Document:

<PAGE>
                              AMENDMENT TO GUARANTY

      THIS AMENDMENT TO GUARANTY ("AMENDMENT") is made as of October 1, 2001, by
MEDCATH INCORPORATED, a North Carolina corporation ("MEDCATH"), ST. JOSEPH
HEALTHCARE SYSTEM, a New Mexico nonprofit corporation ("ST. JOSEPH"), SWCA, LLC,
a New Mexico limited liability company ("SWCA") and NMHI, LLC, a New Mexico
limited liability company ("NMHI") (MedCath, St. Joseph, SWCA and NMHI are
hereinafter individually referred to as a "GUARANTOR" and collectively referred
to as "GUARANTORS") in favor of HEALTH CARE PROPERTY INVESTORS, INC., a Maryland
corporation ("LENDER").

                                 R E C I T A L S

      A.    Guarantors executed and delivered that certain Guaranty ("GUARANTY")
dated as of September 30, 1998, in favor of Lender to guarantee certain
repayment and construction obligations in connection with the Heart Hospital of
New Mexico, LLC ("BORROWER") as more particularly described in the Guaranty. A
true and correct copy of the Guaranty is attached hereto as Exhibit A.

      B.    MedCath has agreed to purchase 32% of St. Joseph's Membership
Interest in Borrower.

      C.    In connection with the purchase of St. Joseph's Membership Interest,
Lender has agreed to release St. Joseph as a guarantor under the Guaranty;
provided that MedCath assumes the Guaranty obligations of St. Joseph as set
forth herein.

      D.    Guarantors and Lender desire that the Guaranty be amended to provide
for the assumed obligations of MedCath and release of St. Joseph as a guarantor.

      NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Lender and Guarantor hereby agree
as follows:

      1.    Amendment.

            1.1   Lender and each of the Guarantors hereby agree that all
references to St. Joseph as a guarantor under the Guaranty shall hereby be
eliminated.

            1.2   MedCath hereby assumes, affirms, confirms and ratifies its
obligations under the Guaranty with respect to the increase in the limitation of
liability amounts provided at Section 19 by the amounts previously guaranteed by
St. Joseph as set forth in Exhibit B attached hereto and incorporated herein.

      2.    Release. Lender hereby releases only St. Joseph from all personal
indebtedness, obligations and covenants under the Guaranty.
<PAGE>
      3.    Reaffirmation. In all other respects, the Guaranty shall remain as
originally stated. Each Guarantor hereby reaffirms, confirms and ratifies its
obligations under the Guaranty as amended hereby.

      4.    Binding Effect. This Amendment shall be binding upon the parties
hereto and their successors and assigns.

      5.    Applicable Law. This Amendment shall be determined as to its
validity, construction, effect and enforcement under the laws of the State of
New Mexico.

      6.    Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be an original, but all of which shall
constitute one and the same instrument.

      IN WITNESS WHEREOF, Lender and Guarantors do hereby execute this Amendment
as of the date first written above.

LENDER:

HEALTH CARE PROPERTY INVESTORS, INC.,
a Maryland corporation

By:   /s/ Edward J. Henning
      ------------------------------------------
      Name:  Edward J. Henning
             -----------------------------------
      Title: Senior Vice President
             -----------------------------------

GUARANTORS:

MEDCATH INCORPORATED,
a North Carolina corporation

By:   /s/James A. Parker
      ------------------------------------------
      Name:  James A. Parker
             -----------------------------------
      Title: Treasurer
             -----------------------------------

[SIGNATURES CONTINUED ON NEXT PAGE]

                                      -2-
<PAGE>
ST. JOSEPH HEALTHCARE SYSTEM,
a New Mexico nonprofit corporation

By:   /s/ Arthur T. Dunn
      ------------------------------------------
      Name:  Arthur T. Dunn
             -----------------------------------
      Title: Interim President
             -----------------------------------

SWCA, LLC,
a New Mexico limited liability company

By:   /s/Harvey White, M.D.
      ------------------------------------------
      Name:  Harvey White MD
             -----------------------------------
      Title: President
             -----------------------------------

NMHI, LLC,
a New Mexico limited liability company

By:   /s/ Richard L. Gerety
      ------------------------------------------
      Name:  Richard L. Gerety
             -----------------------------------
      Title: President
             -----------------------------------

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

                                      -3-
<PAGE>
                                  EXHIBIT "A"

                               Original Guaranty

                                   [Attached]
<PAGE>
                                    GUARANTY

                                 (SECURED LOAN)

      THIS GUARANTY (Secured Loan) (this "Guaranty) is made as of September 30,
1998, by MEDCATH INCORPORATED, a North Carolina corporation ("MedCath"), ST.
JOSEPH HEALTHCARE SYSTEM, a New Mexico nonprofit corporation ("St. Joseph"),
SWCA, LLC, a New Mexico limited liability company ("SWCA") and NMHI, LLC, a New
Mexico limited liability company ("NMHI") (MedCath, St. Joseph, SWCA and NMHI
are hereinafter individually and collectively referred to as "Guarantor") in
favor of HEALTH CARE PROPERTY INVESTORS, INC., a Maryland corporation
("Lender").

                                 R E C I T A L S

      A.    Pursuant to the terms of that certain Construction Loan Agreement of
even date herewith, by and between Heart Hospital of New Mexico, L.L.C., a New
Mexico limited liability company ("Borrower"), as borrower, and Lender, as
lender (the "Loan Agreement"), Borrower and Lender have agreed to the terms and
conditions of the Loan (as defined in the Loan Agreement). Those terms used
herein with their initial letter capitalized shall have the meanings given them
in the Loan Agreement, unless otherwise defined herein.

      B.    The Loan is evidenced by the Note and secured by certain other Loan
Documents. The Loan Documents include this Guaranty.

      THEREFORE, to induce Lender to enter into the Loan Agreement and to
consummate the transactions contemplated thereby, and in consideration thereof,
each Guarantor unconditionally guarantees and agrees as follows:

      1.    Guaranty. Each Guarantor hereby jointly and severally,
unconditionally and irrevocably guarantees, subject to the limitations set forth
in Paragraph 19 hereof, to Lender:

            (a)   Full and timely payment when due (whether at maturity, by
      acceleration, or otherwise) of all of the indebtedness of Borrower now or
      hereafter existing under the Loan Documents (or any of them), whether for
      principal, interest, penalties, expenses, costs, and fees, including,
      without limitation, reasonable attorneys' fees, court costs, inspection
      fees, accounting costs, investigation expenses, and other reasonable
      related costs and expenses incurred by, or on behalf of, Lender, together
      with all renewals, extensions, modifications, rearrangements, and
      restatements of such indebtedness; and

            (b)   Full and timely performance and satisfaction when due of all
      of the agreements, covenants, terms and conditions to be performed by, or
      on behalf of, Borrower pursuant to the Loan Documents, together with all
      renewals, extensions, modifications, rearrangements, and restatements of
      such agreements, covenants, and conditions, irrespective of the validity,
      regularity, or enforceability of the Loan Documents.
<PAGE>
      2.    Construction Obligations. Without limiting the foregoing and subject
to the limitations set forth in Paragraph 19 hereof, each Guarantor jointly and
severally, unconditionally and irrevocably guarantees to Lender (a) the
construction and completion of the Improvements in accordance in all material
respects with the Plans and within the time periods, in the manner and in
accordance with the other requirements set forth in the Loan Agreement,
including, without limitation, satisfaction of those conditions precedent set
forth in Exhibit E to the Loan Agreement for payment of the final advance; and
(b) the payment without demand, and without right to reimbursement therefor, of
all development, construction and related costs of the Project incurred for any
reason whatsoever in excess of the Committed Sum. If for any reason whatsoever
Borrower: (i) fails or neglects to complete the Improvements as contemplated by,
and in accordance with the requirements set forth in, the Loan Agreement,
including the time and manner therein specified; (ii) fails to prosecute with
diligence and continuity the construction of the Improvements in accordance with
the Loan Agreement; (iii) commits, or permits to exist, a Default; or (iv) is
unable to satisfy, within fifteen (15) days after Lender's written request
therefor, any condition precedent to obtaining an Advance requested by Borrower
pursuant to the Loan Agreement, then Lender, in addition to its other rights,
remedies and recourses, whether existing hereunder, under the Loan Documents or
otherwise, may require Guarantor to complete the Improvements and take such
other action as hereinafter described. Within thirty (30) calendar days from the
date Lender notifies Guarantor of Borrower's failure to satisfy any of the
construction obligations described above, Guarantor agrees, at its sole cost and
expense, to commence completion of construction of the Improvements and to
diligently pursue such construction in order to complete the Improvements within
the time and in the manner specified in the Loan Agreement. Guarantor shall pay
all reasonable costs and expenses in connection with such construction and shall
indemnify and hold Lender harmless from any and all losses, costs, liabilities,
or expenses incurred in connection with such completion.

      3.    Rights of Lender. Guarantor authorizes Lender, without giving notice
to Guarantor or obtaining Guarantor's consent and without affecting the
liability of Guarantor hereunder, from time to time to: (a) renew or extend all
or any portion of Borrower's or any other person's obligations due under the
Note or any of the other Loan Documents; (b) declare all sums owing to Lender
under the Note and any of the other Loan Documents due and payable upon the
occurrence of a default or event of default under the Loan Documents; (c) make
changes in the dates specified for payments of any sums payable in periodic
installments under the Note or any of the Loan Documents, and accept or deny, in
Lender's sole discretion, partial payments on or performance of the Note; (d)
otherwise modify the terms of any of the Loan Documents, except for (i)
increases in the principal amount of the Note in excess of the Committed Sum as
a result of additional advances made directly to Borrower after the Conversion
Date, (ii) changes in the manner by which interest rates, fees or charges are
calculated under the Note or any of the other Loan Documents (Guarantor
acknowledges that, if the Note or any of the other Loan Documents so provides,
said interest rates, fees and charges may vary from time to time), or (iii)
accelerate the maturity date of the Note where no default or event of default
has occurred under the Loan Documents; (e) take and hold additional security for
the performance of Borrower's or any other person's obligations under the Note
and the other Loan Documents and abandon, fail to perfect, exchange, enforce,
waive or release any such

                                       2
<PAGE>
additional or existing security; (f) apply such additional or existing security
for the Note and direct the order or manner of sale thereof as Lender in its
sole discretion may determine; (g) release; substitute or add any one or more
endorsers of the Note or guarantors of Borrower's or any other person's
obligations under the Note or any of the other Loan Documents; (h) apply
payments received by Lender from Borrower or any other person to any obligations
of Borrower or such other person under the Note and the other Loan Documents, in
such order as Lender shall determine, in its sole discretion, whether or not any
such obligations are covered by this Guaranty; (i) consent, in the sole
discretion of Lender, to the merger, consolidation, restructuring, dissolution
or other change in the structure of Borrower or any other person; and (3) assign
this Guaranty in whole or in part.

      4.    Guarantor's General Waivers. Guarantor waives: (a) any defense now
existing or hereafter arising based upon any legal disability or other defense
of Borrower, Guarantor or any other guarantor or other person, or by reason of
the cessation or limitation of the liability of Borrower, Guarantor or any other
guarantor or other person from any cause other than full payment and performance
of all obligations due under the Note or any of the other Loan Documents; (b)
any defense based upon any lack of authority of the officers, directors,
partners or agents acting or purporting to act on behalf of Borrower or any
other person, or any defect in the formation of Borrower or any other person;
(c) the unenforceability or invalidity of any security or guaranty or the lack
of perfection or continuing perfection, or failure of priority of any security
for the obligations guarantied hereunder; (d) any defense based upon Lender's
election of any remedy against Guarantor, Borrower or any other person; (e) any
defense based upon Lender's failure to disclose to Guarantor any information
concerning Borrower's or any other person's financial condition or any other
circumstances bearing on Borrower's or any other person's ability to pay and
perform all obligations due under the Note or any of the other Loan Documents;
(f) any failure by Lender to give notice to Borrower, Guarantor or any other
person of the sale or other disposition of security held for the Note, and any
defect in notice given by Lender in connection with any such sale or disposition
of security held for the Note; (g) any failure of Lender to comply with
applicable laws in connection with the sale or disposition of security held for
the Note, including, without limitation, any failure by Lender to conduct a
commercially reasonable sale or other disposition of such security; (h) any
defense based upon any statute or rule of law which provides that the obligation
of a surety must be neither larger in amount nor in any other respects more
burdensome than that of a principal, or that reduces a surety's or guarantor's
obligations in proportion to the principal's obligation; (i) any use of cash
collateral under Section 363 of the Federal Bankruptcy Code; (j) any defense
based upon Lender's election, in any proceeding instituted under the Federal
Bankruptcy Code, of the application of Section 1111(b)(2) of the Federal
Bankruptcy Code or any successor statute; (k) any defense based upon any
borrowing or any grant of a security interest under Section 364 of the Federal
Bankruptcy Code; (l) prior to payment in full of all of the Obligations, any
right of subrogation, any right to enforce any remedy which Lender may have
against Borrower or any other person and any right to participate in, or benefit
from, any security now or hereafter held by Lender for the obligations due under
the Note or any of the other Loan Documents; (m) presentment, demand, protest
and notice of any kind, including, without limitation, notice of acceptance of
this Guaranty and of the existence, creation or incurring of new or additional

                                       3
<PAGE>
guaranteed obligations and notice of intent to accelerate and of acceleration of
the indebtedness under the Note; (n) the benefit of any statute of limitations
affecting the liability of Borrower or any other person, enforcement of the Note
or any other Loan Documents, the liability of Guarantor hereunder or the
enforcement hereof; and (o) any failure of Lender to pursue, or delay in
pursuing, any other remedy in Lender's power. Guarantor agrees that the payment
and performance of all obligations due under the Note or any of the other Loan
Documents or any part thereof or other act which tolls any statute of
limitations applicable to the Note or the other Loan Documents shall similarly
operate to toll the statute of limitations applicable to Guarantor's liability
hereunder. Without limiting the generality of the foregoing or any other
provision hereof, Guarantor hereby expressly waives all suretyship defenses to
the extent such laws are applicable to this Guaranty or the agreements,
covenants, or obligations of Guarantor hereunder.

      5.    Waiver of Rights of Subrogation. Notwithstanding anything to the
contrary contained herein or in any other document to which Guarantor is a
party, until all obligations under this Guaranty are fully paid and performed,
Guarantor hereby expressly waives with respect to Borrower and any other person
(including any surety) any and all rights at law or in equity to subrogation, to
reimbursement, to exoneration, to contribution, to setoff or to any other rights
that could accrue to a surety against a principal, to a guarantor against a
maker or obligor, to an accommodation party against the party accommodated, or
to a holder or transferee against a maker, and which Guarantor may have or
hereafter acquire against Borrower or any other person in connection with or as
a result of Guarantor's execution, delivery and/or performance of this Guaranty
or any other document to which Guarantor is a party. Guarantor agrees that
Guarantor shall not have or assert any such rights against Borrower or any other
person (including any surety), either directly or as an attempted setoff to any
action commenced against Guarantor by Borrower or any other person (whether as
borrower or in any other capacity) or by Lender. Guarantor hereby acknowledges
and agrees that this waiver is intended to benefit Lender and shall not limit or
otherwise affect Guarantor's liability hereunder, under any other document to
which Guarantor is a party, or the enforceability hereof or thereof.

      6.    Guarantor's Warranties and Covenants. Guarantor warrants and
acknowledges that: (a) Lender would not enter into the Loan Agreement and
consummate the transactions contemplated thereby but for this Guaranty; (b)
Guarantor has read and understands the Loan Agreement, the Note and the other
Loan Documents; (c) there are no conditions precedent to the effectiveness of
this Guaranty and this Guaranty shall be in full force and effect and binding on
Guarantor as of the date hereof, regardless of whether Lender obtains other
collateral or any guaranties from others or takes any other action not
contemplated by Guarantor; (d) Guarantor has established adequate means of
obtaining from sources other than Lender, on a continuing basis, financial and
other information pertaining to Borrower's financial condition, and the status
of Borrower's payment and performance of all obligations due under the Note and
the other Loan Documents, and Guarantor agrees to keep adequately informed from
such means of any facts, events or circumstances which might in any way affect
Guarantor's risks hereunder, and Lender has made no representation to Guarantor
as to any such matters; (e) the most recent financial statements of Guarantor
delivered to Lender are true and correct in all material respects, have been
prepared in accordance with generally accepted accounting principles
consistently applied (or other principles disclosed in writing and acceptable to
Lender) and fairly present, in all

                                       4
<PAGE>
material respects, the financial condition of Guarantor as of the respective
dates thereof, and no material adverse change has occurred in the financial
condition of Guarantor since the respective dates thereof; and (f) Guarantor has
not and shall not, without the prior written consent of Lender, sell, lease,
assign, encumber, hypothecate, transfer or otherwise dispose of all or
substantially all of Guarantor's assets, or any interest therein, without
Lender's prior written consent, which consent may be given or withheld in
Lender's sole discretion, unless (i) either Guarantor or a successor entity
remains liable under the Guaranty, and (ii) Guarantor or such successor entity,
whichever remains liable under the Guaranty, satisfies the financial covenants
of Guarantor set forth in the Loan Agreement.

      7.    Subordination. Until all the obligations under this Guaranty are
fully paid and performed, Guarantor hereby subordinates all present and future
indebtedness owing by Borrower to Guarantor to the obligations at any time owing
by Borrower to Lender under the Note and the other Loan Documents; provided,
however, that as long as there is no Default, Borrower shall be entitled to make
payments of principal and interest on the up to $19,000,000 line of credit to
Borrower provided by MedCath Finance Company or any third party lender or any
combination thereof. Guarantor agrees to make no claim for such indebtedness
until all obligations of Borrower and any other person under the Note and any of
the other Loan Documents and all other direct and indirect obligations of
Guarantor to Lender have been fully discharged. Guarantor further agrees not to
assign to any party other than Lender all or any part of such indebtedness,
unless (a) Lender shall give its prior written consent to such assignment, which
consent may be given or withheld in Lender's sole discretion and (b) such
assignment shall be made subject to the terms of this Guaranty. Within five (5)
days after Lender's request (i) all instruments evidencing such indebtedness
shall be duly endorsed and delivered to Lender, (ii) all security for such
indebtedness shall be duly assigned and delivered to Lender, (iii) if a Default
has occurred, such indebtedness shall be enforced, collected and held by
Guarantor as trustee for Lender and shall be paid over to Lender on account of
the obligations guaranteed hereunder but without reducing or affecting in any
manner the liability of Guarantor under the other provisions of this Guaranty,
and (iv) Guarantor shall execute, file and record such documents and instruments
and take such other action as Lender deems necessary or appropriate to perfect,
preserve and enforce Lender's rights in and to such indebtedness and any
security therefor. If Guarantor fails to take any such action and a Default has
occurred under the Loan Agreement, Lender, as attorney-in-fact for Guarantor, is
hereby authorized to do so in the name of Guarantor. The foregoing power of
attorney is coupled with an interest and cannot be revoked.

      8.    Bankruptcy of Borrower or Any Other Person; Reinstatement and
Revival. In any bankruptcy or other proceeding in which the filing of claims is
required by law, Guarantor shall file, on or before the date which is twenty
(20) days prior to the expiration of the prescribed statutory period for filing
of claims, all claims which Guarantor may have against Borrower or any other
person relating to any indebtedness of Borrower to Guarantor and shall assign to
Lender all rights of Guarantor thereunder. If Guarantor does not timely file any
such claim, Lender, as attorney-in-fact for Guarantor, is hereby authorized to
do so in the name of Guarantor or; in Lender's discretion, to assign the claim
to a nominee and to cause a proof of claim to be filed in the name of Lender's
nominee. The foregoing power of attorney is coupled with an

                                       5
<PAGE>
interest and cannot be revoked. Lender or its nominee shall have the right, in
its reasonable discretion, to accept or reject any plan proposed in such
proceeding and to take any other action which a party filing a claim is entitled
to do. In all such cases, whether in administration, bankruptcy or otherwise,
the person or persons authorized to pay such claim shall pay to Lender the
amount payable on such claim and, to the full extent necessary for that purpose,
Guarantor hereby assigns to Lender all of Guarantor's rights to any such
payments or distributions; provided, however, Guarantor's obligations hereunder
shall not be satisfied except to the extent that Lender receives cash by reason
of any such payment or distribution. If Lender receives anything hereunder other
than cash, the same shall be held as collateral for amounts due under this
Guaranty. The liability of Guarantor hereunder shall be reinstated and revived,
and the rights of Lender shall continue, with respect to any amount at any time
paid by Borrower or any other person on account of the Note of any of the other
Loan Documents, which Lender shall be required to restore or return upon the
bankruptcy, insolvency or reorganization of Borrower or any other person or for
any other reason, all as though such amount had not been paid.

      9.    Disclosure of Information. Lender shall have the right at any time
to sell, assign, transfer, negotiate or, so long as Lender continues to be the
"lead lender", grant participations of at least $5 million each in, all or any
part of the Loan, the Note and/or the other Loan Documents, including, without
limitation, this Guaranty, and Guarantor acknowledges and agrees that, in
connection with any such action by Lender, Lender may forward to each actual or
prospective assignee, transferee or participant all documents and information in
Lender's possession, relating to this Guaranty or to Guarantor, whether such
documents and information were furnished by Borrower or Guarantor to Lender or
otherwise, provided that such parties have executed confidentiality agreements
in form reasonably acceptable to Guarantor.

      10.   Additional, Independent and Unsecured Obligations. This is a
guaranty of payment and not of collection and the obligations of Guarantor
hereunder shall be in addition to and shall not limit or in any way affect the
obligations of Guarantor under any other existing or future guaranties unless
said other guaranties are expressly modified or revoked in writing. This
Guaranty is independent of the obligations of Borrower and any other person
under the Note and the other Loan Documents. Lender may bring a separate action
to enforce the provisions hereof against Guarantor without taking action against
Borrower or any other person or joining Borrower or any other person as a party
to such action, and without first or concurrently proceeding against any
security held by Lender. This Guaranty is secured and shall be deemed to be
secured by any security instrument which recites that it secures this Guaranty.

      11.   Attorneys' Fees; Enforcement. Notwithstanding anything contained
herein to the contrary, if any attorney is engaged by Lender to enforce or
defend any provision of this Guaranty or any of the other Loan Documents, or as
a consequence of any default or event of default under this Guaranty or any of
the other Loan Documents, with or without the filing of any legal action or
proceeding, then Guarantor shall immediately pay on demand all Attorneys' Fees
and Costs, as defined below, incurred by Lender in connection therewith,
together with interest thereon from the date of such demand until paid, at the
rate of interest then applicable to the principal owing under the Note. As used
in this Guaranty, "Attorneys' Fees and Costs" shall mean all the reasonable fees
and expenses of counsel to Lender incurred after a Default, which

                                       6
<PAGE>
may include, without limitation, costs incurred for printing, Photostatting,
duplicating, facsimile transmissions, record searches, appraisals, air freight
charges, discovery, investigation and other expenses, and fees billed for law
clerks, paralegals, experts and witnesses, accountants, and others not admitted
to the bar but performing services under the supervision of or on behalf of an
attorney. The term "Attorneys' Fees and Costs" shall also include, without
limitation, all such reasonable fees and expenses incurred with respect to legal
actions, appeals, arbitrations, and bankruptcy proceedings, whether or not any
action or proceeding is brought with respect to the matter for which said fees
and expenses were incurred.

      12.   Effect of Waivers. Guarantor warrants and agrees that each of the
waivers set forth in this Guaranty are made with Guarantor's full knowledge of
their significance and consequences, and that under the circumstances the
waivers are reasonable. If any of said waivers shall hereafter be determined by
a court of competent jurisdiction to be contrary to any applicable law or
against public policy, such waivers shall be effective only to the maximum
extent permitted by law.

      13.   Rules of Construction. The word "Borrower" as used herein shall
include the named Borrower and any other person at any time assuming or
otherwise becoming primarily liable for all or any part of the obligations of
the named Borrower under the Note or any of the other Loan Documents. The term
"person" as used herein shall include any individual, company, trust or other
legal entity of any kind whatsoever. If this Guaranty is executed by more than
one person, the term "Guarantor" shall include all such persons. When the
context and construction so require, all words used in the singular herein shall
be deemed to have been used in the plural and vice versa. All headings appearing
in this Guaranty are for convenience only and shall be disregarded in construing
this Guaranty. Any capitalized term not defined in this Guaranty shall have the
meaning given to such term in the Loan Agreement or the other Loan Documents.

      14.   Governing Law. This Guaranty shall be governed by, and construed in
accordance with, the laws of the State of New Mexico; except to the extent
preempted by Federal laws. Guarantor and all persons and entities in any manner
obligated to Lender under this Guaranty consent to the jurisdiction of any
Federal or State Court within the State of New Mexico, and also consent to
service of process by any means authorized by New Mexico or Federal law.

      15.   No Third Party Beneficiaries. This Guaranty is solely for the
benefit of Lender and its successors and assigns, and is not intended to nor
shall it be deemed to be for the benefit of any third party, including, without
limitation, Borrower.

      16.   Amendments. Neither this Guaranty nor any provision hereof may be
amended, modified, waived, discharged or terminated except by an instrument in
writing duly signed by or on behalf of Lender and Guarantor.

      17.   Miscellaneous. The provisions of this Guaranty shall bind and
benefit the heirs, executors, administrators, legal representatives, successors
and assigns of Guarantor and Lender. The liability of all persons and entities
who are in any manner obligated hereunder shall be joint

                                       7
<PAGE>
and several. If any provision of this Guaranty shall be determined by a court of
competent jurisdiction to be invalid, illegal or unenforceable, that portion
shall be deemed severed from this Guaranty and the remaining pans shall remain
in full force as though the invalid, illegal or unenforceable portion had never
been part of this Guaranty.

      18.   Waiver of Right to Trial by Jury. GUARANTOR ACKNOWLEDGES THAT IT HAS
HAD THE ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT TO ITS RIGHTS TO TRIAL BY
JURY UNDER THE CONSTITUTIONS OF THE UNITED STATES AND THE STATE OF NEW MEXICO.
GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (l) ARISING UNDER THIS GUARANTY OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH
OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF
LENDER AND GUARANTOR WITH RESPECT TO THIS GUARANTY OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND
GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT LENDER
MAY FILE A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF GUARANTOR TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

      Guarantor's Initials:   /s/ HJW                    /s/ SJS
                              ---------------------      ---------------------

                                                         /s/ illegible
                              ---------------------      ---------------------

      19.   Limitation of Liability.

            (a)   Notwithstanding anything contained in this Guaranty to the
      contrary, the liability of each Guarantor to Lender under this Guaranty
      shall be limited to the amount set forth in the table below:

<TABLE>
<CAPTION>
                      MAXIMUM LIABILITY UNDER THIS GUARANTY
--------------------------------------------------------------------------------
       MEDCATH            ST. JOSEPH             SWCA                NMHI
--------------------------------------------------------------------------------
<S>                       <C>                 <C>                 <C>
     $16,575,000          $8,925,000          $3,824,962          $6,630,038
</TABLE>

                                       8
<PAGE>
            (b)   As used herein, "Fixed Charge Ratio" shall mean a ratio of (1)
      the sum of Net Income, depreciation, amortization, income taxes, and
      interest expense, to (2) interest expense. IF, after the Conversion Date,
      Borrower has (i) maintained a Fixed Charge Ratio of not less than 1.5 to
      1.0 for seven (7) of eight (8) consecutive calendar quarter, and (ii) over
      such eight (8) calendar quarters the average of Borrower's Fixed Charge
      Ratio is at least 1.5 .to 1.0, THEN Guarantor may submit to Lender a
      written certification stating that such events have occurred, together
      with Borrower's financial statements showing that such events have
      occurred ("Guarantor Certification"). Upon Lender's receipt and acceptance
      of the Guarantor Certification, the liability of each Guarantor to Lender
      under this Guaranty shall be limited to the amount set forth in the table
      below:

<TABLE>
<CAPTION>
              MAXIMUM LIABILITY UNDER THIS GUARANTY - 1ST REDUCTION
--------------------------------------------------------------------------------
       MEDCATH            ST. JOSEPH             SWCA                NMHI
--------------------------------------------------------------------------------
<S>                       <C>                 <C>                 <C>
     $9,975,000           $8,925,000          $3,824,962          $6,630,038
</TABLE>

            (c)   Only if the 1st Reduction referred to in subsection (b) above
      occurs, then, IF the Borrower has (i) maintained a Fixed Charge Ratio of
      not less than 1.5 to 1.0 for seven (7) of eight (8) consecutive calendar
      quarters, and (ii) over such eight (8) calendar quarters the average of
      Borrower's Fixed Charge Ratio is at least 1.5 to 1.0, THEN Guarantor may
      submit to Lender a Guarantor Certification. This 2nd Reduction may only
      occur if at least four (4) calendar quarters have passed since the
      occurrence of the 1st Reduction. Upon Lender's receipt and acceptance of
      the Guarantor Certification, the liability of each Guarantor to Lender
      under this Guaranty shall be limited to the amount set forth in the table
      below:

<TABLE>
<CAPTION>
              MAXIMUM LIABILITY UNDER THIS GUARANTY - 2ND REDUCTION
--------------------------------------------------------------------------------
       MEDCATH            ST. JOSEPH             SWCA                NMHI
--------------------------------------------------------------------------------
<S>                       <C>                 <C>                 <C>
     $5,003,390           $7,296,610          $3,127,088          $5,420,370
</TABLE>

                                       9
<PAGE>
            (d)   Only if the 1st Reduction and 2nd Reduction referred to in
      subsections (b) and (c) above occur, then, IF the Borrower has (i)
      maintained a Fixed Charge Ratio of not less than 1.5 to 1.0 for seven (7)
      of eight (8) consecutive calendar quarters, and (ii) over such eight (8)
      calendar quarters the average of Borrower's Fixed Charge Ratio is at least
      1.5 to 1.0, THEN Guarantor may submit to Lender a Guarantor Certification.
      This Final Reduction may only occur if at least four (4) calendar quarters
      have passed since the occurrence of the 2nd Reduction. Upon Lender's
      receipt and acceptance of the Guarantor Certification, the liability of
      each Guarantor to Lender under this Guaranty shall be limited to the
      amount set forth in the table below:

<TABLE>
<CAPTION>
             MAXIMUM LIABILITY UNDER THIS GUARANTY - FINAL REDUCTION
--------------------------------------------------------------------------------
       MEDCATH            ST. JOSEPH             SWCA                NMHI
--------------------------------------------------------------------------------
<S>                       <C>                 <C>                 <C>
     $3,945,763           $5,754,237          $2,466,077          $4,274,601
</TABLE>

            (e)   Notwithstanding anything to the contrary in this Guaranty,
      Lender acknowledges and agrees that the liability of St. Joseph, SWCA and
      NMHI hereunder shall be several and not joint.

      20.   Additional Provisions. Such additional terms, covenants and
conditions as may be set forth on any exhibit executed by Guarantor and attached
hereto which recites that it is an exhibit to this Guaranty are incorporated
herein by this reference.

                                       10
<PAGE>
      IN WITNESS WHEREOF, each Guarantor has executed this Guaranty as of the
date first written above.

GUARANTOR:

MEDCATH INCORPORATED,
a North Carolina corporation

By: /s/ Richard J. Post
   ----------------------------------
Name:  Richard J. Post
       ------------------------------
Title: Secretary
       ------------------------------

ST. JOSEPH HEALTHCARE SYSTEM,
a New Mexico nonprofit corporation

By: /s/ Steven J. Smith
   ----------------------------------
Name:  Steven J. Smith
       ------------------------------
Title: President & CEO
       ------------------------------

SWCA, LLC,
a New Mexico limited liability company

By: /s/ Harvey J. White
   ----------------------------------
Name:  Harvey J. White, Jr.
       ------------------------------
Title: President
       ------------------------------

NMHI, LLC,
a New Mexico limited liability company

By: /s/ signature illegible
   ----------------------------------
Name:
       ------------------------------
Title: President
       ------------------------------

                                       11
<PAGE>
                                   EXHIBIT "B"

                               Amended Section 19

      Section 19 shall hereby be deleted and replaced with the following:

      "19   Limitation of Liability.

            (a)   Notwithstanding anything contained in this Guaranty to the
contrary, the liability of each Guarantor to Lender under this Guaranty shall be
limited to the amount set forth in the table below:

<TABLE>
<CAPTION>
                      MAXIMUM LIABILITY UNDER THIS GUARANTY
--------------------------------------------------------------------------------
      MEDCATH                         SWCA                            NMHI
--------------------------------------------------------------------------------
<S>                                <C>                             <C>
    $25,500,000                    $3,824,962                      $6,630,038
</TABLE>

            (b)   As used herein, "Fixed Charge Ratio" shall mean a ratio of (1)
the sum of Net Income, depreciation, amortization, income taxes, and interest
expense, to (2) interest expense. IF, after the first anniversary of the
Conversion Date, Borrower has (i) maintained a Fixed Charge Ratio of not less
than 1.5 to 1.0 for seven (7) of eight (8) consecutive calendar quarters, and
(ii) over such eight (8) calendar quarters the average of Borrower's Fixed
Charge Ratio is at least 1.5 to 1.0, THEN Guarantor may submit to Lender a
written certification stating that such events have occurred ("Guarantor
Certification"). Upon Lender's receipt and acceptance of the Guarantor
Certification, the liability of each Guarantor to Lender under this Guaranty
shall be limited to the amount set forth in the table below:

<TABLE>
<CAPTION>
              MAXIMUM LIABILITY UNDER THIS GUARANTY - 1ST REDUCTION
--------------------------------------------------------------------------------
      MEDCATH                         SWCA                            NMHI
--------------------------------------------------------------------------------
<S>                                <C>                             <C>
    $18,900,000                    $3,824,962                      $6,630,038
</TABLE>

            (c)   Only if the 1st Reduction referred to in subsection (b) above
occurs, then, IF the Borrower has (i) maintained a Fixed Charge Ratio of not
less than 1.5 to 1.0 for seven (7) of eight (8) consecutive calendar quarters,
and (ii) over such eight (8) calendar quarters the average of Borrower's Fixed
Charge Ratio is at least 1.5 to 1.0, THEN Guarantor may submit to Lender a
Guarantor Certification. This 2nd Reduction may only occur if at least six (6)
calendar quarters have passed since the occurrence of the 1st Reduction. Upon
Lender's receipt and acceptance of the Guarantor Certification, the liability of
each Guarantor to Lender under this Guaranty shall be limited to the amount set
forth in the table below:

                                       12
<PAGE>
<TABLE>
<CAPTION>
              MAXIMUM LIABILITY UNDER THIS GUARANTY - 2ND REDUCTION
--------------------------------------------------------------------------------
      MEDCATH                         SWCA                            NMHI
--------------------------------------------------------------------------------
<S>                                <C>                             <C>
    $12,300,000                    $3,127,088                      $5,420,370
</TABLE>

            (d)   Only if the 1st Reduction and 2nd Reduction referred to in
subsections (b) and (c) above occur, then, IF the Borrower has (i) maintained a
Fixed Charge Ratio of not less than 1.5 to 1.0 for seven (7) of eight (8)
consecutive calendar quarters, and (ii) over such eight (8) calendar quarters
the average of Borrower's Fixed Charge Ratio is at least 1.5 to 1.0, THEN
Guarantor may submit to Lender a Guarantor Certification. This Final Reduction
may only occur if at least four (4) calendar quarters have passed since the
occurrence of the 2nd Reduction. Upon Lender's receipt and acceptance of the
Guarantor Certification, the liability of each Guarantor to Lender under this
Guaranty shall be limited to the amount set forth in the table below:

<TABLE>
<CAPTION>
             MAXIMUM LIABILITY UNDER THIS GUARANTY - FINAL REDUCTION
--------------------------------------------------------------------------------
      MEDCATH                         SWCA                            NMHI
--------------------------------------------------------------------------------
<S>                                <C>                             <C>
    $9,700,000                     $2,466,077                      $4,274,601
</TABLE>

            (e)   Notwithstanding anything to the contrary in this Guaranty,
Lender acknowledges and agrees that the liability of MedCath, SWCA and NMHI
hereunder shall be several and not joint."

                                      -2-Exhibit 10.26

Christopher R. Kaup
State Bar No. 014820
Tiffany & Bosco, P.A.
FIFTH FLOOR VIAD TOWER
1850 NORTH CENTRAL AVENUE
PHOENIX, ARIZONA 85004-4546
TELEPHONE: (602) 255-6000
FACSIMILE: (602) 255-0103

Attorneys for Debtors

J. Thomas Beckett
State Bar No. 05587
R. David Grant
Utah State Bar No. 6233
Parsons Behle & Latimer
201 South Main Street
Suite 1800
Salt Lake City, Utah  84111
Telephone: (801) 532-1234
Facsimile: (801) 536-6111

Attorneys for Canopy

                         UNITED STATES BANKRUPTCY COURT
                               DISTRICT OF ARIZONA

In re:                                   Chapter 11 Proceedings

EBIZ ENTERPRISES, INC.,                  Case Nos.  _____________ and
a Nevada corporation,                               _____________

                           Debtor.       (Joint Administration Pending)
----------------------------------

In re:

JONES BUSINESS SYSTEMS, INC.,
a Texas corporation,                       STIPULATION PROVIDING FOR USE OF CASH
                                           COLLATERAL AND ADEQUATE PROTECTION OF
                           Debtor.         SECURED CREDITOR'S LIEN
----------------------------------

     Debtors,  EBIZ ENTERPRISES,  INC. ("EBIZ") and JONES BUSINESS SYSTEMS, INC.
("JBSI")  (collectively,  "Debtors"),  and The Canopy Group,  Inc.  (hereinafter
"Canopy"),  stipulate  and  agree to entry of an Order  approving  the terms and
conditions of this Stipulation Providing For Use of Cash Collateral and Adequate
Protection of Secured Creditor's Lien (this "Stipulation"), as set forth herein.
Debtors also have sought, by separate Motion filed  contemporaneously  herewith,
to have their Bankruptcy Estates joint administered.
<PAGE>
I. RECITALS

     A. On or about  _____________,  Debtors filed their separate  petitions for
relief under Chapter 11 of the Bankruptcy Code.

     B. Debtors are operating a business involved in the manufacture and sale of
computers and computer  components (the "Business").  Pursuant to Section 541 of
the Bankruptcy Code, the business,  personal property  (furniture,  fixtures and
equipment)  used  therein,   and  accounts  and  accounts  receivable  generated
therefrom are property of Debtors' estates.

     C.  Debtors'  purpose  and  intent in filing  their  respective  Chapter 11
proceedings  is to  accomplish  an effective  reorganization  of their  business
affairs and operations.  Canopy has entered into this Stipulation in reliance on
Debtors' intent as expressed in this paragraph.

     D.  Canopy is a secured  creditor of Debtors  holding a properly  perfected
security  interest in all of Debtors'  accounts  receivable  and  inventory,  by
virtue of several  prepetition  loan  arrangements  pursuant to which Canopy and
Finova Capital  Corporation  ("Finova")  advanced funds to Debtors.  The debt to
Canopy  consists of five  components:  a term loan (the "Term Loan"),  a line of
credit (the "Line of Credit"),  an amended and restated  promissory note and two
secured  convertible  promissory  notes  (the  "Notes").  Prior to the filing by
Debtors of their  Bankruptcy  Petitions,  Canopy purchased the Term Loan and the
Line of Credit from Finova and Finova  assigned its security  interests  and all
other rights as against Debtors and their assets to Canopy.

                                      -2-
<PAGE>
     E. For purposes of this  Stipulation,  Debtors  concede that  proceeds from
collection  of  prepetition  accounts  receivable  and proceeds from the sale of
prepetition  inventory  are cash  collateral  of Canopy within the meaning of 11
U.S.C. ss. 363(a) ("Cash  Collateral").1  Debtors further  acknowledge that they
are aware of no defenses to  Canopy's  security  interest  and  acknowledge  the
validity and perfection of Canopy's security interest in the Cash Collateral.

     F. Debtors and Canopy have entered into this  Stipulation  to: (i) preserve
the value of the estate assets; (ii) permit continued operations that will allow
for a distribution to general  unsecured  creditors;  (iii) avoid protracted and
costly cash collateral  litigation;  (iv) provide a means for  accountability of
Cash Collateral receipt and expenditure;  and (v) adequately protect Canopy from
the  diminution  of its  interest  in the Cash  Collateral.  Debtors  and Canopy
believe this  Stipulation  to be in the best interests of the estate and Canopy,
and  respectfully  request the Court approve this  Stipulation  according to its
terms.

II. OPERATIVE PROVISIONS - USE OF CASH COLLATERAL/ADEQUATE PROTECTION

     A. The parties  hereby  incorporate  the  foregoing  "Recitals"  into these
"Operative Provisions" as though fully set forth.

     B.  Debtors  shall have the right and  authority  to operate and manage the
Business, subject to the terms of this Stipulation.

     C. Canopy hereby consents to the use of its Cash Collateral,  to the extent
and up to an amount  that  shall not  exceed  ninety-five  percent  (95%) of the
aggregate amount of its Cash Collateral, under the following conditions:

----------
(1) Assuming Court approval of this  Stipulation,  Debtors concede that proceeds
from collection of post-petition  accounts receivable and proceeds from the sale
of  post-petition  inventory also will be cash collateral of Canopy and included
in the definition of "Cash Collateral" used herein.

                                       -3-
<PAGE>
     1. Debtors may,  with the Cash  Collateral,  pay the  reasonable  costs and
expenses of the Business provided:  (i) no expenditure of Cash Collateral during
any four-week  period may exceed the  respective  amount set forth in the budget
for the  Business,  attached  hereto as Exhibit "A,"  without the express  prior
consent of Canopy;  (ii) in the event the specific  persons named in Exhibit "A"
are not employed by Debtors during any successive four-week period for which use
of Cash Collateral is authorized (e.g.,  having accepted employment with another
employer), Debtors may employ alternate workers to perform the tasks anticipated
to have been  performed  by the  listed  person at a rate no  greater  than that
authorized on Exhibit "A"; and (iii) Debtors and Canopy specifically reserve the
right to agree to a  modification  of the budget without  additional  Bankruptcy
Court  approval  if such  modification  appears  to  Debtors  and  Canopy  to be
justified by the costs and benefits associated with administering the estate. In
the event that any unforeseen,  additional, or emergency costs or expenses shall
arise,  Debtors may make  payment  thereof  from Cash  Collateral  only upon the
express  consent of Canopy or  further  Order of this  Court.  If funds for such
unforeseen,  additional  or  emergency  expenses  are  advanced  to Debtors by a
principal or insider of Debtors,  reimbursement  of sums so advanced may be made
from the Cash  Collateral  only with the  consent  of Canopy or an Order of this
Court;

     2. Canopy  shall  collect  any Cash  Collateral  paid to Debtors  under the
"lockbox"  arrangement  provided for by the loan  documentation with Debtors and
shall immediately forward or make available to Debtors ninety-five percent (95%)
of all such Cash Collateral.  Canopy may, at its discretion, apply the remaining
five percent (5%) of such Collateral first to interest and then to principal due
to Canopy by Debtors;

     3. In the event that ninety-five  percent (95%) of all such Cash Collateral
forwarded or made  available to Debtors is  insufficient  to pay the  reasonable
costs and expenses of the Business as set forth in the budget for the  Business,

                                      -4-
<PAGE>
attached  hereto as Exhibit  "A,"  Canopy may  advance  additional  funds to the
Debtors beyond the ninety-five percent (95%) of all such Cash Collateral;

     4. Debtors  acknowledge  that, by agreeing to forward or make  available to
Debtors ninety-five percent (95%) of all such Cash Collateral, without receiving
in exchange substitute collateral of equal or greater value, and potentially, by
advancing additional funds to the Debtors, Canopy is providing credit to Debtors
post-petition,  and  Canopy  is  only  willing  to  provide  credit  to  Debtors
post-petition on the terms contained in this Stipulation. Debtors represent that
they are unable to obtain unsecured credit allowable under section  503(b)(1) of
the Bankruptcy Code.

     5. Any Cash  Collateral  collected by Debtors or  transferred to Debtors by
Canopy shall be held by Debtors in a  Debtor-in-Possession  account that may, in
the exercise of Debtors'  reasonable  business  discretion,  be interest bearing
(the "Cash Collateral Account").  The Cash Collateral Account shall contain only
the Cash  Collateral  of Canopy,  and no other estate assets shall be commingled
with the Cash Collateral proceeds;

     6. Debtors, in the exercise of their reasonable business judgment, may from
time to time during the term of this Stipulation disburse to Canopy excess funds
on hand in either of the bankruptcy estates ("Excess Funds") that are undisputed
to be the Cash  Collateral of Canopy.  In the event there exists,  or Debtors in
good faith  believe there  exists,  a dispute or competing  claim to said Excess
Funds,  Debtors may give notice of their  intention to disburse  estate funds to
Canopy  by use of a 10-day  bar date  notice.  Nothing  contained  herein  shall
prevent or  restrict  Canopy  from  seeking  an order from this Court  directing
Debtors  to  disburse  Excess  Funds in an  amount  greater,  or at  times  more
frequent, than that deemed appropriate by Debtors;

                                      -5-
<PAGE>
     7. Debtors  shall timely file the required  interim  financial  reports and
such other accountings as are required by Local Bankruptcy Rules.  Debtors shall
provide  copies of said  reports to Canopy by mail or  delivery  to counsel  for
Canopy upon filing with the Court;

     8.  Debtors  shall  prepare and deliver (by hand  delivery or  telecopy) to
Canopy bi-weekly reports of accounts receivable and itemizations of all receipts
and  disbursements in a format to be reasonably  designated from time to time by
Canopy, but which may include:

          a. All billing  information  from the  prepetition  and  post-petition
period, including the parties billed, and the amounts of those bills;

          b. A list of all accounts receivable  containing the name, address and
account  information of each payor,  the dates of all billings and the amount(s)
still owing on such accounts;

          c. A list of all  funds  received  and  expended  including  receipts,
invoices or evidence of payment for all expenses paid in accordance with Exhibit
"A." Canopy  reserves  the right to require from  Debtors  additional  financial
reports that are  reasonably  related to  determining  and  confirming  Debtors'
financial condition during the term of this Stipulation.

          F.  Upon  receipt  of  the  accountings  described  in  the  preceding
paragraphs,  Canopy  shall  have the right to inspect  the books and  records of
Debtors from which such accounts  were made.  Such  inspection  may be made upon
48-hour  request  by  Canopy  to  Debtors  and  to  Counsel  for  Debtors.  Such
inspections  shall be  conducted  at  Debtors'  place of  business at a mutually
agreed time so as not to unduly  interfere with Debtors'  administration  of the
estate.

          G. In order to  adequately  protect  Canopy from a  diminution  in the
value of its collateral,  which will  necessarily  occur as Debtors utilize Cash
Collateral,  and to provide security for any additional advances made to Debtors
by Canopy,  Debtors:  (i) confirm the validity of Canopy's  security interest to

                                      -6-
<PAGE>
the fullest  extent  described in their  agreements  with Canopy;  and (ii) have
agreed and consent to and hereby do grant to Canopy to secure the loans owing by
the Debtors to Canopy to the extent of the Cash Collateral advanced by Canopy to
the  Debtors and not repaid by the  Debtors,  and any  additional  post-petition
advances,  in addition to the security  interest already held by Canopy, a first
position  security  interest in the  accounts  receivable  of  Debtors,  if any,
generated post-petition,  all inventory acquired by Debtors post-petition and in
the proceeds of same. In determining the amount of cash  collateral  advanced by
Canopy to the  Debtors  and not  repaid  by the  Debtors,  only Cash  Collateral
collected  by  Canopy  under  the   "lockbox"   arrangement   that  is  paid  on
post-petition  accounts  receivable  and  inventory  will be  applied  to reduce
post-petition  advances of Cash  Collateral.  Debtors and Canopy agree the loans
owing by the Debtors to Canopy to the extent of the Cash Collateral  advanced by
Canopy  to the  Debtors  and not  repaid  by the  Debtors,  and  any  additional
post-petition  advances,  will  have  priority  over  any or all  administrative
expenses of the kind  specified  in section  503(b) or 507(b) of the  Bankruptcy
Code,  and Debtors  agree and grant a security  interest in the  property of the
estate that is not otherwise subject to a lien, as provided in section 364(c)(2)
of the Bankruptcy  Code, and Debtors agree and grant a security  interest in the
property  of the  estate  that is  subject  to a lien  junior to such  lien,  as
provided in section  364(c)(3) of the Bankruptcy Code, to secure the loans owing
by the Debtors to Canopy to the extent of the Cash Collateral advanced by Canopy
to the Debtors and not repaid by the Debtors,  and any additional  post-petition
advances. However, the liens granted to Canopy shall be subject to the following
carve-out  expenses  (the  "Carve-Out  Amounts")  and  shall  not  attach to the
property  of Debtors to the extent of:

     (1) The fees  payable  or which may become  payable  to the  United  States
Trustee, pursuant to 228 U.S.C. ss. 1930;

                                      -7-
<PAGE>
     (2) The fees payable or which may become payable to the Clerk of the Court;
and

     (3) The unpaid reasonable fees and expenses actually incurred,  on or after
the date of the filing by Debtors of their petitions for relief under Chapter 11
of the  Bankruptcy  Code and as shall be approved from time to time by the Order
of the Court, by any attorneys,  accountants and other professionals retained by
the Bankruptcy Estate, pursuant to 11 U.S.C. ss.ss. 327 & 1103, in an amount not
to exceed the aggregate amount of $150,000.00.

     H. Any payments received by Canopy from Debtors, including the five percent
(5%) of the Cash Collateral to be retained by Canopy, shall be applied to reduce
first the  accrued  but unpaid  interest,  next to the  principal  amount of the
prepetition debt, and last to any other sum due pursuant to debt instruments.

III. OPERATIVE PROVISIONS - GENERAL

     A. This  Stipulation  shall  remain in effect until the earlier of: (i) the
close of business  on the fifth  (5th)  business  day  following  the receipt by
Counsel  for  Debtors  of a  Notice  of  Default  and  Termination  from  Canopy
describing with particularity the nature of Debtors' breach of the terms of this
Stipulation,  if Debtors  fail to cure that breach  prior to that date and time;
(ii) further Order of this Court modifying the terms hereof;  (iii) confirmation
of a Plan of  Reorganization in both of the above captioned cases; (iv) the date
of the entry of an Order by this Court converting  either of the above captioned
cases to a case under  Chapter 7 of the  Bankruptcy  Code;  or (v)  dismissal of
either of the above captioned cases.

     B. Debtors agree that, in the event Debtors seek other Debtor-In-Possession
financing  under section 364 of the  Bankruptcy  Code,  Canopy will have a first
right of refusal for thirty days to provide the  Debtor-In-Possession  financing
on the same terms as offered by the  alternate  lender.  Further,  to the extent
Debtors receive  financing from any source other than Canopy,  whether through a
debt instrument or equity or other vehicle, such as a rights offering,  prior to

                                      -8-
<PAGE>
confirmation of any Plan of Reorganization,  Debtors agree that Canopy will have
the right, but not the obligation to participate in providing such financing, in
such amount as Canopy  desires.  In the event that Canopy chooses not to provide
all of the Debtors'  Debtor-in-Possession  or other  financing,  and the Debtors
obtain  financing  from  another  source  prior to  confirmation,  any  security
interest in collateral or other rights granted to the alternate financier, other
than the right to repayment, to the extent they have not already been granted to
Canopy,  will be granted to Canopy by the  Debtors,  and Canopy and the  Debtors
agree that all such rights and collateral will be shared pro rata between Canopy
and the new financier to serve as security for the  repayment of new  financing,
as well as any amounts due and owing by the Debtors to Canopy under the terms of
this Stipulation to the extent of the Cash Collateral  advanced by Canopy to the
Debtors  and  not  repaid  by the  Debtors,  and  any  additional  post-petition
advances.

     C. Debtors shall comply with the Debtor-in-Possession account and
reporting requirements of the guidelines promulgated by the Office of the United
States  Trustee.  However,  to the extent  the  administrative  activity  in the
jointly  administered  estates is provided for the benefit of each estate and is
not readily  susceptible of segregation,  such activity may be consolidated  and
performed in the EBIZ estate,  and paid from the  Debtor-in-Possession  accounts
and reported as activity of that estate.

     D. Debtors will not file or propose any Plan of Reorganization  (including,
but not limited to, any amendment or modification  of a Plan of  Reorganization,
whether before or after confirmation),  which does not incorporate all the terms
of this Stipulation.  In the event of any inconsistency between this Stipulation
and any Plan of Reorganization  filed or proposed by Debtors,  the terms of this
Stipulation will control,  and any such  inconsistent  provisions of any Plan of
Reorganization or any confirmation order thereon will be null and void.

                                      -9-
<PAGE>
     E.  All   notices,   requests,   demands,   payment   of  monies  or  other
communications  hereunder shall be in writing and shall be addressed as follows:
(i) in the case of Debtor - c/o Christopher Kaup, Esq.,  Tiffany & Bosco,  P.A.,
1850 North Central, 5th Floor, Phoenix,  Arizona 85004 (telecopy  602-255-0103);
and (ii) in the case of Canopy - c/o J. Thomas Beckett, Esq. and R. David Grant,
Esq.,  Parsons  Behle & Latimer,  201 South Main Street,  Suite 1800,  Salt Lake
City, Utah, 84111 (telecopy (801) 536-6111).

     F. Any  party  may  designate  another  address  in  writing.  All  notices
hereunder  shall be  considered  received  and  effective on the earliest of the
following  (the  "Receipt  Date"):  (i) three (3) days after deposit in the U.S.
Mail,  postage prepaid,  registered or certified mail, return receipt requested;
(ii) 24 hours after  delivery,  if sent by  facsimile  transmission;  (iii) upon
delivery,  if delivered in person, to the address set forth above; or (iii) upon
delivery, if sent by commercial express service, such as Federal Express, except
that notices of change of address,  shall be  effective  ten (10) days after the
Receipt Date.  Any Receipt Date that occurs on a weekend or a legal holiday will
be deemed  extended to the first business day thereafter  occurring.  Any matter
sent by the  methods  and  directed  to the  addressor  and/or  telecopy  number
described above (if telecopy notice reflecting successful delivery exists) shall
be conclusively presumed to have been received.

     G. Except as expressly set forth  herein,  this  Stipulation  and any Order
entered in connection with this Stipulation shall not operate as an adjudication
of adequate  protection  or any other  related  rights  asserted by any party in
interest under 11 U.S.C. ss.ss. 361, 362, or 363. Further,  this Court shall not
prevent Canopy from moving for or obtaining any appropriate relief in this case,
including the request of additional adequate protection of its interests.

     H. Nothing in this  Stipulation will be deemed or construed as an admission
or  waiver  by any  party  regarding  the  validity  or  propriety  of the above
captioned  Chapter 11 cases or regarding  any issue or fact  therein,  including

                                      -10-
<PAGE>
(except as expressly set forth  herein) but not limited to adequate  protection,
valuation,  any  matter(s)  pertinent  to the  assumption  or  rejection  of any
executory  contract(s)  or any matter(s)  pertinent to the granting or denial of
stay relief with respect to the Business  and/or its rents,  issues and profits.
This Stipulation has been made for the limited purpose concerning the use of the
Debtors'  inventory  and accounts  receivable to  facilitate  administration  of
Debtors' estates,  to provide adequate protection for the diminution of Canopy's
collateral and to provide a basis for post-petition  financing, and the scope of
this Stipulation is limited to its express provisions.

     I. This Stipulation may be executed in counterparts,  all of which together
shall  constitute  one  complete  Stipulation.   Signatures  sent  by  facsimile
transmission shall be effective in all respects as originals.

               DATED this ____ day of August, 2001.

                                        TIFFANY & BOSCO, P.A.

                                        By: /s/ Christopher R. Kaup
                                            ------------------------------------
                                            Christopher R. Kaup, Esq.
                                            Fifth Floor Viad Tower
                                            1850 North Central Avenue
                                            Phoenix, Arizona 85004-4546
                                            Attorneys for Debtors

                                        THE CANOPY GROUP INC

                                        By: /s/ Darcy Mott
                                            ------------------------------------
                                            Darcy Mott, VP Finance, Treasurer
                                            and Chief Financial Officer

                                      -11-

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