  the  transaction  is  in  compliance  with   Massachusetts
      corporate and securities laws and federal securities laws.

           (c)  The   execution,   delivery  and   performance   of  Purchaser's
      obligations under the Documents have been duly authorized by all requisite
      corporate actions of Purchaser and the Documents have been (or will be, at
      Closing) duly executed and delivered by Purchaser.

           (d) The  Documents  are  legal,  valid  and  binding  obligations  of
      Purchaser and are enforceable  against  Purchaser in accordance with their
      respective terms,  except as limited by general equity principles (whether
      considered  in a  proceeding  at law  or at  equity)  and  by  bankruptcy,
      insolvency,  reorganization,  moratorium  and  other  laws  affecting  the
      enforcement of creditors' rights generally.

           (e) To the best knowledge of counsel after due inquiry, the execution
      and  delivery  by  Purchaser  of the  Documents  and the  consummation  by
      Purchaser of the transactions contemplated hereby will not be or result in
      a violation of any statute or regulation of any governmental  authority or
      of any decree, order, or judgment and will not be or result in a violation
      or  constitute  a default or ground  for  revocation  under any  contract,
      agreement, indenture, license or instrument known to such counsel to which
      Purchaser is a party or by which Purchaser is bound.


SECTION 7.  CONDITIONS TO CLOSING.  Purchaser shall not be obligated to purchase
the Business  Assets nor is it bound by any of the terms of this Agreement until
all of the following  conditions  are met, any one or all of which may be waived
by Purchaser.

           7.1 REPRESENTATION, WARRANTIES AND COVENANTS. The representations and
      warranties  of Seller  contained  in this  Agreement  shall be true in all
      material   respects   at  and   through   the   Closing  as  though   such
      representations  and  warranties  were made on that date and Seller  shall
      have  performed all  covenants  and  agreements on its part required to be
      performed on or before the Closing Date which are specifically  authorized
      or  contemplated  by this  Agreement.  The  provisions of this Section 7.1
      shall  apply also as a  condition  precedent  to  Seller's  obligation  to
      consummate  this  transaction by  substituting  the term  "Purchaser"  for
      "Seller" in the foregoing sentence.

           7.2 LEASE FOR REAL PROPERTY.  Purchaser  shall have executed a valid,
      legally  enforceable  lease for the Property or for Alternative  Premises,
      upon terms  acceptable to Purchaser  (the "Lease  Agreement").  Said Lease
      Agreement shall provide occupancy rights to Purchaser  effective as of the
      Closing Date on terms acceptable to Purchaser,  including, but not limited
      to,  Purchaser's use of the premises as an outpatient mental health Clinic
      and related  offices.  Purchaser shall not  unreasonably  reject the Lease
      Agreement  or  delay  in  locating   alternative  suitable  space.  If  an
      acceptable Lease Agreement is not obtained,  or alternative suitable space
      is not located by October 10,  1995,  then either  party may  exercise its
      rights under Section 10.2 or Section  10.3, as the case may be.  Purchaser
      shall be obligated to use timely and good faith  efforts to obtain  timely
      an effective Lease Agreement.

           7.3  THIRD  PARTY  PAYORS.  Purchaser  shall  have  satisfied  itself
      independently  of  Seller's  documentation  that  there  will be  adequate
      insurance and third party payor  reimbursement  available for patients who
      will be treated for mental health services by the Clinic as intended to be
      operated by Purchaser.

           7.4  LICENSES  AND  APPROVALS.  Purchaser  shall  have  obtained  all
      necessary  licenses,  permits  and  approvals  to occupy the  Property  or
      Alternative Premises and have made application for all necessary licenses,
      permits and  approvals to operate said  premises as an  outpatient  mental
      health clinic .

           7.5 SALE OF BUSINESS  ASSETS.  Seller  shall  deliver to Purchaser at
      Closing  the Bill of Sale in the form  attached  hereto as  Exhibit  M, an
      Assignment of Intangible  Rights in the form attached hereto as Exhibit N,
      and an Assignment and Assumption  Agreement in the form attached hereto as
      Exhibit O, and any other forms of  documentation  reasonably  requested by
      Purchaser and appropriate to this transaction.

           7.6 INSURANCE. Purchaser shall have obtained general and professional
      liability  insurance  coverage in amounts  Purchaser  deems  necessary  to
      operate the Clinic as an outpatient  mental health Clinic.  If Seller does
      not continue  coverage under Dr.  Roitman's  current  medical  malpractice
      policy  Seller shall provide  evidence to Purchaser  that it has purchased
      the  requisite  "tail"  insurance  policy  to cover  Dr.  Roitman  for any
      outstanding  or latent claims which may arise as a result of its operation
      of the Clinic prior to the Closing Date.

           7.7 NO MATERIAL  CHANGE.  The business or financial  condition of the
      Clinic and or any of the Business Assets shall not have been, or shall not
      be  threatened to be,  adversely  affected in any way as a result of fire,
      explosion,  earthquake,  disaster, accident, labor trouble or dispute, any
      action by the United  States or any other  governmental  authority,  civil
      disturbances,  uprising, activity of armed forces, or Act of God or public
      enemy which has not been disclosed or provided for in this Agreement.

           7.8  NON-COMPETITION.  Seller shall have  executed a  Non-Competition
      Agreement in substantially the same form as Exhibit P attached hereto.

           7. 9 PAYROLL.  At the Closing,  Purchaser shall be provided by Seller
      with a copy of the  most  recent  payroll  register  for the  Clinic  with
      evidence that all employees of Seller have been compensated as provided in
      this Agreement up to the Closing Date.

           7.10  CONSENTS.  At the  Closing,  Seller will furnish to Purchaser a
      written  consent  to  Purchaser's  assumption  and  use  of  any  and  all
      tradenames,  trademarks, goodwill and other Business Assets referred to in
      Section 1 in a form provided by Purchaser and approved by Seller.

           7.11  FINANCIAL DUE DILIGENCE.  Purchaser  shall have been allowed by
      Seller to  conduct  financial  due  diligence  with  respect  to  Seller's
      detailed  business  records for the  thirty-six  month period prior to the
      execution date of this Agreement.

           7.12 CORPORATE  AUTHORITY.  Seller shall have complied fully with the
      laws of the  State of Nevada  applicable  to Seller  and  relevant  to the
      transactions contemplated herein. Seller shall provide to Purchaser a copy
      of the  necessary  corporate  procedures  to duly  approve the  execution,
      delivery and  performance  of the Documents by Seller.  The  provisions of
      this  Section  7.12 shall apply also as a condition  precedent to Seller's
      obligation to  consummate  this  transaction  by  interchanging  the words
      "Seller" and "Purchaser" in the preceding sentences.

           7.13  OPINION OF COUNSEL FOR SELLER.  Purchaser  shall have  received
      from counsel to Seller,  at least five (5) days prior to the Closing Date,
      a written  opinion  letter (which shall be limited to the laws of Nevada),
      satisfactory to Purchaser and Purchaser's counsel,  addressed to Purchaser
      in form and substance to the effect that:

           (a) Seller has the full corporate  power and authority to execute and
      deliver the Documents to be executed by Seller.

           (b) The execution,  delivery and performance of Seller's  obligations
      under the Documents have been duly  authorized by all requisite  corporate
      actions of Seller and the  Documents,  have been (or will be, at  Closing)
      duly executed and delivered by Seller.

           (c) The Documents are legal, valid and binding  obligations of Seller
      and are  enforceable  against Seller in accordance  with their  respective
      terms,  except as limited by general equity principles (whether considered
      in a  proceeding  at law or at  equity)  and  by  bankruptcy,  insolvency,
      reorganization,  moratorium  and other laws  affecting the  enforcement of
      creditors' rights generally.

           (d) To the best knowledge of counsel after due inquiry, the execution
      and delivery by Seller of the Documents and the  consummation by Seller of
      the transactions  contemplated hereby will not be or result in a violation
      of any  statute or  regulation  of any  governmental  authority  or of any
      decree,  order,  or judgment  and will not be or result in a violation  or
      constitute  a  default  or  ground  for  revocation  under  any  contract,
      agreement, indenture, license or instrument known to such counsel to which
      Seller is a party or by which Seller is bound.

           (e) The  shareholders  of Seller have  approved  the  transfer of the
      Business Assets by Seller to Purchaser pursuant to this Agreement.

           (f) To the  knowledge of counsel  after due inquiry,  Seller is not a
      party to any  pending  litigation  or any  proceeding  before any court or
      government   department   or  agency   which  might   affect  the  subject
      transaction,  and  such  counsel  does  not  know of any  such  threatened
      litigation or proceeding  against  Seller,  except as disclosed in Section
      4.11.

           7.14  CERTIFICATE  OF RELEASE.  As soon as  available  after  Closing
      Seller shall provide a Certificate  of Release from the Nevada  Employment
      Development   Department   stating  that  as  of  the  Closing   Date,  no
      contributions,   interest,   or  penalties  are  due  to  the   Employment
      Development  Department from the Seller. In all events Seller shall be and
      remains liable for all such contributions, interest or penalties if due.

           In the event the foregoing  conditions  precedent cannot be satisfied
      in accordance with their stated terms or, if sooner,  prior to the Closing
      Date, and such unsatisfied conditions are not waived by the party entitled
      to the benefit of same,  this  Agreement  shall be null and void,  and the
      Deposit shall be subject to disposition  under Section 10. Purchaser shall
      use its best efforts in good faith to bring about the  fulfillment  of all
      conditions within its control set forth in this Section 7. Without waiving
      any rights with respect to representations,  warranties and covenants made
      by Seller in this Agreement,  Purchaser agrees that by proceeding with the
      Closing,  all  conditions  precedent to the  obligations of Purchaser have
      been met to Purchaser's satisfaction.

     7.15  EMPLOYMENT  AGREEMENT.  Purchaser  shall  enter  into  an  employment
agreement  with Dr.  Roitman  as Chief  Medical  Officer of the Clinic and Chief
Medical Officer of PHC of Nevada.  This is a separate  agreement and is attached
hereto as Exhibit  Q, (the  "Employment  Agreement").  Seller's  obligations  to
consummate  this  transaction  are  dependent  on  execution  of the  Employment
Agreement by Purchaser and Dr. Roitman.

SECTION 8. NO ASSUMPTION OF LIABILITIES.  Except as specifically provided to the
contrary in this  Agreement,  Purchaser  shall not assume any liabilities of any
kind or nature of Seller or any liabilities of any kind or nature arising out of
the business  conducted with respect to the Business  Assets through the Closing
Date. Seller shall not assume any liabilities of any kind or nature of Purchaser
(including without limitation, liability of Purchaser arising from or related to
the transactions contemplated by this Agreement) or any liability of any kind or
nature arising out of the business conducted with respect to the Business Assets
after the Closing Date.

SECTION 9.  INDEMNIFICATION.

           9.1 INDEMNIFICATION OF PURCHASER. Seller hereby indemnifies and holds
      Purchaser, its directors, officers, employees and agents harmless from:

              (i)  Except  as  specifically  provided  to the  contrary  in this
      Agreement,  any and all  liabilities  and  obligations  or claims  against
      Seller,  and from all liabilities and obligations or claims arising out of
      the operation of the Clinic through the Closing Date,  including,  but not
      limited to, any and all liabilities, obligations, claims, fines, penalties
      or similar  charges  levied upon the Clinic due to the  non-compliance  of
      Seller prior to the Closing Date with any  applicable  federal,  state and
      local laws, ordinances, codes, regulations and requirements;

              (ii) Any actual damage,  loss,  cost or expense arising out of the
      breach of warranty, misrepresentation,  or nonfulfillment of any agreement
      on the part of the Seller under this Agreement;

              (iii) With respect to all actions,  suits,  proceedings,  demands,
      assessments,  judgments,  costs and expenses  connected with the foregoing
      including without limitation reasonable attorney's fees and expenses.

           9.2  INDEMNIFICATION  OF SELLER.  Purchaser  shall indemnify and hold
      Seller, its directors, officers, employees and agents harmless from:

              (i) Any and all liabilities, obligations or claims, arising out of
            the conduct of the business after the Closing Date by the Purchaser,
            including, but not limited to, any and all liabilities, obligations,
            claims,  fines,  penalties or similar charges levied upon the Clinic
            or the new  subsidiary  of  Purchaser  which will operate the Clinic
            after Closing,  PHC of Nevada,  Inc., due to the  non-compliance  of
            Purchaser  with  any  applicable  federal,  state  and  local  laws,
            ordinances, codes, regulations and requirements;

              (ii) Any actual damage,  loss,  cost or expense arising out of the
      breach  of  any  warranty,  misrepresentation,  or  nonfulfillment  of any
      agreement on the part of Purchaser under this Agreement; and

              (iii) With respect to all actions,  suits,  proceedings,  demands,
      assessments,  judgments,  costs and expenses connected with the foregoing,
      including without limitation reasonable attorney's fees and expenses.

              The foregoing  shall not be applicable to any actions or inactions
      on the part of Dr.  Roitman  arising from Dr.  Roitman's  relationship  to
      Purchaser after the Closing.

SECTION 10.  RIGHTS OF TERMINATION AND REMEDIES FOR DEFAULT67.

           10.1  DEFAULT  BY  SELLER.  In the event  that all of the  conditions
      precedent set forth in Section 7 of this  Agreement have been satisfied or
      waived by  Purchaser  on or prior to the  Closing  Date and  Purchaser  is
      ready, willing and able to proceed with the Closing, but Seller is unable,
      unwilling  or refuses to  consummate  the Closing in  accordance  with the
      terms and  conditions  of this  Agreement,  or in the event that Seller is
      otherwise in breach of this Agreement,  then the Deposit shall be returned
      to  Purchaser.  Purchaser  shall  also have the right to pursue  all other
      remedies available at law or equity.

           10.2  PURCHASER'S  RIGHT TO TERMINATE.  If any one or more conditions
      set forth in  Section 7 has not been  fulfilled  or  satisfied  through no
      fault of  Purchaser  or waived in writing by  Purchaser on or prior to the
      Closing Date, then Purchaser, at its option, may terminate this Agreement,
      effective   upon  the  receipt  by  Seller  of  written   notice  of  such
      termination.  In the event of any such termination of this Agreement,  all
      of Seller's and Purchaser's  obligations hereunder shall terminate without
      further loss, cost, damage,  claim, right or remedy in favor of any Party,
      and none of the  Parties  hereto  shall  have  any  further  liability  or
      responsibility  to the other  without  the need to  exchange  releases  to
      confirm same. In addition  Purchaser  shall be entitled to a refund of the
      Deposit, unless Section, 10.3 applies.

           10.3  SELLER'S  RIGHT TO  TERMINATE.  In the event that  Purchaser is
      unable to close by November 15, 1995,  through no fault of Seller,  Seller
      shall be entitled to  terminate  the  transaction  and retain the Deposit.
      However,  if the  condition  set forth in Section 7.2 is not satisfied and
      Purchaser  has made  good  faith  and  timely  efforts  to  obtain a Lease
      Agreement,  and that is the  cause of  Purchaser's  inability  to close by
      November 15, 1995, then Seller or Purchaser may terminate this transaction
      and upon such termination Purchaser shall be entitled to the refund of its
      Deposit.  In the event of a  termination  of this  transaction  under this
      Section 10.3, all of Seller's and Purchaser's  obligations hereunder shall
      terminate without further loss, cost,  damage,  claim,  right or remedy in
      favor of any Party,  and none of the Parties hereto shall have any further
      liability  or  responsibility  to the other  without  the need to exchange
      releases to confirm same.

           10.4 DEFAULT BY  PURCHASER.  In the event that all of the  conditions
      precedent  to Seller's  performance  have been  satisfied or waived by the
      Closing  Date,  and Seller is ready,  willing and able to proceed with the
      Closing and Purchaser fails to complete the  transactions  contemplated in
      this  Agreement,  which failure is due  exclusively to the  unwillingness,
      inability  or refusal of  Purchaser  to fulfill  its  obligations  at such
      Closing,  other than pursuant to Purchaser's  right to terminate under any
      provision  of  Section  10.2 or 10.3,  or in the event that  Purchaser  is
      otherwise in material  breach of this  Agreement then Seller may terminate
      this Agreement and retain the Deposit thereon.  Seller shall also have the
      right to pursue all other remedies available at law or equity.

SECTION 11.  MISCELLANEOUS.

           11.1 SURVIVAL.  Except as otherwise specified in this Agreement,  all
      representations,   warranties   and  covenants  of  Seller  and  Purchaser
      contained herein shall survive the Closing.

           11.2 DISCLAIMER OF INTENT TO BECOME PARTNERS.  The parties hereto, by
      executing this Agreement, do not intend to become partners.

           11.3  ADDITIONAL  DOCUMENTS.  Purchaser  and Seller will, at any time
      before, at or after the Closing Date, sign, execute and deliver,  or cause
      others to do so, all such documents and  instruments to do, or cause to be
      done, all such other acts and things as may be reasonable and necessary to
      carry out the provisions and/or intent of this Agreement.



<PAGE>


           11.4 NOTICES. Any notice,  request or other communication to be given
      by any party hereunder shall be in writing and shall be sent by registered
      or certified mail, postage prepaid, addressed as follows:

           (a)  If to Seller, to:
           Norton A. Roitman, M.D.
           2340 Paseo Del Prado, Suite D-301
           Las Vegas, NV  89102

           With a copy to:
           Mim Penney, Esquire
           Penney and Penney
           3770 Howard Hughes Parkway
           Suite 275
           Las Vegas, NV  89109

or         to such other  person or place as Seller  shall  notify  Purchaser in
           writing; and (b) If to Purchaser, to:

           Bruce A. Shear, President
           Pioneer Healthcare
           200 Lake Street, Suite 102
           Peabody, MA  01960

With a copy to:

           William F. Grieco, Esquire
           Choate, Hall & Stewart
           Exchange Place
           53 State Street
           Boston, MA  02109

or to such other person or place as Purchaser shall notify Seller in writing.

           11.5 NON-ASSIGNMENT.  Except as otherwise provided herein, the rights
      under this Agreement may not be assigned,  nor obligations  delegated,  by
      either Party hereto without the prior written consent of the other, except
      that without such consent  Purchaser  may assign its rights  herein to any
      corporation,  partnership or other entity  wholly-owned  by Purchaser.  In
      such case,  Purchaser's assignee shall be substituted for Purchaser in all
      respects  as if such  assignee  were  the  original  Purchaser  hereunder;
      however,  PHC,  Inc.,  shall in all  events be and  remain  liable for the
      performance of the Purchaser's duties under this Agreement.

           11.6 SOLE AGREEMENT. This Agreement may be amended or modified in any
      respect  whatsoever  only by instrument  in writing  signed by the Parties
      hereto.  This  Agreement  constitutes  the entire  agreement  between  the
      Parties hereto with respect to the subject  matter hereof,  and supersedes
      all prior oral or written agreements between them.

           11.7  SUCCESSORS.  All the terms of this  Agreement  shall be binding
      upon and inure to the benefit of and be  enforceable by the successors and
      assigns of the parties  hereto,  subject to the provisions of Section 11.5
      hereof.

           11.8 CAPTIONS.  The captions of this Agreement are for convenience of
      reference  only  and  shall  not  define  or  limit  any of the  terms  or
      provisions hereof.

           11.9  SEVERABILITY.  If any  one or more  of the  provisions  of this
      Agreement  is  determined  by a  court  of  competent  jurisdiction  to be
      invalid, unlawful or unenforceable in any respect, the validity,  legality
      and enforceability of the remaining provisions of this Agreement shall not
      in any way be  affected or  impaired  thereby,  unless the absence of such
      invalid, unlawful or unenforceable provision will frustrate the purpose of
      this Agreement.

           11.10  COUNTERPARTS.  This Agreement may be executed in any number of
      counterparts,  each of which shall be an original,  but such  counterparts
      shall together constitute but one and the same instrument.

           11.11 NO WAIVER.  Except as provided herein,  the failure to exercise
      and/or the delay in  exercising,  on the part of either Party,  any of its
      rights,  powers or  privileges  hereunder  shall not  operate  as a waiver
      thereof;  any single or partial exercise of any right,  power or privilege
      hereunder  by either  Party shall not  preclude  the exercise of any other
      right, power or privilege.  The rights provided are cumulative and are not
      exclusive of any rights provided by law.

           11.12  ATTORNEY'S  FEES AND COSTS.  In connection with any litigation
      with  respect to this  Agreement,  the  prevailing  party to the  greatest
      quantifiable  extent shall be entitled to recover its expenses,  including
      reasonable  attorneys' fees and costs, in connection with such litigation,
      including appellate proceedings and post-judgment proceedings.

     11.3  APPLICABLE  LAW,  JURISDICTION  AND  VENUE.  The laws of the State of
Nevada  shall  apply to the  construction  and  enforcement  of this  Agreement.
Jurisdiction  over any such disputes  shall reside in the Courts of the State of
Nevada. Venue shall lie in Las Vegas, Clark County, Nevada.

<PAGE>


           IN WITNESS  WHEREOF,  the parties have executed this Agreement on the
      date set opposite  their names.  However,  for  reference  purposes,  this
      Agreement shall be dated as of the date first written above.

"Seller":

Harmony Healthcare Systems, Inc.


By:                                       Date:             10/28/95
Norton A. Roitman, M.D., President

Witness:    ROBERT H. BOSWELL

Clinical Services of Nevada, Inc.


By:                                       Date:             10/28/95
Norton A. Roitman, M.D., President

Witness:    ROBERT H. BOSWELL


By:                                       Date:             10/28/95
Norton A. Roitman, M.D., Individually

Witness:          ROBERT H. BOSWELL

"Purchaser":

PHC, Inc., d/b/a Pioneer Healthcare, Inc.


By:                                       Date:       10/28/95
Bruce A. Shear, President

Witness:    ROBERT H. BOSWELL

PHC of Nevada, Inc.


By:___________________________
Bruce A. Shear, President

Witness:  ROBERT H. BOSWELL               Date:       10/28/95


<PAGE>



                                  LIST OF EXHIBITS



Exhibit A:  Inventory of Tangible Assets - REQUEST FROM HARMONY

Exhibit B:  Assumed Contracts, Agreements & Leases - CREATE @ PHC

Exhibit C:  Leasehold Improvements - REQUEST FROM HARMONY

     Exhibit D: Schedule of Accounts Receivable for Clinical Services of Nevada,
Inc. - REQUEST FROM HARMONY

Exhibit E:  Certain Receivables - CREATE @ PHC Sent for review

Exhibit F:  Schedule of Leased Equipment - attached for Harmony Review

Exhibit G:  Schedule of Seller's Indebtedness - attached for Harmony Review

Exhibit H:  Schedule of Employment Agreements - attached for Harmony Review

Exhibit I:  Payroll Record - REQUEST MOST RECENT, UPDATE @ CLOSING

Exhibit J:  Employee Benefit Plans - attached for Harmony Review

Exhibit K:  Schedule of Consultants - attached for Harmony Review

Exhibit L:  Confidentiality Agreement - BEING REVISED @ PHC

Exhibit M:  Bill of Sale - attached for Harmony Review

Exhibit N:  Assignment of Intangible Rights - attached for Harmony Review

Exhibit O:  Assignment & Assumption Agreement - attached for Harmony Review

Exhibit P:  Non-Compete Agreement - CREATE @ PHC Sent for review

Exhibit Q:  Employment Agreement - CREATE @ PHC Sent for review



<PAGE>




                                     EXHIBIT B

                       ASSUMED CONTRACTS, AGREEMENTS & LEASES

      The following is a list of contracts, agreements and leases between Seller
and Third  Parties  with  respect  to the  Clinic or the  ownership,  operation,
management or administration of the Clinic.

A.    THIRD PARTY PAYORS

*1.   ALADDIN HOTEL & CASINO, effective 10/1/92, consecutive 1 year terms with
automatic renewal, 30 day notice to quit, assignable with consent of other party
only, fee schedule modified on 2/27/95. (CLINICAL SERVICES OF NEVADA)

*2.   SHOWBOAT HOTEL & CASINO, effective 9/1/92, consecutive 1 year terms with
automatic renewal, 30 day notice to quit, assignable with consent of other party
only, fee schedule modified on 6/15/95. (CLINICAL SERVICES OF NEVADA)

B.    EDUCATIONAL AGREEMENT(S)

     *1.  UNIVERSITY OF NEVADA LAS VEGAS,  social work intern  program,  term is
7/1/95 to
6/30/96, no compensation to Roitman or Clinical Services, not assignable without
consent of university - SANDE WILL SEND FINAL, EXECUTED CONTRACT.   (CLINICAL
SERVICES OF NEVADA)

B.    SERVICE AGREEMENTS

     1. COMPUTER SYSTEMS FOR PHYSICIANS INC.,  Computer  services,  no contract,
software  support  $175/mo,  hardware  support  $347.74/mo,  total = $522.74/mo.
(NORTON A. ROITMAN, M.D.)

2.    NEVADA COPY SYSTEMS, Copy machine repair, dated 3/15/95, term is 12 mos,
$184.18/mo, automatic renewal for 12 mo periods, 30 day notice to quit. (HARMONY
HEALTH CARE)

*3.   ANSWER AMERICA, Telephone answering service, $135.00/mo, dated 9/28/94,
assignable with consent of company only.(HARMONY COUNSELING CENTER/HARMONY
HEALTHCARE)

C.    OFFICE SPACE & ADMINISTRATIVE SERVICE AGREEMENTS

1.    DR. PETERSON & DR. EARNEST - Rent office space & admin services, Bldg D,
Suite 301, 2340 Paseo del Prado, Las Vegas, NV, $520.00/mo, start 6/1/94, ends
5/31/96. (HARMONY HEALTHCARE SYSTEMS, INC.)

2.    DR. WETZEL - Rent office space & admin services, Bldg D, Suite 307, 2340
Paseo del Prado, Las Vegas, NV, $300.00/mo, start 11/1/91, successive six month
terms. (HARMONY HEALTHCARE SYSTEMS, INC.)

*BAS:  If you want to assume these contracts/agreements, we need to obtain
      consent.  How should we go about doing this?


<PAGE>



D.    LEASE CONTRACTS

1. PLAZAS OFFICE PARK, BLDG D, SUITE 301, 302, 305 - dated 4/9/91, original term
was 18 mos,  NOW  MONTH  TO  MONTH,  30 day  notice  to  quit,  current  rent is
$2,768.70/mo for 2,961 sq feet.  Assignable with landlords consent only. (NORTON
A. ROITMAN, M.D.)

2. PLAZAS OFFICE PARK,  BLDG D, SUITE 207, 208 - dated  3/11/94,  term is 36 mos
through  3/11/97,  current rent is $3,002.95/mo  for 2,071 sq feet (increases to
$3,210.05 on 4/1/96).  Assignable  with  landlords  consent  only,  Dr.  Roitman
personal guarantor. (HARMONY HEALTHCARE SYSTEMS, INC.)

3. PLAZAS OFFICE PARK, BLDG D, SUITE 307, 308 - dated 8/10/89,  term was 36 mos,
NOW MONTH TO MONTH,  current rent is $2,116.95/mo for 1,283 sq feet.  Assignable
with landlords consent only. (NORTON A. ROITMAN, M.D.)

     4. PLAZAS OFFICE PARK, BLDG D, SUITE 206 - dated 6/12/90,  term was 60 mos,
ENDED 6/12/95 no indication  converted to month to month, rent was $4,128.56 for
2,520 sq feet.  Assignable  with  landlords  consent only.  (CHILD  GUIDANCE AND
FAMILY TREATMENT CENTER, A NEVADA CORPORATION)

5.    PITNEY BOWES, Postage Meter/Scale/Stand  - dated 6/11/92, orig term was 48
mos, ENDED 6/11/94, no indication converted to month to month, payment of
$116.00/quarter. (HARMONY HEALTHCARE SYSTEMS)

     *6. ALCO CAPITAL RESOURCE, INC., 2 Sharp Copiers, dated 3/15/94, term is 36
months - through  3/15/97,  $633.00/mo,  not  assignable.  (HARMONY  HEALTH CARE
SYSTEMS) **INDICATES NON-ASSIGNABLE. DO WE WANT TO TRY TO GET INTO THIS CONTRACT
OR NEGOTIATE OUR OWN?

     7. FIRST SECURITY  LEASING CO., Amtel Phone System dated 11/25/92,  term is
36 mos - through 11/25/95, $575.11/mo,  assignable. (HARMONY HEALTHCARE SYSTEMS,
INC.) **CONTRACT TERM WILL EXPIRE IN JUST OVER 1 MONTH





<PAGE>



                                     EXHIBIT E

                                CERTAIN RECEIVABLES

1.    MGM -  $26,600.00  for services  provided  for the period  August 15, 1995
      through September 15, 1995.

2.    CENTER FOR CHILDREN - $14,000.00 for services provided through September,
1995.

3.    "EXECUTIVE D" - $12,000.00.



<PAGE>



                                     EXHIBIT F

                            SCHEDULE OF LEASED EQUIPMENT

1.    PITNEY BOWES, Postage Meter/Scale/Stand  - dated 6/11/92, orig term was 48
mos, ENDED 6/11/94, no indication converted to month to month, payment of
$116.00/quarter. (HARMONY HEALTHCARE SYSTEMS)

     2. ALCO CAPITAL RESOURCE,  INC., 2 Sharp Copiers, dated 3/15/94, term is 36
months - through  3/15/97,  $633.00/mo,  not  assignable.  (HARMONY  HEALTH CARE
SYSTEMS)

     3. FIRST SECURITY  LEASING CO., Amtel Phone System dated 11/25/92,  term is
36 mos - through 11/25/95, $575.11/mo,  assignable. (HARMONY HEALTHCARE SYSTEMS,
INC.)






<PAGE>




                                     EXHIBIT G

                         SCHEDULE OF SELLER'S INDEBTEDNESS

1.    AMERICAN BANK OF COMMERCE, Loan Agreement - Principal $17,400.00, dated
6/21/94, due 12/21/95, unsecured, assignable with consent of lender only.
Guarantors are Norton A. Roitman, M.D. & Anita G. Roitman.  (HARMONY HEALTHCARE
SYSTEMS, INC.)


<PAGE>


                                     EXHIBIT H

                         SCHEDULE OF EMPLOYMENT AGREEMENTS

     EMPLOYMENT  AGREEMENTS  (37):  (CLINICAL  SERVICES  OF  NEVADA,  INC.)  (a)
indicates indefinite term, 2 weeks notice to terminate,  assignable/binding upon
successors  (b) indicates 1 year term with automatic  renewal,  15 day notice to
terminate, 2 weeks vacation/5 sick days, assignable/binding upon successors

                  Armes - 4/1/95 (a)  Bremmer - 9/8/94 (a) Carillo - 9/12/94 (a)
                  Cross - 11/26/93 (a) Earnest - 2/1/95 (b) Start 1/31/95
                  Duffy - 5/20/94 (b) Start 8/1/94, 3 WEEKS VACATION, 1 week for
                        education,   60  day  notice  to  terminate*(8)  CERTAIN
                        EMPLOYMENT BENEFITS PROVIDED BY EMPLOYER
                  Erickson - 1/26/94      (b)  Start 1/26/95
                  Flagg - 8/1/94          (b)
                  Fontillas - 6/1/94      (a)
                  Grasso - 11/15/93 (a)
                  Harder - 8/1/95         (b)
                  Harris, Judy - 9/20/93  (a)
                  Harris, Ray - 6/27/94   (b)
                  Hebert - 4/1/95         (a)
                  Hess - 2/1/95           (a)
                  Kelly - 7/1/93          (b)  2 week notice to terminate
                  Kerr - 2/1/95           (a)
                  Kinsora - 10/18/94      (a)
                  Krendel - 7/7/94  (a)
                  Ladenburger - 6/27/94(b)
                  LeBaron - 2/1/92  (a)
                  Lisoskie - 6/19/95 (b) 30 day notice to terminate  Longbrake -
                  10/17/91 (b) Start 6/25/91 Lowey - 5/2/94 (a) Maksoud - 6/6/94
                  (b)  No  Vac/Sick   provisions   McFarlane   -  11/23/94   (a)
                  McNight-DeWeese  - 8/8/95  (a)  Osgood - 7/10/95  (b) Ostrom -
                  6/1/95  (a)  Peterson  -  10/18/95  (a)  Phelps - 5/11/95  (a)
                  Pickering  - 7/1/93 (b) 4 week notice to  terminate  Ratelle -
                  5/24/95  (a)  Ruiz -  9/12/94  (a)  Schneider  -  5/18/95  (a)
                  Stockman - 3/25/92 (b) Tucker - 3/19/95 (b)

<PAGE>



     INDEPENDENT  CONTRACTOR AGREEMENTS (15): perpetual,  30 day notice to quit,
changes in writing signed by both parties (CLINICAL SERVICES OF NEVADA, INC.)

                  Antoine  (Place) - 11/1/94  Barrera - 4/1/94 Boudreau - 3/1/94
                  Boys'  Town of  Nevada -  6/20/95  Cathey  (Johnson)  - 2/9/95
                  Colosimo - 12/1/94
                  Center for Independent Living (Kalnoski) - 2/17/95
                  Clover - 5/1/95
                  Family & Child Treatment Center (Shope) - 2/95
                  Marcks - 3/15/94  Oates  (Bell-Hozack)  - 2/20/95  Peterson  -
                  9/22/94 Schwied (Stevens) - 2/15/95 Simpson (Solomon) - 2/2/94
                        *15 day notice to quit
                  Wetzel - 5/1/94


<PAGE>




                                     EXHIBIT J

                               EMPLOYEE BENEFIT PLANS

1.    Health Insurance:



2.    Dental Insurance:



3.    Disability Insurance:



4.    Life Insurance:



5.    Paid Vacation Time:

      Two (2) weeks paid  vacation  per year unless  otherwise  indicated in the
      individual employee's employment agreement.


6.    Paid Sick Time:

      Five (5) days  paid  sick time per  year,  cumulative  over the  course of
employment.


7.    Paid Holidays




<PAGE>




                                     EXHIBIT K

                        SCHEDULE OF INDEPENDENT CONTRACTORS

     INDEPENDENT  CONTRACTOR AGREEMENTS (15): perpetual,  30 day notice to quit,
changes
in writing signed by both parties (CLINICAL SERVICES OF NEVADA, INC.)

                  Antoine  (Place) - 11/1/94  Barrera - 4/1/94 Boudreau - 3/1/94
                  Boys'  Town of  Nevada -  6/20/95  Cathey  (Johnson)  - 2/9/95
                  Colosimo - 12/1/94
                  Center for Independent Living (Kalnoski) - 2/17/95
                  Clover - 5/1/95
                  Family & Child Treatment Center (Shope) - 2/95
                  Marcks - 3/15/94  Oates  (Bell-Hozack)  - 2/20/95  Peterson  -
                  9/22/94 Schwied (Stevens) - 2/15/95 Simpson (Solomon) - 2/2/94
                        *15 day notice to quit
                  Wetzel - 5/1/94

<PAGE>



                                     EXHIBIT P

                               NON-COMPETE AGREEMENT

      Harmony  Healthcare  Systems,  Inc. and Clinical Services of Nevada,  Inc.
shall not compete directly or indirectly,  with PHC of Nevada, Inc. for a period
of five (5) years after November 1, 1995,  within the  geographical  area having
its center at the present location of Harmony Healthcare  Systems,  Inc. at 2340
Paseo del Prado, Las Vegas,  Nevada 89012 and having its radius twenty-five (25)
miles. Competition shall include any activities associated with the marketing of
services, or provision of treatment,  for Employee Assistance Programs or mental
health outpatient clinical services.


Harmony Healthcare Systems, Inc.



By                                        Date
      Norton A. Roitman, President


Witness




Clinical Services of Nevada, Inc.



By                                        Date
      Norton A. Roitman, President


Witness


<PAGE>


Exhibit 10.83
                              ASSET PURCHASE AGREEMENT

This Agreement is made as of this 16th day of March,  1996, by and between Total
Concept Employee Assistance  Program,  Inc., a Kansas corporation (the "Seller")
located at 7451 Switzer,  Suite 101, Shawnee  Mission,  KS 66203; and PHC, Inc.,
doing business as Pioneer Healthcare (the "Purchaser"), a Massachusetts business
corporation  with   headquarters  at  200  Lake  Street,   Suite  102,  Peabody,
Massachusetts  01960. Seller and Purchaser may hereinafter be referred to as the
"Parties".

WHEREAS,  Seller owns a business which  operates  employee  assistance  programs
located at 7451 Switzer,  Suite 101, Shawnee Mission,  KS 66203,  known as Total
Concept EAP (the "Business"). This business and all of the assets of Seller used
in the  operation  of the  Business  shall  hereinafter  be  referred  to as the
"Business Assets";

WHEREAS,  Seller wishes to sell the Business Assets and Purchaser  wishes to buy
the Business Assets subject to the conditions herein set forth;

     WHEREAS,  Purchaser wishes to employ Ronald J. Dreier ("Mr. Dreier"),  sole
shareholder,  sole director and President of Seller, as Director of the Business
and Mr. Dreier wishes to be so employed; and

WHEREAS,  Purchaser  wishes  to enter  into a lease for the  premises  presently
occupied by the Business at 7451 Switzer,  Suite 101,  Shawnee  Mission,  Kansas
(the "Property") or to enter into a lease for alternative premises acceptable to
Purchaser and suitable for operation of the Business ("Alternative Premises");


NOW,  THEREFORE  for  and  in  consideration  of  the  mutual  covenants  herein
contained, Seller and Purchaser agree to the following:

SECTION 1. SALE OF THE BUSINESS  ASSETS.  On the terms and  conditions set forth
herein,  Seller shall sell to Purchaser and Purchaser shall purchase from Seller
the Business Assets including, but not limited to, the following:

           1.1  All  machinery,  equipment,  furniture,  furnishings,  vehicles,
      computers,   telephones,   supplies,  and  all  tangible  assets  used  in
      connection  with the operation of the  Business,  wherever  located,  more
      particularly described in EXHIBIT A attached hereto;

           1.2 All of Seller's  right,  title and  interest in, to, or under the
      contracts,  agreements,  leases, licenses,  permits,  approvals,  purchase
      orders and commitments, and any other intangible assets used in connection
      with  the  operation  of  the  Business,  through  the  Closing  Date  (as
      hereinafter  defined),  which will be assumed by Purchaser as specifically
      enumerated and more fully described in EXHIBIT B attached hereto;

           1.3 All  leasehold  improvements  owned  or made to the  Property  by
      Seller should Purchaser enter into a Lease for the Property;

           1.4 All Seller's books,  records,  files and correspondence,  display
      and  promotional  material  relating to or utilized in connection with the
      operation of the  Business,  wherever  located,  through the Closing Date,
      together  with all of the goodwill  throughout  the world  attached to the
      Business,  and any  other  intangibles,  including  trademarks,  corporate
      names,  trade names, all customer lists,  consent to the rights to use the
      telephone numbers and listings pertaining to same, the entire inventory of
      office, housekeeping, recreation and maintenance supplies, if any;

           1.5 Except as expressly  provided  herein to the contrary,  all other
      assets,  tangible  or  intangible,  wherever  located,  held  or  used  in
      connection  with the ownership,  operation and management of the Business,
      whether  or not  included  in or  reflected  on the books of Seller or its
      financial statements; and

           1.6  All rights and claims of Seller relating to the Business Assets.


<PAGE>


SECTION 2.  PURCHASE PRICE AND ALLOCATION OF PURCHASE PRICE.

           (a) The  purchase  price  payable  by  Purchaser  to  Seller  for the
      Business  Assets shall be 12,000 shares of PHC, Inc. Class A Common Stock,
      subject to the  restrictions of Rule 144 of the Securities Act of 1933, at
      the Closing (the "Purchase Price").

     (b)  Allocation  of Purchase  Price.  It is agreed that the purchase  price
shall be allocated as follows:

              (i)       for tangible personal property;
              (ii       for non-competition agreement;
              (iii)           the balance for customer contracts, goodwill and
      other                         intangibles.

SECTION 3. CLOSING. Consummation of this Agreement (the "Closing") shall be held
at such place as the  parties  may  mutually  agree  upon or through  the use of
escrow agents,  as the parties may agree.  The Closing shall take place on March
16, 1996, (the "Closing  Date").  The Parties may agree in writing to extend the
Closing Date without prejudice to either party.



<PAGE>


SECTION 4.  REPRESENTATIONS AND WARRANTIES OF SELLER.
As an  inducement  to Purchaser  to enter into and  consummate  this  Agreement,
Seller warrants and represents that:

     4.1  CORPORATE  EXISTENCE.  Seller  is a  corporation  duly  organized  and
existing in good standing under the laws of the State of Kansas.  Seller has the
corporate  power to own the  Business  Assets and to operate the Business as now
conducted.

           4.2  CORPORATE  AUTHORITY.  Seller is the sole owner of the  Business
      Assets,  and has the full power and authority to enter into and to perform
      this Agreement.  All corporate proceedings necessary to duly authorize the
      execution  and delivery of this  Agreement  by the  officer,  or officers,
      executing the same on Seller's behalf,  have been taken and this Agreement
      is the legal and binding  obligation of Seller,  enforceable in accordance
      with its terms and conditions applicable to Seller.

           4.3 FINANCIAL STATEMENTS.  Seller has delivered to Purchaser relevant
      tax returns, income statements and balance sheets for the Business for the
      calendar  years  ending 1993  through  1995 and monthly  from January 1995
      through   January  1996  (the  "Financial   Statements").   The  Financial
      Statements have been prepared on a consistent  basis and fairly  represent
      the financial condition of Seller at the relevant dates and the results of
      operations  and the changes in  financial  position of the Seller for such
      periods.  Ten days prior to Closing  Seller shall  deliver to Purchaser an
      income statement and balance sheet for the period ending January 31, 1996.
      If the Closing Date is extended, financial statements will be provided for
      the most recent month's end.

           4.4 NO VIOLATION OF AGREEMENT.  Neither the execution and delivery of
      this  Agreement  nor the  consummation  of the  transactions  contemplated
      herein will violate or result in a breach of any condition of the Articles
      of Incorporation or the Bylaws of Seller, or violate or result in a breach
      of any condition of any  agreement,  lease,  contract,  judgment,  decree,
      statute,  rule or  regulation  applicable  to  Seller,  or  result  in the
      creation  or  imposition  of  any  security  interest,   lien,  charge  or
      encumbrance upon the Business Assets, except as provided herein.

           4.5 REGULATORY COMPLIANCE.  The Business and the Business Assets are,
      and  will be at the  Closing  Date,  in  compliance  with  all  applicable
      federal,  state  and  local  laws,  ordinances,   codes,  regulations  and
      requirements.

           4.6  NON-COMPETITION  AND DISSOLUTION.  Seller shall not compete with
      Purchaser  in the business of providing  employee  assistance  services to
      individuals  within a  seventy-five  (75)  mile  radius  of  Kansas  City,
      Missouri,  for a period of four (4) years after the Closing  date.  Seller
      shall seek to dissolve  under the laws of Kansas as soon as possible after
      Purchaser  has acquired all  regulatory  approvals  and licenses such that
      Purchaser  is able to operate  the  Business  under  authority  of its own
      license.

           4.7 LEASES. Seller owns all assets necessary to operate the Business.
      Seller does not lease any personal property, equipment or fixtures used in
      the conduct of the Business.

     4.8 INDEBTEDNESS. Seller has no indebtedness, contingent or otherwise.

           4.9  CONTRACTS AND COMMITMENTS.

           (a) Seller has no purchase  commitments  extending beyond the Closing
      Date which are in excess of the normal,  ordinary,  and usual requirements
      of the operation of the Business or at any excessive price;

     (b) Seller has no collective bargaining or employment  agreements,  nor any
agreements  that  contain  any  severance  or  termination  pay  liabilities  or
obligations;

           (c) Seller has no bonus,  deferred  compensation,  profit sharing, or
      retirement  arrangement,  whether  legally  binding  or not,  nor  does it
      presently pay any pension, deferred compensation,  or retirement allowance
      to anyone;

           (d) Seller has no employees  except as shown in Seller's  most recent
      payroll record attached hereto as EXHIBIT C to whom it pays  compensation;
      and

           (e)  Seller  does  not  pay  any  compensation,  vacation,  sick  day
      allowances or other benefit  programs to any of its employees which is not
      disclosed in EXHIBIT C.

           4.10 TAX  RETURNS  AND  PAYMENTS.  All  federal,  state and local tax
      reports and returns required to have been filed by Seller have been filed.
      Seller has paid or withheld all federal,  state and local taxes which were
      due and payable or required by law to have been withheld, respectively, to
      the date hereof,  except those which are being  contested in good faith by
      an appropriate  proceeding.  There are no unpaid assessments of federal or
      state income taxes or other federal,  state or local taxes pending against
      Seller.  Seller has made adequate  provisions for all taxes,  assessments,
      fees, penalties,  interest, and all other governmental charges which were,
      or may  become,  payable  with  respect  to it at any time as a result  of
      events  occurring  on or before the  Closing  Date,  which will in any way
      affect the  licensure  or  operation  of the  Business or ownership of the
      Business Assets by Purchaser.

           4.11 LITIGATION AND OTHER PROCEEDINGS.  Except as otherwise described
      herein, there is no litigation,  arbitration, or other legal proceeding or
      administrative  proceeding pending or threatened against the Business, the
      Business  Assets or the Property,  which might affect the operation of the
      Business or the Business Assets,  or its authorization to operate employee
      assistance  programs under the applicable  provisions of Kansas or federal
      law,  and  Seller is not in  default  in any  respect  of any order or any
      decree  or rule of any  court or  governmental  authority  which  may have
      jurisdiction  over Seller,  the Property or the  Business  Assets.  Seller
      possesses  all permits and  licenses  necessary  for the  operation of the
      Business,  and otherwise operates the Business in material compliance with
      all applicable laws, regulations, and ordinances.

           4.12 BROKER. No broker, finder or agent has been engaged by Seller or
      Purchaser  in regard to the sale of the  Business  Assets  and  Seller and
      Purchaser  hereby agree to  indemnify  each other and hold each other free
      and harmless from and against any and all liability,  loss, costs, damage,
      and expense including without limitation,  reasonable  attorneys' fees and
      costs of  litigation  any party shall ever suffer or incur  because of any
      claim by any broker, or any agent thereof, whether or not meritorious, for
      any fee, commission,  or other compensation with respect to this Agreement
      or to the sale of the Business Assets.

           4.13  Insurance.  Seller has  continuously  maintained  insurance for
      professional  liability and for general liability for the Business and the
      Property, since June 1,1991.

           4.14  NOTICES.  Seller  is not  aware  of and  has not  received  any
      communications from any insurance companies, governmental agencies or from
      any other parties of any conditions,  defects or inadequacies with respect
      to the Property or the Business Assets,  (including health hazards,  state
      or local notices  relating to health care  licensing,  certificate of need
      status,  or dangers,  nuisance or waste,  which,  if not corrected,  would
      result in termination of insurance  coverage or increase its cost) or from
      governmental  agencies or any other parties with respect to any violations
      of building  codes and/or zoning  ordinances or other  governmental  laws,
      regulations or orders with respect to the Property or the Business Assets,
      pending  or  threatened  condemnation  proceedings  with  respect  to  the
      Property,  or any other modification of the zoning  classification,  or of
      any building or environmental code requirements applicable to the Property
      or any part  thereof.  Seller shall  immediately  notify  Purchaser of any
      violations or conditions of which Seller receives notice (whether  written
      or oral).

           4.15 EMPLOYEES.  There are no employees of Seller or of any affiliate
      of Seller currently  employed in the operation  and/or  maintenance of the
      Business Assets, other than as shown on EXHIBIT C attached hereto. EXHIBIT
      D attached  hereto sets forth as of the date of this  Agreement a complete
      list and  description of all fringe  benefits,  including  hospitalization
      insurance,  accident  and health  insurance,  disability  insurance  death
      insurance,  vacation  policies,  meals and  lodging  policies  and parking
      policies along with true, correct and complete copies of all contracts and
      disclosures related thereto.  As of the date of this Agreement,  there are
      no pension,  retirement,  incentive or other similar arrangements or plans
      to which Seller is bound.

           4.16 EMPLOYMENT  LAWS.  Seller has complied in all material  respects
      with all  applicable  state and federal  laws and  regulations  respecting
      employment and employment  practices,  terms and conditions of employment,
      wages and hours and other laws and  regulations  related to  employment of
      employees of the Seller,  the Business Assets or of agents of Seller,  and
      there  are no  arrears  in the  payment  of wages,  withholding  or social
      security  taxes,   unemployment   insurance   premiums  or  other  similar
      obligations  other  than  in  the  ordinary  course  of  business  and  no
      impediment to termination of service of any such employees.

           4.17 COST  REPORTS.  All rate  setting  forms or cost  reports  which
      Seller has been  required to file as of the Closing Date with any state or
      federal  authority or other third party payor,  have been timely filed and
      accurately reflect the costs of the operation of the Business.
           4.18  BANKRUPTCY,  ETC.  No  bankruptcy,   insolvency,  petition  for
      dissolution, rearrangement or similar action involving the Business or the
      Business  Assets,   whether  voluntary  or  involuntary,   is  pending  or
      threatened, and Seller has not:

           (a)  filed  a  consent  for   dissolution   except   that   Purchaser
      acknowledges   Seller's  intention  to  file  a  consent  for  dissolution
      following the Closing;

           (b)  filed a voluntary petition in bankruptcy;

           (c) been  adjudicated as bankrupt or insolvent or filed a petition or
      action   seeking  any   reorganization,   arrangement,   recapitalization,
      readjustment, liquidation, dissolution or similar relief under any Federal
      bankruptcy act or any other laws;

           (d) sought or acquiesced in the appointment of any trustee,  receiver
      or  liquidator  of all or any  substantial  part  of its  properties,  the
      Business Assets, personal property or any portion thereof; or

           (e) made an  assignment  for the benefit of  creditors or admitted in
      writing its inability to pay its debts generally as the same become due.

           Seller is not  anticipating or  contemplating  any of the actions set
      forth in (a) through (e) of this subsection.

           4.19  INFORMATION  NOT  MISLEADING.  All the  information  concerning
      Seller,  the Business Assets and the Property and all reports,  contracts,
      or other items obtained by Purchaser  pursuant to this Agreement are true,
      complete and correct in all respects  and fairly  present the  information
      set forth in a manner  that is not  misleading  and Seller has not omitted
      any  information  required to be included in order to make the information
      furnished not misleading.

           4.20  AUDITS.  There  have  been no  Medicaid,  Medicare  or  private
      insurance audits within the 36 months preceding the date of this Agreement
      and Seller has not been informed of any recoupment claims.

           4.21 TRADE NAME.  Seller  represents,  warrants,  and covenants  that
      Seller has the  exclusive  right in perpetuity to use the trade name Total
      Concept  EAP and any other  names  used now or in the past in  association
      with the  Business,  and Seller has not  granted and will not grant to any
      other person, firm, or corporation the right to use that trade name.

     4.22  PROPERTY.  Seller  leases  the  Property  under  the terms of a lease
agreement, as previously disclosed to Purchaser.

     4.23  PATIENT  PAYMENTS.  There are no  advances  or  pre-payments  made by
clients for services not rendered, or to be rendered, prior to the Closing Date.

           4.24 SELLER'S  RESPONSIBILITIES.  Seller shall remain responsible for
      all liabilities, including but not limited to, the payment of compensation
      of the employees of the Business  including  any and all accrued  benefits
      and the amounts  payable,  for the period prior to the Closing  Date.  The
      accounts  receivable for the period prior to the Closing Date shall remain
      the assets of Seller.  After the Closing  Date,  any monies  collected  by
      Purchaser  for the period  prior to the Closing  Date will be forwarded to
      Seller upon receipt.

           4.25  CONSULTANTS.  There are no consultants of Seller currently
      employed in the operation and/or maintenance of the Business Assets.

SECTION 5.  COVENANTS OF SELLER.

           5.1 CONDITION OF PERSONAL  PROPERTY.  Seller  represents and warrants
      that,  subject to ordinary  wear and tear,  all equipment  appliances  and
      machinery  shall be in good working  order and repair  through the Closing
      Date.

           5.2 ACCESS AND PREPARATION OF LICENSE  APPLICATION.  Seller agrees to
      use best  efforts  to  assist  Purchaser  in  making  application  for all
      necessary  licenses and permits required for the operation of the Business
      by Purchaser.  Seller will provide whatever access,  materials,  expertise
      and information  reasonably  requested in connection with any licensing or
      permitting  authority  review.  Seller will  likewise  cooperate  with any
      efforts of  Purchaser to obtain  contracts  with or  certification  by any
      third party payor or  insurer.  Until this  transition  is  complete,  and
      Seller has obtained all necessary licenses,  contracts and certifications,
      Seller  will  allow  Purchaser  to  operate  under  Seller's  license  and
      certifications to the extent allowable by law.

           5.3 ORDINARY COURSE OF BUSINESS.  From the date hereof to the Closing
      Date,  Seller shall  conduct its  operation  of the  Business  only in the
      ordinary  course thereof,  will take all necessary  action to preserve the
      goodwill and operation of such Business,  and will make no material change
      in the  operation of such  Business  nor enter into any material  contract
      creating an obligation extending after the Closing in excess of $500.00 or
      incur any material  liability  without the written  consent of  Purchaser,
      which consent shall not be unreasonably withheld.

           5.4  COMPENSATION.  From the date hereof  through  the Closing  Date,
      except  without  prior  written  consent  of  Purchaser,  Seller  will not
      increase any salary or other form of  compensation  payable,  or to become
      payable, to any of its employees or make any other severance or retirement
      arrangement with any such employees.

           5.5 INSURANCE.  From the date hereof through the Closing Date, Seller
      shall  maintain  insurance  on the  Business  at  the  same  levels  as is
      maintained on the date hereof.

           5.6 REVIEW OF STAFF.  Seller shall allow  Purchaser an opportunity to
      review the  credentials  and employment  histories of all current staff of
      the Business upon execution of this Agreement.

           5.7 RIGHT OF  INSPECTION.  Prior to the  Closing,  Purchaser  and its
      officers, employees,  attorneys and agents shall be entitled during normal
      business hours, to inspect the  properties,  books,  documents and records
      relating  to the  Business  Assets,  and to make  copies of the same,  and
      Seller  agrees to  furnish  such  information  relating  to Seller and the
      Business  Assets  as  Purchaser  reasonably  may  request  and  to  permit
      Purchaser  and such  persons  to  consult  with the  officers,  employees,
      attorneys and agents of Seller for the purpose of determining the accuracy
      of the covenants, representations and warranties made herein. Seller shall
      cooperate  with  Purchaser as necessary and  reasonable to insure a smooth
      transition of ownership of the Business.

           5.8 DISCHARGE OF OBLIGATIONS.  On or before the Closing Date,  Seller
      shall  discharge  and obtain  releases  with  respect  to all  outstanding
      security  interests in the Business  Assets and any liens and mortgages on
      the Business.

           5.9  PUBLICITY.  All press  releases,  filings  and  other  publicity
      concerning   the   transactions   contemplated   hereby  will  be  jointly
      coordinated  and will be subject to review and approval by both Seller and
      Purchaser,  such approval not to be unreasonably  withheld or delayed.  In
      addition,  Seller  has  executed  a  Confidentiality  Agreement,  which is
      attached hereto as EXHIBIT E.

SECTION 6.  REPRESENTATION AND WARRANTIES OF PURCHASER.

           6.1  ORGANIZATION  OF  PURCHASER.  Purchaser  is a  corporation  duly
      organized,   existing  and  in  good  standing   under  the  laws  of  The
      Commonwealth of Massachusetts.

           6.2  CORPORATE  ACTION BY  PURCHASER.  Purchaser  has full  power and
      authority  to  enter  into  and  perform  this  Agreement,  all  corporate
      proceedings  necessary to duly authorize the execution and delivery of the
      Agreement  by the officer or officers  executing  the same on  Purchaser's
      behalf  have been  taken  and this  Agreement  is the  legal  and  binding
      obligation of  Purchaser,  enforceable  in  accordance  with its terms and
      conditions applicable to Purchaser.

SECTION 7.  CONDITIONS TO CLOSING.  Purchaser shall not be obligated to purchase
the Business  Assets nor is it bound by any of the terms of this Agreement until
all of the following  conditions  are met, any one or all of which may be waived
by Purchaser.

           7.1 REPRESENTATION, WARRANTIES AND COVENANTS. The representations and
      warranties  of Seller  contained  in this  Agreement  shall be true in all
      material   respects   at  and   through   the   Closing  as  though   such
      representations  and  warranties  were made on that date and Seller  shall
      have  performed all  covenants  and  agreements on its part required to be
      performed on or before the Closing Date which are specifically  authorized
      or contemplated by this Agreement.

           7.2 LEASE FOR REAL PROPERTY.  Purchaser  shall have executed a valid,
      legally  enforceable  lease for the Property or for Alternative  Premises,
      upon terms  acceptable to Purchaser  (the "Lease  Agreement").  Said Lease
      shall provide occupancy rights to Purchaser effective  coincident with the
      Closing Date on terms acceptable to Purchaser,  including, but not limited
      to,  Purchaser's  use of  the  premises  to  operate  employee  assistance
      programs.  Purchaser shall not unreasonably  reject the Lease Agreement or
      delay in locating  alternative  suitable  space.  If an  acceptable  Lease
      Agreement is not obtained,  or alternative  suitable space is not located,
      then Purchaser may exercise its rights under Section 10.3.

           7.3 THIRD PARTY PAYORS.  Purchaser  shall have satisfied  itself that
      there will be  adequate  insurance  and third  party  payor  reimbursement
      available  for  patients  who  will be  treated  for  employee  assistance
      services by the Business as intended to be operated by Purchaser.

           7.4  LICENSES  AND  APPROVALS.  Purchaser  shall  have  obtained  all
      necessary  licenses,  permits  and  approvals  to occupy the  Property  or
      Alternative Premises and have made application for all necessary licenses,
      permits and approvals to operate said  premises as an employee  assistance
      program .

           7.5 SALE OF BUSINESS ASSETS.  Seller shall sell,  convey and transfer
      to Purchaser  the Business  Assets by  delivering to Purchaser the Bill of
      Sale in the form attached hereto as EXHIBIT F, an Assignment of Intangible
      Rights in the form  attached  hereto as EXHIBIT G, and an  Assignment  and
      Assumption  Agreement  in the form  attached  hereto as EXHIBIT H, and any
      other forms of documentation requested by Purchaser.

           7.6 INSURANCE. Purchaser shall have obtained general and professional
      liability  insurance  coverage in amounts  Purchaser  deems  necessary  to
      operate the Business as an employee assistance program.  Seller shall have
      provided  evidence to Purchaser that it has purchased the requisite "tail"
      insurance  policy to cover  Seller for any  outstanding  or latent  claims
      which may arise as a result of its operation of the Business  prior to the
      Closing Date.  Purchaser shall reimburse  Seller the cost of obtaining the
      requisite "tail" insurance policy.

           7.7 NO MATERIAL  CHANGE.  The business or financial  condition of the
      Business and or any of the Business  Assets shall not have been,  or shall
      not be  threatened  to be,  adversely  affected  in any way as a result of
      fire, explosion, earthquake, disaster, accident, labor trouble or dispute,
      any action by the United States or any other governmental authority, civil
      disturbances,  uprising, activity of armed forces, or Act of God or public
      enemy which has not been disclosed or provided for in this Agreement.

           7.8  NON-COMPETITION.  Seller shall have  executed a  Non-Competition
      Agreement  in  substantially  the same  form and  substance  as  EXHIBIT I
      attached hereto.

           7. 9 PAYROLL.  At the Closing,  Purchaser  shall have  received  from
      Seller a copy of the most recent  payroll  register for the Business  with
      evidence  that all  employees  of Seller have been  compensated  up to the
      Closing Date.

           7.10  CONSENTS.  At the  Closing,  Seller will  furnish to  Purchaser
      written  consents from third parties to Purchaser's  assumption and use of
      any and all  tradenames,  trademarks,  goodwill and other Business  Assets
      referred to in Section 1.

           7.11 FINANCIAL DUE DILIGENCE. Purchaser shall have had an opportunity
      to conduct  financial  due  diligence  with  respect to Seller's  detailed
      business  records for the thirty six month period  prior to the  execution
      date of this Agreement.

           7.12 CORPORATE  AUTHORITY.  Seller shall have complied fully with the
      laws of the  State of Kansas  relevant  to the  transactions  contemplated
      herein.  Seller  shall  provide  to  Purchaser  a copy  of  the  necessary
      corporate  resolutions  to  duly  approve  the  execution,   delivery  and
      performance of this Agreement by Seller.

           7.13  OPINION OF COUNSEL FOR SELLER.  Purchaser  shall have  received
      from counsel to Seller, ten (10) days prior to the Closing Date, a written
      opinion letter (which shall be limited to the laws of Kansas) addressed to
      Purchaser in form and substance to the effect that:

           (a) Seller has the full corporate  power and authority to execute and
      deliver this Agreement and such other documents contemplated hereby.

           (b) The  execution,  delivery and  performance  of this Agreement and
      such other documents  contemplated hereby have been duly authorized by all
      requisite  corporate  actions of Seller and this  Agreement and such other
      documents  contemplated  hereby,  have been duly executed and delivered by
      Seller.

           (c) This Agreement and such other  documents as  contemplated  hereby
      are legal,  valid and binding  obligations  of Seller and are  enforceable
      against them in accordance with their respective terms,  except as limited
      by general equity principles (whether considered in a proceeding at law or
      at equity) and by bankruptcy, insolvency,  reorganization,  moratorium and
      other laws affecting the enforcement of creditors' rights generally.

           (d) To the knowledge of counsel after due inquiry,  the execution and
      delivery by Seller of this Agreement and the consummation by Seller of the
      transactions  contemplated  hereby will not be or result in a violation of
      any statute or regulation of any governmental  authority or of any decree,
      order,  or judgment and will not be or result in a violation or constitute
      a  default  or  ground  for  revocation  under  any  contract,  agreement,
      indenture,  license or instrument known to such counsel to which Seller is
      a party or by which Seller is bound.

           (e) The  shareholders  of Seller have  approved  the  transfer of the
      Business Assets by Seller to Purchaser pursuant to this Agreement.

           (f) To the  knowledge of counsel  after due inquiry,  Seller is not a
      party to any  pending  litigation  or any  proceeding  before any court or
      government   department   or  agency   which  might   affect  the  subject
      transaction,  and  such  counsel  does  not  know of any  such  threatened
      litigation or proceeding against Seller.

           7.14  CERTIFICATE  OF  RELEASE.   Purchaser  shall  have  received  a
      Certificate  of Release  from the  Kansas  Department  of Human  Resources
      stating  that, as of a date not more than five (5) days before the Closing
      Date, no contributions,  interest,  or penalties are due to the Department
      of Human Resources from the Seller.

           In the event the foregoing  conditions  precedent cannot be satisfied
      prior to the Closing Date and are not waived by Purchaser,  this Agreement
      shall be null and void. Purchaser shall use its best efforts in good faith
      to bring about the  fulfillment of all  conditions  within its control set
      forth in this  Section7.  Without  waiving  any  rights  with  respect  to
      representation, warranties and covenants made by Seller in this agreement,
      Purchaser  agrees that by  proceeding  with the  Closing,  all  conditions
      precedent to the  obligations  of Purchaser  have been met to  Purchaser's
      satisfaction.

     7.15  EMPLOYMENT  AGREEMENT.  Purchaser  shall  enter  into  an  employment
agreement  with Mr.  Dreier as  Director  of the  Business.  This is a  separate
agreement and is attached hereto as EXHIBIT J (the "Employment Agreement").

SECTION 8. NO ASSUMPTION OF  LIABILITIES.  Purchaser shall assume no liabilities
of any kind or nature of Seller or any liabilities of any kind or nature arising
out of the business  conducted  with respect to the Business  Assets through the
Closing  Date.  Seller  shall  assume  no  liabilities  of any kind or nature of
Purchaser  or any  liability  of any kind or nature  arising out of the business
conducted with respect to the Business  Assets after the Closing Date,  with the
exception  of any  obligations  assumed by Mr.  Dreier as a  consequence  of his
activities under the Employment Agreement.


<PAGE>


SECTION 9.  INDEMNIFICATION.

           9.1 INDEMNIFICATION OF PURCHASER. Seller hereby indemnifies and holds
      Purchaser, its directors, officers, employees and agents harmless from:

              (i) Any and all  liabilities  and  obligations  or claims  against
      Seller,  and from all liabilities and obligations or claims arising out of
      the operation of the Business  through the Closing Date, or claims arising
      out of the winding up or dissolution of Seller, if any, including, but not
      limited to, any and all liabilities, obligations, claims, fines, penalties
      or similar charges levied upon the Business due to the  non-compliance  of
      Seller with any  applicable  federal,  state and local  laws,  ordinances,
      codes, regulations and requirements;

              (ii)  Any  damage  or  deficiency   due  to  breach  of  warranty,
      misrepresentation,  or  nonfulfillment of any agreement on the part of the
      Seller under this Agreement;

              (iii) With respect to all actions,  suits,  proceedings,  demands,
      assessments,  judgments,  costs and expenses  connected with the foregoing
      including without limitation reasonable attorney's fees and expenses.  For
      purposes of  satisfying  any claim under this  indemnification  provision,
      Purchaser  shall have all remedies  available  under this  indemnification
      provision.

           9.2  INDEMNIFICATION  OF SELLER.  Purchaser  shall indemnify and hold
      Seller, its directors, officers, employees and agents harmless from:

              (i) Any and all liabilities,  claims actual damage,  loss, cost or
      expense  arising out of the conduct of the business after the Closing Date
      by the  Purchaser,  if any;  including,  but not  limited  to, any and all
      liabilities,  obligations,  claims,  fines,  penalties or similar  charges
      levied  upon the  Business  due to the  non-compliance  of Buyer  with any
      applicable federal, state and local laws, ordinances,  codes,  regulations
      and requirements;

              (ii) Any actual damage,  loss,  cost or expense arising out of the
      breach  of  any  warranty,  misrepresentation,  or  nonfulfillment  of any
      agreement on the part of Purchaser under this Agreement; and

              (iii) With respect to all actions,  suits,  proceedings,  demands,
      assessments,  judgments,  costs and expenses connected with the foregoing,
      including without limitation reasonable attorney's fees and expenses.

              The foregoing  shall not be applicable to any actions or omissions
      on the  part  of Mr.  Dreier  in  fulfilling  his  obligations  under  the
      Employment Agreement.


<PAGE>


SECTION 10.  RIGHTS OF TERMINATION AND REMEDIES FOR DEFAULT.

           10.1  DEFAULT  BY  SELLER.  In the event  that all of the  conditions
      precedent set forth in Section 7 of this  Agreement have been satisfied or
      waived by  Purchaser  on or prior to the  Closing  Date and  Purchaser  is
      ready, willing and able to proceed with the Closing, but Seller is unable,
      unwilling  or refuses to  consummate  the Closing in  accordance  with the
      terms and  conditions  of this  Agreement,  or in the event that Seller is
      otherwise in breach of this  Agreement,  Purchaser shall have the right to
      pursue all other remedies available at law or equity.

           10.2  PURCHASER'S  RIGHT TO TERMINATE.  If any one or more conditions
      set forth in  Section 7 has not been  fulfilled  or  satisfied  through no
      fault of  Purchaser  and not waived in writing by Purchaser on or prior to
      the Closing  Date,  then  Purchaser,  at its option,  may  terminate  this
      Agreement,  effective upon the receipt by Seller of written notice of such
      termination.  In the event of any such termination of this Agreement,  all
      of Seller's and Purchaser's  obligations hereunder shall terminate without
      further loss, cost, damage,  claim, right or remedy in favor of any Party,
      and none of the  Parties  hereto  shall  have  any  further  liability  or
      responsibility  to the other  without  the need to  exchange  releases  to
      confirm same.

           10.3  SELLER'S  RIGHT TO  TERMINATE.  In the event that  Purchaser is
      unable to close by March  16,  1996,  and the  Parties  have not  mutually
      agreed to an extension and this  inability to close is not due to Seller's
      default,  then  Seller  shall be entitled to  terminate  the  transaction;
      provided,  however,  if  nonsatisfaction  of the  condition  set  forth in
      Section 7.2 is the sole cause of  Purchaser's  inability to close by March
      16, 1996,  Seller hereby agrees not to terminate the  transaction.  In the
      event of a termination of this transaction under this Section 10.3, all of
      Purchaser's  obligations  hereunder shall terminate  without further loss,
      cost,  damage,  claim,  right or remedy in favor of any Party, and none of
      the Parties hereto shall have any further  liability or  responsibility to
      the other without the need to exchange releases to confirm same.

           10.4 DEFAULT BY PURCHASER. In the event that Seller is ready, willing
      and able to proceed with the Closing and  Purchaser  fails to complete the
      transactions  contemplated  in  this  Agreement,   which  failure  is  due
      exclusively  to the  unwillingness,  inability  or refusal of Purchaser to
      fulfill  its   obligations  at  such  Closing,   other  than  pursuant  to
      Purchaser's  right to  terminate  under any  provision  of Section 10.2 or
      10.3, then Seller may terminate this Agreement. Seller shall also have the
      right to pursue all other remedies available at law or equity.

SECTION 11.  MISCELLANEOUS.

     11.1 SURVIVAL. All representations,  warranties and covenants of Seller and
Purchaser contained herein shall survive the Closing.

           11.2  DISCLAIMER OF INTENT TO BECOME  PARTNERS.  The Parties , by the
      executing of this Agreement, do not intend to become partners.

           11.3  ADDITIONAL  DOCUMENTS.  Purchaser  and Seller will, at any time
      before, at or after the Closing Date, sign, execute and deliver,  or cause
      others to do so, all such documents and  instruments to do, or cause to be
      done, all such other acts and things as may be reasonable and necessary to
      carry out the provisions of this Agreement.

           11.4 NOTICES. Any notice,  request or other communication to be given
      by any party hereunder shall be in writing and shall be sent by registered
      or certified mail, postage prepaid, addressed as follows:

           (a)  If to Seller, to:

           Ron Dreier
           7451 Switzer, Suite 101
           Shawnee Mission, KS  66203

     or to such other  person or place as Seller  shall  furnish to Purchaser in
writing; or

           (b)  If to Purchaser, to:

           Bruce A. Shear, President
           Pioneer Healthcare
           200 Lake Street, Suite 102
           Peabody, MA  01960

With a copy to:

           Willie J. Washington, Esq.
           Choate, Hall & Stewart
           Exchange Place
           53 State Street
           Boston, MA  02109

     or to such other  person or place as Purchaser  shall  furnish to Seller in
writing.

           11.5 NON-ASSIGNMENT.  Except as otherwise provided herein, the rights
      under this Agreement may not be assigned,  nor obligations  delegated,  by
      either party hereto without the prior written consent of the other, except
      that without such consent  Purchaser  may assign its rights  herein to any
      corporation,  partnership  or other entity or individual  affiliated  with
      Purchaser.  In such case,  Purchaser's  assignee shall be substituted  for
      Purchaser in all respects as if such assignee were the original  Purchaser
      hereunder.

           11.6 SOLE AGREEMENT. This Agreement may not be amended or modified in
      any  respect  whatsoever  except by  instrument  in writing  signed by the
      Parties.  This  Agreement  constitutes  the entire  agreement  between the
      Parties with respect to the subject  matter  hereof,  and  supersedes  all
      prior negotiations, discussions, writing and agreements between them.

     11.7  GOVERNING  LAW.  This  Agreement  shall be governed and  construed in
accordance with the law of The Commonwealth of Massachusetts.

           11.8  SUCCESSORS.  All the terms of this  Agreement  shall be binding
      upon and inure to the benefit of and be  enforceable by the successors and
      assigns of the Parties, subject to the provisions of Section 11.5 hereof.

           11.9 CAPTIONS.  The captions of this Agreement are for convenience of
      reference  only  and  shall  not  define  or  limit  any of the  terms  or
      provisions hereof.

           11.10 SEVERABILITY.  Should any one or more of the provisions of this
      agreement be determined to be invalid,  unlawful or  unenforceable  in any
      respect,  the  validity,  legality  and  enforceability  of the  remaining
      provisions  thereof shall not in any way be affected or impaired  thereby,
      unless the absence of such invalid,  unlawful or  unenforceable  provision
      will frustrate the purpose of this Agreement.

           11.11  COUNTERPARTS.  This Agreement may be executed in any number of
      counterparts,  each of which shall be an original,  but such  counterparts
      shall together constitute but one and the same instrument.

           11.12 NO WAIVER.  Except as provided  herein,  no failure to exercise
      and no delay in exercising, on the part of the Purchaser, any right, power
      or privilege  hereunder shall operate as a waiver  thereof;  nor shall any
      single or partial  exercise  of any right,  power or  privilege  hereunder
      preclude  any other right,  power or  privilege.  The rights  provided are
      cumulative and not exclusive of any rights provided by law.

           11.13  ATTORNEY'S FEES AND COSTS.  Each party to this Agreement shall
      pay  its'  own  out-of-pocket  charges  and  expenses  (including  without
      limitation  attorneys'  fees) incurred in connection with the negotiation,
      preparation  and  execution  of this  Agreement.  In  connection  with any
      litigation with respect to this Agreement,  the prevailing party,  whether
      Purchaser  or Seller,  shall be entitled  to recover  all costs  incurred,
      including  reasonable  attorneys' fees for services rendered in connection
      with such litigation,  including  appellate  proceedings and post-judgment
      proceedings.
           IN WITNESS  WHEREOF,  the parties have executed this Agreement on the
      date first above written.

SELLER:

Total Concept Employee Assistance Program, Inc.


                                          Date:
Ronald J. Dreier, President




PURCHASER:

PHC, Inc., d/b/a Pioneer Healthcare
                                          Date:
Bruce A. Shear, President


<PAGE>




                                  LIST OF EXHIBITS



Exhibit A:  Inventory of Tangible Assets

Exhibit B:  Assumed Contracts, Agreements & Leases

Exhibit C:  Payroll Record

Exhibit D:  Employee Benefit Plans

Exhibit E:  Confidentiality Agreement

Exhibit F:  Bill of Sale

Exhibit G:  Assignment of Intangible Rights

Exhibit H:  Assignment & Assumption Agreement

Exhibit I:  Non-Compete Agreement

Exhibit J:  Employment Agreement








<PAGE>




                                     EXHIBIT B

                       ASSUMED CONTRACTS, AGREEMENTS & LEASES

      The following is a list of contracts, agreements and leases between Seller
and  Third  Parties  with  respect  to the  Business  or  ownership,  operation,
management or administration of the Business.

A.    THIRD PARTY PAYORS

1. THE TRAVELERS MANAGED CARE SYSTEM AGREEMENT,  effective 9/1/93, consecutive 1
year terms  with  automatic  renewal,  60 day  notice to quit,  assignable  with
consent of other party only.

     2.  PEOPLE  RESOURCES,  INC.,  effective  8/1/93,  30 day  notice  to quit,
assignable.

3. CORPHEALTH, INC., NO EXECUTED CONTRACT ON FILE, consecutive 1 year terms with
automatic  renewal,  120 day notice to quit,  assignable  with  consent of other
party only.

     4. CMG  HEALTH,  INC.,  effective  9/30/93,  amended  7/1/93 - NO  EXECUTED
CONTRACT ON FILE

5. MANAGED HEALTH NETWORK,  INC.,  effective  1/15/94,  consecutive 1 year terms
with automatic renewal, 30 day notice to quit,  assignable with consent of other
party only.

6.    OZARK O'REILLY AUTOMOTIVE, NO EXECUTED CONTRACT ON FILE

7. NATIONAL  COMPUTER SYSTEMS,  NO EXECUTED CONTRACT ON FILE,  effective 8/1/95,
consecutive 1 year terms with automatic renewal, 30 day notice to quit.

     8. SCHOOL  SERVICES & LEASING,  INC. AND KINCAID & COACH,  INC.,  effective
11/29/94,  consecutive  1 year terms with  automatic  renewal,  60 day notice to
quit.

9. AMERICAN  PSYCHMANAGEMENT,  INC., NO EXECUTED CONTRACT ON FILE, consecutive 1
year terms  with  automatic  renewal,  90 day  notice to quit,  assignable  with
consent of other party only.

10.   OMNI HEALTH SYSTEMS, INC., NO EXECUTED CONTRACT ON FILE, 60 day notice to
quit, NOT ASSIGNABLE.

11.  PERSPECTIVES,  LTD.,  effective  12/1/92,  consecutive  1 year  terms  with
automatic renewal, 60 day notice to quit, NOT ASSIGNABLE.

12.   CHESTNUT HEALTH SYSTEMS, effective 4/1/90, 60 day notice to quit.

13.   LONGVIEW ASSOCIATES, INC., effective 4/17/95.

     14. PERSONAL PERFORMANCE CONSULTANTS,  NO EXECUTED CONTRACT ON FILE, 60 day
notice to quit, assignable.

<PAGE>



B.    SERVICE AGREEMENTS

1. AIRTOUCH,  Paging services & 4 pagers, dated 4/10/95,  $25.00/mo, 1 year term
with  automatic  renewal unless term by written notice at least 30 days prior to
end of term ( BEFORE 3/10/96).

2. CELLULARONE,  Car phone, dated 9/9/94,  $47.45/mo, 1 year term with automatic
renewal, $200 fee to term at any time other than end of term.


C.    LEASE CONTRACTS

1. KING'S COVE OFFICE PARK, SUITE 101 - dated 5/13/93, term 36 mos ends 5/31/96,
current  rent is  $1,735.00/mo  for  1,850 sq feet.  Assignable  with  landlords
consent only.



<PAGE>



                                     EXHIBIT C

                                   PAYROLL RECORD

                             Dreier, Ron
                             Maughan, Sue
                             Wash, Darlene
                             Potts, Leila
                             Dannar, Judy





<PAGE>




                                     EXHIBIT D

                               EMPLOYEE BENEFIT PLANS

1.    Health Insurance: None



2.    Dental Insurance: None



3.    Disability Insurance:   None



4.    Life Insurance:         None



5.    Paid Vacation Time:

            Full Time   Employed less than 6 mos - 1 week
                        Employed less than 1 year - 2 weeks
                        Employed less than 5 years - 3 weeks
            Part Time   Pro-rated based on hours worked


6.    Paid Sick Time:   Full Time - 9 days per year
                        Part Time - pro-rated based on hours worked


7.    Paid Holidays (6): New Years Day
                        Memorial Day
                        Independence Day
                        Labor Day
                        Thanksgiving Day
                        Christmas Day



<PAGE>


                             CONFIDENTIALITY AGREEMENT


     This Confidentiality Agreement is made and entered into as of this 11TH day
of  January,  1996,  by  and  among  PHC,  Inc.  d/b/a  Pioneer  Healthcare,   a
Massachusetts corporation (hereinafter referred to as "Pioneer"),  Total Concept
EAP, Inc., a Kansas  corporation and Ron Dreier,  an individual  residing in the
State of Kansas  (hereinafter  collectively  referred to as the "Company").  The
Company  and  Pioneer  are  negotiating  for the  purchase by Pioneer of certain
assets of the Company,  as well as the employment of Mr. Dreier by Pioneer after
the closing of the purchase (collectively, "the Transaction").

      WHEREAS,  in connection with the Transaction,  the Company will furnish to
Pioneer  certain  information  related  to the  Company,  its  assets,  and  its
operations  including  without  limitation,  information  which  is  non-public,
proprietary  or  confidential  in nature.  Any such oral or written  information
provided  or  disclosed  by the  Company  or its  agents or  representatives  to
Pioneer, together with any analyses, compilation,  studies or other documents or
records  which  contain,  reflect or are  generated  from such  information  are
hereafter defined as "Company Information".

      WHEREAS,  in connection  with the  Transaction,  the Company has requested
that Pioneer disclose to the Company certain oral or written information related
to Pioneer,  its  assets,  and its  operations  including,  without  limitation,
information which is non-public, proprietary or confidential in nature. Any such
oral or written  information  provided or  disclosed by Pioneer or its agents or
representatives to the Company, together with any analyses, compilation, studies
or other documents or records which contain,  reflect or are generated from such
information are hereafter defined as the "Pioneer Information."

      WHEREAS,  the Company has agreed to maintain  the Pioneer  Information  as
confidential  and to use the  Pioneer  Information  for the sole  and  exclusive
purpose of evaluating  the  Transaction  and the parties have made certain other
agreements as set forth below.

      NOW, THEREFORE,  in consideration of the foregoing, of the mutual promises
contained herein, and of other good and valuable consideration,  the receipt and
sufficiency of which is hereby  acknowledged,  the parties hereto,  on behalf of
themselves, their officers, directors, parents, subsidiaries, agents, successors
and assigns intending to be legally bound, do hereby agree as follows:

      1. LIMITATIONS ON USE AND DISCLOSURE OF INFORMATION

         Unless and until the  Company  and  Pioneer  shall have  consummated  a
Transaction pursuant to a definitive agreement, it is agreed that:


<PAGE>



           All Company  Information  provided  to Pioneer  shall be used for the
               sole and exclusive  purpose of evaluating a possible  Transaction
               and  for  no  other  purpose  whatsoever.  Further,  all  Company
               Information  shall be kept  confidential by Pioneer and shall not
               be  disclosed  to any third  party or person  not a party to this
               Agreement,  except  upon  the  advance  written  consent  of  the
               Company.  Notwithstanding  the  foregoing,  Pioneer may  disclose
               Company  Information  to its officers,  directors,  employees and
               agents,  as well as to  attorneys,  accountants  and  consultants
               retained by  Pioneer.  Pioneer  may make  disclosures  of Company
               Information to the Securities and Exchange Commission, the NASDAQ
               Stock  Exchange and with related  press  releases  with the prior
               written   consent  of  the  Company,   such  consent  not  to  be
               unreasonably withheld.
           All information  provided to the  Company  shall be used for the sole
               and exclusive  purpose of evaluating a possible  Transaction  and
               for no other purpose whatsoever. Further, all Pioneer Information
               shall  be kept  confidential  by the  Company  and  shall  not be
               disclosed  to any  third  party  or  person  not a party  to this
               Agreement,  except upon the advance  written  consent of Pioneer,
               which may be withheld in the sole discretion of Pioneer.
           Notwithstanding  Section 1 (b) of this  Agreement,  the Company  may,
               solely  and  exclusively   for  the  purpose  of   investigating,
               evaluating and formulating opinions related to the possibility of
               a  Transaction,  provide  access to  Pioneer  Information  to its
               officers,  directors,   employees  and  agents,  as  well  as  to
               attorneys,  accountants and  consultants  retained by the Company
               for that purpose;  PROVIDED,  HOWEVER that (i) any person granted
               access to Pioneer Information under this provision shall agree in
               writing  to the  restrictions  on use and  disclosure  of Pioneer
               Information  contained  in  this  Agreement;  (ii)  such  written
               agreement shall be delivered to Pioneer at least ten (10) days in
               advance  of any  disclosure;  and  (iii)  Pioneer  shall not have
               provided  a written  objection  to the  Company  concerning  such
               disclosure.
           The Company agrees to keep all Pioneer  Information  confidential and
               agrees to take all reasonably  necessary  precautions,  including
               the  establishment of appropriate  procedures and discipline,  to
               avoid all disclosure of Pioneer Information and knowledge derived
               therefrom  not  expressly   authorized  by  Pioneer  or  by  this
               Agreement and to safeguard the confidential nature of the Pioneer
               Information provided.

<PAGE>



           The Company  agrees not to  duplicate  or make  copies of any Pioneer
               Information  furnished to it pursuant to this Agreement except as
               necessary for the proper evaluation,  investigation,  acquisition
               and  development  of  opinions  related to the  possibility  of a
               Transaction.
           All Pioneer  Information  provided  pursuant  to the  terms  of  this
               Agreement,  and all copies thereof,  shall be returned to Pioneer
               immediately  upon  the  earlier  of a  request  by  Pioneer  or a
               decision  by either  party not to pursue a  Transaction.  At such
               time,  that  portion  of the  information  that  may be  found in
               analyses, compilations, studies or other documents prepared by or
               for the Company,  will be  destroyed  by the Company  which shall
               certify  in writing to  Pioneer  that such  destruction  has been
               made.
           The Company agrees not to use the Pioneer Information,  in any way or
               event,  to the detriment of Pioneer.  The Company  further agrees
               (i) to inform all of its employees, agents or representatives who
               receive  the  information  of the  confidential  nature  of  such
               Pioneer  Information  and to direct all such  representatives  to
               treat such Pioneer  Information  confidentially and to not use it
               other  than  for  the  purposes   described  above;  (ii)  to  be
               responsible  in any event for any breach of this Agreement by any
               of its employees,  agents or  representatives;  (iii) to make all
               reasonable,  necessary and  appropriate  efforts to safeguard the
               Pioneer  Information  from  disclosure  to anyone  other  than is
               permitted hereby.

      2. NO REPRESENTATION OR WARRANTY BY PIONEER

         The  Company  acknowledges  and agrees that  Pioneer  does not make any
representation  or warranty as to the  accuracy or  completeness  of the Pioneer
Information  other than the  representations  and  warranties  contained in that
certain  Asset  Purchase  Agreement  executed by the parties with respect to the
Transaction.  Neither Pioneer nor any  representative  of Pioneer shall have any
liability to the Company or any of its representatives resulting from the use of
the Pioneer Information by the Company or its representatives.

      3. CONFIDENTIALITY OF DISCUSSIONS

         The Company  agrees not to  disclose  to any  person,  other than those
employees  and  representatives  of  Pioneer  who are  designated  in writing by
Pioneer to engage in  Transaction  negotiations,  the fact that the  Company has
been provided Pioneer Information or that discussions or negotiations are taking
place concerning a possible  Transaction  between the Company and Pioneer or the
status thereof.

<PAGE>



      4. NON-RESTRICTED INFORMATION

         The  foregoing  restrictions  with  respect to the Pioneer  Information
shall not apply to any information which the Company  demonstrates (i) is on the
date hereof or thereafter  becomes generally  available to the public other than
as a result of a  disclosure,  directly  or  indirectly,  by the  Company or its
representatives;  (ii) was available to the Company on a non-confidential  basis
prior to its  disclosure to the Company by Pioneer or its  representatives  by a
source,  which source was not itself bound by a  confidentiality  agreement with
Pioneer or its representatives and did not receive such information, directly or
indirectly, from a person or entity so bound; or (iii) has been already lawfully
developed or acquired independently by the Company other than through the breach
of any agreement with Pioneer.

      5. RESTRICTIVE COVENANTS

         For a period  of one (1) year  after  the date of this  Agreement,  the
Company will neither directly or indirectly  solicit for employment  (other than
through  advertisements  to the public or the  industry at large),  or advise or
recommend to any other person or entity that they or it solicit for  employment,
any employee of, or  independent  contractor  to,  Pioneer or any  affiliates of
Pioneer.

      6. SPECIFIC PERFORMANCE

         The Company agrees that the Pioneer  Information  provided  pursuant to
this Agreement is unique, proprietary and confidential,  that failure to perform
its  obligations in this Agreement will result in irreparable  damage to Pioneer
for which money damages would not be an adequate  remedy and that in addition to
any other remedies available to Pioneer, specific performance of the obligations
herein may be obtained by suit in equity.

      7. GENERAL PROVISIONS

      All prior  negotiations  between the parties  relating to the  exchange of
Pioneer  Information  are merged into this  Agreement and there are no promises,
agreements,  conditions,  undertakings,  warranties or representations,  oral or
written,  express or implied,  between them other than as set forth  herein.  No
change or  modification  of this Agreement  shall be valid unless the same is in
writing and signed by the parties  thereto or their  successors  or assigns.  No
waiver  of any of the  provisions  of this  Agreement  shall be valid  unless in
writing and signed by the party  against whom it is sought to be enforced.  This
Agreement  shall be binding upon and inure to the benefit of the parties hereto,
their successors, permitted assigns, agents and representatives.  This Agreement
shall  be  governed  by and  integrated  in  accordance  with  the  laws  of the
Commonwealth of Massachusetts.


<PAGE>



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


COMPANY:

Total Concept EAP, Inc.



                                          Date:
Ron Dreier, President



                                          Date:
Ron Dreier, Individually



PIONEER:

PHC, Inc., d/b/a Pioneer Healthcare



                                          Date:
Bruce A. Shear, President



<PAGE>



                                    BILL OF SALE


      FOR GOOD AND VALUABLE CONSIDERATION,  the receipt and sufficiency of which
is hereby acknowledged,  TOTAL CONCEPT EMPLOYEE ASSISTANCE PROGRAM, INC., a duly
organized  and  existing  Kansas  corporation,   (hereinafter   referred  to  as
"Seller"), does hereby sell, assign, transfer and convey to PHC OF KANSAS, INC.,
a duly organized and existing Massachusetts corporation (hereinafter referred to
as "Purchaser"), all right, title and interest in and to the business assets (as
defined below),  free and clear of any lien as that term is defined in the Asset
Purchase Agreement as defined below,  except as disclosed herein or in the Asset
Purchase  Agreement (as hereinafter  defined).  The term "Business Assets" shall
mean all of the  assets  owned by Seller or in which  Seller  has any  rights or
interests  comprising  and used by Seller in  connection  with or related to the
ownership,  management  or operation of employee  assistance  programs  known as
Total Concept EAP (the "Business")  located at 7451 Switzer,  Suite 101, Shawnee
Mission,  Kansas,  as of the date hereof,  tangible and intangible,  wheresoever
situated  and  whether  or not  specifically  referred  to,  and  any and all of
Seller's right,  title and interest therein and thereto as noted in that certain
Asset Purchase Agreement dated as of March , 1996 by and between Seller and PHC,
Inc., as amended (the "Asset Purchase Agreement"),  including,  without limiting
the generality of the foregoing, the following:

      a) All machinery, equipment, furniture,  furnishings,  fixtures, vehicles,
computers,  telephones, supplies, and all other tangible assets now or hereafter
owned by Seller  prior to the  Closing  Date (as  defined in the Asset  Purchase
Agreement) and used in connection  with the operation of the Business,  wherever
located, as more particularly described, without limitation, in EXHIBIT A of the
Asset Purchase Agreement.

      b) All  of  Seller's  right,  title  and  interest  in,  to or  under  the
contracts, agreements, leases, licenses, permits, approvals, purchase orders and
commitments,  and any other  intangible  assets in which Seller now or hereafter
has any present or future  right or interest  prior to the Closing Date and used
in  connection  with the  operation  of the  Business,  which will be assumed by
Purchaser as  specifically  enumerated and more fully  described in EXHIBIT B of
the Asset Purchase Agreement.

      c)     All leasehold improvements owned or made to the real property where
the  Business is located (the "Property").

      d) All other  tangible and  intangible  assets owned by Seller and used in
connection with the ownership and operation of the Business,  on the date hereof
or as of the Closing Date, including, without limitation, all books and records,
customer and supplier  lists,  provider  agreements,  patient lists,  approvals,
permits,  contracts, plans, surveys, policy manuals, accounts, records, Seller's
forms and office supplies,  all advertising and promotional  literature relating
to Seller's products, services or operations, all software and computer programs
and documentation,  if any, used in conducting the business,  including, without
limitation,  flow charts,  diagrams,  descriptive  texts and programs,  computer
printouts,  underlying  tapes,  computer  data bases and  similar  items used in
Seller's business.

      e) Any and all of Seller's trademarks and trademark applications,  service
marks and service mark applications,  trade names including, without limitation,
the name "Total  Concept  EAP" (and all  derivatives  thereof),  copyrights  and
copyright applications,  and including the associated goodwill, the right to sue
for and  recover  such  damages  and such other  relief as might be granted by a
court of  competent  jurisdiction  for past  infringement  thereof,  and, to the
extent  transferable,  any and  all  licenses  or  permits  (including,  without
limitation, any transferable licenses, permits,  certificates,  registrations or
authorizations  from or with  federal and state  regulatory  authorities  and/or
Medicare  and/or  Medicaid)  with respect to the business  and/or  operations of
Seller and the Business.

     f) Any and all advances or  pre-payments  made by patients for services not
rendered prior to the Closing Date.

      g) Except as expressly provided herein to the contrary,  all other assets,
tangible or intangible,  wherever  located,  held or used in connection with the
ownership,  operation and management of the Business, whether or not included in
or reflected on the books of Seller or its financial statements.

      Notwithstanding  anything to the contrary  herein  provided,  the Business
Assets  shall not  include  any cash,  bank  balances,  money  market  accounts,
certificates of deposit, marketable securities or accounts, or accounts or loans
received by Seller.



<PAGE>


      IN WITNESS  WHEREOF,  this Bill of Sale has been  executed by Seller as of
 the day of March, 1996.


                              Seller:
                              Total Concept Employee Assistance Program, Inc.

                              By:

                              Name:  RONALD J. DREIER

                              Title:      PRESIDENT





<PAGE>


                          ASSIGNMENT OF INTANGIBLE RIGHTS



      FOR GOOD AND VALUABLE CONSIDERATION,  the receipt and sufficiency of which
is hereby acknowledged,  TOTAL CONCEPT EMPLOYEE ASSISTANCE PROGRAM, INC., a duly
organized  and  existing  Kansas  corporation,   (hereinafter   referred  to  as
"Assignor"), do hereby sell, assign, transfer and convey to PHC OF KANSAS, INC.,
a  Massachusetts  corporation  (hereinafter  referred  to  as  "Assignee"),  its
successors and assigns  forever,  as of the date hereof,  to the extent transfer
and assignment  thereof is not prohibited,  all of Assignor's  right,  title and
interest,  in and to the contract  rights and other  intangible  assets owned by
Assignor  constituting  "Business Assets" within the meaning ascribed thereto in
Section 1 of that certain Asset Purchase  Agreement  dated as of March , 1996 by
and between  Assignor and PHC, Inc. (the "Asset  Purchase  Agreement",  with all
capitalized  terms used herein and not  otherwise  defined  having the  meanings
ascribed  thereto  in the Asset  Purchase  Agreement),  and  including,  without
limiting  the  generality  of the  foregoing,  the  contract  rights  and  other
intangible  assets  described  in said  Section 1, and meaning and  intending to
convey all of the  Business  Assets not  conveyed to  Assignee  pursuant to that
certain Bill of Sale from Assignor to Assignee dated as of the date hereof, free
and clear of any Lien, charge,  encumbrance or claim of any third party,  except
as disclosed in the Asset Purchase Agreement.

      TO HAVE AND TO HOLD all of Assignor's right,  title and interest in and to
such Business Assets hereby assigned, sold and transferred to Assignee.

      ASSIGNEE HEREBY ACCEPTS the foregoing assignment and agrees to perform all
of Assignor's duties under such contracts.  Assignee warrants that it is a valid
Massachusetts corporation authorized to transact business in the State of Kansas
and that it has the authority to execute and deliver this Assignment document.


<PAGE>



      IN WITNESS WHEREOF, Assignor and Assignee have caused these presents to be
executed as of this day of March, 1996.



     Assignor:

                              Total Concept Employee Assistance Program, Inc.

                              By:

                              Name:  RONALD J. DREIER

                              Title:  PRESIDENT


                              Assignee:

                              PHC of Kansas, Inc.

                              By:

                              Name:  BRUCE A. SHEAR

                              Title:  PRESIDENT







<PAGE>


                        ASSIGNMENT AND ASSUMPTION AGREEMENT


      This  Agreement  is entered into this day of March,  1996,  by and between
TOTAL CONCEPT EMPLOYEE ASSISTANCE  PROGRAM,  INC., a duly organized and existing
Kansas  corporation  (hereinafter  referred  to as the  "Assignor")  and  PHC OF
KANSAS, INC., a Massachusetts corporation (the "Assignee").

                                     WITNESSETH

      WHEREAS,  the Assignor has this day sold and  transferred  to the Assignee
certain  personal  property used in  connection  with the operation of the Total
Concept  EAP  which  is  a  provider  of  employee   assistance   programs  (the
"Business"); and

      WHEREAS, as a part of the sale and transfer of the Business,  the Assignor
has agreed to transfer  and assign to the extent  transfer  and  assignment  are
permissible,  and the Assignee  has agreed to receive and assume,  to the extent
assumption  is  permissible,  certain  contracts,  leases  and other  agreements
identified on EXHIBIT B to that certain  Asset  Purchase  Agreement  between the
Assignor and PHC,  Inc.  dated March , 1996 and updated as of the closing  date,
all as listed on EXHIBIT 1 attached hereto.

      NOW THEREFORE,  in  consideration of the mutual covenants herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:

             The Assignor  hereby  assigns and  transfers to the Assignee all of
the  Assignor's  rights and interest with respect to the  contracts,  leases and
agreements  on  EXHIBIT  1  annexed  hereto,  to  the  extent  such  rights  are
assignable.

             The Assignee  hereby assumes the Assignor's  rights and obligations
arising  from the conduct of the business  conducted  at the Business  after the
date hereof with respect to the  contracts,  leases and  agreements on EXHIBIT 1
annexed hereto, to the extent such obligations are assumable.

             The Assignor  warrants that (a) it has the authority to execute and
deliver this Assignment and Assumption Agreement,  (b) it has not made any prior
assignment of its rights under the  agreements  and leases on EXHIBIT 1 attached
hereto,  and (c) it will  execute and deliver to the  Assignee  such  additional
documents as the Assignee may reasonably request to secure its rights under this
Assignment and Assumption Agreement.

             The Assignee warrants that it is a valid Massachusetts  corporation
authorized  to  transact  business  in the State of  Kansas  and that it has the
authority to execute and deliver this Assignment and Assumption Agreement.



<PAGE>


                 ASSIGNOR:

                 TOTAL CONCEPT EMPLOYEE ASSISTANCE PROGRAM, INC.


                 By:

                 Name:  RONALD J. DREIER

                 Title:  PRESIDENT


                 ASSIGNEE:

                 PHC OF KANSAS, INC.


                 By:

                 Name:  BRUCE A. SHEAR

                 Title:  PRESIDENT



<PAGE>


                                     EXHIBIT 1

                       ASSUMED CONTRACTS, AGREEMENTS & LEASES

      The following is a list of contracts, agreements and leases between Seller
and  Third  Parties  with  respect  to the  Business  or  ownership,  operation,
management or administration of the Business.

A.    THIRD PARTY PAYORS

1. THE TRAVELERS MANAGED CARE SYSTEM AGREEMENT,  effective 9/1/93, consecutive 1
year terms  with  automatic  renewal,  60 day  notice to quit,  assignable  with
consent of other party only.

     2.  PEOPLE  RESOURCES,  INC.,  effective  8/1/93,  30 day  notice  to quit,
assignable.

3. CORPHEALTH, INC., NO EXECUTED CONTRACT ON FILE, consecutive 1 year terms with
automatic  renewal,  120 day notice to quit,  assignable  with  consent of other
party only.

     4. CMG  HEALTH,  INC.,  effective  9/30/93,  amended  7/1/93 - NO  EXECUTED
CONTRACT ON FILE

5. MANAGED HEALTH NETWORK,  INC.,  effective  1/15/94,  consecutive 1 year terms
with automatic renewal, 30 day notice to quit,  assignable with consent of other
party only.

6.    OZARK O'REILLY AUTOMOTIVE, NO EXECUTED CONTRACT ON FILE

7. NATIONAL  COMPUTER SYSTEMS,  NO EXECUTED CONTRACT ON FILE,  effective 8/1/95,
consecutive 1 year terms with automatic renewal, 30 day notice to quit.

     8. SCHOOL  SERVICES & LEASING,  INC. AND KINCAID & COACH,  INC.,  effective
11/29/94,  consecutive  1 year terms with  automatic  renewal,  60 day notice to
quit.

9. AMERICAN  PSYCHMANAGEMENT,  INC., NO EXECUTED CONTRACT ON FILE, consecutive 1
year terms  with  automatic  renewal,  90 day  notice to quit,  assignable  with
consent of other party only.

10.   OMNI HEALTH SYSTEMS, INC., NO EXECUTED CONTRACT ON FILE, 60 day notice to
quit, NOT ASSIGNABLE.

11.  PERSPECTIVES,  LTD.,  effective  12/1/92,  consecutive  1 year  terms  with
automatic renewal, 60 day notice to quit, NOT ASSIGNABLE.

12.   CHESTNUT HEALTH SYSTEMS, effective 4/1/90, 60 day notice to quit.

13.   LONGVIEW ASSOCIATES, INC., effective 4/17/95.

     14. PERSONAL PERFORMANCE CONSULTANTS,  NO EXECUTED CONTRACT ON FILE, 60 day
notice to quit, assignable.

<PAGE>



B.    SERVICE AGREEMENTS

1. AIRTOUCH,  Paging services & 4 pagers, dated 4/10/95,  $25.00/mo, 1 year term
with  automatic  renewal unless term by written notice at least 30 days prior to
end of term ( BEFORE 3/10/96).

2. CELLULARONE,  Car phone, dated 9/9/94,  $47.45/mo, 1 year term with automatic
renewal, $200 fee to term at any time other than end of term.


C.    LEASE CONTRACTS

1. KING'S COVE OFFICE PARK, SUITE 101 - dated 5/13/93, term 36 mos ends 5/31/96,
current  rent is  $1,735.00/mo  for  1,850 sq feet.  Assignable  with  landlords
consent only.





<PAGE>


                               NON-COMPETE AGREEMENT

      Ronald J. Dreier  shall not compete  directly or  indirectly,  with PHC of
Kansas,  Inc.  for a period of four (4) years  from  March  16,  1996,  within a
seventy-five  (75) mile  radius  of Kansas  City,  Missouri.  Competition  shall
include any activities  associated with the marketing of services,  or provision
of treatment, relating to the operation of employee assistance programs.




                                          Date:
Ronald J. Dreier


Witness



<PAGE>



Exhibit J
                                EMPLOYMENT AGREEMENT



      THIS     EMPLOYMENT AGREEMENT is made and entered into as of day of March,
               1996, by and between PHC of Kansas, Inc., a
Massachusetts corporation (hereinafter referred to as the "Employer") and Ronald
J. Dreier, an individual residing in the State of Kansas  (hereinafter  referred
to as the "Employee").

                                W I T N E S S E T H:

      WHEREAS, Employer desires to employ the Employee, and the Employee desires
to be employed, on the terms and conditions provided herein;

      NOW,  THEREFORE,  in  consideration  of the mutual  promises and covenants
herein contained, the parties agree as follows:

      1.    DUTIES AND OBLIGATIONS OF THE EMPLOYEE.

            1.1. DUTIES.  During the term of this Agreement,  the Employee shall
perform such duties as may be assigned to the Employee by Employer  from time to
time including,  but not limited to, those duties  described below. The Employee
shall, as part of his duties,  provide clinical and  administrative  services at
Total  Concept  EAP  (the  "Business")  or at  such  other  locations  as may be
designated  from time to time by Employer,  at times to be set by Employer.  The
Employee  shall perform such duties under the  supervision  and direction of the
President of the Employer.

            1. 2 FULL TIME AND BEST EFFORTS.  During the term of this Agreement,
the Employee  shall be employed full time by Employer and shall use best efforts
in the performance of his duties under this Agreement. The Employee acknowledges
that the  obligations  incumbent  upon him under this  Agreement  constitute the
primary claim upon his or her professional  time,  effort,  energy and skill and
agrees to undertake only such additional professional  obligations as will in no
way  compromise  his  ability  to carry out his or her  obligations  under  this
Agreement in a complete and timely  manner.  The Employee  further agrees not to
undertake any such additional  professional  obligations  without  obtaining the
prior written consent of the President of the Employer.

            1.3  STANDARDS.  The  Employee  shall  provide  services  under this
Agreement  in  accordance  with quality  assurance  standards of Employer and in
compliance with all applicable  statutes,  regulations,  rules and directives of
federal,  state and other governmental and regulatory bodies having jurisdiction
over the Business; the Bylaws, rules and regulations of the Employer; applicable
standards of the Joint Commission on Accreditation of Healthcare  Organizations;
and  currently  accepted and approved  methods and  practices  applicable to the
provision of employee assistance services.

            1.4 RECORDS AND REPORTS.  The Employee shall  maintain  records in a
timely and legible  fashion as required by  applicable  laws and in keeping with
generally  accepted  standards  of record  keeping and  documentation  and shall
maintain  and furnish  Employer  with such  records,  reports and  documentation
evidencing  the  performance  of his duties  hereunder  as may be  requested  by
Employer or required by applicable law.

      2.    OBLIGATIONS OF EMPLOYER.

            2.1  COMPENSATION.  Employer  shall pay the  Employee  for  services
rendered  pursuant to this Agreement during the initial term an annual salary of
$ 60,000,  less  amounts  required to be withheld by law,  payable in arrears in
equal monthly  installments  plus $300.00 per month as a car allowance.  If this
Agreement is renewed pursuant to Section 3.1 hereof,  the  compensation  paid to
the Employee  for each such  renewal term shall be as mutually  agreed to by the
parties.

In addition,  Mr. Dreier will be eligible for an annual bonus,  payable ten (10)
days following  September 30 of each year  according to the following  plan: for
the twelve month period of operation after the Closing, Mr. Dreier shall receive
10 % of the Profit of the  Business  (Profit is to be defined as all income less
all direct expenses of the Business prior to taxes.  For purposes of calculating
the profits of the Business on which Mr.  Dreier's  profit  share is based,  the
following items are not to be treated as "direct  expenses" and are,  therefore,
not deducted from income in determining  Profit:  (i) Corporate  management fees
paid to PHC, Inc.
or any affiliate.

            2.2 FRINGE  BENEFITS.  Employer  shall,  from time to time,  adopt a
fringe benefit plan (the "Benefit Plan") for its executive  employees.  Employer
hereby agrees to provide the Employee with benefits  consistent with the Benefit
Plan as in effect during his  employment.  Any such Benefit Plan may be modified
prospectively  at any  time and will  remain  in  effect  until  such  time as a
subsequent  Benefit  Plan is adopted by  Employer.  The current  Benefit Plan is
described  in Exhibit A, which is  attached  hereto and  incorporated  herein by
reference.

            2.3  FACILITIES  AND SERVICES.  Employer will provide or arrange for
the  provision of office space,  secretarial  assistance,  clinical  assistance,
supplies and equipment  suitable to the  performance  of the  Employee's  duties
under this Agreement.

      3.    TERM AND TERMINATION.

            3.1 TERM.  This Agreement shall commence on March 16, 1996 and shall
have an initial term of two years.  Unless  terminated  in  accordance  with the
provisions of this Section 3, this Agreement shall be automatically  renewed for
successive one year terms upon expiration of the initial term.

            3.2 VOLUNTARY TERMINATION. Either party may terminate this Agreement
by giving at least 90 days prior written notice to the other party, which notice
shall specify the effective date for such termination.

            3.3  TERMINATION  FOR CAUSE.  Either  party  shall have the right to
terminate  this  Agreement  for cause by giving at least 30 days  prior  written
notice to the other  party,  which  notice shall state the cause and specify the
effective date of such termination.

     a. EMPLOYER.  For Employer,  cause shall include  without  limitation (i) a
material breach by the Employee of any of his or her obligations  hereunder;  or
(ii) other good cause relating to the performance of the Employees duties.

     b. THE EMPLOYEE. For the Employee, cause shall include without limitation a
material breach by Employer of any of its obligations hereunder.

      4.    NOTICES.

            Any notices  permitted  or required to be given  hereunder  shall be
deemed  properly  given  when sent by  registered  or  certified  mail,  postage
pre-paid, return receipt requested, as follows:

            If to Employer, to:                                Bruce A. Shear
                                          PHC of Kansas, Inc.
                                          200 Lake Street, Suite 102
                                          Peabody, MA  01960
                                          (508) 536-2777

            If to the Employee, to:       Ronald J. Dreier
                                          7451 Switzer, Suite 101
                                          Shawnee Mission, KS  66203
                                          (913) 384-6488

or such other person or address as any party may designate by notice duly given.

      5.    ASSIGNMENT.

            Assignment by the Employee of any rights or  obligations  under this
Agreement is expressly prohibited.



<PAGE>


      6.    SEVERABILITY.

            Should any  provision of this  Agreement or  application  thereof be
held invalid or  unenforceable,  the  remainder of this  Agreement  shall not be
affected and shall  continue to be valid and  enforceable  to the fullest extent
permitted by law unless to do so would defeat the purpose of this Agreement.

            7.   WAIVER.

            The  failure  by a party at any time to require  performance  of any
provision of this Agreement  shall not constitute a waiver of such provision and
shall not affect the right of such party to require performance at a later time.

            8.   CONFIDENTIALITY.

            The parties agree to hold  confidential  the terms contained  herein
except to the extent  that such terms need to be  disclosed  to  effectuate  the
terms of this  Agreement to close business  advisors  (such as  accountants  and
attorneys)  with whom it is  essential to do so. Any such  disclosures  shall be
subject to the same confidentiality requirement.

            9.   AMENDMENT.

            This  Agreement  represents the entire  agreement and  understanding
between the parties  with  respect to the subject  matter  hereof and may not be
amended except by the written agreement of the parties.

            10.  GOVERNING LAW.

                 This Agreement shall be governed by and construed in accordance
with the laws of The Commonwealth of Massachusetts.

            12.  COUNTERPARTS.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.



<PAGE>


            IN WITNESS  WHEREOF,  the parties  hereunto  set their hands to this
Agreement as of the day and year first written above.

                                    EMPLOYER:

                               PHC of Kansas, Inc.


                                         By:
                                             Bruce A. Shear, President


                                    EMPLOYEE:


                                             Ronald J. Dreier

<PAGE>


EXHIBIT A

                               EXECUTIVE BENEFIT PLAN


HEALTH AND DENTAL INSURANCE
As provided by HRC - ARMCO, through American Medical Security. Plan and cost not
yet established,  however, the plan will either be 80/20 indemnity plan or a PPO
with 70/30 out-of-network costs.

LIFE INSURANCE
Annual  salary  up to  $50,000  if  subscribe  to  health  insurance;  otherwise
supplemental available at employee's cost.

SECTION 125 CAFETERIA PLAN

NON-CONTRIBUTORY 401(K) PLAN

EMPLOYEE STOCK PURCHASE PLAN




<PAGE>


EXHIBIT 10.74
                                     PHC, INC.

                         1995 EMPLOYEE STOCK PURCHASE PLAN
                          Effective as of October 18, 1995

1. PURPOSE.  The purpose of this Employee Stock Purchase Plan (the "Plan") is to
provide  employees  (including  leased  employees) of PHC, Inc., a Massachusetts
corporation  (the  "Company"),   and  its  subsidiaries,   who  wish  to  become
stockholders of the Company,  an opportunity to purchase Class A Common Stock of
the Company  (the  "Shares").  The Plan is  intended to qualify as an  "employee
stock purchase  plan" within the meaning of Section 423 of the Internal  Revenue
Code of 1986, as amended (the "Code").

2.      ELIGIBLE EMPLOYEES.  Subject to provisions of Sections 7, 8 and 9 below,
        any individual who
is in the full-time  employment (as defined below) of the Company, or any of its
subsidiaries  (as defined in Section  424(f) of the Code) the employees of which
are  designated  by the Board of  Directors  of the  Company  (the  "Board")  as
eligible to  participate in the Plan, is eligible to participate in any Offering
of Shares  (as  defined  in  Section  3 below)  made by the  Company  hereunder.
Full-time employment shall include all employees whose customary employment is:

        (a) in excess of 20 hours per week; and (b) more than five months in the
        relevant calendar year.

   3.  OFFERING  DATES.  From time to time the Company,  by action of the Board,
will grant rights to purchase Shares to employees eligible to participate in the
Plan pursuant to one or more  offerings  (each of which is an  "Offering")  on a
date or series of dates (each of which is an  "Offering  Date")  designated  for
this purpose by the Board.

     4. PRICES.  The price per Share for each grant of rights hereunder shall be
the lesser of:

     (a)  eighty-five  percent  (85%) of the fair market value of a Share on the
Offering Date on which such right was granted;  or (b) eighty-five percent (85%)
of the fair market value of a Share on the date such right is exercised.

      At its discretion, the Board of Directors may determine a higher price for
a grant of rights.

       For purposes of this Plan, the term "fair market value" on any date means
(i) the average (on that date) of the high and low prices of the Company's Class
A Common Stock on the principal national  securities exchange on which the Class
A Common  Stock is  traded,  if the Class A COMMON  Stock is then  traded  -on a
national  securities  exchange;  or (ii) the last  reported  sale price (on that
date) of the Class A Common Stock on the NASDAQ National Market,  if the Class A
Common Stock is not then traded on a national securities exchange;  or (iii) the
average of the  closing bid and asked  prices-  last quoted (on that date) by an
established  quotation service for over-the-counter  securities,  if the Class A
Common Stock is not reported on the NASDAQ  National  Market.  If the  Company's
Class A Common Stock is not publicly traded at the time a right is granted under
this Plan,  "fair market  value" shall mean the fair market value of the Class A
Common Stock as determined by the  Administrator (as defined below) after taking
into  consideration all factors which it deems appropriate,  including,  without
limitations  recent sale and offer prices of the Class A Common Stock in private
transactions negotiated at arms' length.

    5.   EXERCISE OF RIGHTS AND METHOD OF PAYMENT.

    (a)  Rights granted under the Plan will be exercisable periodically on
         specified dates as determined by the
Board.
     (b) The method of payment  for Shares  purchased  upon  exercise  of rights
granted  hereunder shall be through  regular  payroll  deductions or by lump sum
cash payment or both, as determined by the Board. No interest shall be paid upon
payroll deductions unless specifically provided for by the Board.

                                        C-1


<PAGE>


(c) Any payments  received by the Company from a participating  employee and not
utilized for the purchase of Shares upon exercise of a right  granted  hereunder
shall be promptly returned to such employee by that Company after termination of
the right to which the payment relates.

6. TERM OF RIGHTS. Rights granted on any Offering Date shall be exercisable upon
the expiration of such period ("Offering  Period") as shall be determined by the
Board when it authorizes the Offering,  provided that such Offering Period shall
in no event be longer than twenty-seven (27) months.

7. SHARES  SUBJECT TO THE PLAN. No more than 100,000 Shares may be sold pursuant
to rights granted under the lan; PROVIDED,  HOWEVER, that appropriate adjustment
shall be made to such  number,  to the number of Shares  covered by  outstanding
rights granted hereunder, to the exercise price of the rights and to the maximum
number of Shares which an employee may purchase (pursuant to Section 8 below) to
give effect to any mergers, consolidations, reorganizations,  recapitalizations,
stock splits, stock dividends or other relevant changes in the capitalization of
the Company  occurring  after the effective  date of the Plan,  provided that no
fractional  Shares  shall be subject to a right and each right shall be adjusted
downward to the nearest full Share.  Any  agreement  of merger or  consolidation
will  include   provisions  for  protection  of  the  then  existing  rights  of
participating employees under the Plan. Either authorized and unissued Shares or
issued  Shares  heretofore  or hereafter  reacquired  by the Company may be made
subject to rights  under the Plan.  If for any  reason any right  under the Plan
terminates  in whole or in part,  Shares  subject to such  terminated  right may
again be subjected to a right under the Plan.

8.   LIMITATIONS ON GRANTS.

(a) No employee shall be granted a right hereunder if such employee, immediately
after  the right is  granted,  would  own  stock or  rights  to  purchase  stock
possessing five percent (5%) or more of the total combined voting power or value
of all  classes  of stock of the  Company,  or of any  subsidiary,  computed  in
accordance with Sections 423(b)(3) and 424(d) of the Code.

(b) No employee  shall be granted a right  which  permits his rights to purchase
shares of capital stock of the Company under all employee  stock  purchase plans
of  the  Company  and  its  subsidiaries  to  accrue  at a  rate  which  exceeds
twenty-five  thousand  dollars  ($25,000)  (or  such  other  maximum  as  may be
prescribed  from time to time by the Code) of fair  market  value of such Shares
(determined  at the time such right is granted) for each  calendar year in which
such right is  outstanding  at any time in  accordance  with the  provisions  of
Section 423(b)(8) of the Code.

(c) The  number of Shares  for  which  rights  granted  in any  Offering  can be
exercised shall be either (i) the same for each employee  participating  in such
Offering  or (ii) shall bear a uniform  relation  to the total  compensation  or
basic or regular rate of compensation  for each employee  participating  in such
Offering. No right granted to any participating employee under a single Offering
shah cover more shares than may be purchased  at an exercise  price equal to 10%
of the compensation  payable to the employee during the Offering not taking into
consideration any changes in the employee's rate of compensation  after the date
the employee elects to participate in the Offering,  or such other percentage as
determined by the Board from time to time.  This provision shall be construed to
meet the requirements set forth in Section 423(b)(5) of the Code.

     9. LIMIT ON PARTICIPATION. Participation in an Offering shall be limited to
eligible  employees who elect to participate in such Offering in the manner, and
within the time  limitation,  established  by the Board when it  authorizes  the
Offering.

10.  CANCELLATION  OF ELECTION TO  PARTICIPATE.  An employee  who has elected to
participate in an Offering may, unless the employee has waived this cancellation
right  at the time of such  election  in a manner  established  b-,7 the  Board.
cancel such  election as to all (but not part) of the rights  granted under such
Offering by giving written notice of such cancellation to the Company before the
expiration  of the  Offering  Period.  Any amounts  paid by the employee for the
Shares or withheld for the purchase of Shares from the  employee's  compensation
through payroll deductions shall be paid to the employee. without interest, upon
such cancellation.

                                       C-2



<PAGE>


11.  TERMINATION OF EMPLOYMENT.  Upon  termination of employment for any reason,
including the death of the employee, before the date on which any rights granted
under the Plan are exercisable,  all such rights shall immediately terminate and
amounts  paid by the  employee  for the Shares or withheld  for the  purchase of
Shares from the employee's compensation through payroll deductions shall be paid
to the employee ,)r to the employee's estate, without interest.

12. EMPLOYEE'S RIGHTS AS STOCKHOLDER.  No participating  employee shall have any
rights as a stockholder  in the Shares  covered by a a right  granted  hereunder
until  such  right  has been  exercised,  full  payment  has  been  made for the
corresponding Shares and the certificate for such Shares is actually issued.

     13. RIGHTS NOT  TRANSFERABLE.  Rights under the Plan are not  assignable or
transferable  by a  participating  employee  and  are  exercisable  only  by the
employee.

14. LIMITS ON SALE OF STOCK  PURCHASED  UNDER THE PLAN.  The Plan is intended to
provide shares of Class A Common Stock for  investment  and not for resale.  The
Company does not,  however,  intend to restrict or influence any employee in the
conduct of such employee's own affairs. An employee may,  therefore,  sell stock
purchased under the Plan at any time the employee chooses, subject to compliance
with any applicable Federal or state securities laws;  PROVIDED,  HOWEVER,  that
because of certain  Federal tax  requirements,  each employee agrees by entering
the Plan,  promptly  to cive the  Company  notice of any such stock  disposed of
within  two years  after the date of grant of the  applicable  right or one year
after transfer of the Shares to such employee  showing the number of such Shares
disposed of. THE  EMPLOYEE  ASSUMES THE RISK OF ANY MARKET  FLUCTUATIONS  IN THE
PRICE OF THE STOCK.

     15.  AMENDMENTS TO OR DISCONTINUANCE OF THE PLAN. The Board may at any time
terminate or amend the Plan  without  notice and without  further  action on the
part of stockholders of the Company, provided:

     (a) that no such  termination or amendment shall adversely  affect the then
existing rights of any participating  employee;  and (b) that any such amendment
which:  (i) increases  the number of Shares  subject to the Plan (subject to the
provisions  of  Section  7);  (ii)  changes  the class of  persons  eligible  to
participate under the Plan; or (iii) materially  increases the benefits accruing
to participants  under the Plan shall be subject to approval of the stockholders
of the Company.

16.  EFFECTIVE DATE AND APPROVALS.  The Plan was adopted by the Board on October
18, 1995 to become effective as of said date. The Company's obligation to offer,
sell and  deliver  its Shares  under the Plan is subject to the  approval of its
stockholders not later than October 18, 1996, and of any governmental  authority
required in connection  with the authorized  issuance or sale of such Shares and
is further subject to the Company  receiving the opinion of its counsel that all
applicable securities laws have been complied with.

     17. TERM OF PLAN.  No rights shall be granted  under the Plan after October
18, 2005.

18. ADMINISTRATION OF THE PLAN. The Board or any committee or persons to whom it
delegates its authority (the  "Administrator")  shall administer,  interpret and
apply all provisions of the Plan. The Administrator may waive such provisions of
the Plan as it deems necessary to meet special  circumstances not anticipated or
covered expressly by the Plan. Nothing contained in this Section shall be deemed
to authorize the Administrator to alter or administer the provisions of the Plan
in a manner  inconsistent  with the  provisions  of Section 423 of the Code.  No
member of the Administrator shall be liable for any action or determination made
in good faith with respect to the Plan or any right granted under it.

Date approved by the Board
of Directors of the Company: October 18, 1995

Date approved by the
Stockholders of the Company:  December 15, 1995

                                        C-3



<PAGE>


EXHIBIT 4.75
                                     PHC, INC.
                    1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. Purpose. This 1995 Non-Employee Director Stock Option Plan (hereinafter,  the
"Plan") is intended to promote  the  interests  of PHC,  Inc.,  a  Massachusetts
corporation (the "Company"), by providing an inducement to obtain and retain the
services of qualified  persons who are not  employees of the Company to serve as
members of its Board of Directors (the "Board").

2. Available  Shares.  The total number of shares of Class A Common Stock,  $.0l
par value,  of the Company (the "Class A Common Stock") for which options may be
granted under the Plan shall not exceed 30,000 shares,  subject to adjustment in
accordance  with  Section  10 of  the  Plan.  Shares  subject  to the  Plan  are
authorized but unissued shares or shares that were once issued and  subsequently
reacquired by the Company. If any options granted under the Plan are surrendered
before  exercise  or lapse  without  exercise,  in whole or in part,  the shares
reserved therefor shall continue to be available under the Plan.

   3.  Administration.  The Plan  shall  be  administered  by the  Board or by a
committee  appointed by the Board (the "Co@ttee").  In the event the Board fails
to appoint or refrains  from  appointing a  Committee,  the Board shall have all
power and authority to administer the Plan. In such event,  the word "Committee"
wherever  used herein shall be deemed to mean the Board.  The  Committee  shall,
subject to the  provisions of the Plan,  have the power to construe the Plan, to
determine  all  questions  hereunder,  and to adopt  and  amend  such  rules and
regulations  for the  administration  of the Plan as it may deem  desirable.  No
member  of the  Board  or the  Committee  shall  be  liable  for any  action  or
determination  made in good faith with respect to the Plan or any option granted
under it.

    4. Granting of Options.

    During the term of the Plan and subject to the  availability of shares under
    the Plan:

      (A)  INITIAL  GRANTS.  Each  director  who is, at the time of the  initial
    approval by the Board of this Plan, serving as a director of the Company and
    who is not a current or former employee of the Company shall,  contingent on
    shareholder  approval of this Plan, receive at the time of the first meeting
    of the  Board  following  approval  by the  Board of this  Plan an option to
    purchase  the number of shares of Class A Common Stock which is equal to 500
    multiplied by the number of full years such director has served on the Board
    at that time.

      (B)  SUBSEQUENT  GRANTS.  At the time of each annual meeting of the Board,
    beginning  with the first such  meeting  following  the meeting at which the
    initial grants are made pursuant to subsection 4(a) hereof,  during the term
    of this Plan,  there shall be granted to each  director who is not a current
    or former  employee  of the Company an option to  purchase  2,000  shares of
    Class A Common Stock.

    Except for the specific options referred to above, no other options shall be
    granted under the Plan.

   5. Option Price. The purchase price of the stock covered by an option granted
pursuant  to the Plan shall be 100% of the fair  market  value of such shares on
the day the option is granted. The option price will be subject to adjustment in
accordance  with the  provisions of Section 10 of the Plan.  For purposes of the
Plan, if, at the time an option is granted under the Plan, the Company's Class A
Common Stock is publicly  traded,  "fair market value" shall be determined as of
the last business day for which the prices or quotes  discussed in this sentence
are  available  prior to the date such  option is granted and shall mean (i) the
average (on that date) of the high and low prices of the Class A Common Stock on
the principal national  securities exchange on which the Class A Common Stock is
traded,  if the Class A Common  Stock is then  traded on a  national  securities
exchange; (ii) the last reported sale price (on that date) of the Class A Common
Stock on the NASDAQ  National  Market,  if the Class A Common  Stock is not then
traded on a national  securities  exchange;  or (iii) the  closing bid price (or
average of bid prices)  last quoted (on that date) by an  established  quotation
service for over-the-counter securities, if the

                                        D-1



<PAGE>


Class A Common  Stock is not  reported  on the  NASDAQ  National  Market or on a
national  securities  exchange.  If, at the time an option is granted  under the
Plan, the Company's  Class A Common Stock is not publicly  traded,  "fair market
value" shall be as  determined  (i) by the mutual  agreement of the optionee and
the Company,  or (ii) if such parties are unable to reach such agreement  within
30 days after the grant of such option, by a reputable appraiser selected by the
Company (the  "Appraiser").  The Appraiser shall determine the fair market value
without  giving  any  consideration,  premium or  discount  to the fact that the
optionee  may own more or less than a majority of the  outstanding  stock of the
Company.  The Appraiser  shall determine the fair market value not LATER than 60
days after the grant of such option.  The cost of the appraisal as determined by
the Appraiser shall be home by the Company.

   6.  PERIOD  OF  OPTION.  Unless  sooner  terminated  in  accordance  with the
provisions of Section 8 of the Plan, an option granted hereunder shall expire on
the date which is ten (10) years after the date of grant of the option.

    7.VESTING OF SHARES AND NON-TRANSFERABFLITY OF OPTIONS.

   (A)VESTING.  Options  granted under the Plan shall not be  exercisable  until
they become vested. Options granted under the PI= shall vest in the optionee and
thus become  exercisable by the optionee as follows:  25% immediately and 25% on
each of the first, second and third anniversary of the date of grant.

   (B)LEGEND ON CERTIFICATES.  The certificates  representing  such shares shall
carry such appropriate  legend and such written  instructions  shall be given to
the Company's  transfer agent as may be deemed necessary or advisable by counsel
to the Company in order to comply with the requirements of the Securities Act of
1933 or any state securities laws.

   (C)NON-TRANSFERABILITY.  Any option granted pursuant to the Plan shall not be
assignable  or  transferable  other  than  by will or the  laws of  descent  and
distribution and shall be exercisable during the optionee's lifetime only by him
or her.

    8.   TERMINATION OF OPTION RIGHTS.

(a) In the event an  optionee  ceases to be a member of the Board for any reason
other  than  death or  permanent  disability,  any then  unexercised  portion of
options  granted  to  such  optionee  shall,  to the  extent  not  then  vested,
immediately  terminate  and become void;  any portion of an option which is then
vested but has not been  exercised  at the time the  optionee  so ceases to be a
member of the Board may be  exercised,  to the extent it is then vested,  by the
optionee  within 180 days of the date the optionee  ceased to be a member of the
Board, and all options shall terminate after the 180-day period has expired.

   (b)In the event that an optionee ceases to be a member of the Board by reason
of his or her death or permanent disability, any option granted to such optionee
shall be immediately and  automatically  accelerated and become fully vested and
all  unexercised  options  shall  be  exercisable  by  the  optionee  (or by the
optionee's  personal  representative,  heir or  legatee,  in the event of death)
until the  earlier of the  scheduled  expiration  date of the option or 180 days
after the death or disability of the optionee.

9. EXERCISE OF OPTION.  Subject to the terms and  conditions of the Plan and the
option  agreements,  an option  granted  hereunder  shall,  to the  extent  then
exercisable,  be exercisable in whole or in part by giving written notice to the
Company at its  principal  office  address,  stating  the number of shares  with
respect to which the option is being  exercised,  accompanied by payment in full
for such  shares.  Payment  may be (a) in United  States  dollars  in cash or by
check.  (b) in whole or in part in shares of Class A Common Stock of the Company
already owned by the person or persons  exercising  the option or shares subject
to the option being exercised  (subject to such  restrictions  and guidelines as
the Board may adopt from time to time),  valued at fair market value  determined
in accordance with the provisions of Section 5 or (C) consistent with applicable
law, through the delivery of an assignment to the Company of a sufficient amount
of the proceeds from the sale of the Class A Common Stock acquired upon exercise
of the option and an authorization to the broker or selling agent to pay

                                        D-2



<PAGE>


that amount to the Company,  which sale shall be at the participant's  direction
at the time of exercise.  There shall be no such  exercise at any one time as to
fewer  than  one  hundred  (100)  shares  or all of the  remaining  shares  then
purchasable by the person or persons  exercising  the option,  if fewer than one
hundred  (100)  shares.  The Company's  transfer  agent shall,  on behalf of the
Company, prepare a certificate or certificates representing such shares acquired
pursuant to exercise of the option,  shall register the optionee as the owner of
such  shares on the books of the  Company  and  shall  cause the fully  executed
certificates(s) representing such shares to be delivered to the optionee as soon
as  practicable  after  payment  of the option  price in full.  The holder of an
option  shall not have any rights of a  stockholder  with  respect to the shares
covered by the option  except to the extent  that one or more  certificates  for
such shares shall be delivered to him or her upon the due exercise o the option.

     10. Adjustments Upon Changes in Capitalization and Other Matters.  Upon the
occurrence of any of the following  events, an optionee's rights with respect to
options  granted  to him or her  hereunder  shall  be  adjusted  as  hereinafter
provided:

            (A) STOCK DIVIDENDS. In the event the Company shall issue any of its
shares as a stock  dividend  upon or with  respect to the shares of stock of the
class which shall at the time be subject to option hereunder, each optionee upon
exercising  an Option shall be entitled to receive (for the purchase  price paid
upon such  exercise) the shares as to which he is exercising  his Option and, in
addition thereto (at no additional  cost), such number of shares of the class or
classes in which such stock  dividend or dividends  were  declared or paid,  and
such amount of cash in lieu of fractional  shares,  as he would have received if
he had been the holder of the shares as to which he is exercising  his Option at
all times between the date of grant of such Option and the date of its exercise.

            (B) MERGER; CONSOLIDATION; LIQUIDATION; SALE OF ASSETS. In the event
the  Company is merged  into or  consolidated  with  another  corporation  under
circumstances  where the  Company  is not the  surviving  corporation  or if the
Company is liquidated or sells or otherwise disposes of all or substantially all
of  its  assets  to  another   corporation  while  unexercised   options  remain
outstanding   under  the  Plan,   after  the  effective  date  of  such  merger,
consolidation or sale, as the case may be, each holder of an outstanding  option
shall be entitled, upon exercise of such option, to receive in lieu of shares of
Class A Common Stock, shares of such stock or other securities as the holders of
shares of Class A Common  Stock  received  pursuant  to the terms of the merger,
consolidation or sale.

            (C) ISSUANCE OF SECURITIES.  Except as expressly provided herein, no
issuance  by the  Company  of  shares  of  stock  of any  class,  or  securities
convertible into shares of stock of any class,  shall affect,  and no adjustment
by reason  thereof  shall be made with respect to, the number or price of shares
subject to options.  No adjustments  shall be made for dividends paid in cash or
in property other than securities of the Company.

            (D) NO FRACTIONAL  SHARES.  No fractional  shares shall  actually be
issued under the PlaiL Any fractional shares which, but for this subsection (d),
would have been issued to an optionee pursuant to an Option,  shall be deemed to
have been  issued and  immediately  sold to the  Company  for their fair  market
value,  and the  optionee  shall  receive  from the Company cash in lieu of such
fiuctional shares.

            (E) ADJUSTMENTS.  Upon the happening of any of the foregoing events,
the class and aggregate number of shares set forth in Section 2 of the Plan that
are subject to options which previously have been or subsequently may be granted
under the Plan shall also be appropriately  adjusted to reflect such events. The
Board shall determine the specific  adjustments to be made under this Section 10
and its determination shall be conclusive.

11.  Restrictions  on  Issuance of Shares.  Notwithstanding  the  provisions  of
Sections 4 and 9 of the Plan,  the Company  shall have no  obligation to deliver
any  certificate  or  certificates  upon  exercise of an option until one of the
following conditions shall be satisfied:

            (i) The shares with  respect to which the option has been  exercised
are at the  time  of the  issue  of such  shares  effectively  registered  under
applicable  Federal  and  state  securities  laws as now in force  or  hereafter
amended; or

                                        D-3





<PAGE>


            (ii)  Counsel for the Company  shall have given an opinion that such
shares are exempt from  registration  under Federal and state securities laws as
now in force  or  hereafter  amended;  and the  Company  has  complied  with all
applicable  laws  and  regulations  with  respect  thereto,   including  without
limitation  all  regulations  required  by any  stock  exchange  upon  which the
Company's outstanding Class A Common Stock is then listed.

12.  Representation of Optionee. If requested by the Company, the optionee shall
deliver to the Company written  representations  and warranties upon exercise of
the  option  that are  necessary  to show  compliance  with  Federal  and  state
securities laws,  including  representations and warranties to the effect that a
purchase of shares under the option is made for  investment  and not with a view
to their distribution (as that term is used in the Securities Act of 1933).

13. Option  Agreement Each option granted under the provisions of the Plan shall
be evidenced by an option agreement,  which agreement shall be duly executed and
delivered  on behalf of the Company  and by the  optionee to whom such option is
granted.  The  option  agreement  shall  contain  such  terms,   provisions  and
conditions  not  inconsistent  with the Plan as may be Determined by the officer
executing it.

14. Term and Amendment of Plan.  The Plan was adopted by the Board  effective as
of October 18,  1995,  subject to approval by the  stockholders  of the Company.
Options may not be granted under the Plan after  October 18, 2005,  and the Plan
shall  terminate  when all  options  granted or to be granted  hereunder  are no
longer outstanding. Subject to the provisions of Section 4 above, options may be
granted under the Plan prior to the date of stockholder approval of the Plan. If
the approval of  stockholders is not obtained by October 18, 1996, any grants of
options under the Plan made prior to that date will be rescinded.  The Board may
at any time terminate the Plan or make such modification or amendment thereof as
it deems advisable;  PROVIDED, HOWEVER, that the Board may not, without approval
by the stockholders, (a) increase the maximum number of shares for which options
may be granted under the Plan (except by adjustment pursuant to Section 10), (b)
materially modify the requirements as to eligibility to participate in the Plan,
(c) materially  increase  benefits  accruing to option holders under the Plan or
(d)  amend  the Plan in any  manner  which  would  cause  Rule  16b-3 to  become
inapplicable  to the Plan; and PROVIDED  FURTHER that the provisions of the Plan
specified in Rule  16b-3(c)(2)(ii)(A)  (or any  successor  or amended  provision
thereof)  under  the  Securities   Exchange  Act  of  1934  (including   without
limitation,  provisions as to eligibility,  amount,  price and timing of awards)
may not be amended  more than once every six months,  other than to comport with
changes  in the  Internal  Revenue  Code.  Termination  or any  modification  or
amendment of the Plan shall not, without consent of a participant, affect his or
her rights under an option previously granted to him or her.

15. Compliance with Regulations. It is the Company's intent that the Plan comply
in all respects  with Rule ]6b-3 under the  Securities  Exchange Act of 1934 (or
any successor or amended  version  thereof) and any  applicable  Securities  and
Exchange  Commission  interpretations  thereof.  If any provision of the Plan is
deemed not to be in compliance with Rule 16b-3,  the provision shall be null and
void.

     16.  Governing  Law.  The  validity  and  construction  of the Plan and the
instruments evidencing options shall be governed by the laws of The Commonwealth
of  Massachusetts,  without  giving effect to the principles of conflicts of law
thereof.








                                        D-4




<PAGE>


EXHIBIT 99.1

                       CAUTIONARY STATEMENT FOR PURPOSES
                    OF THE "SAFE HARBOR" PROVISIONS OF THE
                     PRIVATE LITIGATION REFORM ACT OF 1995

      PHC,  Inc.  (the  "Company)  desires  to take  advantage  of the new "safe
harbor" provisions of the Private  Securities  Litigation Reform Act of 1995 and
is including this Exhibit 99.1 in its Form 10-KSB in order to do so.

      The  Company  wishes  to  caution  readers  that the  following  important
factors,  among  others,  in some cases have  affected,  and in the future could
affect,  the  Company's  actual  results  and could cause the  Company's  actual
consolidated  results for the Company's  current  quarter and beyond,  to differ
materially from those expressed in any forward-looking statements made by, or on
behalf of, the Company.

      During its last  fiscal  year and in  certain  other  fiscal  years of its
operation,  the Company has generated  losses and there can be no assurance that
future losses will not occur.

      The Company has experienced a significant  increase in accounts receivable
in recent years and there can be no assurance that this trend will not continue,
and that if it does,  that it will not have a  material  adverse  effect  on the
Company's cash flow and financial performance.

      The Company historically experiences and expects to continue to experience
a  decline  in  revenue  in its  fiscal  quarters  ending  December  31 due to a
seasonality  decline in revenue from the Company's  substance  abuse  facilities
during such period.

      Payment for the Company's substance abuse treatment is provided by private
insurance  carriers and managed care  organizations;  payment for  long-term and
subacute  care  is  provided  by  private  insurance   carriers,   managed  care
organizations  and the Medicare and Medicaid  programs;  payment for psychiatric
services is provided by private insurance  carriers,  managed care organizations
and the Medicare and Medicaid  programs.  In general,  revenues derived from the
Medicare and Medicaid  programs in  connection  with the  long-term and subacute
care services  provided by the Company have been less  profitable to the Company
than revenues  derived from private  insurers and managed care  organizations in
connection  with the  substance  abuse  treatment  provided  by the  Company and
changes in the sources of the Company's revenues could  significantly  alter the
Company's profitability. Additionally, the Company experiences greater delays in
the  collection of amounts  reimbursable  by the Medicare and Medicaid  programs
than in the collection of amounts  reimbursable by private  insurers and managed
care  organizations.  Accordingly,  a change in the  Company's  service mix from
substance abuse to long-term care could have a materially  adverse effect on the
Company as would an increase in the percentage of the Company's patients who are
insured by Medicare or Medicaid.

      Cost  containment  pressures  from  private  insurers in the  Medicare and
Medicaid  programs  may begin to restrict the amount that the Company can charge
for its services.

      There can be no assurance  that the  Company's  existing  facilities  will
continue to meet, or that proposed  facilities will meet, the  requirements  for
reimbursement by third party or government payors.

      The Company has substantial  receivables  from Medicare and Medicaid which
constitute  a  concentration  of credit risk should these  agencies  defer or be
unable to make reimbursement payments as due.

      The Company  often  experiences  significant  delays in the  collection of
amounts  reimbursable by third-party  payors.  Although the Company  believes it
maintains  an  adequate  allowance  for  doubtful  accounts,  if the  amount  of
receivables which eventually becomes uncollectible  exceeds such allowance,  the
Company could be materially adversely affected.

      If a growing number of managed care organizations and insurance  companies
adopt policies which limit the length of stay for substance abuse treatment, the
Company's business would be materially adversely affected.

      There can be no assurance that occupancy rates at the Company's facilities
will continue at present levels.  Similarly,  there can be no assurance that the
patient census will not decrease in the future.

      There  can  be no  assurance  that  the  Company  will  be  successful  in
identifying  appropriate  acquisition  opportunities,  or if it  does,  that the
Company will be  successful in acquiring  such  facilities or that such acquired
facilities  will be  profitable.  The  failure of the Company to  implement  its
acquisition  strategy  could have a materially  adverse  effect on the Company's
financial performance. Moreover, the inherent risks of expansion could also have
a material adverse effect on the Company's business.

      Additionally,  the Company's  acquisition  program will be directed by the
President  and Chief  Executive  Officer of the Company and the Company does not
intend to seek stockholder approval for any such acquisitions unless required by
applicable law or  regulations.  Accordingly,  investors  will be  substantially
dependent upon the business judgment of management in making such  acquisitions.
Furthermore, the Company's acquisition strategy is highly dependent on access to
capital, of which there can be no assurance.

      The  Company  and the  healthcare  industry  in  general  are  subject  to
extensive  federal,  state and local  regulation  with respect to licensure  and
conduct of  operations.  There can be no assurance that the Company will be able
to obtain new  licenses  to affect its  acquisition  strategy  or  maintain  its
existing licenses and reimbursement program participation approvals.

      It is not possible to  accurately  predict the content or impact of future
legislation and regulations affecting the healthcare industry. In addition, both
the  Medicare and Medicaid  programs  are subject to  statutory  and  regulatory
changes and there can be no assurances that payments under those programs to the
Company will, in the future,  remain at a level  comparable to the present level
or be sufficient to cover the cost allocable to such patients.

      Bruce A. Shear the  President and Chief  Executive  Officer of the Company
together with his affiliates is able to control all matters  requiring  approval
of the stockholders, including the election of a majority of the directors, as a
result of his ownership of the Company's stock.

      There can be no assurance that the Company will be successful in hiring or
retaining the personnel it requires for  continued  growth,  or that the Company
will be able to  continue  to attract  and retain  highly  qualified  personnel,
particularly skilled healthcare personnel.

      The  healthcare  business  is highly  competitive  and  subject  to excess
capacity.

      The  Company  has  entered  into   relationships   with  large  employers,
healthcare institutions, labor unions and other key clients to provide treatment
for chemical  dependency  and substance  abuse as well as other services and the
loss  of  any  of  these  key  clients  would  require  the  Company  to  expend
considerable  effort to replace  patient  referrals  and would result in revenue
losses to the Company and attendant loss in income.

      Existing   environmental   contamination   at  certain  of  the  Company's
facilities  and  potential  future  environmental  contamination  at  facilities
acquired by the Company could have a materially  adverse effect on the Company's
operations.

     On October  31,  1994,  the  Company  was served with a summons for a Civil
Action in the Superior Court Department of the Trial Court of the Commonwealth
of Massachusetts by NovaCare, Inc. ("NovaCare"), an entity which contracted with
the Company in 1992 to provide rehabilitation therapy and related administrative
services to the Company's long-term care facility (the "Action").  The complaint
alleged  that the Company  owed  NovaCare  contractual  damages in the amount of
approximately $587,000, plus interest,  attorney fees, costs of collection,  and
double or triple damages pursuant to a Massachusetts  statute prohibiting unfair
and deceptive trade  practices.  The Company filed a counterclaim  alleging that
NovaCare  breached  the  contract in  question  and that the Company may be owed
damages in excess of the amount sought by NovaCare.

      On February  13, 1996,  the Company  settled the Action by agreeing to pay
NovaCare  an amount  less than its claim.  The  Company  is not paying  NovaCare
accrued interest,  attorney's fees, costs of collection,  or multiple damages. A
portion  of the  settlement  amount  has  already  been paid The  balance of the
settlement amount is payable over twelve (12) months with interest on the unpaid
balance at 9.5%. In the event that the Company defaults on its obligation to pay
the  settlement  amount,  it has agreed to entry of  judgment  against it in the
amount of $457,637.46 (the "Judgment").  The Judgment represents the full unpaid
balance of NovaCare's claim against the Company, including interest,  attorney's
fees, and costs of collection. Any amounts paid by the Company to NovaCare after
February  9, 1996 shall be  deducted  from the  Judgment.  Until the  settlement
amount is paid, NovaCare will continue to hold a mortgage on a day care property
owned by the Company in Saugus, Massachusetts.

      Interruption  by fire,  earthquakes or other  catastrophic  events,  power
failures,  work  stoppages,  regulatory  actions  or other  causes to any of the
Company's operations could have a materially adverse impact on the Company.

      The Company's  Class C Common Stock will  automatically  be converted into
Class B Common Stock if the Company achieves certain earnings targets. If such a
conversion occurs, the Company will concurrently record a charge to its earnings
equal to the product  obtained by multiplying the number of shares  converted by
the then fair market value of the  converted  shares which may have a subsequent
adverse effect on the market price for the Company's securities.

      The Company has and in the future may enter into  transactions in which it
acquires  businesses or obtains financing for a consideration  that includes the
issuance of stock,  warrants,  options or convertible  debt at a price less than
the value at which the Company's stock may then be trading in the public markets
or which are  convertible  into or exercisable  for Common Stock at a conversion
rate or exercise  price less than such value.  Such  transactions  may result in
significant dilution to the existing holders of the Company's stock.

      The Company has authorized  1,000,000  shares of Preferred Stock the terms
of which  may be  fixed  and  which  may be  issued  by the  Company's  Board of
Directors  without  stockholder  approval.  The issuance of the Preferred  Stock
could have the effect of making it more  difficult  for a third party to acquire
the Company and may result in the  issuance of stock that  dilutes the  existing
stockholders and has  liquidation,  redemption,  dividend and other  preferences
superior to the Company's outstanding Class A Common Stock.


NOTE:
      THIS DOES NOT DISCUSS PREFERRED STOCK, REDEMPTION OF WARRANTS, THE EFFECTS
OF DE-LISTING FROM NASDAQ,  PENNY STOCK RULES OR THIN FLOAT. THOSE SUBJECTS ARE,
HOWEVER, INCLUDED IN THE RISK-FACTOR SECTION OF THE 11/95 S-3.
<PAGE>
EHXIBIT 21.1

                                                            STATE OF
NAME OF SUBSIDIARY         DOING BUSINESS AS NAME         INCORPORATION

PHC, Inc.                  Pioneer Healthcare             Massachusetts
                           PDSS


PHC of Utah, Inc.          Highland Ridge Hospital        Massachusetts


PHC of Virginia, Inc.      Mount Regis Center             Massachusetts
                           Mount Regis Center-Changes
                           Clinic

PHC of  Rhode Island, Inc. Good Hope Center               Massachusetts


PHC of Michigan, Inc.      Harbor Oaks Hospital           Massachusetts
                           Pioneer Healthcare of Michigan


PHC of  Nevada, Inc.       Harmony Counseling             Massachusetts


North Point-Pioneer, Inc.  Pioneer Health Centers         Massachusetts
                           Pioneer Healthcare of Michigan


PHC of Kansas, Inc.        Total Concept EAP              Massachusetts


Quality Care Centers of    Franvale Nursing and           Massachusetts
Massachusetts, Inc.        Rehabilitation Center


PHC of California, Inc.    Marin Grove                    Massachusetts