Document:

EXHIBIT 10.3

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                                CREDIT AGREEMENT

                                     among

                         VANGUARD HEALTH SYSTEMS, INC.,

                                VARIOUS LENDERS,

                       BANC OF AMERICA SECURITIES LLC and
                      MORGAN STANLEY SENIOR FUNDING, INC.,
                   as JOINT LEAD ARRANGERS AND BOOK MANAGERS,

                             BANK OF AMERICA, N.A.,
                            as ADMINISTRATIVE AGENT,

                      MORGAN STANLEY SENIOR FUNDING, INC.,
                             as SYNDICATION AGENT,

                                      and

                         FIRST UNION NATIONAL BANK and
                     GENERAL ELECTRIC CAPITAL CORPORATION,
                           as CO-DOCUMENTATION AGENTS

                       ----------------------------------

                           Dated as of July 30, 2001

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                               TABLE OF CONTENTS
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                                                                           Page
                                                                           ----
SECTION 1.  Amount and Terms of Credit........................................1

         1.01  The Commitments................................................1
         1.02  Minimum Amount of Each Borrowing...............................4
         1.03  Notice of Borrowing............................................4
         1.04  Disbursement of Funds..........................................5
         1.05  Notes..........................................................6
         1.06  Conversions....................................................7
         1.07  Pro Rata Borrowings............................................8
         1.08  Interest.......................................................8
         1.09  Interest Periods...............................................9
         1.10  Increased Costs, Illegality, etc..............................10
         1.11  Compensation..................................................12
         1.12  Change of Lending Office......................................13
         1.13  Incremental Term Loan Commitments.............................13
         1.14  Replacement of Lenders........................................17
         1.15  Additional Provisions Regarding the Incurrence of Eurodollar
                 Loans Prior to the Syndication Date.........................19

SECTION 2.  Letters of Credit................................................19

         2.01  Letters of Credit.............................................19
         2.02  Maximum Letter of Credit Outstandings; Final Maturities.......20
         2.03  Letter of Credit Requests; Minimum Stated Amount..............20
         2.04  Letter of Credit Participation................................21
         2.05  Agreement to Repay Letter of Credit Drawings..................23
         2.06  Increased Costs...............................................23

SECTION 3.  Fees; Reductions of Commitment...................................24

         3.01  Fees..........................................................24
         3.02  Voluntary Termination of Unutilized Commitments...............25
         3.03  Mandatory Reduction of Commitments............................26

SECTION 4.  Prepayments; Payments; Taxes.....................................27

         4.01  Voluntary Prepayments.........................................27
         4.02  Mandatory Repayments..........................................28
         4.03  Method and Place of Payment...................................34
         4.04  Net Payments; Taxes...........................................34

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                                                                           Page
                                                                           ----
SECTION 5A.  Conditions Precedent to Effective Date..........................37

         5A.01  Execution of Agreement; Notes................................37
         5A.02  Fees, etc....................................................37
         5A.03  Opinion of Counsel...........................................37
         5A.04  Corporate Documents; Proceedings; etc........................37
         5A.05  Employee Benefit Plans; Shareholders' Agreements; Management
                  Agreements; Collective Bargaining Agreements; Existing
                  Indebtedness Agreements; Tax Sharing Agreements; Material
                  Leases.....................................................38
         5A.06  Senior Subordinated Notes....................................39
         5A.07  Refinancing..................................................39
         5A.08  Pledge Agreement.............................................40
         5A.09  Subsidiaries Guaranty........................................40
         5A.10  Security Agreement...........................................40
         5A.11  Mortgages; Title Insurance; Survey; etc......................41
         5A.12  Adverse Change; Approvals; etc...............................41
         5A.13  Litigation...................................................42
         5A.14  Pro Forma Balance Sheet; Projections.........................42
         5A.15  Solvency Certificate; Insurance Certificates.................42
         5A.16  Maximum Leverage Ratio.......................................42

SECTION 5B.  Conditions Precedent to each Incurrence of Incremental
             Term Loans......................................................42

         5B.01  Occurrence of Syndication Date...............................42
         5B.02  Incremental Term Loan Commitment Agreement; Related
                  Documentation..............................................42
         5B.03  Incremental Term Notes.......................................43
         5B.04  Officer's Certificate........................................43
         5B.05  Other Conditions Specified in the Relevant Incremental Term
                  Loan Commitment Agreement..................................43

SECTION 6.  Conditions Precedent to All Credit Events........................43

         6.01  No Default; Representations and Warranties....................43
         6.02  Notice of Borrowing; Letter of Credit Request.................43

SECTION 7.  Representations and Warranties...................................44

         7.01  Corporate and Other Status....................................44
         7.02  Corporate or Partnership Power and Authority..................44
         7.03  No Violation..................................................45
         7.04  Governmental Approvals........................................45
         7.05  Financial Statements; Financial Condition; Undisclosed
                  Liabilities; Projections; etc..............................45
         7.06  Litigation....................................................46
         7.07  True and Complete Disclosure..................................47
         7.08  Use of Proceeds; Margin Regulations...........................47
         7.09  Tax Returns and Payments......................................47
         7.10  Compliance with ERISA.........................................48

                                      ii
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                                                                           Page
                                                                           ----
         7.11  The Security Documents........................................49
         7.12  Approvals; etc................................................49
         7.13  Properties....................................................49
         7.14  Capitalization................................................50
         7.15  Subsidiaries..................................................50
         7.16  Compliance with Statutes, etc.................................50
         7.17  Investment Company Act........................................50
         7.18  Public Utility Holding Company Act............................50
         7.19  Environmental Matters.........................................50
         7.20  Labor Relations...............................................51
         7.21  Patents, Licenses, Franchises and Formulas....................51
         7.22  Indebtedness..................................................52
         7.23  Hospital Properties...........................................52
         7.24  Subordination.................................................52
         7.25  Legal Names; Organizational Identification Numbers; Jurisdiction
                  and Type of Organization; etc..............................52
         7.26  No Director, Executive Officer or Principal Shareholder.......52

SECTION 8.  Affirmative Covenants............................................52

         8.01  Information Covenants.........................................53
         8.02  Books, Records and Inspections................................55
         8.03  Maintenance of Property; Insurance, Reserves..................56
         8.04  Corporate Franchises..........................................56
         8.05  Compliance with Statutes, etc.................................56
         8.06  Compliance with Environmental Laws............................56
         8.07  ERISA.........................................................57
         8.08  End of Fiscal Years; Fiscal Quarters..........................58
         8.09  Performance of Obligations....................................58
         8.10  Payment of Taxes..............................................59
         8.11  Accreditation and Licensing...................................59
         8.12  Additional Security; Further Assurances.......................59
         8.13  Use of Proceeds...............................................61
         8.14  VHS Phoenix Health Plan, Inc..................................61

SECTION 9.  Negative Covenants...............................................61

         9.01  Liens.........................................................61
         9.02  Consolidation, Merger, Purchase or Sale of Assets, etc........64
         9.03  Dividends.....................................................67
         9.04  Indebtedness..................................................68
         9.05  Advances, Investments and Loans...............................71
         9.06  Transactions with Affiliates..................................73
         9.07  Capital Expenditures..........................................74
         9.08  Consolidated Interest Coverage Ratio..........................76
         9.09  Consolidated Leverage Ratio...................................77

                                      iii
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                                                                           Page
                                                                           ----
         9.10  Limitation on Payments of Certain Indebtedness; Modifications
                  of Certain Indebtedness and PIK Preferred Stock;
                  Modifications of Certificate of Incorporation, By-Laws and
                  Certain Agreements; etc....................................77
         9.11  Limitation on Certain Restrictions on Subsidiaries............78
         9.12  Limitation on Issuance of Capital Stock.......................79
         9.13  Business......................................................79
         9.14  Limitation on Creation of Subsidiaries and Health Care Joint
                  Ventures...................................................80
         9.15  Changes To Legal Names; Organizational Identification Numbers,
                  Jurisdiction or Type of Organization.......................81
         9.16  No Designation of Other Indebtedness as "Designated Senior
                  Indebtedness"..............................................82
         9.17  Limitation on Assets Held By Non-Guarantor Subsidiaries.......82

SECTION 10.  Events of Default...............................................82

         10.01  Payments.....................................................82
         10.02  Representations, etc.........................................82
         10.03  Covenants....................................................82
         10.04  Default Under Other Agreements...............................82
         10.05  Bankruptcy, etc..............................................83
         10.06  ERISA........................................................83
         10.07  Security Documents...........................................84
         10.08  Subsidiaries Guaranty........................................84
         10.09  Judgments....................................................84
         10.10  Change of Control............................................84

SECTION 11.  Definitions and Accounting Terms................................85

         11.01  Defined Terms................................................85
         11.02  Certain Pro Forma Calculations..............................114

SECTION 12.  The Agents and the Joint Lead Arrangers........................118

         12.01  Appointment.................................................118
         12.02  Nature of Duties............................................118
         12.03  Lack of Reliance on the Agents and the Joint Lead Arrangers.119
         12.04  Certain Rights of the Agents and the Joint Lead Arrangers...119
         12.05  Reliance....................................................119
         12.06  Indemnification.............................................119
         12.07  The Agents and the Joint Lead Arrangers in their Individual
                  Capacities................................................120
         12.08  Holders.....................................................120
         12.09  Resignation by the Agents and the Joint Lead Arrangers......120

SECTION 13.  Miscellaneous..................................................121

         13.01  Payment of Expenses, etc....................................121
         13.02  Right of Setoff.............................................122
         13.03  Notices.....................................................123
         13.04  Benefit of Agreement........................................124

                                      iv

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                                                                           Page
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         13.05  No Waiver; Remedies Cumulative..............................125
         13.06  Payments Pro Rata...........................................126
         13.07  Calculations; Computations..................................126
         13.08  GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE;
                       WAIVER OF JURY TRIAL.................................127
         13.09  Counterparts................................................128
         13.10  Effectiveness...............................................128
         13.11  Headings Descriptive........................................128
         13.12  Amendment or Waiver; etc....................................128
         13.13  Survival....................................................130
         13.14  Domicile of Loans...........................................130
         13.15  Confidentiality.............................................130
         13.16  Register....................................................131
         13.17  Limitation on Increased Costs...............................132

SCHEDULE I      Commitments
SCHEDULE II     Lender Addresses
SCHEDULE III    Existing Letters of Credit
SCHEDULE IV     Real Property
SCHEDULE V      ERISA Matters
SCHEDULE VI     Subsidiaries
SCHEDULE VII    Intellectual Property
SCHEDULE VIII   Existing Indebtedness
SCHEDULE IX     Insurance
SCHEDULE X      Existing Liens
SCHEDULE XI     Existing Investments
SCHEDULE XII    Legal Names; Organizational Identification Numbers; Jurisdiction
                of Organization; Type of Organization; etc.

EXHIBIT A       Notice of Borrowing
EXHIBIT B-1     Revolving Note
EXHIBIT B-2     Swingline Note
EXHIBIT B-3     Incremental Term Note
EXHIBIT C       Incremental Term Loan Commitment Agreement
EXHIBIT D       Letter of Credit Request
EXHIBIT E       Section 4.04(b)(ii) Certificate
EXHIBIT F-1     Opinion of Davis, Polk & Wardwell, Special Counsel to the Credit
                Parties
EXHIBIT F-2     Opinion of Ronald P. Soltman, Esq., General Counsel to the
                Credit Parties
EXHIBIT G       Officers' Certificate
EXHIBIT H       Pledge Agreement
EXHIBIT I       Subsidiaries Guaranty
EXHIBIT J       Security Agreement
EXHIBIT K       Compliance Certificate
EXHIBIT L       Solvency Certificate

                                      v
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EXHIBIT M       Intercompany Note
EXHIBIT N       Subordination Agreement
EXHIBIT O       Joinder Agreement
EXHIBIT P       Assignment and Assumption Agreement

                                       vi

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     CREDIT  AGREEMENT,  dated  as of July  30,  2001,  among  VANGUARD  HEALTH
SYSTEMS,  INC., a Delaware  corporation  (the  "Borrower"),  the Lenders  party
hereto from time to time,  BANC OF AMERICA  SECURITIES  LLC and MORGAN  STANLEY
SENIOR  FUNDING,  INC.,  as Joint Lead  Arrangers  and Book  Managers  (in such
capacities,  each a "Joint Lead  Arranger" and,  collectively,  the "Joint Lead
Arrangers"),  BANK OF AMERICA, N.A., as Administrative Agent (in such capacity,
the  "Administrative   Agent"),   MORGAN  STANLEY  SENIOR  FUNDING,   INC.,  as
Syndication Agent (in such capacity,  the "Syndication  Agent") and FIRST UNION
NATIONAL BANK and GENERAL ELECTRIC  CAPITAL  CORPORATION,  as  Co-Documentation
Agents (in such capacities,  each a "Co-Documentation Agent" and, collectively,
the  "Co-Documentation  Agents") (all capitalized terms used herein and defined
in Section 11 are used herein as therein defined).

                              W I T N E S S E T H:
                              - - - - - - - - - -

          WHEREAS,  subject  to and upon the terms and  conditions  herein  set
forth, the Lenders are willing to make available to the Borrower the respective
credit facilities provided for herein;

          NOW, THEREFORE, IT IS AGREED:

          SECTION 1. Amount and Terms of Credit.

          1.01  The  Commitments.  (a)  Subject  to  and  upon  the  terms  and
conditions  set forth  herein,  each Lender with a  Revolving  Loan  Commitment
severally  agrees, at any time and from time to time on and after the Effective
Date and prior to the Revolving Loan Maturity Date, to make a revolving loan or
revolving  loans (each, a "Revolving  Loan" and,  collectively,  the "Revolving
Loans") to the Borrower,  which Revolving Loans (i) shall, at the option of the
Borrower,  be Base Rate Loans or,  subject to Section 1.15,  Eurodollar  Loans,
provided that,  except as otherwise  specifically  provided in Section 1.10(b),
all Revolving Loans  comprising the same Borrowing shall at all times be of the
same Type, (ii) may be repaid and reborrowed at any time in accordance with the
provisions  hereof,  (iii)  shall not  exceed  for any such  Lender at any time
outstanding that aggregate principal amount which, when added to the product of
(A) such Lender's Percentage and (B) the sum of (I) the aggregate amount of all
Letter of Credit  Outstandings  (exclusive of Unpaid  Drawings which are repaid
with the proceeds of, and simultaneously with the incurrence of, the respective
incurrence of Revolving  Loans) at such time and (II) the  aggregate  principal
amount of all Swingline  Loans  (exclusive of Swingline  Loans which are repaid
with the proceeds of, and simultaneously with the incurrence of, the respective
incurrence of Revolving  Loans) then  outstanding,  equals the  Revolving  Loan
Commitment  of such  Lender at such  time and (iv)  shall  not  exceed  for all
Lenders at any time  outstanding that aggregate  principal  amount which,  when
added  to (I)  the  aggregate  amount  of all  Letter  of  Credit  Outstandings
(exclusive  of Unpaid  Drawings  which are  repaid  with the  proceeds  of, and
simultaneously  with the incurrence of, the respective  incurrence of Revolving
Loans) at such time and (II) the  aggregate  principal  amount of all Swingline
Loans  (exclusive of Swingline Loans which are repaid with the proceeds of, and
simultaneously  with the incurrence of, the respective  incurrence

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of  Revolving  Loans)  then  outstanding,   equals  the  Total  Revolving  Loan
Commitment at such time.

          (b) Subject to and upon the terms and  conditions  set forth  herein,
the  Swingline  Lender  agrees to make, at any time and from time to time after
the Effective Date and prior to the Swingline  Expiry Date, a revolving loan or
revolving  loans (each a "Swingline  Loan" and,  collectively,  the  "Swingline
Loans") to the Borrower, which Swingline Loans (i) shall be made and maintained
as Base Rate Loans,  (ii) may be repaid and  reborrowed in accordance  with the
provisions hereof,  (iii) shall not exceed in aggregate principal amount at any
time  outstanding,  when combined with the  aggregate  principal  amount of all
Revolving  Loans  then  outstanding  and  the  Letter  of  Credit  Outstandings
(exclusive  of Unpaid  Drawings  which are  repaid  with the  proceeds  of, and
simultaneously  with the incurrence of, the respective  incurrence of Swingline
Loans) at such time, an amount equal to the Total  Revolving Loan Commitment at
such time, and (iv) shall not exceed in aggregate  principal amount at any time
outstanding the Maximum  Swingline  Amount.  The Swingline  Lender shall not be
obligated to make any Swingline  Loans at a time when a Lender  Default  exists
unless the Swingline Lender has entered into an arrangement  satisfactory to it
and the Borrower,  to eliminate the Swingline Lender's risk with respect to the
Lender  which  is the  subject  of  such  Lender  Default,  including  by  cash
collateralizing  the Lender's  Percentage of the outstanding  Swingline  Loans.
Notwithstanding anything to the contrary contained in this Section 1.01(b), the
Swingline  Lender  shall  not make any  Swingline  Loan  after it has  received
written notice from the Borrower or the Required Lenders stating that a Default
or an Event of  Default  exists  and is  continuing  until such time as (A) the
Swingline  Lender shall have received  written  notice (i) of rescission of all
such notices from the party or parties  originally  delivering such notice,  or
(ii) of the waiver of such Default or Event of Default by the Required  Lenders
or (B) the  Administrative  Agent in good faith  believes  that such Default or
Event of Default has ceased to exist.

          (c) On any  Business  Day,  the  Swingline  Lender  may,  in its sole
discretion, give notice to the Lenders with Revolving Loan Commitments that its
outstanding  Swingline  Loans  shall be funded with one or more  Borrowings  of
Revolving  Loans  (provided  that  such  notice  shall be  deemed  to have been
automatically  given  upon the  occurrence  of a Default or an Event of Default
under Section 10.05 or upon the exercise of any of the remedies provided in the
last  paragraph  of  Section  10),  in  which  case one or more  Borrowings  of
Revolving Loans constituting Base Rate Loans (each such Borrowing, a "Mandatory
Borrowing")  shall be made on the  immediately  succeeding  Business Day by all
such Lenders pro rata based on each such Lender's Percentage (determined before
giving effect to any termination of the Revolving Loan Commitments  pursuant to
the last  paragraph  of Section 10) and the proceeds  thereof  shall be applied
directly  by the  Swingline  Lender  to repay  the  Swingline  Lender  for such
outstanding Swingline Loans. Each such Lender hereby irrevocably agrees to make
Revolving  Loans upon one  Business  Day's  notice  pursuant to each  Mandatory
Borrowing in the amount and in the manner  specified in the preceding  sentence
and on the date  specified in writing by the Swingline  Lender  notwithstanding
(i) the  amount of the  Mandatory  Borrowing  may not comply  with the  Minimum
Borrowing  Amount  otherwise  required  hereunder,  (ii) whether any conditions
specified in Section 6 are then satisfied,  (iii) whether a Default or an Event
of Default then exists,  (iv) the date of such Mandatory  Borrowing and (v) the
amount of the Total  Revolving Loan  Commitment at such time. In the event that
any  Mandatory  Borrowing  cannot for any reason be

                                      -2-
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made on the date otherwise required above (including,  without limitation, as a
result of the  commencement  of a  proceeding  under the  Bankruptcy  Code with
respect to the  Borrower),  then each such Lender  hereby  agrees that it shall
forthwith purchase (as of the date the Mandatory Borrowing would otherwise have
occurred,  but adjusted for any payments received from the Borrower on or after
such  date  and  prior  to  such  purchase)  from  the  Swingline  Lender  such
participations  in the  outstanding  Swingline  Loans as shall be  necessary to
cause such Lenders to share in such  Swingline  Loans  ratably based upon their
respective  Percentages  (determined before giving effect to any termination of
the Total Revolving Loan  Commitment  pursuant to the last paragraph of Section
10), provided that (x) all interest payable on the Swingline Loans shall be for
the account of the Swingline  Lender until the date as of which the  respective
participation  is required to be purchased and, to the extent  attributable  to
the purchased participation, shall be payable to the participant from and after
such date,  (y) at the time any  purchase  of  participations  pursuant to this
sentence is actually made,  the purchasing  Lender shall be required to pay the
Swingline Lender interest on the principal  amount of  participation  purchased
for each day from and  including  the day upon  which the  Mandatory  Borrowing
would  otherwise  have  occurred to but  excluding the date of payment for such
participation, at the overnight Federal Funds Rate for the first three days and
at the rate  otherwise  applicable to Revolving  Loans  maintained as Base Rate
Loans  hereunder for each day thereafter and (z) whenever the Swingline  Lender
receives a payment in respect of a Swingline Loan in which such a participation
has been  purchased,  the  Swingline  Lender  shall  pay to the  Lenders  which
acquired  such  participation  an amount equal to such  Lenders'  share in such
Swingline Loan.

          (d) Subject to Section 1.13, the other terms and conditions set forth
herein and the relevant Incremental Term Loan Commitment Agreement, each Lender
with an Incremental  Term Loan Commitment  severally agrees to make a term loan
or term  loans  (each,  an  "Incremental  Term  Loan"  and,  collectively,  the
"Incremental  Term Loans") to the Borrower,  which  Incremental Term Loans: (i)
only may be  incurred  on one or more  Incremental  Term Loan  Borrowing  Dates
(which dates, in any event (x) shall not be earlier than the  Syndication  Date
and (y) shall not be later than the Revolving Loan Maturity Date);  (ii) except
as hereafter  provided,  shall, at the option of the Borrower,  be incurred and
maintained  as, and/or  converted  into,  Base Rate Loans or Eurodollar  Loans,
provided  that all  Incremental  Term Loans made as part of the same  Borrowing
shall, unless otherwise  specifically  provided herein,  consist of Incremental
Term Loans of the same Type;  (iii)  shall be made by each such  Lender in that
aggregate  principal  amount  which does not exceed the  Incremental  Term Loan
Commitment of such Lender (as set forth in the relevant  Incremental  Term Loan
Commitment  Agreement) on the respective  Incremental  Term Loan Borrowing Date
and (iv) shall not exceed  $150,000,000 in aggregate  principal  amount for all
Incremental  Term Loans made by all Incremental  Term Loan Lenders  pursuant to
this Agreement and the various  Incremental  Term Loan  Commitment  Agreements,
provided  that the aggregate  principal  amount of  Incremental  Term Loans may
exceed such  $150,000,000  amount so long as at the time of the  incurrence  of
Incremental Term Loans in excess of such  $150,000,000  amount the Consolidated
Senior  Leverage Ratio  (calculated  on a Post-Test  Period Pro Forma Basis and
assuming  that all  Incremental  Term  Loans  to be  incurred  on such  date or
pursuant to any other then existing Incremental Term Loan Commitment Agreements
have been  incurred and the  proceeds  thereof have been applied in a manner as
certified to by an  Authorized  Officer of the  Borrower to the  Administrative
Agent) is less than

                                      -3-
<PAGE>

2.50:1.00,  provided  further,  however,  that in no event shall the  aggregate
principal  amount of all Incremental  Term Loans made by all  Incremental  Term
Loan Lenders  pursuant to this Agreement and the various  Incremental Term Loan
Commitment Agreements exceed $250,000,000.  Once repaid, Incremental Term Loans
may not be reborrowed.

          1.02 Minimum Amount of Each Borrowing. The aggregate principal amount
of each Borrowing of Loans shall not be less than the Minimum  Borrowing Amount
applicable thereto.  More than one Borrowing may occur on the same date, but at
no time shall  there be  outstanding  as  Eurodollar  Loans under any Tranche a
greater  number of  Borrowings  than the Maximum  Eurodollar  Borrowing  Number
applicable to such Tranche.

          1.03 Notice of Borrowing.  (a) Whenever the Borrower desires to incur
a Borrowing of Loans  (excluding  Swingline  Loans and Revolving Loans incurred
pursuant to a Mandatory Borrowing),  the Borrower shall give the Administrative
Agent at the Notice Office at least one Business Day's prior written notice (or
telephonic notice promptly  confirmed in writing) of each Base Rate Loan and at
least three Business Days' prior written notice (or telephonic  notice promptly
confirmed in writing) of each Eurodollar  Loan to be made  hereunder,  provided
that any such  notice  shall be deemed to have been given on a certain day only
if given before 1:00 P.M. (New York time) on such day. Each such written notice
or written  confirmation  of telephonic  notice (each a "Notice of Borrowing"),
except as otherwise  expressly  provided in Section 1.10,  shall be irrevocable
and shall be given by the  Borrower  in the form of  Exhibit  A,  appropriately
completed  to specify  (i) the  aggregate  principal  amount of the Loans to be
incurred  pursuant to such  Borrowing,  (ii) the date of such Borrowing  (which
shall be a Business  Day) and (iii)  whether the Loans  being made  pursuant to
such Borrowing shall constitute Revolving Loans or Incremental Term Loans (and,
if Incremental  Term Loans, the Tranche under which such Incremental Term Loans
are to be made, as designated in the relevant  Incremental Term Loan Commitment
Agreement) and whether the Loans being incurred  pursuant to such Borrowing are
to be  initially  maintained  as Base Rate Loans or  Eurodollar  Loans and,  if
Eurodollar  Loans,  the  initial  Interest  Period  to be  applicable  thereto.
Notwithstanding  anything to the contrary  contained above, if Incremental Term
Loans are being  extended  which are being  added to (and will form part of) an
existing  Tranche of Incremental  Term Loans,  then the Incremental  Term Loans
being so extended  shall be added to the existing  Borrowings of the respective
Tranche in accordance with the  requirements of Section 1.13 and the respective
Notice  of  Borrowing   shall  be   completed   consistently   therewith.   The
Administrative  Agent shall promptly give each Lender which is required to make
Loans of the Tranche  specified in the respective Notice of Borrowing notice of
such proposed  Borrowing,  of such Lender's  proportionate share thereof and of
the  other  matters  required  by  the  immediately  preceding  sentence  to be
specified in the Notice of Borrowing.

                  (b) (i) Whenever the Borrower desires to incur Swingline
Loans hereunder, the Borrower shall give the Swingline Lender no later than
2:00 P.M. (New York time) on the date that a Swingline Loan is to be incurred,
written notice or telephonic notice promptly confirmed in writing of each
Swingline Loan to be incurred hereunder. Each such notice shall be irrevocable
and specify in each case (A) the date of Borrowing (which shall be a Business
Day) and (B) the aggregate principal amount of the Swingline Loans to be
incurred pursuant to such Borrowing.

                                      -4-
<PAGE>

          (ii) Mandatory  Borrowings shall be made upon the notice specified in
Section 1.01(c),  with the Borrower irrevocably  agreeing, by its incurrence of
any Swingline  Loan, to the making of the Mandatory  Borrowings as set forth in
Section 1.01(c).

          (c) Without in any way  limiting  the  obligation  of the Borrower to
confirm in writing any  telephonic  notice of any  Borrowing or  prepayment  of
Loans, the  Administrative  Agent or the Swingline  Lender, as the case may be,
may act without liability upon the basis of telephonic notice of such Borrowing
or prepayment believed by the Administrative  Agent or the Swingline Lender, as
the case may be, in good faith to be from an Authorized Officer of the Borrower
prior to receipt  of written  confirmation.  In each such  case,  the  Borrower
hereby waives the right to dispute the Administrative  Agent's or the Swingline
Lender's  record of the terms of such  telephonic  notice of such  Borrowing or
prepayment of Loans (absent manifest error).

          1.04  Disbursement  of Funds. No later than 2:00 P.M. (New York time)
on the  date  specified  in each  Notice  of  Borrowing  (or (x) in the case of
Swingline  Loans, no later than 3:00 P.M. (New York time) on the date specified
pursuant to Section 1.03(b)(i) or (y) in the case of Mandatory  Borrowings,  no
later  than  12:00  Noon  (New  York  time) on the date  specified  in  Section
1.01(c)),  each Lender with a  Commitment  under the  respective  Tranche  will
disburse  its pro rata portion of each  Borrowing  requested to be made on such
date (or,  in the case of  Swingline  Loans,  the  Swingline  Lender  will make
available  the full amount  thereof).  All such  amounts  shall be disbursed in
Dollars  and in  immediately  available  funds at the  Payment  Office  and the
Administrative  Agent will  promptly  disburse  to the  Borrower at the Payment
Office,  in Dollars and in immediately  available  funds,  the aggregate of the
amounts so made  available  by the Lenders  (other than in respect of Mandatory
Borrowings).  Unless the  Administrative  Agent shall have been notified by any
Lender  prior to the date of  Borrowing  that such  Lender  does not  intend to
disburse to the Administrative  Agent such Lender's portion of any Borrowing to
be made on such date, the Administrative  Agent may assume that such Lender has
disbursed such amount to the Administrative Agent on such date of Borrowing and
the Administrative Agent may, in reliance upon such assumption, disburse to the
Borrower a corresponding  amount. If such  corresponding  amount is not in fact
disbursed to the Administrative  Agent by such Lender, the Administrative Agent
shall be  entitled  to recover  such  corresponding  amount on demand from such
Lender.  If such Lender does not pay such  corresponding  amount forthwith upon
the  Administrative  Agent's demand therefor,  the  Administrative  Agent shall
promptly  notify the Borrower and the Borrower shall within three Business Days
thereafter  pay such  corresponding  amount to the  Administrative  Agent.  The
Administrative Agent shall also be entitled to recover (without duplication) on
demand from such Lender or the Borrower,  as the case may be,  interest on such
corresponding  amount in respect  of each day from the date such  corresponding
amount was disbursed by the Administrative Agent to the Borrower until the date
such corresponding  amount is recovered by the Administrative  Agent, at a rate
per annum equal to (i) if recovered  from such Lender,  the  overnight  Federal
Funds Rate for the first three days and the interest rate otherwise  applicable
to such Loans for each day  thereafter and (ii) if recovered from the Borrower,
the rate of interest  applicable  to the  respective  Borrowing,  as determined
pursuant  to  Section  1.08.  Nothing in this  Section  1.04 shall be deemed to
relieve any Lender from its obligation to make Loans  hereunder or to prejudice
any rights  which the  Borrower  may have against any Lender as a result of any
failure by such Lender to make Loans hereunder.

                                      -5-
<PAGE>

          1.05 Notes.  (a) The  Borrower's  obligation to pay the principal of,
and  interest  on,  the  Loans  made by each  Lender to the  Borrower  shall be
evidenced in the Register  maintained by the  Administrative  Agent pursuant to
Section 13.16 and shall, if requested by such Lender,  also be evidenced by (i)
if Revolving  Loans,  a  promissory  note duly  executed  and  delivered by the
Borrower  substantially  in the form of Exhibit B-1, with blanks  appropriately
completed in conformity  herewith (each, a "Revolving Note" and,  collectively,
the "Revolving  Notes"),  (ii) if Swingline  Loans,  by a promissory  note duly
executed by the Borrower  substantially in the form of Exhibit B-2, with blanks
appropriately completed in conformity herewith (the "Swingline Note") and (iii)
if Incremental  Term Loans, by a promissory note duly executed and delivered by
the  Borrower   substantially   in  the  form  of  Exhibit  B-3,   with  blanks
appropriately  completed in  conformity  herewith and the relevant  Incremental
Term  Loan  Commitment   Agreement   (each  an  "Incremental   Term  Note"  and
collectively, the "Incremental Term Notes").

          (b) The  Revolving  Note  issued to each  Lender that has a Revolving
Loan  Commitment or  outstanding  Revolving  Loans shall (i) be executed by the
Borrower, (ii) be payable to such Lender or its registered assigns and be dated
the Effective  Date (or, if issued after the Effective  Date, be dated the date
of the issuance  thereof),  (iii) be in a stated  principal amount equal to the
Revolving Loan  Commitment of such Lender (or, if issued after the  termination
thereof,  be in a stated  principal  amount equal to the outstanding  Revolving
Loans of such Lender at such time) and be payable in the outstanding  principal
amount of the Revolving Loans evidenced  thereby,  (iv) mature on the Revolving
Loan Maturity Date, (v) bear interest as provided in the appropriate  clause of
Section  1.08 in respect of the Base Rate Loans and  Eurodollar  Loans,  as the
case may be,  evidenced  thereby,  (vi) be subject to voluntary  prepayment  as
provided in Section 4.01,  and mandatory  repayment as provided in Section 4.02
and (vii) be entitled to the  benefits of this  Agreement  and the other Credit
Documents.

          (c) The Swingline  Note issued to the  Swingline  Lender shall (i) be
executed  by the  Borrower,  (ii) be  payable  to the  Swingline  Lender or its
registered  assigns  and be  dated  the  Effective  Date,  (iii) be in a stated
principal  amount equal to the Maximum  Swingline  Amount and be payable in the
outstanding principal amount of the Swingline Loans evidenced thereby from time
to time,  (iv)  mature on the  Swingline  Expiry  Date,  (v) bear  interest  as
provided in the appropriate  clause of Section 1.08 in respect of the Base Rate
Loans evidenced thereby, (vi) be subject to voluntary prepayment as provided in
Section 4.01, and mandatory  repayment as provided in Section 4.02 and (vii) be
entitled to the benefits of this Agreement and the other Credit Documents.

          (d) The  Incremental  Term  Note  issued to each  Lender  that has an
Incremental  Term Loan  Commitment or outstanding  Incremental  Term Loans of a
given  Tranche  shall (i) be executed by the  Borrower,  (ii) be payable to the
order of such  Lender or its  registered  assigns  and be dated the date of the
issuance thereof,  (iii) be in a stated principal amount equal to the principal
amount of outstanding  Incremental  Term Loans of such Lender of the respective
Tranche on such date and be payable in the principal amount of Incremental Term
Loans evidenced thereby, (iv) mature on the Incremental Term Loan Maturity Date
of the  respective  Tranche,  (v) bear interest as provided in the  appropriate
clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar  Loans,
as the case may be, evidenced thereby,  (vi) be subject to

                                      -6-
<PAGE>

voluntary  prepayment as provided in Section 4.01,  and mandatory  repayment as
provided  in  Section  4.02  and  (vii) be  entitled  to the  benefits  of this
Agreement and the other Credit Documents.  In connection with the foregoing, it
is understood  and agreed that (x) any Lender that has  Incremental  Term Loans
outstanding  pursuant  to more than one  Tranche  shall be  entitled,  upon its
request,  to receive an  Incremental  Term Note with respect to each Tranche of
its outstanding Incremental Term Loans and (y) if any Lender extends additional
Incremental  Term Loans  pursuant to an existing  Tranche of  Incremental  Term
Loans where such Lender already had outstanding  Incremental  Term Loans,  such
Lender  shall be  entitled  to  request  a new  Incremental  Term Loan for such
Tranche reflecting the aggregate  principal amount of Incremental Term Loans of
such Lender of such Tranche then outstanding.

          (e) Each Lender will note on its internal  records the amount of each
Loan made by it and each  payment  in  respect  thereof  and will  prior to any
transfer  of any Note  endorse on the  reverse  side  thereof  the  outstanding
principal amount of Loans evidenced thereby.  Failure to make any such notation
(or any error in such notation) shall not affect the Borrower's  obligations in
respect of such Loans.

          (f) Notwithstanding  anything to the contrary contained above in this
Section 1.05 or elsewhere in this  Agreement,  Notes shall only be delivered to
Lenders which at any time  specifically  request the delivery of such Notes. No
failure of any Lender to request or obtain a Note  evidencing  its Loans to the
Borrower  shall affect or in any manner impair the  obligations of the Borrower
to pay the Loans (and all related  Obligations)  incurred by the Borrower which
would  otherwise be evidenced  thereby in accordance  with the  requirements of
this  Agreement,  and shall not in any way affect the  security  or  guaranties
therefor provided  pursuant to the various Credit  Documents.  Any Lender which
does not have a Note  evidencing  its  outstanding  Loans  shall in no event be
required to make the notations  otherwise described in preceding clause (e). At
any time when any Lender  requests the delivery of a Note to evidence its Loans
of a given Tranche or Tranches, the Borrower shall promptly execute and deliver
to the  respective  Lender  the  requested  Note in the  appropriate  amount or
amounts to evidence such Loans.

          1.06 Conversions.  The Borrower shall have the option to convert,  on
any Business Day occurring  after the Effective Date, all or a portion equal to
at least the applicable  Minimum Borrowing Amount of the outstanding  principal
amount of Loans (other than Swingline Loans which may not be converted pursuant
to this Section  1.06) of a given Tranche made to the Borrower into a Borrowing
or Borrowings (of the same Tranche) of another Type of Loan,  provided that (i)
each  conversion of  Eurodollar  Loans into Base Rate Loans on a day other than
the last day of an Interest Period applicable to such Eurodollar Loans shall be
subject to the provisions  contained in Section 1.11 and no partial  conversion
of a Borrowing  of  Eurodollar  Loans shall  reduce the  outstanding  principal
amount of such  Eurodollar  Loans made  pursuant to a single  Borrowing to less
than the Minimum Borrowing Amount applicable thereto,  (ii) unless the Required
Lenders  otherwise  consent,  Base  Rate  Loans  may  only  be  converted  into
Eurodollar  Loans if no Default or Event of Default is in existence on the date
of the  conversion,  (iii) no  conversion  pursuant to this  Section 1.06 shall
result in a greater number of Borrowings of Eurodollar  Loans than is permitted
under Section 1.02 and (iv) any conversions pursuant to this Section 1.06 shall
be subject to Section  1.15.  Each such  conversion  shall be  effected  by the
Borrower by giving the Administrative  Agent at the Notice Office prior to 1:00
P.M. (New York

                                      -7-
<PAGE>

time) at least three  Business  Days' prior  written  notice (each a "Notice of
Conversion") specifying the Loans to be so converted, the Borrowing(s) pursuant
to which such Loans were made and, if to be converted  into  Eurodollar  Loans,
the Interest  Period to be initially  applicable  thereto.  The  Administrative
Agent  shall give each Lender  prompt  notice of any such  proposed  conversion
affecting any of its Loans.

          1.07 Pro Rata  Borrowings.  All  Borrowings  of  Revolving  Loans and
Incremental  Term Loans of a particular  Tranche under this Agreement  shall be
incurred from the Lenders pro rata on the basis of their  respective  Revolving
Loan Commitments or Incremental Term Loan  Commitments,  as the case may be. It
is understood  that no Lender shall be responsible for any default by any other
Lender of its obligation to make Loans  hereunder and that each Lender shall be
obligated to make the Loans provided to be made by it hereunder,  regardless of
the failure of any other Lender to make its Loans hereunder.

          1.08 Interest.  (a) The Borrower agrees to pay interest in respect of
the unpaid  principal  amount of each Base Rate Loan from the date the proceeds
thereof are made  available to the Borrower or from the date of any  conversion
to a Base Rate Loan pursuant to Sections  1.06,  1.09 or 1.10,  as  applicable,
until the earlier of (i) the maturity (whether by acceleration or otherwise) of
such  Base  Rate  Loan and (ii) the  conversion  of such  Base  Rate  Loan to a
Eurodollar  Loan  pursuant to Section  1.06, at a rate per annum which shall be
equal to the sum of the  Applicable  Margin in effect from time to time for the
Tranche under which such Loans were incurred, plus the Base Rate in effect from
time to time.

          (b) The  Borrower  agrees to pay  interest  in  respect of the unpaid
principal amount of each Eurodollar Loan from the date the proceeds thereof are
made  available  to the  Borrower  or  from  the  date of any  conversion  to a
Eurodollar  Loan pursuant to Section 1.06 until the earlier of (i) the maturity
(whether by  acceleration  or otherwise) of such  Eurodollar  Loan and (ii) the
conversion  of such  Eurodollar  Loan to a Base Rate Loan  pursuant  to Section
1.06, 1.09 or 1.10, as applicable, at a rate per annum which shall, during each
Interest  Period  applicable  thereto,  be equal  to the sum of the  Applicable
Margin in effect from time to time during such Interest  Period for the Tranche
under  which  such  Loans  were  incurred,  plus the  Eurodollar  Rate for such
Interest Period.

          (c) Overdue  principal and, to the extent  permitted by law,  overdue
interest in respect of each Loan shall,  in each case,  bear interest at a rate
per  annum  equal to the  greater  of (x) 2% per  annum in  excess  of the rate
otherwise  applicable to Base Rate Loans of the respective Tranche from time to
time and (y) the rate which is 2% in excess of the rate otherwise applicable to
such Loans, and all other amounts payable  hereunder and under any other Credit
Document  shall bear interest at a rate per annum equal to the rate which is 2%
in excess of the rate  applicable  to Revolving  Loans  maintained as Base Rate
Loans from time to time.  Interest  which  accrues  under this Section  1.08(c)
shall be payable on demand.

          (d) Accrued (and theretofore unpaid) interest (other than overdue
interest described in preceding clause (c) which shall be payable as provided
in such preceding clause (c)) shall be payable (i) in respect of each Base Rate
Loan, quarterly in arrears on each Quarterly Payment Date, (ii) in respect of
each Eurodollar Loan, on the last day of each Interest Period

                                      -8-
<PAGE>

applicable  thereto  and, in the case of an Interest  Period in excess of three
months,  on each date occurring at three month intervals after the first day of
such  Interest  Period and (iii) in respect of each Loan,  on any  repayment or
prepayment  (on  the  amount  repaid  or  prepaid),  at  maturity  (whether  by
acceleration or otherwise) and, after such maturity, on demand.

          (e) Upon each Interest  Determination Date, the Administrative  Agent
shall  determine the Eurodollar  Rate for each Interest  Period  commencing two
Business Days thereafter and shall promptly notify the Borrower and the Lenders
thereof.  Each such  determination  shall,  absent manifest error, be final and
conclusive and binding on all parties hereto.

          1.09 Interest  Periods.  At the time the Borrower gives any Notice of
Borrowing or Notice of  Conversion  in respect of the making of, or  conversion
into,  any  Eurodollar  Loan  (in  the  case  of the  initial  Interest  Period
applicable  thereto) or on the third Business Day prior to the expiration of an
Interest  Period  applicable  to  such  Eurodollar  Loan  (in  the  case of any
subsequent  Interest  Period),  the Borrower shall have the right to elect,  by
giving the  Administrative  Agent notice thereof,  the interest period (each an
"Interest  Period")  applicable to such Eurodollar  Loan, which Interest Period
shall,  at the option of the Borrower,  be (i) a one,  two,  three or six-month
period or (ii) if deemed available in the sole discretion of the Administrative
Agent, a one-week or nine or twelve-month  period or (iii) if available to each
of the  Lenders of the  respective  Tranche,  and  selected  in order to ensure
compliance  with clause (vii) of this Section 1.09, any period between one week
and three  months  which ends on a Scheduled  Incremental  Term Loan  Repayment
Date, provided that:

          (i) all Eurodollar  Loans  comprising a Borrowing  shall at all times
     have the same Interest Period;

          (ii) the  initial  Interest  Period  for any  Eurodollar  Loan  shall
     commence on the date of Borrowing of such  Eurodollar  Loan (including the
     date of any conversion  thereto from a Loan of a different  Type) and each
     Interest  Period  occurring  thereafter in respect of such Eurodollar Loan
     shall  commence  on the day on which the next  preceding  Interest  Period
     applicable thereto expires;

          (iii) if any Interest  Period relating to a Eurodollar Loan begins on
     a day for which there is no numerically  corresponding day in the calendar
     month at the end of such Interest  Period,  such Interest Period shall end
     on the last Business Day of such calendar month;

          (iv) if any Interest Period would otherwise  expire on a day which is
     not a  Business  Day,  such  Interest  Period  shall  expire  on the  next
     succeeding  Business Day; provided,  however,  that if any Interest Period
     for a  Eurodollar  Loan  would  otherwise  expire  on a day which is not a
     Business Day but is a day of the month after which no further Business Day
     occurs  in such  month,  such  Interest  Period  shall  expire on the next
     preceding Business Day;

          (v) unless the Required Lenders consent  thereto,  no Interest Period
     may be  selected at any time when a Default or an Event of Default is then
     in existence;

                                      -9-
<PAGE>

          (vi) no Interest Period in respect of any Borrowing of any Tranche of
     Loans shall be selected  which  extends  beyond the Maturity  Date of such
     Tranche; and

          (vii) no Interest  Period in respect of any  Borrowing of any Tranche
     of  Incremental  Term Loans shall be  selected  which  extends  beyond any
     Scheduled  Incremental Term Loan Repayment Date applicable  thereto if the
     aggregate principal amount of such Tranche of Incremental Term Loans which
     have Interest  Periods which will expire after such date will be in excess
     of the  aggregate  principal  amount of such Tranche of  Incremental  Term
     Loans  then  outstanding  less  the  aggregate  amount  of  the  Scheduled
     Incremental  Term Loan Repayment with respect thereto which will be due on
     such Scheduled Incremental Term Loan Repayment Date.

          If  upon  the  expiration  of any  Interest  Period  applicable  to a
Borrowing of  Eurodollar  Loans,  the  Borrower has failed to elect,  or is not
permitted to elect, a new Interest  Period to be applicable to such  Eurodollar
Loans as  provided  above,  the  Borrower  shall be deemed to have  elected  to
convert  such  Eurodollar  Loans  into  Base  Rate  Loans  effective  as of the
expiration date of such current Interest Period.

          1.10  Increased  Costs,  Illegality,  etc.  (a) In the event that any
Lender shall have determined (which determination shall, absent manifest error,
be final and  conclusive  and binding upon all parties hereto but, with respect
to clause (i) below, may be made only by the Administrative Agent):

          (i) on any Interest Determination Date that, by reason of any changes
     arising  after the  Effective  Date  affecting  the  interbank  Eurodollar
     market,  adequate  and  fair  means  do not  exist  for  ascertaining  the
     applicable  interest rate on the basis  provided for in the  definition of
     Eurodollar Rate; or

          (ii) at any time,  that such Lender  shall incur  increased  costs or
     reductions in the amounts received or receivable hereunder with respect to
     any Eurodollar  Loan because of (x) any change since the Effective Date in
     any applicable law or governmental rule,  regulation,  order, guideline or
     request (whether or not having the force of law) or in the  interpretation
     or administration thereof and including the introduction of any new law or
     governmental rule,  regulation,  order, guideline or request, such as, for
     example,  but not  limited  to: (A) a change in the basis of  taxation  of
     payment to any Lender of the  principal of or interest on such  Eurodollar
     Loan or any other  amounts  payable  hereunder  (except for changes in the
     rate of tax on, or  determined  by  reference  to,  the net  income or net
     profits of such Lender,  or any  franchise  tax based on the net income or
     net  profits  of a Lender,  in  either  case  pursuant  to the laws of the
     jurisdiction  in which such Lender is organized or in which such  Lender's
     principal   office  or  applicable   lending  office  is  located  or  any
     subdivision  thereof  or  therein),  or (B) a change in  official  reserve
     requirements,  but,  in all  events,  excluding  reserves  required  under
     Regulation D to the extent  included in the  computation of the Eurodollar
     Rate and/or (y) other  circumstances  since the Effective  Date  affecting
     such Lender or the  interbank  Eurodollar  market or the  position of such
     Lender in such market; or

                                     -10-
<PAGE>

          (iii) at any time,  that the making or  continuance of any Eurodollar
     Loan  has  been  made  (x)  unlawful  by  any  law or  governmental  rule,
     regulation  or order,  (y)  impossible by compliance by any Lender in good
     faith with any  governmental  request (whether or not having force of law)
     or (z)  impracticable  as a result of a  contingency  occurring  after the
     Effective  Date which  materially  and  adversely  affects  the  interbank
     Eurodollar market;

then, and in any such event, such Lender (or the  Administrative  Agent, in the
case of clause (i) above) shall promptly give notice (by telephone confirmed in
writing) to the Borrower  and,  except in the case of clause (i) above,  to the
Administrative  Agent of such  determination  (which notice the  Administrative
Agent shall promptly transmit to each of the other Lenders).  Thereafter (x) in
the case of clause (i) above,  Eurodollar  Loans  shall no longer be  available
until such time as the  Administrative  Agent  notifies  the  Borrower  and the
Lenders  that the  circumstances  giving  rise to notice by the  Administrative
Agent no longer  exist,  and any Notice of  Borrowing  or Notice of  Conversion
given by the Borrower with respect to Eurodollar  Loans which have not yet been
incurred (including by way of conversion) shall be deemed a Notice of Borrowing
or Notice of  Conversion  for or into Base Rate  Loans  unless  such  Notice of
Borrowing or Notice of  Conversion  is  rescinded by the Borrower  prior to the
making of such  Borrowing  or such  conversion,  (y) in the case of clause (ii)
above,  the Borrower shall,  subject to the provisions of Section 13.17 (to the
extent  applicable),  pay to such Lender,  upon written demand  therefor,  such
additional  amounts (in the form of an increased rate of, or a different method
of  calculating,  interest or otherwise  as such Lender in its sole  discretion
shall  determine) as shall be required to compensate  such Lender for increased
costs or  reductions  in amounts  received or  receivable  hereunder (a written
notice as to the additional amounts owed to such Lender,  showing the basis for
the calculation thereof, submitted to the Borrower by such Lender in good faith
shall,  absent  manifest  error, be final and conclusive and binding on all the
parties  hereto) and (z) in the case of clause (iii) above,  the Borrower shall
take one of the actions  specified  in Section  1.10(b) as promptly as possible
and,  in any  event,  within  the  time  period  required  by law.  Each of the
Administrative  Agent and each  Lender  agrees  that if it gives  notice to the
Borrower of any of the events  described in clause (i) or (iii) above, it shall
promptly  notify  the  Borrower  and,  in the  case  of any  such  Lender,  the
Administrative  Agent,  if such  event  ceases  to  exist.  If any  such  event
described in clause (iii) above ceases to exist as to a Lender, the obligations
of such  Lender to make  Eurodollar  Loans and to convert  Base Rate Loans into
Eurodollar  Loans  on the  terms  and  conditions  contained  herein  shall  be
reinstated.  In  addition,  if the  Administrative  Agent  gives  notice to the
Borrower that the events described in clause (i) above cease to exist, then the
obligations  of the Lenders to make  Eurodollar  Loans and to convert Base Rate
Loans into Eurodollar  Loans on the terms and conditions  contained herein (but
subject to clause (iii) above) shall also be reinstated.

          (b)  At  any  time  that  any  Eurodollar  Loan  is  affected  by the
circumstances  described in Section 1.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar  Loan  affected by the  circumstances  described in
Section  1.10(a)(iii) the Borrower shall) either (x) if the affected Eurodollar
Loan is then being made  initially  or  pursuant  to a  conversion,  cancel the
respective  Borrowing  by giving the  Administrative  Agent  telephonic  notice
(confirmed  in writing) on the same date that the  Borrower was notified by the
affected Lender or the Administrative  Agent pursuant to Section 1.10(a)(ii) or
(iii) or (y) if the affected Eurodollar Loan is then outstanding, upon at least
three Business Days' written notice to the  Administrative

                                     -11-
<PAGE>

Agent,  require the affected Lender to convert such Eurodollar Loan into a Base
Rate Loan, provided that, if more than one Lender is affected at any time, then
all affected Lenders must be treated the same pursuant to this Section 1.10(b).

          (c) If at any time any Lender  determines  that,  after the Effective
Date, the  introduction  of or any change in any applicable law or governmental
rule, regulation, order, guideline, directive or request (whether or not having
the  force  of law  and  including,  without  limitation,  those  announced  or
published  prior to the Effective Date)  concerning  capital  adequacy,  or any
change  in  interpretation  or  administration  thereof  by  the  NAIC  or  any
governmental authority, central bank or comparable agency, will have the effect
of  increasing  the amount of capital  required or expected to be maintained by
such Lender or any corporation  controlling  such Lender based on the existence
of such Lender's Commitments hereunder or its Obligations  hereunder,  then the
Borrower  shall,  subject to the  provisions  of  Section  13.17 (to the extent
applicable),  pay to such  Lender,  upon  its  written  demand  therefor,  such
additional amounts as shall be required to compensate such Lender or such other
corporation for the increased cost to such Lender or such other  corporation or
the reduction in the rate of return to such Lender or such other corporation as
a result of such increase of capital.  In determining such additional  amounts,
each Lender will act  reasonably  and in good faith and will use  averaging and
attribution   methods  which  are  reasonable,   provided  that  such  Lender's
reasonable good faith  determination  of compensation  owing under this Section
1.10(c) shall,  absent  manifest  error, be final and conclusive and binding on
all the parties  hereto.  Each Lender,  upon  determining  that any  additional
amounts  will be payable  pursuant to this  Section  1.10(c),  will give prompt
written notice  thereof to the Borrower,  which notice shall show the basis for
calculation of such additional  amounts.  In addition,  each such Lender,  upon
determining  that the  circumstances  giving rise to the payment of  additional
amounts  pursuant  to this  Section  1.10(c)  cease to exist,  will give prompt
written notice thereof to the Borrower.

          1.11  Compensation.  The Borrower shall compensate each Lender,  upon
its written  request  (which  request shall set forth the basis for  requesting
such  compensation),  for  all  reasonable  losses,  expenses  and  liabilities
(including,  without  limitation,  any loss,  expense or liability  incurred by
reason of the  liquidation or  reemployment of deposits or other funds required
by such  Lender  to  fund  its  Eurodollar  Loans  but  excluding  any  loss of
anticipated profit) which such Lender may sustain: (i) if for any reason (other
than a default by such Lender or the  Administrative  Agent) a Borrowing of, or
conversion  from or into,  Eurodollar  Loans does not occur on a date specified
therefor  in a Notice of  Borrowing  or Notice of  Conversion  (whether  or not
withdrawn by the  Borrower or deemed  withdrawn  pursuant to Section  1.10(a));
(ii) if any repayment (including any repayment made pursuant to Section 4.01 or
4.02 or as a result of an  acceleration of the Loans pursuant to Section 10) or
conversion of any of the Borrower's  Eurodollar Loans occurs on a date which is
not the last day of an  Interest  Period  with  respect  thereto;  (iii) if any
prepayment of any of the  Borrower's  Eurodollar  Loans is not made on any date
specified in a notice of prepayment  given by the  Borrower;  (iv) prior to the
Syndication Date in connection with the primary syndication of the Loans and/or
Commitments  unless the Borrower has selected  only one week  Interest  Periods
prior  to such  Syndication  Date;  or (v) as a  consequence  of (x) any  other
default by the  Borrower to repay its Loans when  required by the terms of this
Agreement or the Note,  if any,  held by such Lender or (y) any  election  made
pursuant to Section 1.10(b).

                                     -12-
<PAGE>

          1.12  Change  of  Lending  Office.  Each  Lender  agrees  that on the
occurrence of any event giving rise to the operation of Section  1.10(a)(ii) or
(iii),  Section  1.10(c),  Section  2.06 or Section  4.04 with  respect to such
Lender, it will, if requested by the Borrower,  use reasonable efforts (subject
to overall policy  considerations  of such Lender) to designate another lending
office for any Loans and/or Letters of Credit affected by such event,  provided
that such  designation  is made on such terms that such  Lender and its lending
office suffer no material (as determined by such Lender in its sole discretion)
economic,  legal or  regulatory  disadvantage,  with the object of avoiding the
consequence of the event giving rise to the operation of such Section.  Nothing
in this Section 1.12 shall  affect or postpone  any of the  obligations  of the
Borrower or the right of any Lender provided in Sections 1.10, 2.06 and 4.04.

          1.13 Incremental Term Loan Commitments.  (a) So long as no Default or
Event of Default then exists or would result therefrom,  the Borrower shall, in
consultation with the Administrative Agent, have the right to request on one or
more  occasions on and after the  Syndication  Date and prior to the  Revolving
Loan Maturity  Date that one or more Lenders  (and/or one or more other Persons
which will become  Lenders as provided  below)  provide  Incremental  Term Loan
Commitments under a given Tranche of Incremental Term Loans as designated (with
the  approval  of  the  Administrative  Agent  (which  approval  shall  not  be
unreasonably  withheld  or delayed if such  designation  is  otherwise  made in
accordance with the provisions of this Agreement)) in the Incremental Term Loan
Commitment Agreement and, subject to the terms and conditions contained in this
Agreement and the relevant  Incremental  Term Loan Commitment  Agreement,  make
Incremental  Term Loans  pursuant  thereto,  it being  understood  and  agreed,
however, that:

          (i) no Lender shall be obligated to provide an Incremental  Term Loan
     Commitment as a result of any such request by the Borrower, and until such
     time, if any, as such Lender has agreed in its sole  discretion to provide
     an  Incremental  Term Loan  Commitment  and executed and  delivered to the
     Administrative  Agent an  Incremental  Term Loan  Commitment  Agreement as
     provided in clause (b) of this  Section  1.13,  such  Lender  shall not be
     obligated to fund any Incremental Term Loans;

          (ii) except as otherwise  provided in clauses (ix) and (x) below, any
     Lender (or, in the  circumstances  contemplated by clause (vii) below, any
     other  Person  which  is  an  Eligible   Transferee)  may  so  provide  an
     Incremental Term Loan Commitment without the consent of any other Lender;

          (iii) each provision of Incremental Term Loan Commitments pursuant to
     this Section 1.13 on a given date shall be in a minimum  aggregate  amount
     (for all Lenders  (including in the  circumstances  contemplated by clause
     (vii)  below,   Eligible   Transferees   who  will  become   Lenders))  of
     $25,000,000;

          (iv) the aggregate  amount of all Incremental  Term Loan  Commitments
     permitted  to be provided  pursuant to this  Section 1.13 shall not exceed
     $150,000,000, provided that the Borrower may request Incremental Term Loan
     Commitments  to be provided (as set forth in this Section  1.13) in excess
     of  $150,000,000 so long as at the time of such request and at the time of
     the provision of such  Incremental  Term Loan Commitments the

                                     -13-
<PAGE>

     Consolidated  Senior Leverage Ratio  (calculated on a Post-Test Period Pro
     Forma Basis and assuming  that all  Incremental  Term Loans to be incurred
     pursuant to such  Incremental  Term Loan  Commitments  (and any other then
     existing  Incremental  Term Loan  Commitments)  have been incurred and the
     proceeds  thereof  have been  applied  in a manner as  certified  to by an
     Authorized  Officer of the Borrower to the  Administrative  Agent) is less
     than  2.50:1.00,  provided  further,  however,  that in no event shall the
     aggregate  amount of  Incremental  Term Loan  Commitments  permitted to be
     provided pursuant to this Section 1.13 exceed $250,000,000;

          (v)  each   Incremental   Term  Loan   Commitment   Agreement   shall
     specifically  designate  (with the  approval of the  Administrative  Agent
     (which  approval  shall not be  unreasonably  withheld  or delayed if such
     designation  is otherwise  made in accordance  with the provisions of this
     Agreement)) the Tranche of the  Incremental  Term Loan  Commitments  being
     provided  thereunder  (which Tranche shall be a new Tranche (i.e., not the
     same as any existing Tranche of Incremental Term Loans or Incremental Term
     Loan Commitments) unless the requirements of following Section 1.13(c) are
     satisfied);

          (vi)  each  Lender  agreeing  to  provide  an  Incremental  Term Loan
     Commitment  pursuant  to an  Incremental  Term Loan  Commitment  Agreement
     shall, subject to the satisfaction of the relevant conditions set forth in
     this Agreement, make Incremental Term Loans under the Tranche specified in
     such  Incremental  Term Loan  Commitment  Agreement as provided in Section
     1.01(d) and such Loans shall  thereafter be deemed to be Incremental  Term
     Loans under such Tranche for all purposes of this  Agreement and the other
     Credit Documents;

          (vii) if,  within 10 Business  Days after the Borrower has  requested
     the then  existing  Lenders  (other  than  Defaulting  Lenders) to provide
     Incremental  Term  Loan  Commitments  pursuant  to this  Section  1.13 the
     Borrower  has  not  received  Incremental  Term  Loan  Commitments  in  an
     aggregate amount equal to that amount of Incremental Term Loan Commitments
     which the  Borrower  desires to obtain  pursuant  to such  request (as set
     forth in the notice  provided by the Borrower as provided in clause (b) of
     this  Section  1.13),  then the  Borrower  may,  with the  consent  of the
     Administrative Agent (which consent shall not be unreasonably  withheld or
     delayed), request Incremental Term Loan Commitments from Persons which are
     Eligible  Transferees in an aggregate amount equal to such deficiency (and
     with the fees and interest to be paid to such Eligible Transferee to be no
     greater  than  that to be paid  (or  which  was  offered  to) to the  then
     existing  Lenders  providing  (or which were  requested  to  provide)  the
     requested Incremental Term Loan Commitments);

          (viii)  all  Incremental  Term  Loans  to  be  incurred  pursuant  to
     Incremental  Term Loan  Commitments  provided in response to a  particular
     request  for same made by the  Borrower in  accordance  with clause (b) of
     this  Section  1.13 shall be incurred  pursuant to  Incremental  Term Loan
     Commitments provided pursuant to a single Incremental Term Loan Commitment
     Agreement, which may be executed in counterparts;

                                     -14-
<PAGE>

          (ix) unless those Lenders holding (as  outstanding  Loans or existing
     Revolving  Loan  Commitments,  as the case may be) (x) a  majority  of the
     aggregate principal amount of outstanding  Incremental Term Loans having a
     Maturity Date after such proposed  Maturity Date plus (y) if such proposed
     Maturity Date is to be prior to the Revolving  Loan  Maturity  Date,  more
     than 66-2/3% of the Total  Revolving Loan  Commitment,  expressly agree in
     writing, in no event shall the Maturity Date of the Incremental Term Loans
     to be provided pursuant to any Incremental Term Loan Commitment  Agreement
     be  earlier  than the  Maturity  Date of any  other  Tranche  of Loans (or
     Revolving Loan  Commitment)  outstanding at the time such Incremental Term
     Loans are incurred;

          (x) unless those Lenders  holding (as  outstanding  Loans or existing
     Revolving  Loan  Commitments,  as the case may be) (x) a  majority  of the
     aggregate principal amount of outstanding  Incremental Term Loans having a
     Weighted  Average  Life to  Maturity  which is  longer  than the  Weighted
     Average Life to Maturity of the Incremental Term Loans to be made pursuant
     to the relevant Incremental Term Loan Commitments plus (y) if the proposed
     Weighted Average Life to Maturity of the Incremental Term Loans to be made
     pursuant to the respective  Incremental Term Loan Commitment  Agreement is
     shorter than the Weighted Average Life to Maturity of the Revolving Loans,
     more than 66-2/3% of the Total Revolving Loan Commitment,  expressly agree
     in writing, in no event shall the Weighted Average Life to Maturity of the
     Incremental  Term Loans to be provided  pursuant to any  Incremental  Term
     Loan  Commitment  Agreement  be less  than the  Weighted  Average  Life to
     Maturity of any other  Tranche of Loans (or  Revolving  Loan  Commitments)
     outstanding at the time such Incremental Term Loans are incurred; and

          (xi) all actions taken by the Borrower  pursuant to this Section 1.13
     shall be take in coordination with the Administrative Agent.

          (b) At the time of any provision of Incremental Term Loan Commitments
of a given  Tranche  pursuant  to this  Section  1.13,  (i) the  Borrower,  the
Administrative  Agent and each Lender or other Eligible Transferee which agrees
to provide an Incremental Term Loan Commitment (each an "Incremental  Term Loan
Lender") shall execute (which execution may be in counterparts)  and deliver to
the  Administrative  Agent an Incremental  Term Loan  Commitment  Agreement (it
being understood that a single Incremental Term Loan Commitment Agreement shall
be executed  and  delivered  by all  Incremental  Term Loan  Lenders  providing
Incremental Term Loan Commitments in response to a particular  request for same
made by the  Borrower)  substantially  in the form of Exhibit C  (appropriately
completed and with such  modifications  as may be reasonably  acceptable to the
Administrative  Agent),  with the  effectiveness  of the Incremental  Term Loan
Commitment(s)  provided  therein  to  occur  on the  date  set  forth  in  such
Incremental Term Loan Commitment Agreement and the payment of any fees required
in  connection  therewith;  (ii) the Borrower and its  Subsidiaries  shall have
delivered such  amendments,  modifications  and/or  supplements to the Security
Documents as are necessary or, in the reasonable  opinion of the Administrative
Agent,  desirable  to ensure  that the  additional  Obligations  to be incurred
pursuant to the Incremental  Term Loan Commitments are secured by, and entitled
to the benefits  of, the Security  Documents;  (iii) the  Administrative  Agent
shall receive an  acknowledgment  from the Credit Parties that the  Incremental
Term Loans to be incurred  pursuant to such  Incremental  Term Loan Commitments
are  entitled to the  benefits of the

                                     -15-
<PAGE>

Subsidiaries  Guaranty and the Security  Documents,  together with  resolutions
executed by (x) the Borrower,  authorizing  the incurrence of such  Incremental
Term Loans  pursuant to such  Incremental  Term Loan  Commitments  and (y) each
other  Credit  Party,  stating that the  Incremental  Term Loans to be incurred
pursuant to such  Incremental Term Loan Commitments are entitled to benefits of
the Subsidiaries  Guaranty and the Security Documents;  (iv) the Administrative
Agent  shall have  received  evidence  satisfactory  to it that the  additional
Obligations to be incurred  pursuant to the Incremental  Term Loan  Commitments
are permitted by, and constitute  "Senior  Indebtedness" and "Designated Senior
Indebtedness"  (or any  similar  term)  under,  the  Senior  Subordinated  Note
Documents and the Permitted  Subordinated  Note Documents (if any); and (v) the
Borrower shall deliver to the Administrative  Agent an opinion or opinions,  in
form and substance  reasonably  satisfactory to the Administrative  Agent, from
counsel to the Borrower  reasonably  satisfactory to the  Administrative  Agent
(which,  unless otherwise requested by the Administrative Agent or the Required
Lenders,  may be the Borrower's General Counsel) and dated such date,  covering
such of the  matters  set forth in the  opinions  of counsel  delivered  to the
Administrative  Agent on the Effective  Date pursuant to Section 5.03 as may be
reasonably requested by the Administrative Agent, and such other matters as the
Administrative Agent may reasonably request (including, without limitation, the
matters  described in immediately  preceding clause (iv)).  The  Administrative
Agent  shall  promptly  notify  each  Lender  as to the  effectiveness  of each
Incremental Term Loan Commitment Agreement,  and shall deliver to each Lender a
copy of same, and (i) at such time Annex I shall be deemed  modified to reflect
the  Incremental  Term Loan  Commitments  (including  the  Tranche or  Tranches
thereof) of such Incremental Term Loan Lenders and (ii) to the extent requested
by such Incremental Term Loan Lenders, the appropriate Notes will be issued, at
the Borrower's expense, to such Incremental Term Loan Lenders, to be consistent
with the requirements of Section 1.05 (with appropriate  modifications,  to the
extent needed) to reflect the Incremental  Term Loans made by such  Incremental
Term Loan Lenders or such Incremental Term Loan Lender, as the case may be.

          (c)  Notwithstanding  anything to the contrary  contained  above, the
Incremental Term Loan  Commitments  provided by an Incremental Term Loan Lender
or  Incremental  Term  Loan  Lenders,  as the  case  may be,  pursuant  to each
Incremental  Term Loan  Commitment  Agreement  shall  constitute a new Tranche,
which shall be separate and distinct  from the  existing  Tranches  pursuant to
this   Agreement   (with  a   designation   reasonably   satisfactory   to  the
Administrative  Agent, which designation may be made in letters (i.e., A, B, C,
etc.),  numbers (1, 2, 3, etc.) or a combination  thereof (i.e., A-1, A-2, B-1,
B-2,  etc.),  provided  that  the  parties  to a given  Incremental  Term  Loan
Commitment  Agreement may specify therein that the respective  Incremental Term
Loans  made  pursuant  thereto  shall  constitute  part of, and be added to, an
existing   Tranche  of  Incremental  Term  Loans,  so  long  as  the  following
requirements are satisfied:

          (i)  the  Incremental   Term  Loans  to  be  made  pursuant  to  such
     Incremental  Term Loan  Commitment  Agreement shall have the same Maturity
     Date and the same  Weighted  Average  Life to  Maturity  as the Tranche of
     Incremental  Term Loans to which the new Incremental  Term Loans are being
     added,  and shall bear  interest  at the same rates  (i.e.,  have the same
     Applicable Margins) applicable to such Tranche;

                                     -16-
<PAGE>

          (ii) the new  Incremental  Term Loans  shall have the same  Scheduled
     Incremental  Term Loan Repayment  Dates as then remain with respect to the
     Tranche to which such new Incremental Term Loans are being added (with the
     amount of each Scheduled  Incremental  Term Loan  Repayment  applicable to
     such new Incremental Term Loans to be the same (on a proportionate  basis)
     as is theretofore  applicable to the Tranche to which such new Incremental
     Term Loans are being  added,  thereby  increasing  the amount of each then
     remaining  Scheduled  Incremental  Term Loan  Repayment of the  respective
     Tranche proportionately; and

          (iii) on the date of the making of such new  Incremental  Term Loans,
     and  notwithstanding  anything to the contrary set forth in Section  1.09,
     same shall be added to (and form part of) each  Borrowing  of  outstanding
     Incremental  Term  Loans of the  respective  Tranche  on a pro rata  basis
     (based on the relative sizes of the various  outstanding  Borrowings),  so
     that each Lender will participate proportionately in each then outstanding
     Borrowing  of Loans of the  respective  Tranche,  and so that the existing
     Lenders  with   respect  to  such  Tranche   continue  to  have  the  same
     participation  (by amount) in each Borrowing as they had before the making
     of the new Incremental Term Loans of such Tranche.

          To the extent the  provisions of preceding  clause (iii) require that
Lenders  making  new  Incremental  Term  Loans  add  same to  then  outstanding
Borrowings of Eurodollar  Loans, it is acknowledged that the effect thereof may
result in such new Incremental  Term Loans having short Interest Periods (i.e.,
an Interest  Period that began  during an Interest  Period then  applicable  to
outstanding  Eurodollar  Loans  and  which  will  end on the  last  day of such
Interest  Period).  In  connection  therewith,  the Borrower may agree,  in the
respective  Incremental  Term Loan  Commitment  Agreement,  to  compensate  the
Lenders making the new  Incremental  Term Loans of the  respective  Tranche for
funding  Eurodollar  Loans during an existing  Interest Period on such basis as
may be agreed by the Borrower and their respective Lender or Lenders.

          1.14  Replacement  of  Lenders.  (a) (x) If any Lender (i)  becomes a
Defaulting  Lender or otherwise  defaults in its  obligations  to make Loans or
fund Unpaid  Drawings or (ii) refuses to consent to certain  proposed  changes,
waivers,  discharges or terminations  with respect to this Agreement which have
been  approved by the Required  Lenders as provided in Section  13.12(b) or (y)
upon the  occurrence  of any event  giving  rise to the  operation  of  Section
1.10(a)(ii)  or (iii),  Section  1.10(c),  Section  2.06 or  Section  4.04 with
respect to any Lender  which  results in such Lender  charging to the  Borrower
increased  costs in  excess  of those  being  generally  charged  by the  other
Lenders, the Borrower shall have the right, in accordance with the requirements
of Section 13.04(b),  if no Default or Event of Default will exist after giving
effect to such replacement, to replace such Lender (the "Replaced Lender") with
one or more  other  Eligible  Transferee  or  Transferees,  none of whom  shall
constitute a Defaulting  Lender at the time of such replacement  (collectively,
the "Replacement  Lender"),  reasonably  acceptable to the Administrative Agent
or, at the option of the  Borrower,  to  replace  only (A) the  Revolving  Loan
Commitment (and outstanding  Revolving Loans pursuant  thereto) of the Replaced
Lender with an identical  Revolving Loan Commitment provided by the Replacement
Lender,  or (B) in the case of a  replacement  as provided in Section  13.12(b)
where the consent of the  respective  Lender is required  with  respect to less
than all Tranches,  the Commitments  and/or outstanding Loans of

                                     -17-
<PAGE>

such Lender in respect of each  Tranche  where the consent of such Lender would
otherwise be individually required,  with identical Commitments and/or Loans of
the respective Tranche provided by the Replacement  Lender;  provided that, (i)
at the time of any  replacement  pursuant to this  Section  1.13,  the Replaced
Lender and the  Replacement  Lender shall enter into one or more Assignment and
Assumption  Agreements  pursuant to Section 13.04(b) (and with all fees payable
pursuant  to  said  Section  13.04(b)  to be paid  by the  Replacement  Lender)
pursuant to which the  Replacement  Lender shall acquire all of the Commitments
and all of the  outstanding  Loans (or, in the case of the  replacement of only
(a)  the  Revolving   Loan   Commitment,   outstanding   Revolving   Loans  and
participations in Letter of Credit  Outstandings and Swingline Loans and/or (b)
a particular  Tranche or Tranches of Incremental  Term Loans,  the  outstanding
principal amount of such Tranche or Tranches of Incremental Term Loans) of, and
in each case  (except  for the  replacements  of only one or more  Tranches  of
Incremental  Term  Loans of a  Replaced  Lender)  participations  in Letters of
Credit  and  Swingline  Loans  by,  the  Replaced  Lender  and,  in  connection
therewith,  shall pay to (A) the Replaced  Lender in respect  thereof an amount
equal to the sum of (1) an amount  equal to the  principal  of all  outstanding
Loans of the Replaced  Lender (or, in the case of the  replacement  of only (i)
the Revolving Loan Commitment of the Replaced Lender, all outstanding Revolving
Loans of the  Replaced  Lender or (ii) the  outstanding  principal  amount of a
particular  Tranche or  Tranches  of  Incremental  Term  Loans of the  Replaced
Lender,  all outstanding  Incremental Term Loans of such Tranche or Tranches of
the Replaced  Lender) and (2) except in the case of the replacement of only one
or more  Tranches of  Incremental  Term Loans of a Replaced  Lender,  an amount
equal to all Unpaid  Drawings that have been funded by (and not  reimbursed to)
such Replaced  Lender,  (B) in the case of any  replacement  of Revolving  Loan
Commitments,  the  respective  Issuing  Lender an amount equal to such Replaced
Lender's  Percentage of any Unpaid Drawing relating to Letters of Credit issued
by such Issuing  Lender  (which at such time remains an Unpaid  Drawing) to the
extent such amount was not  theretofore  funded by such Replaced Lender to such
Issuing  Lender  and  (C) in the  case of any  replacement  of  Revolving  Loan
Commitments,  the Swingline  Lender an amount equal to such  Replaced  Lender's
Percentage  of any  Mandatory  Borrowing  to the  extent  such  amount  was not
theretofore funded by such Replaced Lender to the Swingline Lender and (ii) all
obligations of the Borrower owing to the Replaced  Lender (other than (a) those
specifically  described in clause (i) above in respect of which the  assignment
purchase price has been, or is concurrently  being, paid or (b) relating to any
Tranche of Loans and/or  Commitments  of the respective  Replaced  Lender which
will remain  outstanding  after giving  effect to the  respective  replacement)
shall  be  paid  in  full  to  such  Replaced  Lender  concurrently  with  such
replacement. All amounts of (i) interest in respect of all outstanding Loans of
any such Replaced  Lender (or, in the case of the  replacement  of only (x) the
Revolving  Loan  Commitment  of  such  Replaced  Lender,   in  respect  of  all
outstanding  Revolving  Loans of such  Replaced  Lender or (y) the  outstanding
principal amount of a particular  Tranche or Tranches of Incremental Term Loans
of such Replaced Lender,  in respect of all outstanding  Incremental Term Loans
of such Tranche or Tranches of such  Replaced  Lender) which has accrued to the
date of such replacement and has not been paid as of such date shall be paid to
such Replaced  Lender at the time such interest  would  otherwise be payable in
accordance  with the  provisions of Section  1.08(d) and (ii) all accrued,  but
theretofore  unpaid Fees owing to the Replaced  Lender  pursuant to the Section
3.01 at the time of such  replacement  (but only with  respect to the  relevant
Tranches,  in the case of a replacement of less than all of the Tranches of the
respective  Replaced  Lender) shall be paid to

                                     -18-
<PAGE>

such  Replaced  Lender at the time such fees  would  otherwise  be  payable  in
accordance with the provisions of Section 3.01.

          (b) Upon the execution of the  respective  Assignment  and Assumption
Agreements,  the  payment of  amounts  referred  to in clauses  (i) and (ii) of
Section 1.13(a) and, if so requested by the Replacement Lender, delivery to the
Replacement  Lender of the appropriate  Note or Notes executed by the Borrower,
the  Replacement  Lender  shall  become  a Lender  hereunder  and,  unless  the
respective  Replaced  Lender  continues to have a Revolving Loan  Commitment or
outstanding  Incremental Term Loans hereunder,  the Replaced Lender shall cease
to  constitute  a Lender  hereunder,  except  with  respect to  indemnification
provisions under this Agreement (including, without limitation,  Sections 1.10,
1.11,  2.06,  4.04,  13.01 and 13.06),  which shall survive as to such Replaced
Lender.

          1.15  Additional  Provisions  Regarding the  Incurrence of Eurodollar
Loans Prior to the Syndication Date.  Notwithstanding  anything to the contrary
contained  in this  Section  1 or  elsewhere  in this  Agreement,  prior to the
Syndication Date, the Borrower shall only be permitted to incur and/or maintain
Eurodollar  Loans with an Interest  Period of (A) subject to Section 1.09,  one
week, and only so long as all Eurodollar Loans incurred and/or maintained prior
to such earlier date shall be subject to the same one week  Interest  Period or
(B) any other Interest Period otherwise permitted  hereunder,  but, in the case
of this clause (B),  only so long as the Borrower  compensates  each Lender for
any and all expenses of the type  described  in Section  1.11  incurred by such
Lender  in  connection  with  the  primary  syndication  of  the  Loans  and/or
Commitments.

          SECTION 2. Letters of Credit.

          2.01  Letters  of  Credit.  (a)  Subject  to and upon the  terms  and
conditions  set forth herein,  the Borrower may request that any Issuing Lender
issue,  at any time and from time to time on and after the  Effective  Date and
prior to the 30th day prior to the Revolving  Loan Maturity  Date,  (x) for the
account of the  Borrower  and for the  benefit  of any holder (or any  trustee,
agent or other similar  representative for any such holders) of L/C Supportable
Obligations of the Borrower or any of its Subsidiaries,  an irrevocable standby
letter of credit,  in a form customarily used by such Issuing Lender or in such
other form as has been  approved  by such  Issuing  Lender  (each such  standby
letter  of  credit,  a  "Standby  Letter of  Credit")  in  support  of such L/C
Supportable  Obligations  and (y) for the account of the  Borrower  and for the
benefit  of  sellers  of goods and  materials  used in the  ordinary  course of
business  of the  Borrower  or any of its  Subsidiaries  an  irrevocable  sight
commercial  letter of credit in a form  customarily used by such Issuing Lender
or in such other form as has been  approved by such  Issuing  Lender (each such
commercial  letter of credit,  a "Trade  Letter of Credit," and each such Trade
Letter of Credit and each  Standby  Letter of Credit,  a "Letter of Credit") in
support of commercial  transactions of the Borrower and its  Subsidiaries.  All
Letters of Credit  shall be  denominated  in Dollars.  It is  acknowledged  and
agreed that each of the letters of credit  which were issued under the Existing
Credit Agreement and which remain outstanding on the Effective Date and are set
forth on  Schedule  III (each such  letter of credit,  an  "Existing  Letter of
Credit" and,  collectively,  the "Existing  Letters of Credit") shall, from and
after the  Effective  Date,  constitute  a Letter of Credit for all purposes of
this  Agreement  and shall,  for purposes of Sections  2.04 and 3.01, be deemed

                                     -19-
<PAGE>

issued on the Effective  Date.  The Stated  Amount of each  Existing  Letter of
Credit and the expiry date therefor,  each as in effect on the Effective  Date,
is set forth on Schedule III.

          (b) Subject to and upon the terms and  conditions  set forth  herein,
each Issuing  Lender  hereby  agrees that it will, at any time and from time to
time on and  after  the  Effective  Date and prior to the 30th day prior to the
Revolving Loan Maturity Date, following its receipt of the respective Letter of
Credit Request,  issue for the account of the Borrower,  one or more Letters of
Credit  (x) in the case of Standby  Letters  of Credit,  in support of such L/C
Supportable  Obligations  of the  Borrower  or any of its  Subsidiaries  as are
permitted to exist without  giving rise to a Default or an Event of Default and
(y) in the case of Trade Letters of Credit, for the benefit of sellers of goods
or materials used in the ordinary  course of business of the Borrower or any of
its Subsidiaries as referenced in Section 2.01(a), provided that the respective
Issuing  Lender shall be under no  obligation  to issue any Letter of Credit of
the types described above if at the time of such issuance:

          (i) any order,  judgment or decree of any  governmental  authority or
     arbitrator  shall  purport by its terms to enjoin or restrain such Issuing
     Lender  from  issuing  such  Letter of Credit  or any  requirement  of law
     applicable to such Issuing Lender or any request or directive  (whether or
     not  having  the  force  of law)  from  any  governmental  authority  with
     jurisdiction over such Issuing Lender shall prohibit, or request that such
     Issuing Lender  refrain from, the issuance of letters of credit  generally
     or such Letter of Credit in  particular  or shall impose upon such Issuing
     Lender with respect to such Letter of Credit any restriction or reserve or
     capital  requirement  (for  which  such  Issuing  Lender is not  otherwise
     promptly compensated by the Borrower) not in effect on the date hereof, or
     any unreimbursed loss, cost or expense which was not applicable, in effect
     or known to such  Issuing  Lender as of the date  hereof  and  which  such
     Issuing Lender reasonably and in good faith deems material to it; or

          (ii) such Issuing Lender shall have received notice from the Required
     Lenders  prior  to the  issuance  of such  Letter  of  Credit  of the type
     described in the second sentence of Section 2.03(b).

          2.02  Maximum  Letter  of  Credit  Outstandings;   Final  Maturities.
Notwithstanding  anything to the contrary  contained in this Agreement,  (i) no
Letter of Credit shall be issued the initial Stated Amount of which, when added
to the Letter of Credit  Outstandings  (exclusive of Unpaid  Drawings which are
repaid on the date of, and prior to the issuance of, the  respective  Letter of
Credit) at such time would exceed either (x)  $50,000,000  or (y) when added to
the aggregate  principal amount of all Revolving Loans then outstanding and the
aggregate  principal amount of all Swingline Loans then outstanding,  an amount
equal to the Total  Revolving Loan Commitment at such time and (ii) each Letter
of Credit shall by its terms  terminate on or before (A) in the case of Standby
Letters of Credit, the earlier of (x) the date which occurs 12 months after the
date of the issuance thereof (although any such Standby Letter of Credit may be
extendible for successive  periods of up to 12 months, but not beyond the third
Business Day prior to the Revolving Loan Maturity Date, on terms  acceptable to
the  Issuing  Lender  thereof)  and (y) the  third  Business  Day  prior to the
Revolving  Loan  Maturity  Date and (B) in the case of Trade

                                     -20-
<PAGE>

Letters of Credit,  the earlier of (x) the date which occurs 360 days after the
date of issuance  thereof and (y) 30 days prior to the Revolving  Loan Maturity
Date.

          2.03 Letter of Credit Requests;  Minimum Stated Amount.  (a) Whenever
the Borrower  desires  that a Letter of Credit be issued for its  account,  the
Borrower shall give the Administrative  Agent and the respective Issuing Lender
at least three  Business  Days' (or such shorter period as is acceptable to the
respective Issuing Lender) written notice thereof.  Each notice shall be in the
form of Exhibit D (each a "Letter of Credit Request").

          (b) The making of each Letter of Credit Request shall be deemed to be
a representation and warranty by the Borrower that such Letter of Credit may be
issued in accordance  with, and will not violate the  requirements  of, Section
2.02.  Unless the  respective  Issuing  Lender  has  received  notice  from the
Required  Lenders  before it issues a Letter of Credit  that one or more of the
conditions  specified in Section 5 are not satisfied on the  Effective  Date or
Section 6 are not then satisfied, or that the issuance of such Letter of Credit
would violate  Section 2.02, then such Issuing Lender shall issue the requested
Letter of Credit  for the  account  of the  Borrower  in  accordance  with such
Issuing  Lender's  usual  and  customary  practices.  Upon the  issuance  of or
amendment or modification to a Letter of Credit,  the respective Issuing Lender
shall  promptly  notify  the  Borrower  and the  Administrative  Agent  of such
issuance,  amendment or modification and such notification shall be accompanied
by a copy of the issued Letter of Credit or amendment or modification.

          (c) The initial  Stated  Amount of each Letter of Credit shall not be
less than $100,000 or such lesser  amount as is  acceptable  to the  respective
Issuing Lender.

          2.04  Letter  of  Credit  Participation.  (a)  Immediately  upon  the
issuance by the respective Issuing Lender of any Letter of Credit, such Issuing
Lender shall be deemed to have sold and transferred to each Lender,  other than
such Issuing Lender (each such Lender, in its capacity under this Section 2.04,
a  "Participant"),  and each such Participant  shall be deemed  irrevocably and
unconditionally  to have  purchased  and  received  from such  Issuing  Lender,
without recourse or warranty,  an undivided interest and participation,  to the
extent of such Participant's Percentage, in such Letter of Credit, each drawing
or payment made  thereunder  and the  obligations  of the  Borrower  under this
Agreement  with  respect  thereto,   and  any  security  therefor  or  guaranty
pertaining  thereto.  Upon any change in the Revolving Loan  Commitments of the
Lenders  pursuant to Section  1.13 or 13.04,  it is hereby  agreed  that,  with
respect to all outstanding  Letters of Credit and Unpaid Drawings,  there shall
be an automatic adjustment to the participations  pursuant to this Section 2.04
to reflect the new Percentages of the assignor and assignee Lender, as the case
may be.

                  (b) In determining whether to pay under any Letter of Credit,
the respective Issuing Lender shall have no obligation relative to the other
Lenders other than to confirm that any documents required to be delivered under
such Letter of Credit appear to have been delivered and that they appear to
substantially comply on their face with the requirements of such Letter of
Credit. Any action taken or omitted to be taken by any Issuing Lender under or
in connection with any Letter of Credit if taken or omitted in the absence of
gross negligence or willful mis-

                                     -21-
<PAGE>

conduct, shall not create for such Issuing Lender any resulting liability to
the Borrower, any other Credit Party, any Lender or any other Person.

          (c) In the event that any Issuing  Lender makes any payment under any
Letter of Credit and the Borrower shall not have reimbursed such amount in full
to such Issuing Lender pursuant to Section  2.05(a),  such Issuing Lender shall
promptly  notify the  Administrative  Agent,  which shall promptly  notify each
Participant  of  such  failure,   and  each  Participant   shall  promptly  and
unconditionally  pay to such  Issuing  Lender the amount of such  Participant's
Percentage of such  unreimbursed  payment in Dollars and in same day funds.  If
the  Administrative  Agent so notifies,  prior to 11:00 A.M. (New York time) on
any Business Day, any Participant  required to fund a payment under a Letter of
Credit, such Participant shall make available to such Issuing Lender in Dollars
such  Participant's  Percentage  of the amount of such payment on such Business
Day in same day funds. If and to the extent such Participant  shall not have so
made its  Percentage  of the amount of such  payment  available to such Issuing
Lender,  such  Participant  agrees to pay to such Issuing Lender,  forthwith on
demand such amount, together with interest thereon, for each day from such date
until the date  such  amount is paid to such  Issuing  Lender at the  overnight
Federal Funds Rate for the first three days and at the interest rate applicable
to Revolving Loans  maintained as Base Rate Loans for each day thereafter.  The
failure  of any  Participant  to make  available  to such  Issuing  Lender  its
Percentage  of any  payment  under any Letter of Credit  shall not  relieve any
other Participant of its obligation hereunder to make available to such Issuing
Lender  its  Percentage  of any  Letter  of  Credit  on the date  required,  as
specified above, but no Participant shall be responsible for the failure of any
other  Participant  to  make  available  to  such  Issuing  Lender  such  other
Participant's Percentage of any such payment.

          (d) Whenever any Issuing Lender receives a payment of a reimbursement
obligation  as to which it has  received  any  payments  from the  Participants
pursuant to clause (c) above, such Issuing Lender shall pay to each Participant
which has paid its  Percentage  thereof,  in Dollars and in same day funds,  an
amount  equal  to  such  Participant's  share  (based  upon  the  proportionate
aggregate amount  originally funded by such Participant to the aggregate amount
funded by all  Participants)  of the  principal  amount  of such  reimbursement
obligation and interest  thereon  accruing after the purchase of the respective
participations.

          (e) Upon the request of any  Participant,  each Issuing  Lender shall
furnish to such  Participant  copies of any  Letter of Credit  issued by it and
such other  documentation  relating  thereto as may  reasonably be requested by
such Participant.

          (f) The  obligations  of the  Participants  to make  payments to each
Issuing  Lender  with  respect  to  Letters  of  Credit  issued  by it shall be
irrevocable and not subject to any  qualification  or exception  whatsoever and
shall be made in accordance  with the terms and  conditions  of this  Agreement
under all circumstances,  including,  without limitation,  any of the following
circumstances:

          (i) any lack of validity or  enforceability  of this Agreement or any
     of the other Credit Documents;

                                     -22-
<PAGE>

          (ii) the existence of any claim, setoff, defense or other right which
     the  Borrower or any of its  Subsidiaries  may have at any time  against a
     beneficiary  named in a Letter of Credit,  any transferee of any Letter of
     Credit (or any Person for whom any such  transferee  may be  acting),  the
     Administrative  Agent,  any Participant,  or any other Person,  whether in
     connection with this  Agreement,  any Letter of Credit,  the  transactions
     contemplated   herein  or  any  unrelated   transactions   (including  any
     underlying  transaction  between  the  Borrower or any  Subsidiary  of the
     Borrower and the beneficiary named in any such Letter of Credit);

          (iii) any draft,  certificate or any other document  presented  under
     any  Letter  of  Credit  proving  to be  forged,  fraudulent,  invalid  or
     insufficient  in any  respect or any  statement  therein  being  untrue or
     inaccurate in any respect;

          (iv) the surrender or impairment of any security for the  performance
     or observance of any of the terms of any of the Credit Documents; or

          (v) the occurrence of any Default or Event of Default.

          2.05 Agreement to Repay Letter of Credit  Drawings.  (a) The Borrower
hereby agrees to reimburse the respective  Issuing Lender, by making payment to
the Administrative Agent in immediately  available funds at the Payment Office,
for any payment or disbursement made by such Issuing Lender under any Letter of
Credit  issued by it (each such amount,  so paid until  reimbursed,  an "Unpaid
Drawing"),  immediately after, and in any event on the date of, such payment or
disbursement,  with interest on the amount so paid or disbursed by such Issuing
Lender,  to the extent not reimbursed prior to 3:00 P.M. (New York time) on the
date of such  payment  or  disbursement,  from and  including  the date paid or
disbursed to but excluding the date such Issuing  Lender was  reimbursed by the
Borrower  therefor  at a rate per annum  which shall be the Base Rate in effect
from time to time plus the Applicable  Margin for Revolving Loans maintained as
Base  Rate  Loans;  provided,  however,  to the  extent  such  amounts  are not
reimbursed  prior to 3:00  P.M.  (New  York  time) on the  third  Business  Day
following the receipt by the Borrower of notice of such payment or disbursement
or following  the  occurrence of a Default or an Event of Default under Section
10.05,  interest shall thereafter accrue on the amounts so paid or disbursed by
such Issuing Lender (and until  reimbursed by the Borrower) at a rate per annum
which  shall be the Base Rate in effect  from time to time plus the  Applicable
Margin for Revolving Loans  maintained as Base Rate Loans plus 2%, in each such
case,  with interest to be payable on demand.  The  respective  Issuing  Lender
shall give the Borrower  prompt written notice of each Drawing under any Letter
of Credit,  provided  that the failure to give any such notice  shall in no way
affect, impair or diminish the Borrower's obligations hereunder.

          (b) The  obligations  of the  Borrower  under  this  Section  2.05 to
reimburse  the  respective  Issuing  Lender  with  respect  to Unpaid  Drawings
(including, in each case, interest thereon) shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim or
defense to payment  which the  Borrower may have or have had against any Lender
(including   in  its  capacity  as  issuer  of  the  Letter  of  Credit  or  as
Participant), including, without limitation, any defense based upon the failure
of any drawing  under a Letter of Credit (each a  "Drawing")  to conform to the
terms of the Letter of Credit or any  nonapplication  or  mis-

                                     -23-
<PAGE>

application  by the  beneficiary  of the  proceeds of such  Drawing;  provided,
however,  that the Borrower  shall not be  obligated  to reimburse  any Issuing
Lender for any wrongful  payment made by such Issuing  Lender under a Letter of
Credit as a result of acts or  omissions  constituting  willful  misconduct  or
gross negligence on the part of such Issuing Lender.

          2.06 Increased  Costs.  If at any time after the Effective  Date, the
introduction of or any change in any applicable law, rule,  regulation,  order,
guideline or request or in the interpretation or administration  thereof by the
NAIC  or  any  governmental   authority  charged  with  the  interpretation  or
administration  thereof, or compliance by any Issuing Lender or any Participant
with any request or directive by any such authority  (whether or not having the
force of law), shall either (i) impose,  modify or make applicable any reserve,
deposit,  capital  adequacy or similar  requirement  against  letters of credit
issued by any Issuing Lender or  participated  in by any  Participant,  or (ii)
impose on any Issuing Lender or any Participant any other conditions  relating,
directly  or  indirectly,  to  this  Agreement;  and the  result  of any of the
foregoing is to increase the cost to any Issuing  Lender or any  Participant of
issuing,  maintaining or participating  in any Letter of Credit,  or reduce the
amount  of any  sum  received  or  receivable  by  any  Issuing  Lender  or any
Participant  hereunder or reduce the rate of return on its capital with respect
to Letters of Credit  (except for changes in the rate of tax on, or  determined
by  reference  to, the net income or  profits  of such  Issuing  Lender or such
Participant  pursuant to the laws of the  jurisdiction in which it is organized
or in which its principal office or applicable lending office is located or any
subdivision  thereof or therein),  then,  upon the delivery of the  certificate
referred to below to the  Borrower by such Issuing  Lender or any  Participant,
the Borrower  shall,  subject to the provisions of Section 13.17 (to the extent
applicable),  pay to such Issuing Lender or such  Participant  such  additional
amount or amounts as will  compensate  such Issuing Lender or  Participant  for
such increased  cost or reduction in the amount  receivable or reduction on the
rate of return on its  capital.  Any Issuing  Lender or any  Participant,  upon
determining  that any  additional  amounts  will be  payable  pursuant  to this
Section 2.06,  will give prompt written  notice thereof to the Borrower,  which
notice shall  include a  certificate  submitted to the Borrower by such Issuing
Lender or such Participant (a copy of which  certificate  shall be sent by such
Issuing Lender or such Participant to the Administrative  Agent), setting forth
in reasonable detail the basis for the calculation of such additional amount or
amounts  necessary to compensate  such Issuing Lender or such  Participant.  In
determining such additional  amounts,  each Issuing Lender and each Participant
will act reasonably and in good faith,  provided that the certificate  required
to be delivered pursuant to this Section 2.06 shall,  absent manifest error, be
final and conclusive and binding on the Borrower.

          SECTION 3. Fees; Reductions of Commitment.

          3.01 Fees. (a) The Borrower agrees to pay to the Administrative Agent
for distribution to each Non-Defaulting Lender with a Revolving Loan Commitment
a commitment  commission (the "Commitment  Commission") for the period from the
Effective Date to but not including the Revolving Loan Maturity Date (or to but
not including such earlier date as the Total  Revolving Loan  Commitment  shall
have been terminated), computed at a rate per annum for each day equal to 0.50%
on the Unutilized  Revolving Loan Commitment of such  Non-Defaulting  Lender on
such day. Accrued  Commitment  Commission shall be due and payable quarterly in

                                     -24-
<PAGE>

arrears on each Quarterly  Payment Date and on the Revolving Loan Maturity Date
or such  earlier  date upon  which  the  Total  Revolving  Loan  Commitment  is
terminated.

          (b)  The  Borrower  agrees  to pay to the  Administrative  Agent  for
distribution  to each  Non-Defaulting  Lender  with an  Incremental  Term  Loan
Commitment such facility fees, commitment commission and other amounts, if any,
as are specified in the Incremental Term Loan Commitment  Agreement pursuant to
which such Incremental Term Loan Commitment  Agreement has been provided,  with
such facility fees,  commitment  commission  and other  amounts,  if any, to be
payable  at the  times  set  forth in such  Incremental  Term  Loan  Commitment
Agreement.

          (c)  The  Borrower  agrees  to pay to the  Administrative  Agent  for
distribution to each Lender (based on each such Lender's respective Percentage)
a fee in respect of each  Letter of Credit  issued  hereunder  (the  "Letter of
Credit  Fee"),  for the period from and  including the date of issuance of such
Letter of Credit to and including the date of termination or expiration of such
Letter of Credit,  computed at a rate per annum equal to the Applicable  Margin
for Revolving Loans  maintained as Eurodollar  Loans on the daily Stated Amount
of such  Letter of  Credit.  Accrued  Letter of  Credit  Fees  shall be due and
payable  quarterly in arrears on each  Quarterly  Payment Date and on the first
day after the  termination of the Total Revolving Loan Commitment upon which no
Letters of Credit remain outstanding.

          (d) The Borrower  agrees to pay to each Issuing  Lender,  for its own
account,  a facing  fee in  respect  of each  Letter of  Credit  issued by such
Issuing  Lender (the "Facing  Fee") (x) in the case of each  Standby  Letter of
Credit,  for the period from and including the date of issuance of such Standby
Letter of Credit to and including the date of the  termination  of such Standby
Letter  of  Credit,  computed  at a rate  equal to 1/4 of 1% per annum (or such
lesser rate as is agreed on by the Borrower and the respective  Issuing Lender)
of the daily Stated Amount of such Standby Letter of Credit and (y) in the case
of each Trade Letter of Credit, in an amount equal to 1/4 of 1% (or such lesser
rate as is agreed on by the Borrower and the respective  Issuing Lender) of the
Stated  Amount  of such  Trade  Letter  of  Credit  as of the date of  issuance
thereof.  Accrued Facing Fees payable with respect to Standby Letters of Credit
shall be due and payable  quarterly in arrears on each  Quarterly  Payment Date
and upon the  first  day after the  termination  of the  Total  Revolving  Loan
Commitment upon which no Standby  Letters of Credit remain  outstanding and all
Facing Fees  payable  with  respect to each Trade Letter of Credit shall be due
and payable on the date of issuance of such Trade Letter of Credit.

          (e) The Borrower agrees to pay, upon each drawing under, issuance of,
or amendment to, any Letter of Credit, such amount as shall at the time of such
event be the  administrative  charge  and the  reasonable  expenses  which  the
applicable  Issuing  Lender  is  generally  imposing  in  connection  with such
occurrence with respect to letters of credit.

          (f) The Borrower  agrees to pay to the Joint Lead  Arrangers and each
Agent, for their respective accounts, such other fees as have been agreed to in
writing by the Borrower  with the Joint Lead  Arrangers  or such Agent,  as the
case may be.

                                     -25-
<PAGE>

          3.02  Voluntary  Termination of Unutilized  Commitments.  (a) Upon at
least one Business  Day's prior written notice to the  Administrative  Agent at
the  Notice  Office  (which  notice the  Administrative  Agent  shall  promptly
transmit to each of the  Lenders),  the Borrower  shall have the right,  at any
time or from  time to  time,  without  premium  or  penalty,  to  terminate  or
partially  reduce (i) the Total  Unutilized  Revolving Loan  Commitment,  in an
integral multiple of $1,000,000 in the case of partial  reductions to the Total
Revolving  Loan  Commitment;  provided  that each such  reduction  shall  apply
proportionately  to permanently  reduce the Revolving  Loan  Commitment of each
Lender with such a  Commitment,  and/or (ii) unless  otherwise  provided in the
respective  Incremental  Term Loan Commitment  Agreement,  the Incremental Term
Loan  Commitments  provided  pursuant to any  Incremental  Term Loan Commitment
Agreement,  in an  integral  multiple of  $1,000,000  (or as may  otherwise  be
provided in the respective  Incremental Term Loan Commitment  Agreement) in the
case of partial  reductions to the aggregate  amount of  Incremental  Term Loan
Commitments   provided  pursuant  to  the  respective   Incremental  Term  Loan
Commitment   Agreement;   provided  that  each  such   reduction   shall  apply
proportionately  to permanently reduce the Incremental Term Loan Commitments of
the various Lenders provided  pursuant to the respective  Incremental Term Loan
Commitment Agreement.

          (b) In the  event of  certain  refusals  by a Lender  to  consent  to
certain proposed changes,  waivers,  discharges or terminations with respect to
this Agreement which have been approved by the Required  Lenders as provided in
Section 13.12(b), the Borrower may, subject to the requirements of said Section
13.12(b) and upon five  Business  Days'  written  notice to the  Administrative
Agent at the  Notice  Office  (which  notice  the  Administrative  Agent  shall
promptly  transmit to each of the Lenders)  terminate the entire Revolving Loan
Commitment  of such  Lender so long as all Loans,  together  with  accrued  and
unpaid  interest,  Fees and all other  amounts owing to such Lender (other than
amounts  owing in respect  of any  Tranche  of  Incremental  Term Loans of such
Lender, if such Tranche of Incremental Term Loans are not being repaid pursuant
to Section  13.12(b)) are repaid  concurrently  with the  effectiveness of such
termination pursuant to this Section 3.02(b) (at which time Schedule I shall be
deemed  modified  to reflect  such  changed  amounts)  and,  in the case of any
replacement  of Revolving  Loan  Commitments,  such Lender's  Percentage of all
outstanding  Letters of Credit is cash  collateralized in a manner satisfactory
to the  Administrative  Agent and the respective  Issuing Lenders,  and at such
time,  unless the respective  Lender continues to have outstanding  Incremental
Term Loans  hereunder,  such Lender  shall no longer  constitute a "Lender" for
purposes of this Agreement,  except with respect to indemnifications under this
Agreement  (including,  without  limitation,  Sections 1.10,  1.11, 2.06, 4.04,
13.01 and 13.06), which shall survive as to such repaid Lender.

          3.03 Mandatory  Reduction of Commitments.  (a) The Total  Commitments
(and each of the  Commitments of each Lender) shall terminate in their entirety
on August 15, 2001,  unless the Effective  Date shall have occurred on or prior
to such date.

          (b) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total  Revolving Loan  Commitment  (and the Revolving
Loan  Commitment of each Lender) shall terminate in its entirety on the earlier
of (i) unless the  Required  Lenders  otherwise  agree in writing in their sole
discretion, the date on which a Change of Control occurs and (ii) the Revolving
Loan Maturity Date.

                                     -26-
<PAGE>

          (c) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total Revolving Loan Commitment  shall be permanently
reduced at the times, and in the amounts, required by Section 4.02(h).

          (d) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, (i) the  Incremental  Term Loan Commitment of each Lender
provided  pursuant to a particular  Incremental Term Loan Commitment  Agreement
shall be permanently  reduced on each  Incremental  Term Loan Borrowing Date on
which  Incremental  Term Loans are incurred  pursuant to such  Incremental Term
Loan Commitment  Agreement in an amount equal to the aggregate principal amount
of Incremental Term Loans made by such Lender pursuant to such Incremental Term
Loan  Commitment  Agreement  on such  date,  (ii)  the  Incremental  Term  Loan
Commitment of each Lender provided  pursuant to a particular  Incremental  Term
Loan Commitment  Agreement shall terminate at 5:00 P.M. (New York City time) on
the earlier of (i) the date specified in such  Incremental Term Loan Commitment
and (ii) the Revolving Loan Maturity Date (whether or not any Incremental  Term
Loans are incurred on either such date),  (iii) the aggregate  Incremental Term
Loan  Commitments  provided  pursuant to any  Incremental  Term Loan Commitment
Agreement  shall be  permanently  reduced  at the  times,  and in the  amounts,
required  by Section  4.02(h) and (iv) unless the  Required  Lenders  otherwise
agree in writing in their sole discretion,  any then existing  Incremental Term
Loan  Commitments  shall  terminate  in their  entirety  on the date on which a
Change in Control occurs.

          (e) Each reduction to the Total Revolving Loan Commitment pursuant to
this Section 3.03 shall be applied proportionately to reduce the Revolving Loan
Commitment of each Lender with such a Commitment. Each reduction to Incremental
Term Loan Commitments provided pursuant to any Incremental Term Loan Commitment
Agreement  pursuant to this Section 3.03 shall,  except as otherwise  expressly
provided above, be applied  proportionately to reduce the Incremental Term Loan
Commitment of each Lender provided pursuant to the respective  Incremental Term
Loan Commitment Agreement.

          SECTION 4. Prepayments; Payments; Taxes.

          4.01 Voluntary Prepayments.  (a) The Borrower shall have the right to
prepay the Loans,  without premium or penalty,  in whole or in part at any time
and from time to time on the following terms and  conditions:  (i) the Borrower
shall give the  Administrative  Agent prior to 2:00 P.M. (New York time) at the
Notice  Office  (x) at least  one  Business  Day's  prior  written  notice  (or
telephonic  notice promptly  confirmed in writing) of the Borrower's  intent to
prepay Base Rate Loans and (y) at least  three  Business  Days'  prior  written
notice (or telephonic  notice promptly  confirmed in writing) of the Borrower's
intent to prepay Eurodollar Loans, whether Revolving Loans,  Swingline Loans or
one or more specified Tranches of Incremental Term Loans shall be prepaid,  the
amount of such prepayment and the Types of Loans to be prepaid and, in the case
of Eurodollar  Loans,  the specific  Borrowing or Borrowings  pursuant to which
made, which notice the Administrative  Agent shall promptly transmit to each of
the Lenders;  (ii) each prepayment of Loans shall be in an aggregate  principal
amount of at least $1,000,000 (or $100,000 in the case of Swingline Loans), and
thereafter,  in integral  multiples of $100,000,  provided  that if any partial
prepayment of Eurodollar  Loans made pursuant to any Borrowing shall reduce the
outstanding  Eurodollar Loans made pursuant to such Borrowing to an amount

                                     -27-
<PAGE>

less than the Minimum Borrowing Amount applicable thereto,  then such Borrowing
may not be continued as a Borrowing of Eurodollar  Loans and any election of an
Interest  Period with respect thereto given by the Borrower shall have no force
or effect;  (iii) at the time of any prepayment of Eurodollar Loans pursuant to
this Section  4.01 on any date other than the last day of the  Interest  Period
applicable  thereto,  the Borrower shall pay the amounts  required  pursuant to
Section 1.11; (iv) each prepayment  pursuant to this Section 4.01(a) in respect
of any Loans made pursuant to a Borrowing  shall be applied pro rata among such
Loans,  provided  that  at the  Borrower's  election  in  connection  with  any
prepayment  of Revolving  Loans,  such  prepayment  shall not be applied to the
prepayment  of  Revolving  Loans of a  Defaulting  Lender;  (v) each  voluntary
prepayment of Incremental  Term Loans pursuant to this Section 4.01(a) shall be
applied pro rata to each  Tranche of  Incremental  Term  Loans,  with each such
Tranche of Incremental Term Loans to be allocated its Relevant Incremental Term
Loan  Percentage  of such  repayment;  and (vi) the  amount  of each  voluntary
prepayment of Incremental  Term Loans made pursuant to this Section 4.01(a) and
applied to a  particular  Tranche of  Incremental  Term  Loans as  provided  in
preceding  clause (v) shall be applied (A) (1) first,  to reduce the  Scheduled
Incremental  Term Loan  Repayments of the respective  Tranche which will become
due within twelve  months after the date of such  prepayment in direct order of
maturity of the dates of such Scheduled  Incremental  Term Loan  Repayments and
(2)  second,  to the extent in excess of the amount  required  to be applied as
provided in the preceding  clause (1), to reduce the then  remaining  Scheduled
Incremental Term Loan Repayments of the respective  Tranche on a pro rata basis
(based on the then remaining  principal  amounts of such Scheduled  Incremental
Term Loan  Repayments),  or (B) as otherwise  provided in the Incremental  Term
Loan Commitment  Agreement  pursuant to which such  Incremental  Term Loans are
made,  or (C) in the case of any  Tranche of  Incremental  Term Loans  extended
pursuant to more than one Incremental  Term Loan Commitment  Agreement,  as may
otherwise be provided in the first  Incremental Term Loan Commitment  Agreement
executed and delivered with respect to such Tranche.

          (b) In the  event of a  refusal  by a Lender to  consent  to  certain
proposed  changes,  waivers,  discharges or  terminations  with respect to this
Agreement  which have been  approved  by the  Required  Lenders as  provided in
Section  13.12(b),  the Borrower may,  upon five  Business  Days' prior written
notice to the  Administrative  Agent at the  Notice  Office  (which  notice the
Administrative  Agent shall promptly transmit to each of the Lenders) repay all
Loans,  together with accrued and unpaid interest,  Fees, and all other amounts
owing to such Lender (or owing to such  Lender  with  respect to the Tranche or
Tranches  which  gave  rise to the  need to  obtain  such  Lender's  individual
consent) in accordance with said Section 13.12(b) so long as (A) in the case of
the  repayment of any  Revolving  Loans of any Lender  pursuant to this Section
4.01(b),   the  Revolving   Loan   Commitment  of  such  Lender  is  terminated
concurrently  with such  repayment  pursuant to Section  3.02(b) (at which time
Schedule I shall be deemed  modified  to reflect  the  changed  Revolving  Loan
Commitment)  and (B) the consents  required by Section  13.12(b) in  connection
with the repayment pursuant to this Section 4.01(b) have been obtained.

          4.02 Mandatory Repayments. (a) On any day on which the sum of (I) the
aggregate  outstanding  principal  amount  of  Revolving  Loans,  plus (II) the
aggregate outstanding principal amount of Swingline Loans plus (III) the Letter
of Credit Outstandings,  exceeds the Total Revolving Loan Commitment as then in
effect, the Borrower shall prepay on such day principal of Swingline Loans and,
after all  Swingline  Loans  have been  repaid in full,  Revolving

                                     -28-
<PAGE>

Loans in an  amount  equal to such  excess.  If,  after  giving  effect  to the
prepayment  of  all  outstanding  Swingline  Loans  and  Revolving  Loans,  the
aggregate  amount  of the  Letter  of  Credit  Outstandings  exceeds  the Total
Revolving  Loan  Commitment  as then in effect,  the Borrower  shall pay to the
Administrative  Agent at the  Payment  Office  on such day an amount of cash or
Cash  Equivalents  equal to the amount of such  excess (up to a maximum  amount
equal to the Letter of Credit  Outstandings  at such  time),  such cash or Cash
Equivalents  to be  held  as  security  for  all  obligations  of the  Borrower
hereunder in a cash collateral  account to be established by the Administrative
Agent.

          (b)  (i)  In  addition  to any  mandatory  repayments  or  commitment
reductions  pursuant to this Section  4.02,  the Borrower  shall be required to
repay the principal  amount of  Incremental  Term Loans on the dates and in the
amounts set forth in the respective  Incremental Term Loan Commitment Agreement
or Agreements  relating to such  Incremental Term Loans (each such repayment as
the same may be reduced as  provided  in  Sections  4.01 and 4.02(h) and (i), a
"Scheduled  Incremental  Term Loan  Repayment," and each such date a "Scheduled
Incremental Term Loan Repayment  Date"),  provided that if any Incremental Term
Loans  are  incurred  which  will be added to (and  form  part of) an  existing
Tranche of Incremental Term Loans,  the amount of the then remaining  Scheduled
Incremental   Term  Loan   Repayments  of  the  respective   Tranche  shall  be
proportionally  increased  (with the aggregate  amount of increases to the then
remaining  Scheduled  Incremental  Term Loan  Repayments to equal the aggregate
principal  amount of such new  Incremental  Term Loans then being  incurred) in
accordance with the requirements of Section 1.13(c).

          (c) In  addition  to any other  mandatory  repayments  or  commitment
reductions pursuant to this Section 4.02,  promptly,  but in any event no later
than the third  Business Day,  after each date on or after the  Effective  Date
upon which the Borrower  receives any cash proceeds  from any Qualified  Public
Offering,  an amount equal to 50% of the Net Equity Proceeds therefrom shall be
applied as a mandatory repayment (and/or commitment reduction,  as the case may
be), of outstanding  Incremental  Term Loans (if any) (and/or  Incremental Term
Loan  Commitments) in accordance with the  requirements of Sections 4.02(h) and
(i).

          (d) In  addition  to any other  mandatory  repayments  or  commitment
reductions pursuant to this Section 4.02,  promptly,  but in any event no later
than the third  Business Day,  after each date on or after the  Effective  Date
upon which the Borrower or any of its  Subsidiaries  receives any cash proceeds
from any incurrence by the Borrower or any of its  Subsidiaries of Indebtedness
for borrowed money  (excluding  Indebtedness for borrowed money permitted to be
incurred  pursuant to Section  9.04),  an amount  equal to 100% of the Net Debt
Proceeds of the  respective  incurrence of  Indebtedness  shall be applied as a
mandatory  repayment  (and/or  commitment  reduction,  as the  case  may be) of
outstanding  Loans (and/or  Commitments) in accordance with the requirements of
Sections 4.02(h) and (i).

          (e) In  addition  to any other  mandatory  repayments  or  commitment
reductions pursuant to this Section 4.02,  promptly,  but in any event no later
than the third  Business Day,  after each date on or after the  Effective  Date
upon which the Borrower or any of its Subsidiaries  receives  proceeds from any
sale or other disposition of assets,  including sales or other  dispositions of
capital stock,  other Equity  Interests and securities  held by the Borrower or
any of

                                     -29-
<PAGE>

its  Subsidiaries,  but excluding (A) sales or transfers of assets permitted by
Sections 9.02(ii),  (v), (vi), (ix), (x), (xi), (xii),  (xiii), (xv) and (xvi),
(B)  sales or other  dispositions  of assets  (other  than  those  dispositions
described in clauses (A) and (C) of this Section 4.02(e)) the Net Sale Proceeds
of which do not exceed $5,000,000 in any fiscal year of the Borrower and (C) so
long as no Default or Event of Default then exists, sales or other dispositions
of assets  (other than those  dispositions  described in clauses (A) and (B) of
this  Section  4.02(e)),  the Net Sale  Proceeds of which do not exceed  either
$20,000,000 in any fiscal year of the Borrower or $50,000,000 in the aggregate,
provided  that in the case of preceding  clause (C), such Net Sale Proceeds are
used to  purchase  or improve  tangible  assets for use in the  business of the
Borrower and its Subsidiaries within 270 days following the receipt of such Net
Sale  Proceeds and the Borrower  delivers a certificate  to the  Administrative
Agent on or prior to such date of receipt  stating that such Net Sale  Proceeds
shall be used to  purchase  or improve  such  tangible  assets  within 270 days
following the date of the receipt of such Net Sale Proceeds (which  certificate
shall set forth the  estimates  of the proceeds to be so  expended),  an amount
equal  to 100%  of the Net  Sale  Proceeds  therefrom  shall  be  applied  as a
mandatory  repayment  (and/or  commitment  reduction,  as the  case  may be) of
outstanding  Loans (and/or  Commitments) in accordance with the requirements of
Sections  4.02(h) and (i). To the extent Net Sale  Proceeds are not required to
be applied pursuant to this Section 4.02(e) as a result of clause (C) contained
in the  parenthetical  appearing in the first sentence of this Section  4.02(e)
and all or any  portion  of such Net Sale  Proceeds  are not so  reinvested  in
tangible assets within such 270 day period,  then the remaining portion of such
Net Sale Proceeds shall be applied on the last day of such applicable period as
otherwise required by this Section 4.02(e)  (determined  without regard to such
clause (C)).  Without  limiting the  aforementioned  provisions of this Section
4.02(e), to the extent that the Borrower is not otherwise required to apply Net
Sale  Proceeds  from any such asset sale or other  disposition  to repay  Loans
and/or reduce Commitments  hereunder and the Borrower is (or would be) required
to make an offer to  prepay  the  Senior  Subordinated  Notes or any  Permitted
Subordinated  Notes with such Net Sale  Proceeds,  the Borrower  shall  instead
apply such Net Sale Proceeds as a mandatory  repayment or commitment  reduction
(as the case may be) of outstanding Loans or Commitments in accordance with the
requirements  of Section  4.02(h)  and (i) prior to the time when the  Borrower
would  otherwise  be  required  to make any such  offer to  prepay  the  Senior
Subordinated  Notes or any  Permitted  Subordinated  Notes  with  such Net Sale
Proceeds.

          (f) In  addition  to any other  mandatory  repayments  or  commitment
reductions  pursuant to this Section 4.02, on each Excess Cash Payment Date, so
long as Excess Cash Flow for the relevant  Excess Cash Payment  Period  exceeds
$1,000,000,  an  amount  equal to 50% of the  Excess  Cash  Flow in  excess  of
$1,000,000  for the relevant  Excess Cash Payment  Period shall be applied as a
mandatory  repayment  (and/or  commitment  reduction,  as the  case  may be) of
outstanding  Incremental  Term  Loans (if any)  (and/or  Incremental  Term Loan
Commitments) in accordance with the requirements of Sections 4.02(h) and (i).

          (g) In  addition  to any other  mandatory  repayments  or  commitment
reductions pursuant to this Section 4.02, within 10 days following each date on
or  after  Effective  Date on which  the  Borrower  or any of its  Subsidiaries
receives  any proceeds in excess of  $1,000,000  from any  Recovery  Event,  an
amount equal to 100% of the Net Insurance Proceeds (and not just the portion in
excess  of  $1,000,000)  shall be  applied  as a  mandatory  repayment  (and/or
commitment  reduction,  as the  case  may  be)  of  outstanding  Loans  (and/or
Commitments) in accordance with

                                     -30-
<PAGE>

Sections  4.02(h) and (i),  provided that (i) so long as no Default or Event of
Default then exists and such Net Insurance  Proceeds do not exceed  $3,000,000,
such Net Insurance Proceeds shall not be required to be so applied on such date
of receipt to the extent that the Borrower has delivered a  certificate  to the
Administrative  Agent on or prior to such date stating that such proceeds shall
be used or shall be committed  to be used to replace or restore any  properties
or assets in respect of which such proceeds were paid within 270 days following
the date of receipt of such  proceeds  (which  certificate  shall set forth the
estimates of the proceeds to be so expended)  and (ii) so long as no Default or
Event of Default  then exists and to the extent that (a) the amount of such Net
Insurance  Proceeds  exceeds  $3,000,000,  (b) the amount of such Net Insurance
Proceeds,   together  with  other  cash  available  to  the  Borrower  and  its
Subsidiaries and permitted to be spent by them on Capital  Expenditures  during
the  relevant  period,  equals  at  least  100% of the cost of  replacement  or
restoration  of the properties or assets in respect of which such Net Insurance
Proceeds  were paid as  determined  by the  Borrower  and as  supported by such
estimates or bids from contractors or  subcontractors  or such other supporting
information  as the  Administrative  Agent  may  reasonably  require,  (c)  the
Borrower has delivered to the Administrative Agent a certificate on or prior to
the date the certificate  would otherwise be required  pursuant to this Section
4.02(g)  in the form  described  in clause  (i) above and also  certifying  its
determination   as  required  by  preceding   clause  (b)  and  certifying  the
sufficiency of business interruption insurance as required by succeeding clause
(d),  and (d) the  Borrower  has  delivered  to the  Administrative  Agent such
evidence  as the  Administrative  Agent  may  reasonably  request  in form  and
substance satisfactory to the Administrative Agent establishing that the amount
of  business  interruption  insurance  which  the  Borrower  has,  if  any,  is
sufficient  and that the  Borrower  will  receive  payment  thereunder  in such
amounts and at such times as, when combined with funds from  operations and any
equity contributions received from Shareholders,  may reasonably be expected to
be  necessary  to  satisfy  all   obligations  and  expenses  of  the  Borrower
(including,  without  limitation,  all  debt  service  requirements,  including
pursuant to this Agreement),  without any delay or extension  thereof,  for the
period from the date of the respective  casualty,  condemnation  or other event
giving rise to the Recovery Event and continuing  through the completion of the
replacement or restoration of respective  properties or assets, then the entire
amount of the Net Insurance  Proceeds of such  Recovery  Event and not just the
portion in excess of  $3,000,000  shall be  deposited  with the  Administrative
Agent pursuant to a cash collateral arrangement reasonably  satisfactory to the
Administrative  Agent whereby such proceeds  shall be disbursed to the Borrower
from time to time as needed to pay or reimburse the Borrower or such Subsidiary
for the actual  costs  incurred by it in  connection  with the  replacement  or
restoration  of  the  respective   properties  or  assets   (pursuant  to  such
certification  requirements as may be established by the Administrative Agent),
provided  further,  that at any time while an Event of Default has occurred and
is continuing,  the Required  Lenders may direct the  Administrative  Agent (in
which case the  Administrative  Agent shall,  and is hereby  authorized  by the
Borrower  to,  follow said  directions)  to apply any or all  proceeds  then on
deposit in such  collateral  account to the repayment  (and/or the reduction of
commitments) of outstanding Loans (and/or Commitments) hereunder,  and provided
further, that if all or any portion of such Net Insurance Proceeds not required
to be applied  to the  repayment  of Loans  pursuant  to the  second  preceding
proviso (whether  pursuant to clause (i) or (ii) thereof) are either (A) not so
used or  committed  to be so used  within 270 days after the date of receipt of
such  proceeds or (B) if committed to be used within 270 days after the date of
receipt of such Net  Insurance  Proceeds  and not so used

                                     -31-
<PAGE>

within 360 days after the date of receipt of such proceeds then, in either such
case,  such  remaining  portion not used or committed to be used in the case of
preceding  clause (A) and not used in the case of preceding clause (B) shall be
applied  on the date  occurring  270 days  after  the date of  receipt  of such
proceeds in the case of clause (A) above or the date  occurring  360 days after
the date of  receipt  of such  proceeds  in the case of  clause  (B) above as a
mandatory  repayment  (and/or  commitment  reduction,  as the  case  may be) of
outstanding Loans (and/or  Commitments) in accordance with Sections 4.02(h) and
(i).

          (h) Each amount  required  to be applied  pursuant to any of Sections
4.02(c), (d), (e), (f) and (g) shall be applied as follows:

          (i) Each  amount  required  to be applied to repay  Loans  (and/or to
     reduce  Commitments)  pursuant to any of Sections 4.02(c) and (f) shall be
     applied (1) first, to repay the outstanding  principal of Incremental Term
     Loans and (2) second, to the extent such amount is in excess of the amount
     required to be applied as provided in preceding clause (1), to permanently
     reduce any then outstanding  Incremental  Term Loan Commitments  (with the
     amount of any such permanent reduction to the then outstanding Incremental
     Term Loan  Commitments  being deemed to be an  application of cash in such
     amount,  it being  understood  that, if the amount  required to be applied
     pursuant to this  clause (i) exceeds the amount  required to be applied to
     repay  outstanding   principal  of  Incremental  Term  Loans  pursuant  to
     preceding clause (1) and so long as any required  reduction to Incremental
     Term Loan  Commitments  is actually  made as required by preceding  clause
     (2),  the  Borrower  and its  Subsidiaries  may  retain  any  excess  cash
     generated from the events  described above in this clause (i) and use same
     for their own purposes).

          (ii) Each amount  required  to be applied to repay  Loans  (and/or to
     reduce  Commitments)  pursuant to Sections  4.02(d),  (e) and (g) shall be
     applied  (1)  first,  to repay  outstanding  Incremental  Term  Loans  and
     permanently  reduce  the  Total  Revolving  Loan  Commitment,   with  such
     outstanding  Incremental  Term Loans to be allocated the Incremental  Term
     Loan  Tranches  Percentage  of such  amount and the Total  Revolving  Loan
     Commitment to be reduced by the Revolving Loan Tranche  Percentage of such
     amount  (it being  understood  that cash in an amount up to the  Revolving
     Loan Tranche Percentage of such amount shall be applied to the extent then
     required  pursuant to following  clause (vi) and/or (without  duplication)
     Section  4.02(a),  with any  excess  above the  amount  required  to be so
     applied to be retained by the Borrower and its  Subsidiaries for their own
     purposes),  and (2) second, to the extent in excess of the amount required
     to be applied as provided in preceding  clause (1), to permanently  reduce
     any  then   outstanding   Incremental  Term  Loan  Commitments  (it  being
     understood  that the  amount of any  reduction  to  Incremental  Term Loan
     Commitments  pursuant to this clause (2) shall be deemed an application of
     cash, with the Borrower and its Subsidiaries  permitted to retain the cash
     so deemed applied for their own purposes).

          (iii) The amount of each  principal  repayment  of  Incremental  Term
     Loans made as required  by  preceding  clauses (i) and (ii) (and  Sections
     4.02(c),  (d), (e), (f) and (g)) shall be applied pro rata to each Tranche
     of then outstanding Incremental Term Loans, with

                                     -32-
<PAGE>

     each such Tranche of Incremental Term Loans to be allocated its Relevant
     Incremental Term Loan Percentage of such payment.

          (iv) The amount of each principal repayment of Incremental Term Loans
     made as required by preceding  clauses (i) and (ii) (and Sections 4.02(c),
     (d), (e), (f) and (g)) and applied to a particular  Tranche of Incremental
     Term Loans as provided in preceding  clause (iii) shall be applied (A) (1)
     first,  to reduce the Scheduled  Incremental  Term Loan  Repayments of the
     respective  Tranche  which will become due within  twelve months after the
     date of such  repayment  in direct  order of maturity of the dates of such
     Scheduled  Incremental Term Loan Repayments and (2) second,  to the extent
     in  excess  of the  amount  required  to be  applied  as  provided  in the
     preceding clause (1), to reduce the then remaining  Scheduled  Incremental
     Term Loan Repayments of the respective  Tranche on a pro rata basis (based
     on the then remaining principal amounts of such Scheduled Incremental Term
     Loan  Repayments),  or (B) as otherwise  provided in the Incremental  Term
     Loan Commitment  Agreement  pursuant to which such  Incremental Term Loans
     are made,  or (C) in the case of any  Tranche  of  Incremental  Term Loans
     extended  pursuant  to more  than one  Incremental  Term  Loan  Commitment
     Agreement, as may otherwise be provided in the first Incremental Term Loan
     Commitment Agreement executed and delivered with respect to such Tranche.

          (v) Each  amount  required  to be  applied to  Incremental  Term Loan
     Commitments  pursuant to  preceding  clauses (i) and (ii) (and by Sections
     4.02(c),  (d), (e), (f) and (g)) shall be applied pro rata to each Tranche
     of then  outstanding  Incremental  Term Loan  Commitments,  with each such
     Tranche of Incremental  Term Loan Commitments to be allocated its Relevant
     Incremental  Term Loan  Commitment  Percentage  of such  amount  (and each
     Incremental Term Loan Lender's  Incremental  Term Loan  Commitments  under
     each such  Tranche to be  proportionately  reduced  based on the  relative
     amount of each such Incremental  Term Loan Lender's  Incremental Term Loan
     Commitments under such Tranche).

          (vi) At the  time of  each  reduction  to the  Total  Revolving  Loan
     Commitment as provided in clause (ii) of this Section 4.02(h), outstanding
     principal  of  Swingline  Loans and  Revolving  Loans (to the extent  then
     outstanding) shall be repaid in a like amount.

          (i) With respect to each  repayment of Loans required by this Section
4.02, the Borrower may designate the Types of Loans of the  respective  Tranche
which are to be repaid  and,  in the case of  Eurodollar  Loans,  the  specific
Borrowing or Borrowings  pursuant to which made,  provided that: (i) repayments
of Eurodollar Loans pursuant to this Section 4.02 shall be made on the last day
of an Interest  Period  applicable  thereto  unless all  Eurodollar  Loans with
Interest  Periods  ending on such date of required  repayment and all Base Rate
Loans have been paid in full;  (ii) if any repayment of  Eurodollar  Loans made
pursuant to a single  Borrowing shall reduce the outstanding  Eurodollar  Loans
made  pursuant to such  Borrowing to an amount less than the Minimum  Borrowing
Amount applicable thereto,  such Borrowing shall be converted at the end of the
then current  Interest  Period into a Borrowing  of Base Rate Loans;  and (iii)
each repayment of Loans made pursuant to a Borrowing  shall be applied pro rata
among  such  Loans

                                     -33-
<PAGE>

of all Lenders. In the absence of a designation by the Borrower as described in
the preceding sentence,  the Administrative  Agent shall, subject to the above,
make such  designation in its sole  discretion.  Notwithstanding  the foregoing
provisions  of this  Section 4.02 (other than  Section  4.02(a) and (b),  which
Sections  shall not have the  benefits  of this  sentence),  if at any time the
mandatory repayment of Loans pursuant to this Section 4.02 would result,  after
giving  effect to the  procedures  set forth  above in this  clause (i), in the
Borrower  incurring breakage costs under Section 1.11 as a result of Eurodollar
Loans being repaid other than on the last day of an Interest Period  applicable
hereto (any such Eurodollar Loans,  "Affected Loans"),  the Borrower may elect,
by written notice to the  Administrative  Agent,  to have the provisions of the
following sentence be applicable so long as no Default or Event of Default then
exists.  At the time any Affected  Loans are otherwise  required to be prepaid,
the Borrower may elect to deposit  100% (or such lesser  percentage  elected by
the Borrower as not being repaid) of the principal amounts that otherwise would
have been paid in respect of the Affected Loans with the  Administrative  Agent
to be held as security for the obligations of the Borrower  hereunder  pursuant
to a cash  collateral  agreement  to be  entered  into  in form  and  substance
satisfactory  to the  Administrative  Agent,  with such cash  collateral  to be
released from such cash collateral  account (and applied to repay the principal
amount of such Eurodollar  Loans) upon each  occurrence  thereafter of the last
day of an Interest Period  applicable to such Eurodollar Loans (or such earlier
date or dates as shall be requested by the  Borrower,  with the amount to be so
released and applied on the last day of each  Interest  Period to be the amount
of such  Eurodollar  Loans to which such Interest  Period applies (or, if less,
the amount remaining in such cash collateral account);  provided, however, that
at any time while an Event of  Default  has  occurred  and is  continuing,  the
Required  Lenders  may  direct  the  Administrative  Agent (in  which  case the
Administrative  Agent  shall,  and is hereby  authorized  by the  Borrower  to,
follows said  directions)  to apply any or all proceeds then on deposit in such
collateral account to the payment of such Affected Loans.

          (j)  Notwithstanding  anything to the contrary contained elsewhere in
the Agreement, (i) all then outstanding Loans of any Tranche shall be repaid in
full on the respective Maturity Date for such Tranche of Loans, and (ii) unless
the Required Lenders otherwise agree in writing (in their sole discretion), all
then outstanding Loans shall be repaid in full on the date on which a Change of
Control occurs.

          4.03 Method and Place of Payment.  Except as  otherwise  specifically
provided herein, all payments under this Agreement or any Note shall be made to
the  Administrative  Agent for the  account of the  Lender or Lenders  entitled
thereto not later than 2:00 P.M. (New York time) on the date when due and shall
be made in Dollars in immediately  available funds at the Payment Office of the
Administrative  Agent.  Whenever any payment to be made  hereunder or under any
Note  shall be stated to be due on a day which is not a Business  Day,  the due
date thereof  shall be extended to the next  succeeding  Business Day and, with
respect to payments of principal,  interest  shall be payable at the applicable
rate during such extension.

          4.04 Net Payments;  Taxes.  (a) All payments made by any Credit Party
hereunder  or under  any Note or other  Credit  Document  will be made  without
setoff,  counterclaim or other

                                     -34-
<PAGE>

defense.  Except as provided in Section 4.04(b), all such payments will be made
free and clear of, and without  deduction  or  withholding  for, any present or
future taxes, levies,  imposts,  duties, fees,  assessments or other charges of
whatever  nature  now  or  hereafter  imposed  by  any  jurisdiction  or by any
political  subdivision or taxing  authority  thereof or therein with respect to
such  payments  (but  excluding,  except as provided  in the second  succeeding
sentence,  any tax imposed on or measured by the net income or net profits of a
Lender,  or any  franchise  tax  based on the net  income or net  profits  of a
Lender,  in either case pursuant to the laws of the jurisdiction in which it is
organized  or the  jurisdiction  in which the  principal  office or  applicable
lending office of such Lender is located or any subdivision thereof or therein)
and all  interest,  penalties  or  similar  liabilities  with  respect  to such
non-excluded taxes, levies, imposts, duties, fees, assessments or other charges
(all such non-excluded taxes, levies,  imposts,  duties,  fees,  assessments or
other charges being referred to  collectively  as "Taxes").  Subject to Section
4.04(b), if any Taxes are so levied or imposed,  the Borrower agrees to pay the
full amount of such Taxes,  and such additional  amounts as may be necessary so
that every  payment of all amounts due under this  Agreement or under any Note,
after withholding or deduction for or on account of any Taxes, will not be less
than the amount provided for herein or in such Note. If any amounts are payable
in respect of Taxes pursuant to the preceding sentence,  the Borrower agrees to
reimburse each Lender,  promptly after the written request of such Lender,  for
taxes  imposed on or measured by the net income or net profits of such  Lender,
or any  franchise  tax based on the net income or net  profits of a Lender,  in
either case  pursuant to the laws of the  jurisdiction  in which such Lender is
organized or in which the principal office or applicable lending office of such
Lender is  located  or under the laws of any  political  subdivision  or taxing
authority  of any such  jurisdiction  in which such Lender is  organized  or in
which the  principal  office or  applicable  lending  office of such  Lender is
located and for any withholding of income or similar taxes as such Lender shall
determine  are  payable by, or  withheld  from,  such Lender in respect of such
amounts  so paid to or on  behalf  of such  Lender  pursuant  to the  preceding
sentence  and in respect  of any  amounts  paid to or on behalf of such  Lender
pursuant to this  sentence.  The Borrower  will  furnish to the  Administrative
Agent within 45 days after the date the payment of any Taxes is due pursuant to
applicable law certified copies of tax receipts  evidencing such payment by the
Borrower.  The Borrower agrees to indemnify and hold harmless each Lender,  and
reimburse such Lender upon its written request,  for the amount of any Taxes so
levied or imposed and paid by such Lender. All amounts payable pursuant to this
Section  4.04(a)  shall be subject to the  provisions  of Section 13.17 (to the
extent applicable).

          (b) Each Lender that is not a United  States  person (as such term is
defined  in  Section  7701(a)(30)  of the Code)  for U.S.  Federal  income  tax
purposes agrees to deliver to the Borrower and the  Administrative  Agent on or
prior to the Effective  Date, or in the case of a Lender that is an assignee or
transferee  of an interest  under this  Agreement  pursuant to Section  1.13 or
13.04 (unless the respective Lender was already a Lender hereunder  immediately
prior  to such  assignment  or  transfer),  on the date of such  assignment  or
transfer to such Lender,  (i) two accurate and complete  original signed copies
of Internal  Revenue  Service  Form W-8ECI or Form  W-8BEN  (with  respect to a
complete exemption under any income tax treaty) (or successor forms) certifying
to such  Lender's  entitlement  as of such date to a  complete  exemption  from
United  States  withholding  tax with respect to payments to be made under this
Agreement  and under any Note, or (ii) if the Lender is not a "bank" within the
meaning of Section  881(c)(3)(A)

                                     -35-
<PAGE>

of the Code and cannot deliver either  Internal  Revenue Service Form W-8ECI or
Form W-8BEN (with respect to a complete  exemption  under an income tax treaty)
(or  successor   forms)  pursuant  to  clause  (i)  above,  (x)  a  certificate
substantially  in the form of  Exhibit  E (any  such  certificate,  a  "Section
4.04(b)(ii)  Certificate")  and (y) two accurate and complete  original  signed
copies of Internal  Revenue  Service Form W-8BEN (with respect to the portfolio
interest exemption) (or successor form) certifying to such Lender's entitlement
as of such date to a complete exemption from United States withholding tax with
respect to payments of interest to be made under this  Agreement  and under any
Note.  In  addition,  each  Lender  agrees  that  from  time to time  after the
Effective  Date,  when a lapse in time or change in  circumstances  renders the
previous  certification  obsolete or inaccurate in any material  respect,  such
Lender  will  deliver  to the  Borrower  and the  Administrative  Agent two new
accurate and complete  original signed copies of Internal  Revenue Service Form
W-8ECI,  Form W-8BEN  (with  respect to the benefits of any income tax treaty),
Form W-8BEN (with respect to the portfolio  interest  exemption)  and a Section
4.04(b)(ii)  Certificate,  as the case may be, and such  other  forms as may be
required in order to confirm or establish the  entitlement  of such Lender to a
continued  exemption  from or reduction in United States  withholding  tax with
respect to payments under this Agreement and any Note, or it shall  immediately
notify the Borrower and the  Administrative  Agent of its  inability to deliver
any such form or  certificate,  in which case such Lender shall not be required
to deliver  any such form or  certificate  pursuant  to this  Section  4.04(b).
Notwithstanding  anything to the  contrary  contained in Section  4.04(a),  but
subject to Section 13.04(b) and the immediately  succeeding  sentence,  (x) the
Borrower  shall be  entitled,  to the extent it is required to do so by law, to
deduct or withhold income or similar taxes imposed by the United States (or any
political  subdivision or taxing  authority  thereof or therein) from interest,
Fees or other amounts payable  hereunder for the account of any Lender which is
not a United States person (as such term is defined in Section  7701(a)(30)  of
the Code) for U.S.  Federal  income tax purposes to the extent that such Lender
has not provided to the  Borrower  U.S.  Internal  Revenue  Service  forms that
establish a complete  exemption from such deduction or withholding  and (y) the
Borrower shall not be obligated pursuant to Section 4.04(a) to indemnify or pay
additional amounts to a Lender in respect of income or similar taxes imposed by
the United  States if (I) such  Lender has not  provided  to the  Borrower  the
Internal Revenue Service forms required to be provided to the Borrower pursuant
to this Section 4.04(b) or (II) in the case of a payment,  other than interest,
to a Lender  described  in clause (ii) above,  to the extent that such Forms do
not  establish  a  complete   exemption   from   withholding   of  such  taxes.
Notwithstanding anything to the contrary contained in the preceding sentence or
elsewhere in this Section 4.04 and except as set forth in Section 13.04(b), the
Borrower  agrees to pay any additional  amounts and to indemnify each Lender in
the manner set forth in Section 4.04(a)  (without regard to the identity of the
jurisdiction  requiring the deduction or withholding) in respect of any amounts
deducted or withheld by it as described in the immediately  preceding  sentence
as a result of any changes that are effective  after the Effective  Date in any
applicable law, treaty,  governmental rule, regulation,  guideline or order, or
in the  interpretation  thereof,  relating to the deducting or  withholding  of
income or similar taxes.

          (c) If the  Borrower  pays any  additional  amount under this Section
4.04 to a Lender and such Lender  determines in its sole discretion that it has
actually  received  or  realized  in  connection  therewith  any  refund or any
reduction of, or credit against,  its Tax liabilities in or with respect to the
taxable year in which the  additional  amount is paid (a "Tax  Benefit"),  such

                                     -36-
<PAGE>

Lender shall pay to the Borrower an amount that the Lender  shall,  in its sole
discretion,  determine  is equal  to the net  benefit,  after  tax,  which  was
obtained  by the  Lender in such  year as a  consequence  of such Tax  Benefit;
provided,  however, that (i) any Taxes that are imposed on a Lender as a result
of a  disallowance  or reduction  (including  through the expiration of any tax
credit  carryover  or carryback  of such Lender that  otherwise  would not have
expired)  of any Tax  Benefit  with  respect  to which  such  Lender has made a
payment to the Borrower  pursuant to this Section 4.04(c) shall be treated as a
Tax for which the Borrower is obligated  to indemnify  such Lender  pursuant to
this  Section  4.04 without any  exclusions  or defenses;  (ii) nothing in this
Section  4.04(c)  shall  require  the  Lender  to  disclose  any   confidential
information to the Borrower (including,  without limitation,  its tax returns);
(iii) any Lender  may  determine  in its sole  discretion  consistent  with the
policies of such Lender whether to seek a Tax Benefit; and (iv) no Lender shall
be required to pay the Borrower any amount pursuant to this Section 4.04(c) for
so long as a Default or an Event of Default exists, until such Default or Event
of Default is no longer continuing.

          (d) Each Lender and the Administrative  Agent agrees that it will (i)
take all actions reasonably  requested by the Borrower that are without risk or
material cost to such Lender or the  Administrative  Agent (as the case may be)
to maintain all  exemptions  available to it from  withholding  taxes  (whether
available by treaty or existing  administrative waiver), and (ii) to the extent
reasonable  and  without  material  cost to it,  otherwise  cooperate  with the
Borrower to minimize any amounts  payable by the Borrower  under this  Section;
provided,  however,  a Lender will not be obligated to deliver any tax returns,
income tax schedules or  computations,  or any other  documentation  that would
require  such Lender to disclose  any other  information  that would  adversely
affect such Lender, as determined by such Lender in its sole discretion.

          SECTION 5A. Conditions Precedent to Effective Date. The occurrence of
the Effective Date pursuant to Section 13.10 is subject to the  satisfaction of
the following conditions:

          5A.01  Execution of  Agreement;  Notes.  On or prior to the Effective
Date,  there  shall have been  delivered  to the  Administrative  Agent for the
account  of each  of the  Lenders  that  has  requested  same  the  appropriate
Revolving  Note  executed by the  Borrower  and to the  Swingline  Lender,  the
Swingline Note executed by the Borrower,  in each case in the amount,  maturity
and as otherwise provided herein.

          5A.02 Fees,  etc. On or prior to the  Effective  Date,  the  Borrower
shall have paid to each  Agent,  the Joint Lead  Arrangers  and the Lenders all
Fees and all other  reasonable  costs,  fees and expenses  (including,  without
limitation,  reasonable  legal fees and  expenses)  payable to each Agent,  the
Joint Lead Arrangers and the respective Lenders to the extent then due.

          5A.03 Opinion of Counsel.  On the Effective Date, the  Administrative
Agent shall have received (i) from Davis,  Polk & Wardwell,  special counsel to
the Credit Parties,  an opinion addressed to the Agents and each of the Lenders
and dated the Effective  Date covering the matters set forth in Exhibit F-1 and
such other  matters  incident to the  transactions  contemplated  herein as the
Administrative Agent may reasonably request, (ii) from Ronald P. Soltman, Esq.,
General Counsel to the Credit Parties,  an opinion  addressed to the Agents and
each of the Lenders and dated the Effective Date covering the matters set forth
in Exhibit F-2 and

                                     -37-
<PAGE>

such other  matters  incident to the  transactions  contemplated  herein as the
Administrative  Agent may reasonably  request,  and (iii) from local counsel in
the States of  Illinois,  Arizona  and  California,  opinions  each in form and
substance  reasonably  satisfactory  to the Agents and addressed to the Agents,
the  Collateral  Agent and each of the Lenders and dated the Effective Date and
covering such matters incident to the transactions  contemplated  herein as the
Administrative Agent may reasonably request.

          5A.04  Corporate  Documents;  Proceedings;  etc. (a) On the Effective
Date, the  Administrative  Agent shall have received a  certificate,  dated the
Effective Date,  signed by the chairman of the board,  the president,  any vice
president or the treasurer of the Borrower and each Credit Party,  and attested
to by the secretary or any assistant  secretary of the respective Credit Party,
in the form of Exhibit G with appropriate  insertions,  together with copies of
the  certificate  of  incorporation  and by-laws of such Credit Party,  and the
resolutions  of such  Credit  Party  referred to in such  certificate,  and the
foregoing shall be reasonably acceptable to the Agents.

          (b) On or prior to the  Effective  Date,  all  corporate,  and  legal
proceedings   and  all  instruments  and  agreements  in  connection  with  the
transactions  contemplated  by this  Agreement  and the other Credit  Documents
shall be reasonably  satisfactory in form and substance to the Agents,  and the
Administrative  Agent shall have  received  all  information  and copies of all
documents  and  papers,   including   records  of  corporate  and   partnership
proceedings,  governmental  approvals (to the extent  required),  good standing
certificates  and  bring-down  telegrams,  if any,  which the  Agents  may have
reasonably requested in connection  therewith,  such documents and papers where
appropriate to be certified by proper corporate, or governmental authorities.

          5A.05 Employee Benefit Plans;  Shareholders'  Agreements;  Management
Agreements; Collective Bargaining Agreements; Existing Indebtedness Agreements;
Tax Sharing  Agreements;  Material  Leases.  On or prior to the Effective Date,
there shall have been  delivered to the  Administrative  Agent true and correct
copies of the  following  documents,  in each case as same will be in effect on
the Effective Date:

          (i) all Plans (and for each Plan that is  required  to file an annual
     report on Internal  Revenue Service Form  5500-series,  a copy of the most
     recent  such  report  (including,  to the  extent  required,  the  related
     financial  and  actuarial  statements  and opinions  and other  supporting
     statements, certifications,  schedules and information), and for each Plan
     that is a  "single-employer  plan," as defined in Section  4001(a)(15)  of
     ERISA, the most recently prepared  actuarial  valuation  therefor) and any
     other "employee  benefit plans," as defined in Section 3(3) of ERISA,  and
     any other  material  agreements,  plans or  arrangements,  with or for the
     benefit of  current  or former  employees  of the  Borrower  or any of its
     Subsidiaries  or any ERISA  Affiliate  (provided that the foregoing  shall
     apply in the case of any  multiemployer  plan, as defined in 4001(a)(3) of
     ERISA,  only to the extent that any document  described  therein is in the
     possession of the Borrower or any  Subsidiary of the Borrower or any ERISA
     Affiliate or reasonably  available  thereto from the sponsor or trustee of
     any such plan) (collectively, the "Employee Benefit Plans");

                                     -38-
<PAGE>

          (ii) all material  agreements  entered into by the Borrower or any of
     its  Subsidiaries  governing the terms and relative  rights of its capital
     stock and any agreements entered into by shareholders relating to any such
     entity with respect to its capital stock (collectively, the "Shareholders'
     Agreements"); provided, that at the Borrower's election, the Borrower may,
     in the  alternative,  in cases where there are two or more  instances of a
     Shareholders'   Agreement  based  upon  a  model  form,   deliver  to  the
     Administrative   Agent  a  copy  of  such  model  form,  together  with  a
     certificate,  signed by an Authorized Officer of the Borrower, which lists
     all Shareholders' Agreements based on that form other than those which the
     Borrower has independently delivered to the Administrative Agent, together
     with the  parties to each such  Shareholders'  Agreement,  the  amounts of
     shares  subject to each such  Shareholders'  Agreement,  and any  material
     divergence  of each such  Shareholders'  Agreement  from the model form of
     Shareholders' Agreement delivered therewith;

          (iii) all  material  agreements  with members of, or with respect to,
     the  senior  management  of  the  Borrower  or  any  of  its  Subsidiaries
     (collectively,   the  "Management  Agreements");   provided  that  at  the
     Borrower's  election,  the Borrow may, in the alternative,  in cases where
     there are two or more  instances  of a Management  Agreement  based upon a
     model form, deliver to the Administrative Agent a copy of such model form,
     together  with a  certificate,  signed  by an  Authorized  Officer  of the
     Borrower,  which lists all Management  Agreements based on that form other
     than  those  which  the  Borrower  has  independently   delivered  to  the
     Administrative  Agent,  together with the parties to each such  Management
     Agreement,  the amounts thereof,  and any material divergence of each such
     Management Agreement from the model form of Management Agreement delivered
     therewith;

          (iv) all collective bargaining agreements applying or relating to any
     employee of the  Borrower or any of its  Subsidiaries  (collectively,  the
     "Collective Bargaining Agreements");

          (v)  all  agreements  evidencing  or  relating  to  Indebtedness  for
     borrowed  money of the  Borrower  or any of its  Subsidiaries  which is to
     remain  outstanding  after giving effect to the Effective Date, other than
     agreements in respect of Capitalized  Lease Obligations to the extent such
     Indebtedness   is  less  than   $100,000   (collectively,   the  "Existing
     Indebtedness Agreements");

          (vi) all tax sharing,  tax  allocation  and other similar  agreements
     entered into by the Borrower or any of its Subsidiaries (collectively, the
     "Tax Sharing Agreements"); and

          (vii) all  material  leases  under  which the  Borrower or any of its
     Subsidiaries  lease  (as  lessee)  any real  property  (collectively,  the
     "Material Leases");

all of which  Employee  Benefit  Plans,  Shareholders'  Agreements,  Management
Agreements, Collective Bargaining Agreements, Existing Indebtedness Agreements,
Tax Sharing Agreements and Material Leases shall be in full force and effect on
the Effective Date.

                                     -39-
<PAGE>

          5A.06 Senior  Subordinated  Notes.  On the  Effective  Date,  (i) the
Borrower shall have received gross cash proceeds of at least  $150,000,000 from
the issuance by it of Senior  Subordinated  Notes and (ii) the  Borrower  shall
have utilized an amount of the net cash proceeds  received from the issuance of
the Senior  Subordinated  Notes  sufficient to effect the  Refinancing  without
utilizing  any  proceeds of the Loans for such  purpose.  There shall have been
delivered to the Agents and the Lenders  true and correct  copies of all Senior
Subordinated Note Documents,  and all of the terms and conditions of the Senior
Subordinated Note Documents shall be in form and substance  satisfactory to the
Agents. In addition,  the Administrative Agent shall have received evidence, in
form and substance reasonably satisfactory to it, that the matters set forth in
this Section 5A.06 have been satisfied as of the Effective Date.

          5A.07  Refinancing.  On the  Effective  Date,  the total  commitments
pursuant to the Existing Credit Agreement shall have been  terminated,  and all
loans and notes with respect  thereto shall have been repaid in full  (together
with interest thereon), all letters of credit issued thereunder shall have been
terminated  (or either  incorporated  as Letters of Credit  hereunder  or fully
supported  with  Letters  of Credit  issued  hereunder)  and all other  amounts
(including premiums) owing pursuant to the Existing Credit Agreement shall have
been repaid in full. The creditors in respect of the Existing Credit  Agreement
shall have  terminated and released all security  interests in and Liens on the
assets of the Borrower and its  Subsidiaries  created  pursuant to the security
documentation  relating to the Existing  Credit  Agreement,  and such creditors
shall have returned all such assets to the Borrower or such Subsidiary, and the
Administrative  Agent  shall  have  received  evidence,  in form and  substance
reasonably satisfactory to it, that the matters set forth in this Section 5A.07
have been satisfied as of the Effective Date.

          5A.08  Pledge  Agreement.  On or prior to the  Effective  Date,  each
Credit  Party  shall have duly  authorized,  executed  and  delivered  a Pledge
Agreement in the form of Exhibit H (as modified,  supplemented  or amended from
time  to  time,  the  "Pledge  Agreement")  and  shall  have  delivered  to the
Collateral Agent, as Pledgee thereunder,  all the certificated Pledge Agreement
Collateral,  if any,  referred to therein then owned by such Credit Party,  (x)
endorsed in blank in the case of promissory notes constituting Pledge Agreement
Collateral and (y) together with executed and undated stock powers, in the case
of  capital  stock or other  Equity  Interests  constituting  Pledge  Agreement
Collateral.

          5A.09 Subsidiaries  Guaranty. On or prior to the Effective Date, each
Subsidiary  Guarantor  shall have duly  authorized,  executed and delivered the
Subsidiaries  Guaranty in the form of Exhibit I (as modified,  supplemented  or
amended from time to time, the "Subsidiaries Guaranty").

          5A.10 Security  Agreement.  On or prior to the Effective  Date,  each
Credit Party shall have duly  authorized,  executed and  delivered the Security
Agreement in the form of Exhibit J (as modified,  supplemented  or amended from
time to time,  the "Security  Agreement")  covering all of such Credit  Party's
present and future Security Agreement Collateral, together with:

          (i) proper Financing  Statements (Form UCC-1 or the equivalent) fully
     executed for filing under the UCC or other  appropriate  filing offices of
     each jurisdiction as may be

                                     -40-
<PAGE>

     necessary or, in the reasonable opinion of the Collateral Agent, desirable
     to perfect the security interests  purported to be created by the Security
     Agreement;

          (ii)  certified  copies of Requests for  Information  or Copies (Form
     UCC-11), or equivalent reports, listing all effective financing statements
     that name any Credit Party or any of its  Subsidiaries  as debtor and that
     are filed in the  jurisdictions  referred to in clause (i) above or in any
     other  jurisdiction  which  might  result in the  existence  of  perfected
     security   interests,   together  with  copies  of  such  other  financing
     statements that name any Credit Party or any of its Subsidiaries as debtor
     (none of which  shall  cover any of the  Collateral  except to the  extent
     evidencing  Permitted  Liens or in respect of which the  Collateral  Agent
     shall have  received  termination  statements  (Form  UCC-3) or such other
     termination  statements  as shall be required by local law fully  executed
     for filing); and

          (iii) evidence of the  completion of all other actions  necessary or,
     in the reasonable  opinion of the Collateral  Agent,  desirable to perfect
     the security interests intended to be created by the Security Agreement.

          5A.11  Mortgages;  Title Insurance;  Survey;  etc. On or prior to the
Effective Date, the Collateral Agent shall have received:

          (i)  fully  executed  counterparts  of  Mortgages,  each in form  and
     substance  reasonably  satisfactory  to the Agents,  which Mortgages shall
     cover  the  Real  Property  owned  or  leased  by  the  Borrower  and  its
     Subsidiaries on the Effective Date and designated as "Mortgaged  Property"
     on Schedule IV, together with evidence that counterparts of such Mortgages
     have been delivered to the title  insurance  company  insuring the Lien of
     such Mortgages for recording in all places to the extent  necessary or, in
     the reasonable opinion of the Collateral Agent,  desirable, to effectively
     create  a valid  and  enforceable  mortgage  lien on each  such  Mortgaged
     Property in favor of the Collateral Agent (or such other trustee as may be
     required  or  desired  under  local law) for the  benefit  of the  Secured
     Creditors; and

          (ii) a mortgagee title insurance policy (or a binding commitment with
     respect thereto) (each, a "Mortgage  Policy") on the Mortgaged  Properties
     issued by a title insurer reasonably satisfactory to the Agents in amounts
     satisfactory  to  the  Agents  assuring  the  Collateral  Agent  that  the
     Mortgages on such Mortgaged  Properties are valid and enforceable mortgage
     liens  on the  respective  Mortgaged  Properties,  free  and  clear of all
     defects and  encumbrances  except such defects and  encumbrances as may be
     reasonably  acceptable  to the  Administrative  Agent  and  such  Mortgage
     Policies shall otherwise be in form and substance reasonably  satisfactory
     to the Agents.

          5A.12  Adverse  Change;  Approvals;  etc.  (a) Since  June 30,  2000,
nothing  shall have  occurred  (and no Agent nor any Lender  shall have  become
aware of any facts or  conditions  not  previously  known by, or  disclosed  in
writing to, such Agent or such Lender)  which could  reasonably  be expected to
have a material  adverse  effect (i) on the rights or  remedies of any Agent or
the Lenders,  or on the ability of any Credit  Party to perform its  respective
obligations  to any Agent or the Lenders under the Credit  Documents or (ii) on
the business, property, assets,

                                     -41-
<PAGE>

liabilities  (actual or  contingent),  operations  or condition  (financial  or
otherwise) of the Borrower and its Subsidiaries taken as a whole.

          (b) On or prior to the Effective  Date,  all  necessary  governmental
(domestic  and  foreign)  and third party  approvals  and/or  consents (if any)
required  in  connection  with  (i)  the  making  of the  Loans  and  (ii)  the
transactions  contemplated  by the Credit  Documents and otherwise  referred to
herein or therein,  in each case shall have been obtained and remain in effect,
except in the case of clause (ii) above for such consents and/or  approvals the
failure of which to obtain could not  reasonably be expected to have a material
adverse effect on the transactions  contemplated by this Agreement or the other
Documents  or  on  the  business,  property,  assets,  liabilities  (actual  or
contingent),  operations or condition  (financial or otherwise) of the Borrower
and its Subsidiaries  taken as a whole and all applicable waiting periods shall
have expired  without any action being taken by any competent  authority  which
restrains, prevents or imposes materially adverse conditions upon the making of
the  Loans  and  the  transactions  contemplated  by the  Credit  Documents  or
otherwise  referred to herein or therein.  Additionally,  there shall not exist
any judgment, order, injunction or other restraint issued or filed or a hearing
seeking injunctive relief or other restraint pending or notified prohibiting or
imposing  materially  adverse  conditions  upon the  making of the Loans or the
consummation of the Transaction or the other  transactions  contemplated by the
Documents.

          5A.13 Litigation.  On the Effective Date, no litigation by any entity
(private or  governmental)  shall be pending or, to the best of the  Borrower's
knowledge,  threatened with respect to the Documents or any other documentation
executed in connection  herewith or therewith or the transactions  contemplated
hereby or thereby.

          5A.14  Pro  Forma  Balance  Sheet;  Projections.  On or  prior to the
Effective  Date,  the  Agents  shall  have  received  the pro  forma  financial
statements and the Projections  referred to in Sections  7.05(b) and (e) which,
pro forma financial  statements and Projections  shall be in form and substance
reasonably satisfactory to the Agents.

          5A.15 Solvency Certificate; Insurance Certificates. On or prior to
the Effective Date, there shall have been delivered to the Administrative
Agent:

          (a) a solvency  certificate  in the form of Exhibit L,  addressed  to
     each Agent and each of the Lenders and dated the  Effective  Date from the
     chief financial officer of the Borrower; and

          (b)  certificates  of insurance  complying with the  requirements  of
     Section  8.03 for the  business  and  properties  of the  Borrower and its
     Subsidiaries,  in scope, form and substance reasonably satisfactory to the
     Agents and stating that such insurance shall not be canceled or materially
     changed  without at least 30 days' prior written  notice by the respective
     insurer to the Administrative Agent.

          5A.16  Maximum  Leverage  Ratio.  On  the  Effective  Date,  (x)  the
Consolidated Leverage Ratio (calculated after giving effect to the Transaction)
shall not be greater than  4.00:1.00 and (y) the Borrower  shall have delivered
to the Administrative Agent a certificate

                                     -42-
<PAGE>

showing the  calculations  required by  preceding  clause (x),  and  compliance
therewith, in reasonable detail.

          SECTION 5B.  Conditions  Precedent to each  Incurrence of Incremental
Term Loans.  The obligation of each Lender party to any  Incremental  Term Loan
Commitment Agreement to make Incremental Term Loans as contemplated therein and
by this  Agreement,  is subject  at the time of the making of such  Incremental
Term Loans to the satisfaction of the following conditions:

          5B.01 Occurrence of Syndication Date. The Syndication Date shall have
already occurred.

          5B.02   Incremental   Term   Loan   Commitment   Agreement;   Related
Documentation.  The  Administrative  Agent shall have  received the  respective
Incremental  Term Loan  Commitment  Agreement,  executed by each party  thereto
(which execution may be in counterparts),  and the  Administrative  Agent shall
have received all related  documentation in accordance with the requirements of
Section  1.13(b),   in  each  case  to  the  reasonable   satisfaction  of  the
Administrative Agent.

          5B.03 Incremental Term Notes.  There shall have been delivered to the
Administrative  Agent for the account of each of the relevant  Lenders that has
requested same the appropriate  Incremental  Term Note executed by the Borrower
in the amount, with the maturity and in the form as otherwise provided herein.

          5B.04  Officer's  Certificate.  On the  date  of each  incurrence  of
Incremental  Term  Loans,  the  Administrative  Agent  shall  have  received  a
certificate,  dated the date of such Incurrence,  signed by the chairman of the
board,  the  president,  any vice  president  or the  treasurer of the Borrower
certifying  that the  Incremental  Term Loans are being  incurred in accordance
with all relevant requirements of this Agreement,  including without limitation
Sections  1.01(d) and 1.13, and showing in reasonable  detail  calculations  of
compliance  with the  requirements  of  clause  (iv) of the first  sentence  of
Section 1.01(d) and clause (iv) of Section 1.13(a).

          5B.05 Other  Conditions  Specified in the Relevant  Incremental  Term
Loan Commitment  Agreement.  If any other conditions precedent are specified in
the  relevant  Incremental  Term Loan  Commitment  Agreement,  such  conditions
precedent  shall be satisfied on the date of the  incurrence of the  respective
Incremental Term Loans.

          SECTION 6. Conditions  Precedent to All Credit Events. The obligation
of each Lender to make Loans (including any Loans made on the Effective Date or
at any time  thereafter),  and the  obligation of each Issuing  Lender to issue
Letters of Credit  (including  any  Letters of Credit  issued on the  Effective
Date), is subject, at the time of each such Credit Event (except as hereinafter
indicated), to the satisfaction of the following conditions:

          6.01 No Default;  Representations and Warranties. At the time of each
such Credit Event and also after giving effect thereto (i) there shall exist no
Default  or  Event of  Default  and (ii)  all  representations  and  warranties
contained herein and in the other Credit

                                     -43-
<PAGE>

Documents  shall be true and  correct in all  material  respects  with the same
effect as though such  representations and warranties had been made on the date
of the making of such  Credit  Event (it being  understood  and agreed that any
representation  or warranty  which by its terms is made as of a specified  date
shall be required to be true and correct in all  material  respects  only as of
such specified date).

          6.02 Notice of Borrowing;  Letter of Credit Request. (a) Prior to the
making of each Loan  (other  than a  Swingline  Loan or a  Revolving  Loan made
pursuant  to a  Mandatory  Borrowing),  the  Administrative  Agent  shall  have
received a Notice of Borrowing  meeting the  requirements  of Section  1.03(a).
Prior to the making of each  Swingline  Loan,  the Swingline  Lender shall have
received the notice referred to in Section 1.03(b)(i).

          (b)  Prior  to  the   issuance   of  each   Letter  of  Credit,   the
Administrative  Agent and the  respective  Issuing Lender shall have received a
Letter of Credit Request meeting the requirements of Section 2.03.

          The  acceptance  of the  proceeds of each Loan and the making of each
Letter of Credit Request shall constitute a representation  and warranty by the
Borrower  to the  Administrative  Agent  and each of the  Lenders  that all the
conditions  specified  in  Section  5A (with  respect  to Credit  Events on the
Effective  Date),  Section 5B (with respect to each  incurrence of  Incremental
Term  Loans) and in this  Section 6 (with  respect to all Credit  Events on and
after the Effective  Date) and applicable to such Credit Event exist as of that
time. All of the Notes,  certificates,  legal opinions and other  documents and
papers  referred to in Section 5A, 5B and in this  Section 6, unless  otherwise
specified,  shall be delivered to the Administrative Agent at the Notice Office
for the account of each of the Lenders and, except for the Notes, in sufficient
counterparts  for  each of the  Lenders  and  shall  be in form  and  substance
reasonably satisfactory to the Agents and the Required Lenders.

          SECTION 7.  Representations  and  Warranties.  In order to induce the
Lenders  to enter  into  this  Agreement  and to make the  Loans  and issue (or
participate  in) the Letters of Credit as provided  herein,  the Borrower makes
the following  representations,  warranties and agreements,  in each case after
giving effect to the transactions contemplated by this Agreement as consummated
on the Effective Date, all of which shall survive the execution and delivery of
this  Agreement  and the Notes and the making of the Loans and  issuance of the
Letters of Credit,  with the  occurrence  of each Credit  Event on or after the
Effective  Date being deemed to constitute a  representation  and warranty that
the matters  specified  in this Section 7 are true and correct on and as of the
Effective  Date and on the date of each such Credit Event (it being  understood
and agreed that any representation or warranty which by its terms is made as of
a  specified  date shall be  required  to be true and  correct in all  material
respects only as of such specified date).

          7.01  Corporate  and  Other  Status.  The  Borrower  and  each of its
Subsidiaries  (i)  is  a  duly  organized  and  validly  existing  corporation,
partnership or limited liability company in good standing under the laws of the
jurisdiction  of  its  organization  or  formation,  (ii)  has  the  corporate,
partnership or limited liability  company power and authority,  as the case may
be, to own its  property and assets and to transact the business in which it is
engaged and  presently  proposes to engage and (iii) is duly  qualified  and is
authorized to do business and, to the extent

                                     -44-
<PAGE>

applicable,  is in good standing in each jurisdiction  where the conduct of its
business  requires such  qualifications  except for failures to be so qualified
which,  individually  or in the aggregate,  would not reasonably be expected to
have a material adverse effect on the business,  property,  assets, liabilities
(actual or contingent), operations or condition (financial or otherwise) of the
Borrower and its Subsidiaries taken as a whole.

          7.02 Corporate or Partnership Power and Authority.  Each Credit Party
has  the  corporate,   partnership  or  limited  liability  company  power  and
authority,  as the case may be, to  execute,  deliver and perform the terms and
provisions of each of the Credit Documents to which it is a party and has taken
all necessary  corporate,  partnership or limited  liability company action, as
the case may be, to authorize the execution,  delivery and performance by it of
each of such  Credit  Documents.  Each  Credit  Party  has  duly  executed  and
delivered each of the Credit Documents to which it is a party, and each of such
Credit Documents  constitutes the legal,  valid and binding  obligation of such
Credit Party  enforceable  in accordance  with its terms,  except to the extent
that the  enforceability  thereof  may be  limited  by  applicable  bankruptcy,
insolvency,   reorganization,   moratorium  or  other  similar  laws  generally
affecting creditors' rights and by equitable principles  (regardless of whether
enforcement is sought in equity or at law).

          7.03 No Violation. Neither the execution,  delivery or performance by
any Credit Party of the Credit Documents to which it is a party, nor compliance
by it with the  terms  and  provisions  thereof,  nor the  consummation  of the
transactions  contemplated  therein,  (i) will  contravene any provision of any
applicable  law,  statute,  rule or regulation or any applicable  order,  writ,
injunction or decree of any court or  governmental  instrumentality,  (ii) will
conflict  with  or  result  in any  breach  of any  of  the  terms,  covenants,
conditions or provisions  of, or constitute a default  under,  or result in the
creation  or  imposition  of (or the  obligation  to create or impose) any Lien
(except  pursuant to the  Security  Documents)  upon any of the  properties  or
assets of the Borrower or any of its Subsidiaries  pursuant to the terms of any
indenture,  mortgage, deed of trust, credit agreement or loan agreement, or any
other material agreement,  contract or instrument, to which the Borrower or any
of its  Subsidiaries is a party or by which it or any of its property or assets
is bound or to which it may be subject or (iii) will  violate any  provision of
the  certificate  of  incorporation  or by-laws (or  equivalent  organizational
document(s)) of the Borrower or any of its Subsidiaries.

          7.04 Governmental  Approvals. No order, consent,  approval,  license,
authorization  or  validation  of, or filing,  recording or  registration  with
(except  as have  been  obtained  or made and which  remain  in full  force and
effect), or exemption by, any governmental or public body or authority,  or any
subdivision  thereof,  is required to  authorize,  or is required in connection
with, (i) the  execution,  delivery and  performance of any Credit  Document or
(ii) the  legality,  validity,  binding  effect or  enforceability  of any such
Credit Document.

          7.05   Financial   Statements;   Financial   Condition;   Undisclosed
Liabilities;  Projections;  etc.  (a) The  consolidated  balance  sheets of the
Borrower and its Subsidiaries for the fiscal years ended on June 30, 1998, June
30, 1999 and June 30, 2000 and the interim  nine-month  period  ended March 31,
2001,  and the  related  consolidated  statements  of  income,  cash  flows and
shareholders'  equity of the Borrower for the fiscal year or nine-month  period
ended on such dates,  copies of which have been  furnished to the Lenders prior
to the Effective Date, present

                                     -45-
<PAGE>

fairly in all material  respects  the  consolidated  financial  position of the
Borrower  and its  Subsidiaries  at the dates of such  balance  sheets  and the
consolidated results of the operations of the Borrower and its Subsidiaries for
the periods covered  thereby.  All of the foregoing  financial  statements have
been   prepared  in  accordance   with  GAAP  (except,   in  the  case  of  the
aforementioned   interim  financial  statements,   for  normal  year-end  audit
adjustments  and  the  absence  of  footnotes).  After  giving  effect  to  the
Transaction  (but for this purpose  assuming the Transaction had occurred prior
to June 30, 2000),  since June 30, 2000 nothing has occurred  which has had, or
could  reasonably  be  expected  to have,  a  material  adverse  effect  on the
business,  property, assets, liabilities (actual or contingent),  operations or
condition  (financial or otherwise) of the Borrower and its Subsidiaries  taken
as a whole.

          (b) The  consolidated pro forma balance sheet of the Borrower and its
Subsidiaries  at  June  30,  2001  (calculated   after  giving  effect  to  the
Transaction,  and  assuming  that the  Transaction  had occurred on such date),
copies of which have been furnished to the Lenders prior to the Effective Date,
present  fairly  the pro  forma  financial  position  of the  Borrower  and its
Subsidiaries,  and the related pro forma  consolidated  statements of income of
the Borrower and its Subsidiaries for the twelve-month period ended on June 30,
2001 (calculated after giving effect to the Transaction,  and assuming that the
Transaction had occurred on July 1, 2000).

          (c) On and as of the  Effective  Date and after giving  effect to the
Transaction and to all Indebtedness  (including the Senior  Subordinated  Notes
and the Loans (if any))  being  incurred  or assumed  and Liens  created by the
Credit Parties in connection  therewith,  (i) the sum of the assets,  at a fair
valuation,  of each of the  Borrower on a stand alone basis and of the Borrower
and its Subsidiaries  taken as a whole will exceed its debts;  (ii) each of the
Borrower on a stand alone basis and the Borrower and its Subsidiaries  taken as
a whole has not  incurred  and does not intend to incur,  and does not  believe
that it will  incur,  debts  beyond its ability to pay such debts as such debts
mature;  and (iii) each of the Borrower on a stand alone basis and the Borrower
and its Subsidiaries  taken as a whole will have sufficient  capital with which
to conduct its business. For purposes of this Section 7.05(c), "debt" means any
liability on a claim,  and "claim"  means (x) right to payment,  whether or not
such  a  right  is  reduced  to  judgment,  liquidated,   unliquidated,  fixed,
contingent,   matured,  unmatured,   disputed,  undisputed,  legal,  equitable,
secured,  or  unsecured  or (y)  right to an  equitable  remedy  for  breach of
performance  if such breach gives rise to a payment,  whether or not such right
to an equitable  remedy is reduced to  judgment,  fixed,  contingent,  matured,
unmatured, disputed, undisputed, secured or unsecured. The amount of contingent
liabilities  at any time shall be computed as the amount that,  in the light of
all the facts and  circumstances  existing at such time,  represents the amount
that can reasonably be expected to become an actual or matured liability.

          (d) Except as fully disclosed in the financial  statements  delivered
pursuant to Section 7.05(a) or in other information delivered to the Lenders in
writing, there were as of the Effective Date no liabilities or obligations with
respect to the  Borrower or any of its  Subsidiaries  of any nature  whatsoever
(whether  absolute,  accrued,  contingent  or otherwise and whether or not due)
which, either individually or in aggregate,  would reasonably be expected to be
material to the Borrower and its Subsidiaries taken as a whole.

                                     -46-
<PAGE>

          (e) On and as of the Effective Date, the Projections delivered to the
Administrative  Agent and the  Lenders  prior to the  Effective  Date have been
prepared in good faith and are based on assumptions believed by the Borrower to
be reasonable,  and there are no statements or  conclusions in the  Projections
which  are  based  upon or  include  information  known to the  Borrower  to be
misleading in any material  respect or which fail to take into account material
information known to the Borrower  regarding the matters reported  therein.  On
the Effective  Date, the Borrower  believes that the Projections are reasonable
and attainable, it being understood that the Projections include assumptions as
to  future  events  that are not to be  viewed  as facts  and  there  can be no
assurance that such assumptions,  statements, estimates and Projections will be
realized and that actual results may differ from the projected results and such
differences may be material and adverse.

          7.06 Litigation.  There are no actions,  suits or proceedings pending
or, to the  Borrower's  knowledge,  threatened  (i) with  respect to any Credit
Document, (ii) on and as of the Effective Date with respect to the Transaction,
or (iii) with respect to any matter that could reasonably be expected to have a
material adverse effect on the business,  property, assets, liabilities (actual
or  contingent),  operations  or  condition  (financial  or  otherwise)  of the
Borrower and its Subsidiaries taken as a whole.

          7.07 True and Complete Disclosure.  All factual information (taken as
a whole) regarding the Borrower or any of its  Subsidiaries  furnished by or on
behalf  of  the  Borrower  or  any  of  its  Subsidiaries  in  writing  to  the
Administrative  Agent  or  any  Lender  (including,   without  limitation,  all
information contained in the Credit Documents) for purposes of or in connection
with this Agreement, the other Credit Documents or any transaction contemplated
herein or therein is, and all other such factual information (taken as a whole)
hereafter  furnished by or on behalf of the Borrower or any of its Subsidiaries
in writing to the Administrative Agent or any Lender will be, true and accurate
in all material  respects on the date as of which such  information is dated or
certified and not  incomplete  by omitting to state any fact  necessary to make
such  information  (taken as a whole) not misleading in any material respect at
such  time in light of the  circumstances  under  which  such  information  was
provided.  It is understood  that the  Projections  do not  constitute  factual
information for purposes of this Section 7.07.

          7.08 Use of  Proceeds;  Margin  Regulations.  (a) All proceeds of the
Revolving  Loans  and the  Swingline  Loans  shall be used  solely  to  finance
Permitted   Acquisitions  and  for  the  working  capital   purposes,   Capital
Expenditures  and other  general  corporate  purposes of the  Borrower  and its
Subsidiaries;  provided that no Revolving  Loans or Swingline Loans may be used
to make payments  pursuant to the  Refinancing  or to pay the fees and expenses
incurred in connection therewith.

          (b) All proceeds of  Incremental  Term Loans shall be used solely (i)
to finance Permitted Acquisitions, (ii) to finance Capital Expenditures and the
Borrower's and its Subsidiaries'  other general corporate purposes and (iii) to
repay outstanding Revolving Loans.

          (c) No part of any Credit  Event (or the  proceeds  thereof)  will be
used to purchase or carry any Margin Stock or to extend  credit for the purpose
of purchasing or carrying any Margin Stock.  Neither the making of any Loan nor
the use of the proceeds  thereof nor the

                                     -47-
<PAGE>

occurrence of any other Credit Event will violate or be  inconsistent  with the
provisions  of  Regulation  T, U or X of the Board of  Governors of the Federal
Reserve System.

          7.09 Tax Returns and  Payments.  Each of the Borrower and each of its
Subsidiaries  has filed all federal  income tax returns and all other  material
tax returns,  domestic and foreign, required to be filed by it and has paid all
material taxes and assessments  payable by it which have become due, other than
those contested in good faith fully provided for on the financial statements of
the Borrower and its  Subsidiaries  in accordance  with GAAP.  The Borrower and
each of its  Subsidiaries  have at all times paid,  or have  provided  adequate
reserves (in the good faith judgment of the management of the Borrower) for the
payment of, all  federal,  state and foreign  income taxes  applicable  for all
prior fiscal years and for the current fiscal year to date. There is no action,
suit,  proceeding,  investigation,  audit,  or claim  now  pending  or,  to the
knowledge of the  Borrower,  threatened  by any  authority  regarding any taxes
relating to the Borrower or any of its  Subsidiaries  that could  reasonably be
expected to have a material adverse effect on the business,  property,  assets,
liabilities  (actual or  contingent),  operations  or condition  (financial  or
otherwise) of the Borrower and its Subsidiaries  taken as a whole.  Neither the
Borrower  nor any of its  Subsidiaries  has entered into an agreement or waiver
which is  currently  in  effect  or has  pending  a  request  to enter  into an
agreement  or waiver  extending  any  statute of  limitations  relating  to the
payment or collection of taxes of the Borrower or any of its  Subsidiaries,  or
is aware of any  circumstances  that  would  cause the  taxable  years or other
taxable periods of the Borrower or any of its Subsidiaries not to be subject to
the normally applicable statute of limitations.

          7.10  Compliance  with ERISA.  Schedule V sets forth each Plan;  each
Plan (and each related  trust,  insurance  contract or fund) is in  substantial
compliance  with its terms and with all  applicable  laws,  including,  without
limitation,  ERISA and the Code;  each Plan (and each  related  trust,  if any)
which is intended to be qualified under Section 401(a) of the Code has received
a determination  letter from the Internal Revenue Service to the effect that it
meets the requirements of Sections 401(a) and 501(a) of the Code; no Reportable
Event has occurred;  except as would not result in any material  liability,  no
Plan which is a multiemployer  plan (as defined in Section 4001(a)(3) of ERISA)
is insolvent or in  reorganization;  no Plan has an Unfunded Current  Liability
which, when added to the aggregate amount of Unfunded Current  Liabilities with
respect  to all other  Plans,  exceeds  $250,000;  no Plan  which is subject to
Section  412 of the Code or  Section  302 of ERISA has an  accumulated  funding
deficiency,  within the meaning of such  Sections of the Code or ERISA,  or has
applied for or received a waiver of an  accumulated  funding  deficiency  or an
extension of any amortization period,  within the meaning of Section 412 of the
Code or Section 303 or 304 of ERISA; except as would not result in any material
liability,  all  contributions  required to be made with respect to a Plan have
been timely made;  neither the Borrower nor any  Subsidiary of the Borrower nor
any  ERISA  Affiliate  has  incurred  any  material  liability  (including  any
indirect,  contingent  or  secondary  liability)  to or on  account  of a  Plan
pursuant to Section 409,  502(i),  502(l),  515, 4062,  4063, 4064, 4069, 4201,
4204  or 4212 of  ERISA  or  Section  401(a)(29),  4971 or 4975 of the  Code or
expects to incur any such  liability  under any of the foregoing  sections with
respect to any Plan; no condition  exists which presents a material risk to the
Borrower or any Subsidiary of the Borrower or any ERISA  Affiliate of incurring
a  material  liability  to or on account of a Plan  pursuant  to the  foregoing
provisions  of ERISA and the Code;  no  proceedings  have  been  instituted  to
terminate or appoint a

                                     -48-
<PAGE>

trustee  to  administer  any Plan  which is  subject  to Title IV of ERISA;  no
action, suit,  proceeding,  hearing, audit or investigation with respect to the
administration,  operation or the  investment of assets of any Plan (other than
routine  claims  for  benefits)  is  pending,  expected  or  threatened;  using
actuarial  assumptions  and  computation  methods  consistent  with  Part  1 of
subtitle E of Title IV of ERISA, the aggregate  liabilities of the Borrower and
its Subsidiaries and its ERISA Affiliates to all Plans which are  multiemployer
plans (as  defined in Section  4001(a)(3)  of ERISA) in the event of a complete
withdrawal  therefrom,  as of the close of the most recent  fiscal year of each
such Plan ended prior to the date of the most recent  Credit  Event,  would not
exceed $250,000;  each group health plan (as defined in Section 607(1) of ERISA
or Section  4980B(g)(2)  of the Code) which covers or has covered  employees or
former employees of the Borrower,  any Subsidiary of the Borrower, or any ERISA
Affiliate  has at all times  been  operated  in  material  compliance  with the
provisions of Part 6 of subtitle B of Title I of ERISA and Section 4980B of the
Code;  no lien imposed under the Code or ERISA on the assets of the Borrower or
any  Subsidiary of the Borrower or any ERISA  Affiliate  exists or is likely to
arise on account of any Plan;  and the  Borrower  and its  Subsidiaries  do not
maintain or  contribute  to any  employee  welfare  benefit plan (as defined in
Section 3(1) of ERISA) which  provides  benefits to retired  employees or other
former  employees  (other than as required by Section 601 of ERISA) or any Plan
the  obligations  with respect to which could  reasonably be expected to have a
material  adverse  effect  on  the  ability  of  the  Borrower  or  any  of its
Subsidiaries  to perform  its  obligations  under this  Agreement  or any other
Credit Document.

          7.11 The  Security  Documents.  (a) The  provisions  of the  Security
Agreement  are  effective  to create in favor of the  Collateral  Agent for the
benefit  of the  Secured  Creditors  a legal,  valid and  enforceable  security
interest in all right, title and interest of the Credit Parties in the Security
Agreement  Collateral  described  therein,  and the Collateral  Agent,  for the
benefit of the  Secured  Creditors,  has a fully  perfected  first lien on, and
security  interest  in, all right,  title and  interest in all of the  Security
Agreement  Collateral  described therein,  subject to no other Liens other than
Permitted Liens. The recordation of (x) the Grant of Security  Interest in U.S.
Patents  and (y) the  Grant of  Security  Interest  in U.S.  Trademarks  in the
respective form attached to the Security Agreement,  in each case in the United
States  Patent and Trademark  Office,  together with filings on Form UCC-1 made
pursuant to the Security  Agreement,  will create,  as may be perfected by such
filings and  recordation,  a perfected  security  interest in the United States
trademarks and patents covered by the Security  Agreement,  and the recordation
of the Grant of Security  Interest in U.S.  Copyrights  in the form attached to
the Security  Agreement with the United States Copyright Office,  together with
filings on Form UCC-1 made pursuant to the Security Agreement,  will create, as
may be perfected by such filings and recordation, a perfected security interest
in the United States copyrights covered by the Security Agreement.

          (b) The  security  interests  created  under the Pledge  Agreement in
favor of the  Collateral  Agent,  as  Pledgee,  for the  benefit of the Secured
Creditors,  constitute  perfected  security  interests in the Pledge  Agreement
Collateral described in the Pledge Agreement,  subject to no security interests
of any other Person.  No filings or recordings are required in order to perfect
(or maintain the perfection or priority of) the security  interests  created in
the Pledge  Agreement  Collateral  under the Pledge  Agreement  other than with
respect to that  portion  of the Pledge  Agreement  Collateral  constituting  a
"general intangible" under the UCC.

                                     -49-
<PAGE>

          7.12  Approvals;  etc. All consents and approvals of, and filings and
registrations  with,  and all other  actions  in respect  of, all  governmental
agencies,  authorities or instrumentalities required in order to consummate the
transactions contemplated by this Agreement have been obtained, given, filed or
taken and are or will be in full force and effect (or effective judicial relief
with respect  thereto has been obtained),  except such consents,  approvals and
filings the failure of which to obtain or file could not reasonably be expected
to have a material  adverse  effect on the  transactions  contemplated  by this
Agreement or on the business, operations, property, assets, liabilities (actual
or  contingent),  operations  or  condition  (financial  or  otherwise)  of the
Borrower and its Subsidiaries  taken as a whole. All transactions  contemplated
hereby have been  consummated in all material  respects in accordance  with the
documentation  therefor and all applicable laws, and all actions pursuant to or
in furtherance of the transactions contemplated by this Agreement have been and
will be taken in compliance in all material respects with all applicable laws.

          7.13 Properties. All Real Property owned or leased by the Borrower or
any of its  Subsidiaries  as of the Effective  Date (other than any such leased
Real Property  consisting of  insignificant  office or other  spaces),  and the
nature of the  interest  therein,  is  correctly  set forth in Schedule IV. The
Borrower and each of its  Subsidiaries  have good and  marketable  title to all
material properties owned by them, including all property reflected in Schedule
IV and in the balance sheets  referred to in Section 7.05(a) (except as sold or
otherwise  disposed  of since the date of such  balance  sheet in the  ordinary
course of business or as  permitted by the terms of this  Agreement),  free and
clear of all Liens, other than Permitted Liens.

          7.14  Capitalization.  On the Effective Date, the authorized  capital
stock of the  Borrower  shall  consist of (i) 600,000  shares of common  stock,
$0.01 par value per share,  203,294 of which  shall be issued and  outstanding,
and (ii) 150,000 shares of preferred stock,  $0.01 par value per share,  21,600
of which shares shall be designated  as PIK  Preferred  Stock and be issued and
outstanding.  All  outstanding  shares of such capital stock have been duly and
validly  issued,  are fully paid and  nonassessable  and are free of preemptive
rights.  Except for certain  options  issued  pursuant to employee and director
stock option plans and the provisions of the Shareholders'  Agreements,  on the
Effective  Date  the  Borrower  does  not  have   outstanding   any  securities
convertible  into or  exchangeable  for its capital  stock or  outstanding  any
rights to subscribe for or to purchase,  or any options for the purchase of, or
any agreements  providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, its capital stock.

          7.15  Subsidiaries.  The Borrower has no Subsidiaries  other than (i)
those Subsidiaries  listed on Schedule VI and (ii) new Subsidiaries  created in
compliance  with  Section  9.14.  Schedule VI correctly  sets forth,  as of the
Effective Date, the percentage  ownership  (direct or indirect) of the Borrower
in each class of capital stock or other equity of each of its  Subsidiaries and
also identifies the direct owner thereof.

          7.16  Compliance  with  Statutes,  etc.  The Borrower and each of its
Subsidiaries  are in compliance with all applicable  statutes,  regulations and
orders of all  governmental  bodies,  domestic  or  foreign,  in respect of the
conduct of its business and the ownership of its property (including applicable
Environmental Laws) except such noncompliances as could not, individ-

                                     -50-
<PAGE>

ually or in the  aggregate,  reasonably be expected to have a material  adverse
effect on the business,  property,  assets, liabilities (actual or contingent),
operations  or  condition  (financial  or  otherwise)  of the  Borrower and its
Subsidiaries taken as a whole.

          7.17  Investment  Company  Act.  Neither the  Borrower nor any of its
Subsidiaries  is  an  "investment  company"  or a  company  "controlled"  by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.

          7.18 Public Utility Holding Company Act. Neither the Borrower nor any
of its  Subsidiaries  is a "holding  company," or a  "subsidiary  company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company"  of a  "holding  company"  within the  meaning  of the Public  Utility
Holding Company Act of 1935, as amended.

          7.19  Environmental  Matters.  (a)  The  Borrower  and  each  of  its
Subsidiaries  have  complied  with all  applicable  Environmental  Laws and the
requirements of any permits issued under such Environmental  Laws. There are no
pending  or,  to the  Borrower's  knowledge,  threatened  Environmental  Claims
against the Borrower or any of its  Subsidiaries  or any Real  Property  owned,
leased or operated by the  Borrower  or any of its  Subsidiaries.  There are no
facts,  circumstances,  conditions or occurrences  on any Real Property  owned,
leased  or  operated  by the  Borrower  or any of its  Subsidiaries  or, to the
Borrower's knowledge,  on any property adjoining or in the vicinity of any such
Real  Property  that would  reasonably  be expected (i) to form the basis of an
Environmental Claim against the Borrower or any of its Subsidiaries or any such
Real  Property  or (ii) to cause any such Real  Property  to be  subject to any
restrictions on the ownership,  occupancy,  use or transferability of such Real
Property  by the  Borrower  or any of its  Subsidiaries  under  any  applicable
Environmental Law.

          (b) Hazardous  Materials are not being,  and to the  Borrower's  best
knowledge after due inquiry,  have not at any time previously been,  generated,
used,  treated or stored on, or transported to or from, or Released on or from,
any Real  Property  owned,  leased or  operated  by the  Borrower or any of its
Subsidiaries except in compliance with all applicable Environmental Laws.

          (c)  Notwithstanding  anything to the contrary in this Section  7.19,
the  representations  made in this  Section  7.19  shall  only be untrue if the
aggregate   effect  of  all  failures,   noncompliances,   activities,   facts,
circumstances,  conditions and  occurrences of the types  described above could
reasonably  be  expected  to have a material  adverse  effect on the  business,
property, assets,  liabilities (actual or contingent),  operations or condition
(financial or otherwise) of the Borrower and its Subsidiaries taken as a whole.

          7.20  Labor   Relations.   Neither  the   Borrower  nor  any  of  its
Subsidiaries  is engaged in any unfair labor practice that could  reasonably be
expected to have a material adverse effect on the Borrower and its Subsidiaries
taken as a whole.  There is (i) no  unfair  labor  practice  complaint  pending
against the Borrower or any of its  Subsidiaries  or, to the best  knowledge of
the  Bor-

                                     -51-
<PAGE>

rower,  threatened  against any of them,  before the National  Labor  Relations
Board, and no grievance or arbitration  proceeding  arising out of or under any
collective  bargaining  agreement is so pending  against the Borrower or any of
its Subsidiaries or, to the best knowledge of the Borrower,  threatened against
any of them,  (ii) no strike,  labor  dispute,  slowdown  or  stoppage  pending
against the Borrower or any of its  Subsidiaries  or, to the best  knowledge of
the Borrower,  threatened against any of them and (iii) no union representation
question  exists with  respect to the  employees  of the Borrower or any of its
Subsidiaries,  except (with respect to any matter specified in clause (i), (ii)
or (iii) above,  either  individually  or in the  aggregate)  such as could not
reasonably  be  expected  to have a material  adverse  effect on the  business,
property, assets,  liabilities (actual or contingent),  operations or condition
(financial or otherwise) of the Borrower and its Subsidiaries taken as a whole.

          7.21 Patents, Licenses,  Franchises and Formulas. Except as set forth
on Schedule VII hereto,  each of the Borrower and each of its Subsidiaries owns
all the patents,  trademarks,  permits, service marks, trade names, copyrights,
licenses,  franchises,  proprietary  information  (including but not limited to
rights in computer programs and databases) and formulas, or rights with respect
to the foregoing,  and has obtained  assignments of all leases and other rights
of whatever nature, necessary for the present conduct of its business,  without
any known  conflict with the rights of others  which,  or the failure to obtain
which, as the case may be, could reasonably be expected to result in a material
adverse  effect on the  business,  property,  assets,  liabilities  (actual  or
contingent),  operations or condition  (financial or otherwise) of the Borrower
and its Subsidiaries taken as a whole.

          7.22 Indebtedness.  Schedule VIII sets forth a true and complete list
of all  Indebtedness  of the Borrower and its  Subsidiaries as of the Effective
Date (after giving  effect to the  Refinancing,  but  excluding the Loans,  the
Letters  of  Credit  and  the  Senior   Subordinated   Notes,   the   "Existing
Indebtedness"), in each case showing the aggregate principal amount thereof and
the  name  of the  respective  borrower  and  any  Credit  Party  or any of its
Subsidiaries which directly or indirectly guaranteed such Indebtedness.

          7.23 Hospital  Properties.  The Borrower owns no Hospital  Properties
directly,  and on the  Effective  Date,  each  Hospital  Property is owned by a
Wholly-Owned  Subsidiary  of  the  Borrower  which  is a  Subsidiary  Guarantor
organized  under  the  laws of a state  in the  United  States.  Each  Hospital
Property is located in the United States.

          7.24 Subordination. (a) The subordination provisions contained in the
Senior  Subordinated Note Documents are enforceable  against the Borrower,  the
Subsidiary  Guarantors party thereto and the holders of the Senior Subordinated
Notes,  and all  Obligations  hereunder  and in the other Credit  Documents are
within  the  definitions  of  "Senior   Indebtedness"  and  "Designated  Senior
Indebtedness" included in such subordination provisions.

          (b) At all  times  from  and  after  the  issuance  of any  Permitted
Subordinated  Notes, the  subordination  provisions  contained in the Permitted
Subordinated  Note  Documents  shall be enforceable  against the Borrower,  the
Subsidiary   Guarantors   party  thereto  and  the  holders  of  the  Permitted
Subordinated  Notes  and all  obligations  hereunder  and in the  other  Credit
Documents  shall  be  within  the  definition  of  "Senior   Indebtedness"  and
"Designated Senior Indebtedness" (or any substantially  similar terms) included
in such subordination provisions.

                                     -52-
<PAGE>

          7.25 Legal Names; Organizational Identification Numbers; Jurisdiction
and Type of  Organization;  etc.  Schedule  XII  hereto  sets  forth a true and
correct list, as of the Effective  Date, of the exact legal name of each Credit
Party, the organizational  identification number (if any) of such Credit Party,
the  jurisdiction  of  organization  of  such  Credit  Party  and  the  type of
organization of such Credit Party.

          7.26 No  Director,  Executive  Officer or Principal  Shareholder.  No
director,  executive officer or principal shareholder of the Borrower or any of
its Subsidiaries is a director,  executive officer or principal  shareholder of
any  Lender  that is a bank  subject to  Regulation  O (or any  similar  law or
regulation restricting loans to insiders), unless the extensions of credit made
by such bank hereunder  would not violate  Regulation O, or such similar law or
regulation,  as the case may be. For the purposes hereof, the terms "director,"
"executive  officer" and "principal  shareholder"  (when used with reference to
any Lender) shall have the respective  meanings  assigned thereto in Regulation
O.

          SECTION 8. Affirmative  Covenants.  The Borrower hereby covenants and
agrees that on and after the Effective Date and until the Total Commitments and
all Letters of Credit have terminated and the Loans, Notes and Unpaid Drawings,
together with interest,  Fees and all other obligations  incurred hereunder and
thereunder, are paid in full:

          8.01  Information  Covenants.   The  Borrower  will  furnish  to  the
Administrative  Agent (with sufficient copies for each of the Lenders,  and the
Administrative Agent will promptly forward to each of the Lenders):

          (a) Quarterly Financial Statements. Within 45 days after the close of
the  first  three  quarterly  accounting  periods  in each  fiscal  year of the
Borrower,   (i)  the  consolidated  balance  sheet  of  the  Borrower  and  its
Subsidiaries as at the end of such quarterly  accounting period and the related
consolidated  statements of income and retained  earnings and statement of cash
flows for such quarterly  accounting  period and for the elapsed portion of the
fiscal year ended with the last day of such  quarterly  accounting  period,  in
each case  setting  forth  comparative  figures for the related  periods in the
prior  fiscal  year,  all of which shall be  certified  by the Chief  Financial
Officer of the Borrower,  subject to normal  recurring  adjustments  and (ii) a
comparison of the performance of the Borrower and its Subsidiaries  against the
current business plan of the Borrower.

          (b) Annual Financial  Statements.  (i) Within 90 days after the close
of each fiscal year of the Borrower,  (A) the consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of such fiscal year and the related
consolidated  statements of income and retained  earnings and of cash flows for
such fiscal year setting forth  comparative  figures for the  preceding  fiscal
year and certified (without the inclusion of any "going concern" qualification)
by any of the "Big Five" independent certified public accountants or such other
independent  certified  public  accountants  of  recognized  national  standing
reasonably  acceptable to the Administrative  Agent and (B) a comparison of the
performance of the Borrower and its  Subsidiaries  against the current business
plan of the Borrower.

                                     -53-
<PAGE>

          (ii) At the time of the delivery of the annual  financial  statements
pursuant  to clause  (i)  above,  a report of the  applicable  accounting  firm
stating that in the course of its regular audit of the financial  statements of
the Borrower and its Subsidiaries, which audit was conducted in accordance with
generally  accepted  auditing  standards,  such  accounting  firm  obtained  no
knowledge  of any  Default  or Event  of  Default  which  has  occurred  and is
continuing  under  Sections  9.07,  9.08 or 9.09 or, if in the  opinion of such
accounting  firm such a Default  or an Event of  Default  has  occurred  and is
continuing, a statement as to the nature thereof.

          (c)  Budgets;  Business  Plan.  No  later  than  45  days  after  the
commencement  of each fiscal year of the Borrower,  a budget in form reasonably
satisfactory to the  Administrative  Agent (including,  in any event,  budgeted
statements  of income and sources  and uses of cash and balance  sheets of cash
flow and budgeted debt and cash  balances) for such fiscal year prepared by the
Borrower in reasonable  detail and accompanied by the current  business plan of
the Borrower and a statement of the Chief Financial  Officer of the Borrower to
the  effect  that,  to the best of such  officer's  knowledge,  the budget is a
reasonable estimate of the period covered thereby.

          (d)  Officer's  Certificates.  At the  time  of the  delivery  of the
financial  statements  provided  for in Sections  8.01(a) and (b), a compliance
certificate  of the Chief  Financial  Officer  of the  Borrower  in the form of
Exhibit  K  certifying  on  behalf of the  Borrower  that,  to the best of such
officer's  knowledge,  no  Default  or Event of  Default  has  occurred  and is
continuing  or,  if any  Default  or  Event  of  Default  has  occurred  and is
continuing,  specifying the nature and extent thereof,  which certificate shall
(x)  set  forth  the  calculations  (in  reasonable  detail,  and  showing  any
adjustments  required  pursuant to Section 11.02) required to establish (A) the
Applicable  Margins  for  the  respective  Margin  Reduction  Period  (and  the
Consolidated  Leverage  Ratio  for  purposes  of  determining  such  Applicable
Margins) and (B) whether the Borrower and its  Subsidiaries  were in compliance
with the provisions of Sections  4.02(c),  (d), (e), (f) and (g),  9.01,  9.02,
9.03,  9.04,  9.05, 9.07, 9.08, 9.09 and 9.17 at the end of such fiscal quarter
or year,  as the case may be, (y) if delivered  with the  financial  statements
required  by Section  8.01(b),  set forth the  amount of (and the  calculations
required to establish)  Excess Cash Flow for the respective Excess Cash Payment
Period,  and (z)(i)  certify  that no changes are required to be made to any of
Schedule XII hereto, Annexes A through I of the Security Agreement or Annexes A
through G of the Pledge  Agreement,  in each case so as to make the information
set forth therein accurate and complete as of the date of such certificate,  or
(ii) to the extent that such  information is no longer accurate and complete as
of such date, list in reasonable detail all information  necessary to make such
Schedule  and all such  Annexes  accurate  and  complete  (at  which  time such
Schedule  and/or such Annexes,  as the case may be, shall be deemed modified to
reflect such information).

          (e) Management  Letters.  Promptly after the Borrower's or any of its
Subsidiaries'  receipt thereof, a copy of any "management letter" received from
its certified public accountants.

          (f)  Notice of  Default  or  Litigation.  Promptly,  and in any event
within five  Business  Days,  after any  executive  officer of any Credit Party
obtains  knowledge  thereof,  notice of (i) the  occurrence  of any event which
constitutes  a  Default  or an Event of  Default  and  (ii) any  litigation  or
governmental  investigation or proceeding pending or threatened (x) against the
Bor-

                                     -54-
<PAGE>

rower or any of its Subsidiaries which, either individually or in the aggregate
could reasonably be expected to have a material adverse effect on the business,
property, assets,  liabilities (actual or contingent),  operations or condition
(financial or otherwise) of the Borrower and its Subsidiaries  taken as a whole
or (y) with respect to any Credit Document.

          (g) Other Reports and Filings.  Promptly after the filing or delivery
thereof,  copies  of all  financial  information,  proxy  materials  and  other
information   and  reports   with  respect  to  the  Borrower  or  any  of  its
Subsidiaries,  if any, which the Borrower or any of its Subsidiaries shall file
with or furnish to the  Securities  and Exchange  Commission  or any  successor
thereto  (the "SEC") and copies of all material  notices and reports  which the
Borrower  or its  Subsidiaries  shall  deliver to  holders of its  Indebtedness
pursuant to the terms of the documentation  governing such Indebtedness (or any
trustee, agent or other representative therefor).

          (h)  Environmental  Matters.  Promptly  upon, and in any event within
fifteen  Business  Days after,  any senior or  executive  officer of any Credit
Party  obtaining  knowledge  thereof,  notice  of one or more of the  following
environmental   matters,   unless  such   environmental   matters   could  not,
individually or when aggregated with all other such environmental  matters,  be
reasonably  expected  to  have a  material  adverse  effect  on  the  business,
property, assets,  liabilities (actual or contingent),  operations or condition
(financial or otherwise) of the Borrower and its Subsidiaries taken as a whole:

          (i)  any  pending  or  threatened  Environmental  Claim  against  the
     Borrower or any of its Subsidiaries or any Real Property owned,  leased or
     operated by the Borrower or any of its Subsidiaries;

          (ii) any condition or occurrence on or arising from any Real Property
     owned,  leased or operated by the Borrower or any of its Subsidiaries that
     (a) results in  non-compliance  by the Borrower or any of its Subsidiaries
     with any applicable  Environmental Law or (b) could reasonably be expected
     to form the basis of an Environmental Claim against the Borrower or any of
     its Subsidiaries or any such Real Property;

          (iii) any condition or occurrence on any Real Property owned,  leased
     or  operated  by  the  Borrower  or any of  its  Subsidiaries  that  could
     reasonably  be expected  to cause such Real  Property to be subject to any
     restrictions on the ownership,  occupancy, use or transferability by it or
     any of its Subsidiaries of such Real Property under any Environmental Law;

          (iv) the taking of any removal or remedial  action in response to the
     actual or alleged presence of any Hazardous  Material on any Real Property
     owned,  leased or operated by the Borrower or any of its  Subsidiaries  as
     required  by  any   Environmental   Law  or  any   governmental  or  other
     administrative agency; and

          (v) all notices  received by the Borrower or any of its  Subsidiaries
     from any government or  governmental  agency under, or pursuant to, CERCLA
     which  identify the  Borrower or any of its  Subsidiaries  as  potentially
     responsible parties for remediation costs

                                     -55-
<PAGE>

     or which  otherwise  notify the  Borrower  or any of its  Subsidiaries  of
     potential liability under CERCLA.

All such notices shall  describe in reasonable  detail the nature of the claim,
investigation,  condition,  occurrence  or removal or  remedial  action and the
Borrower's  or such  Subsidiary's  response or proposed  response  thereto.  In
addition,  the  Borrower and any of its  Subsidiaries  will provide the Lenders
with copies of all  material  communications  with any  governmental  agency or
other third Person that is adverse to the Borrower or such Subsidiary  relating
to material  Environmental  Claims required to be otherwise reported under this
clause (h), and such detailed reports of any such material  Environmental Claim
as may reasonably be requested by the Administrative Agent or any Lender.

          (i) Other  Information.  From time to time, such other information or
documents  (financial  or  otherwise)  with  respect  to  the  Borrower  or its
Subsidiaries as the Administrative Agent may reasonably request.

          8.02 Books,  Records and  Inspections.  The Borrower  will,  and will
cause each of its  Subsidiaries  to, keep proper books of record and account in
which  full,  true  and  correct  entries  in  conformity  with  GAAP  and  all
requirements of law shall be made of all dealings and  transactions in relation
to its business and activities.  Upon reasonable notice, the Borrower will, and
will  cause  each  of its  Subsidiaries  to,  permit  officers  and  designated
representatives  of the  Administrative  Agent or any Lender (at the expense of
the  Administrative  Agent or Lender) to visit and inspect,  under  guidance of
officers of it or such Subsidiary, any of the properties of the Borrower or any
of its  Subsidiaries,  and to examine the books of account of the  Borrower and
any of its Subsidiaries  and discuss the affairs,  finances and accounts of the
Borrower and any of its  Subsidiaries  with,  and be advised as to the same by,
its and their  officers  and,  so long as an  officer of the  Borrower  or such
Subsidiary is present,  independent  accountants,  all at such reasonable times
and intervals and to such reasonable extent as the Administrative Agent or such
Lender may reasonably request.

          8.03 Maintenance of Property;  Insurance,  Reserves. Schedule IX sets
forth a true and complete listing of all insurance  maintained by, or on behalf
of, the Borrower and its  Subsidiaries  as of the Effective  Date. The Borrower
will,  and will  cause  each of its  Subsidiaries  to,  (i)  keep all  property
necessary to the business of the Borrower and its  Subsidiaries in good working
order and condition,  ordinary wear and tear excepted,  (ii) maintain insurance
on all its property and assets which are of an insurable  character in at least
such amounts and against at least such risks as is consistent and in accordance
with industry  practice for a company  similarly  situated and are no less than
the full replacement  value thereof,  and otherwise in accordance with Schedule
IX, and (iii) furnish to the  Administrative  Agent,  a certified  copy of each
policy  providing for such insurance  (which policies shall name the Collateral
Agent as loss payee and/or  additional  insured),  together with an endorsement
thereto providing that the insurance  companies issuing such policies will give
the Administrative Agent at least 30 days' prior written notice of cancellation
or non-renewal.  In addition,  the Borrower shall maintain reserves during each
of its fiscal  years for  professional  liability  claims in an amount for each
such  fiscal year not less than the amount  determined  as  appropriate  by the
Borrower's independent actuaries.

                                     -56-
<PAGE>

          8.04 Corporate Franchises.  The Borrower will, and will cause each of
its  Subsidiaries  to, do or cause to be done, all things necessary to preserve
and keep in full  force and  effect  its  existence  and its  material  rights,
franchises,  licenses  and  patents;  provided,  however,  that nothing in this
Section 8.04 shall prevent (i) any of the transactions  permitted in accordance
with  Section  9.02  or  (ii)  the  withdrawal  by the  Borrower  or any of its
Subsidiaries of its qualification as a foreign corporation in any jurisdiction,
or the  dissolution or liquidation  of  Subsidiaries  which hold no substantial
assets and do not operate any businesses,  in each case where such  withdrawal,
dissolution or liquidation  could not reasonably be expected to have a material
adverse  effect on the  business,  property,  assets,  liabilities  (actual  or
contingent),  operations or condition  (financial or otherwise) of the Borrower
and its Subsidiaries taken as a whole.

          8.05 Compliance with Statutes, etc. The Borrower will, and will cause
each of its Subsidiaries to, comply with all applicable  statutes,  regulations
and orders of all governmental  bodies,  domestic or foreign, in respect of the
conduct of its business and the ownership of its property (including applicable
Environmental  Laws), except such noncompliances as could not,  individually or
in the aggregate,  reasonably be expected to have a material  adverse effect on
the business, property, assets, liabilities (actual or contingent),  operations
or condition  (financial  or  otherwise)  of the Borrower and its  Subsidiaries
taken as a whole.

          8.06  Compliance  with  Environmental  Laws.  (a) The  Borrower  will
comply,  and  will  cause  each  of  its  Subsidiaries  to  comply,   with  all
Environmental  Laws  applicable  to the  ownership,  lease  or use of its  Real
Property now or hereafter  owned,  leased or operated by the Borrower or any of
its Subsidiaries  (except such noncompliances as could not,  individually or in
the aggregate,  reasonably be expected to have a material adverse effect on the
business,  property, assets, liabilities (actual or contingent),  operations or
condition  (financial or otherwise) of the Borrower and its Subsidiaries  taken
as a whole),  will  promptly  pay or cause to be paid all  costs  and  expenses
incurred in connection  with such  compliance;  provided that there shall be no
violation of any of the foregoing so long as any obligation to comply or pay is
being contested in good faith and by appropriate proceedings for which adequate
reserves have been  established in accordance with GAAP, and will keep or cause
to be kept all such Real Property free and clear of any Liens imposed  pursuant
to such Environmental Laws except for Permitted Liens. Neither the Borrower nor
any of its Subsidiaries will generate,  use, treat,  store,  Release or dispose
of, or knowingly permit the generation,  use,  treatment,  storage,  Release or
disposal of Hazardous  Materials on any Real Property now or hereafter owned or
operated by the Borrower or any of its Subsidiaries, or transport or permit the
transportation of Hazardous  Materials to or from any such Real Property except
for Hazardous Materials generated,  used, treated, stored, released or disposed
of at any such Real Properties in compliance with all applicable  Environmental
Laws  (except  such  noncompliances  as  could  not,  individually  or  in  the
aggregate,  reasonably  be  expected to have a material  adverse  effect on the
business,  property, assets, liabilities (actual or contingent),  operations or
conditions  (financial or otherwise) of the Borrower and its Subsidiaries taken
as a whole), and reasonably required in connection with the operation,  use and
maintenance  of  the  business  or  operations  of the  Borrower  or any of its
Subsidiaries.

          (b) To the extent any Credit Party delivers  notice of the occurrence
of the environmental matters as described in Section 8.01(h), the Borrower will
provide,  upon the written request of the Administrative  Agent or the Required
Lenders,  which request shall specify

                                     -57-
<PAGE>

in  reasonable  detail the basis  therefor,  at its sole cost and  expense,  an
environmental  site assessment report concerning the relevant Real Property now
or  hereafter  owned  or  operated  by  such  Credit  Party,   prepared  by  an
environmental consulting firm reasonably approved by the Agents, indicating the
presence or absence of Hazardous Materials and, to the extent practicable,  the
potential  cost of any  removal  or  remedial  action  in  connection  with any
Hazardous Materials on such Real Property. If the Borrower fails to provide the
same within 90 days after such request was made, the Agents may order the same,
and the Borrower shall grant and hereby  grants,  to the Agents and the Lenders
and their  agents  access to such Real  Property  and  specifically  grants the
Agents and the Lenders an  irrevocable  non-exclusive  license,  subject to the
rights of tenants,  to  undertake  such an  assessment,  all at the  Borrower's
reasonable expense.

          8.07 ERISA.  As soon as possible  and, in any event,  within ten (10)
days after the Borrower,  any Subsidiary of the Borrower or any ERISA Affiliate
knows or has reason to know of the  occurrence of any of the following  (except
to the extent that the occurrence of any of the following  could not reasonably
be expected to result in a liability,  loss or claim exceeding  $250,000),  the
Borrower will deliver to the  Administrative  Agent a certificate  of the chief
financial  officer of the  Borrower  setting  forth the full details as to such
occurrence and the action,  if any, that the Borrower,  such Subsidiary or such
ERISA  Affiliate  is required or  proposes to take,  together  with any notices
required  or  proposed  to be given to or filed  with or by the  Borrower,  the
Subsidiary,  the ERISA  Affiliate,  the PBGC,  a Plan  participant  or the Plan
administrator  with  respect  thereto:  that a  Reportable  Event has  occurred
(except to the extent that the Borrower has previously delivered to the Lenders
a certificate  and notices (if any)  concerning such event pursuant to the next
clause hereof);  that a contributing sponsor (as defined in Section 4001(a)(13)
of ERISA) of a Plan  subject  to Title IV of ERISA is  subject  to the  advance
reporting  requirement of PBGC Regulation  Section  4043.61  (without regard to
subparagraph  (b)(1)  thereof),  and an event described in subsection .62, .63,
 .64,  .65,  .66,  .67 or .68 of PBGC  Regulation  Section  4043  is  reasonably
expected to occur with respect to such Plan within the following 30 days;  that
an  accumulated  funding  deficiency,  within the meaning of Section 412 of the
Code or Section 302 of ERISA, has been incurred or an application may be or has
been  made  for a  waiver  or  modification  of the  minimum  funding  standard
(including  any  required   installment   payments)  or  an  extension  of  any
amortization  period  under  Section  412 of the Code or Section  303 or 304 of
ERISA with respect to a Plan;  that any  contribution  required to be made with
respect  to a Plan has not  been  timely  made;  that a Plan has been or may be
terminated,  reorganized,  partitioned or declared  insolvent under Title IV of
ERISA; that a Plan has an Unfunded Current  Liability;  that proceedings may be
or have been  instituted to terminate or appoint a trustee to administer a Plan
which is subject to Title IV of ERISA;  that a proceeding  has been  instituted
pursuant  to Section  515 of ERISA to collect a  delinquent  contribution  to a
Plan; that the Borrower,  any Subsidiary of the Borrower or any ERISA Affiliate
will or may incur any material liability  (including any indirect,  contingent,
or secondary  liability) to or on account of the  termination  of or withdrawal
from a Plan under Section 4062,  4063,  4064,  4069,  4201,  4204 or 4212(c) of
ERISA or with respect to a Plan under Section 401(a)(29), 4971, 4975 or 4980 of
the Code or Section 409 or 502(i) or 502(l) of ERISA or with respect to a group
health plan (as defined in Section  607(1) of ERISA or Section  4980B(g)(2)  of
the  Code)  under  Section  4980B  of the  Code;  or that the  Borrower  or any
Subsidiary  of the Borrower may incur any  material  liability  pursuant to any
employee  welfare  benefit  plan (as  defined  in Section  3(1) of ERISA)  that
provides benefits to

                                     -58-
<PAGE>

retired  employees or other former employees (other than as required by Section
601 of ERISA) or any Plan.  The  Borrower  will  deliver to the  Administrative
Agent (i) upon  request  of the  Administrative  Agent a  complete  copy of the
annual  report (on  Internal  Revenue  Service Form  5500-series)  of each Plan
(including,  to the  extent  required,  the  related  financial  and  actuarial
statements  and  opinions  and  other  supporting  statements,  certifications,
schedules  and  information)  required  to be filed with the  Internal  Revenue
Service and (ii) copies of any  records,  documents or other  information  that
must be furnished to the PBGC with respect to any Plan pursuant to Section 4010
of ERISA. In addition to any  certificates or notices  delivered to the Lenders
pursuant  to the  first  sentence  hereof,  any  records,  documents  or  other
information  required to be  furnished to the PBGC,  and any  material  notices
received by the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate
with  respect to any Plan shall be  delivered  to the Lenders no later than ten
(10) days after the date such records,  documents  and/or  information has been
furnished  to the PBGC or such notice has been  received by the  Borrower,  the
Subsidiary or the ERISA Affiliate, as applicable.

          8.08 End of Fiscal Years;  Fiscal  Quarters.  The Borrower will cause
(i) each of its, and each of its Subsidiaries',  fiscal years to end on June 30
and (ii) each of its, and each of its Subsidiaries',  fiscal quarters to end on
September 30, December 31, March 31 and June 30.

          8.09  Performance of  Obligations.  The Borrower will, and will cause
each of its Subsidiaries to, perform all of its obligations  under the terms of
each mortgage, deed of trust, indenture,  security agreement, loan agreement or
credit agreement and each other material  agreement,  contract or instrument by
which it or any of its Real Property is bound, except such  non-performances as
could not,  individually or in the aggregate,  reasonably be expected to have a
material adverse effect on the business,  property, assets, liabilities (actual
or  contingent),  operations  or  condition  (financial  or  otherwise)  of the
Borrower and its Subsidiaries taken as a whole.

          8.10 Payment of Taxes. The Borrower will pay and discharge,  and will
cause each of its Subsidiaries to pay and discharge, all taxes, assessments and
governmental  charges or levies  imposed upon it or upon its income or profits,
or upon any  properties  belonging to it, prior to the date on which  penalties
attach thereto, and all lawful claims for sums that have become due and payable
which,  if unpaid,  might become a Lien not otherwise  permitted  under Section
9.01(i) provided that neither the Borrower nor any of its Subsidiaries shall be
required to pay any such tax, assessment,  charge, levy or claim which is being
contested in good faith and by proper proceedings if it has maintained adequate
reserves with respect thereto in accordance with GAAP.

          8.11  Accreditation  and Licensing.  The Borrower will (i) obtain and
maintain,  and cause  each of its  Subsidiaries  to obtain  and  maintain,  all
permits,  licenses and other governmental approvals as may be necessary for the
operation  of  each of its  Hospital  Properties,  except  for  those  permits,
licenses and approvals  the failure of which to obtain and maintain  could not,
individually  or in the  aggregate  with all other  failures  pursuant  to this
Section 8.11,  reasonably be expected to have a material  adverse effect on the
business,  property, assets, liabilities (actual or contingent),  operations or
condition  (financial or otherwise) of the Borrower and its Subsidiaries  taken
as a whole,  (ii) obtain and maintain,  and cause each of its  Subsidiaries  to
obtain and maintain,  its  qualification for participation in any payment under
CHAMPUS,  Medicare,

                                     -59-
<PAGE>

Medicaid,  Blue Cross, Blue Shield and any other private insurance  programs of
similar broad application and any other federal,  state and local  governmental
programs providing for payment of reimbursement for services rendered which the
Borrower deems prudent in its reasonable  discretion,  except to the extent any
failure  to  maintain  such  qualification  could not,  individually  or in the
aggregate with all other failures pursuant to this Section 8.11,  reasonably be
expected to have a material adverse effect on the business, property, assets or
liabilities  (actual or  contingent),  operations  or condition  (financial  or
otherwise) of the Borrower and its Subsidiaries taken as a whole, and (iii) use
its best efforts to cause each Hospital  Property owned,  leased or operated by
the  Borrower or any  Subsidiary  of the  Borrower to have at all times a valid
Certificate of Accreditation of the Joint Commission of Accreditation of Health
Care  Organizations in full force and effect,  except to the extent any failure
to have any such valid  Certificate of Accreditation of the Joint Commission of
Accreditation of Health Care  Organizations  could not,  individually or in the
aggregate with all other failures pursuant to this Section 8.11,  reasonably be
expected to have a material adverse effect on the business,  property,  assets,
liabilities  (actual or  contingent),  operations  or condition  (financial  or
otherwise) of the Borrower and its Subsidiaries taken as a whole.

          8.12 Additional Security;  Further Assurances. (a) The Borrower will,
and will cause each of the  Subsidiary  Guarantors  to, grant to the Collateral
Agent  security  interests and  mortgages in such assets and  properties of the
Borrower  and such  Subsidiary  Guarantors  as are not covered by the  original
Security Documents, and as may be reasonably requested from time to time by the
Administrative  Agent or the Required  Lenders  (collectively,  the "Additional
Security  Documents"),  provided that notwithstanding  anything to the contrary
contained in this  Agreement (i) Leasehold  Mortgages  shall not be required on
any Real Property  other than Hospital  Properties,  large clinics and surgical
centers and other material Real Property,  (ii) no  landlord-lender  agreements
shall be required on any  Leasehold  not  subject to a Leasehold  Mortgage  and
(iii) at the Borrower's  election  (which  election shall be made by delivering
written  notice thereof to the  Administrative  Agent) neither the Borrower nor
any  Subsidiary  Guarantor  shall be required  to grant a security  interest or
mortgage in any asset as  otherwise  required  above  pursuant to this  Section
8.12(a) so long as the book value or fair market value (as  determined  in good
faith by the Borrower), whichever is greater, is less than $1,000,000 (although
in no event shall the aggregate  book value or fair market value (as determined
in good faith by the Borrower), whichever is greater, of all assets so excluded
as provided in this clause (iii) exceed $5,000,000).  Subject to the provisions
contained  in the proviso  appearing  in the  immediately  preceding  sentence,
within 30 days following the  Administrative  Agent's or the Required  Lenders'
request  therefor,  the Borrower  will,  and will cause each of the  Subsidiary
Guarantors  to,  grant  to the  Collateral  Agent  mortgages  on  any  Hospital
Properties  constructed or acquired by the Borrower or any Subsidiary Guarantor
following the Effective  Date. All such security  interests and mortgages shall
be  granted  pursuant  to  documentation  reasonably  satisfactory  in form and
substance  to  the   Administrative   Agent  and  shall  constitute  valid  and
enforceable perfected security interests and mortgages superior to and prior to
the  rights of all third  Persons  and  subject  to no other  Liens  except for
Permitted  Liens.  The Additional  Security  Documents or  instruments  related
thereto  shall  have been duly  recorded  or filed in such  manner  and in such
places as are required by law to establish,  perfect,  preserve and protect the
Liens in favor of the Collateral

                                     -60-
<PAGE>

Agent required to be granted pursuant to the Additional  Security Documents and
all taxes,  fees and other charges  payable in connection  therewith shall have
been paid in full.

          (b)  The  Borrower  will,  and  will  cause  each  of the  Subsidiary
Guarantors  to, at the expense of the  Borrower or such  Subsidiary  Guarantor,
make,  execute,  endorse,  acknowledge,  file and/or  deliver to the Collateral
Agent  from  time to time  such  vouchers,  invoices,  schedules,  confirmatory
assignments,  conveyances,  financing statements, transfer endorsements, powers
of attorney,  certificates, real property surveys, reports and other assurances
or instruments  and take such further steps relating to the Collateral  covered
by  any of the  Security  Documents  as the  Collateral  Agent  may  reasonably
require. Furthermore, the Credit Parties will use their reasonable best efforts
to cause to be  delivered  to the  Collateral  Agent such  opinions of counsel,
title insurance and other related  documents as may be reasonably  requested by
the  Administrative  Agent to assure  itself  that this  Section  8.12 has been
complied with.

          (c) If the  Administrative  Agent or the Required Lenders  reasonably
determine  that  they are  required  by law or  regulation  to have  appraisals
prepared  in  respect  of the Real  Property  of  Borrower  and the  Subsidiary
Guarantors  constituting  Collateral,  the Borrower  will,  at its own expense,
provide to the  Administrative  Agent  appraisals  which satisfy the applicable
requirements.

          (d) The  Borrower  agrees  that each  action  required  above by this
Section 8.12 (other than actions described in the second sentence of clause (a)
of this Section  8.12) shall be completed as soon as possible,  but in no event
later  than 90 days after such  action is either  requested  to be taken by the
Administrative  Agent or the  Required  Lenders or  required to be taken by the
Borrower  or its  Subsidiaries  pursuant  to the  terms of this  Section  8.12;
provided  that in no event  will the  Borrower  or any of its  Subsidiaries  be
required  to take any  action,  other  than using its best  efforts,  to obtain
consents  from third parties with respect to its  compliance  with this Section
8.12.

          8.13 Use of Proceeds. The Borrower will use the proceeds of the Loans
only as provided in Section 7.08.

          8.14  VHS  Phoenix   Health  Plan,   Inc.  The  Borrower   shall  use
commercially  reasonable  efforts to (i) obtain all necessary  governmental and
other third party  approvals to permit VHS Phoenix Health Plan, Inc. to execute
and deliver, and (ii) thereafter cause VHS Phoenix Health Plan, Inc. to execute
and deliver,  counterparts of the Subsidiaries Guaranty, the Security Agreement
and the Pledge Agreement,  or a Joinder Agreement,  and in connection therewith
take all action VHS Phoenix  Health  Plan,  Inc.  would have taken  pursuant to
Section 5A if it had been a Subsidiary Guarantor on the Effective Date.

          SECTION 9. Negative Covenants. The Borrower covenants and agrees that
on and after the Effective Date and until the Total Commitments and all Letters
of Credit have terminated and the Loans,  Notes and Unpaid  Drawings,  together
with interest,  Fees and all other Obligations incurred hereunder and under the
other Credit Documents, are paid in full:

                                     -61-
<PAGE>

          9.01 Liens.  The  Borrower  will not,  and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets (real or personal, tangible or intangible) of
the  Borrower  or any of its  Subsidiaries,  whether  now  owned  or  hereafter
acquired,  or sell any such property or assets subject to an  understanding  or
agreement,  contingent  or  otherwise,  to  repurchase  such property or assets
(including  sales of accounts  receivable  with recourse to the Borrower or any
Subsidiary of the  Borrower),  or assign any right to receive  income or permit
the filing of any financing statement under the UCC or any other similar notice
of Lien  under any  similar  recording  or notice  statute,  provided  that the
provisions  of this  Section 9.01 shall not prevent the  creation,  incurrence,
assumption  or  existence  of the  following  Liens  (collectively,  "Permitted
Liens"):

          (i) inchoate Liens for taxes,  assessments or governmental charges or
     levies  not yet  due and  payable  or  Liens  for  taxes,  assessments  or
     governmental  charges  or  levies  being  contested  in good  faith and by
     appropriate  proceedings for which adequate reserves have been established
     in accordance with GAAP;

          (ii) Liens in respect of property or assets of the Borrower or any of
     its  Subsidiaries  imposed by law,  which were  incurred  in the  ordinary
     course of business and do not secure Indebtedness for borrowed money, such
     as carriers', warehousemen's, materialmen's and mechanics' liens and other
     similar Liens arising in the ordinary course of business, and (x) which do
     not in the aggregate  materially  detract from the value of the Borrower's
     or such  Subsidiary's  property  or assets or  materially  impair  the use
     thereof  in  the  operation  of  the  business  of the  Borrower  or  such
     Subsidiary or (y) which are being  contested in good faith by  appropriate
     proceedings,   which   proceedings  have  the  effect  of  preventing  the
     forfeiture or sale of the property or assets subject to any such Lien;

          (iii) Liens in existence on the Effective Date which are listed,  and
     the  property  subject  thereto  described,  in Schedule X but only to the
     respective  date, if any, set forth in such Schedule X for the removal and
     termination of any such Liens, plus renewals and extensions of such Liens,
     provided  that (x) the  Indebtedness  secured  by such Liens is renewed or
     extended on terms (taken in the aggregate)  not materially  less favorable
     to the Borrower or its  Subsidiary,  as the case may be, than the terms of
     the  Indebtedness  being  renewed or extended  (it being  understood  that
     increases in interest rates and other pricing  provisions  with respect to
     such Indebtedness which reflect market conditions  existing at the time of
     the renewal or  extension  of such  Indebtedness  shall not be  considered
     materially  less favorable to the Borrower or the respective  Subsidiary),
     (y) the aggregate  principal  amount of the  Indebtedness  secured by such
     Liens does not increase  from that amount  outstanding  at the time of any
     such renewal or extension  (except for amounts required to pay accrued and
     unpaid interest on, and premiums with respect to, such Indebtedness at the
     time of such renewal or extension or reasonable fees and expenses incurred
     in connection  with such renewal or extension) and (z) any such renewal or
     extension  does not encumber any  additional  assets or  properties of the
     Borrower or any of its Subsidiaries;

          (iv) Permitted Encumbrances;

                                     -62-
<PAGE>

          (v) Liens created pursuant to the Security Documents;

          (vi) leases or  subleases  granted to other  Persons  not  materially
     interfering with the conduct of the business of the Borrower or any of its
     Subsidiaries;

          (vii) Liens (A) upon assets subject to Capitalized Lease Obligations,
     (B) created pursuant to purchase money mortgages or security  interests or
     (C) placed upon real estate,  equipment or machinery  used in the ordinary
     course of business of the Borrower or any of its  Subsidiaries at the time
     of acquisition thereof by the Borrower or any such Subsidiary or within 90
     days thereafter to secure Indebtedness incurred to pay all or a portion of
     the purchase  price thereof,  in each case to the extent such  Capitalized
     Lease Obligations or the other Indebtedness  secured by Liens, as the case
     may be, are permitted by Section  9.04(iii),  provided that (x) such Liens
     only  serve to secure  the  payment  of  Indebtedness  arising  under such
     Capitalized  Lease  Obligation,  such purchase money mortgages or security
     interests  or  incurred to finance the  acquisition  of such real  estate,
     equipment or machinery,  as the case may be, and (y) the Lien  encumbering
     the real estate, equipment, machinery or asset giving rise to the purchase
     money  mortgage  security  interest  or  the  asset  giving  rise  to  the
     Capitalized  Lease  Obligation,  as the case may be, does not encumber any
     other asset of the Borrower or any of the Borrower's Subsidiaries;

          (viii)  easements,  rights-of-way,  restrictions,  encroachments  and
     other similar charges or encumbrances,  and minor title  deficiencies,  in
     each case not securing  Indebtedness  and not materially  interfering with
     the conduct of the business of the Borrower or any of its Subsidiaries;

          (ix) Liens arising from precautionary UCC financing statement filings
     in respect of operating leases;

          (x) statutory and common law  landlords'  liens under leases to which
     the Borrower or any of its Subsidiaries is a party;

          (xi) Liens (other than Liens created or imposed under ERISA) incurred
     in  the  ordinary   course  of  business  in   connection   with  workers'
     compensation,  unemployment  insurance and other types of social security,
     or to secure the  performance of tenders,  statutory  obligations,  surety
     bonds, bids, government  contracts,  performance and return-of-money bonds
     and other similar obligations  incurred in the ordinary course of business
     (exclusive of obligations in respect of the payment for borrowed money);

          (xii)  Liens  arising out of  judgments  or awards  (including  Liens
     securing  Contingent  Obligations  on surety  and  appeal  bonds  relating
     thereto)  in  respect  of  which  the  Borrower  or any of the  Borrower's
     Subsidiaries  shall in good faith be  prosecuting an appeal or proceedings
     for review in respect of which there shall have been  secured a subsisting
     stay of execution  pending such appeal or  proceedings,  provided that the
     aggregate  amount  of  all  such  judgments  or  awards  does  not  exceed
     $25,000,000 at any time outstanding;

                                     -63-
<PAGE>

          (xiii) Liens on property or assets  acquired  pursuant to a Permitted
     Acquisition  effected  pursuant to Section  9.02(viii),  or on property or
     assets of a  Subsidiary  of the  Borrower  in  existence  at the time such
     property or assets are acquired  pursuant to such  Permitted  Acquisition,
     provided  that  (i) any  Indebtedness  that is  secured  by such  Liens is
     permitted  to exist under  Section  9.04(vii)  and (ii) such Liens are not
     incurred  in  connection   with  or  in  anticipation  of  such  Permitted
     Acquisition and do not attach to any other asset of the Borrower or any of
     its Subsidiaries;

          (xiv)  deposits  required to be made in connection  with any proposed
     acquisition to the extent that the aggregate  principal amount of all such
     deposits outstanding at any time shall not exceed $5,000,000;

          (xv) Liens on  property  or assets  acquired  pursuant to a Permitted
     Acquisition,  or on property or assets of a Subsidiary  of the Borrower in
     existence at the time such Subsidiary is acquired  pursuant to a Permitted
     Acquisition,  provided that (x) any  Indebtedness  that is secured by such
     Liens is permitted to exist under  Section  9.04(iii),  and (y) such Liens
     are not incurred in connection  with, or in  contemplation or anticipation
     of, such Permitted Acquisition and do not attach to any other asset of the
     Borrower or any of its Subsidiaries; and

          (xvi) Liens not  otherwise  permitted  by the  foregoing  clauses (i)
     through  (xv)  provided  that (i) the  aggregate  fair market value of all
     assets  subject to such Liens does not at any time exceed  $2,500,000  and
     (ii) the aggregate  principal amount of (x) all Indebtedness  plus (y) all
     other liabilities  secured by such Liens does not exceed $2,500,000 at any
     time outstanding.

          9.02  Consolidation,  Merger,  Purchase or Sale of Assets,  etc.  The
Borrower  will not,  and will not permit any of its  Subsidiaries  to, wind up,
liquidate  or dissolve its affairs or enter into any  transaction  of merger or
consolidation,  or convey,  sell, lease or otherwise dispose of (or agree to do
any of the  foregoing  at any future  time) all or any part of its  property or
assets, or enter into any sale-leaseback transactions, or purchase or otherwise
acquire (in one or a series of related  transactions)  any part of the property
or assets (other than purchases or other acquisitions of inventory,  materials,
equipment  and other assets in the ordinary  course of business) of any Person,
except that:

          (i) Capital  Expenditures by the Borrower and its Subsidiaries  shall
     be permitted to the extent not in violation of Section 9.07;

          (ii) the  Borrower and each of its  Subsidiaries  may in the ordinary
     course of business,  sell or otherwise  dispose of  inventory,  materials,
     equipment  and other  assets  which,  in the  reasonable  opinion  of such
     Person,  are  obsolete,  uneconomic  or no longer useful in the conduct of
     such Person's business;

          (iii)  Investments  may be made to the  extent  permitted  by Section
     9.05;

                                     -64-
<PAGE>

          (iv) the Borrower and each of its  Subsidiaries may lease (as lessee)
     real or personal  property in the ordinary  course of business (so long as
     any such lease  does not  create a  Capitalized  Lease  Obligation  unless
     permitted by Section 9.04(iii));

          (v) the Borrower and each of its  Subsidiaries  may purchase and sell
     inventory and supplies in the ordinary course of business;

          (vi) the Borrower and its Subsidiaries may liquidate Cash Equivalents
     in the ordinary course of business;

          (vii) each of the Borrower and its Subsidiaries may sell or otherwise
     dispose of other  assets  provided (i) no Default or Event of Default then
     exists or would exist immediately  after giving effect thereto,  (ii) each
     such sale or other  disposition is in an arm's-length  transaction and the
     Borrower or the respective  Subsidiary receives at least fair market value
     (as  determined in good faith by the Borrower or such  Subsidiary,  as the
     case may be),  (iii) at least 75% of the total  consideration  received by
     the Borrower or such Subsidiary is cash and is received at the time of the
     consummation of such sale or other disposition,  (iv) the aggregate amount
     of the  proceeds  received  from all assets  sold  pursuant to this clause
     (vii)  shall not  exceed  either  $20,000,000  in any  fiscal  year of the
     Borrower  or  $50,000,000  in the  aggregate,  (v) the Net  Sale  Proceeds
     therefrom are either applied as provided in Section  4.02(e) or reinvested
     in assets to the extent  permitted by Section 4.02(e) and (vi) in the case
     of any  such  sale or other  disposition  of less  than all of the  Equity
     Interests  of any  Subsidiary  of the  Borrower,  if after  giving  effect
     thereto  such  Subsidiary  (x)  becomes a  Non-Guarantor  Subsidiary,  the
     Borrower  shall be in compliance  with Section 9.17 after giving effect to
     such  sale or other  disposition  or (y)  becomes  a Person  in which  the
     Borrower or one of its  Subsidiaries  retains a minority equity  interest,
     such retained  equity  interest  shall be deemed to be an  Investment  and
     shall be required to be justified under Section 9.05(xvi);

          (viii)  any  Subsidiary  of the  Borrower  may  acquire  one or  more
     Hospital  Properties  located  in the United  States  and any Health  Care
     Assets  which are  complementary  to the  Borrower  and its  Subsidiaries'
     businesses,  or the Borrower or any Subsidiary of the Borrower may acquire
     Equity  Interests  in any  Person  (which as a result of such  acquisition
     becomes a Subsidiary of the Borrower)  all or  substantially  all of whose
     assets  consist of one or more Hospital  Properties  located in the United
     States and any Health Care Assets  located in the United  States which are
     complementary to the Borrower and its Subsidiaries'  businesses (each such
     acquisition,  a "Permitted Acquisition" and, collectively,  the "Permitted
     Acquisitions");  provided  that (w) no Default  or Event of  Default  then
     exists or would exist immediately after giving effect thereto,  (x) to the
     extent the purchase price for such Permitted  Acquisition is $2,500,000 or
     more, the Borrower shall deliver to the  Administrative  Agent a Permitted
     Acquisition  Compliance  Certificate,  no  later  than  the  date  of  the
     consummation of such Permitted Acquisition,  (y) at the time of, and after
     giving effect to, each such Permitted  Acquisition,  the Borrower shall be
     in compliance with Sections 9.08 and 9.09 on a Post-Test  Period Pro Forma
     Basis and shall be in  compliance  with Section 9.17 and (z) the aggregate
     purchase price  (including for this purpose any Acquisition  CapEx and any
     earn-outs in connection with such Permitted

                                     -65-
<PAGE>

     Acquisition  (taking the good faith  estimate of an Authorized  Officer of
     the Borrower as the amount which would become due in connection  with such
     earn-out)) for all such Permitted Acquisitions permitted under this clause
     (viii) (determined,  in each case, net of consideration in the form of, or
     paid with the proceeds  of,  contemporaneous  issuances of the  Borrower's
     common  stock (to the extent such  proceeds are not required to be applied
     pursuant to Section  4.02(c)) shall not exceed  $25,000,000  except to the
     extent that the  Borrower  certifies  to the  Administrative  Agent in the
     respective  Permitted  Acquisition  Certificate,  in  connection  with any
     Permitted  Acquisition  which would cause the  foregoing  limitation to be
     exceeded,  that such  excess  consideration  does not exceed the  Retained
     Excess  Cash Flow Amount as then in effect and which  shall  constitute  a
     utilization  thereof,  provided  further,  that clause (z) above shall not
     apply so long as at the time of the respective Permitted  Acquisition (and
     after giving effect thereto),  (I) the Consolidated  Senior Leverage Ratio
     determined on a Post-Test  Period Pro Forma Basis (and after giving effect
     to any Indebtedness incurred in connection with such Permitted Acquisition
     or to  finance  same) is less  than  2.50:1.00  and (II) the  Consolidated
     Debt/Total Capitalization Ratio determined on a Post-Test Period Pro Forma
     Basis (and after giving effect to any Indebtedness  incurred in connection
     with  such  Permitted  Acquisition  or  to  finance  same)  is  less  than
     0.50:1.00;

          (ix) the  Borrower  and its  Subsidiaries  may  transfer  assets to a
     Subsidiary  Guarantor,  and, so long as fair  market  value is received as
     consideration,  Subsidiaries  of the Borrower that are not Credit  Parties
     may transfer  assets to other  Subsidiaries  of the Borrower  that are not
     Credit Parties; and any Wholly-Owned  Subsidiary of the Borrower may merge
     with and into any Subsidiary Guarantor which is a Wholly-Owned Subsidiary,
     in each case so long as the respective  Subsidiary  Guarantor,  if any, is
     the surviving entity of any such merger;

          (x) so long as no Default or Event of  Default  then  exists or would
     exist  immediately  after  giving  effect  thereto,  the  Borrower and the
     Subsidiary Guarantors may transfer assets to Non-Guarantor Subsidiaries;

          (xi) each of the Borrower and its  Subsidiaries may (i) lease real or
     personal  property to  physicians or other  medical  professionals  in the
     ordinary course of business,  and (ii) otherwise grant leases or subleases
     of real or personal  property to other Persons not materially  interfering
     with  the  conduct  of  the  business  of  the  Borrower  or  any  of  its
     Subsidiaries;

          (xii) the Borrower  and its  Subsidiaries  may enter into  short-term
     leases at any time with respect to (i) equipment not being utilized by any
     Hospital  Property  at  such  time,  so long  as  such  equipment  was not
     purchased  by the Borrower or any of its  Subsidiaries  for the purpose of
     leasing such equipment,  and (ii) durable medical  equipment leased by the
     Borrower and its Subsidiaries to its patients;

          (xiii)  sale-leaseback  transactions shall be permitted to the extent
     permitted by Section 9.04(iii);

                                     -66-
<PAGE>

          (xiv) the Borrower and its Subsidiaries may pre-pay rent under leases
     and may purchase  pre-paid  insurance  and  services,  in each case in the
     ordinary course of business;

          (xv) so long as the aggregate  fair market value of all Real Property
     disposed  of  pursuant  to this  clause (xv) does not, at the time of (and
     giving effect to) any such  disposition,  exceed 2% of the Total Assets of
     the Borrower and its Subsidiaries, the Borrower and its Subsidiaries shall
     be  permitted  to  make  dispositions  of  substantially  unimproved  Real
     Property to, or ground lease  unimproved Real Property to, Persons who are
     developers,   for  sale  or  lease   consideration   pursuant  to  overall
     arrangements  deemed  by  management  of  the  Borrower  to  be  fair  and
     reasonable,  for  the  purpose  of the  respective  transferee  or  lessee
     building  on such Real  Property  (A) a  medical  office  building,  (B) a
     building to contain a  healthcare  business or (C) a parking  garage to be
     used in connection with a medical office building or a building containing
     or to contain a healthcare business, and any such transaction may include,
     if a ground lease, a  subordination  of the fee ownership  interest of the
     lessor  to the  lien of the  lender  for  such  developer  (valued  at the
     aggregate fair market value of the Real Property sold or leased); and

          (xvi) the  Borrower  and/or its  Subsidiaries  may,  in the  ordinary
     course  of  business  and  consistent  with  past  practices  prior to the
     Effective  Date,  sell or otherwise  transfer  receivables  owing to it to
     third  parties for the  purposes of  collection  of  outstanding  balances
     thereunder.

To the extent the Required  Lenders or all of the Lenders,  as the case may be,
waive the  provisions  of this  Section  9.02 with  respect  to the sale of any
Collateral  (other  than  the sale of any  Collateral  to the  Borrower  or any
Subsidiary  Guarantor),  or any Collateral is sold or otherwise  disposed of as
permitted by this Section 9.02 (other than any sale or any  disposition  to the
Borrower  or any  Subsidiary  Guarantor),  such  Collateral  shall  be  sold or
otherwise  disposed  of free and clear of the  Liens  created  by the  Security
Documents,  and the  Administrative  Agent and the  Collateral  Agent  shall be
authorized  to take any  actions  deemed  appropriate  in order  to  effect  or
evidence the  foregoing.  In addition,  subject to  continued  compliance  with
Section  9.17,  upon the  occurrence of any sale of all or less than all of the
Equity Interests of any Subsidiary Guarantor consummated in accordance with the
provisions of Section 9.02(vii),  upon the receipt by the Administrative  Agent
and the Collateral  Agent of (i) a certificate of an Authorized  Officer of the
Borrower  certifying  that  (x)  such  Subsidiary  is to be  released  from the
Subsidiaries  Guaranty and the Security  Documents to which it is a party as in
accordance  with  provisions  hereof and thereof and (y) no Default or Event of
Default exists at the time of, or would exist  immediately  after giving effect
to,  such   release  and  (ii)   evidence   reasonably   satisfactory   to  the
Administrative Agent and the Collateral Agent that such Subsidiary has been (or
will contemporaneously with the release described below, will be) released from
its  guarantee  (if  any)  of  any  and  all  Indebtedness   under  the  Senior
Subordinated Notes and, after the issuance thereof, the Permitted  Subordinated
Notes, such Subsidiary shall be released from the Subsidiaries Guaranty and the
Security Documents to which it is party, and the  Administrative  Agent and the
Collateral  Agent shall be authorized to take any action deemed  appropriate in
order to effect or evidence the foregoing.

                                     -67-
<PAGE>

          9.03 Dividends. The Borrower will not, and will not permit any of its
Subsidiaries  to,  authorize,  declare or pay any Dividends with respect to the
Borrower or any of its Subsidiaries, except that:

          (i) any  Subsidiary of the Borrower may pay Dividends to the Borrower
     or to a Wholly-Owned Subsidiary of the Borrower;

          (ii) the Borrower may redeem or  repurchase  the  Borrower's  capital
     stock from present or former  officers,  employees and directors (or their
     trusts or estates) of the  Borrower  or any of its  Subsidiaries  upon the
     death,  permanent  disability,  retirement or termination of employment of
     any such Person or otherwise in accordance with any stock option plan, any
     employee stock  ownership plan or any  Shareholders'  Agreement,  provided
     that (x) no Default,  and no Event of Default,  exists under Section 10.01
     or 10.05 or would arise therefrom and (y) the aggregate amount of all cash
     paid in respect  of all such  shares so  redeemed  or  repurchased  in any
     calendar  year  does not  exceed  the sum of (A)  $1,000,000  plus (B) all
     amounts  obtained  by the  Borrower  from  the  sale of such  stock  (or a
     substantially  concurrent  issuance of the  Borrower's  capital  stock) to
     other present or former officers, employees and directors;

          (iii) so long as there shall exist no Default  under Section 10.01 or
     Event of Default  (both  before  and after  giving  effect to the  payment
     thereof) any non-Wholly-Owned Subsidiary of the Borrower may pay Dividends
     to its  shareholders  or  partners  generally  in the form of  cash,  Cash
     Equivalents,  common  stock and  preferred  stock  permitted  to be issued
     pursuant to Section  9.12(b),  so long as the  Borrower or its  respective
     Subsidiary  which owns the equity  interest or interests in the Subsidiary
     paying such Dividends  receives at least its  proportionate  share thereof
     (based upon its relative  holdings of equity  interests in the  Subsidiary
     paying such Dividends and taking into account the relative preferences, if
     any, of the various classes of equity interests in such Subsidiary);

          (iv) the  Borrower may purchase its common stock at fair market value
     from  officers,  employees  and  directors  of the  Borrower or any of its
     Subsidiaries  to the  extent  necessary  to cover  the  exercise  price of
     options and income tax withholding,  provided that (x) no Default or Event
     of Default  is then in  existence  or would  arise  therefrom  and (y) the
     aggregate amount of cash paid in respect of all such shares so repurchased
     in any calendar year does not exceed $500,000;

          (v) the Borrower may make cash  payments to officers,  employees  and
     directors of the Borrower or any of its  Subsidiaries  in respect of stock
     appreciation rights issued pursuant to a compensation plan approved by the
     board  of  directors  of the  Borrower  or by the  compensation  committee
     thereof,  provided  that (x) no  Default  or Event of  Default  is then in
     existence or would arise  therefrom and (y) the  aggregate  amount of cash
     paid  pursuant  to this  clause (v) in any  calendar  year does not exceed
     $500,000;

          (vi) the Borrower may repurchase equity interests in non-Wholly-Owned
     Subsidiaries and Health Care Joint Ventures,  provided that (x) no Default
     or Event of Default

                                     -68-
<PAGE>

     is then in existence or would arise therefrom and (y) the aggregate amount
     of cash paid  pursuant to this clause (vi) in any  calendar  year does not
     exceed $500,000;

          (vii) the Borrower may pay regularly  accruing Dividends with respect
     to PIK Preferred  Stock (x) prior to January 1, 2008,  solely  through the
     issuance of additional shares of PIK Preferred Stock (and not in cash) and
     (y)  thereafter,  in cash so long as no Default  or Event of Default  then
     exists or would  arise  therefrom,  in the case of each of clauses (x) and
     (y) pursuant to the  Certificate of  Designations,  Preferences and Rights
     relating thereto and as in effect on the Effective Date; and

          (viii) so long as no Default or Event of Default is then in existence
     or  would  arise  therefrom,  the  Borrower  may pay  cash  Dividends  not
     otherwise permitted in clauses (i) through (vii) above in an amount not to
     exceed $750,000 per calendar year.

          9.04 Indebtedness.  The Borrower will not, and will not permit any of
its  Subsidiaries to, contract,  create,  incur,  assume or suffer to exist any
Indebtedness, except:

          (i)  Indebtedness  incurred  pursuant to this Agreement and the other
     Credit Documents;

          (ii)  Existing  Indebtedness  to the  extent  the same is  listed  on
     Schedule VIII,  but no  refinancings  or renewals  thereof other than such
     refinancings  and renewals which are on terms (taken in the aggregate) not
     materially  less favorable to the Borrower and its  Subsidiaries  than the
     terms of the Indebtedness being refinanced or renewed (it being understood
     that increases in interest rates and other pricing provisions with respect
     to such Indebtedness which reflect market conditions  existing at the time
     of the refinancing or renewal of such Indebtedness shall not be considered
     materially  less favorable to the Borrower or the  respective  Subsidiary)
     and  which  do not  increase  the  outstanding  principal  amount  of such
     Indebtedness  at the  time of such  refinancing  or  renewal  (except  for
     amounts  required to pay accrued and unpaid  interest on and premiums with
     respect to, such  Indebtedness at the time of such  refinancing or renewal
     or  reasonable  fees  and  expenses   incurred  in  connection  with  such
     refinancing or renewal);

          (iii)   Indebtedness  of  the  Borrower  and  its   Subsidiaries  (v)
     consisting  of  Capitalized  Lease  Obligations  to the  extent  permitted
     pursuant  to Section  9.07,  (w) under  sale-leaseback  transactions,  (x)
     incurred  pursuant  to  purchase  money  mortgages,  (y)  subject to Liens
     permitted  under  Section   9.01(vii)(C)  or,  to  the  extent  that  such
     Indebtedness  does not  constitute  Indebtedness  of a type  described  in
     clause  (i),  (ii),  (iii),  (iv),  (v)  or  (vi)  of  the  definition  of
     Indebtedness,  Liens  permitted  under  Section  9.01(xi)  or (xii) or (z)
     assumed at the time of a  Permitted  Acquisition,  provided  that (I) such
     Indebtedness  was not incurred in connection  with, or in  anticipation or
     contemplation  of, such Permitted  Acquisition and (II) such  Indebtedness
     does not  constitute  debt for borrowed  money,  it being  understood  and
     agreed that Capitalized Lease Obligations and purchase money  Indebtedness
     shall not  constitute  debt for borrowed money for purposes of this clause
     (z);  provided  that in no event shall the aggregate  principal  amount of
     Capitalized  Lease

                                     -69-
<PAGE>

     Obligations,  sale-leaseback transactions and other Indebtedness permitted
     by this clause (iii) exceed $25,000,000 at any time outstanding;

          (iv) intercompany  Indebtedness among the Borrower and the Subsidiary
     Guarantors to the extent permitted by Section 9.05(iii);

          (v) (A)  Indebtedness  of  Non-Guarantor  Subsidiaries  owing  to the
     Borrower  and the  Subsidiary  Guarantors  to the extent  permitted  under
     Section  9.05(iv),  (B)  Indebtedness  of the Borrower and the  Subsidiary
     Guarantors  owing to  Non-Guarantor  Subsidiaries to the extent  permitted
     under  Section  9.05(v)  and  (C)  intercompany   Indebtedness  among  the
     Non-Guarantor Subsidiaries to the extent permitted by Section 9.05(vi);

          (vi) Indebtedness under Other Hedging Agreements providing protection
     against  fluctuations in currency values in connection with the Borrower's
     or any Credit Party's  ordinary  course of business  operations so long as
     management of the Borrower or such Credit  Party,  as the case may be, has
     determined  in good faith  that the  entering  into of such Other  Hedging
     Agreements are bona fide hedging activities;

          (vii) unsecured senior subordinated Indebtedness of the Borrower (and
     unsecured  senior  subordinated   guarantees  thereof  by  any  Subsidiary
     Guarantor  for so long as such  Person  remains  a  Subsidiary  Guarantor)
     incurred  pursuant to the Senior  Subordinated  Notes and the other Senior
     Subordinated  Note  Documents,  in an  aggregate  principal  amount not to
     exceed $300,000,000 less the amount of any repayments of principal thereof
     after the Effective Date;

          (viii) amounts  constituting  deferred  purchase price or earnouts in
     connection with Permitted Acquisitions; provided that the aggregate amount
     of all  Indebtedness  permitted  under this clause (vii)  (taking the good
     faith  estimate  of an  Authorized  Officer of the  Borrower as the amount
     which  would  become  due  in  connection   therewith)  shall  not  exceed
     $20,000,000 at any time outstanding;

          (ix) amounts constituting deferred payment obligations resulting from
     adjudications or settlements of any claims or litigation;

          (x) Indebtedness  owing to Subsidiaries of the Borrower in connection
     with the cash management program of the Borrower;

          (xi)  Contingent  Obligations  of the Borrower  and its  Subsidiaries
     constituting  guarantees by the Borrower of Indebtedness of any Subsidiary
     Guarantor (for so long as such Person  remains a Subsidiary  Guarantor) or
     guarantees by any of the Subsidiary  Guarantor (for so long as such Person
     remains a Subsidiary  Guarantor) of Indebtedness of any of the Borrower or
     any  other  Subsidiary  Guarantor  (for so long as such  Person  remains a
     Subsidiary  Guarantor),  but in each  case  only to the  extent  that  the
     Indebtedness being guaranteed is otherwise permitted by this Section 9.04,
     provided that this clause (xi) shall not permit any Contingent Obligations
     in respect of Senior  Subordinated  Notes

                                     -70-
<PAGE>

     or Permitted Subordinated Notes (with any guarantees thereof by Subsidiary
     Guarantors  to be permitted  only in  accordance  with the  provisions  of
     Section 9.04(vii) or (xv), as the case may be);

          (xii)  Contingent  Obligations  of the  Borrower  or  any  Subsidiary
     Guarantor  (for so long as such  Person  remains a  Subsidiary  Guarantor)
     constituting  guarantees of (i)  obligations of Health Care Joint Ventures
     under their  operating  leases and (ii)  Indebtedness of Health Care Joint
     Ventures in an aggregate  principal  amount for all such  Indebtedness not
     exceeding $5,000,000;

          (xiii)  Indebtedness of the Borrower  consisting of deferred purchase
     price for  redemptions or  repurchases  of the  Borrower's  capital stock,
     provided that the Borrower's payment obligations thereunder are limited to
     the extent necessary to be in compliance with Section 9.03(ii);

          (xiv) Indebtedness under Interest Rate Protection  Agreements entered
     into with respect to other Indebtedness  permitted under this Section 9.04
     so long as the entering into of such Interest Rate  Protection  Agreements
     are bona fide hedging activities and are not for speculative purposes;

          (xv)  unsecured  subordinated   Indebtedness  of  the  Borrower  (and
     unsecured subordinated guarantees thereof by any Subsidiary Guarantor (for
     so long as such Person  remains a Subsidiary  Guarantor))  incurred  under
     Permitted  Subordinated  Notes and the other Permitted  Subordinated  Note
     Documents in an aggregate  principal amount not to exceed  $100,000,000 so
     long as (A) at least five Business Days prior to the issuance thereof, the
     Borrower shall have delivered to the Administrative  Agent and each Lender
     substantially  final drafts of the Permitted  Subordinated  Note Documents
     and with any  changes  thereto  made after the  initial  delivery  of such
     Permitted   Subordinated   Note   Documents   to  be   delivered   to  the
     Administrative  Agent at least two Business  Days prior to the issuance of
     any Permitted  Subordinated  Notes, (B) the final maturity date thereof is
     no shorter  than six months  following  the latest  Incremental  Term Loan
     Maturity  Date  in  effect  at the  time  of the  incurrence  of any  such
     Permitted Subordinated Notes for then outstanding  Incremental Term Loans,
     (C) there are no scheduled  amortization,  mandatory redemption or sinking
     fund  provisions  or  similar  provisions  prior  to the  maturity  of the
     Permitted  Subordinated Notes (other than provisions requiring an offer to
     purchase Permitted  Subordinated Notes to be made upon the occurrence of a
     change  in  control  or asset  sale on terms  not more  onerous  (from the
     perspective  of  the  Borrower)   than  those   contained  in  the  Senior
     Subordinated   Note   Indenture  as   originally   in  effect),   (D)  the
     subordination  provisions  applicable to the Permitted  Subordinated Notes
     shall  be  substantially  identical  to  those  contained  in  the  Senior
     Subordinated  Notes  (although at the option of the  Borrower,  the Senior
     Subordinated  Notes may be included as "Senior Debt",  but not "Designated
     Senior Debt", for purposes of the  subordination  provisions  contained in
     any  issue  of  Permitted  Subordinated  Notes),  (E) the  interest  rates
     (calculated including any original issued discount in respect thereof) and
     related premiums  applicable to any issue of Permitted  Subordinated Notes
     shall be based on then  market  interest  rates,  (F) all other  terms and
     conditions  of each issue of Permitted  Subordinated  Notes shall,  in

                                     -71-
<PAGE>

     the  aggregate,  be no less  favorable,  in any material  respect,  to the
     Borrower (and any  Subsidiary  Guarantors)  and the Lenders than the terms
     contained in the Senior Subordinated Notes and related Senior Subordinated
     Note  Documents,  (G) no Default or Event of Default  then exists or would
     result  from  the  issuance  thereof,  (H)  prior to the  issuance  of any
     Permitted  Subordinated  Notes,  the Borrower  shall have delivered to the
     Administrative  Agent  and  each  of  the  Lenders  a  certificate  of the
     Borrower's   Chief   Financial   Officer   certifying   (and  showing  the
     calculations  therefor in  reasonable  detail)  that the  Borrower and its
     Subsidiaries  shall  be in  compliance  with  Sections  9.08 and 9.09 on a
     Post-Test Period Pro Forma Basis on the date of the respective issuance of
     the Permitted  Subordinated  Notes and after giving effect thereto and the
     application  of the  proceeds  thereof  on such  date and (I) prior to the
     issuance of any Permitted  Subordinated  Notes, the Borrower shall deliver
     evidence satisfactory to the Administrative Agent, including a certificate
     of the  Chief  Financial  Officer  of  the  Borrower  (accompanied  by any
     required  financial  calculations in reasonable  detail) and an opinion of
     counsel for the Borrower, that the issuance of such Permitted Subordinated
     Notes is  permitted  by the terms of the  Senior  Subordinated  Notes (and
     related  Senior  Subordinated  Note  Documents)  and any  other  issue  of
     Permitted  Subordinated  Notes (and related  Permitted  Subordinated  Note
     Documents) then outstanding;

          (xvi)   Contingent   Obligations  of  the  Borrower  or  any  of  its
     Subsidiaries arising from Physician Support Obligations to the extent same
     are permitted under Section 9.05(xiv); and

          (xvii)  Indebtedness not otherwise permitted by the foregoing clauses
     of this  Section  9.04 not to exceed  $5,000,000  in  aggregate  principal
     amount at any time outstanding.

          9.05 Advances, Investments and Loans. The Borrower will not, and will
not permit any of its  Subsidiaries  to, directly or indirectly,  lend money or
credit or make  advances  to any  Person,  or  purchase  or acquire  any stock,
obligations  or  securities  of, or any other  interest in, or make any capital
contribution  to, any other  Person,  or purchase or own a futures  contract or
otherwise  become  liable  for  the  purchase  or  sale of  currency  or  other
commodities at a future date in the nature of a futures  contract,  or hold any
cash  or  Cash  Equivalents   (each  of  the  foregoing  an  "Investment"  and,
collectively, "Investments"), except that the following shall be permitted:

          (i) the Borrower and its  Subsidiaries  may acquire and hold accounts
     receivables  and  prepaid  expenses  owing to any of them,  if  created or
     acquired in the ordinary  course of business and payable or  dischargeable
     in accordance with customary  terms, and the Borrower and its Subsidiaries
     may  own  Investments  received  in  connection  with  the  bankruptcy  or
     reorganization  of  suppliers,  customers and others with whom it has done
     business or against  whom it has claims and in  settlement  of  delinquent
     obligations of, and other disputes with,  customers,  suppliers and others
     with whom it has done business or against whom it has claims, in each case
     arising in the ordinary course of business;

          (ii) the Borrower and its  Subsidiaries may acquire and hold cash and
     Cash Equivalents;

                                     -72-
<PAGE>

          (iii)  the  Borrower   and  the   Subsidiary   Guarantors   may  make
     intercompany  loans and advances to one another,  provided that (i) in the
     case of each  intercompany  loan evidenced by a note, each such note shall
     be in the form of Exhibit M and shall be pledged  (and  delivered)  to the
     Collateral  Agent  pursuant to (and to the extent  required by) the Pledge
     Agreement  and (ii) in the event any such  Subsidiary  Guarantor  that has
     made such intercompany loans or advances and/or to which such intercompany
     loans have been made ceases to constitute  same, such  intercompany  loans
     and advances  shall only be permitted to the extent  allowed under Section
     9.05(iv), (v) or (vi), as applicable;

          (iv) the Borrower or any Subsidiary Guarantor may make unsubordinated
     loans and advances to  Non-Guarantor  Subsidiaries,  provided  that (i) no
     Default or Event of Default then exists or would exist  immediately  after
     giving  effect  thereto and (ii) in the case of any such loans or advances
     evidenced by a note,  each such note shall be in the form of Exhibit M and
     shall be pledged (and delivered) to the Collateral  Agent pursuant to (and
     to the extent required by) the Pledge Agreement;

          (v)  Non-Guarantor  Subsidiaries  may make loans and  advances to the
     Borrower or any Subsidiary  Guarantor,  provided that such loan or advance
     (other than any such loans or advances  represented  by  short-term,  open
     account working capital notes entered into the ordinary course of business
     for cash management  purposes and consistent with past practices) shall be
     expressly  subordinated to the payment of the Obligations pursuant to duly
     executed  and   delivered   (by  the   respective   borrower  and  lender)
     Subordination Agreement in the form of Exhibit N;

          (vi)  Non-Guarantor  Subsidiaries  may make loans and advances to one
     another;

          (vii) the Borrower and its  Subsidiaries  may make loans and advances
     in the ordinary course of business to their  respective  employees so long
     as  the  aggregate  principal  amount  thereof  at  any  time  outstanding
     (determined  without regard to any write-downs or write-offs of such loans
     and advances) shall not exceed $500,000;

          (viii) the Borrower and its Subsidiaries may enter into Other Hedging
     Agreements to the extent permitted by Section 9.04(vi);

          (ix)  the  Borrower  and  its   Subsidiaries   may  receive  non-cash
     consideration  in  connection  with any asset  sale  permitted  by Section
     9.02(vii) but only to the extent set forth in such Section 9.02(vii);

          (x) Permitted  Acquisitions  may be effected in  accordance  with the
     relevant requirements of Section 9.02(viii);

          (xi) the Borrower and its Subsidiaries may hold Existing Investments,
     provided  that any  further  Investments  with  respect  thereto  shall be
     independently justified under another clause of this Section 9.05;

          (xii)  the   Borrower   and  its   Subsidiaries   may  make   capital
     contributions in and to their respective  Subsidiaries that are Subsidiary
     Guarantors  (which  are  Wholly-Owned

                                     -73-
<PAGE>

     Subsidiaries)  to the extent in existence on the Effective Date or created
     thereafter pursuant to Section 9.14;

          (xiii) so long as no Default or Event of Default then exists or would
     exist  immediately  after  giving  effect  thereto,  the  Borrower and the
     Subsidiary   Guarantors   may  make   Investments   consisting  of  Equity
     Investments in Non-Guarantor Subsidiaries;

          (xiv) Investments  constituting  Physician Support Obligations in the
     aggregate  amount  not  to  exceed  at any  time  outstanding  the  sum of
     $10,000,000 plus the Additional  Physician Support  Obligations  Amount as
     then in effect;

          (xv) the Borrower may enter into Interest Rate Protection  Agreements
     to the extent permitted under Section 9.04(xiv); and

          (xvi)  the  Borrower  and  its   Subsidiaries   may  make  additional
     Investments  not  otherwise  permitted  by the  foregoing  clauses of this
     Section 9.05 not to exceed an aggregate amount  (determined using the book
     value of such  Investments  when same are made) equal to $10,000,000  plus
     the Additional Investment Amount as then in effect.

          9.06 Transactions with Affiliates. The Borrower will not, and will
not permit any of its Subsidiaries to, enter into any transaction or series of
related transactions, whether or not in the ordinary course of business, with
any Affiliate of the Borrower or any of its Subsidiaries, other than on terms
and conditions substantially as favorable to the Borrower or such Subsidiary as
would reasonably be obtained by the Borrower or such Subsidiary at that time in
a comparable arm's-length transaction with a Person other than an Affiliate,
except that notwithstanding the foregoing:

          (i) Dividends may be paid to the extent provided in Section 9.03;

          (ii)  Investments may be made and other  transactions  may be entered
     into by and among the  Borrower  and the  Borrower's  Subsidiaries  to the
     extent permitted by Section 9.02, 9.04 or 9.05;

          (iii)  customary  fees may be paid to  non-officer  directors  of the
     Borrower or any of its Subsidiaries;

          (iv) Subsidiaries of the Borrower may pay management and similar fees
     to the Borrower or any Wholly-Owned Subsidiary of the Borrower;

          (v)  transactions  may be entered  into  between the Borrower and any
     Subsidiary Guarantor or among any Subsidiary  Guarantors to the extent not
     otherwise permitted in clauses (i) through (iv) above; and

          (vi)  Shareholders may enter into  transactions  with the Borrower to
     purchase  the  capital  stock  of the  Borrower  in  accordance  with  the
     Shareholders' Agreements.

                                     -74-
<PAGE>

          9.07 Capital  Expenditures.  (a) The Borrower  will not, and will not
permit any of its  Subsidiaries  to,  make any Capital  Expenditures  except in
accordance with this Section 9.07.

          (b) Notwithstanding  anything to the contrary contained in clause (a)
above, during any period set forth below, the Borrower and its Subsidiaries may
make Capital  Expenditures  in  connection  with their  operations  (but not in
connection with any Specified Construction  Projects,  except to the extent the
amount  thereof is justified by the Borrower as described in the  parenthetical
contained in Section  9.07(d)) so long as the aggregate  amount of such Capital
Expenditures  made (to the extent  made) under this  Section  9.07(b)  does not
exceed in any such  period set forth  below the sum of (i) the amount set forth
opposite such period below plus (ii) the Additional Capital Expenditures Amount
for such period:

              Period                                               Amount
              ------                                               ------
Effective Date through June 30, 2002                            $30,000,000

July 1, 2002 through June 30, 2003                              $30,000,000

July 1, 2003 through June 30, 2004                              $30,000,000

July 1, 2004 through June 30, 2005                              $30,000,000

July 1, 2005 through the Revolving Loan Maturity Date           $30,000,000

Each fiscal year of the Borrower ended after June 30, 2006      $30,000,000

          (c) Notwithstanding anything to the contrary contained in clauses (a)
and (b) above and clause (d) below, to the extent that the aggregate  amount of
Capital  Expenditures  made by the  Borrower and its  Subsidiaries  pursuant to
Section  9.07(b) in any fiscal year of the Borrower  (beginning with the fiscal
year  ended June 30,  2002) are less than the  amount of  Capital  Expenditures
permitted to be made by the Borrower  and its  Subsidiaries  during such fiscal
year pursuant to such Section 9.07(b), the Borrower may elect (by notifying the
Administrative Agent in writing within 90 days following the end of such fiscal
year to either (i) carry forward (A) 50% of the amount of Capital  Expenditures
permitted  to be made by the  Borrower  and its  Subsidiaries  pursuant to such
Section  9.07(b)  during  such fiscal year but not made during such fiscal year
(with 100% of the amount of the Capital  Expenditures  permitted  to be made by
the  Borrower  and its  Subsidiaries  pursuant to Section  9.07(b)  during such
fiscal year but not made during  such fiscal year being  herein  referred to as
the "Unused Capital Expenditures Amount") to make Capital Expenditures (but not
in connection with any Specified  Construction  Projects,  except to the extent
the  amount   thereof  is  justified  by  the  Borrower  as  described  in  the
parenthetical  appearing  in Section  9.07(d))  in the  immediately  succeeding
fiscal year but in no fiscal year thereafter  (after the full amount of Capital
Expenditures  otherwise  permitted  to be made  under  Section  9.07(b) in such
succeeding  fiscal year,  without  regard to the provisions of this clause (c),
have been made),  and (B) the remaining 50% of the Unused Capital  Expenditures
Amount  to  make  Capital   Expenditures   in  connection  with  any  Specified
Construction  Project  (to the extent the amount  thereof is  justified  by the
Borrower as described in the parenthetical appearing in Section 9.07(d)) in any
fiscal  year  thereafter,  or (ii) carry  forward

                                     -75-
<PAGE>

100% of the Unused Capital  Expenditures Amount to make Capital Expenditures in
connsection  with  Specified  Construction  Projects  (to the  extent the amount
thereof  is  justified  by the  Borrower  as  described  in  the  parenthetical
appearing in Section 9.07(d)) in any fiscal year thereafter.

          (d) Notwithstanding anything to the contrary contained in clauses (a)
and (b) above,  the Borrower  and the  Subsidiary  Guarantors  may make Capital
Expenditures  to  finance  projects  which at the time the  respective  Capital
Expenditures are made constitute Specified Construction Projects so long as (i)
the aggregate amount of all such Capital  Expenditures made after the Effective
Date solely pursuant to this clause (d) does not exceed $75,000,000 (plus up to
an additional  $25,000,000 of such Capital Expenditures,  so long as the excess
Capital  Expenditures  contemplated by this  parenthetical are permitted within
the  limitations set forth pursuant to preceding  Sections  9.07(b) and (c), in
which case such  Capital  Expenditures  shall be counted  for  purposes of this
parenthetical  and shall be deemed to constitute a utilization of the permitted
Capital  Expenditure  amounts set forth in said Sections 9.07(b) and/or (c), as
the case may be) and (ii) on the date of the making of any Capital  Expenditure
pursuant to this clause (d), the  Consolidated  Senior  Leverage  Ratio for the
then most recently ended Test Period shall be less than 2.50:1.00. The Borrower
and  the  Subsidiary  Guarantors  shall  also  be  permitted  to  make  Capital
Expenditures in connection with the purchase of Real Property which at the time
of such purchase the Borrower in good faith expects to designate as a Specified
Construction  Project within fifteen  months  following such purchase  provided
that (i) the aggregate amount of all such Capital Expenditures made pursuant to
this  sentence  do not  exceed  $10,000,000  (net of Capital  Expenditures  for
projects  that have  theretofore  been  designated  as  Specified  Construction
Projects under the definition  thereof,  without giving effect (solely for this
purpose) to the last sentence  thereof) and (ii) such Capital  Expenditures are
permitted  within  the  limitations  set  forth  in the  immediately  preceding
sentence,  and shall be deemed to  constitute a  utilization  of the  permitted
Capital Expenditure amounts set forth in such preceding sentence.

          (e) In  addition to the Capital  Expenditures  permitted  pursuant to
preceding  clauses (b), (c) and (d), the Borrower and its Subsidiaries may make
additional  Capital  Expenditures  (but not in  connection  with any  Specified
Construction  Projects,  except  in the case of  following  clause  (ii) to the
extent  proceeds of a Recovery  Event with respect to a Specified  Construction
Project are reinvested in the same Specified  Construction Project) as follows:
(i) Capital Expenditures consisting of the reinvestment of Net Sale Proceeds of
asset sales  (exclusive of asset sales of the types  described in clause (A) of
Section  4.02(e)) not required to be applied to prepay the Loans and/or  reduce
Commitments  pursuant to Section  4.02(e) as a result of clauses (B) and/or (C)
contained  therein,  (ii) the  reinvestment  of proceeds of Recovery Events not
required to be applied to prepay the Loans and/or reduce  Commitments  pursuant
to Section 4.02(g),  and (iii) Capital Expenditures made on any date so long as
same do not  exceed  the  Retained  Excess  Cash Flow  Amount as then in effect
(before giving effect to the respective Capital  Expenditures),  and so long as
the Borrower certifies to the Administrative  Agent that the respective Capital
Expenditures  constitute a utilization of (and shall reduce by the amount spent
pursuant to this  clause  (iii) on the  respective  Capital  Expenditures)  the
Retained Excess Cash Flow Amount.

                                     -76-
<PAGE>

          (f) In  addition to the Capital  Expenditures  permitted  pursuant to
preceding  clauses (b),  (c),  (d) and (e),  the  Borrower  and the  Subsidiary
Guarantors  may  make  additional  Capital   Expenditures  in  connection  with
Specified  Construction  Projects to the extent such Capital  Expenditures  are
financed with the proceeds of issuances of the common stock of the Borrower not
required to be applied pursuant to Section  4.02(c),  provided that at the time
of each such issuance,  the Borrower certifies to the  Administrative  Agent in
reasonable  detail  the  Capital  Expenditures  to be made  with  the  proceeds
thereof.

          9.08 Consolidated  Interest Coverage Ratio. Solely as of the last day
of each  Test  period  set  forth  below,  the  Borrower  will not  permit  the
Consolidated  Interest  Coverage  Ratio to be less  than the  ratio  set  forth
opposite the last day of such Test Period below:

              Test Period Ending On                               Ratio
              ---------------------                               -----
              September 30, 2001                                2.00:1.00
              December 31, 2001                                 2.00:1.00
              March 31, 2002                                    2.15:1.00
              June 30, 2002                                     2.15:1.00
              September 30, 2002                                2.30:1.00
              December 31, 2002                                 2.30:1.00
              March 31, 2003                                    2.45:1.00
              June 30, 2003                                     2.45:1.00
              September 30, 2003                                2.60:1.00
              December 31, 2003                                 2.60:1.00
              March 31, 2004                                    2.75:1.00
              June 30, 2004                                     2.75:1.00
              September 30, 2004                                2.90:1.00
              December 31, 2004                                 2.90:1.00
              March 31, 2005 and thereafter                     3.05:1.00

Notwithstanding  anything to the contrary  contained in this Section 9.08,  all
calculations  of compliance with this Section 9.08 shall be made on a Pro Forma
Basis.

          9.09 Consolidated  Leverage Ratio.  Solely as of the last day of each
Test period set forth  below,  the  Borrower  will not permit the  Consolidated
Leverage  Ratio to be greater than the ratio set forth opposite the last day of
such Test Period below:

              Test Period Ending On                              Ratio
              ---------------------                              -----
              September 30, 2001                                4.75:1.00
              December 31, 2001                                 4.75:1.00
              March 31, 2002                                    4.75:1.00
              June 30, 2002                                     4.75:1.00
              September 30, 2002                                4.50:1.00
              December 31, 2002                                 4.50:1.00
              March 31, 2003                                    4.25:1.00
              June 30, 2003                                     4.25:1.00

                                     -77-
<PAGE>
              Test Period Ending On                              Ratio
              ---------------------                              -----
              September 30, 2003                                4.00:1.00
              December 31, 2003                                 4.00:1.00
              March 31, 2004                                    3.75:1.00
              June 30, 2004                                     3.75:1.00
              September 30, 2004                                3.50:1.00
              December 31, 2004                                 3.50:1.00
              March 31, 2005                                    3.25:1.00
              June 30, 2005                                     3.25:1.00
              September 30, 2005 and thereafter                 3.00:1.00

Notwithstanding  anything to the contrary  contained in this Section 9.09,  all
calculations  of compliance with this Section 9.09 shall be made on a Pro Forma
Basis.

          9.10 Limitation on Payments of Certain Indebtedness; Modifications of
Certain  Indebtedness and PIK Preferred Stock;  Modifications of Certificate of
Incorporation,  By-Laws and Certain Agreements; etc. (a) The Borrower will not,
and will not permit any of its Subsidiaries to:

          (i) make (or give any notice in respect of) any voluntary or optional
     payment  or  prepayment  on or  redemption  or  acquisition  for value of,
     including, in each case without limitation,  by way of depositing with the
     trustee  with  respect  thereto  money or  securities  before  due for the
     purpose of paying when due,  any Senior  Subordinated  Notes or, after the
     issuance thereof by the Borrower, any Permitted Subordinated Notes;

          (ii) amend or modify, or permit the amendment or modification of, any
     provision of any Existing  Indebtedness  or any PIK Preferred  Stock other
     than  amendments  not  adverse  to the  interests  of the  Lenders  in any
     material respect provided that a copy of such amendment or modification is
     delivered to the  Administrative  Agent at least 10 Business Days prior to
     the execution thereof by the Borrower or the relevant Subsidiary;

          (iii) amend or modify, or permit the amendment or modification of any
     provision of, any Senior Subordinated Note Document or, after the issuance
     of any Permitted  Subordinated  Notes, any related Permitted  Subordinated
     Note  Document  other  than (x) any such  modification  which  releases  a
     Subsidiary of the Borrower,  or adds a Subsidiary of the Borrower which is
     (or concurrently therewith becomes) a Subsidiary Guarantor, as a guarantor
     (on a subordinated  basis in accordance with the Senior  Subordinated Note
     Documents or the Permitted  Subordinated  Note Documents,  as the case may
     be) of  Indebtedness  under  the  Senior  Subordinated  Notes or under any
     outstanding  Permitted  Subordinated Notes and (y) technical amendments or
     modifications to the Senior  Subordinated Note Documents or such Permitted
     Subordinated Note Documents which do not amend or modify the subordination
     provisions  contained therein and do not require the consent of any holder
     of the Senior  Subordinated Notes or any Permitted  Subordinated Notes, as
     the case may be, and are not, in any event, adverse to the interest of the
     Lenders in any material respect;

                                     -78-
<PAGE>

          (iv) amend or modify, or permit the amendment or modification of, any
     provision of, any Management  Agreement or Shareholders'  Agreement in any
     manner materially adverse to the interests of the Lenders; or

          (v)  amend,   modify  or  change  its  certificate  of  incorporation
     (including,  without  limitation,  by the  filing or  modification  of any
     certificate of designation),  partnership  agreement or limited  liability
     company or operating  agreement or by-laws (or  equivalent  organizational
     documents) or any agreement  entered into by it with respect to its Equity
     Interests,  or enter  into any new  agreement  with  respect to its Equity
     Interests, other than any amendments, modifications or changes or any such
     new  agreements  which are not  adverse  in any  material  respect  to the
     interests of the Lenders.

          (b) Without  limiting the provisions of foregoing  subclause  (a)(i),
the Borrower  shall take such actions as may be necessary,  including,  without
limitation,  prepaying all of the Loans and other  Obligations  and terminating
the Total Commitments, in accordance with the terms of such Senior Subordinated
Notes or Permitted Subordinated Notes, as the case may be, to avoid the need to
purchase  (whether  because of change of control,  asset sale or otherwise) any
Senior  Subordinated  Notes  or,  after the  issuance  thereof,  any  Permitted
Subordinated  Notes at any time when the covenants  contained in this Section 9
remain in effect in accordance with the introductory  paragraph of this Section
9.

          9.11 Limitation on Certain Restrictions on Subsidiaries. The Borrower
will  not,  and  will  not  permit  any of its  Subsidiaries  to,  directly  or
indirectly,  create or otherwise  cause or suffer to exist or become  effective
any encumbrance or restriction on the ability of any Subsidiary of the Borrower
to (a) pay  dividends or make any other  distributions  on its capital stock or
any other interest or participation in its profits owned by the Borrower or any
of its  Subsidiaries,  or pay  any  Indebtedness  owed to the  Borrower  or any
Subsidiary of the  Borrower,  (b) make loans or advances to the Borrower or any
Subsidiary  of the Borrower or (c) transfer any of its  properties or assets to
the Borrower or any  Subsidiary of the  Borrower,  except in each case for such
encumbrances or restrictions existing under or by reason of (i) applicable law,
(ii) this Agreement,  the other Documents,  the Shareholders'  Agreements as in
effect on the Effective Date and any Permitted  Subordinated  Note Document (so
long as such encumbrances and restrictions therein are no less favorable to the
Borrower than those contained in the Senior Subordinated Note Documents), (iii)
customary  provisions   restricting  subletting  or  assignment  of  any  lease
governing  a  leasehold  interest  of the  Borrower  or any  Subsidiary  of the
Borrower,  (iv) customary  provisions  restricting  assignment of any licensing
agreement entered into by the Borrower or any Subsidiary of the Borrower in the
ordinary  course of  business  and (v)  customary  provisions  restricting  the
transfer of assets subject to Liens permitted under Section 9.01(vii).

          9.12  Limitation on Issuance of Capital Stock.  (a) The Borrower will
not issue (i) any preferred stock (other than (x) the issuance of shares of PIK
Preferred  Stock in payment of  regularly  accruing  dividends  on  theretofore
outstanding  shares of PIK Preferred  Stock and (y) other preferred stock which
by its terms (A) is not  exchangeable or convertible  into any  Indebtedness of
the Borrower or its Subsidiaries,  (B) shall not have cash dividends  declared,
is not subject to mandatory  redemptions and shall not be voluntarily redeemed,
in any case  prior to

                                     -79-
<PAGE>

January 1, 2008,  and (C) is  otherwise  issued in such  amounts and subject to
such terms which are not materially  adverse to the Borrower or the Lenders) or
(ii) any redeemable common stock.

          (b) The Borrower will not permit any of its Subsidiaries to issue any
Equity  Interests  (including by way of sales of treasury stock) or any options
or warrants to purchase,  or securities  convertible  into,  Equity  Interests,
except (i) for transfers and replacements of then outstanding  shares of Equity
Interests,  (ii) for stock  splits,  stock  dividends and similar or additional
issuances which do not decrease the percentage ownership of the Borrower or any
of its  Subsidiaries in any class of the Equity  Interests of such  Subsidiary,
(iii) to qualify  directors to the extent  required by applicable law, (iv) for
issuances by newly created or Wholly-Owned Subsidiaries of the Borrower created
or  acquired  in  accordance  with  the  terms of this  Agreement,  and (v) for
issuances of Equity Interests by any Subsidiary of the Borrower to the Borrower
or any other Person, provided that if the Person to which such Equity Interests
are issued (A) is the Borrower or a Subsidiary Guarantor, such Equity Interests
shall be pledged  pursuant  to the  Security  Documents  and (B) is neither the
Borrower  nor any  Subsidiary  Guarantor,  (I) such  Equity  Interests  are not
preferred stock or similarly  preferred Equity Interests and (II) no Default or
Event of Default then exists or would result  immediately  after giving  effect
thereto.  Subject to continued compliance with Section 9.17, if, as a result of
any such  issuances  made pursuant to clause (v) in the  immediately  preceding
sentence,  a Wholly-Owned  Subsidiary which is a Subsidiary Guarantor ceases to
constitute a Wholly-Owned  Subsidiary,  upon the receipt by the  Administrative
Agent and the Collateral Agent of (i) a certificate from an Authorized  Officer
and the Borrower certifying that (x) such Subsidiary is to be released from the
Subsidiaries  Guaranty  and the  Security  Documents  to which it is a party in
accordance  with the provisions  hereof and thereof and (y) no Default or Event
of  Default  exists at the time of, or would  exist  immediately  after  giving
effect to,  such  release  and (ii)  evidence  reasonably  satisfactory  to the
Administrative  Agent and the Collateral Agent and such Subsidiary has been (or
will contemporaneously with the release described below, will be) released from
its guaranty (if any) of any and all Indebtedness under the Senior Subordinated
Notes and, after the issuance thereof,  the Permitted  Subordinated Notes, such
Subsidiary  shall,  so long as no Default or Event of  Default  then  exists or
would result  therefrom,  be released  from the  Subsidiaries  Guaranty and the
Security  Documents to which it is a party,  and the Collateral  Agent shall be
authorized to take any action deemed appropriate in order to effect or evidence
the foregoing.

          9.13 Business.  (a) The Borrower will not, and will not permit any of
its Subsidiaries to, engage (directly or indirectly) in any business other than
the business of owning and or operating  Health Care Assets and activities that
are reasonably similar or reasonably related thereto.

          (b)  Notwithstanding  anything  to the  contrary  contained  in  this
Agreement,  the  Borrower  will not  operate any active  businesses  other than
through its Subsidiaries,  and will not own or hold directly any Investments or
assets  other than (i)  proceeds of  issuances  of its  capital  stock or other
equity  securities or Indebtedness  permitted under Section 9.04 so long as any
such proceeds  thereof  received by the Borrower are promptly  invested (to the
extent  permitted under Section 9.05) in its  Subsidiaries or Health Care Joint
Ventures as either (A) purchases of Equity  Interests of such  Subsidiaries  or
Health Care Joint Ventures or (B)  intercompany  loans to such  Subsidiaries or
Health Care Joint Ventures  evidenced by Intercompany Notes or other promissory

                                     -80-
<PAGE>

notes issued by a Health Care Joint Venture and payable to the Borrower, if the
Health Care Joint  Venture is not a  Subsidiary,  (ii) equity  interests in its
Subsidiaries and Health Care Joint Ventures, (iii) Intercompany Notes, and (iv)
Interest Rate  Protection  Agreements  provided,  that the Equity  Interests or
notes  permitted  to be held  pursuant to clauses (ii) and (iii) above shall be
permitted  only to the extent such  Equity  Interests  or notes  required to be
pledged  (and  delivered)  to the  Collateral  Agent  pursuant  to  the  Pledge
Agreement are so pledged (and delivered).

          9.14  Limitation  on Creation of  Subsidiaries  and Health Care Joint
Ventures. Notwithstanding anything to the contrary contained in this Agreement,
the  Borrower  will  not,  and  will not  permit  any of its  Subsidiaries  to,
establish,  create or acquire after the Effective Date any Subsidiary or Health
Care  Joint   Venture,   provided  that  the  Borrower  and  its   Wholly-Owned
Subsidiaries  shall  be  permitted  to (i)  establish  or  create  one or  more
Wholly-Owned  Subsidiaries,  or acquire a Person,  which  immediately upon such
acquisition will constitute a Wholly-Owned  Subsidiary of the Borrower, in each
case so long as within a reasonable time from such  establishment,  creation or
acquisition  (x) the capital stock,  partnership or limited  liability  company
interests,  as the case may be, of such new Wholly-Owned  Subsidiary is pledged
pursuant  to, and to the extent  required  by,  the  Pledge  Agreement  and the
certificates  representing  such  Equity  Interests  (if  any),  together  with
endorsements  for transfer thereof duly executed in blank, are delivered to the
Collateral  Agent for the  benefit of the Secured  Creditors,  and (y) such new
Wholly-Owned  Subsidiary  executes a counterpart to the Subsidiaries  Guaranty,
the  Pledge  Agreement  and  the  Security  Agreement  or a  Joinder  Agreement
substantially  in the form or  Exhibit O  (except  that,  if such  Wholly-Owned
Subsidiary,  as a result of a material  contract with Arizona  Health Care Cost
Containment System or similar regulator or healthcare  provider existing at the
time of such  acquisition  and not entered into in  contemplation  thereof,  is
prohibited  from  becoming a  Subsidiary  Guarantor (a  "Pre-existing  Material
Restriction"),  then  upon  the  receipt  by  the  Administrative  Agent  of  a
certificate  of an  Authorized  Officer of the  Borrower  requesting  that such
Subsidiary  shall be a Non-Guarantor  Subsidiary,  and certifying that (x) such
Subsidiary is subject to a Pre-existing Material Restriction,  (y) the Borrower
has used commercially  reasonable  efforts, in connection with the acquisition,
to obtain a waiver  or  amendment  of such  Pre-existing  Material  Restriction
sufficient to allow such  Subsidiary  to become a Subsidiary  Guarantor but has
not been able to so obtain such waiver or amendment and (z) no Default or Event
of  Default  exists at the time of, or would  exist  immediately  after  giving
effect to the  designation  of such  Subsidiary as a  Non-Guarantor  Subsidiary
(including without limitation under Section 9.17), such Subsidiary shall not be
required to become a Subsidiary  Guarantor and take such other actions referred
to above provided for a Subsidiary  Guarantor unless and until such later date,
if any, upon which such Pre-existing  Material  Restriction no longer prohibits
such  result  (without  limitation  of  Section  9.17))  and (ii) to the extent
otherwise permitted under this Agreement,  establish,  create or enter into one
or more Health Care Joint  Ventures,  or acquire Equity  Interests in a Person,
which  immediately  upon such  acquisition  will constitute a Health Care Joint
Venture,  in  each  case  so  long  as  within  a  reasonable  time  from  such
establishment,  creation  or  acquisition,  the  Equity  Interests  held by the
Borrower or any of its  Subsidiaries  in any new Health Care Joint Venture that
(A) is a Subsidiary  of the Borrower or (B) has Equity  Interests  owned by any
and all Credit  Parties with an aggregate  investment  cost equal to or greater
than $2,000,000,  in each case, are delivered for pledge pursuant to the Pledge
Agreement and the  certificates  representing  such Equity  Interests,  if any,
together with

                                     -81-
<PAGE>

endorsements  for the transfer thereof duly executed in blank, are delivered to
the Collateral Agent for the benefit of the Secured Creditors. In addition, any
new Wholly-Owned  Subsidiary shall execute and deliver, or cause to be executed
and delivered, all other relevant documentation (including, without limitation,
counterparts  of the  Subsidiaries  Guaranty,  the  Pledge  Agreement  and  the
Security Documents, or a Joinder Agreement substantially in the form of Exhibit
O) of the type described in Section 5A as such  Wholly-Owned  Subsidiary  would
have had to deliver if such Wholly-Owned  Subsidiary were a Credit Party on the
Effective Date.

          9.15 Changes To Legal Names;  Organizational  Identification Numbers,
Jurisdiction or Type of Organization.  No Credit Party shall change,  or permit
any  change  to,  its  legal  name  until  (i)  it  shall  have  given  to  the
Administrative  Agent and the  Collateral  Agent  not less  then 15 days  prior
written notice of its intention so to do, clearly  describing such new name and
providing other information in connection therewith as the Administrative Agent
or Collateral  Agent may  reasonably  request and (ii) with respect to such new
name, it shall have taken all action reasonably requested by the Administrative
Agent  or  Collateral   Agent  to  maintain  the  security   interests  of  the
Administrative  Agent or  Collateral  Agent in the  Collateral  intended  to be
granted pursuant to the Security  Documents at all times fully perfected and in
full force and effect.  In  addition,  to the extent that any Credit Party does
not have an organizational  identification  number on the date hereof and later
obtains  one,  or if there is any change in the  organizational  identification
number of any Credit  Party,  the Borrower or such Credit Party shall  promptly
notify the Administrative Agent and the Collateral Agent of such new or changed
organizational  identification  number  and shall take all  actions  reasonably
satisfactory to the Administrative Agent and the Collateral Agent to the extent
necessary  to maintain the security  interests of the  Administrative  Agent or
Collateral  Agent in the  Collateral  intended  to be granted  pursuant  to the
Security  Documents fully perfected and in full force and effect.  Furthermore,
no Credit Party shall change its  jurisdiction  of  organization or its type of
organization until (i) it shall have given to the Administrative  Agent and the
Collateral Agent not less than 15 days prior written notice of its intention so
to do, clearly describing such new jurisdiction of organization  and/or type of
organization  and providing such other  information in connection  therewith as
the  Administrative  Agent or Collateral Agent may reasonably  request and (ii)
with respect to such new  jurisdiction  and/or type of  organization,  it shall
have taken all actions reasonably  requested by the Administrative Agent or the
Collateral Agent to maintain the security interests of the Administrative Agent
or Collateral  Agent in the Collateral  intended to be granted  pursuant to the
Security  Documents at all times fully  perfected and in full force and effect.
If at any time  Schedule  XII hereto is not true and correct (as of the date in
question,  which may be after the Effective  Date),  whether because of changes
thereto or as a result of the  creation or  acquisition  of  additional  Credit
Parties,  the Borrower shall promptly furnish to the  Administrative  Agent and
the  Collateral  Agent a true and correct  updated  Schedule  XII,  which shall
contain the updated  information  required  therein with respect to each Credit
Party as of the date of any change thereto.

          9.16 No  Designation  of Other  Indebtedness  as  "Designated  Senior
Indebtedness".  The  Borrower  will  not,  and  will  not  permit  any  of  its
Subsidiaries  to,  designate any  Indebtedness  (other than the Obligations) of
such Credit Party as "Designated  Senior  Indebtedness" for the purposes of the
Senior  Subordinated  Note Documents or any Permitted Senior  Subordinated Note
Documents.

                                     -82-
<PAGE>

          9.17  Limitation on Assets Held By  Non-Guarantor  Subsidiaries.  The
Borrower will not permit the Total Assets of all Non-Guarantor Subsidiaries to,
at  any  time,  exceed  20%  of the  Total  Assets  of  the  Borrower  and  its
Subsidiaries.

          SECTION 10.  Events of  Default.  Upon the  occurrence  of any of the
following specified events (each an "Event of Default"):

          10.01  Payments.  The Borrower  shall (i) default in the payment when
due of any principal of any Loan or any Note or (ii) default,  and such default
shall continue  unremedied for three or more Business Days, in the payment when
due of any interest on any Loan or Note,  any Unpaid Drawing or any Fees or any
other  amounts  notified  hereunder  owing  hereunder or under any other Credit
Document; or

          10.02  Representations,  etc. Any  representation or warranty made by
any Credit Party herein or in any other Credit  Document or in any  certificate
delivered to the Administrative  Agent or any Lender pursuant hereto or thereto
shall prove to be untrue in any  material  respect on the date as of which made
or deemed made; or

          10.03  Covenants.  Any  Credit  Party  shall (i)  default  in the due
performance or observance by it of any term, covenant or agreement contained in
Sections  9.01 through  9.05,  9.07 through  9.10 or 9.12  through  9.16,  (ii)
default in the due performance or observance by it of the provisions  contained
in Section 9.17 and such default shall  continue  unremedied for a period of 30
days or (iii) default in the due  performance  or observance by it of any other
term,  covenant or agreement  contained  in this  Agreement or any other Credit
Document  (other than as provided in Sections 10.01 and 10.02) and such default
in the case of this clause (iii) shall  continue  unremedied for a period of 30
days after written  notice to the Borrower by the  Administrative  Agent or the
Required Lenders; or

          10.04 Default Under Other Agreements.  (i) The Borrower or any of its
Subsidiaries  shall (x) default in any payment of any Indebtedness  (other than
the  Obligations)  beyond the period of grace or cure, if any,  provided in the
instrument  or  agreement  under  which such  Indebtedness  was  created or (y)
default in the observance or performance of any agreement or condition relating
to any Indebtedness (other than the Obligations) or contained in any instrument
or agreement evidencing, securing or relating thereto, or any other event shall
occur or  condition  exist,  the  effect  of which  default  or other  event or
condition is to cause, or to permit the holder or holders of such  Indebtedness
(or a  trustee  or  agent  on  behalf  of such  holder  or  holders)  to  cause
(determined  without  regard  to  whether  any  notice is  required),  any such
Indebtedness  to  become  due  prior  to  its  stated  maturity,  or  (ii)  any
Indebtedness  (other  than  the  Obligations)  of  the  Borrower  or any of its
Subsidiaries  shall be declared to be (or shall  become)  due and  payable,  or
required to be prepaid other than by a regularly  scheduled required prepayment
(including,  without  limitation,  by reason of the  occurrence  of a change of
control or other  similar  event,  but  excluding by reason of any  due-on-sale
clause  contained in Indebtedness so long as the aggregate  principal amount of
all such Indebtedness does not exceed $3,500,000), prior to the stated maturity
thereof,  provided  that it shall not be a Default or an Event of Default under
clauses (i) or (ii) of this  Section  10.04  unless the  aggregate  outstanding
principal  amount of all Indebtedness as described in such clauses (i) and (ii)
is at least $3,500,000; or

                                     -83-
<PAGE>

          10.05 Bankruptcy,  etc. The Borrower or any of its Subsidiaries shall
commence a voluntary case concerning itself under Title 11 of the United States
Code  entitled  "Bankruptcy,"  as now or hereafter in effect,  or any successor
thereto (the "Bankruptcy  Code");  or an involuntary case is commenced  against
the Borrower or any of its  Subsidiaries  and the petition is not  controverted
within 15 days, or is not dismissed within 60 days,  after  commencement of the
case; or a custodian (as defined in the  Bankruptcy  Code) is appointed for, or
takes  charge of, all or  substantially  all of the property of the Borrower or
any of its  Subsidiaries or the Borrower or any of its  Subsidiaries  commences
any other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Borrower or any
of its  Subsidiaries,  or there is commenced against the Borrower or any of its
Subsidiaries any such proceeding  which remains  undismissed for a period of 60
days, or the Borrower or any of its  Subsidiaries  is adjudicated  insolvent or
bankrupt;  or any  order of relief or other  order  approving  any such case or
proceeding is entered;  or the Borrower or any of its Subsidiaries  suffers any
appointment of any custodian or the like for it or any substantial  part of its
property to continue  undischarged  or unstayed for a period of 60 days; or the
Borrower or any of its Subsidiaries  makes a general assignment for the benefit
of creditors;  or any  corporate  action is taken by the Borrower or any of its
Subsidiaries for the purpose of effecting any of the foregoing; or

          10.06 ERISA.  (a) Any Plan shall fail to satisfy the minimum  funding
standard  required for any plan year or part thereof  under  Section 412 of the
Code or Section 302 of ERISA or a waiver of such  standard or  extension of any
amortization  period is  sought or  granted  under  Section  412 of the Code or
Section  303 or 304 of  ERISA,  a  Reportable  Event  shall  have  occurred,  a
contributing  sponsor  (as defined in Section  4001(a)(13)  of ERISA) of a Plan
subject  to  Title  IV of  ERISA  shall be  subject  to the  advance  reporting
requirement of PBGC Regulation  Section 4043.61 (without regard to subparagraph
(b)(1)  thereof) and an event  described in subsection .62, .63, .64, .65, .66,
 .67 or .68 of PBGC  Regulation  Section  4043 shall be  reasonably  expected to
occur with respect to such Plan within the following 30 days, any Plan which is
subject  to Title IV of ERISA  shall  have had or is  likely  to have a trustee
appointed at the instance of the PBGC to administer  such Plan,  any Plan which
is  subject  to  Title IV of ERISA  is,  shall  have  been or is  likely  to be
terminated or to be the subject of  termination  proceedings  under ERISA,  any
Plan shall have an Unfunded Current  Liability,  a contribution  required to be
made with respect to a Plan or a Foreign Pension Plan has not been timely made,
the  Borrower or any  Subsidiary  of the  Borrower or any ERISA  Affiliate  has
incurred or is likely to incur any  liability  to or on account of a Plan under
Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of
ERISA or Section 401(a)(29),  4971 or 4975 of the Code or on account of a group
health plan (as defined in Section  607(1) of ERISA or Section  4980B(g)(2)  of
the Code) under Section 4980B of the Code, or the Borrower or any Subsidiary of
the Borrower has incurred or is likely to incur liabilities  pursuant to one or
more employee  welfare benefit plans (as defined in Section 3(1) of ERISA) that
provide benefits to retired  employees or other former employees (other than as
required by Section 601 of ERISA) or Plans or Foreign Pension Plans;  (b) there
shall  result  from any such event or events the  imposition  of a lien on, the
granting  of a security  interest  by, or a  liability  or a  material  risk of
incurring a liability  by, the  Borrower,  a  Subsidiary  of the Borrower or an
ERISA  Affiliate;   and  (c)  such  lien,   security   interest  or  liability,
individually,  and/or  in the  aggregate,  in  the  reasonable  opinion  of the
Required Lenders,  has had,

                                     -84-
<PAGE>

or could  reasonably  be expected to have, a material  adverse  effect upon the
business, property, liabilities (actual or contingent), operations or condition
(financial   or  otherwise)  of  the  Borrower  or  of  the  Borrower  and  its
Subsidiaries taken as a whole; or

          10.07  Security  Documents.  At any  time  after  the  execution  and
delivery thereof, any of the Security Documents shall cease to be in full force
and effect,  or shall cease to give the Collateral Agent for the benefit of the
Secured  Creditors the Liens,  rights,  powers and  privileges  purported to be
created thereby (including,  without limitation,  a perfected security interest
in,  and Lien on,  all of the  Collateral  in  favor of the  Collateral  Agent,
superior to and prior to the rights of all third  Persons  (except as permitted
by Section 9.01), and subject to no other Liens (except as permitted by Section
9.01); or

          10.08  Subsidiaries  Guaranty.  At any time after the  execution  and
delivery  thereof,  the  Subsidiaries  Guaranty or any provision  thereof shall
cease to be in full  force or effect  as to any  Subsidiary  Guarantor,  or any
Subsidiary  Guarantor or any Person  acting by or on behalf of such  Subsidiary
Guarantor shall deny or disaffirm such Subsidiary Guarantor's obligations under
the Subsidiaries  Guaranty or any Subsidiary Guarantor shall default in the due
performance  or observance of any material  term,  covenant or agreement on its
part to be performed or observed pursuant to the Subsidiaries Guaranty; or

          10.09  Judgments.  One or more  judgments or decrees shall be entered
against the Borrower or any of its Subsidiaries  involving in the aggregate for
the Borrower and its  Subsidiaries  a liability  (to the extent not paid or not
covered by a reputable and solvent  insurance  company) and such  judgments and
decrees  either  shall be final and  non-appealable  or shall  not be  vacated,
discharged or stayed or bonded  pending appeal for any period of 30 consecutive
days, and the aggregate amount of all such judgments and decrees (determined as
provided  in  the  preceding  parenthetical  of  this  Section  10.09)  exceeds
$3,500,000; or

          10.10 Change of Control.  A Change of Control shall occur;

then,  and in any such  event,  and at any  time  thereafter,  if any  Event of
Default shall then be continuing,  the  Administrative  Agent, upon the written
request of the Required Lenders, shall by written notice to the Borrower,  take
any or all of the  following  actions,  without  prejudice to the rights of any
Agent,  any Lender or the holder of any Note to enforce its claims  against any
Credit Party (provided that, if an Event of Default  specified in Section 10.05
shall occur with respect to the Borrower, the result which would occur upon the
giving  of  written  notice  by the  Administrative  Agent to the  Borrower  as
specified in clauses (i) and (ii) below shall occur  automatically  without the
giving of any such  notice):  (i)  declare  the Total  Commitments  terminated,
whereupon  all of the  Commitments  of each Lender  shall  forthwith  terminate
immediately  and any  Commitment  Commission  shall  forthwith  become  due and
payable without any other notice of any kind; (ii) declare the principal of and
any accrued  interest in respect of all Loans and the Notes and all Obligations
owing  hereunder  and  thereunder  to be,  whereupon  the  same  shall  become,
forthwith due and payable without presentment,  demand, protest or other notice
of any  kind,  all of which  are  hereby  waived by each  Credit  Party;  (iii)
terminate any Letter of Credit which may be  terminated in accordance  with its
terms;  (iv)  direct the  Borrower  to pay (and the  Borrower  agrees that upon
receipt of such notice, or upon the occurrence of an Event of Default

                                     -85-
<PAGE>

specified in Section  10.05 with respect to the  Borrower,  it will pay) to the
Collateral  Agent at the Payment Office such  additional  amount of cash, to be
held as security by the Collateral  Agent, as is equal to the aggregate  Stated
Amount of all Letters of Credit issued for the account of the Borrower and then
outstanding;  (v) enforce,  as Collateral  Agent, all of the Liens and security
interests created pursuant to the Security  Documents;  and (vi) apply any cash
collateral  held by the  Administrative  Agent  pursuant to Section 4.02 to the
repayment of the Obligations.

          SECTION 11. Definitions and Accounting Terms.

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

          "Acquisition"  shall mean the  acquisition  by the Borrower or any of
its  Subsidiaries  (from a Person  other  than  the  Borrower  or a  Subsidiary
thereof)  of Health  Care  Assets in  accordance  with the  provisions  of this
Agreement.

          "Acquisition  CapEx" shall mean, for any period, the aggregate amount
of all  Capital  Expenditures  incurred  or  committed  to be  incurred  by the
Borrower or any of its  Subsidiaries  within six months of the  consummation of
any  Permitted  Acquisition,  which  expenditures  have been  identified by the
Borrower  to the  Administrative  Agent as part of the  aggregate  value of all
consideration  paid by the  Borrower  or such  Subsidiary  in  respect  of such
Permitted Acquisition.

                  "Additional Capital Expenditures Amount" shall mean, for any
fiscal year of the Borrower after its fiscal year ended June 30, 2001, an
amount (not less than $0) equal to the product of (a) .05 multiplied by the
remainder of (x) the consolidated net revenue for such fiscal year attributable
to Health Care Assets (other than health maintenance organizations) of the
Borrower and its Subsidiaries less (y) the consolidated net revenue for the
Borrower's fiscal year ended June 30, 2001 (determined on a pro forma basis in
a manner consistent with the methodology used in preparing the financial
statements referred to in Section 7.05(b)) attributable to Health Care Assets
(other than health maintenance organizations) of the Borrower and its
Subsidiaries (in each case as determined in good faith by an Authorized Officer
of the Borrower and set forth in reasonable detail in the Compliance
Certificate delivered by the Borrower to the Administrative Agent within 90
days following each fiscal year end of the Borrower pursuant to Section
8.01(d)).

          "Additional Investment Amount" shall initially mean $0, provided that
from and including the first fiscal year of the Borrower for which Consolidated
EBITDA  exceeds  $55,000,000,  the Additional  Investment  Amount shall mean an
amount  equal  to the  greater  of (i) 10% of such  excess  and (ii) 10% of the
highest amount by which  Consolidated  EBITDA for any subsequent fiscal year of
the Borrower exceeds $55,000,000.

          "Additional  Security  Documents"  shall have the meaning provided in
Section 8.12(a).

                                     -86-
<PAGE>

          "Additional  Physician  Support  Obligations  Amount" shall initially
mean $0;  provided  that,  from and  including  the  first  fiscal  year of the
Borrower for which  Consolidated  EBITDA  exceeds  $55,000,000,  the Additional
Physician  Support  Obligation Amount shall mean an amount equal to the greater
of  (i)  5% of  such  excess  and  (ii)  5% of  the  highest  amount  by  which
Consolidated  EBITDA for any  subsequent  fiscal year of the  Borrower  exceeds
$55,000,000.

          "Adjusted   Consolidated  Net  Income"  shall  mean  for  any  period
Consolidated  Net Income of the Borrower and its  Subsidiaries  for such period
plus, without  duplication,  the amount of all net non-cash charges (including,
without limitation, depreciation,  amortization, deferred tax expense, non-cash
interest  expense) and net non-cash  losses which were  included in arriving at
Consolidated  Net Income for such  period less the sum of the amount of all net
non-cash  gains and gains from the sale or other  disposition  of assets (other
than sales of inventory in the ordinary course of business) which were included
in arriving at Consolidated Net Income for such period.

          "Adjusted  Consolidated  Working  Capital"  at any  time  shall  mean
Consolidated  Current  Assets  (but  excluding  therefrom  all  cash  and  Cash
Equivalents) less Consolidated Current Liabilities at such time.

          "Administrative  Agent"  shall  mean  Bank of  America,  N.A.  in its
capacity as  Administrative  Agent  (including  in its  capacity as  Collateral
Agent) for the  Lenders  hereunder,  and shall  include  any  successor  to the
Administrative Agent appointed pursuant to Section 12.09.

          "Affected Loans" shall have the meaning provided in Section 4.02(i).

          "Affiliate" shall mean, with respect to any Person,  any other Person
(i)  directly or  indirectly  controlling  (including,  but not limited to, all
directors,  executive officers and general partners of such Person), controlled
by, or under direct or indirect  common control with,  such Person or (ii) that
directly or indirectly owns more than 15% of any class of the voting securities
or capital  stock of or Equity  Interests  in such  Person.  A Person  shall be
deemed  to  control  another  Person  if such  Person  possesses,  directly  or
indirectly,  the power to direct or cause the direction of the  management  and
policies  of such  other  Person,  whether  through  the  ownership  of  voting
securities, by contract or otherwise.

          "Agent"  shall  mean  and  include  any of the  Administrative  Agent
(including in its capacity as Collateral  Agent),  the  Syndication  Agent and,
solely for the purposes of Sections 12 and 13.01, each Co-Documentation Agent.

          "Agreement"   shall  mean  this  Credit   Agreement,   as   modified,
supplemented, amended, restated, extended, renewed, refinanced or replaced from
time to time.

          "Applicable  Margin" shall mean, from and after any Start Date to and
including the  corresponding  End Date (a) with respect to Revolving  Loans and
Swingline Loans, the respective  percentage per annum set forth below under the
respective  Type of Loans and opposite  the  respective  Level (i.e.,  Level 1,
Level 2,  Level 3,  Level 4 or Level 5, as the case may be)

                                     -87-
<PAGE>

indicated to have been achieved on the applicable Test Date (as shown on the
respective officer's certificate delivered pursuant to Section 8.01(d) or the
first proviso below):

                     Applicable Margins for Revolving Loans
                     --------------------------------------

          Consolidated
          Leverage Ratio
       (calculated on a Pro
          Forma Basis in
        accordance with, and                                 Revolving Loans
           subject to the        Revolving Loans         maintained as
        exceptions contained       maintained as        Base Rate Loans and
Level    in, Section 11.02)       Eurodollar Loans       Swingline Loans
-----    ------------------       ----------------       ---------------
  1     Greater than or equal to
        4.25:1.00                         3.25%                 2.25%
  2     Greater than or equal to
        3.75:1.00 but less than
        4.25:1.00                         3.00%                 2.00%
  3     Greater than or equal to
        3.25:1.00 but less than
        3.75:1.00                         2.75%                 1.75%
  4     Greater than or equal to
        2.75:1.00 but less than
        3.25:1.00                         2.50%                 1.50%
  5     Less than 2.75:1.00               2.25%                 1.25%

;  provided,  however,  that if the  Borrower  fails to deliver  the  financial
statements  required  to be  delivered  pursuant  to  Section  8.01(a)  or  (b)
(accompanied by the officer's  certificate required to be delivered pursuant to
Section  8.01(d)  showing  the  applicable   Consolidated  Leverage  Ratio  (as
calculated on a Pro Forma Basis in  accordance  with Section 11.02 for purposes
of  determining  Applicable  Margins) on the relevant Test Date) on or prior to
the respective date required by such Sections, then Level 1 pricing shall apply
until such time,  if any,  as the  financial  statements  required as set forth
above and the accompanying  officer's  certificate have been delivered  showing
the pricing for the respective  Margin  Reduction Period is at a level which is
less than Level 1 (it being  understood  that, in the case of any late delivery
of the financial  statements  and  officer's  certificate  as so required,  any
reduction in the Applicable  Margin shall apply only from and after the date of
the delivery of the complying financial statements and officer's  certificate);
provided  further,  that (i) subject to following  clause (ii), Level 2 pricing
shall apply for the period from the  Effective  Date to but not  including  the
date which is the first Start Date after the  Borrower's  fiscal quarter ending
on December 31, 2001 and (ii) Level 1 pricing  shall apply at any time when any
Default or Event of Default is in existence.

                                     -88-
<PAGE>

          (b) with  respect  to any  Tranche of  Incremental  Term  Loans,  the
respective  percentages  per  annum  relating  to the  respective  Type of such
Tranche of Incremental  Term Loans as set forth in the  applicable  Incremental
Term Loan  Commitment  Agreement (or, in the case of any Tranche of Incremental
Term Loans extended  pursuant to more than one Incremental Term Loan Commitment
Agreement,  as may be provided in the first  Incremental  Term Loan  Commitment
Agreement executed and delivered with respect to such Tranche).

          "Assignment  and Assumption  Agreement"  shall mean an Assignment and
Assumption  Agreement  substantially  in the form of  Exhibit P  (appropriately
completed).

          "Authorized  Officer"  of any  Credit  Party  shall  mean  any of the
President,  the Chief Financial  Officer or any  Vice-President  of such Credit
Party or any other  officer of such Credit Party which is designated in writing
to the  Administrative  Agent by any of the  foregoing  officers of such Credit
Party as being authorized to give such notices under this Agreement.

          "BAS" shall mean Banc of America  Securities  LLC, in its  individual
capacity.

          "Bank of America" shall mean Bank of America, N.A., in its individual
capacity.

          "Bankruptcy Code" shall have the meaning provided in Section 10.05.

          "Base  Rate" at any time  shall mean the higher of (i) the rate which
is 1/2 of 1% in excess of the  Federal  Funds  Rate and (ii) the Prime  Lending
Rate.

          "Base Rate Loan"  shall  mean (i) each  Swingline  Loan and (ii) each
other Loan designated or deemed  designated as such by the Borrower at the time
of the incurrence thereof or conversion thereto.

          "Borrower"  shall have the meaning provided in the first paragraph of
this Agreement.

          "Borrowing" shall mean the borrowing of one Type of Loan from all the
Lenders  (or from the  Swingline  Lender in the case of  Swingline  Loans) on a
given date (or resulting  from a conversion or conversions on such date) having
in the case of Eurodollar  Loans the same Interest  Period,  provided that Base
Rate Loans incurred pursuant to Section 1.10(b) shall be considered part of the
related Borrowing of Eurodollar Loans.

          "Business  Day" shall mean (i) for all purposes other than as covered
by clause (ii) below, any day except  Saturday,  Sunday and any day which shall
be in New York, New York a legal holiday or a day on which banking institutions
are authorized or required by law or other government  action to close and (ii)
with respect to all notices and determinations in connection with, and payments
of principal and interest on, Eurodollar Loans, any day which is a Business Day
described  in  clause  (i) above  and  which is also a day for  trading  by and
between banks in the London interbank Eurodollar market.

          "Capital  Expenditures"  shall mean, with respect to any Person,  all
expenditures by such Person which should be capitalized in accordance with GAAP
and reflected as either prop-

                                     -89-
<PAGE>

erty, plant or equipment,  and, without duplication,  the amount of Capitalized
Lease Obligations  incurred by such Person,  provided that Capital Expenditures
shall not include (i)  financing  costs  required to be  capitalized,  (ii) the
purchase price of Permitted Acquisitions to the extent paid during such period,
(iii) any  Acquisition  CapEx incurred or committed to be incurred  during such
period, and (iv) interim costs incurred during such period in connection with a
proposed  acquisition  to the extent such costs would  constitute a part of the
purchase price for such acquisition upon its  consummation;  provided that upon
the consummation of any such proposed acquisition,  such interim costs shall be
included as Acquisition CapEx for such period;  provided  further,  that at any
time such  proposed  acquisition  is no  longer  expected  to occur,  all costs
excluded from this definition of Capital  Expenditures  pursuant to this clause
(iv) shall be reversed and expensed in the current period.

          "Capitalized  Lease  Obligations" of any Person shall mean all rental
obligations which, under GAAP, are or will be required to be capitalized on the
books of such Person, in each case taken at the amount thereof accounted for as
indebtedness in accordance with such principles.

          "Cash  Equivalents"  shall  mean,  as to any Person,  (i)  securities
issued or directly and fully  guaranteed or insured by the United States or any
agency or  instrumentality  thereof (provided that the full faith and credit of
the United States is pledged in support thereof) having  maturities of not more
than  one year  from the date of  acquisition,  (ii)  Dollar  denominated  time
deposits and certificates of deposit of any commercial bank having, or which is
the principal banking  subsidiary of a bank holding company having,  capital in
excess of $500,000,000  with maturities of not more than one year from the date
of acquisition by such Person, (iii) repurchase  obligations with a term of not
more than 30 days for  underlying  securities of the types  described in clause
(i) above  entered into with any bank meeting the  qualifications  specified in
clause (ii) above,  (iv) commercial paper issued by any Person  incorporated in
the United  States  rated at least A-2 or the  equivalent  thereof by S&P or at
least P-2 or the  equivalent  thereof by Moody's and in each case  maturing not
more than 270 days  after the date of  acquisition  by such  Person,  (v) other
Dollar denominated  securities issued by any Person  incorporated in the United
States  rated at least  "A-" or the  equivalent  by S&P or at least "A3" or the
equivalent  by Moody's  and in each case either (x)  maturing  not more than 90
days after the date of acquisition by such Person or (y) which are subject to a
repricing  arrangement  (such as a Dutch  auction) not more than 270 days after
the date of acquisition by such Person which such Person believes in good faith
will permit such Person to sell such  security at par in  connection  with such
repricing  mechanism and (vi)  investments in money market funds  substantially
all of whose  assets are  comprised  of  securities  of the types  described in
clauses (i) through (iv) above.

          "CERCLA"  shall  mean  the  Comprehensive   Environmental   Response,
Compensation,  and  Liability Act of 1980, as the same may be amended from time
to time, 42 U.S.C.A. ss. 9601 et seq.

          "Change  of  Control"  shall  mean (x) (i) at any  time  prior to the
consummation of a Qualified Public  Offering,  the Morgan Stanley Holders shall
cease to own at least 50.1% of the voting  interests in the  Borrower's  Equity
Interests,  or (ii) at any time after the  consummation  of a Qualified  Public
Offering, (A) the Morgan Stanley Holders shall cease to own at least 30% of the

                                     -90-
<PAGE>

voting  interests  in the  Borrower's  Equity  Interests  or (B) any  Person or
"group"  (within the meaning of Rules 13d-3 or 13d-5 under the Exchange Act (as
in effect on the  Effective  Date))  (for this  purpose,  excluding  the Morgan
Stanley Holders),  shall have acquired beneficial  ownership of a percentage of
the voting  interest  in the  Borrower's  Equity  Interests  which  exceeds the
percentage  ownership of the Morgan Stanley Holders of the voting  interests in
the Borrower's Equity Interests,  (y) any Person or "group" (within the meaning
of Rules  13d-3 or 13d-5 of the  Exchange  Act (as in effect  on the  Effective
Date)) (for this  purpose  excluding  the Morgan  Stanley  Holders)  shall have
obtained  the power  (whether  or not  exercised)  to elect a  majority  of the
Borrower's  directors,  provided that no Person shall be deemed a member of any
such group merely by having  become a party to any  Shareholders'  Agreement to
which Morgan  Stanley  Capital  Partners or its  Affiliates is a party or (z) a
"Change of  Control",  as defined in the Senior  Subordinated  Note  Documents,
shall occur under the Senior Subordinated Note Documents or a comparable event,
whether or not so titled,  shall occur under any  Permitted  Subordinated  Note
Document.

          "Claims"  shall  have  the  meaning  provided  in the  definition  of
"Environmental Claims."

          "Co-Documentation  Agents"  shall have the  meaning  provided  in the
first paragraph of this Agreement.

          "Code" shall mean the Internal  Revenue Code of 1986, as amended from
time to time, and the regulations promulgated thereunder. Section references to
the Code are to the Code,  as in effect at the date of this  Agreement,  and to
any subsequent provision of the Code, amendatory thereof,  supplemental thereto
or substituted therefor.

          "Collateral"  shall  mean all  property  with  respect  to which  any
security  interests have been granted (or purported to be granted)  pursuant to
any Security  Document,  including,  without  limitation,  all Pledge Agreement
Collateral, all Security Agreement Collateral and the Mortgaged Properties.

          "Collateral  Agent"  shall mean the  Administrative  Agent  acting as
collateral agent for the Secured Creditors pursuant to the Security Documents.

          "Collective Bargaining Agreements" shall have the meaning provided in
Section 5A.05.

          "Commitment"  shall mean any of the commitments of any Lender,  i.e.,
whether the Revolving Loan Commitment or any  Incremental  Term Loan Commitment
of such Lender.

          "Commitment Commission" shall have the meaning provided in
Section 3.01(a).

                  "Consolidated Cash Interest Expense" shall mean, for any
period, the total consolidated cash interest expense, in each case, for such
period (calculated without regard to any limitations on the payment thereof)
plus, without duplication, that portion of Capitalized Lease Obligations of the
Borrower and its Subsidiaries representing the interest factor for such period
and capitalized interest for such period, but (i) excluding interest expense
not payable in cash by

                                     -91-
<PAGE>

its terms (including amortization of discount,  deferred financing costs to the
extent  included in this  definition of  Consolidated  Cash  Interest  Expense,
interest  expense  recognized on unfunded  malpractice  liability  reserves and
interest on life  insurance  policies  owned by the  Borrower to the extent not
paid in cash) and (ii) subtracting from  Consolidated  Cash Interest Expense as
otherwise  determined above for any period, the cash portion of interest income
actually received by the Borrower and its Subsidiaries  during such period, all
as determined on a consolidated basis in accordance with GAAP.

          "Consolidated  Current  Assets" shall mean, at any time,  the amounts
that would be classified as consolidated current assets of the Borrower and its
Subsidiaries in accordance with GAAP in a classified balance sheet.

          "Consolidated  Current  Liabilities"  shall  mean,  at any time,  the
amounts that would be classified as  consolidated  current  liabilities  of the
Borrower  and its  Subsidiaries  at  such  time in  accordance  with  GAAP in a
classified balance sheet, but excluding the current portion of any Indebtedness
under this Agreement and any other long-term Indebtedness which would otherwise
be included therein.

          "Consolidated Debt" shall mean, at any time, (a) the principal amount
of all  Indebtedness  (excluding  (x)  Indebtedness  of the type  described  in
clauses  (iii),  (v) or (vi)  of the  definition  thereof  to the  extent  such
Indebtedness  would not appear on a consolidated  balance sheet of the Borrower
and its  Subsidiaries as debt or capital leases in accordance with GAAP and (y)
Indebtedness of the type described in clause (ii) of the definition  thereof to
the extent such Indebtedness  consists of undrawn amounts in respect of letters
of credit) of the Borrower and its  Subsidiaries  at such time  (including  any
Indebtedness  incurred  at such  time),  less (b) the  amount  of cash and Cash
Equivalents  held by the Borrower and its  Subsidiaries  at such time and which
would  appear  on  a  consolidated  balance  sheet  of  the  Borrower  and  its
Subsidiaries as part of the consolidated assets of the Borrower;  provided that
if Revolving  Loans or Swingline  Loans are  outstanding  at such time then the
amount of cash and Cash Equivalents  deducted pursuant to this clause (b) shall
not exceed the sum of (x) $25,000,000 and (y) the Required AHCCS Amount at such
time;  provided further that cash or Cash Equivalents which are deposited with,
or held by,  Subsidiaries of the Borrower that have a contract with the Arizona
Health  Care Cost  Containment  System to  arrange  health  care  services  for
Medicaid  patients shall only reduce  Consolidated Debt to the extent such cash
or Cash Equivalents, as the case may be, (x) are required by the Arizona Health
Care Cost Containment System (or the relevant  governmental  authorities having
jurisdiction  over same) to remain with such Subsidiaries on the date for which
Consolidated Debt is being determined  (which date for which  Consolidated Debt
is being  determined must be within seven days prior to or seven days after the
last day of any fiscal  quarter of the  Borrower or there shall be no reduction
to the amount of Consolidated  Debt for cash or Cash  Equivalents  held by such
Subsidiaries)  and  (y)  shall  not be  required  by the  Arizona  Health  Care
Containment  System (or other relevant  governmental  authority) to remain with
such  Subsidiary at any time other than during the period  beginning seven days
prior to, and ending  seven days after,  the last day of any fiscal  quarter of
the Borrower.

          "Consolidated  Debt/Total  Capitalization  Ratio" shall mean,  at any
time, the ratio of Consolidated  Debt at such time to Total  Capitalization  at
such time.

                                     -92-
<PAGE>

          "Consolidated  EBIT" shall mean,  for any  period,  Consolidated  Net
Income of the Borrower and its  Subsidiaries  plus,  in each case to the extent
actually  deducted  in  determining  Consolidated  Net Income for such  period,
Consolidated  Cash  Interest  Expense and  provision  for taxes for such period
adjusted to exclude for such period (x) any extraordinary  gains or losses, (y)
any gains or losses from non-current assets held for divestiture or write-downs
of non-current assets relating to impairments or the sale of non-current assets
and (z) non-cash  expenses  incurred in connection  with stock  options,  stock
appreciation rights or other similar equity rights.

          "Consolidated  EBITDA" shall mean, for any period,  Consolidated EBIT
for such period,  adjusted by adding thereto the amount of all amortization and
depreciation  that were  deducted  in arriving  at  Consolidated  EBIT for such
period.

          "Consolidated  Interest  Coverage  Ratio" shall mean, for any period,
the ratio of Consolidated  EBITDA for such period to Consolidated Cash Interest
Expense for such period.

          "Consolidated  Leverage  Ratio" shall mean, at any time, the ratio of
Consolidated Debt at such time to Consolidated EBITDA for the Test Period ended
on the date of  determination  or, if the date of determination is not the last
day of a Test Period, for the then most recently ended Test Period.

          "Consolidated Net Income" shall mean, for any Person and period,  the
net  income  (or loss) of such  Person and its  Subsidiaries  for such  period,
determined  on  a  consolidated   basis,   provided  that  (i)  in  determining
Consolidated  Net Income of the  Borrower,  the net income of any other  Person
which  is not a  Subsidiary  of the  Borrower  or a  Subsidiary  thereof  or is
accounted  for by the Borrower or a Subsidiary  thereof by the equity method of
accounting  shall be included only to the extent of the payment of dividends or
distributions  by such other  Person to the  Borrower or a  Subsidiary  thereof
during  such  period,  (ii)  in  determining  Consolidated  Net  Income  of the
Borrower, the net income of any Health Care Joint Venture shall not be included
to the extent that payment of dividends  or  distributions  by such Health Care
Joint  Venture to the  Borrower or a  Wholly-Owned  Subsidiary  are  prohibited
pursuant  to the  organizational  documents  relating to such Health Care Joint
Venture,  (iii) the net income (or loss) of any other  Person  acquired by such
specified  Person or a  Subsidiary  of such  Person in a pooling  of  interests
transaction  for any  period  prior  to the date of such  acquisition  shall be
excluded  and (iv) to the  extent  Consolidated  Net  Income  reflects  amounts
attributable to minority  interests in Subsidiaries  that are not  Wholly-Owned
Subsidiaries of the Borrower,  Consolidated  Net Income shall be reduced by the
amounts attributable to such minority interests.

          "Consolidated  Net Worth" shall mean, at any time,  the  consolidated
stockholders'  equity of the  Borrower  at such time  plus,  to the  extent not
otherwise  included,  any preferred  stock of the Borrower,  with the foregoing
determinations to be made in accordance with GAAP.

          "Consolidated  Senior Debt" shall mean, at any time, the remainder of
(x)  Consolidated  Debt  at such  time  less  (y) the sum of (i) the  aggregate
principal amount of Senior  Subordinated Notes outstanding at such time (to the
extent same are  reflected  in  Consolidated  Debt at such time),  and (ii) the
aggregate  principal amount of all Permitted

                                     -93-
<PAGE>

Subordinated  Notes  outstanding at such time (to the extent same are reflected
in Consolidated Debt at such time).

          "Consolidated  Senior  Leverage  Ratio" shall mean, at any time,  the
ratio of Consolidated  Senior Debt at such time to Consolidated  EBITDA for the
Test Period ended on the date of determination or, if the date of determination
is not the last day of a Test  Period,  for the then most  recently  ended Test
Period.

          "Contingent  Obligation" shall mean, as to any Person, any obligation
of such  Person  guaranteeing  or  intended to  guarantee  (including,  without
limitation,  as a result of such  Person  being a general  partner of the other
Person,  unless the underlying  obligation is expressly made non-recourse as to
such general partner) any Indebtedness,  leases, dividends or other obligations
("primary  obligations")  of any other  Person (the  "primary  obligor") in any
manner,  whether directly or indirectly,  including,  without  limitation,  any
obligation of such Person, whether or not contingent,  (i) to purchase any such
primary  obligation or any property  constituting  direct or indirect  security
therefor,  (ii) to advance or supply  funds (x) for the  purchase or payment of
any such  primary  obligation  or (y) to  maintain  working  capital  or equity
capital  of the  primary  obligor or  otherwise  to  maintain  the net worth or
solvency of the primary  obligor,  (iii) to purchase  property,  securities  or
services  primarily  for the purpose of assuring  the owner of any such primary
obligation  of the  ability  of the  primary  obligor  to make  payment of such
primary  obligation or (iv)  otherwise to assure or hold harmless the holder of
such primary  obligation  against loss in respect thereof;  provided,  however,
that  the  term  Contingent   Obligation  shall  not  include  endorsements  of
instruments for deposit or collection in the ordinary  course of business.  The
amount of any  Contingent  Obligation  shall be deemed to be an amount equal to
the stated or determinable amount of the primary obligation in respect of which
such  Contingent  Obligation  is made or, if not  stated or  determinable,  the
maximum  reasonably  anticipated  liability in respect  thereof  (assuming such
Person is required to perform  thereunder) as determined by such Person in good
faith.

          "Credit Documents" shall mean this Agreement and, after the execution
and delivery  thereof  pursuant to the terms of this Agreement,  each Note, the
Subsidiaries  Guaranty,  each Security  Document,  each  Incremental  Term Loan
Commitment Agreement and each Joinder Agreement.

          "Credit  Event"  shall mean the making of any Loan or the issuance of
any Letter of Credit but shall not include the  commencement  of a new Interest
Period applicable to a Borrowing of Eurodollar Loans upon the expiration of the
Interest Period applicable  thereto or the conversion of Loans of one Type into
Loans of the  other  Type,  provided  that,  in any such  case,  the  aggregate
outstanding principal amount of Loans is not increased as a result thereof.

          "Credit Party" shall mean the Borrower and each Subsidiary Guarantor.

          "Current Liabilities" shall mean, as to any Person, accrued expenses,
trade payables and insurance premiums payable within one year of the incurrence
thereof of such Person.

                                     -94-
<PAGE>

          "Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.

          "Defaulting  Lender"  shall mean any Lender  with  respect to which a
Lender Default is in effect.

          "Disposition"  shall  mean any  sale,  lease,  sale  and  lease-back,
assignment, conveyance, transfer or other disposition by the Borrower or any of
its Subsidiaries (to a Person other than the Borrower or a Subsidiary  thereof)
of any Health Care Assets.

          "Dividends"  with  respect to any Person  shall mean that such Person
has  declared  or  paid a  dividend  or  returned  any  equity  capital  to its
stockholders or partners or authorized or made any other distribution,  payment
or delivery of property  (other than common  stock (or  equivalent  thereof) of
such  Person) or cash to its  stockholders,  members or  partners  as such,  or
redeemed, retired, purchased or otherwise acquired, directly or indirectly, for
a  consideration  any  shares  of any class of its  capital  stock or any other
Equity Interests  outstanding on or after the Effective Date (or any options or
warrants  issued by such  Person  with  respect to its  capital  stock or other
Equity Interests), or set aside any funds for any of the foregoing purposes, or
shall have permitted any of its  Subsidiaries to purchase or otherwise  acquire
for a  consideration  any  shares  of any class of the  capital  stock or other
Equity Interests of such Person  outstanding on or after the Effective Date (or
any options or warrants issued by such Person with respect to its capital stock
or other Equity  Interests).  Without limiting the foregoing,  "Dividends" with
respect to any Person shall also  include all payments  (other than as excluded
above) made or  required  to be made by such  Person with  respect to any stock
appreciation  rights,  plans,  equity  incentive  or  achievement  plans or any
similar plans (other than payments  under normal cash bonus plans for employees
that are approved by the board of directors of the  Borrower) or setting  aside
of any funds for the foregoing purposes.

          "Documents"  shall mean,  collectively,  the Credit Documents and the
Senior Subordinated Note Documents.

          "Dollars" and the sign "$" shall each mean freely transferable lawful
money of the United States.

          "Drawing" shall have the meaning provided in Section 2.05(b).

          "Effective Date" shall have the meaning provided in Section 13.10.

          "Eligible  Transferee"  shall  mean and  include a  commercial  bank,
financial  institution or other "accredited investor" (as defined in Regulation
D of the Securities Act); provided,  however, that individual persons shall not
be included in this definition of Eligible Transferee.

          "Employee  Benefit Plans" shall have the meaning  provided in Section
5A.05.

          "End Date" shall mean, for any Margin Reduction Period,  the last day
of such Margin Reduction Period.

                                     -95-
<PAGE>

          "Environmental   Claims"  shall  mean  any  and  all  administrative,
regulatory or judicial actions, suits, formal demands, demand letters,  claims,
liens,  notices of non-compliance  or violation,  investigations or proceedings
relating  in any way to any  Environmental  Law or any  permit  issued,  or any
approval given,  under any such law (hereafter  "Claims"),  including,  without
limitation,  (a) any and all Claims by governmental  or regulatory  authorities
for  enforcement,  cleanup,  removal,  response,  remedial or other  actions or
damages  pursuant  to any  applicable  Environmental  Law,  and (b) any and all
Claims by any third party seeking damages, contribution,  indemnification, cost
recovery,  compensation or injunctive  relief in connection with alleged injury
or threat of injury to health, safety or the environment due to the presence of
Hazardous Materials.

          "Environmental Law" shall mean any applicable Federal, state, foreign
or local statute, law, rule,  regulation,  ordinance,  code, written guideline,
written  policy and rule of common law now or  hereafter  in effect and in each
case as amended,  and any binding  judicial  or  administrative  interpretation
thereof,  including any judicial or  administrative  order,  consent  decree or
judgment binding on the Borrower or any Subsidiary, as applicable, and relating
to the  environment,  occupational  safety and health or  Hazardous  Materials,
including,  without  limitation,  CERCLA;  RCRA;  the Federal  Water  Pollution
Control Act, 33  U.S.C.A.ss.2601  et seq.; the Toxic Substances Control Act, 15
U.S.C.ss.  2601 et seq.;  the Clean Air Act, 42  U.S.C.A.ss.  7401 et seq.; the
Safe Drinking Water Act, 42 U.S.C.A.ss.  3803 et seq.; the Oil Pollution Act of
1990, 33  U.S.C.A.ss.  2701 et seq.;  the Emergency  Planning and the Community
Right-to-Know Act of 1986, 42 U.S.C.A.ss. 11001 et seq.; the Hazardous Material
Transportation  Act, 49 U.S.C.A.ss.  1801 et seq.; the Occupational  Safety and
Health  Act,  29  U.S.C.A.ss.  651 et seq.;  and any state and local or foreign
counterparts or equivalents, in each case as amended from time to time.

          "Equity  Interests"  of any  Person  shall  mean any and all  shares,
interests,  rights to  purchase,  warrants,  options,  participations  or other
equivalents  of or  interests  in (however  designated)  equity of such Person,
including any preferred stock, any limited or general partnership  interest and
any limited liability company membership interest.

          "Equity  Investment"  shall mean any Investment  evidenced  solely by
Equity Interests.

          "ERISA"  shall mean the Employee  Retirement  Income  Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued  thereunder.  Section  references to ERISA are to ERISA, as in effect at
the date of this Agreement and any subsequent  provisions of ERISA,  amendatory
thereof, supplemental thereto or substituted therefor.

          "ERISA  Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) which  together  with the  Borrower or a  Subsidiary  of the Borrower
would be deemed to be a "single employer" within the meaning of Section 414(b),
(c), (m) or (o) of the Code.

          "Eurodollar  Loan"  shall  mean each Loan  designated  as such by the
Borrower at the time of the incurrence thereof or conversion thereto.

                                     -96-
<PAGE>

          "Eurodollar Rate" shall mean for any Interest Determination Date with
respect  to an  Interest  Period  for a  Eurodollar  Loan,  the rate per  annum
obtained  by dividing  (i)(a) the per annum rate for  deposits in Dollars for a
period  corresponding  to the  duration of the relevant  Interest  Period which
appears on Telerate Page 3750 at approximately 11:00 A.M. (London time) on such
Interest  Determination  Date or (b) if such rate does not  appear on  Telerate
Page 3750 on such  Interest  Determination  Date,  the rate per annum  (rounded
upward to the nearest  1/16 of one  percent)  at which  deposits in Dollars are
offered by  Administrative  Agent to first-class  banks in the London interbank
market, in the approximate amount of Administrative Agent's relevant Eurodollar
Loan and having a maturity  approximately  equal to such  Interest  Period,  at
approximately  11:00 A.M. (London time) on such Interest  Determination Date by
(ii) a  percentage  equal to 100%  minus the then  stated  maximum  rate of all
reserve requirements (including,  without limitation, any marginal,  emergency,
supplemental,  special or other reserves required by applicable law) applicable
to any member bank of the  Federal  Reserve  System in respect of  Eurocurrency
funding or liabilities as defined in Regulation D (or any successor category of
liabilities  under  Regulation D). The Eurodollar  Rate shall be rounded to the
next higher  multiple  of 1/100 of 1% if the rate is not such a  multiple.  The
reference to Telerate Page 3750 in this  definition  shall be construed to be a
reference to the relevant  page or any other page that may replace such page on
the Telerate  service or any other service that may be nominated by the British
Bankers'  Association as the  information  vendor for the purpose of displaying
British Bankers' Association Interest Settlement Rates for deposits in Dollars.

          "Event of Default" shall have the meaning provided in Section 10.

          "Excess Cash Flow" shall mean,  for any period,  the remainder of (i)
the sum of (a)  Adjusted  Consolidated  Net Income for such  period and (b) the
decrease,  if any, in Adjusted  Consolidated Working Capital from the first day
to the last day of such  period,  minus  (ii) the sum of (a) the  amount of all
Capital  Expenditures  and  Acquisition  CapEx  made  by the  Borrower  and its
Subsidiaries pursuant to Section 9.07(b) and (c) and (d) during such period, in
each case except to the extent financed with  Indebtedness  (including  without
limitation  proceeds of Revolving Loans or Swingline Loans hereunder),  (b) the
aggregate  principal amount of permanent principal payments of Indebtedness for
borrowed money of the Borrower and its Subsidiaries  (other than repayments (x)
made with proceeds of Indebtedness,  equity issuances,  asset sales or Recovery
Events and (y) of Loans, provided that repayments of Loans shall be included in
the deduction set forth in clause (ii)(b) above in determining Excess Cash Flow
if such  repayments  were (x)  required as a result of a Scheduled  Incremental
Term Loan Repayment under Section 4.02(b) or (y) made as a voluntary prepayment
with internally  generated funds (but in the case of a voluntary  prepayment of
Revolving  Loans  or  Swingline  Loans,  only to the  extent  accompanied  by a
voluntary reduction to the Total Revolving Loan Commitment in an equal amount))
during such  period and (c) the  increase,  if any,  in  Adjusted  Consolidated
Working Capital from the first day to the last day of such period.

          "Excess  Cash  Payment  Date" shall mean the date  occurring  95 days
after the last day of each  fiscal  year of the  Borrower  (beginning  with its
fiscal year ending June 30, 2002).

          "Excess  Cash  Payment  Period"  shall  mean,  with  respect  to  the
repayment required on each Excess Cash Payment Date, the immediately  preceding
fiscal year of the Borrower.

                                     -97-
<PAGE>

          "Exchange  Act" shall mean the  Securities  Exchange Act of 1934,  as
amended, and the rules and regulations promulgated thereunder.

          "Exchange Senior  Subordinated  Notes" shall mean Senior Subordinated
Notes which are substantially  identical  securities to the Senior Subordinated
Notes  issued  on or  prior  to  the  Effective  Date,  which  Exchange  Senior
Subordinated  Notes shall be issued pursuant to a registered  exchange offer or
private  exchange offer for the Senior  Subordinated  Notes and pursuant to the
Senior  Subordinated  Notes  Indenture.  In no event will the  issuance  of any
Exchange Senior  Subordinated Notes increase the aggregate  principal amount of
Senior  Subordinated  Notes then outstanding or otherwise result in an increase
in the interest rate applicable to the Senior Subordinated Notes.

          "Existing Credit Agreement" shall mean the Credit Agreement, dated as
of February 1, 2000, among Vanguard Health Systems,  Inc., as Borrower,  Morgan
Stanley Senior Funding,  Inc., as Administrative Agent, and various banks party
thereto from time to time.

          "Existing  Indebtedness"  shall have the meaning  provided in Section
7.22.

          "Existing Indebtedness Agreements" shall have the meaning provided in
Section 5A.05.

          "Existing  Investments"  shall  mean  those  Investments  held by the
Borrower and its  Subsidiaries  on the Effective Date and listed on Schedule XI
hereto.

          "Existing  Letters of  Credit"  shall have the  meaning  provided  in
Section 2.01(a).

          "Facing Fee" shall have the meaning provided in Section 3.01(d).

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

          "Fees" shall mean all amounts  payable  pursuant to or referred to in
Section 3.01.

          "Final  Maturity Date" shall mean, at any time,  the latest  Maturity
Date in respect of any Tranche of Loans.

          "First Union" shall mean First Union National Bank, in its individual
capacity.

          "Foreign  Pension  Plan"  means any plan,  fund  (including,  without
limitation,  any superannuation  fund) or other similar program  established or
maintained  outside the United  States of America by the Borrower or any one or
more of its Subsidiaries primarily for the benefit

                                     -98-
<PAGE>

of esmployees of the Borrower or such  Subsidiaries  residing outside the United
States of America,  which plan,  fund or other  similar  program  provides,  or
results  in,  retirement  income,  a  deferral  of income in  contemplation  of
retirement or payments to be made upon  termination  of  employment,  and which
plan is not subject to ERISA or the Code.

          "GAAP" shall have the meaning provided in Section 13.07(a).

          "GECC"  shall  mean  General  Electric  Capital  Corporation,  in its
individual capacity.

          "Hazardous  Materials"  shall  mean (a) any  petroleum  or  petroleum
products,  radioactive  materials,  asbestos in any form that is friable,  urea
formaldehyde   foam  insulation,   dielectric   fluid   containing   levels  of
polychlorinated  biphenyls,  and radon gas;  (b) any  chemicals,  materials  or
substances defined as or included in the definition of "hazardous  substances,"
"hazardous wastes," "hazardous  materials,"  "restricted  hazardous materials,"
"extremely   hazardous   wastes,"   "restrictive   hazardous   wastes,"  "toxic
substances,"  "toxic  pollutants,"  "contaminants" or "pollutants," or words of
similar meaning and regulatory effect under any applicable  Environmental  Law;
and (c) any other  chemical,  material  or  substance,  the Release of which is
prohibited, limited or regulated by any governmental authority.

          "Health Care Asset" shall mean (a) a medical surgical facility, acute
care  facility or  hospital,  psychiatric  hospital,  surgical  center,  health
maintenance organization, preferred provider organization, retirement center or
physician practice, (b) any asset held or used in the conduct of the businesses
of owning or operating any of the foregoing or any ancillary  business  related
to any of the  foregoing,  including,  without  limitation,  any medical office
building, diagnostic center, physical therapy center, home health care services
center,  skilled nursing facility or other health care service provider and (c)
the stock or other Equity Interests of any Person all or  substantially  all of
whose assets consist of any of the foregoing.

          "Health Care Joint Venture" shall mean a Person engaged  primarily in
the operation of businesses  utilizing Health Care Assets in which the Borrower
and its Wholly-Owned Subsidiaries collectively own less than 100% of the Equity
Interests.

          "Hospital  Property"  shall mean each  psychiatric  hospital or acute
care  hospital,  and the campus and Real  Property  on which such  hospital  is
located,  owned,  leased or operated by the Borrower or any of its Subsidiaries
(including the furniture, fixture and equipment thereon).

          "Incremental  Term Loan" shall have the  meaning  provided in Section
1.01(d).

          "Incremental  Term Loan Borrowing Date" shall mean each date on which
Incremental Term Loans are incurred pursuant to Section 1.01(d).

          "Incremental  Term Loan Commitment"  shall mean, for each Incremental
Term Loan Lender,  the commitment of such  Incremental Term Loan Lender to make
Incremental Term Loans pursuant to Section 1.01(b) on a given  Incremental Term
Loan  Borrowing  Date, as such  commitment  (x) is set forth in the  respective
Incremental  Term Loan  Commitment  Agreement

                                     -99-
<PAGE>

delivered  pursuant  to  Section  1.13(b)  and (y) may be reduced  pursuant  to
Section 4.02 or terminated pursuant to Sections 3.03 and/or 10.

          "Incremental   Term  Loan   Commitment   Agreement"   shall  mean  an
Incremental Term Loan Commitment Agreement substantially in the form of Exhibit
C (appropriately  completed and with such modifications as may be acceptable to
the Administrative Agent).

          "Incremental  Term Loan  Lender"  shall have the meaning  provided in
Section 1.13(b).

          "Incremental  Term Loan Maturity  Date" shall mean for any Tranche of
Incremental  Term Loans, the maturity date for such Tranche of Incremental Term
Loans set forth in the  Incremental  Term Loan  Commitment  Agreement  relating
thereto,  provided that the Maturity Date for all  Incremental  Term Loans of a
given Tranche shall be the same date.

          "Incremental Term Loan Tranches  Percentage" shall mean, with respect
to any mandatory  repayment of Incremental Term Loans and mandatory  reductions
to the Total Revolving Loan Commitment pursuant to Section 4.02(d), (e) and (g)
at any time, a fraction  (expressed as a percentage)  the numerator of which is
equal to the aggregate  principal amount of Incremental Term Loans  outstanding
at such  time  and the  denominator  of  which  is  equal to the sum of (i) the
aggregate  principal amount of all Incremental  Term Loans  outstanding at such
time plus  (ii) the Total  Revolving  Loan  Commitment  at such time or, if the
Total  Revolving  Loan  Commitment  has  terminated at such time, the aggregate
principal  amount of Revolving  Loans and Swingline  Loans and Letter of Credit
Outstandings at such time.

          "Incremental  Term Note" shall have the  meaning  provided in Section
1.05(a).

          "Indebtedness" shall mean, as to any Person, without duplication, (i)
all  indebtedness  (including  principal,  interest,  fees and charges) of such
Person for  borrowed  money or for the deferred  purchase  price of property or
services,  (ii) the maximum  amount  available to be drawn under all letters of
credit issued for the account of such Person and all unpaid drawings in respect
of such letters of credit,  (iii) all  Indebtedness  of the types  described in
clause (i), (ii),  (iv), (v), (vi) or (vii) of this  definition  secured by any
Lien on any property owned by such Person, whether or not such Indebtedness has
been assumed by such Person  (provided  that,  if the Person has not assumed or
otherwise  become  liable in respect of such  Indebtedness,  such  Indebtedness
shall be  deemed  to be in an  amount  equal to the  fair  market  value of the
property  to which  such  Lien  relates  as  determined  in good  faith by such
Person),  (iv) the aggregate  amount of Capitalized  Lease  Obligations of such
Person,  (v) all  obligations of such Person to pay a specified  purchase price
for goods or services,  whether or not delivered or accepted, i.e., take-or-pay
and similar obligations,  (vi) all Contingent Obligations of such Person to the
extent known and  quantifiable,  and (vii) all  obligations  under any Interest
Rate Protection  Agreement or Other Hedging Agreement or under any similar type
of agreement or  arrangement;  provided that this  definition  of  Indebtedness
shall not include  Current  Liabilities of such Person incurred in the ordinary
course of business.

                                     -100-
<PAGE>

          "Intercompany  Note"  shall mean a  promissory  note  evidencing  the
intercompany Indebtedness of the Borrower and its Subsidiaries substantially in
the form of Exhibit M.

          "Interest  Determination  Date"  shall  mean,  with  respect  to  any
Eurodollar  Loan,  the second  Business  Day prior to the  commencement  of any
Interest Period relating to such Eurodollar Loan.

          "Interest Period" shall have the meaning provided in Section 1.09.

          "Interest  Rate  Protection  Agreement"  shall mean any interest rate
swap agreement,  interest rate cap agreement,  interest rate collar  agreement,
interest rate hedging agreement, interest rate floor agreement or other similar
agreement or arrangement.

          "Investment" shall have the meaning provided in Section 9.05.

          "Issuing Lenders" shall mean the  Administrative  Agent and any other
Lender  which at the  request  of the  Borrower  and with  the  consent  of the
Administrative Agent (which consent shall not be unreasonably withheld) agrees,
in such Lender's sole  discretion,  to become an Issuing Lender for the purpose
of issuing Letters of Credit pursuant to Section 2. The only Issuing Lenders on
the  Effective  Date are the  Administrative  Agent  and,  with  respect to the
Existing Letter Credit only, LaSalle Bank National Association.

          "Joinder  Agreement"  shall mean a Joinder in Subsidiaries  Guaranty,
Security Agreement and Pledge Agreement substantially in the form of Exhibit O.

          "Joint Lead Arrangers"  shall have the meaning  provided in the first
paragraph hereof.

          "L/C  Supportable  Obligations"  shall  mean (i)  obligations  of the
Borrower or any of its Subsidiaries incurred in the ordinary course of business
with respect to workers compensation,  surety bonds and other similar statutory
obligations  and (ii) such  other  obligations  of the  Borrower  or any of its
Subsidiaries  (other  than in respect of the Senior  Subordinated  Notes or any
Permitted  Subordinated  Notes) as are otherwise permitted to exist pursuant to
(or otherwise not prohibited by) the terms of this Agreement.

          "Leasehold"  of any Person  shall  mean all of the  right,  title and
interest  of such  Person as lessee or  licensee  in, to and under any lease or
license of land, improvements and/or fixtures.

          "Lender" shall mean each financial  institution listed on Schedule I,
as well as any Person which  becomes a "Lender"  hereunder  pursuant to Section
1.13, 1.14 or 13.04(b).

          "Lender  Default"  shall  mean (i) the  refusal  (which  has not been
retracted)  or the  failure of a Lender to make  available  its  portion of any
Borrowing  (including any Mandatory Borrowing) in violation of the requirements
of this  Agreement  or to fund its portion of any  unreimbursed  payment  under
Section 2.04(c) or (ii) a Lender having notified in writing the

                                     -101-
<PAGE>

Borrower and/or the Administrative Agent that it does not intend to comply with
its obligations under Section 1.01 or 2.

          "Letter  of  Credit"  shall  have the  meaning  provided  in  Section
2.01(a).

          "Letter of Credit  Fee" shall have the  meaning  provided  in Section
3.01(c).

          "Letter of Credit  Outstandings"  shall mean, at any time, the sum of
(i) the aggregate  Stated Amount of all  outstanding  Letters of Credit at such
time and (ii) the amount of all Unpaid Drawings at such time.

          "Letter of Credit Request" shall have the meaning provided in Section
2.03(a).

          "Lien" shall mean any mortgage,  pledge,  hypothecation,  assignment,
deposit arrangement,  encumbrance,  lien (statutory or other) or other security
agreement  or  preferential  arrangement  of  any  kind  or  nature  whatsoever
(including,  without limitation,  any conditional sale or other title retention
agreement,  any lien  evidenced by a financing  or similar  statement or notice
filed under the UCC or any other similar  recording or notice statute,  and any
lease having substantially the same effect as any of the foregoing).

          "Loan"  shall  mean  each  Revolving  Loan,  Swingline  Loan and each
Incremental Term Loan (if any).

          "Majority  Lenders"  of any Tranche  shall mean those  Non-Defaulting
Lenders which would  constitute the Required  Lenders under, and as defined in,
this  Agreement  (without  giving  effect  to the  proviso  contained  in  such
definition)  if all  outstanding  Obligations  of the other Tranches under this
Agreement  were repaid in full and all  Commitments  with respect  thereto were
terminated.

          "Managed Physician Practices" shall mean Physician practices owned or
managed by a Subsidiary of the Borrower.

          "Management  Agreements"  shall have the meaning  provided in Section
5A.05.

          "Mandatory  Borrowing"  shall have the  meaning  provided  in Section
1.01(c).

          "Margin Reduction Period" shall mean each period which shall commence
on the date occurring after the Effective Date upon which respective  officer's
certificate is delivered pursuant to Section 8.01(d) (together with the related
financial  statements  pursuant to Section  8.01(a) or (b), as the case may be)
and  which  shall  end on the date of  actual  delivery  of the next  officer's
certificates  pursuant to Section 8.01(d) (and related financial statements) or
the latest date on which such next officer's certificate (and related financial
statements) is required to be so delivered.

          "Margin Stock" shall have the meaning provided in Regulation U.

          "Material Leases" shall have the meaning provided in Section 5A.05.

                                     -102-
<PAGE>

          "Maturity Date" shall mean, with respect to any Tranche of Loans, the
Revolving Loan Maturity Date, the Incremental  Term Loan Maturity Date for such
Tranche of Loans or the Swingline Expiry Date, as the case may be.

          "Maximum  Eurodollar  Borrowing Number" shall mean (x) in the case of
Revolving  Loans,  10 and (y) in the case of any  Tranche of  Incremental  Term
Loans,  10 or such other number as may be  specified as the Maximum  Eurodollar
Borrowing  Number for such  Tranche  in the  respective  Incremental  Term Loan
Commitment  Agreement (although any Incremental Term Loan Commitment  Agreement
providing for Incremental Term Loans which will be added to an existing Tranche
shall not specify a Maximum Eurodollar  Borrowing Number for such Tranche which
differs from the Maximum Eurodollar Borrowing Number already applicable to such
Tranche).

          "Maximum Swingline Amount" shall mean $20,000,000.

          "MSCP Group" shall mean Morgan  Stanley  Capital  Partners III, L.P.,
MSCP III 892 Investors,  L.P., Morgan Stanley Capital  Investors,  L.P., Morgan
Stanley Dean Witter Capital Partners IV, L.P., MSDW IV 892 Investors,  L.P. and
Morgan Stanley Dean Witter Capital Investors IV, L.P.

          "Minimum  Borrowing  Amount"  shall  mean  (i) for  Swingline  Loans,
$100,000,  (ii) for Revolving Loans,  $1,000,000 and (iii) for Incremental Term
Loans,  $1,000,000  or such other amount as may be specified in the  respective
Incremental Term Loan Commitment  Agreement  (although an Incremental Term Loan
Commitment Agreement providing for the addition of Incremental Term Loans to an
existing Tranche may not specify a different Minimum Borrowing Amount from that
which already applies to the respective Tranche).

          "Moody's" shall mean Moody's Investors Service, Inc.

          "Morgan  Stanley  Holders" shall mean (a) the MSCP Group,  (b) Morgan
Stanley & Company  Incorporated  and its  Subsidiaries  and any other Person of
which any member of the MSCP Group is a direct or indirect Subsidiary,  (c) any
Subsidiary  of a Person  described in  preceding  clause (a) or (b), or (d) any
investment fund or vehicle managed by any of the Persons described in preceding
clauses (a) through  (c) or the  general  partner of any Person  referred to in
preceding clauses (a) through (c).

          "Mortgage"  shall mean each mortgage,  deed to secure debt or deed of
trust  pursuant to which any Credit Party shall have granted to the  Collateral
Agent a mortgage lien on such Credit Party's Mortgaged Property.

          "Mortgage Policy" shall have the meaning provided in Section 5A.11.

          "Mortgaged Property" shall mean each parcel of Real Property owned or
leased by any Credit Party, as applicable, which is encumbered by a Mortgage.

          "MSSF"  shall  mean  Morgan  Stanley  Senior  Funding,  Inc.,  in its
individual capacity.

                                     -103-
<PAGE>

          "NAIC"   shall   mean   the   National   Association   of   Insurance
Commissioners.

          "Net Debt Proceeds"  shall mean,  with respect to each  incurrence of
Indebtedness  for  borrowed  money by any  Person,  the cash  proceeds  (net of
underwriting  discounts and commissions and other  reasonable  costs associated
therewith)  received  by such  Person from the  respective  incurrence  of such
Indebtedness for borrowed money.

          "Net Equity  Proceeds"  shall mean,  with respect to each issuance or
sale of any Equity Interests by any Person or any capital  contribution to such
Person,  the cash proceeds (net of  underwriting  discounts and commissions and
other reasonable costs associated  therewith)  received by such Person from the
respective  sale or issuance  of its Equity  Interests  or from the  respective
capital contribution.

          "Net  Insurance  Proceeds"  shall mean,  with respect to any Recovery
Event,  the cash  proceeds  (net of  reasonable  costs  and taxes  incurred  in
connection  with such  Recovery  Event)  received by the  respective  Person in
connection with such Recovery Event.

          "Net Sale Proceeds"  shall mean,  with respect to any asset sale, the
gross cash proceeds  (including  any cash  received by way of deferred  payment
pursuant to a promissory  note,  receivable or otherwise,  but only as and when
received) received from such sale of assets, net of (i) the reasonable costs of
such sale (including fees and  commissions,  payments of unassumed  liabilities
relating to the assets sold and required  payments of any  Indebtedness  (other
than  Indebtedness  under the Credit Documents or any Indebtedness  owed to the
Borrower or a Subsidiary  thereof)  which is secured by the  respective  assets
which were sold), (ii) the marginal increased amount of all taxes to the extent
actually  payable in cash  during (or within 120 days after) the fiscal year in
which the respective asset sale occurred as a direct  consequence of such asset
sale  and  (iii)  in  the  event  of  any  such  sale  of  assets  owned  by  a
non-Wholly-Owned  Subsidiary that is a Non-Guarantor Subsidiary, net of amounts
received by third Persons which own Equity Interests in such Subsidiary so long
as such amounts do not exceed such Persons'  proportionate share thereof (based
upon such Persons' relative holdings of Equity Interests in such Subsidiary).

          "Non-Defaulting Lender" shall mean and include each Lender other than
a Defaulting Lender.

          "Non-Guarantor  Subsidiary" shall mean any Subsidiary of the Borrower
not party to the Subsidiaries Guaranty.

          "Note" shall mean each Revolving Note, each Incremental Term Note and
the Swingline Note.

          "Notice of  Borrowing"  shall have the  meaning  provided  in Section
1.03(a).

          "Notice of  Conversion"  shall have the  meaning  provided in Section
1.06.

          "Notice  Office"  shall mean the office of the  Administrative  Agent
located at 101 North Tryon Street,  Fifteenth Floor, Charlotte,  North Carolina
28255, Attention: James

                                     -104-
<PAGE>

Young, or such other office as the Administrative Agent may hereafter designate
in writing as such to the other parties hereto.

          "Obligations"  shall  mean all  amounts  owing to the  Administrative
Agent,  the  Collateral  Agent  or any  Lender  pursuant  to the  terms of this
Agreement or any other Credit Document.

          "Other Hedging Agreements" shall mean any foreign exchange contracts,
currency swap agreements,  commodity  agreements or other similar agreements or
arrangements designed to protect against the fluctuations in currency values.

          "Participant" shall have the meaning provided in Section 2.04(a).

          "Payment  Office" shall mean the office of the  Administrative  Agent
located at 101 North Tryon  Street,  Charlotte,  North  Carolina  28255 or such
other office as the Administrative  Agent may hereafter designate in writing as
such to the other parties hereto.

          "PBGC"   shall  mean  the  Pension   Benefit   Guaranty   Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.

          "Percentage"  of  any  Lender  at any  time  shall  mean  a  fraction
(expressed  as a  percentage)  the  numerator  of which is the  Revolving  Loan
Commitment  of such  Lender  at such time and the  denominator  of which is the
Total Revolving Loan  Commitment at such time,  provided that if the Percentage
of any Lender is to be determined after the Total Revolving Loan Commitment has
been  terminated,  then the  Percentages  of the  Lenders  shall be  determined
immediately prior (and without giving effect) to such termination.

          "Permitted  Acquisition"  shall have the meaning  provided in Section
9.02(viii).

          "Permitted   Acquisition   Compliance   Certificate"   shall  mean  a
certificate,  signed by an Authorized Officer of the Borrower, delivered to the
Administrative  Agent  in  connection  with  a  Permitted  Acquisition,   which
certificate shall represent and warrant that (i) the purchase agreement and all
related  agreements  evidencing  such  acquisition  shall,  on  the  date  such
acquisition  is  consummated,  have been duly  executed  and  delivered  by the
parties  thereto  and shall be in full force and effect,  (ii) the  acquisition
shall be consummated  in accordance  with the purchase  agreement,  the related
agreements  evidencing such  acquisition and all applicable law (excluding such
violations  of law which could not  reasonably  have,  individually,  or in the
aggregate for all such  violations,  a material adverse effect on the business,
property, assets,  liabilities (actual or contingent),  operations or condition
(financial  or  otherwise)  of the  Borrower  and its  Subsidiaries  taken as a
whole),  (iii) true and correct  copies of the purchase  agreement  and related
agreements evidencing such acquisition have been delivered to the Lenders, (iv)
both before and after giving effect to the proposed acquisition,  no Default or
Event of Default is or shall be in  existence,  (v) no  material  environmental
liabilities are being assumed by the Borrower or its  Subsidiaries  pursuant to
such  acquisition,  and (vi) the  Borrower  is and will be in  compliance  with
Sections  9.08 and 9.09 on a  Post-Test  Period Pro Forma  Basis  after  giving
effect to the respective Permitted  Acquisition and all Acquisition CapEx to be
made in  connection  therewith.  Such

                                     -105-
<PAGE>

Compliance  Certificate  shall also (x) include a statement of all  Acquisition
CapEx required to be made in connection  with such  acquisition,  (y) set forth
the  amount,  if any,  of the  Retained  Excess  Cash Flow Amount to be used in
connection  with the  respective  Permitted  Acquisition  and (z) set forth the
calculations  required to establish  whether the Borrower is in compliance with
the provisions of Sections 9.01 through 9.05,  inclusive and 9.07 through 9.09,
inclusive,  and  Section  9.17,  both  before and after  giving  effect to such
Permitted Acquisition.  Notwithstanding  anything to the contrary above in this
definition, in the event that a Permitted Acquisition Compliance Certificate is
required to be delivered  pursuant to Section  9.02(viii)  and the Borrower has
not  delivered a Permitted  Acquisition  Compliance  Certificate  covering  any
theretofore  consummated  Permitted   Acquisitions,   such  required  Permitted
Acquisition Compliance Certificate shall include all of the representations and
warranties  (except  clause  (iii)  above)  set forth in the  second  preceding
sentence  (and  include  the  information  and  calculations  described  in the
immediately   preceding   sentence)  with  respect  to  all  such   theretofore
consummated Permitted Acquisitions.

          "Permitted  Encumbrances"  shall  mean,  with  respect  to  any  Real
Property,  such exceptions to title which (i) individually or in the aggregate,
do not  materially  detract from the value of such Real  Property,  (ii) in the
case of  Mortgaged  Property  described  in  Section  5A.11,  are set  forth on
Schedule B to the Mortgage Policy relating to such Mortgaged  Property or (iii)
are  otherwise  acceptable  to  the  Administrative  Agent  in  its  reasonable
discretion.

          "Permitted Liens" shall have the meaning provided in Section 9.01.

          "Permitted  Subordinated Note Documents" shall mean all documentation
(including,  without  limitation,  any indenture or purchase agreement) entered
into in connection with any issuance of Permitted Subordinated Notes.

          "Permitted Subordinated Notes" shall mean unsecured subordinated debt
securities of the Borrower (which may be guaranteed on a subordinated  basis by
Subsidiary  Guarantors),  the terms of which (and  conditions  surrounding  the
issuance of which) satisfy the relevant requirements of Section 9.04(xv).

          "Person" shall mean any individual,  partnership,  limited  liability
company,  joint  venture,  firm,  corporation,   association,  trust  or  other
enterprise or any government or political subdivision or any agency, department
or instrumentality thereof.

          "Physician" means,  collectively,  with respect to any hospital owned
or leased and operated by the Borrower or any of its  Subsidiaries,  physicians
employed by or affiliated with such hospital,  Persons in the immediate  family
of such  physicians  and any Person  directly or  indirectly  controlled  by or
acting for the benefit of one or more such  physicians or families.  As used in
this  definition of  "Physicians,"  the term  "control"  means the  possession,
directly or  indirectly,  of the power to direct or cause the  direction of the
management  and policies of a Person,  whether  through the ownership of voting
securities, by contract or otherwise.

          "Physician Support  Obligation" means a loan to or on behalf of, or a
guarantee  of  income  to  or  Indebtedness   of,  a  physician  or  healthcare
professional providing service to patients

                                     -106-
<PAGE>

in the service area of a hospital or other health care facility operated by the
Borrower or any of its Subsidiaries made or given by the Borrower or any of its
Subsidiaries (i) in the ordinary course of its business, and (ii) pursuant to a
written agreement having a period not to exceed five years.

          "PIK Preferred Stock" shall mean the 21,600 shares of preferred stock
of the  Borrower,  $.01 par  value per  share,  held on the  Effective  Date by
MacNeal Memorial Hospital  Association and any additional shares thereof issued
as pay-in-kind Dividends.

          "Plan"  shall mean any  pension  plan as  defined in Section  3(2) of
ERISA,  which is  maintained  or  contributed  to by (or to  which  there is an
obligation to contribute of) the Borrower or a Subsidiary of the Borrower or an
ERISA  Affiliate,  and each  such  plan for the five  year  period  immediately
following  the  latest  date on which  the  Borrower,  or a  Subsidiary  of the
Borrower or an ERISA Affiliate maintained,  contributed to or had an obligation
to contribute to such plan.

          "Pledge Agreement" shall have the meaning provided in Section 5A.08.

          "Pledge Agreement  Collateral" shall mean all "Collateral" as defined
in the Pledge Agreement.

          "Post-Test   Period  Pro  Forma  Basis"  shall  mean  the  making  of
calculations  on a pro  forma  basis  in  accordance  with,  and to the  extent
required by, the provisions of Section 11.02,  giving effect to the adjustments
required to be made therein for  determinations on a Post-Test Period Pro Forma
Basis.

          "Prime   Lending   Rate"  shall  mean  the  rate   announced  by  the
Administrative  Agent from time to time as its prime  lending  rate,  the Prime
Lending Rate to change when and as such prime lending rate  changes.  The Prime
Lending Rate is a reference rate and does not necessarily  represent the lowest
or best rate actually  charged to any customer.  The  Administrative  Agent may
make  commercial  loans or other loans at rates of interest  at, above or below
the Prime Lending Rate.

          "Pro Forma Basis" shall mean the making of any  calculation  on a pro
forma basis in accordance  with, and to the extent  required by, the provisions
of Section 11.02 hereof,  but without making the adjustments  described therein
for determinations to be made on a Post-Test Period Pro Forma Basis.

          "Projections"  shall mean the financial  assumptions  and projections
prepared  by  the  Borrower,  dated  July  17,  2001  in  connection  with  the
Transaction and delivered to the Administrative  Agent and the Lenders prior to
the Effective Date.

          "Quarterly  Payment  Date" shall mean the last  Business  day of each
September, December, March and June occurring after the Effective Date.

          "Qualified  Public  Offering"  shall  mean  an  underwritten   public
offering of common stock of the Borrower  which  generates cash proceeds to the
Borrower of at least $50,000,000.

                                     -107-
<PAGE>

          "RCRA" shall mean the Resource  Conservation and Recovery Act, as the
same may be amended from time to time, 42 U.S.C. ss. 6901 et seq.

          "Real  Property"  of any Person  shall mean all the right,  title and
interest of such Person in and to land,  improvements  and fixtures,  including
Leaseholds.

          "Recovery Event" shall mean the receipt by the Borrower or any of its
Subsidiaries of any cash insurance proceeds or condemnation  awards payable (i)
by reason of theft, loss,  physical  destruction or damage or any other similar
event with  respect to any  property  or assets of the  Borrower  or any of its
Subsidiaries  and (ii) under any policy of insurance  required to be maintained
under Section 8.03.

          "Refinancing"  shall mean the repayment of all outstanding  loans and
all  other  obligations  (and the  termination  of all  commitments)  under the
Existing Credit Agreement, as described in Section 5A.07.

          "Register" shall have the meaning provided in Section 13.16.

          "Regulation  D" shall mean  Regulation D of the Board of Governors of
the Federal  Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing reserve requirements.

          "Regulation  O" shall mean  Regulation O of the Board of Governors of
the Federal  Reserve System as from time to time in effect and any successor to
all or a portion thereof.

          "Regulation  T" shall mean  Regulation T of the Board of Governors of
the Federal  Reserve System as from time to time in effect and any successor to
all or a portion thereof.

          "Regulation  U" shall mean  Regulation U of the Board of Governors of
the Federal  Reserve System as from time to time in effect and any successor to
all or a portion thereof.

          "Regulation  X" shall mean  Regulation X of the Board of Governors of
the Federal  Reserve System as from time to time in effect and any successor to
all or a portion thereof.

          "Release" shall have the meaning provided such term in CERCLA.

          "Relevant  Incremental Term Loan Commitment  Percentage"  shall mean,
with respect to any mandatory reduction of any Incremental Term Loan Commitment
of any  Tranche  at any time,  a  fraction  (expressed  as a  percentage),  the
numerator of which is equal to the aggregate  amount of  Incremental  Term Loan
Commitments of such Tranche at such time and the  denominator of which is equal
to the  aggregate  amount  of all  Incremental  Term  Loan  Commitments  of all
Tranches at such time.

          "Relevant  Incremental Term Loan Percentage" shall mean, with respect
to any voluntary  prepayment or mandatory  repayment of a particular Tranche of
Incremental Term Loans at any time, a fraction (expressed as a percentage), the
numerator of which is equal to the aggregate  outstanding  principal  amount of
Incremental  Term  Loans of such  Tranche at such time

                                     -108-
<PAGE>

and the denominator of which is equal to the aggregate  principal amount of all
Incremental  Term  Loans at such  time,  provided  that to the  extent any such
voluntary  prepayment or mandatory  prepayment is being applied to a particular
Tranche of Incremental Term Loans, as provided in Section  4.01(a)(vi)(A)(1) or
4.02(h)(iv)(1),  as the  case  may  be,  the  Relevant  Incremental  Term  Loan
Percentage  of such Tranche  shall mean a fraction  (expressed as a percentage)
the numerator of which is equal to the aggregate  outstanding  principal amount
of Scheduled  Incremental Term Loan Repayments of such Tranche occurring within
twelve months  following any such prepayment or repayment,  as the case may be,
and the denominator of which is equal to the aggregate  principal amount of all
Scheduled  Incremental Term Loan Repayments of all Tranches of Incremental Term
Loans  occurring   within  twelve  months  following  any  such  prepayment  or
repayment, as the case may be.

          "Replaced Lender" shall have the meaning provided in Section 1.14.

          "Replacement Lender" shall have the meaning provided in Section 1.14.

          "Reportable  Event" shall mean an event  described in Section 4043(c)
of ERISA with respect to a Plan that is subject to Title IV of ERISA other than
those events as to which the 30-day  notice  period is waived under  subsection
 .22, .23, .25, .27 or .28 of PBGC Regulation Section 4043.

          "Required   AHCCS   Amount"   shall  mean,  on  any  date  for  which
Consolidated Debt is being determined,  (x) if the date for which  Consolidated
Debt is being  determined is within seven days prior to or seven days after the
last day of any fiscal  quarter of the Borrower,  the aggregate  amount of cash
and Cash  Equivalents  which are  required to be  deposited  with,  or held by,
Subsidiaries  of the Borrower that have  contracts with the Arizona Health Care
Cost Containment  System to arrange health care services for Medicare patients,
to the extent such cash or Cash  Equivalents,  as the case may be, are required
by  the  Arizona  Health  Care  Cost   Containment   System  (or  the  relevant
governmental  authorities  having  jurisdiction  over same) to remain with such
Subsidiaries on the date for which Consolidated Debt is being determined or (y)
if Consolidated Debt is being determined for a date which does not occur within
seven days prior to, or seven days after, the last day of any fiscal quarter of
the Borrower,  the amount  determined  pursuant to preceding clause (x) for the
last day of the fiscal quarter of the Borrower most recently ended prior to the
date for which Consolidated Debt is being determined.

          "Required  Lenders"  shall mean  Non-Defaulting  Lenders,  the sum of
whose  outstanding  principal of Term Loans and Revolving Loan  Commitments (or
after the termination of the Revolving Loan Commitments,  outstanding Revolving
Loans and Percentage of outstanding  principal of Swingline Loans and Letter of
Credit  Outstandings)  represent  an amount  greater than 50% of the sum of the
outstanding  principal amount of all Term Loans of  Non-Defaulting  Lenders and
the Total  Revolving  Loan  Commitment  (or after the  termination of the Total
Revolving  Loan  Commitment,  the sum of the then total  outstanding  Revolving
Loans  of  Non-Defaulting   Lenders  and  the  aggregate   Percentages  of  all
Non-Defaulting  Lenders of the total  outstanding  principal of Swingline Loans
and Letter of Credit  Outstandings at such time),  provided that from and after
such  time  as  when  the  Borrower  has  obtained  at  least  $125,000,000  of
Incremental Term Loan Commitments,  Required Lenders shall mean (other than for
purposes

                                     -109-
<PAGE>

of taking  action  pursuant  to the last  paragraph  of Section 10 or
causing enforcement  actions to be taken pursuant to the Subsidiaries  Guaranty
or Security Documents) those Non-Defaulting  Lenders which would constitute the
Required Lenders as otherwise provided above if the percentage "50%" above were
changed to "66-2/3%".

          "Retained  Excess Cash Flow Amount" shall initially mean $0, provided
that (w) on each  Excess  Cash  Payment  Date  where  Excess  Cash Flow for the
relevant  Excess Cash Payment Period is less than $0, the Retained  Excess Cash
Flow Amount shall be decreased by such amount  (expressed as a positive  amount
for  purposes of such  deduction),  (x) on each Excess Cash  Payment Date where
Excess Cash Flow for the relevant  Excess Cash  Payment  Period is in excess of
$1,000,000, the Retained Excess Cash Flow Amount shall be increased (so long as
any required  repayments of Loans and/or  reductions of Commitments are made as
required by Section  4.02(f)) by an amount equal to that portion of Excess Cash
Flow for the relevant Excess Cash Payment Period in excess of $1,000,000  which
is  permitted  to be retained by the  Borrower  pursuant to the  provisions  of
Section  4.02(f),  (y) on the date any Permitted  Acquisition is effected which
involves a  utilization  of the  Retained  Excess  Cash Flow  Amount as then in
effect in accordance  with the provisions of clause (z) of the first proviso to
Section  9.02(viii),  the Retained  Excess Cash Flow Amount shall be reduced by
the aggregate  amount of consideration so justified and (z) the Retained Excess
Cash Flow  Amount  shall be reduced  on the date of the  making of any  Capital
Expenditure pursuant to Section 9.07(e)(iii) by the amount thereof.

          "Revolving Loan" shall have the meaning provided in Section 1.01(a).

          "Revolving Loan Commitment"  shall mean, for each Lender,  the amount
set forth  opposite such Lender's name in Schedule I directly  below the column
entitled  "Revolving Loan  Commitment," as same may be (x) reduced from time to
time  pursuant to Sections  3.02,  3.03 and/or 10 or (y) adjusted  from time to
time as a result of assignments to or from such Lender pursuant to Section 1.14
or 13.04(b).

          "Revolving Loan Maturity Date" shall mean July 31, 2006.

          "Revolving Loan Tranche  Percentage"  shall mean, with respect to any
mandatory  repayment of Loans and mandatory  reductions to the Total  Revolving
Loan  Commitment  pursuant  to  Section  4.02(d),  (e) and (g) at any  time,  a
fraction  (expressed as a  percentage),  the numerator of which is equal to the
Total  Revolving Loan  Commitment at such time or, if the Total  Revolving Loan
Commitment  has  terminated  at such time,  the aggregate  principal  amount of
Revolving  Loans and Swingline  Loans and the Letter of Credit  Outstandings at
such time and the denominator of which is equal to the sum of (i) the aggregate
principal amount of all Term Loans outstanding at such time plus (ii) the Total
Revolving  Loan  Commitment  at such  time  or,  if the  Total  Revolving  Loan
Commitment  has  terminated  at such time,  the aggregate  principal  amount of
Revolving  Loans and Swingline  Loans and the Letter of Credit  Outstandings at
such time.

          "Revolving Note" shall have the meaning provided in Section 1.05(a).

          "S&P" shall mean Standard & Poor's Ratings Services.

                                     -110-
<PAGE>

          "Scheduled  Incremental  Term Loan Repayment"  shall have the meaning
provided in Section 4.02(b).

          "Scheduled  Incremental  Term Loan  Repayment  Date"  shall  have the
meaning provided in Section 4.02(b).

          "SEC" shall have the meaning provided in Section 8.01(g).

          "Section 4.04(b)(ii)  Certificate" shall have the meaning provided in
Section 4.04(b).

          "Secured Creditors" shall have the meaning provided in the respective
Security Documents.

          "Securities  Act" shall mean the  Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.

          "Security  Agreement"  shall  have the  meaning  provided  in Section
5A.10.

          "Security  Agreement  Collateral"  shall  mean  all  "Collateral"  as
defined in the Security Agreement.

          "Security  Documents"  shall mean and  include  each of the  Security
Agreement,  the Pledge  Agreement,  each Mortgage and,  after the execution and
delivery thereof, each Additional Security Document.

          "Senior   Subordinated   Note   Documents"   shall  mean  the  Senior
Subordinated  Note  Indenture,  the  Senior  Subordinated  Notes and each other
document  or  agreement  relating to the  issuance  of the Senior  Subordinated
Notes.

          "Senior Subordinated Note Indenture" shall mean the Indenture,  dated
as of July 30, 2001, between the Borrower,  the Subsidiary  Guarantors and Bank
One Trust Company,  N.A., as Trustee thereunder,  as in effect on the Effective
Date and as the same may be amended, modified or supplemented from time to time
in accordance with the terms hereof and thereof.

          "Senior  Subordinated  Notes" shall mean the Borrower's 9-3/4% Senior
Subordinated  Notes due 2011 issued  pursuant to the Senior  Subordinated  Note
Indenture,  as in effect on the Effective  Date and as the same may be amended,
modified or supplemented  from time to time in accordance with the terms hereof
and thereof. As used herein, the term "Senior Subordinated Notes" shall include
any  Exchange  Senior   Subordinated   Notes  issues  pursuant  to  the  Senior
Subordinated  Note  Indenture in exchange for  theretofore  outstanding  Senior
Subordinated  Notes, as contemplated by the Offering  Memorandum dated July 20,
2001, and the definition of Exchange Senior Subordinated Notes.

          "Shareholders"  shall mean each  Person  which owns any shares of any
class of capital stock of the Borrower on the Effective Date.

                                     -111-
<PAGE>

          "Shareholders' Agreements" shall have the meaning provided in Section
5A.05.

          "Specified  Construction  Project" shall mean a construction  project
undertaken by the Borrower or a Subsidiary  Guarantor for the construction of a
Hospital  Property  or other  Health  Care  Assets  that are to be owned by the
Borrower  or such  Subsidiary  Guarantor  provided  that  (i) a  project  shall
constitute a Specified  Construction Project only if the respective Health Care
Assets are to be owned by the Borrower or such  Subsidiary  Guarantor  and have
been  designated  as a  "Specified  Construction  Project"  in  writing  by the
Borrower to the  Administrative  Agent,  which writing shall certify compliance
with the  requirements of this definition and shall set forth the  calculations
(in reasonable  detail) required to establish  compliance with the requirements
of succeeding  clause (v)),  (ii) no Default or Event of Default shall exist on
the date of any designation of a project as a Specified  Construction  Project,
(iii) each project designated as a Specified  Construction Project shall remain
a Specified Construction Project until the first to occur of (x) the date which
is two years after such project was  designated  by the Borrower as a Specified
Construction  Project  (which  designation  shall not occur any later  than the
first  date  on  which  actual  construction  has  commenced  on  the  Specific
Construction  Project)  and (y) the first day on which  respective  Health Care
Asset provides treatment or other health services to its first patient, (iv) on
the earlier of the dates  specified in preceding  clause (iii),  the respective
construction project shall cease to constitute a Specified Construction Project
and (v) the  Consolidated  Senior  Leverage  Ratio  (calculated  on a Post-Test
Period  Pro  Forma  Basis)  shall  be less  than  2.5:1.00  at the  time of any
designation of a project as a Specified  Construction  Project. In addition, to
the extent the Borrower or any Subsidiary Guarantor purchases any Real Property
as contemplated in the last sentence of Section  9.07(d),  the requirements set
forth  in  clauses  (ii)  and (v) of the  immediately  preceding  sentence  are
satisfied  at  the  time  of  such  purchase  and  the  Borrower  notifies  the
Administrative Agent in writing that it wishes to treat such Real Property as a
Specified  Construction  Project,  such Real  Property  shall be deemed to be a
Specified  Construction  Project  for the  purposes  hereof for a period not to
exceed  15  months,  at which  time  such  Real  Property  shall  cease to be a
Specified  Construction  Project  unless  the  Borrower  designates  such  Real
Property as a "Specified Construction Project" in writing as provided in clause
(i) of the immediately  preceding  sentence and each of the other  requirements
set forth above in this definition are satisfied at such time.

          "Standby Letter of Credit" shall have the meaning provided in Section
2.01(a).

          "Start Date" shall mean, with respect to any Margin Reduction Period,
the first day of such Margin Reduction Period.

          "Stated Amount" of each Letter of Credit shall mean, at any time, the
maximum  amount  available  to be drawn  thereunder  (in each  case  determined
without regard to whether any conditions to drawing could then be met).

          "Subsidiaries  Guaranty"  shall have the meaning  provided in Section
5A.09.

          "Subsidiary"  shall mean, as to any Person,  (i) any corporation more
than 50% of whose  stock of any class or  classes  having by the terms  thereof
ordinary voting power to elect a majority of the directors of such  corporation
(irrespective  of  whether  or not at the time stock of

                                     -112-
<PAGE>

any class or classes of such corporation  shall have or might have voting power
by reason of the  happening  of any  contingency)  is at the time owned by such
Person and/or one or more Subsidiaries of such Person and (ii) any partnership,
limited liability company, association,  joint venture or other entity in which
such Person and/or one or more  Subsidiaries of such Person has more than a 50%
equity interest at the time. Except as otherwise specified herein or unless the
context  otherwise  requires,  references  in  this  Agreement  to one or  more
"Subsidiaries" are to Subsidiaries of the Borrower.

          "Subsidiary  Guarantor"  shall mean each  Subsidiary  of the Borrower
designated as a "Subsidiary  Guarantor" on Schedule VI hereto or which executes
the  Subsidiaries  Guaranty  after the Effective Date pursuant to Section 9.14,
provided that any such Person shall cease to constitute a Subsidiary  Guarantor
upon its  release  from the  Subsidiaries  Guaranty  in  accordance  with  this
Agreement and the Subsidiaries Guaranty.

          "Supermajority   Lenders"   of   any   Tranche   shall   mean   those
Non-Defaulting  Lenders which would  constitute the Required Lenders under, and
as defined in, this Agreement if (x) all  outstanding  Obligations of the other
Tranches  under this  Agreement  were repaid in full and all  Commitments  with
respect thereto were terminated and (y) the percentage "50%" contained  therein
were changed to "66-2/3%".

          "Swingline  Expiry  Date" shall mean the date which is five  Business
Days prior to the Revolving Loan Maturity Date.

          "Swingline  Lender" shall mean Bank of America and its successors and
assigns.

          "Swingline Loan" shall have the meaning provided in Section 1.01(b).

          "Swingline Note" shall have the meaning provided in Section 1.05(a).

          "Syndication  Agent"  shall have the  meaning  provided  in the first
paragraph of this Agreement.

          "Syndication  Date" shall mean the earlier of (x)  September 15, 2001
and (y) that date (if any) upon which the Joint Lead  Arrangers  determine (and
notify the Borrower) that the primary  syndication  (and resultant  addition of
Persons  as  Lenders  pursuant  to  Section  13.04(b))  has  been  successfully
completed (to the satisfaction of the Joint Lead Arrangers).

          "Tax Benefit" shall have the meaning provided in Section 4.04(c).

          "Tax Sharing  Agreements"  shall have the meaning provided in Section
5A.05.

          "Taxes" shall have the meaning provided in Section 4.04(a).

          "Test Date" shall mean,  with respect to any Start Date, the last day
of the most recent fiscal  quarter of the Borrower ended  immediately  prior to
such Start Date for which the financial  statements required by Section 8.01(a)
or (b),  as the  case  may be,  have  been  delivered  as  contemplated  by the
definition of Margin Reduction Period.

                                     -113-
<PAGE>

          "Test  Period"  shall  mean each  period of four  consecutive  fiscal
quarters of the Borrower (taken as one accounting period).

          "Total Assets" means,  with respect to any Person,  the  consolidated
total assets of such Person and its  consolidated  Subsidiaries,  determined in
accordance with GAAP; provided that in determining Total Assets of any group of
Non-Guarantor Subsidiaries,  such Total Assets shall be determined for all such
Non-Guarantor Subsidiaries on a combined basis without duplication.

          "Total Capitalization" of the Borrower at any time shall mean the sum
of (x) Consolidated  Debt of the Borrower at such time and (y) the Consolidated
Net Worth of the Borrower at such time.

          "Total  Commitments"  shall  mean,  at  any  time,  the  sum  of  the
Commitments of each of the Lenders.

          "Total Revolving Loan Commitment" shall mean, at any time, the sum of
the Revolving Loan Commitments of each of the Lenders.

          "Total Unutilized Revolving Loan Commitment" shall mean, at any time,
an amount equal to the  remainder of (x) the Total  Revolving  Loan  Commitment
then in effect less (y) the sum of the aggregate  principal amount of Revolving
Loans and Swingline Loans then  outstanding  plus the then aggregate  amount of
Letter of Credit Outstandings.

          "Trade Letter of Credit"  shall have the meaning  provided in Section
2.01(a).

          "Tranche" shall mean the respective facility and commitments utilized
in making Loans  hereunder,  with there being a single Tranche on the Effective
Date  (consisting of the Total  Revolving Loan Commitment and the extensions of
credit (i.e.,  Revolving Loans, Swingline Loans and Letters of Credit) pursuant
thereto.  In addition,  any Incremental Term Loans extended after the Effective
Date shall be made pursuant to one or more  additional  Tranches which shall be
designated  pursuant  to  the  respective   Incremental  Term  Loan  Commitment
Agreements in accordance  with the relevant  requirements  specified in Section
1.13.

          "Transaction"  shall  mean the  occurrence  of the  Refinancing,  the
entering into of the Credit  Documents and the  extensions of credit under this
Agreement on the Effective  Date,  and the issuance of the Senior  Subordinated
Notes.

          "Type"  shall  mean the type of Loan  determined  with  regard to the
interest  option  applicable  thereto,  i.e.,  whether  a Base  Rate  Loan or a
Eurodollar Loan.

          "UCC" shall mean the Uniform  Commercial Code as from time to time in
effect in the relevant jurisdiction.

          "Unfunded  Current  Liability" of any Plan shall mean the amount,  if
any, by which the accumulated benefit obligation under the Plan as of the close
of  its  most  recent  plan  year,

                                     -114-
<PAGE>

determined in accordance  with actuarial  assumptions  at such time  consistent
with  Statement of Financial  Accounting  Standards No. 87,  exceeds the market
value of the assets allocable thereto.

          "United  States"  and "U.S."  shall  each mean the  United  States of
America.

          "Unpaid  Drawing"  shall  have the  meaning  provided  for in Section
2.05(a).

          "Unused Capital  Expenditures Amount" shall have the meaning provided
in Section 9.07(c).

          "Unutilized  Revolving Loan Commitment" with respect to any Lender at
any time shall mean such Lender's  Revolving  Loan  Commitment at such time, if
any,  less  the  sum of (i)  the  aggregate  outstanding  principal  amount  of
Revolving  Loans made by such Lender and (ii) such  Lender's  Percentage of the
outstanding  principal of Swingline Loans and the Letter of Credit Outstandings
at such time.

          "Weighted  Average Life to Maturity"  shall mean, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the then
outstanding  principal  amount  of such  Indebtedness  into  (ii)  the  product
obtained by multiplying  (x) the amount of each then  remaining  installment or
other  required  scheduled  payments of principal,  including  payment at final
maturity,  in respect  thereof,  by (y) the number of years  (calculated to the
nearest  one-twelfth) that will elapse between such date and the making of such
payment.

          "Wholly-Owned  Subsidiary"  shall  mean,  as to any  Person,  (i) any
corporation  100% of whose  capital  stock  (other than  directors'  qualifying
shares) is at the time  owned by such  Person  and/or one or more  Wholly-Owned
Subsidiaries  of such  Person  and  (ii)  any  partnership,  limited  liability
company, association, joint venture or other entity in which such Person and/or
one or more  Wholly-Owned  Subsidiaries  of such Person owns 100% of the Equity
Interests  at such time.  Except as  otherwise  specified  herein or unless the
context  otherwise  requires,  references  in  this  Agreement  to one or  more
"Wholly-Owned Subsidiaries" are to Wholly-Owned Subsidiaries of the Borrower.

          11.02 Certain Pro Forma Calculations. (a) For purposes of calculating
Consolidated  EBITDA for any Test Period for  purposes of this  Agreement,  the
following rules shall apply:

          (i) if at any time during the  respective  Test Period  (and,  in the
     case of  determinations  being made on a Post-Test  Period Pro Forma Basis
     only,  thereafter  and on or  prior  to the  date  of  determination)  the
     Borrower  or any of its  Subsidiaries  shall  have  made any  Disposition,
     Consolidated  EBITDA  for such Test  Period  shall be reduced by an amount
     equal to the Consolidated EBITDA (if positive)  attributable to the assets
     or Equity  Interests  which are the subject of such  Disposition  for such
     Test Period or increased by an amount equal to the Consolidated EBITDA (if
     negative)  applicable  thereto for such Test Period;  provided that if any
     Disposition  is of Equity  Interests in a Subsidiary of the Borrower which
     remains a Subsidiary after giving effect to such Disposition, Consolidated
     EBITDA  shall be  adjusted  to give pro forma  effect  thereto (as if such

                                     -115-
<PAGE>

     disposition  occurred on the first day of the  respective  Test Period) in
     accordance with the rules set forth in the definition of Consolidated  Net
     Income contained herein;

          (ii) if during such Test Period (and,  in the case of  determinations
     being made on a Post-Test  Period Pro Forma Basis only,  thereafter and on
     or prior to the date of  determination)  the Borrower or any  Subsidiaries
     shall have made any Acquisition,  Consolidated EBITDA for such Test Period
     shall be  calculated  after  giving  pro forma  effect  thereto as if such
     Acquisition had occurred on the first day of such Test Period;

          (iii) if during such Test Period (and, in the case of  determinations
     being made on a Post-Test  Period Pro Forma Basis only,  thereafter and on
     or prior to the date of determination) any Person that became a Subsidiary
     or was merged with or into the Borrower or any of its  Subsidiaries  since
     the beginning of such Test Period shall have entered into any  disposition
     or acquisition transaction that would have required an adjustment pursuant
     to clause (i) or (ii) above if made by the Borrower or a Subsidiary of the
     Borrower during such Test Period, Consolidated EBITDA for such Test Period
     shall be  calculated  after  giving  pro forma  effect  thereto as if such
     transaction occurred on the first day of such Test Period; and

          (iv) pro forma calculations of Consolidated EBITDA,  whether pursuant
     to this Section 11.02 or otherwise,  shall not give effect to  anticipated
     cost  savings  and/or  increases to  Consolidated  EBITDA for the relevant
     period,  except in cases of  Acquisitions  for factually  supportable  and
     identifiable  pro forma cost  savings  and/or  increases  to  Consolidated
     EBITDA for the relevant period (in each case reasonably  expected to occur
     within  one  year  of  the  respective  date  of  acquisition)   that  are
     attributable to such Acquisition,  in which case such adjustments shall be
     permitted  so long as same are  demonstrated  in writing  by the  Borrower
     (with supporting  calculations) to the Administrative Agent at the time of
     the relevant  Acquisition;  provided further,  that the add backs for cost
     savings and/or  increases to  Consolidated  EBITDA for any Test Period for
     all  Acquisitions  (whether  being  determined  on a Pro Forma  Basis or a
     Post-Test  Period Pro Forma Basis) shall not,  without the written consent
     of the  Required  Lenders,  exceed the greater of (x) 15% of  Consolidated
     EBITDA for the relevant Test Period, as calculated on a Pro Forma Basis or
     Post-Test  Period Pro Forma Basis, as the case may be, after giving effect
     to such additions and (y) $20 million.

          (b) For purposes of calculating  Consolidated  Debt and  Consolidated
Senior Debt for purposes of this Agreement, the following rules shall apply:

          (i) all  determinations of Consolidated Debt and Consolidated  Senior
     Debt  shall be made  based on the actual  amount of  Consolidated  Debt or
     Consolidated  Senior Debt, as the case be,  outstanding on the last day of
     the respective  Test Period or, in the case of  determinations  being on a
     Post-Test   Period  Pro  Forma  Basis,  on  the  date  of  the  respective
     determination,  except that for all purposes,  other than  calculations of
     the  Consolidated  Leverage  Ratio (and component  defined terms,  as used
     therein) for purposes of determining  Applicable Margins, (i) Consolidated
     Debt and Consolidated Senior Debt, as the case may be, shall be calculated
     to exclude all  Indebtedness  which  would  otherwise

                                     -116-
<PAGE>

     have been  included  therein  to the  extent  the  Borrower  certifies  in
     reasonable detail that the respective Indebtedness being excluded has been
     incurred to finance one or more Specified  Construction Projects which, on
     the  last  date  of  the  respective  Test  Period  or,  in  the  case  of
     determinations  being made on a Post-Test  Period Pro Forma Basis,  on the
     date  of the  respective  determination,  remain  at such  time  Specified
     Construction Projects and (ii) during the first year immediately following
     the date when a Specified  Construction Project ceases to constitute same,
     Consolidated  Debt and  Consolidated  Senior Debt shall be  calculated  to
     exclude  (1)  during the first four  months  beginning  after the date the
     respective  Specified  Construction Project ceased to constitute same, all
     Indebtedness  which  would  otherwise  have been  included  therein to the
     extent the Borrower  certifies in  reasonable  detail that the  respective
     Indebtedness  has  been  incurred  to  finance  the  respective  Specified
     Construction  Project,  (2) during the second four months  beginning after
     the  date  the  respective   Specified   Construction  Project  ceased  to
     constitute same,  two-thirds of the amount of all Indebtedness which would
     otherwise have been included therein to the extent the Borrower  certifies
     in reasonable detail that the respective Indebtedness has been incurred to
     finance the respective  Specified  Construction Project and (3) during the
     third  four  months  beginning  after  the date the  respective  Specified
     Construction Project ceased to constitute same, one-third of the amount of
     all  Indebtedness  which would otherwise have been included therein to the
     extent  Borrower  certifies  in  reasonable  detail  that  the  respective
     Indebtedness  has  been  incurred  to  finance  the  respective  Specified
     Construction  Project;  provided that (x) no more than an aggregate amount
     of  Indebtedness  equal to 0.5 multiplied by the  Borrower's  Consolidated
     EBITDA for the relevant  Test Period  (determined  on a Pro Forma Basis or
     Post-Test  Period Pro Forma Basis,  as the case may be) shall be permitted
     to be so excluded  pursuant to the provisions of preceding clauses (i) and
     (ii) and (y) no such  Indebtedness  shall be excluded at any time when the
     Borrower's Consolidated Debt/Total Capitalization Ratio (calculated on the
     last day of the respective Test Period in the case of  determinations on a
     Pro  Forma  Basis,  and on the  date of  determination  in the case of any
     calculations  being made on a Post-Test Period Pro Forma Basis, but in any
     event  including  all  Indebtedness  relating  to  Specified  Construction
     Projects  which may  otherwise  be excluded as provided  above) is greater
     than 50%; and

          (ii) all  determinations  for purposes of Section 1.01 and 1.13 shall
     determine  Consolidated  Senior Debt as if all unfunded  Incremental  Term
     Loan  Commitments  then in effect had in fact been fully  funded  (thereby
     adding same as a component to Consolidated Senior Debt).

          (c) For purposes of calculating  Consolidated  Cash Interest  Expense
for any Test Period for purposes of this  Agreement,  the following rules shall
apply:

          (i)  Consolidated  Cash Interest  Expense shall be determined for the
     respective Test Period based on actual Consolidated Cash Interest Expense;
     provided  that such amount  shall be adjusted to give pro forma effect (as
     if the events  described below occurred on the first day of the respective
     Test  Period,  based  on  the  historical  rates  which  would  have  been
     applicable thereto in the case of pro forma determinations of Indebtedness
     which would have been  outstanding  for periods when same was not actually

                                     -117-
<PAGE>

     outstanding) to (x) all  incurrences of  Indebtedness  incurred to finance
     any Acquisition  during the respective Test Period (or, for determinations
     being  made  on a  Post-Test  Period  Pro  Forma  Basis,  on the  date  of
     determination)   to  the  extent  the  respective   Indebtedness   remains
     outstanding  on the  last  day of the  respective  Test  Period  (or,  for
     determinations  being made on a Post-Test  Period Pro Forma Basis,  on the
     date of determination) and (y) all to permanent repayments of Indebtedness
     described in  immediately  preceding  clause (x) actually made during such
     Test Period (or, for  determinations  being made on a Post-Test Period Pro
     Forma  Basis,  through  the  date of  determination)  made  with  net cash
     proceeds of events of the type described in Sections  4.02(c),  (e) and/or
     (g),  whether  or not such  net cash  proceeds  were  required  to be used
     permanently to repay Loans hereunder; and

          (ii)  notwithstanding  anything to the contrary  contained above, (x)
     with  respect  to each  Specified  Construction  Project  which  remains a
     Specified  Construction  Project  on the last day of the  respective  Test
     Period (or, for determinations  being made on a Post-Test Period Pro Forma
     Basis, on the date of  determination),  Consolidated Cash Interest Expense
     shall be calculated by excluding any cash interest expense attributable to
     Indebtedness  incurred to finance the  respective  Specified  Construction
     Project,  so long as the  Borrower  certifies  in  reasonable  detail  the
     respective  Indebtedness  and related  Consolidated  Cash Interest Expense
     being  excluded  as  provided  above  in  this  clause  (ii)  and  (y) for
     determinations of Consolidated Cash Interest Expense where the last day of
     the  respective  Test  Period  (or,  for  determinations  being  made on a
     Post-Test Period Pro Forma Basis, the date of determination) occurs within
     the  first  year  immediately   following  the  date  when  the  Specified
     Construction Project ceased to constitute same, Consolidated Cash Interest
     Expense  shall  be  calculated  to  exclude  (1)  if the  last  day of the
     respective Test Period (or, for  determinations  being made on a Post-Test
     Period Pro Forma Basis, the date of  determination)  occurs before the end
     of the first four months beginning after the date the respective Specified
     Construction  Project  ceased to constitute  same, all  Consolidated  Cash
     Interest  Expense which would otherwise have been included  therein to the
     extent the Borrower  certifies in  reasonable  detail that the  respective
     Indebtedness  has  been  incurred  to  finance  the  respective  Specified
     Construction  Project and the Consolidated  Cash Interest Expense relating
     thereto being excluded as provided above in this subclause (1), (2) if the
     last day of the respective Test Period (or, for determinations  being made
     on a Post-Test Period Pro Forma Basis, the date of  determination)  occurs
     during the four months following the end of the period described in clause
     (1) above,  two-thirds of the  Consolidated  Cash  Interest  Expense which
     would  otherwise  have been  included  therein to the extent the  Borrower
     certifies in reasonable  detail that the respective  Indebtedness has been
     incurred to finance the respective Specified  Construction Project and the
     Consolidated  Cash Interest  Expense  relating  thereto being  excluded as
     provided  above  in this  subclause  (2),  and (3) if the  last day of the
     respective Test Period (or, for  determinations  being made on a Post-Test
     Period Pro Forma Basis, the date of determination)  occurs during the four
     months  following  the end of the  period  described  in clause (2) above,
     one-third of the Consolidated  Cash Interest Expense which would otherwise
     have been  included  therein  to the  extent  the  Borrower  certifies  in
     reasonable  detail that the respective  Indebtedness  has been incurred to
     finance

                                     -118-
<PAGE>

     the respective  Specified  Construction  Project and the Consolidated Cash
     Interest Expense relating thereto being excluded as provided above in this
     subclause   (3);   provided  if  any   Indebtedness   (where  the  related
     Consolidated Cash Interest Expense would otherwise be excluded in whole or
     in part pursuant to the foregoing  provisions of this clause (ii)) related
     to a Specified  Construction  Project is included in Consolidated  Debt or
     Consolidated  Senior Debt by virtue of the proviso to Section  11.02(b)(i)
     above,  the related Cash Interest  Expense  shall  likewise be included in
     Consolidated  Cash Interest Expense (and shall not be excluded pursuant to
     the preceding provisions of this clause (ii)).

          SECTION 12. The Agents and the Joint Lead Arrangers.

          12.01  Appointment.  The Lenders hereby  designate Bank of America as
Administrative  Agent (for purposes of this Section 12 and Section  13.01,  the
term  "Administrative  Agent" shall  include Bank of America in its capacity as
Collateral Agent pursuant to the Security Documents) to act as specified herein
and in the  other  Credit  Documents.  The  Lenders  hereby  designate  MSSF as
Syndication Agent to act as specified herein and in the other Credit Documents.
The Lenders hereby designate First Union and GECC as Co-Documentation Agents to
act as specified herein and in the other Credit  Documents.  The Lenders hereby
designate BAS and MSSF as Joint Lead  Arrangers to act as specified  herein and
in the other Credit Documents.  Each Lender hereby irrevocably authorizes,  and
each  holder  of any  Note by the  acceptance  of such  Note  shall  be  deemed
irrevocably to authorize,  each Agent and each Joint Lead Arranger to take such
action on its behalf under the provisions of this  Agreement,  the other Credit
Documents  and any  other  instruments  and  agreements  referred  to herein or
therein and to exercise  such powers and to perform such duties  hereunder  and
thereunder as are  specifically  delegated to or required of each Agent or each
Joint Lead  Arranger by the terms  hereof and thereof and such other  powers as
are reasonably  incidental thereto. Each Agent and each Joint Lead Arranger may
perform  any of its duties  hereunder  by or through its  respective  officers,
directors, agents, employees or affiliates.

          12.02 Nature of Duties. Neither any Agent nor any Joint Lead Arranger
shall have any duties or  responsibilities  except those expressly set forth in
this Agreement and in the other Credit Documents. Neither Agent, any Joint Lead
Arranger nor any of their respective officers,  directors, agents, employees or
affiliates  shall be  liable  for any  action  taken or  omitted  by it or them
hereunder  or under any other  Credit  Document  or in  connection  herewith or
therewith,   unless  caused  by  its  or  their  gross  negligence  or  willful
misconduct.  The duties of the Agents  and the Joint  Lead  Arrangers  shall be
mechanical and  administrative  in nature; no Agent nor any Joint Lead Arranger
shall have by reason of this Agreement or any other Credit Document a fiduciary
relationship in respect of any Lender or the holder of any Note; and nothing in
this Agreement or any other Credit Document,  expressed or implied, is intended
to or shall be so  construed  as to impose  upon any  Agent or any  Joint  Lead
Arranger  any  obligations  in respect of this  Agreement  or any other  Credit
Document except as expressly set forth herein or therein.

          12.03 Lack of  Reliance  on the Agents and the Joint Lead  Arrangers.
Independently  and without  reliance upon any Agent or any Joint Lead Arranger,
each  Lender and the

                                     -119-
<PAGE>

holder of each  Note,  to the extent it deems  appropriate,  has made and shall
continue  to make  (i)  its  own  independent  investigation  of the  financial
condition  and  affairs  of  the  Borrower  and  each  of its  Subsidiaries  in
connection  with the making and the  continuance of the Loans and the taking or
not taking of any action in  connection  herewith and (ii) its own appraisal of
the  creditworthiness  of the Borrower and each of its Subsidiaries and, except
as expressly  provided in this Agreement,  no Agent nor any Joint Lead Arranger
shall have any duty or  responsibility,  either  initially  or on a  continuing
basis, to provide any Lender or the holder of any Note with any credit or other
information with respect thereto, whether coming into its possession before the
making of the Loans or at any time or times thereafter.  No Agent nor any Joint
Lead Arranger  shall be responsible to any Lender or the holder of any Note for
any recitals, statements, information,  representations or warranties herein or
in any document,  certificate or other writing delivered in connection herewith
or for the execution,  effectiveness,  genuineness,  validity,  enforceability,
perfection,  collectability,  priority or  sufficiency of this Agreement or any
other Credit Document or the financial  condition of the Borrower or any of its
Subsidiaries  or  be  required  to  make  any  inquiry  concerning  either  the
performance or observance of any of the terms, provisions or conditions of this
Agreement  or any other  Credit  Document,  or the  financial  condition of the
Borrower or any of its  Subsidiaries or the existence or possible  existence of
any Default or Event of Default.

          12.04 Certain Rights of the Agents and the Joint Lead  Arrangers.  If
any Agent or Joint Lead Arranger shall request  instructions  from the Required
Lenders  with  respect  to any  act or  action  (including  failure  to act) in
connection with this Agreement or any other Credit Document, such Agent or such
Joint Lead Arranger, as the case may be, shall be entitled to refrain from such
act or taking such action  unless and until Agent or such Joint Lead  Arranger,
as the case may be, shall have received instructions from the Required Lenders;
and neither shall such Agent or such Joint Lead Arranger incur liability to any
Person by reason of so refraining. Without limiting the foregoing, no Lender or
the holder of any Note shall have any right of action  whatsoever  against  any
Agent, any Joint Lead Arranger as a result of the  Administrative  Agent acting
or  refraining  from acting  hereunder  or under any other  Credit  Document in
accordance with the instructions of the Required Lenders.

          12.05  Reliance.  Each Agent shall be entitled to rely,  and shall be
fully  protected  in  relying,  upon any  note,  writing,  resolution,  notice,
statement,  certificate,  telex,  teletype or  telecopier  message,  cablegram,
radiogram, order or other document or telephone message signed, sent or made by
any Person  that such Agent or such  Joint Lead  Arranger,  as the case may be,
believed  to be the proper  Person,  and,  with  respect  to all legal  matters
pertaining  to this  Agreement  and any other  Credit  Document  and its duties
hereunder and thereunder, upon advice of counsel selected by such Agent.

          12.06 Indemnification. To the extent any Agent or Joint Lead Arranger
is not reimbursed and  indemnified by the Borrower,  the Lenders will reimburse
and  indemnify  such  Agent or Joint  Lead  Arranger,  in  proportion  to their
respective   "percentages"   as  used  in  determining  the  Required   Lenders
(determined  as if there were no Defaulting  Lenders),  for and against any and
all liabilities,  obligations,  losses,  damages,  penalties,  claims, actions,
judgments,  costs, expenses or disbursements of whatsoever kind or nature which
may be imposed  on,  asserted  against or  incurred by such Agent or Joint Lead
Arranger in  performing  its  respective

                                     -120-
<PAGE>

duties hereunder or under any other Credit Document,  or in any way relating to
or arising out of this Agreement or any other Credit Document; provided that to
the extent that the  respective  Agent or Joint Lead  Arranger is reimbursed by
the Borrower for amounts  paid by the Lenders  pursuant to this Section  12.06,
such Agent or Joint Lead Arranger shall reimburse the Lenders for such amounts;
provided  further,  that no Lender  shall be  liable  for any  portion  of such
liabilities,  obligations,  losses,  damages,  penalties,  actions,  judgments,
suits, costs,  expenses or disbursements  resulting from the respective Agent's
or Joint Lead Arranger's gross negligence or willful misconduct.

          12.07 The  Agents and the Joint Lead  Arrangers  in their  Individual
Capacities.  With  respect  to its  obligation  to  make  Loans,  or  issue  or
participate  in Letters of Credit,  under this  Agreement,  each Agent and each
Joint Lead  Arranger  shall have the rights and powers  specified  herein for a
"Lender"  and may  exercise  the same  rights  and powers as though it were not
performing  the duties  specified  herein;  and the term  "Lenders,"  "Required
Lenders,"  "Majority Lenders,"  "Supermajority  Lenders," "holders of Notes" or
any similar  terms  shall,  unless the  context  clearly  otherwise  indicates,
include  each Agent and each Joint Lead  Arranger in its  individual  capacity.
Each Agent and each Joint Lead Arranger may accept  deposits  from,  lend money
to, and generally engage in any kind of banking,  investment banking,  trust or
other  business  with,  or  provide  debt  financing,  equity  capital or other
services  (including  financial  advisory services) to, any Credit Party or any
Affiliate of any Credit Party (or any Person engaged in a similar business with
any Credit Party or any Affiliate  thereof) as if they were not  performing the
duties specified herein,  and may accept fees and other  consideration from the
Borrower or any other  Credit  Party or any  Affiliate  of any Credit Party for
services in connection  with this  Agreement and  otherwise  without  having to
account for the same to the Lenders.

          12.08 Holders.  The Administrative Agent may deem and treat the payee
of any Note as the owner  thereof for all  purposes  hereof  unless and until a
written notice of the assignment,  transfer or endorsement thereof, as the case
may be,  shall have been  filed with the  Administrative  Agent.  Any  request,
authority  or consent of any Person who, at the time of making such  request or
giving such authority or consent, is the holder of any Note shall be conclusive
and binding on any subsequent holder, transferee,  assignee or endorsee, as the
case may be, of such Note or of any Note or Notes issued in exchange therefor.

          12.09 Resignation by the Agents and the Joint Lead Arrangers. (a) The
Administrative  Agent may resign from the  performance of all its functions and
duties  hereunder and/or under the other Credit Documents at any time by giving
15  Business  Days'  prior  written  notice  to the  Lenders  and the  Borrower
(provided  that no such notice shall be required to be given to the Borrower if
a Default or an Event of Default of the type  described in Section 10.05 exists
with  respect to the  Borrower).  Such  resignation  shall take effect upon the
appointment of a successor Administrative Agent pursuant to clauses (b) and (c)
below or as otherwise provided below.

          (b) Upon any such notice of resignation by the Administrative  Agent,
the Required Lenders shall appoint a successor  Administrative  Agent hereunder
or  thereunder  who  shall be a  commercial  bank or trust  company  reasonably
acceptable to the Borrower (it being  understood and agreed that (i) so long as
no  Default  or  Event  of   Default   exists  at  such  time  such

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<PAGE>

successor  Administrative Agent shall be required to be reasonably satisfactory
to the Borrower and (ii) any  Non-Defaulting  Lender is deemed to be acceptable
to the Borrower).

          (c) If a  successor  Administrative  Agent  shall  not  have  been so
appointed within such 15 Business Day period, the Administrative Agent with the
consent of the Borrower  (which consent shall not be  unreasonably  withheld or
delayed  but shall not be  required  at any time when a Default  or an Event of
Default),  shall then appoint a successor  Administrative Agent who shall serve
as Administrative Agent hereunder or thereunder until such time, if any, as the
Required Lenders appoint a successor Administrative Agent as provided above.

          (d) The Syndication Agent and any Joint Lead Arranger may resign from
the performance of all its respective  functions and duties hereunder by giving
five  Business  Days'  notice  to the  Administrative  Agent.  Any  resignation
pursuant to the immediately  preceding  sentence shall become  effective on the
5th Business  Day after the  respective  notice is given to the  Administrative
Agent.

          (e) Upon a  resignation  of any  Agent  or any  Joint  Lead  Arranger
pursuant to this Section 12.09, such Agent or such Joint Lead Arranger,  as the
case may be, shall remain  indemnified to the extent provided in this Agreement
and the other  Credit  Documents  and the  provisions  of this Section 12 shall
continue in effect for the benefit of such Agent or Joint Lead Arranger, as the
case may be, for all of its actions and inactions  while serving as an Agent or
a Joint Lead Arranger, as the case may be.

          (f) If no successor  Administrative Agent has been appointed pursuant
to clause (b) or (c) above by the 30th  Business Day after the date such notice
of  resignation  was  given by the  Administrative  Agent,  the  Administrative
Agent's  resignation  shall become  effective  and the Required  Lenders  shall
thereafter perform all the duties of the Administrative  Agent hereunder and/or
under any other  Credit  Document  until such  time,  if any,  as the  Required
Lenders appoint a successor Administrative Agent as provided above.

          SECTION 13. Miscellaneous.

          13.01  Payment of Expenses,  etc. The Borrower  agrees that it shall:
(i) whether or not the transactions  contemplated  herein are consummated,  pay
all  reasonable  out-of-pocket  costs and expenses of each Agent and each Joint
Lead  Arranger  (including,   without  limitation,   the  reasonable  fees  and
disbursements  of counsel,  which shall be limited to the fees and  expenses of
White & Case LLP and such other  relevant  local  counsel as may be retained in
connection  with  security  matters),   in  connection  with  the  preparation,
execution,  delivery and  performance  of this  Agreement  and the other Credit
Documents and the documents and instruments referred to herein and therein, any
amendment, waiver or consent relating hereto or thereto, of each Agent and each
Joint Lead Arranger in connection with its syndication  efforts with respect to
this Agreement and, upon the occurrence and during the  continuance of an Event
of Default,  the  reasonable  costs and  expenses of each Agent and each of the
Lenders in  connection  with the  enforcement  of this  Agreement and the other
Credit  Documents  and the  documents  and  instruments  referred to herein and
therein or in connection  with any refinancing or  restructuring  of the credit
arrangements  provided  under this  Agreement in the nature of a "work-out"  or

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<PAGE>

pursuant to any insolvency or bankruptcy proceedings  (including,  in each case
without  limitation,  the reasonable fees and  disbursements of counsel for the
Administrative  Agent  and,  following  an  Event of  Default,  for each of the
Lenders);  (ii) pay and hold each of the Lenders  harmless from and against any
and all present and future stamp,  excise and other similar  documentary  taxes
with  respect to the  foregoing  matters and save each of the Lenders  harmless
from and against any and all liabilities  with respect to or resulting from any
delay or omission (other than to the extent attributable to such Lender) to pay
such taxes;  and (iii) indemnify each Agent,  each Joint Lead Arranger and each
Lender,  and  each  of  their  respective   officers,   directors,   employees,
representatives  and agents from and hold each of them harmless against any and
all liabilities,  obligations (including removal or remedial actions),  losses,
damages,  penalties,  claims,  actions,  judgments,  suits, costs, expenses and
disbursements  (including  reasonable  attorneys'  and  consultants'  fees  and
disbursements)  incurred  by,  imposed on or assessed  against any of them as a
result of, or arising  out of, or in any way  related  to, or by reason of, (a)
any  investigation,  litigation or other proceeding  (whether or not any Agent,
any Joint  Lead  Arranger  or any  Lender is a party  thereto)  related  to the
entering into and/or performance of this Agreement or any other Credit Document
or the use of any Letter of Credit or the  proceeds of any Loans  hereunder  or
the consummation of any transactions contemplated herein or in any other Credit
Document or the exercise of any of their rights or remedies  provided herein or
in the other  Credit  Documents,  or (b) the  actual  or  alleged  presence  of
Hazardous  Materials in the air, surface water or groundwater or on the surface
or subsurface of any Real Property owned, leased or at any time operated by the
Borrower  or  any  of  its  Subsidiaries,  the  Release,  generation,  storage,
transportation,  handling or disposal of Hazardous  Materials at any  location,
whether  or  not  owned,  leased  or  operated  by the  Borrower  or any of its
Subsidiaries, the non-compliance of any Real Property owned, leased or operated
by the Borrower or any of its  Subsidiaries  with foreign,  federal,  state and
local  laws,   regulations,   and  ordinances   (including  applicable  permits
thereunder)  applicable  to such  Real  Property,  or any  Environmental  Claim
asserted  against the Borrower,  any of its  Subsidiaries  or any Real Property
owned,  leased  or at  any  time  operated  by  the  Borrower  or  any  of  its
Subsidiaries,  including, in each case, without limitation, the reasonable fees
and disbursements of counsel and other consultants  incurred in connection with
any such  investigation,  litigation  or other  proceeding  (but  excluding any
losses,  liabilities,  claims,  damages or expenses  to the extent  incurred by
reason  of the gross  negligence  or  willful  misconduct  of the  Person to be
indemnified (as determined by a court of competent  jurisdiction in a final and
non-appealable decision) or to the extent incurred as a result of actions taken
by a party other than the Borrower or its Subsidiaries  after the Real Property
is no longer owned, leased or operated by the Borrower or its Subsidiaries). To
the  extent  that  the  undertaking  to  indemnify,  pay or hold  harmless  the
Administrative  Agent or any Lender set forth in the preceding  sentence may be
unenforceable because it is violative of any law or public policy, the Borrower
shall make the maximum  contribution to the payment and satisfaction of each of
the indemnified liabilities which is permissible under applicable law.

          13.02 Right of Setoff. (a) In addition to any rights now or hereafter
granted under applicable law or otherwise,  and not by way of limitation of any
such rights,  upon the  occurrence  and during the  continuance  of an Event of
Default,  each  Lender is hereby  authorized  at any time or from time to time,
without  presentment,  demand,  protest  or  other  notice  of any  kind to the
Borrower or to any other Person, any such notice being hereby expressly waived,
to

                                     -123-
<PAGE>

set off and to appropriate and apply any and all deposits  (general or special)
and any other Indebtedness at any time held or owing by such Lender (including,
without  limitation,  by branches and agencies of such Lender wherever located)
to or for the credit or the account of any Credit Party  against and on account
of the  Obligations  and  liabilities of such Credit Party to such Lender under
this Agreement or under any of the other Credit Documents,  including,  without
limitation,  all interests in Obligations  purchased by such Lender pursuant to
Section 13.06(b), and all other claims of any nature or description arising out
of or connected with this Agreement or any other Credit Document,  irrespective
of whether or not such Lender shall have made any demand hereunder and although
said Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.

          (b)  NOTWITHSTANDING  THE FOREGOING  SUBSECTION (a), AT ANY TIME THAT
THE LOANS OR ANY OTHER  OBLIGATION SHALL BE SECURED BY REAL PROPERTY LOCATED IN
CALIFORNIA,  NO LENDER (OTHER THAN THE  ADMINISTRATIVE  AGENT OR THE COLLATERAL
AGENT) SHALL EXERCISE A RIGHT OF SETOFF, LIEN OR COUNTERCLAIM OR TAKE ANY COURT
OR  ADMINISTRATIVE  ACTION OR INSTITUTE ANY PROCEEDING TO ENFORCE ANY PROVISION
OF THIS  AGREEMENT  OR ANY NOTE  UNLESS  IT IS TAKEN  WITH THE  CONSENT  OF THE
ADMINISTRATIVE  AGENT, THE COLLATERAL AGENT OR THE REQUIRED LENDERS (OR, TO THE
EXTENT  REQUIRED BY SECTION 13.12 OF THIS  AGREEMENT,  ALL OF THE LENDERS),  IF
SUCH SETOFF OR ACTION OR PROCEEDING WOULD OR MIGHT (PURSUANT TO CALIFORNIA CODE
OF CIVIL PROCEDURE  SECTIONS 580a, 580b, 580d AND 726 OF THE CALIFORNIA CODE OF
CIVIL PROCEDURE OR SECTION 2924 OF THE CALIFORNIA CIVIL CODE, IF APPLICABLE, OR
OTHERWISE)  AFFECT OR IMPAIR THE VALIDITY,  PRIORITY,  OR ENFORCEABILITY OF THE
LIENS GRANTED TO THE COLLATERAL AGENT PURSUANT TO THE SECURITY DOCUMENTS OR THE
ENFORCEABILITY OF THE NOTES AND OTHER OBLIGATIONS HEREUNDER,  AND ANY ATTEMPTED
EXERCISE BY ANY SUCH LENDER  WITHOUT  OBTAINING  SUCH  CONSENT OF THE  REQUIRED
LENDERS OR THE  ADMINISTRATIVE  AGENT OR THE COLLATERAL  AGENT, AS THE CASE MAY
BE, SHALL BE NULL AND VOID. THIS SUBSECTION (b) SHALL BE SOLELY FOR THE BENEFIT
OF EACH OF THE LENDERS, THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT.

          13.03 Notices.  Except as otherwise  expressly  provided herein,  all
notices and other  communications  provided for  hereunder  shall be in writing
(including  telegraphic,  telex, telecopier or cable communication) and mailed,
telegraphed,  telexed, telecopied, cabled or delivered: if to any Credit Party,
at the address specified  opposite its signature below or in the other relevant
Credit  Documents;  if to any Lender,  at its address specified on Schedule II;
and if to the Administrative  Agent, at the Notice Office; or, as to any Credit
Party or the Administrative Agent, at such other address as shall be designated
by such party in a written  notice to the other parties  hereto and, as to each
Lender,  at such  other  address  as shall be  designated  by such  Lender in a
written notice to the Borrower and the  Administrative  Agent. All such notices
and communications shall, when mailed,  telegraphed,  telexed,  telecopied,  or
cabled or sent by overnight courier,  be effective when deposited in the mails,
delivered to the telegraph company,  cable company or overnight courier, as the
case  may be,  or  sent  by  telex  or  telecopier, except that

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<PAGE>

notices and communications to the Administrative Agent or any Credit Party
shall not be effective until received by the Administrative Agent or such
Credit Party.

          13.04 Benefit of Agreement.  (a) This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto;  provided,  however, the Borrower may not assign
or transfer any of its rights,  obligations or interest  hereunder or under any
other Credit  Document  without the prior  written  consent of the Lenders and,
provided  further,  that,  although  any Lender may  transfer,  assign or grant
participations in its rights hereunder, such Lender shall remain a "Lender" for
all  purposes  hereunder  (and may not transfer or assign all or any portion of
its  Commitments  hereunder  except as  provided in Section  13.04(b))  and the
transferee, assignee or participant, as the case may be, shall not constitute a
"Lender"  hereunder  and,  provided  further,  that no Lender shall transfer or
grant any  participation  under  which the  participant  shall  have  rights to
approve  any  amendment  to or waiver  of this  Agreement  or any other  Credit
Document  except to the extent such  amendment  or waiver  would (i) extend the
final  scheduled  maturity of any Loan,  Note or Letter of Credit  (unless such
Letter of Credit is not extended  beyond the Revolving  Loan Maturity  Date) in
which such participant is participating,  or reduce the rate or extend the time
of payment of interest or Fees thereon  (except in connection  with a waiver of
applicability  of any  post-default  increase in interest  rates,  and it being
understood  and agreed that any  amendment  or  modification  to the  financial
definitions  in this  Agreement or to Section  13.07(a)  shall not constitute a
reduction  in the rate of interest or any Fees for purposes of this clause (i))
or  reduce  the  principal  amount  thereof,  or  increase  the  amount  of the
participant's  participation  over the amount  thereof then in effect (it being
understood  that a waiver of any  Default or Event of Default or of a mandatory
reduction in the Total  Commitments  shall not constitute a change in the terms
of such participation,  and that an increase in any Commitment or Loan shall be
permitted   without  the  consent  of  any  participant  if  the  participant's
participation  is not  increased  as a result  thereof),  (ii)  consent  to the
assignment  or  transfer by the  Borrower of any of its rights and  obligations
under  this  Agreement  or  (iii)  release  all  or  substantially  all  of the
Collateral under all of the Security Documents (except as expressly provided in
the Credit Documents)  supporting the Loans hereunder in which such participant
is participating. In the case of any such participation,  the participant shall
not have any rights under this  Agreement or any of the other Credit  Documents
(the participant's  rights against such Lender in respect of such participation
to be those set forth in the agreement  executed by such Lender in favor of the
participant relating thereto) and all amounts payable by the Borrower hereunder
shall be determined as if such Lender had not sold such participation.

          (b) Notwithstanding the foregoing, any Lender (or any Lender together
with  one or  more  other  Lenders)  may (x)  assign  all or a  portion  of its
Revolving  Loan  Commitment  (and related  outstanding  Obligations  hereunder)
and/or its  outstanding  Incremental  Term Loans to one or more  Lenders or (y)
assign all, or if less than all, a portion equal to at least  $1,000,000 in the
aggregate for the assigning Lender or assigning Lenders, of such Revolving Loan
Commitment  (and  related   outstanding   Obligations   hereunder)  and/or  its
outstanding Incremental Term Loans to one or more Eligible Transferees, each of
which assignees shall become a party to this Agreement as a Lender by execution
of an  Assignment  and  Assumption  Agreement,  provided  that (i) at such time
Schedule  I shall  be  deemed  modified  to  reflect  the  Commitments  (and/or
outstanding  Loans,  as the case may be) of such new Lender and of the existing
Lenders,

                                     -125-
<PAGE>

(ii) upon surrender of the old Notes (if any) (or, upon such assigning Lender's
indemnifying   the  Borrower  for  any  lost  Note   pursuant  to  a  customary
indemnification  agreement),  new  Notes  will  be  issued,  at the  Borrower's
expense,  to such new Lender and to the  assigning  Lender  upon the request of
such new Lender or assigning  Lender,  such new Notes to be in conformity  with
the requirements of Section 1.05 (with appropriate modifications) to the extent
needed to reflect the revised  Commitments  (and/or  outstanding  Loans, as the
case may be), (iii) the consent of the Administrative  Agent and, so long as no
Default or Event of Default then exists,  the Borrower  (each of which consents
shall not be unreasonably  withheld or delayed) shall be required in connection
with any such  assignment  pursuant  to clause  (y) above,  (iv) the  Swingline
Lender  and each  Issuing  Lender  (which  consents  shall not be  unreasonably
withheld  or  delayed)  shall be required  in  connection  with any  assignment
(whether  pursuant  to  preceding  clause  (x) or  (y)) of any  Revolving  Loan
Commitment and (v) the  Administrative  Agent shall receive at the time of such
assignment,  from  the  assigning  and  assignee  Lenders,  the  payment  of  a
processing and recording fee of $3,500,  provided further,  that no transfer or
assignment  pursuant to this Section  13.04(b) will be effective until recorded
by the  Administrative  Agent on the Register pursuant to Section 13.16. To the
extent of any  assignment  pursuant to this  Section  13.04(b),  the  assigning
Lender  shall be  relieved of its  obligations  hereunder  with  respect to its
assigned  Commitments.  At the time (x) any Person  becomes a Lender  hereunder
pursuant to Section  1.1 and (y) of each  assignment  pursuant to this  Section
13.04(b), in either such case if the respective new Lender (whether pursuant to
Section 1.13 or as a result of an assignment pursuant to this Section 13.04(b))
is not already a Lender  hereunder  and is not a United  States Person (as such
term is defined  in Section  7701(a)(30)  of the Code) for  Federal  income tax
purposes,  the  respective  new Lender  shall  provide to the  Borrower and the
Administrative  Agent the appropriate  Internal  Revenue Service Forms (and, if
applicable a Section 4.04(b)(ii)  Certificate) described in Section 4.04(b). To
the extent that an assignment  of all or any portion of a Lender's  Commitments
and related  outstanding  Obligations  pursuant to Section 1.14 or this Section
13.04(b) would, at the time of such assignment, result in increased costs under
Section 1.10,  1.11,  2.06 or 4.04 from those being  charged by the  respective
assigning  Lender  prior to such  assignment,  then the  Borrower  shall not be
obligated to pay or reimburse such increased costs (although the Borrower shall
be  obligated  to pay any other  increased  costs of the type  described  above
resulting from changes after the date of the respective assignment).

          (c) Nothing in this  Agreement  shall  prevent or prohibit any Lender
from  pledging  its Loans  and Notes  hereunder  to a Federal  Reserve  Bank in
support of borrowings  made by such Lender from such Federal  Reserve Bank and,
with the consent of the  Administrative  Agent,  any Lender which is a fund may
pledge all or any  portion of its Loans and Notes to its  trustee in support of
its  obligations  to its trustee.  No pledge  pursuant to this clause (c) shall
release the transferor Lender from any of its obligations hereunder.

          13.05 No Waiver; Remedies Cumulative. No failure or delay on the part
of the  Administrative  Agent  or any  Lender  or any  holder  of any  Note  in
exercising  any right,  power or privilege  hereunder or under any other Credit
Document  and no course of dealing  between the  Borrower  or any other  Credit
Party and the  Administrative  Agent or any  Lender  or the  holder of any Note
shall operate as a waiver thereof;  nor shall any single or partial exercise of
any right,  power or privilege  hereunder  or under any other  Credit  Document
preclude  any other or further  exercise  thereof or the  exercise of any other
right,  power or privilege  hereunder  or  thereunder.

                                     -126-
<PAGE>

The  rights,  powers  and  remedies  herein  or in any  other  Credit  Document
expressly  provided are cumulative  and not exclusive of any rights,  powers or
remedies which the Administrative Agent or any Lender or the holder of any Note
would  otherwise  have.  No notice to or demand on any Credit Party in any case
shall  entitle  any Credit  Party to any other or  further  notice or demand in
similar  or other  circumstances  or  constitute  a waiver of the rights of the
Administrative  Agent or any  Lender or the  holder of any Note to any other or
further action in any circumstances without notice or demand.

          13.06  Payments Pro Rata.  (a) Except as  otherwise  provided in this
Agreement,  the Administrative  Agent agrees that promptly after its receipt of
each payment  from or on behalf of the  Borrower in respect of any  Obligations
hereunder,  it shall  distribute  such  payment to the Lenders  (other than any
Lender  that has  consented  in writing to waive its pro rata share of any such
payment)  pro  rata  based  upon  their  respective  shares,  if  any,  of  the
Obligations with respect to which such payment was received.

          (b) Each of the Lenders  agrees that, if it should receive any amount
hereunder (whether by voluntary payment,  by realization upon security,  by the
exercise  of the right of setoff or banker's  lien,  by  counterclaim  or cross
action,  by the  enforcement  of any  right  under  the  Credit  Documents,  or
otherwise), which is applicable to the payment of the principal of, or interest
on, the Loans, Unpaid Drawings, Commitment Commission or Letter of Credit Fees,
of a sum which  with  respect  to the  related  sum or sums  received  by other
Lenders is in a greater  proportion than the total of such Obligation then owed
and due to such Lender bears to the total of such  Obligation then owed and due
to all of the  Lenders  immediately  prior to such  receipt,  then such  Lender
receiving  such excess  payment  shall  purchase for cash  without  recourse or
warranty  from  the  other  Lenders  an  interest  in  the  Obligations  of the
respective  Credit  Party to such  Lenders in such amount as shall  result in a
proportional  participation by all the Lenders in such amount; provided that if
all or any  portion of such excess  amount is  thereafter  recovered  from such
Lender, such purchase shall be rescinded and the purchase price restored to the
extent of such recovery, but without interest.

          13.07 Calculations;  Computations. (a) The financial statements to be
furnished  to the  Lenders  pursuant  hereto  shall  be made  and  prepared  in
accordance with generally accepted  accounting  principles in the United States
consistently  applied  throughout the periods  involved (except as set forth in
the notes  thereto or as otherwise  disclosed in writing by the Borrower to the
Lenders)  ("GAAP");  provided that, except as otherwise  specifically  provided
herein,  all  computations  of Excess  Cash Flow,  Consolidated  Cash  Interest
Expense,  Consolidated  Debt,  Consolidated  Debt/Total  Capitalization  Ratio,
Consolidated EBIT,  Consolidated EBITDA,  Consolidated Interest Coverage Ratio,
Consolidated Leverage Ratio,  Consolidated Net Income,  Consolidated Net Worth,
Consolidated  Senior Debt and Consolidated  Senior Leverage Ratio (in each case
including component defined terms) and all computations  determining compliance
with Sections 9.08 and 9.09, inclusive, shall utilize accounting principles and
policies  in  conformity  with those used to prepare the  historical  financial
statements of the Borrower referred to in Section 7.05(a).

          (b) All computations of interest,  Commitment  Commission,  and other
Fees  hereunder  shall be made (i) in the case of Base Rate Loans  based on the
Prime  Lending Rate, on

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<PAGE>

the actual number of days elapsed over a year of 365 or 366 days, as the case
may be, and (ii) in all other cases, on the actual number of days over a year
of 360 days (in each case including the first day but excluding the last day).

          13.08 GOVERNING LAW;  SUBMISSION TO  JURISDICTION;  VENUE;  WAIVER OF
JURY TRIAL.  (a) THIS  AGREEMENT AND THE OTHER CREDIT  DOCUMENTS AND THE RIGHTS
AND  OBLIGATIONS  OF THE PARTIES  HEREUNDER  AND  THEREUNDER  SHALL,  EXCEPT AS
OTHERWISE PROVIDED IN CERTAIN OF THE MORTGAGES, BE CONSTRUED IN ACCORDANCE WITH
AND BE  GOVERNED  BY THE LAW OF THE  STATE OF NEW  YORK.  ANY  LEGAL  ACTION OR
PROCEEDING  WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT  DOCUMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED  STATES FOR THE
SOUTHERN DISTRICT OF NEW YORK IN EACH CASE WHICH ARE LOCATED IN THE CITY OF NEW
YORK,  AND, BY EXECUTION AND DELIVERY OF THIS  AGREEMENT,  THE BORROWER  HEREBY
IRREVOCABLY  ACCEPTS FOR ITSELF AND IN RESPECT OF ITS  PROPERTY,  GENERALLY AND
UNCONDITIONALLY,  THE NON-EXCLUSIVE  JURISDICTION OF THE AFORESAID COURTS.  THE
BORROWER HEREBY FURTHER  IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK
JURISDICTION OVER THE BORROWER,  AND AGREES NOT TO PLEAD OR CLAIM, IN ANY LEGAL
ACTION OR  PROCEEDING  WITH  RESPECT  TO THIS  AGREEMENT  OR ANY  OTHER  CREDIT
DOCUMENT  BROUGHT IN ANY OF THE  AFORESAID  COURTS,  THAT ANY SUCH COURT  LACKS
JURISDICTION OVER THE BORROWER.  THE BORROWER FURTHER  IRREVOCABLY  CONSENTS TO
THE  SERVICE OF  PROCESS  OUT OF ANY OF THE  AFOREMENTIONED  COURTS IN ANY SUCH
ACTION  OR  PROCEEDING  BY THE  MAILING  OF COPIES  THEREOF  BY  REGISTERED  OR
CERTIFIED  MAIL,  POSTAGE  PREPAID,  TO THE  BORROWER  AT ITS ADDRESS SET FORTH
OPPOSITE ITS SIGNATURE  BELOW,  SUCH SERVICE TO BECOME  EFFECTIVE 30 DAYS AFTER
SUCH  MAILING.  THE BORROWER  HEREBY  IRREVOCABLY  WAIVES ANY OBJECTION TO SUCH
SERVICE OF PROCESS  AND FURTHER  IRREVOCABLY  WAIVES AND AGREES NOT TO PLEAD OR
CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR UNDER ANY OTHER CREDIT
DOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE  ADMINISTRATIVE  AGENT,  ANY LENDER OR THE
HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER  PERMITTED BY LAW OR TO
COMMENCE  LEGAL  PROCEEDINGS OR OTHERWISE  PROCEED  AGAINST THE BORROWER IN ANY
OTHER JURISDICTION.

          (b) THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS  ARISING OUT OF OR IN CONNECTION  WITH THIS  AGREEMENT OR ANY OTHER
CREDIT  DOCUMENT  BROUGHT  IN THE  COURTS  REFERRED  TO IN CLAUSE (a) ABOVE AND
HEREBY FURTHER  IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH
COURT  THAT ANY SUCH  ACTION OR  PROCEEDING  BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.

                                     -128-
<PAGE>

          (c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY  IRREVOCABLY  WAIVES
ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,  PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR  RELATING  TO THIS  AGREEMENT,  THE  OTHER  CREDIT  DOCUMENTS  OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

          13.09  Counterparts.  This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original,  but all of which
shall together  constitute one and the same  instrument.  A set of counterparts
executed by all the parties  hereto  shall be lodged with the  Borrower and the
Administrative Agent.

          13.10  Effectiveness.  This Agreement  shall become  effective on the
date (the "Effective Date") on which (i) the Borrower,  each Lender, each Agent
and each Joint Lead Arranger  shall have signed a counterpart  hereof  (whether
the same or different  counterparts) and shall have delivered (including by way
of facsimile device) the same to the Administrative  Agent at the Notice Office
or, in the case of the  Lenders,  shall  have  given the  Administrative  Agent
telephonic (confirmed in writing),  written or telex notice (actually received)
at such  office  that  same  has  been  signed  and  mailed  to it and (ii) the
conditions  contained in Section 5A are met to the  satisfaction  of the Agents
and the Required Lenders.  Unless the Administrative  Agent has received actual
notice from any Lender  that the  conditions  contained  in Section 5A have not
been met, upon the satisfaction of the condition described in clause (i) of the
immediately  preceding sentence and upon the Administrative  Agent's good faith
determination  that the conditions  described in clause (ii) of the immediately
preceding  sentence  have been met,  then the  Effective  Date  shall have been
deemed to have occurred, regardless of any subsequent determination that one or
more of the conditions thereto had not been met (although the occurrence of the
Effective Date shall not release the Borrower from any liability for failure to
satisfy one or more of the applicable  conditions contained in Section 5A). The
Administrative  Agent will give the  Borrower  and each Lender  prompt  written
notice of the occurrence of the Effective Date.

          13.11 Headings Descriptive.  The headings of the several sections and
subsections of this Agreement are inserted for  convenience  only and shall not
in any  way  affect  the  meaning  or  construction  of any  provision  of this
Agreement.

          13.12  Amendment or Waiver;  etc. (a) Neither this  Agreement nor any
other Credit  Document nor any terms hereof or thereof may be changed,  waived,
discharged or terminated unless such change,  waiver,  discharge or termination
is in writing  signed by the  respective  Credit  Parties party thereto and the
Required  Lenders,   provided  that  no  such  change,  waiver,   discharge  or
termination shall,  without the consent of each Lender (other than a Defaulting
Lender)  (with  Obligations  being  directly  modified in the case of following
clause (i)),  (i) extend the final  scheduled  maturity of any Loan or Note, or
extend the stated  expiration date of any Letter of Credit beyond the Revolving
Loan  Maturity  Date,  or reduce  the rate or  extend  the time of  payment  of
interest or Fees thereon (except in connection  with a waiver of  applicability
of any post-default increase in interest rates), or reduce the principal amount
thereof  (except to the extent  repaid in cash) (it being  understood  that any
amendment or modification to the financial  definitions in this Agreement or to
Section  13.07(a)  shall not  constitute a reduction in the rate of

                                     -129-
<PAGE>

interest  or any Fees for  purposes of this clause  (i)),  (ii)  release all or
substantially all of the Collateral (except as expressly provided in the Credit
Documents) under all the Security  Documents,  (iii) amend, modify or waive any
provision of this Section 13.12,  (iv) reduce the  percentage  specified in the
definition of Required  Lenders (it being  understood that, with the consent of
the  Required  Lenders,  additional  extensions  of  credit  pursuant  to  this
Agreement  may be  included in the  determination  of the  Required  Lenders on
substantially  the same basis as the  extensions of Loans and  Commitments  are
included on the Effective Date) or (v) consent to the assignment or transfer by
the  Borrower  of any of its  rights  and  obligations  under  this  Agreement;
provided further, that no such change,  waiver,  discharge or termination shall
(1)  increase  the  Commitment  of any Lender over the amount  thereof  then in
effect without the consent of such Lender (it being  understood that waivers or
modifications of conditions precedent, covenants, Defaults or Events of Default
or of a mandatory  reduction in the Total  Commitments  shall not constitute an
increase of the Commitment of any Lender, and that an increase in the available
portion of any Commitment of any Lender shall not constitute an increase in the
Commitment  of such  Lender),  (2) without the consent of each Issuing  Lender,
amend,  modify  or waive any  provision  of  Section  2 or alter its  rights or
obligations  with respect to Letters of Credit,  (3) without the consent of the
Administrative  Agent,  amend,  modify or waive any  provision of Section 12 as
same applies to the Administrative Agent or any other provision as same relates
to the rights or  obligations  of the  Administrative  Agent,  (4)  without the
consent of the Collateral Agent,  amend, modify or waive any provision relating
to the rights or obligations of the Collateral  Agent,  (5) without the consent
of the Swingline  Lender,  alter the Swingline  Lender's  rights or obligations
with  respect to  Swingline  Loans,  (6) without  the  consent of the  Majority
Lenders of each Tranche which is being allocated a lesser prepayment, repayment
or commitment  reduction as a result of the actions described below (or without
the consent of the Majority Lenders of each Tranche in the case of an amendment
to the  definition  of  Majority  Lenders),  amend the  definition  of Majority
Lenders or alter the required  application of any prepayments or repayments (or
commitment  reduction),  as between the various  Tranches,  pursuant to Section
4.01(a) or 4.02 (excluding  Section 4.02(b)) (although the Required Lenders may
waive,  in whole  or in part,  any such  prepayment,  repayment  or  commitment
reduction, so long as the application,  as amongst the various Tranches, of any
such prepayment,  repayment or commitment  reduction which is still required to
be made is not altered),  (7) without the consent of the Supermajority  Lenders
of the  respective  Tranche,  reduce  the amount of, or extend the date of, any
Scheduled  Incremental  Term  Loan  Repayment,   or  amend  the  definition  of
Supermajority  Lenders  (it being  understood  that,  with the  consent  of the
Required  Lenders,  additional  extensions of credit pursuant to this Agreement
may  be  included  in  the  determination  of  the  Supermajority   Lenders  on
substantially  the same basis as the extensions of Revolving Loans are included
on the  Effective  Date),  (8) in cases where any Tranche of  Incremental  Term
Loans is being added to pursuant  to Section  1.13,  without the consent of the
Supermajority  Lenders of the  respective  Tranche  (determined  before  giving
effect  to the  additions  to  such  Tranche),  alter  any of the  requirements
contained  in Section  1.13(c),  and (9) without  the  consent of the  Majority
Lenders  of each  Tranche of Term  Loans and the  Supermajority  Lenders of the
Tranche  consisting of the Total  Revolving Loan Commitment (and the extensions
of  credit  pursuant  thereto),  amend or  modify  the  provisions  of  Section
1.13(a)(ix) or (x).

                                     -130-
<PAGE>

          (b) If, in connection with any proposed change, waiver,  discharge or
termination  with  respect  to any of  the  provisions  of  this  Agreement  as
contemplated  by clauses (i) through (v),  inclusive,  of the first  proviso to
Section  13.12(a),  the consent of the  Required  Lenders is  obtained  but the
consent of one or more of such other  Lenders  whose consent is required is not
obtained, then the Borrower shall have the right, so long as all non-consenting
Lenders whose individual consent is required are treated as described in either
clause (A) or (B) below, to either (A) replace each such non-consenting  Lender
or Lenders  (or,  at the option of the  Borrower,  if the  respective  Lender's
individual  consent is required with respect to less than all Tranches of Loans
(or related  Commitments),  to replace only the Commitments  and/or Loans under
the respective Tranche of the respective  non-consenting Lender which gave rise
to the need to obtain  such a  Lender's  individual  consent)  with one or more
Replacement  Lenders  pursuant  to Section  1.13 so long as at the time of such
replacement,  each such  Replacement  Lender  consents to the proposed  change,
waiver,  discharge or termination or (B) terminate such non-consenting Lender's
Revolving Loan Commitment (if such a Lender's individual consent is required as
a result of its Revolving Loan Commitment)  and/or repay the outstanding  Loans
of such Lender under each Tranche  which gave rise to the need to obtain such a
Lender's individual consent and/or cash collateralize its applicable Percentage
of the Letter of Credit Outstandings in accordance with Sections 3.02(b) and/or
4.01(b),  provided  that,  unless the  Commitments  are  terminated,  and Loans
repaid,  pursuant to preceding  clause (B) are immediately  replaced in full at
such  time  through  the  addition  of  new  Lenders  or  the  increase  of the
Commitments and/or outstanding Loans of existing Lenders (who in each case must
specifically  consent  thereto),  then in the case of any  action  pursuant  to
preceding clause (B) the Required Lenders  (determined  before giving effect to
the proposed action) shall specifically consent thereto, provided further, that
in any  event  the  Borrower  shall  not have the  right to  replace  a Lender,
terminate any of its  Commitments  or repay its Loans solely as a result of the
exercise of such Lender's rights (and the  withholding of any required  consent
by such Lender) pursuant to the second proviso to Section 13.12(a).

          13.13 Survival.  All indemnities set forth herein including,  without
limitation,  in Sections 1.10,  1.11, 2.06, 4.04, 13.01 and 13.06 shall survive
the execution, delivery and termination of this Agreement and the Notes and the
making and repayment of the Obligations.

          13.14 Domicile of Loans. Each Lender may transfer and carry its Loans
at, to or for the  account  of any  office,  Subsidiary  or  Affiliate  of such
Lender.  Notwithstanding  anything to the  contrary  contained  herein,  to the
extent that a transfer of Loans  pursuant to this Section  13.14 would,  at the
time of such transfer, result in increased costs under Section 1.10, 1.11, 2.06
or 4.04  from  those  being  charged  by the  respective  Lender  prior to such
transfer,  then the Borrower shall not be obligated to pay such increased costs
(although the Borrower shall be obligated to pay any other  increased  costs of
the  type  described  above  resulting  from  changes  after  the  date  of the
respective transfer).

          13.15 Confidentiality. (a) Subject to the provisions of clause (b) of
this Section 13.15, each Lender agrees that it will use its reasonable  efforts
in accordance  with its customary  practices not to disclose  without the prior
written  consent  of the  Borrower  (other  than to its  directors,  employees,
auditors,  advisors  or  counsel  or to  another  Lender if the  Lender or such
Lender's  holding or parent company in its sole discretion  determines that any
such party should

                                     -131-
<PAGE>

have access to such information,  provided such Persons shall be subject to the
provisions  of this  Section  13.15  to the same  extent  as such  Lender)  any
information with respect to any Credit Party or any of its  Subsidiaries  which
is now or in the  future  furnished  pursuant  to this  Agreement  or any other
Credit Document, provided that any Lender may disclose any such information (a)
as has  become  generally  available  to the  public  other than by virtue of a
breach of this Section  13.15(a),  (b) as may be required or appropriate in any
report,  statement or testimony  submitted to any  municipal,  state or Federal
regulatory body having or claiming to have  jurisdiction over such Lender or to
the Federal  Reserve Board,  the Federal Deposit  Insurance  Corporation or the
NAIC or similar  organizations  (whether in the United  States or elsewhere) or
their  successors,  (c) as may be  required  or  appropriate  in respect to any
summons or  subpoena  or in  connection  with any  litigation,  (d) in order to
comply with any law, order, regulation or ruling applicable to such Lender, (e)
to the Administrative  Agent or the Collateral Agent and (f) to any prospective
or  actual  transferee  or  participant  in  connection  with any  contemplated
transfer or  participation  of any of the Notes or  Commitments or any interest
therein by such Lender,  provided that such prospective  transferee agrees with
such Lender for the benefit of the Borrower to be subject to the  provisions of
this Section 13.15(a).

          (b) The Borrower hereby  acknowledges and agrees that each Lender may
share with any of its affiliates any  information  related to Credit Parties or
any of  their  respective  Subsidiaries  (including,  without  limitation,  any
nonpublic customer  information  regarding the  creditworthiness  of the Credit
Parties and their  respective  Subsidiaries,  provided  such  Persons  shall be
subject to the  provisions  of this  Section  13.15 to the same  extent as such
Lender),  it being  understood  that for purposes of this Section  13.15(b) the
term "affiliate"  shall mean any direct or indirect holding company of a Lender
as well as any direct or indirect Subsidiary of such holding company.

          13.16  Register.  The Borrower hereby  designates the  Administrative
Agent to serve as the  Borrower's  agent,  solely for  purposes of this Section
13.16,  to  maintain a register  (the  "Register")  on which it will record the
Commitments from time to time of each of the Lenders, the Loans made by each of
the Lenders and each repayment in respect of the principal  amount of the Loans
of each  Lender.  Failure  to make any such  recordation,  or any error in such
recordation  shall not affect  the  Borrower's  obligations  in respect of such
Loans.  With  respect to any Lender,  the transfer of the  Commitments  of such
Lender  and the rights to the  principal  of,  and  interest  on, any Loan made
pursuant to such  Commitments  shall not be  effective  until such  transfer is
recorded on the Register maintained by the Administrative Agent with respect to
ownership  of such  Commitments  and Loans and  prior to such  recordation  all
amounts  owing to the  transferor  with respect to such  Commitments  and Loans
shall  remain  owing to the  transferor.  The  registration  of  assignment  or
transfer of all or part of any  Commitments  and Loans shall be recorded by the
Administrative   Agent  on  the  Register  only  upon  the  acceptance  by  the
Administrative  Agent of a  properly  executed  and  delivered  Assignment  and
Assumption Agreement pursuant to Section 13.04(b). Coincident with the delivery
of such an Assignment and Assumption  Agreement to the Administrative Agent for
acceptance and registration of assignment or transfer of all or part of a Loan,
or as soon thereafter as practicable,  the assigning or transferor Lender shall
surrender the Note evidencing such Loan, and thereupon one or more new Notes in
the same  aggregate  principal  amount  shall be  issued  to the  assigning  or
transferor  Lender and/or the new Lender.  The Borrower agrees to indemnify the
Administrative Agent

                                     -132-
<PAGE>

from and  against  any and all  losses,  claims,  damages  and  liabilities  of
whatsoever  nature which may be imposed on, asserted against or incurred by the
Administrative Agent in performing its duties under this Section 13.16.

          13.17 Limitation on Increased Costs.  Notwithstanding anything to the
contrary  contained in Section 1.10, 1.11, 2.06 or 4.04,  unless a Lender gives
notice to the  Borrower  that it is  obligated  to pay an amount under any such
Section  within 180 days after the later of (x) the date such Lender incurs the
respective increased costs, Taxes, loss, expense or liability,  or reduction in
amounts  received or  receivable  or  reduction in return on capital or (y) the
date such  Lender has actual  knowledge  of its  incurrence  of the  respective
increased costs,  Taxes, loss,  expense or liability,  or reductions in amounts
received or  receivable  or  reduction  in return on capital,  then such Lender
shall  only be  entitled  to be  compensated  for such  amount by the  Borrower
pursuant to said Section 1.10,  1.11,  2.06 or 4.04, as the case may be, to the
extent the costs,  Taxes, loss,  expense or liability,  or reduction in amounts
received  or  receivable  or  reduction  in return on capital  are  incurred or
suffered on or after the date which occurs 180 days prior to such Lender giving
notice to the  Borrower  that it is  obligated  to pay the  respective  amounts
pursuant to said Section  1.10,  1.11,  2.06 or 4.04,  as the case may be. This
Section 13.17 shall have no  applicability  to any Section of this Agreement or
any other Credit Document other than said Sections 1.10, 1.11, 2.06 and 4.04.

                                     * * *

                                     -133-
<PAGE>

          IN  WITNESS  WHEREOF,  the  parties  hereto  have  caused  their duly
authorized  officers to execute and deliver this Agreement as of the date first
above written.

Address:                               VANGUARD HEALTH SYSTEMS, INC.

20 Burton Hills Boulevard
Suite 100
Nashville, TN  37215                   By:  /s/ Joseph D. Moore
                                          --------------------------------------
Telephone No.:  (615) 665-6000             Title: Chief Financial Officer
Telecopier No.:  (615) 665-6099

Attention:  Joseph D. Moore

                                       BANK OF AMERICA, N.A.,
                                           Individually and as Administrative
                                           Agent

                                       By:  /s/   Kevin Wagley
                                          --------------------------------------
                                           Title: Principal

                                       BANC OF AMERICA SECURITIES LLC,
                                           as a Joint Lead Arranger

                                       By:  /s/ Robert A. Schleusner
                                          --------------------------------------
                                           Title: Vice President

                                       MORGAN STANLEY SENIOR FUNDING,
                                           INC., Individually, as Syndication
                                           Agent and as a Joint Lead Arranger

                                       By:  /s/ Todd Vannucci
                                          --------------------------------------
                                           Title: Principal

<PAGE>

                                       FIRST UNION NATIONAL BANK,
                                           Individually and as a
                                           Co-Documentation Agent

                                       By:  /s/ Keith S. Law
                                          --------------------------------------
                                           Title: Director

                                       GENERAL ELECTRIC CAPITAL CORPORATION,
                                           Individually and as a
                                           Co-Documentation Agent

                                       By:  /s/ Brian S. Beckwith
                                          --------------------------------------
                                       Title: Duly Authorized Signatory

                                       LASALLE BANK NATIONAL ASSOCIATION

                                       By:  /s/ Sarah Rusher
                                          --------------------------------------
                                           Title: Vice President

                                       CREDIT SUISSE FIRST BOSTON

                                       By:  /s/ William S. Lutkins
                                          --------------------------------------
                                           Title: Vice President

                                       By:   /s/ Bill O'Daly
                                          --------------------------------------
                                           Title: Vice President

<PAGE>

                                       UBS AG, STAMFORD BRANCH

                                       By:  /s/ Daniel W. Ladd III
                                          --------------------------------------
                                           Title: Executive Director

                                       By:  /s/ Wilfred V. Saint
                                          --------------------------------------
                                           Title: Associate Director

<PAGE>

                                                                      Schedule I
                                                                      ----------

                                  COMMITMENTS
                                  -----------

                                                           Revolving
                                                             Loan
                   Lender                                 Commitment
                   ------                                 ----------
Bank of America, N.A.                                    $20,000,000
Morgan Stanley Senior Funding, Inc.                      $20,000,000
First Union National Bank                                $20,000,000
General Electric Capital Corporation                     $20,000,000
LaSalle Bank National Association                        $20,000,000
Credit Suisse First Boston                               $12,500,000
UBS AG, Stamford Branch                                  $12,500,000
                                                         -----------

         TOTAL:                                          $ 125,000,000

<PAGE>

                                                                     Schedule II
                                                                     -----------

                                LENDER ADDRESSES
                                ----------------

Bank of America, N.A.
414 Union Street, 7th Floor
Nashville, TN  37239
Attention: Kevin Wagley
Telephone No.: (615) 749-3802
Telecopier No.: (615) 749-4640

Banc of America Securities LLC
100 North Tryon Street
Charlotte, NC  28255
Attention:  Robert Schleusner
Telephone No.:  (704) 386-7327
Telecopier No.:  (704) 388-0209

Morgan Stanley Senior Funding, Inc.
1585 Broadway
New York, New York  10036
Attention:  James Morgan
Telephone No.:  (212) 537-1470
Telecopier No.:  (212) 537-1867

First Union National Bank
301 South College Street
NC 0760
Charlotte, North Carolina  28288
Attention:  Keith Law
Telephone No.:  (704) 715) 1788
Telecopier No.:  (704) 374-4793

General Electric Capital Corporation
2325 Lakeview Parkway
Suite 700
Alpharetta, Georgia  30004
Attention:  Susan Crum
Telephone No.:  (678) 624-7974
Telecopier No.:  (678) 624-7904

<PAGE>
                                                                    Schedul e II
                                                                          Page 2

LaSalle Bank National Association
135 South LaSalle Street
Chicago, IL  60603
Attention:  Sarah Rusher
Telephone No.:  (312) 904-6885
Telecopier No.:  (312) 904-6457

Credit Suisse First Boston
11 Madison Avenue
New York, New York  10010
Attention:  William S. Lutkins
Telephone No.:  (212) 325-9705
Telecopier No.:  (212) 325-8319

UBS AG, Stamford Branch
677 Washington Boulevard
6th Floor South
Stamford, Connecticut  06901
Attention:  Susan Brunner
Telephone No.:  (203) 719-4181
Telecopier No.:  (203) 719-4176

<PAGE>

                                                                    Schedule III
                                                                    ------------

                           EXISTING LETTERS OF CREDIT
                           --------------------------

                                           EXISTING LETTERS OF CREDIT

<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
LOC
Number        Bank                 Amount           Issue Date     Maturity Date     Beneficiary                     Purpose
------------  -------------------  ---------------  -------------  ----------------  ------------------------------  ---------------
<S>           <C>                     <C>           <C>            <C>
S525856       LaSalle Bank N.A.       1,565,000     8/1/2000       8/1/2001          The Travelers Indemnity Co.     Workers Comp
------------  -------------------  ---------------  -------------  ----------------  ------------------------------  ---------------
                           Total:  $   1,565,000
------------  -------------------  ---------------  -------------  ----------------  ------------------------------  ---------------

---------------
Note:  LaSalle Bank letter of credit to increase on 8/1/01 by $846,100 for workers comp for a total projected
       Letters of Credit outstanding as of 8/1/01 of $3,200,000.
</TABLE>

<PAGE>

                                                                     Schedule IV
                                                                     -----------

                                 REAL PROPERTY
                                 -------------

Fee or leasehold mortgages (as the case may be) will be granted on the
properties marked with an asterisk (*), such property hereby designated as
Mortgaged Property.

Owned Real Property
--------------------------------------------------------------------------------

Maryvale Hospital Medical Center:
---------------------------------

1.   Maryvale Hospital Medical Center, 5102 West Campbell Avenue, Phoenix, AZ
     85031*
2.   Maryvale Medical Arts Plaza, 4524 North Maryvale Parkway, Phoenix, AZ
     85031

Huntington Beach Hospital:
--------------------------

1.   Huntington Beach Hospital, 17772 Beach Boulevard, Huntington Beach, CA
     92647-9932*
2.   Westminster Building, 7631 Wyoming Street, Westminster, CA 92683*

West Anaheim Medical Center:
----------------------------

1.   West Anaheim Medical Center, 3033 W. Orange Avenue, Anaheim, CA 92804*

MacNeal Hospital:

 1.  Main Hospital, 3249 S. Oak Park Ave. Berwyn, IL 60402*
 2.  Land (only), 3343 S. Oak Park, Ave, Berwyn, IL 60402*
 3.  Parking Garage, Euclid & Windsor, Berwyn, IL 60402*
 4.  Professional Services Building, 3231 S. Euclid, Berwyn, IL 60402*
 5.  Service Building, 3249 S. Oak Park Ave. Berwyn, IL 60402*
 6.  Parking, East Side of Euclid, Berwyn, IL 60402*
 7.  House, 6715 W. 34th Street, Berwyn, IL 60402*
 8.  Library, 3400 S. Oak Park Ave., Berwyn, IL 60402*
 9.  Hicks Building, 6805 W. Stanley Ave., Berwyn, IL 60402*
10.  Remote Employee Parking Lot, Berwyn, IL 60402*
11.  MacNeal Health Care Center, 6425 W. Cermak, Berwyn, IL 60402*
12.  MacNeal Health Care Center, 5601 W. Cermak, Cicero, IL 60804*
13.  Ogden Professional Building, 3722 S. Harlem Ave., Riverside, IL 60546*
14.  MacNeal Health Care Center, 125 N. LaGrange, LaGrange, IL  60525*
15.  MacNeal Health Care Center, 7020 W. 79th Street, Bridgeview, IL 60455*
16.  MacNeal Health Care Center, 5101 S. Kildare, Chicago, IL 60632*
17.  MacNeal Health Care Center & Parking Lot, 8100 S. Western, Chicago,
     IL 60602*
18.  MacNeal Health Care Center - Archer, 6649 Archer, Chicago, IL 60638*
19.  House, 6707 W. 34th Street, Berwyn, IL 60402*
20.  House, 3326 S. Wesley, Berwyn, IL 60402*
21.  House, 3300 S. Wesley, Berwyn, IL 60402*

                                       1
<PAGE>
                                                                     SCHEDULE IV

22.  House, 3306 S. Wesley, Berwyn, IL 60402*
23.  House, 3318 S. Wesley, Berwyn, IL 60402*

La Palma Intercommnunity Hospital:
----------------------------------

1.   La Palma Intercommunity Hospital, 7901 Walker Street, La Palma, CA 90623*

Phoenix Baptist Hospital and Medical Center:
--------------------------------------------

1.   Phoenix Baptist Hospital & Medical Center, 2000 W. Bethany Home Road,
     Phoenix, AZ 85012*
2.   Bethany Medical Center, 2040 W. Bethany Home Road, Phoenix, AZ 85015*

Arrowhead Community Hospital and Medical Center:
------------------------------------------------

1.   Arrowhead Community Hospital & Medical Center, 18701 N. 67th Avenue,
     Glendale, AZ 85308*
2.   Citrus Grove & Mod. Bldg Lot, N. 57th Ave. & W. Sacks Drive, Glendale,
     AZ 85308*
3.   Parking Lot & Vacant Land, 6660 W. Union Hills Blvd., Glendale, AZ 85308*
4.   AMPII (land only), 18700 N. 64th Drive, Glendale, AZ 85308

Phoenix Memorial Hospital:
--------------------------

1.   Phoenix Memorial Hospital & Parking lots, 1201 South 7th Avenue, Phoenix,
     AZ 85036*
2.   Jesse Owens Medical Center, 325 E. Baseline Road, Phoenix, AZ 85040*
3.   Jesse Owens Care Center, 325 E. Baseline Road, Phoenix, AZ 85040*
4.   Palm Valley Medical Center, 13575 W. McDowell Road, Goodyear, AZ 85338*
5.   Buckeye Medical Center, 1209 N. Miller Road, Buckeye, AZ 85326*
6.   Palm Valley unimproved land (future estate only), Goodyear, AZ 85338*
7.   Palm Valley Reversionary Interest parcel, Goodyear, AZ 85338*

CERTAIN LEASED REAL PROPERTY
--------------------------------------------------------------------------------

Maryvale Hospital Medical Center:
---------------------------------

1.   West Valley Health Center, 140 North Litchfield Road, Goodyear, AZ 85338

Huntington Beach Hospital:
--------------------------

1.   Huntington Beach Hospital, 17772 Beach Boulevard, Huntington Beach,
     CA 92647-9932*
2.   North Anaheim Surgicenter, 1154 North Euclid, Anaheim, CA 92801
3.   Magnolia Surgery Center, 14571 Magnolia Street, Suite 107, Westminster,
     CA 92683

                                       2

<PAGE>

                                                                     SCHEDULE IV

West Anaheim Medical Center:
----------------------------

1.   West Anaheim Medical Center, 3033 W. Orange Avenue, Anaheim, CA 92804*
2.   Pottberg Property, 601 South Beach Blvd., Anaheim, CA 92804*

MacNeal Hospital:
-----------------

1.   West Building, 6804 W. Windsor, Berwyn, IL 60402*
2.   3300 S. Oak Park Drive, Berwyn, IL 60402*
3.   Berwyn Medical Center, 3340 S. Oak Park Drive, Berwyn, IL 60402*
4.   Parking Lot, 34th & Grove, Berwyn, IL 60402*
5.   House, 3334 S. Grove, Berwyn, IL 60402*

La Palma Intercommnunity Hospital:
----------------------------------

None.

Phoenix Baptist Hospital and Medical Center:
--------------------------------------------

1.   Texaco Property (portion of Hospital parking lot)*

Arrowhead Community Hospital and Medical Center:
------------------------------------------------

None.

Phoenix Memorial Hospital:
--------------------------

1.   Phoenix Health Plan, 2700 North 3rd Street, Phoenix, AZ 85004

TMC Advanced Imaging:
---------------------

1.   Hudson Place Medical Offices, Suites 5-11, 2501 E. Southern Avenue,
     Tempe, AZ
2.   9449 N. 90th Street, Suites 103 and 112, Scottsdale, AZ 85258
3.   Arrowhead Medical Dental Plaza, Suites C-104 & C-105, 18555 N. 79th Avenue,
     Glendale, AZ 85308
4.   1351 N. Alma School Road, Suites 105, 115, 125, 155 & 175, Chandler,
     AZ 85224
5.   941 South Dobson Road, Suite 226, Mesa, AZ 85202
6.   Palm Valley Office Park Phase I, 1616 North Litchfield Road, Suite 140,
     Goodyear, AZ 85338

Other:
------

1.   Corporate Offices, 20 Burton Hills Boulevard, Suite 100, Nashville,
     Tennessee 37215
2.   Regional Office, 8805 N. 23rd Ave., Suite 250, Phoenix, AZ 85021

                                       3
<PAGE>

                                                                      Schedule V
                                                                      ----------

                                 ERISA MATTERS
                                 -------------

1.   Vanguard Health Management, Inc. Premium Payment Plan dated July 1, 1997

2.   Vanguard 401(k) Retirement Savings Plan dated January 1, 2000 plus Summary
     Plan description related thereto.

<PAGE>

<TABLE>

                                                                                                                         SCHEDULE VI

                                                            SUBSIDIARIES

                                                             State of                      Direct                 Is Subsidiary
                         Name (*)                   Incorporation/Organization            Ownership          a Subsidiary Guarantor?
--------------------------------------------------  --------------------------   ------------------------    -----------------------
<S>                                                  <C>                              <C>                     <C>
Vanguard Health Management, Inc. ("VHMI")                    Delaware                 100% by Borrower                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
Vanguard Health Financial Company, Inc. ("VHFCI")            Tennessee                100% by Borrower                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
VHS Acquisition Corporation                                  Delaware                   100% by VHFCI                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
V-II Acquisition Co., Inc. ("VAC")                         Pennsylvania                 100% by VHFCI                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
Healthcare Compliance, L.L.C.                          District of Columbia             100% by VHMI                   Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
VHS of Orange County, Inc. ("VHOC")                          Delaware                   100% by VHFCI                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
VHS Holding Company, Inc. ("VHS-HC")                         Delaware                   100% by VHFCI                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
VHS of Illinois, Inc.                                        Delaware                   100% by VHFCI                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
MacNeal Medical Records, Inc.                                Delaware                   100% by VHFCI                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
VHS Genesis Labs, Inc.                                       Delaware                   100% by VHFCI                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
MacNeal Management Services, Inc. ("MMS")                    Illinois                   100% by VHFCI                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
VHS of Phoenix, Inc. ("VHS-P")                               Delaware                   100% by VHFCI                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
Trinity MedCare, Inc.                                        Delaware                   100% by VHFCI                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
The VHS Arizona Imaging Centers                              Delaware                   88% by VHS-HC                  Yes
   Limited Partnership                                                                  10% by VHFCI
                                                                                         2% by VHS-I
--------------------------------------------------  --------------------------   -------------------------   -----------------------
VHS Imaging Centers, Inc. ("VHS-I")                          Delaware                   100% by VHFCI                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
VHS Acquisition Subsidiary Number 1, Inc.                    Delaware                   100% by VHFCI                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
VHS Acquisition Subsidiary Number 2, Inc.                    Delaware                   100% by VHFCI                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
VHS Acquisition Subsidiary Number 3, Inc.                    Delaware                   100% by VHFCI                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
VHS Acquisition Subsidiary Number 4, Inc.                    Delaware                   100% by VHFCI                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
VHS Acquisition Subsidiary Number 5, Inc.                    Delaware                   100% by VHFCI                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
VHS Acquisition Subsidiary Number 6, Inc.                    Delaware                   100% by VHFCI                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
VHS Acquisition Subsidiary Number 7, Inc.                    Delaware                   100% by VHFCI                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
VHS Acquisition Subsidiary Number 8, Inc.                    Delaware                   100% by VHFCI                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
VHS Acquisition Subsidiary Number 9, Inc.                    Delaware                   100% by VHFCI                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
VHS Acquisition Subsidiary Number 10, Inc.                   Delaware                   100% by VHFCI                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
VHS of Rancocas, Inc.                                       New Jersey                   100% by VAC                   Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
VHS of Huntington Beach, Inc. ("VHS-HB")                     Delaware                   100% by VHOC                   Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
VHS of Anaheim, Inc. ("VHS-A")                               Delaware                   100% by VHOC                   Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
The Anaheim VHS Limited Partnership                          Delaware                   98% by VHS-HC                  Yes
                                                                                         2% by VHS-A
--------------------------------------------------  --------------------------   -------------------------   -----------------------
The Huntington Beach VHS Limited Partnership                 Delaware                   98% by VHS-HC                  Yes
                                                                                        2% of VHS-HB
--------------------------------------------------  --------------------------   -------------------------   -----------------------

                                                                 1
</TABLE>

<PAGE>
<TABLE>

                                                                                                                         Schedule VI

                                                            SUBSIDIARIES

                                                             State of                      Direct                 Is Subsidiary
                         Name (*)                   Incorporation/Organization            Ownership          a Subsidiary Guarantor?
--------------------------------------------------  --------------------------   ------------------------    -----------------------
<S>                                                  <C>                              <C>                     <C>
Magnolia Surgery Center Limited Partnership                  Delaware                   97% by VHS-HC                   No
                                                                                        2% by VHS-HB
                                                                                      1% by Physicians
--------------------------------------------------  --------------------------   -------------------------   -----------------------
North Anaheim Surgicenter, Ltd.                             California                    75% VHS-A1                    No
                                                                                      25% by Physicians
--------------------------------------------------  --------------------------   -------------------------   -----------------------
Primary Care Physicians Center, LLC                          Illinois                    94% by MMS2                    No
--------------------------------------------------  --------------------------   -------------------------   -----------------------
Midwest Claims Processing, Inc.                              Illinois                    100% by MMS                   Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
MacNeal Health Providers, Inc.                               Illinois                    100% by MMS                   Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
Watermark Physician Services, Inc.3                          Illinois                    100% by MMS                   Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
Pros Temporary Staffing, Inc.                                Illinois                    100% by MMS                   Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
The 6300 West Roosevelt Limited Partnership                  Illinois                   50.33% by MMS4                 No
--------------------------------------------------  --------------------------   -------------------------   -----------------------
VHS of Arrowhead, Inc. ("VA")                                Delaware                   100% by VHS-P                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
VHS Outpatient Clinics, Inc.                                 Delaware                   100% by VHS-P                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
VHS of South Phoenix, Inc. ("VHS-SP")                        Delaware                   100% by VHS-P                  Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
Pleasant Properties, Inc.                                     Arizona                    100% by VA                    Yes
--------------------------------------------------  --------------------------   -------------------------   -----------------------
VHS Phoenix Health Plan, Inc.                                Delaware                  100% by VHS-SP                   No
--------------------------------------------------  --------------------------   -------------------------   -----------------------

--------
1    VHS-A aggregate ownership is 75% of the partnership interests (150 units out of 200 units). Physicians own 50
     LP units for 25% partnership interest ownership.
2    A third party (or parties) owns 6% of the Membership Interests.
3    Formerly, Watermark Ventures, Inc.
4    A third party (or parties) owns 49.67% of the partnership interests.

                                                                 2

</TABLE>

<PAGE>

                                                                    Schedule VII
                                                                    ------------

                             INTELLECTUAL PROPERTY
                             ---------------------

Borrower incorporated in the State of Delaware on July 1, 1997, under the
corporate name "Vanguard Health Systems, Inc." and filed a "Service Mark"
Application in the United States Patent and Trademark Office ("Trademark
Office") on September 18, 1997. From July 1, 1997 through September 18, 1997,
Borrower openly used the Mark in interstate commerce.

On November 7, 1997, Borrower received a letter from Vanguard Healthcare, LLC
("Different Vanguard"), with an address of 2 International Plaza Drive,
Nashville, Tennessee 37217, claiming it had filed a prior federal Service Mark
Application on the Mark and stating "...we suggest you consider a different
name, as we believe your usage may infringe upon our trademark".

Upon investigation Borrower determined that (1) Different Vanguard was
organized on June 14, 1996, as a Tennessee limited liability company under the
name "Total HealthCare, LLC" and changed its name on November 4, 1997, to
Vanguard Healthcare, LLC, and (2) Different Vanguard filed on September 11,
1997 a "Service Mark" Application on the Mark (on an "intent to use" basis)
(i.e. this date was 7 days prior to Borrower's Application ).

The Trademark Office has examined Borrower's Application and approved it for
form and registrability, subject to the issuance or abandonment of the
Application of Different Vanguard. Different Vanguard's Application was
examined by the Trademark Office in the summer of 1999 and was published for
opposition purposes on August 24, 1999. Borrower had 30 days from the date of
publication to file an objection (i.e. an "Opposition") to its registration by
Different Vanguard and the Borrower filed its Opposition on August 30, 1999.

Outside Trademark counsel has informed the Borrower that Different Vanguard's
earlier filing of its Application confers no superior ownership rights of any
kind in the Mark because of Borrower's first and prior public use of the Mark.

Discovery in this matter has begun. Different Vanguard claims no written use of
the Mark by it prior to November 1997, but claims its selection and its oral
use of the Mark starting on July 10, 1997. Different Vanguard is in the nursing
home business, owning and managing nursing homes for itself and for other
owners.

On January 21, 2000 Borrower filed a summary judgment motion in this matter
claiming its prior use of the Mark commencing on or about July 1, 1997, 9 days
before the earliest date claimed by Different Vanguard. The Trademark Office
denied the Borrower's motion for summary judgment on February 28, 2001 finding
that "...there are genuine issues of material fact regarding the priority of
use of the marks".

Thus, this matter currently continues in the discovery process (the depositions
of the Borrower's Chief Executive Officer and General Counsel having been taken
by Different Vanguard in May 2001) with trial of the matter expected during the
last six months of calendar 2001.

Based on the foregoing, Outside Trademark counsel has informed Borrower that
Borrower is more likely than not to prevail in the trial of the facts as to its
objection to the registration of Different Vanguard's Application for the Mark.

This Trademark Office proceeding only involves the issue of registrability. The
Trademark Office cannot enjoin the use of a mark by either party, or award
damages, profits, costs, or attorney fees. The decision by the Trademark Office
is not binding or res judicata on any future proceedings involving the parties'
rights to use their respective marks.

To date, Different Vanguard has not pursued any formal action to preclude
Borrower's use of the Mark VANGUARD HEALTH despite more than two years use by
Borrower. The longer no such action is pursued, the greater likelihood such an
action would be unsuccessful, based on the equitable defenses of laches,
estoppel, and acquiescence.

<PAGE>

<TABLE>
                                                                                                                       Schedule VIII
                                                                                                                       -------------

                                                       EXISTING INDEBTEDNESS
                                                       ---------------------

              LESSOR/DEBTOR                                 DESCRIPTION                    LOAN/LEASE NUMBER        BALANCE
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                                   <C>                      <C>
              1.  ARROWHEAD MOB JOINT VENTURE
                FARM BUREAU LIFE INSURANCE CO        SECURED INSTALLMENT LOAN                                        $2,249,834.00

                     2.  VHS OF PHOENIX, INC.
                             BANC ONE LEASING              CAPITAL LEASE                       1000065630               279,086.71
                             BANC ONE LEASING              CAPITAL LEASE                       1000091094               219,691.52

                   3.  VHS OF ARROWHEAD, INC.
                             BANC ONE LEASING              CAPITAL LEASE                       1000054137               132,124.24
                             BANC ONE LEASING              CAPITAL LEASE                       1000067412               196,185.21

               4.  VHS OF SOUTH PHOENIX, INC.
                                 DATA GENERAL              CAPITAL LEASE                       13311-001              3,454,664.97
                                      SIEMENS              CAPITAL LEASE                    140-0001337-000             348,619.40
                           CHIRON DIAGNOSTICS              CAPITAL LEASE                          1633                   12,128.22

  5.  THE VHS ARIZONA IMAGING CENTERS LIMITED
                                  PARTNERSHIP
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                         181-0                  451,159.38
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        887-006                  33,347.47
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        887-007                  36,750.72
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        1375-001                466,232.56
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        1375-002                389,176.91
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        1375-003                146,434.62
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        1375-004                243,229.63
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        1375-005                 29,346.39
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        1375-006                 97,773.79
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        1375-007                174,839.90
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        1375-008                 40,598.50
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        1375-009                 20,419.56
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        1375-010                 28,389.49
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        1797-001                 14,092.37
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        1830-001                 43,786.78
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        1830-002              1,774,052.10
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        1830-003                172,554.89
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        1830-004                 15,315.26
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        1830-005                386,032.52
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        1830-006                 15,125.86
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        1830-007                335,534.98
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        1830-008              1,192,945.59
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        1830-009                193,491.56
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        1830-010                880,124.02
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        1830-011                219,645.13
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        1830-012                 42,930.97
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        1830-013                198,966.24
                       DVI FINANCIAL SERVICES              CAPITAL LEASE                        1830-014                 48,478.44

                             GENERAL ELECTRIC              CAPITAL LEASE                    8553456-002/003              30,477.99
                             GENERAL ELECTRIC              CAPITAL LEASE                      8512356-001               923,962.02
                             GENERAL ELECTRIC              CAPITAL LEASE                      8512568-001               295,743.95
                             GENERAL ELECTRIC              CAPITAL LEASE                      8513846-002               257,002.56
                             GENERAL ELECTRIC              CAPITAL LEASE                      8513633-001               245,359.75

           6.   VANGUARD HEALTH SYSTEMS, INC.
MORGAN STANLEY SENIOR FUNDING INC./ROYAL BANK            LETTER OF CREDIT                     0699/S19488               788,900.00
                                    OF CANADA
                                                                                                               --------------------
                                                                                                                    $17,124,556.17
                                                                                                               ====================

</TABLE>

<PAGE>

                                                                     Schedule IX
                                                                     -----------

                                   INSURANCE
                                   ---------

1.       Policy:           Excess Healthcare Professional & General Liability

         Effective:                 June 1, 2001

         Expiration:                June 1, 2002

         Carrier:          Truck Insurance Exchange

         Named Insured and address: Vanguard Health Management, Inc.
                                    20 Burton Hill Boulevard
                                    Suite 100
                                    Nashville, TN  37215

         Limits of Liability

         Occurrence Limit:          $49,000,000

         Annual Aggregate:          $49,000,000

         Excess of:                 $ 1,000,000/Occ.
                                    $ 13.2MM.2/Agg.

<PAGE>

2.       POLICY:           Business Automobile

         EFFECTIVE:        June 1, 2001

         EXPIRATION:       June 1, 2002

         CARRIER:          Travelers

         NAMED INSURED AND ADDRESS: Vanguard Health Management, Inc.
                                    20 Burton Hills Boulevard
                                    Suite 100
                                    Nashville, TN  37215

         COVERAGE AND LIMITS

         Limits of Liability:       $1,000,000 CSL BI/PD Per Accident
1)       Any auto

                                    Uninsured/Underinsured Motorist:  $1,000,000
                                    Covered Autos:  2)  All owned Autos

         PHYSICAL DAMAGE COVERAGE AND LIMITS

         o Recovery is Based on Actual Cash Value
         o Comprehensive and Collision is Included as Follows:
         Deductible:       $500
         Covered Autos:    2)  All Owned Autos
                           8)  Hired Autos

         o Hired Car Physical Damage:
         Maximum Value of a Hired Auto:                         $50,000
         Comprehensive and Collision Deductible:                $   500

<PAGE>

                                                                     Schedule IX
                                                                     -----------

3.       POLICY:           Worker's Compensation & Employer's Liability

         EFFECTIVE:        June 1, 2001

         EXPIRATION:       June 1, 2002

         CARRIER:          Travelers

         NAMED INSURED AND ADDRESS: Vanguard Health Management, Inc.
                                    20 Burton Hills Boulevard
                                    Suite 100
                                    Nashville, TN  37215

         COVERAGE AND LIMITS

         Worker's Compensation Applies in the Listed States:  AZ, CA, IL, TN

         Employers' Liability Limits (To Include Pre and Post Judgment Interest)
         Each Accident:                     $1,000,000
         Disease (Policy Limit):            $1,000,000
         Disease (Each Employee):           $1,000,000
         Deductible:                        $  250,000

<PAGE>

                                                                     Schedule IX
                                                                     -----------

4.       POLICY:           Excess Automobile & Employers Liability

         EFFECTIVE:        June 13, 2001

         EXPIRATION:       June 1, 2002

         CARRIER:          National Surety Corporation

         NAMED INSURED AND ADDRESS: Vanguard Health Management, Inc.
                                    20 Burton Hill Boulevard
                                    Suite 100
                                    Nashville, TN  37215

         LIMITS OF LIABILITY

         Occurrence Limit:                                      $49,000,000

         Annual Aggregate:                                      $49,000,000

         Excess of:                                             $ 1,000,000

<PAGE>

                                                                     Schedule IX
                                                                     -----------

5.       POLICY:           Excess Liability

         EFFECTIVE:        June 1, 2001

         EXPIRATION:       June 1, 2002

         CARRIER:          Steadfast Insurance Co.

         NAMED INSURED AND ADDRESS: Vanguard Health Management, Inc.
                                    20 Burton Hill Boulevard
                                    Suite 100
                                    Nashville, TN  37215

         LIMITS OF LIABILITY

         Occurrence Limit:                                   $25,000,000

         Annual Aggregate:                                   $25,000,000

         Excess of:                                          $50,000,000 Occ/Agg

<PAGE>

                                                                     Schedule IX
                                                                     -----------

6.       POLICY:           Excess Liability

         EFFECTIVE:        June 1, 2001

         EXPIRATION:       June 1, 2002

         CARRIER:          XL Insurance Ltd.

         NAMED INSURED AND ADDRESS: Vanguard Health Management, Inc.
                                    20 Burton Hill Boulevard
                                    Suite 100
                                    Nashville, TN  37215

         LIMITS OF LIABILITY

         Occurrence Limit:                                      $25,000,000

         Annual Aggregate:                                      $25,000,000

         Excess of:                                             $75,000,000

<PAGE>

                                                                     Schedule IX
                                                                     -----------

7.       POLICY:           Property

         EFFECTIVE:        June 1, 2001

         EXPIRATION:       June 1, 2002

         CARRIER:          Zurich

         NAMED INSURED AND ADDRESS: Vanguard Health Management, Inc.
                                    20 Burton Hills Boulevard
                                    Suite 100
                                    Nashville, TN  37215

         COVERAGE AND LIMITS

         Policy Limit - Blanket             $1,137,337,239

         Business Interruption:              Policy Limit
         Extra Expense:                     $   25,000,000
         Contingent BVEE:                   $   25,000,000

         Boiler and Machinery:               Policy Limit
         Service Interruption:              $   25,000,000
         Deductible:                        $       10,000

<PAGE>

                                                                     Schedule IX
                                                                     -----------

8.       POLICY:                    Non-Owned Aircraft Liability Insurance

         EFFECTIVE:                 June 1, 2001

         EXPIRATION:                June 1, 2002

         CARRIER: AIG Aviation (National Union Fire Insurance Company of
                  Pittsburg, PA)

         NAMED INSURED AND ADDRESS: Vanguard Health Management, Inc.
                                    20 Burton Hills Boulevard
                                    Suite 100
                                    Nashville, TN  37215

         AIRCRAFT:         Any non-owned fixed wing aircraft having no more than
                           45 total seats and any non-owned rotor wing aircraft
                           having no more than 7 total seats.

         NON-OWNED AIRCRAFT
         COVERAGE:                  $10,000,000 Combined Single Limit Bodily
                                    Injury Liability and Property Damage
                                    Liability, including Passengers

         PASSENGER PERSONAL
         EFFECTS COVERAGE:          $250 Each passenger

         DEDUCTIBLE:                None

<PAGE>

                                                                     Schedule IX
                                                                     -----------

9.       POLICY:           Heliport Liability Insurance

         EFFECTIVE:        June 1, 2001

         EXPIRATION:       June 1, 2002

         CARRIER: AIG Aviation (National Union Fire Insurance Company of
                  Pittsburg, PA)

         NAMED INSURED AND ADDRESS: Vanguard Health Management, Inc.
                                    20 Burton Hills Boulevard
                                    Suite 100
                                    Nashville, TN  37215

         AIRPORT PREMISES
         LIABILITY COVERAGE:        $10,000,000 Combined Single Limit Bodily
                                    Injury and Property Damage Liability

         LOCATION OF
         AIRPORT PREMISES:          o Maryvale Hospital Medical Center
                                            Phoenix, AZ

                                    o West Valley Emergency Center
                                    Goodyear, AZ

                                    o West Anaheim Medical Center
                                    Anaheim, CA

                                    o Huntington Beach Hospital
                                    Huntington Beach, CA

                                    o Arrowhead Community Hospital
                                    Glendale, AZ

                                    o Phoenix Baptist Hospital
                                    Phoenix, AZ

                                    o Phoenix Memorial Hospital
                                    Phoenix, AZ

         DEDUCTIBLE:                None

<PAGE>

                                                                      Schedule X
                                                                      ----------

                                 EXISTING LIENS
                                 --------------

1.   Liens on Subsidiary assets securing the Existing Indebtedness set forth on
     Schedule VIII.

<PAGE>

                                                                     Schedule XI
                                                                     -----------

                              EXISTING INVESTMENTS
                              --------------------

                              EXISTING INVESTMENTS

1.   50% Membership Interest in West Anaheim MSO, LLC (current capital
     contribution - $250,000; no additional capital required without the
     consent of a Subsidiary Guarantor). A Subsidiary Guarantor is the Managing
     Member of this LLC.

2.   $300,000 line of credit to West Anaheim MSO, LLC. (current balance, $0)

3.   25% joint venture (general partner) interest in BHS Digestive Disease
     Associates (a/k/a Gastro & Liver Specialists Joint Venture), an Illinois
     joint venture.

4.   40% joint venture (general partner) interest in MacNeal/CCP Joint Venture.

5.   25% of the Percentage Interests in Berwyn Magnetic Resonance Center, LLC,
     an Illinois limited liability company.

6.   18% limited partnership interest in Palm Valley Nursing Facility Limited
     Partnership LLLP, an Arizona limited partnership.

7.   49% limited partnership interest in PBG Partners, Ltd., a Florida limited
     partnership.

8.   44.45% joint venture (general partner) interest in MacNeal/Daly/Shaw Joint
     Venture, an Illinois joint venture.

9.   Physician Support Obligations in aggregate amount at 6/30/01 of
     approximately $5,700,000.

<PAGE>

                LEGAL NAMES, ORGANIZATION IDENTIFICATION NUMBERS
               JURISDICTION OF ORGANIZATION, TYPE OF ORGANIZATION

                                                                   SCHEDULE XII

<TABLE>

      ENTITY NAME                          JURISDICTION            TYPE OF ORGANIZATION               FEDERAL ID#      STATE ID#
      -----------                          ------------            --------------------               -----------      ---------
<S>                                          <C>                      <C>                              <C>              <C>
Vanguard Health Systems, Inc.                 Delaware                 Corporation                     62-1698183       2765298
VHS Acquisition Corporation                   Delaware                 Corporation                     62-1730519       2863490
VHS of Phoenix, Inc.                          Delaware                 Corporation                     62-1809851       3177186
VHS Outpatient Clinics, Inc.                  Delaware                 Corporation                     62-1816823       3212542
VHS of Arrowhead, Inc.                        Delaware                 Corporation                     62-1811285       318980
Pleasant Properties, Inc.                     Arizona                  Corporation                     86-0692318       0236400-8
VHS of South Phoenix, Inc.                    Delaware                 Corporation                     62-1842396       3348177
The VHS Arizona Imaging Centers
  Limited Partnership                         Delaware                 Limited Partnership             72-1503733       3391889
VHS Imaging Centers, Inc.                     Delaware                 Corporation                     62-1852828       3381167
VHS of Anaheim, Inc.                          Delaware                 Corporation                     62-1781813       3046767
VHS of Orange County, Inc.                    Delaware                 Corporation                     62-1770074       2991266
VHS Holding Company, Inc.                     Delaware                 Corporation                     62-1782796       3053546
VHS of Huntington Beach, Inc.                 Delaware                 Corporation                     62-1782707       3053551
The Anaheim VHS Limited Partnership           Delaware                 Limited Partnership             62-1782797       3054158
The Huntington Beach VHS Limited
  Partnership                                 Delaware                 Limited Partnership             62-1782795       3052
VHS of Illinois, Inc.                         Delaware                 Corporation                     62-1796152       3100647
MacNeal Health Providers, Inc.                Illinois                 Corporation                     36-3361297       D5365-515-7
MacNeal Management Services, Inc.             Illinois                 Corporation                     36-3313638       D5347-087-4
Midwest Claims Processing, Inc.               Illinois                 Corporation                     36-4295667       D6050-154-8
Pros Temporary Staffing, Inc.                 Illinois                 Corporation                     36-4339784       D6086-116-1
Watermark Physician Services, Inc.            Illinois                 Corporation                     36-4339782       D6080-956-9
VHS Genesis Labs, Inc.                        Delaware                 Corporation                     62-1803765       3143714
MacNeal Medical Records, Inc.                 Delaware                 Corporation                     62-1807248       3160763
Vanguard Health Management, Inc.              Delaware                 Corporation                     62-1686886       2712798
Trinity Medcare, Inc.                         Delaware                 Corporation                     62-1684322       2720439
V-II Acquisition Co., Inc.                    Pennsylvania             Corporation                     62-1730482       3795-539
Vanguard Health Financial Company, Inc.       Tennessee                Corporation                     62-1730470       0345736
Healthcare Compliance, L.L.C.                 District of Columbia     Limited Liability Corporation   52-2033964       0236505
VHS of Rancocas, Inc.                         New Jersey               Corporation                     62-1746570       0100-7423-73
VHS Acquisition Subsidiary Number 1, Inc.     Delaware                 Corporation                     62-1861138       3414395
VHS Acquisition Subsidiary Number 2, Inc.     Delaware                 Corporation                     62-1861141       3414394
VHS Acquisition Subsidiary Number 3, Inc.     Delaware                 Corporation                     62-1861142       3414388
VHS Acquisition Subsidiary Number 4, Inc.     Delaware                 Corporation                     62-1861143       3414383
VHS Acquisition Subsidiary Number 5, Inc.     Delaware                 Corporation                     62-1861175       3414379
VHS Acquisition Subsidiary Number 6, Inc.     Delaware                 Corporation                     62-1861197       3414377
VHS Acquisition Subsidiary Number 7, Inc.     Delaware                 Corporation                     62-1861198       3414374
VHS Acquisition Subsidiary Number 8, Inc.     Delaware                 Corporation                     62-1861199       3414371
VHS Acquisition Subsidiary Number 9, Inc.     Delaware                 Corporation                     62-1861200       3414366
VHS Acquisition Subsidiary Number 10, Inc.    Delaware                 Corporation                     62-1861202       3414364
</TABLE>EXHIBIT 10.4

                                                      As amended through 8/8/00

                         VANGUARD HEALTH SYSTEMS, INC.
                             1998 STOCK OPTION PLAN

     1. Purpose; Types of Options; Construction. The purpose of the Vanguard
Health Systems, Inc. 1998 Stock Option Plan is to afford an incentive to
executive officers, other key employees, directors and consultants of Vanguard
Health Systems, Inc. (the "Company"), or any subsidiary of the Company which
now exists or hereafter is organized or acquired by the Company, to acquire a
proprietary interest in the Company, to continue as employees, directors or
consultants, to increase their efforts on behalf of the Company and to promote
the success of the Company's business.

     2. Definitions. As used in this Plan, the following words and phrases
shall have the meanings indicated:

     "Acceleration Date" shall have the meaning set forth in Section 11.

     "Board" shall mean the Board of Directors of the Company.

     "Carry Option Plan" shall mean the Carry Option Plan adopted by the
Company on the date hereof, as the same may be amended from time to time.

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

     "Committee" shall mean the Compensation Committee of the Board or such
other committee established by the Board to administer the Plan, provided if no
such Committee is established by the Board, Committee shall mean the entire
Board.

     "Common Stock" shall mean shares of common stock, par value $.01 per
share, of the Company.

     "Company" shall mean Vanguard Health Systems, Inc. a corporation organized
under the laws of the State of Delaware, or any successor corporation.

     "Disability" shall mean a Grantee's inability to perform his duties with
the Company or any of its affiliates by reason of any medically determinable
physical or mental impairment, as determined by a physician selected by the
Grantee and acceptable to the Company.

     "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time, and as now or hereafter construed, interpreted and applied
by regulations, rulings and cases.

     "Fair Market Value" per share as of a particular date shall mean (i) the
closing sales price per share of Common Stock on the national securities
exchange on which the

                                      -1-
<PAGE>

Common Stock is principally traded for the last preceding date on which there
was a sale of such Common Stock on such exchange (or, on the date of an initial
sale of Common Stock pursuant to an effective registration statement under the
Securities Act of 1933, as amended (other than a registration statement on Form
S-4 or Form S-8 or any successor or similar form), the per share initial sale
price to the public), or (ii) if the shares of Common Stock are then traded in
an over-the-counter market, the average of the closing bid and asked prices for
the shares of Common Stock in such over-the-counter market for the last
preceding date on which there was a sale of such Common Stock in such market,
or (iii) if the shares of Common Stock are not then listed on a national
securities exchange or traded in an over-the-counter market, such value as the
Committee, in its sole discretion, shall determine.

     "First Exercise Termination Period" shall have the meaning set forth in
Section 7(f) hereof.

     "Forfeiture Liquidity Event" shall mean a Liquidity Event that results in
a Net MSCP IRR that is less than or equal to 12.50%.

     "Grantee" shall mean a person who receives a grant of Options under the
Plan.

     "Incentive Stock Option" shall mean any Option intended to be, and
designated as, an incentive stock option within the meaning of Section 422 of
the Code.

     "Insider" shall mean a Grantee who is subject to the reporting
requirements of Section 16(a) of the Exchange Act.

     "Liquidity Event" shall have the meaning set forth in the Shareholders
Agreements.

     "Liquidity Event Options" shall mean those Options that are forfeited and
canceled pursuant to Section 6 hereof if a Forfeiture Liquidity Event shall
have occurred.

     "Management Investor" shall have the meaning set forth in the Shareholders
Agreements.

     "Maximum Share Number" shall have the meaning set forth in Section 5
hereof.

     "Net MSCP Exit Multiple" shall have the meaning set forth in the Carry
Option Plan.

     "Net MSCP IRR" shall have the meaning set forth in the Carry Option Plan.

     "Non-Liquidity Event Option" shall mean any Option that is not a Liquidity
Event Option.

                                      -2-
<PAGE>

     "Non-qualified Stock Option" shall mean any Option other than an Incentive
Stock Option.

     "Option" or "Options" shall mean a grant to a Grantee of an option or
options to purchase shares of Common Stock. Options granted by the Committee
pursuant to the Plan shall constitute either (i) Incentive Stock Options or
Non-qualified Stock Options and (ii) Liquidity Event Options or Non-Liquidity
Event Options.

     "Option Agreement" shall mean an agreement entered into between the
Company and a Grantee in connection with a grant under the Plan.

     "Option Price" shall mean the exercise price per share of Common Stock
covered by an Option, as calculated pursuant to Section 7(c) hereof.

     "Parent" shall mean any company (other than the Company) in an unbroken
chain of companies ending with the Company if, at the time of granting an
Option, each of the companies other than the Company owns stock possessing
fifty percent (50%) or more of the total combined voting power of all classes
of stock in one of the other companies in such chain.

     "Plan" means this Vanguard Health Systems, Inc. 1998 Stock Option Plan, as
further amended from time to time.

     "Second Exercise Termination Period" shall have the meaning set forth in
Section 7(f) hereof.

     "Shareholders Agreements" shall mean the Shareholders Agreement dated as
of June 1, 1998 among the Company and the shareholders of the Company, and the
Surviving Shareholders Agreement dated as of June 1, 1998 among the Company and
the shareholders of the Company, in each case as amended from time to time.

     "Subscription Agreement" means the Amended and Restated Subscription
Agreement dated as of June 1, 2000 among the Company and the investors party
thereto, as it exists on the date hereof.

     "Subsidiary" shall mean any company (other than the Company) in an
unbroken chain of companies beginning with the Company if, at the time of
granting an Option, each of the companies other than the last company in the
unbroken chain owns stock possessing in excess of fifty percent (50%) of the
total combined voting power of all classes of stock in one of the other
companies in such chain.

     "Ten Percent Stockholder" shall mean a Grantee who, at the time an
Incentive Stock Option is granted, owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any Parent or Subsidiary.

     3. Administration. The Plan shall be administered by the Committee. The
Committee shall have the authority in its discretion, subject to and not
inconsistent with the express provisions of the Plan, to administer the Plan
and to exercise all the powers and

                                      -3-
<PAGE>

authorities either specifically granted to it under the Plan or necessary or
advisable in the administration of the Plan, including, without limitation, the
authority to grant Options, to determine which Options shall constitute
Incentive Stock Options and which Options shall constitute Non-qualified Stock
Options; to determine the purchase price of the shares of Common Stock covered
by each Option; to determine the persons to whom, and the time or times at
which Options shall be granted; to determine the number of shares to be covered
by each Option; to interpret the Plan; to prescribe, amend and rescind rules
and regulations relating to the Plan; to determine the terms and provisions of
the Option Agreements (which need not be identical); to accelerate
exercisability of Options; and to grant waivers of or cancel or suspend
Options, as necessary; and to make all other determinations deemed necessary or
advisable for the administration of the Plan.

     The Committee may delegate to one or more of its members or to one or more
agents such administrative duties as it may deem advisable, and the Committee
or any person to whom it has delegated duties as aforesaid may employ one or
more persons to render advice with respect to any responsibility the Committee
or such person may have under the Plan. All decisions, determinations and
interpretations of the Committee shall be final and binding on all Grantees of
any Options under this Plan.

     No member of the Board or Committee shall be liable for any action taken
or determination made in good faith with respect to the Plan or any Option
granted hereunder.

     4. Eligibility. Options may be granted to directors, executive officers
and other key employees and consultants of the Company or its Subsidiaries,
including officers and directors who are employees. In determining the persons
to whom Options shall be granted and the number of shares to be covered by each
Option, the Committee shall take into account the duties of the respective
persons, their present and potential contributions to the success of the
Company and such other factors as the Committee shall deem relevant in
connection with accomplishing the purpose of the Plan.

     5. Stock. The maximum number of shares of Common Stock reserved for the
grant of Options under the Plan (the "Maximum Share Number") shall be 13,306
shares of Common Stock: provided, however, notwithstanding the foregoing, until
a Liquidity Event should occur and a recalculation of the Maximum Share Number
is made pursuant to the following sentence hereof (or, prior thereto,
circumstances should change and an amendment of this Section 5 should be
necessary to restore some or all of the suspended shares), the Committee shall
not grant Options in respect of 2,977 of these 13,306 shares (such 2,977 shares
being deemed to be in suspense until such time); provided, further, that in no
event shall the number of shares of Common Stock with respect to which Options
are granted hereunder exceed 50% of the number of shares of Common Stock
authorized as of the effective date of this Plan. If an Liquidity Event should
occur, the Maximum Share Number shall be recomputed pursuant to the following
formula and if, pursuant to such recalculation, the Maximum Share Number shall
be in excess of 10,329 shares of Common Stock, then such number of shares in
excess of 10,329 (but not in excess of an additional 2,977 shares) shall come
out of suspense and be fully authorized for the grant of Options in respect
thereto under this Plan:

                                      -4-
<PAGE>

     the remainder of (A) 13,306 minus (B) the Special Share Number (as defined
     below).

Such shares may, in whole or in part, be authorized but unissued shares or
shares that shall have been or may be reacquired by the Company. The maximum
number of shares with respect to which Options may be granted during any
calendar year to any individual shall be 10,000.

     If any outstanding Option under the Plan should, for any reason expire, be
canceled or be forfeited without having been exercised in full, other than any
cancellation or forfeiture of a Liquidity Event Option pursuant to Section 6
hereof, the shares of Common Stock allocable to the unexercised, canceled or
terminated portion of such Option shall (unless the Plan shall have been
terminated) become available for subsequent grants of Options under the Plan.

     The term "Special Share Number" shall mean the quotient of (A) the
"Incremental After -Tax Special Cost" divided by (B) the remainder of (i) the
price of one share (on a pre-split basis) of the Common Stock in the Liquidity
Event minus (ii) $1,701.18. The term "Incremental After-Tax Special Cost" shall
mean the sum of the Option Cost (as defined below) and the Bonus Cost (as
defined below). The term "Option Cost" shall mean the remainder of
(A)$6,730,162 minus (B) the product of (i) $6,730,162 times (ii) the "Tax Rate"
(as defined below); provided, however, notwithstanding the following, that in
the event there is as a result of the Liquidity Event both (A) a Net MSCP Exit
Multiple equal to or greater than 3.0x and (B) a Net MSCP IRR equal to or
greater than 25%, then the term "Option Cost" shall mean $0.00. The term "Bonus
Cost" shall mean the remainder of (A)$1,854,863 minus (B) the product of (i)
$1,854,863 times (ii) the Tax Rate. The term "Tax Rate" shall mean the marginal
income tax rate of the Company at the time of the Liquidity Event, as
determined by the Committee.

     6. Forfeiture in Certain Instances. Notwithstanding any other provision
herein to the contrary, at no time shall Options representing shares of Common
Stock in excess of 25% of the Maximum Share Number be granted, outstanding or
exercisable under the Plan at any time which are not Liquidity Event Options.
Upon the occurrence of such a Forfeiture Liquidity Event, all Liquidity Event
Options shall, without any action by any party, be irrevocably and
unconditionally forfeited and canceled without any consideration payable to the
Grantee and the Grantee shall have no further right or interest therein.

     7. Terms and Conditions of Options. Each Option granted pursuant to the
Plan shall be evidenced by an Option Agreement, in the form of Exhibit A hereto
if it is a Non-qualified Stock Option, or in such other form and containing
such terms and conditions as the Committee shall from time to time approve.
Each Option shall be subject to the following terms and conditions, except to
the extent otherwise specifically provided in such Option Agreement:

          (a) Number of Shares. Each Option Agreement shall state the number of
     shares of Common Stock to which the Option relates.

                                      -5-
<PAGE>

          (b) Type of Option. Each Option Agreement shall specifically state
     whether the Option is (i) an Incentive Stock Option or a Non-qualified
     Stock Option and (ii) a Liquidity Event Option or a Non-Liquidity Event
     Option.

          (c) Option Price. (i) Each Option Agreement shall state the Option
     Price which shall be $1,701.18 for each share of Common Stock covered by
     such Option unless, prior to the exercise of any such Option, a Liquidity
     Event shall have occurred that results in (x) a Net MSCP Exit Multiple
     equal to or greater than 3.0x and (y) a Net MSCP IRR equal to or greater
     than 25%, in which case the Option Price for each share of Common Stock
     covered by any such unexercised Option shall be the greater of (1) $425.32
     and (2) ten percent (10%) of the Fair Market Value of each share of Common
     Stock covered by the Option on the date of grant; provided, that in the
     case of an Incentive Stock Option, the Option Price shall be the greater
     of (x) $1,701.18 and (y) one hundred percent (100%) of the Fair Market
     Value of each share of Common Stock covered by the Option on the date of
     grant; and

               (ii) The Option Price shall be subject to adjustment as provided
     in Section 11 hereof. The date as of which the Committee adopts a
     resolution expressly granting an Option shall be considered the day on
     which such Option is granted.

          (d) Medium and Time of Payment. The Option Price shall be paid in
     full, at the time of exercise, in cash or, if permitted by the Committee,
     in shares of Common Stock having a Fair Market Value equal to such Option
     Price or, if permitted by the Committee, in a combination of cash and
     Common Stock or in such other manner as the Committee shall determine
     including, without limitation, a cashless exercise procedure through a
     broker-dealer.

          (e) Term and Exercisability of Options. Each Option Agreement shall
     provide the exercise schedule for the Option as determined by the
     Committee (which may include a requirement for achieving performance
     goals), provided that, subject to Sections 7(g) and 7(h) hereof, the
     Committee shall have the authority to accelerate the exercisability of any
     outstanding Option at such time and under such circumstances as it, in its
     sole discretion, deems appropriate. Subject to Sections 7(g) and 7(h)
     hereof, the exercise period will be ten (10) years from the date of the
     grant of the Option unless otherwise determined by the Committee;
     provided, however, that in the case of an Incentive Stock Option, such
     exercise period shall not exceed ten (10) years from the date of grant of
     such Option. The exercise period shall be subject to earlier termination
     as provided in Section 7(f) hereof. An Option may be exercised, as to any
     or all full shares of Common Stock as to which the Option has become
     exercisable, by written notice delivered in person or by mail to the
     Secretary of the Company, specifying the number of shares of Common Stock
     with respect to which the Option is being exercised.

                                      -6-
<PAGE>

          (f) Termination. Except as provided in this Section 7(f), an Option
     may not be exercised unless (x) the Option is vested, (y) the Grantee is
     then in the employ of or is a director or is maintaining a consultant
     relationship with the Company or a Subsidiary thereof (or a company or a
     Parent or Subsidiary company of such company issuing or assuming the
     Option in a transaction to which Section 424(a) of the Code applies), and
     (z) the Grantee has remained continuously so employed or in the director
     or consultant relationship since the date of grant of the Option. In the
     event that the employment or director or consultant relationship of a
     Grantee shall terminate, (i) all Non-Liquidity Event Options of such
     Grantee that are vested or exercisable at the time of such termination
     may, unless earlier terminated or forfeited in accordance with their
     terms, be exercised within ninety (90) days after the date of such
     termination (or such longer period as the Committee shall prescribe) (such
     90-day period, a "First Exercise Termination Period"), (ii) all Liquidity
     Event Options of such Grantee that are vested shall remain outstanding,
     but shall not be exercisable until the occurrence of a Liquidity Event, at
     which time all such Liquidity Event Options shall be exercisable for a
     period of 90 days after the occurrence of such Liquidity Event (such
     90-day period, the "Second Exercise Termination Period") unless such
     Liquidity Event is a Forfeiture Liquidity Event in which case such Options
     shall be forfeited and canceled pursuant to Section 6 hereof and (iii) all
     other Options that are unvested or nonexercisable at the time of such
     termination shall terminate at such time.

          (g) Exercise by Certain Persons Prior to Liquidity Event.
     Notwithstanding any other provision of this Plan or any Option Agreement,
     but subject to the last sentence of Section 7(f), until the occurrence of
     a Liquidity Event, (i) no Non-Liquidity Event Option granted under the
     Plan may be exercised by a Grantee who is not a Management Investor,
     except during a First Exercise Termination Period, (ii) no Liquidity Event
     Option granted under the Plan may be exercised by a Grantee who is not a
     Management Investor, except during the Second Exercise Termination Period
     and (iii) no Option granted under the Plan may be exercised by a Grantee
     who is a Management Investor until the occurrence of a Liquidity Event.

          (h) Option Agreements for Liquidity Event Options. If the Option is a
     Liquidity Event Option, then the Option Agreement evidencing such
     Liquidity Event Option shall provide that, upon the occurrence of a
     Forfeiture Liquidity Event, without any action by any party, such Option
     shall be irrevocably and unconditionally forfeited and canceled without
     any consideration payable to the Grantee thereof and the Grantee shall
     have no further right or interest therein.

          (i) Other Provisions. The Option Agreements evidencing Options under
     the Plan shall contain such other terms and conditions not inconsistent
     with the Plan as the Committee may determine.

                                      -7-
<PAGE>

     8. Certain Calculations. The Net MSCP Exit Multiple and the Net MSCP IRR
shall be calculated in all respects in the manner set forth in, and pursuant to
the definitions, terms, conditions and provisions of, the Option Carry Plan
(including, without limitation, Section 3 thereof).

     9. Non-qualified Stock Options. Options granted pursuant to this Section 9
are intended to constitute Non-qualified Stock Options and shall not be subject
to the terms and conditions of Section 10 hereof.

     10. Incentive Stock Options. Options granted pursuant to this Section 10
are intended to constitute Incentive Stock Options and shall conform to the
requirements of Section 422 of the Code (or successor to such Section) and
shall be subject to the following special terms and conditions, in addition to
the general terms and conditions specified in Section 7 hereof.

          (i) Value of Shares. The aggregate Fair Market Value (determined as
     of the date the Incentive Stock Option is granted) of the shares of Common
     Stock with respect to which Incentive Stock Options granted under this
     Plan and all other Option plans of any subsidiary become exercisable for
     the first time by any Grantee during any calendar year shall not exceed
     $100,000.

          (ii) Ten Percent Stockholder. In the case of an Incentive Stock
     Option granted to a Ten Percent Stockholder, (i) the Option Price shall
     not be less than one hundred ten percent (110%) of the Fair Market Value
     of the shares of Common Stock on the date of grant of such Incentive Stock
     Option, and (ii) the exercise period shall not exceed five (5) years from
     the date of grant of such Incentive Stock Option.

     11. Effect of Certain Changes.

          (a) In the event of any extraordinary dividend, stock dividend,
     recapitalization, reclassification, merger, consolidation, stock split, or
     combination or exchange of such shares, or other similar transactions, the
     number of shares of Common Stock available for Options, the number of such
     shares covered by outstanding Options, and the price per share of Options
     shall be equitably adjusted by the Committee to reflect such event and
     preserve (and neither increase nor decrease) the value of such Options;
     provided, however, that any fractional shares resulting from such
     adjustment shall be eliminated.

          (b) If, while any Options remain outstanding under the Plan, any of
     the following events shall occur (which events shall constitute a "Change
     in Control of the Company"):

               (i) any "person", as such term is used in Sections 13(d) and
          14(d) of the Exchange Act (other than (1) the Company or any of its
          Subsidiaries, (2) any trustee or other fiduciary holding securities
          under an employee benefit plan of the Company or any of its
          Subsidiaries, (3) an

                                      -8-
<PAGE>

          underwriter temporarily holding securities pursuant to an offering of
          such securities, (4) any corporation owned, directly or indirectly,
          by the stockholders of the Company in substantially the same
          proportions as their ownership of Common Stock, or (5) any person
          that is a stockholder of the Company on the effective date of this
          Plan), is or becomes the "beneficial owner" (as defined in Rule 13d-3
          under the Exchange Act), directly or indirectly, of securities of the
          Company representing more than 50% of the combined voting power of
          the Company's then outstanding voting securities;

               (ii) during any period of not more than two consecutive years,
          not including any period prior to the adoption of this Plan,
          individuals who at the beginning of such period constitute the Board,
          and any new director (other than a director designated by a person
          who has entered into an agreement with the Company to effect a
          transaction described in clause (i), (iii), or (iv) of this Section
          11(b)) whose election by the Board or nomination for election by the
          Company's stockholders was approved by a vote of at least two-thirds
          (2/3) of the directors then still in office who either were directors
          at the beginning of the period or whose election or nomination for
          election was previously so approved, cease for any reason to
          constitute at least a majority thereof;

               (iii) the stockholders of the Company approve a merger or
          consolidation of the Company with any other corporation, other than
          both (A)(1) a merger or consolidation which would result in the
          voting securities of the Company outstanding immediately prior
          thereto continuing to represent (either by remaining outstanding or
          by being converted into voting securities of the surviving or parent
          entity) 50% or more of the combined voting power of the voting
          securities of the Company or such surviving or parent entity
          outstanding immediately after such merger or consolidation or (2) a
          merger or consolidation in which no "person" (as hereinabove defined)
          acquired 50% or more of the combined voting power of the Company's
          then outstanding securities and (B) immediately after the
          consummation of such merger or consolidation described in clause
          (A)(1) or (A)(2) above (and for at least 180 days thereafter) any one
          of the Company's Chief Executive Officer, Chief Operating Officer and
          its Chief Financial Officer change from the people occupying such
          positions immediately prior to such merger or consolidation except as
          a result of their death or Disability and neither of such officers
          shall have changed prior to such merger or consolidation at the
          direction of a Person who has entered into an agreement with the
          Company the consummation of which will constitute a Change in Control
          of the Company; or

               (iv) the stockholders of the Company approve a plan of complete
          liquidation of the Company or an agreement for the sale or

                                      -9-
<PAGE>

          disposition by the Company of all or substantially all of the
          Company's assets (or any transaction having a similar effect)

     then from and after the date on which any such Change in Control shall
     have occurred (the "Acceleration Date"), the Option covered by such
     Agreement shall be exercisable or otherwise nonforfeitable in full,
     whether or not otherwise exercisable or forfeitable; provided that, if a
     Forfeiture Liquidity Event occurs, then all Liquidity Event Options shall
     be forfeited and canceled, pursuant to and in the manner provided in
     Section 6 hereof, and this Section 11(b) shall, in such event, be without
     force and effect in respect of such Liquidity Event Options.

          (c) In the event of a change in the Common Stock of the Company as
     presently constituted that is limited to a change of all of its authorized
     shares of Common Stock into the same number of shares with a different par
     value or without par value, the shares resulting from any such change
     shall be deemed to be the Common Stock within the meaning of the Plan.

     12. Period During Which Options May Be Granted. Options may be granted
pursuant to the Plan from time to time within a period of ten (10) years from
the date the Plan is adopted by the Board.

     13. Transferability of Options. No Option shall be pledged, hypothecated
or otherwise encumbered or subject to any lien, obligation or liability of a
Grantee to any party (other than the Company or a Subsidiary); and no Option
shall be transferred or assignable, or exercisable by, anyone other than the
Grantee to whom it was granted, except (i) by law, will or the laws of descent
and distribution or (ii) that the Committee (in the form of the Option
Agreement or otherwise) may permit transfers of Options if the Grantee is
disabled or by gift or otherwise to a member of a Grantee's immediate family
and/or trusts whose beneficiaries are members of the Grantee's immediate
family, or to such other persons or entities as may be approved by the
Committee. Notwithstanding the foregoing, (a) in no event shall Incentive Stock
Options be transferable or assignable other than by will or by the laws of
descent and distribution and (b) no transfer or assignment shall be made in
violation of the provisions of the Shareholders Agreement. A beneficiary,
transferee, or other person claiming any rights under the Plan from or through
any Grantee shall be subject to all terms and conditions of the Plan and any
Option Agreement applicable to such Grantee, except as otherwise determined by
the Committee, and to any additional terms and conditions deemed necessary or
appropriate by the Committee.

     14. Approval of Stockholders. The Plan shall take effect upon its adoption
by the Board but the Plan (and any grants of Options made prior to the
stockholder approval mentioned herein) shall be subject to the approval of the
holder(s) of more than seventy-five percent (75%) of the issued and outstanding
shares of voting securities of the Company entitled to vote, which approval
must occur within twelve months of the date the Plan is adopted by the Board.

     15. Agreement by Grantee Regarding Withholding Taxes. As a condition of
exercise of an Option, each Grantee shall agree that no later than the date of
such exercise, the Grantee

                                     -10-
<PAGE>

will pay to the Company or make arrangements satisfactory to the Committee
regarding payment of any federal, state or local taxes of any kind required by
law to be withheld upon such exercise. If permitted by the Committee, a Grantee
may elect, to the extent permitted or required by law, to have the Company
deduct federal, state and local taxes of any kind required by law to be
withheld upon such exercise from any payment of any kind due to the Grantee.
The withholding obligation may be satisfied by the withholding or delivery of
Common Stock valued at Fair Market Value.

     16. Amendment and Termination of the Plan. The Board may amend, modify,
suspend or terminate the Plan for the purpose of meeting or addressing any
changes in legal requirements or for any other purpose permitted by law.
Subject to changes in law or other legal requirements that would permit
otherwise, the Plan may not be amended without the consent of the holders of a
majority of the shares of Common Stock then outstanding to increase the
aggregate number of shares of Common Stock that may be issued under the Plan
(except for adjustments pursuant to Section 11(a)). Except as provided in
Section 11(a) hereof, no suspension, termination, modification or amendment of
the Plan may adversely affect any Option previously granted without the written
consent of the Grantee.

     17. Rights as a Shareholder. A Grantee or a transferee of an Option shall
have no rights as a shareholder with respect to any shares covered by the
Option until the date of the issuance of a stock certificate to him for such
shares. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distribution of other rights
for which the record date is prior to the date such stock certificate is
issued, except as provided in Section 11(a) hereof.

     18. Shareholders Agreements. If not already a party thereto, a Grantee
shall, as a condition precedent to the exercise or settlement of an Option,
agree to be bound by the terms of the Shareholders Agreements. Without limiting
the foregoing, any shares of Common Stock acquired upon exercise or settlement
of an Option shall be subject to the provisions in the Shareholders Agreements
regarding restrictions on transfer and the Company's rights to compel sales and
repurchase shares of Common Stock.

     19. No Rights to Employment. Nothing in the Plan or in any Option granted
or Option Agreement entered into pursuant hereto shall confer upon any Grantee
the right to continue in the employ of, or in a consultant relationship with,
the Company or any Subsidiary or to be entitled to any remuneration or benefits
not set forth in the Plan or such Option Agreement or to interfere with or
limit in any way the right of the Company or any such Subsidiary to terminate
such Grantee's employment. Options granted under the Plan shall not be affected
by any change in duties or position of a Grantee as long as such Grantee
continues to be employed by, or in a consultant relationship with, the Company
or any Subsidiary.

     20. Beneficiary. A Grantee may file with the Committee a written
designation of a beneficiary on such form as may be prescribed by the Committee
and may, from time to time, amend or revoke such designation. If no designated
beneficiary survives the Grantee, the executor or administrator of the
Grantee's estate shall be deemed to be the Grantee's beneficiary.

                                     -11-
<PAGE>

     21. Governing Law. The Plan and all determinations made and actions taken
pursuant hereto shall be governed by the laws of the State of New York, without
regard to its conflicts of laws principles.

     22. Effective Date and Duration of the Plan. This Plan shall be effective
as of the date it is approved or ratified by the stockholders of the Company,
and shall terminate on the later of (a) the tenth anniversary of such date or
(b) the last expiration of Options granted hereunder.

                                     -12-

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