Document:

Exhibit 4.01
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                           SECOND AMENDED AND RESTATED
                      NOTE ISSUANCE AND SECURITY AGREEMENT

                                 by and between

                        MEDICAL CAPITAL MANAGEMENT, INC.

                                       and

                           ZIONS FIRST NATIONAL BANK,
                                   as Trustee

                           Dated as of April 10, 2002

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<PAGE>
     Reconciliation  and tie  between  Trust  Indenture  Act of 1939 and  Second
Amended and Restated Note Issuance and Security  Agreement dated as of April 10,
2002.

TRUST INDENTURE ACT SECTION                               NOTE AGREEMENT SECTION
---------------------------                               ----------------------

Section 310(a)(1)                                                5.02
Section 310(a)(2)                                                5.02
Section 310 (b)                                                  5.02;5.03
Section 311                                                      5.04
Section 312(a)                                                   2.01(C)
Section 312(b)                                                   5.05
Section 312(c)                                                   5.05
Section 313(a)                                                   5.06
Section 313(b)                                                   5.06
Section 313(c)                                                   10.03(B)
Section 313(d)                                                   5.06
Section 314(a)                                                   5.07;10.03(B)
Section 314(a)(4)                                                5.08
Section 314(c)(1)                                                10.04
Section 314(c)(2)                                                10.04
Section 314(d)                                                   10.07
Section 314(e)                                                   10.05
Section 315(a)                                                   5.09(A)
Section 315(b)                                                   7.05
Section 315(c)                                                   5.09(A)
Section 315(d)                                                   10.07
Section 315(e)                                                   10.07
Section 316(a)                                                   10.07
Section 316(b)                                                   6.02;10(I)
Section 3.17(a)(1)                                               7.03(B)
Section 317(a)(2)                                                7.04
Section 317(b)                                                   10.07
Section 318(a)                                                   10.07
Section 318(c)                                                   10.07

----------
NOTE: This  reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Amended and Restated Note Issuance and Security Agreement.

Attention  should also be directed to Section 318(c) of the Trust  Indenture Act
of 1939, which provides that the provisions of Sections 310 to and including 317
of the Trust  Indenture  Act of 1939 are a part of and  govern  every  qualified
indenture, whether or not physically contained therein.
<PAGE>
     (This Table of Contents is for  convenience  of  reference  only and is not
intended to define, limit or describe the purpose or intent of any provisions of
this Amended and Restated Note Agreement.)

                                    ARTICLE I

Definitions....................................................................1

                                   ARTICLE II

                                      NOTES

Section 2.01.  The Notes.......................................................8
Section 2.02.  Registration, Transfer and Exchange of Notes...................12
Section 2.03.  Registration, Transfer and Exchange of Beneficial
                Interests in Notes............................................12
Section 2.04.  Persons Deemed Owners..........................................14
Section 2.05.  Redemption.....................................................14
Section 2.06.  Book-Entry Notes...............................................16
Section 2.07.  Notices to Clearing Agency.....................................17
Section 2.08.  Definitive Notes...............................................17

                                   ARTICLE III

                                    SECURITY

Section 3.01.  Grant of Security..............................................18
Section 3.02.  Pledge to Secure Obligations...................................20
Section 3.03.  Collateral Transfers and Other Liens...........................20
Section 3.04.  Sale of Collateral.............................................20
Section 3.05.  Responsibilities of Debtor.....................................21
Section 3.06.  Continuing Security Interest...................................23
Section 3.07.  Further Assurances.............................................23

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

Section 4.01.  Representations and Warranties.................................24
Section 4.02.  Replacement of Defective Collateral............................24

                                    ARTICLE V

                  TRUSTEE; COMMUNICATIONS AND REPORTS; ACCOUNTS

Section 5.01.  Certain Duties of Trustee......................................26
Section 5.02.  Corporate Trustee Required; Eligibility; Conflicting
                Interests.....................................................26
Section 5.03.  Replacement of Trustee.........................................27
Section 5.04.  Preferential Collection of Claims Against Debtor...............28

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Section 5.05.  Communication by Noteholders with Other Noteholders............28
Section 5.06.  Reports by Trustee to Noteholders..............................28
Section 5.07.  Reports by Debtor..............................................28
Section 5.08.  Statement as to Compliance.....................................29
Section 5.09.  Performance by the Trustee.....................................29
Section 5.10.  Indemnity and Expenses.........................................30
Section 5.11.  Accounts; Payments on Notes....................................31

                                   ARTICLE VI

                                   SENIOR DEBT

Section 6.01.  Senior Indebtedness............................................36
Section 6.02.  Noteholders' Rights Not Impaired...............................36
Section 6.03.  Acceptance by Noteholders......................................36

                                   ARTICLE VII

                                     DEFAULT

Section 7.01.  Events of Default..............................................37
Section 7.02.  Noteholder's Direction Upon Default............................38
Section 7.03.  Remedies.......................................................39
Section 7.04.  Trustee May File Proofs of Claim...............................41
Section 7.05.  Notice of Defaults.............................................41
Section 7.06.  Trustee May Enforce Claims Without Possession Of Notes.........42
Section 7.07.  Limitation On Suits............................................42

                                  ARTICLE VIII

                          TERMINATION OF nOTE AGREEMENT

Section 8.01.  Deposit of Payment.............................................43
Section 8.02.  Application of Funds...........................................43
Section 8.03.  Reinstatement..................................................43
Section 8.04.  Unclaimed Funds................................................44

                                   ARTICLE IX

                   AMENDMENTS AND SUPPLEMENTAL NOTE AGREEMENTS

Section 9.01.  General........................................................44
Section 9.02.  Amendment Without Consent of Noteholders.......................44
Section 9.03.  Amendment With Consent of Noteholders..........................45
Section 9.04.  Senior Indebtedness............................................46
Section 9.05.  Notice to Noteholders..........................................46
Section 9.06.  Compliance With TIA............................................46
Section 9.07.  Rights of Noteholders Not Impaired.............................46

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                                    ARTICLE X

                                  MISCELLANEOUS

Section 10.01. Governing Law..................................................46
Section 10.02. Waiver.........................................................46
Section 10.03. Notices........................................................47
Section 10.04. Certificate and Opinion as to Conditions Precedent.............48
Section 10.05. Statements Required in Certificate or Opinion..................48
Section 10.06. Severability...................................................48
Section 10.07. TIA............................................................48
Section 10.08. Nonliability of Directors; No General Obligation...............49
Section 10.09. Scope Of Debtor's Liability....................................49
Section 10.10. Assignment.....................................................49
Section 10.11. When the Debtor May Merge or Transfer Assets...................49
Section 10.12. Section References.............................................50
Exhibit A-1    Form of Eligible Receivable Acquisition Certificate
Exhibit A-2    Form of Non-Receivable Asset Acquisition Certificate
Exhibit A-3    Form of Collateral Replacement Certificate
Exhibit B      Form of Sale of Collateral and Release of Lien Certificate

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<PAGE>
                           SECOND AMENDED AND RESTATED
                      NOTE ISSUANCE AND SECURITY AGREEMENT

     This SECOND  AMENDED AND RESTATED  NOTE  ISSUANCE  AND SECURITY  AGREEMENT,
dated as of the 10th day of April, 2002 (the "Note  Agreement"),  is made by and
between MEDICAL CAPITAL MANAGEMENT,  INC., a Delaware  corporation  (hereinafter
referred to as the "Debtor") and ZIONS FIRST  NATIONAL BANK (the  "Trustee"),  a
national banking  association duly organized,  existing and authorized to accept
and execute  trusts of the  character  herein set out under and by virtue of the
laws of the United States,  with its principal office located in Salt Lake City,
Utah, as trustee for the benefit of the Noteholders, and amends and restates the
Amended and Restated Note Issuance and Security  Agreement  (the  "Restated Note
Agreement") between the Debtor and the Trustee dated as of February 15, 2001.

                                   WITNESSETH:

     WHEREAS,  the parties  hereto desire to amend and restate the Restated Note
Agreement;

     NOW, THEREFORE, in consideration of the foregoing premises and for good and
valuable  consideration,  the  adequacy  and  sufficiency  of  which  is  hereby
acknowledged,  each party agrees, for the benefit of the other and for the equal
and ratable benefit of the  Noteholders,  to amend and restate the Restated Note
Agreement in its entirety to read as follows:

                                    ARTICLE I

                                   DEFINITIONS

     When used  herein,  the  following  terms shall have the meanings set forth
below:

     "ACCOUNTS" means the Concentration Account and the Note Payment Account.

     "ADMINISTRATION  AGREEMENT"  means the  Administrative  Services  Agreement
entered  into as of August 4, 2000  between  the  Administrator  and the  Debtor
concerning the administrative services to be performed by the Administrator with
regard to the Receivables, as supplemented and amended.

     "ADMINISTRATOR"   means  Medical  Capital   Corporation,   Inc.,  a  Nevada
Corporation,  or any other  successor  selected by the Debtor and  identified in
writing to the Trustee.

     "AGGREGATE NOTE BALANCE" means, as of any date of determination,  the total
unpaid  principal  and  accrued  and  unpaid  interest  evidenced  by all of the
Outstanding Notes.

     "A.M.  BEST" shall mean A.M.  Best  Company an  insurance  industry  rating
company existing under the laws of the State of New Jersey.

     "APPLICABLE  NOTES" means (a) the Notes  (Series I) in the case of an Event
of Default  and (b) the Notes of each other  series,  in the case of an Event of
Default  with  respect  to such  series as  provided  in any  supplemental  note
agreement  relating to the Notes of such series;  but in no event shall the term
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"Applicable  Notes"  include  Notes of more than one series  unless  there is an
Event of Default with respect to such series.

     "APPROVED PAYOR" means (a) any private medical  insurance  company which at
the time of purchase of any Receivable payable by such private medical insurance
company,  the private  medical  insurance  company has been assigned a long-term
debt rating, or a rated claims paying ability of "AA" or better by S&P, "AA3" or
better by Moody's,  "A" or better by A.M. Best or Fitch, or the Administrator in
its determination,  otherwise believes is financially suitable;  (b) any Federal
or State  government  sponsored  health  care  program;  (c) large self  insured
corporations (as determined by the  Administrator  in its  discretion);  and (d)
health  maintenance  organizations,  in each case as identified in a certificate
signed by the Administrator and delivered to the Trustee.

     "ASSETS" shall have the meaning set forth in Section 3.01 (b).

     "BATCH"  means a group of  Receivables  that were acquired on the same date
from a single Health Care Provider.

     "BENEFICIAL OWNER" means, with respect to a Book-Entry Note, the Person who
is the owner of such Book-Entry  Note, as reflected on the books of the Clearing
Agency,  or on the books of a Person  maintaining  an account with such Clearing
Agency (directly as a Clearing Agency Participant or as an Indirect Participant,
in accordance with the rules of such Clearing Agency).

     "BOOK-ENTRY NOTES" means Notes in which beneficial  interests are owned and
transferred  through  book  entries  made by a Clearing  Agency as  provided  in
Section  2.06  hereof or through  the  facilities  of the Trustee as provided in
Sections 2.02 and 2.03 hereof.

     "BROKER/DEALER" means First Montauk Securities Corp., First Securities USA,
Inc.,  Hanmi  Securities,  Inc. and such other  Persons as may be  designated in
writing by the Debtor to the Trustee from time to time, provided that the number
of Broker/Dealers the Trustee shall be required to register as Noteholders under
this Note Agreement shall not exceed three at any one time.

     "BUSINESS  DAY"  means  each day of the  year on which  federally-chartered
banking  institutions  are not required or authorized to close in New York,  New
York, and in the city in which the principal office of the Trustee is located.

     "CLEARING  AGENCY" means an organization  registered as a "clearing agency"
pursuant to Section 17A of the Exchange  Act and serving as clearing  agency for
Book-Entry  Notes.  The Clearing Agency shall initially be The Depository  Trust
Company and its  successors,  unless the Debtor shall  designate an  alternative
Clearing Agency by notice given to the Trustee.

     "CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry  transfers  and pledges of  securities  deposited  with such Clearing
Agency.

     "COLLATERAL" shall have the meaning set forth in Section 3.01(c).

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     "CONCENTRATION  ACCOUNT"  means  the  account  established  and  maintained
pursuant to Section 5.11(a) , including any  subaccounts  created by the Trustee
therein pursuant to this Note Agreement.

     "CORPORATE TRUST OFFICE" means the Denver, Colorado office of the corporate
trust  department of the Trustee,  or such other office as may be set forth from
time to time in Section 10.03.

     "DATE OF ISSUE" means,  with respect to a Note, the date the  Broker/Dealer
or other brokerage firm for which the  Broker/Dealer  acts as agent receives the
proceeds from the initial sale of all of the  beneficial  interests in the Note,
or, if later exchanged pursuant to Section 2.01(f), the date the Note or portion
thereof is  exchanged,  or, with respect to Book-Entry  Notes  registered in the
name of a  Clearing  Agency,  the  first  day of the  month in which the Note is
issued.

     "DEBTOR" means Medical Capital Management, Inc., a Delaware corporation, or
its successors in interest.

     "DEFINITIVE  NOTES" means Notes in  definitive,  fully  registered  form as
provided in Section 2.08.

     "DUNN &  BRADSTREET"  means  a  credit  reporting  agency  associated  with
"Moody's" existing under the laws of the State of New Jersey.

     "ELIGIBLE  ACCOUNT"  means a trust  account  established  with  (a) a trust
company or depositary  institution  subject to regulations on fiduciary funds on
deposit substantially similar to 12 CFR Section 9.10 (b), or (b) a trust company
or depository  institution the long-term unsecured debt obligations of which are
rated at least "A" by S&P and "A-1" by Moody's  (unless rated by only one of S&P
and Moody's in which case such rating shall suffice).

     "ELIGIBLE  RECEIVABLE"  means,  as of the date  that it is  pledged  to the
Trustee pursuant to this Note Agreement, any Receivable that:

          (a) an Approved  Payor is directly  obligated  to pay the  Receivable,
     which obligation is valid,  binding,  and enforceable  against the Approved
     Payor in accordance with its terms except that (i) such  enforcement may be
     subject to  bankruptcy,  insolvency,  reorganization,  moratorium  or other
     similar laws (whether statutory, regulatory or decisional) now or hereafter
     in effect  relating to creditors'  rights  generally and (ii) the remedy of
     specific performance and injunctive and other forms of equitable relief may
     be subject to certain equitable defenses and to the discretion of the court
     before which any proceeding  therefor may be brought,  whether a proceeding
     at law or in equity;

          (b) is not subject to any dispute, offset, counterclaim or defense;

          (c) is  denominated  and payable in U.S.  dollars in the United States
     and that is acquired by the Debtor pursuant to a Purchase Document;

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<PAGE>
          (d) constitutes an "account" as defined in the Uniform Commercial Code
     as in effect in the jurisdiction in which the Debtor is required to perfect
     a security interest therein;

          (e) with regard to which each of the  representations  and  warranties
     set forth in Article IV is true and correct;

          (f) the Approved  Payor of which  (other than a Receivable  payable by
     Medicare  or  Medicaid)  has  received  written  notice  of the sale of the
     Receivable to Debtor;

          (g) with regard to which (i) the claim for payment has been  submitted
     to the Approved  Payor not more than one hundred eighty (180) days prior to
     the purchase  thereof by the Debtor (if the Receivable is part of the first
     Batch purchased from a Health Care Provider);

          (h) will be subject  to a first  priority  perfected  lien held by the
     Trustee  pursuant to this Note  Agreement upon its purchase with funds from
     the  Concentration  Account  and the  filing  of any  applicable  financing
     statement pursuant to the UCC;

          (i) the claim for payment has been acknowledged by the Approved Payor;
     and the  Approved  Payor has received  written  notice that  payments  with
     respect thereto are to be sent solely to a Lock Box Account; and

          (j) is set forth in a  certificate  delivered  to the  Trustee  by the
     Debtor in the form attached as Exhibit A-1 hereto.

     "EVENT OF DEFAULT" (a) with respect to the Notes (Series I), shall have the
meaning set forth in Section  7.01 (a) through (j) and (b) with  respect to each
other series of Notes shall have the meaning set forth in the supplemental  note
agreement creating such series.

     "FITCH" shall mean Fitch, Inc., a corporation  organized and existing under
the laws of the State of Delaware, its successors.

     "HEALTH CARE  PROVIDER"  means any provider of medical,  hospital or dental
services, or durable medical equipment,  and whose financial condition meets the
criteria set forth by the Debtor.  The criteria set by the Debtor shall be based
on ratings of the  provider  published  by Dunn &  Bradstreet  and other  rating
agencies, as well as the underwriting criteria for such providers established by
the Debtor from time to time.

     "INDIRECT  PARTICIPANT"  shall mean Persons such as securities  brokers and
dealers,   banks  and  trust  companies  that  clear  or  maintain  a  custodial
relationship with a participant of DTC, either directly or indirectly.

     "INTEREST  PAYMENT DATE" means,  with respect to an  outstanding  Note, the
tenth  day of each  calendar  month  commencing  with the tenth day of the month
following  the month in which the Date of Issue  occurs and  continuing  on each
succeeding tenth day of each month until the Note has been repaid in full, or if

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the tenth day of a month is not a Business Day, then the next following Business
Day.

     "LOCK BOX  ACCOUNT"  means an account  established  by the  Debtor,  or the
Servicer on behalf of the Debtor,  with a bank chartered by the United States or
any state therein for the purpose of collecting the proceeds of Receivables  for
the benefit of the Trustee as set forth in the applicable Purchase Agreement and
as to which a copy of the  written  executed  agreement  pursuant  to which  the
account has been established has been provided to the Trustee.

     "MATURITY  DATE" with respect to a Note of any class shall have the meaning
set forth in Section 2.01(f).

     "MOODY'S" means Moody's Investors Services, Inc., and its successors.

     "NET  COLLECTIBLE  AMOUNT"  means,  with respect to a  Receivable,  the net
amount that is expected to be collected on a medical claim by the related Health
Care  Provider  from a third party payor,  which shall be calculated by Servicer
based on the claim  information  gathered  from the such Health Care Provider in
accordance with the applicable  Purchase Documents and the Servicer's  customary
methods.

     "NOTE" is any one of the different  classes or series of  promissory  notes
issued by the Debtor in book entry form without coupons pursuant to the terms of
this Note Agreement.

     "NOTE PAYMENT  ACCOUNT" shall mean the account  established  and maintained
pursuant to Section  5.11(c),  including any subaccounts  created by the Trustee
therein pursuant to this Note Agreement.

     "NOTE (SERIES I)" is any one of the different  classes of promissory  notes
issued by the Debtor pursuant to Section 2.01(d).

     "NOTE  AGREEMENT"  means this Second Amended and Restated Note Issuance and
Security  Agreement dated as of April 10, 2002,  between the Trustee and Debtor,
as amended, supplemented or otherwise modified from time to time.

     "NOTE REGISTER" has the meaning set forth in Section 2.02(a).

     "NOTEHOLDER"  means the  Person in whose name a Note is  registered  on the
Note Register.

     "OBLIGATIONS" has the meaning set forth in Section 3.02.

     "OUTSTANDING"  shall mean, on the date of determination (i) with respect to
a Note, a Note which has been issued  pursuant to this Note  Agreement  which on
such date remains unpaid as to principal or interest,  unless provision has been
made for such payment pursuant to Section 2.05,  excluding Notes which have been
replaced  pursuant  to this Note  Agreement  and (ii) with  respect to any other
Obligation, the unpaid amount of the Obligation.

     "PERMITTED INVESTMENTS" means any of the following:

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          (a) direct obligations of the United States of America;

          (b)  obligations,  the  payment of the  principal  of and  interest on
     which,  in the opinion of the  Attorney  General of the United  States,  is
     unconditionally guaranteed by the United States;

          (c) interest-bearing time or demand deposits,  certificates of deposit
     or other similar banking arrangements,  investment  agreements,  repurchase
     agreements,  or guaranteed investment contracts,  with a maturity of twelve
     (12)  months  or less  with  any  bank,  trust  company,  national  banking
     association or other depository institution, including those of the Trustee
     (and,  with respect to,  investment  agreements  or  guaranteed  investment
     contracts,  any  corporation),  provided  that,  at the time of  deposit or
     purchase such depository  institution  has commercial  paper which is rated
     "A-1" by S&P, "P-1" by Moody's or "F-1" by Fitch;

          (d) interest-bearing time or demand deposits,  certificates of deposit
     or other similar banking arrangements,  investment  agreements,  repurchase
     agreements,  or guaranteed investment contracts,  with a maturity of twenty
     four (24) months or less, but more than twelve (12) months,  with any bank,
     trust  company,   national   banking   association   or  other   depository
     institution, including those of the Trustee and any of its affiliates (and,
     with respect to , investment agreements or guaranteed investment contracts,
     any  corporation),  provided  that, at the time of deposit or purchase such
     depository institution has senior debt rated "A" or higher by S&P, "P-1" or
     higher by Moody's or "A" or higher by Fitch,  and, if  commercial  paper is
     outstanding, commercial paper which is rated "A-1" by S&P, "P-1" by Moody's
     or "F-1" by Fitch;

          (e) interest-bearing time or demand deposits,  certificates of deposit
     or other similar banking arrangements,  investment  agreements,  repurchase
     agreements,  or guaranteed  investment  contracts,  with a maturity of more
     than twenty four (24) months with any bank, trust company, national banking
     association or other depository institution, including those of the Trustee
     and any of its affiliates (and, with respect to , investment  agreements or
     guaranteed  investment contracts,  any corporation),  provided that, at the
     time of deposit or purchase  such  depository  institution  has senior debt
     rated  "AA" or higher by S&P,  "Aa2" or higher by Moody's or "AA" or higher
     by Fitch and, if commercial paper is outstanding, commercial paper which is
     rated "A-1" by S&P, "Aa2" by Moody's or "F-1" by Fitch;

          (f)  commercial  paper,  including  that of the Trustee and any of its
     affiliates,  which is rated no less than "A-1" by S&P,  "P-1" by Moody's or
     "F-1" by Fitch,  and which matures not more than two hundred  seventy (270)
     days after the date of purchase;

          (g) bonds, debentures, notes or other evidences of indebtedness issued
     or guaranteed by any of the following agencies:  Federal Farm Credit Banks,
     Federal Home Loan  Mortgage  Corporation;  Governmental  National  Mortgage
     Association;  Export-Import  Bank of the United  States;  Federal  National
     Mortgage  Association;  Student Loan  Marketing  Association;  Farmers Home
     Administration;  Federal Home Loan Banks; or any agency or  instrumentality
     of the United States of America which shall be established for the purposes

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     of acquiring the obligations of any of the foregoing or otherwise providing
     financing therefor;

          (h) a money market  mutual fund  investing  solely in the above listed
     assets; or

          (i) the AIM Short-Term  Investments Trust Treasury  Portfolio (Private
     Class) Money Market  Fund,  which is rated "AAA" by S&P,  Moody's and Fitch
     and invests in U.S.  Treasury  bills,  notes and direct  obligations of the
     U.S.  Treasury and in repurchase  agreements fully  collateralized  by such
     obligations.

     "PERSON" or "PERSONS" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.

     "PURCHASE  AGREEMENT" means each fully executed  agreement between a Health
Care  Provider and the Debtor or the  Administrator  in effect as of the date of
determination  pursuant to which  Receivables are acquired from such Health Care
Provider.

     "PURCHASE  DOCUMENTS" means with respect to each Health Care Provider,  (a)
with  regard to the  initial  purchase  of  Receivables  from such  Health  Care
Provider,  the Purchase  Agreement executed by the Debtor (or the Administrator)
and  such  Health  Care  Provider,  including  Exhibit  A  thereto  listing  the
Receivables  to be  purchased,  along with copies of all security  documentation
executed in  connection  therewith,  including  all: UCC  Financing  Statements,
personal guarantees, bills of sale and powers of attorney and (b) with regard to
each  subsequent  purchase of  Receivables  from such Health  Care  Provider,  a
supplement to the Purchase  Agreement  listing the additional  Receivables to be
purchased  from such Health Care Provider,  along with all  additional  security
documentation  executed in connection  therewith,  including  any  amendments to
previously delivered security documentation.

     "RECEIVABLE"  means any right to payment or reimbursement  from an Approved
Payor or Health Care Provider,  whether constituting an account,  chattel paper,
instrument  or a general  intangible,  arising  from or in  connection  with the
provision of medical,  hospital, or dental services by a Health Care Provider or
durable  medical  equipment to a Health Care  Provider  that was (a) acquired or
funded by the Debtor  from  amounts on deposit in the  Concentration  Account or
otherwise accounted for in the Concentration Account or otherwise constituting a
part of the Collateral or (b) substituted or exchanged for Receivables  pursuant
to Article IV, but does not include  Receivables  released from the lien of this
Note Agreement.

     "RECORD DATE" means,  with respect to a Note,  the close of business on the
last day of the month  immediately  preceding  the  month in which a payment  of
interest or principal, or both, is due and payable on a Note.

     "REDEMPTION PRICE" means the unpaid principal balance, plus all accrued and
unpaid interest  thereon to (but  excluding) the date set for redemption,  of an
Outstanding Note (or part thereof)  selected for redemption,  all as pursuant to
Section  2.05.  If a Note is issued with  original  issue  discount,  the amount
payable upon full or partial  redemption  will be the applicable  portion of the
amortized face amount on the redemption  date. The amortized face amount of such
an  original  issue  discount  Note will be equal to the issue  price  plus that

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portion of the  difference  between the issue price and the  original  principal
amount of the Note that would have  accrued at the yield to the  maturity of the
Note, prorated to (but excluding) the redemption date. The amortized face amount
of an  original  issue  discount  Note will never be greater  than its  original
principal amount.

     "REVENUE" or  "REVENUES"  means all  recoveries  of  principal,  dividends,
interest,  payments,  proceeds,  charges and other income or amounts received by
the Trustee or the Debtor from or on account of any of the Collateral (excluding
amounts described in Sections 5.11(a)(ii)(B)).

     "S&P" means Standard & Poor's Ratings Group, a Division of The  McGraw-Hill
Companies, Inc., and its successors.

     "SENIOR INDEBTEDNESS" has the meaning set forth in Article VI.

     "SERVICER"  means Medical  Tracking  Services,  Inc. a Nevada  Corporation,
whose  rights  and  obligations  are  more  fully  set  forth  in the  Servicing
Agreement.

     "SERVICING  AGREEMENT"  means the Master  Servicing  Agreement  dated as of
August 4, 2000 by and between the Debtor and the Servicer,  and  acknowledged by
the Trustee, as the same may be amended, supplemented or otherwise modified from
time to time.

     "TIA" means the Trust  Indenture Act of 1939,  as amended,  as in effect on
the date of this Note Agreement.

     "TRANSACTION DOCUMENTS" means the Notes, this Note Agreement, the Servicing
Agreement,  the  agreements  pursuant to which the Lock Box  accounts  have been
established and are administered, the Purchase Documents and any other documents
executed in connection therewith.

     "TRUSTEE" means Zions First National Bank, a national banking  association,
or its successors in interest.

     "UCC" means, with respect to each separate item of Collateral,  the Uniform
Commercial  Code  of the  State  the  law of  which  governs  the  creation  and
perfection of the Trustee's  security  interest in the item of Collateral or the
Debtor's security interest in the item of Collateral, as the case may be.

                                   ARTICLE II

                                      NOTES

     SECTION 2.01. THE NOTES.

          (a)  ISSUABLE  IN SERIES;  GENERAL  TITLE.  The Notes may be issued in
     series as from time to time shall be authorized by the Debtor. With respect
     to the Notes of any particular series, the Debtor may incorporate in or add
     to the general title of such Notes any words,  letters or figures  designed
     to distinguish  that series.  Each series shall be designated  sequentially

                                       8
<PAGE>
     with Roman numerals  beginning with Series I and each class shall contain a
     sequential alphabetic designation beginning with Class A.

          (b) TERMS OF PARTICULAR  SERIES.  The Notes of each series (other than
     the Notes  (Series  I) as to which  specific  provision  is made in Section
     2.01(d) and (e)) shall be payable at such place or places,  shall mature on
     such date or dates,  shall bear  interest at such rate or rates  payable in
     such  installments  and on such  dates and at such  place or places  and to
     Noteholders  registered  as such,  and may be  redeemable  at such price or
     prices  and  upon  such  terms,  all  as  shall  be  provided  for  in  the
     supplemental  note  agreement  creating that series.  The Debtor may at the
     time of the creation of any series of Notes or at any time thereafter make,
     and the Notes of such series may contain, provision for:

               (i) the redemption of all, or of all or any part, of the Notes of
          such series prior to maturity;

               (ii) a  sinking,  amortizations  improvement  or other  analogous
          fund;

               (iii)  limiting the  aggregate  principal  amount of the Notes of
          such series;

               (iv) the exchange or conversion  of the Notes of that series,  at
          the  option  of the  Noteholders  thereof,  for or into new Notes of a
          different  series  and/or  shares of stock of the Debtor  and/or other
          securities;

               (v)  exchanging  Notes  of  that  series,  at the  option  of the
          Noteholders  thereof,  for other  Notes of the same series of the same
          aggregate  principal  amount of a  different  authorized  kind  and/or
          authorized denomination or denominations; and/or

               (vi)  extension of the maturity  date for the Notes at the option
          of the Noteholder.

          (c)  FORM AND  DENOMINATIONS.  The  form of the  Notes of each  series
     (except the Notes (Series I)) may be established by the  supplemental  note
     agreement  creating such series.  The Notes (Series I) shall be issued only
     as Book-Entry  Notes unless  otherwise agreed by the Debtor and the Trustee
     pursuant to a supplemental  Note Agreement.  The Notes of each series shall
     be  distinguished  from the Notes of other  series in such manner as may be
     prescribed in the  supplemental  note agreement  creating such series.  The
     Notes of each  series  shall be  issued in such  denominations  as shall be
     provided in the supplemental note agreement  creating such series or as the
     Debtor may  determine,  except that the Notes (Series I) shall be issued in
     the denominations provided for in Section 2.01(d) below.

          (d)  NOTES  (SERIES  I).  There  shall be an  initial  series of Notes
     entitled  Secured Notes (Series I). The Notes (Series I) shall be issued as
     various classes of Notes  substantially in the forms set forth in Exhibit A
     hereto.  The Notes (Series I) shall be issued in minimum  denominations  of
     $1,000  and  integral  multiples  of $1,000 in  excess  thereof.  Each Note
     (Series I) shall be payable  and have such other  terms and  provisions  as

                                       9
<PAGE>
     provided  in  Exhibit A and in this Note  Agreement.  The Notes  (Series I)
     issued  with a Clearing  Agency as the  Noteholder  shall be issued  with a
     Maturity Date as follows:

      CLASS                           MATURITY DATE
      -----                           -------------

     Class A        The 10th day of the month occurring 12 months from the month
                    in which the Class A Note is issued;

     Class B        The 10th day of the month occurring 24 months from the month
                    in which the Class B Note is issued;

     Class C        The 10th day of the month occurring 36 months from the month
                    in which the Class C Note is issued; and

     Class D        The 10th day of the month occurring 48 months from the month
                    in which the Class D Note is issued.

     The Notes  (Series I) issued  without a Clearing  Agency as the  Noteholder
     shall be issued with a Maturity Date as follows:

                                                 MATURITY DATE FROM
                     CLASS                        DATE OF ISSUANCE
                     -----                        ----------------
                    Class A                           One year
                    Class B                           Two years
                    Class C                          Three years
                    Class D                           Four years

          (e) GENERAL TERMS.  Notes will bear different  Maturity Dates based on
     the Date of Issue and its class or series designation,  but in no event may
     a Note have a term of less than one (1)  year.  Interest  rates may vary as
     among the series and classes of Notes,  as  determined by the Debtor in its
     sole  discretion.  Notes in the same class of a series  may be issued  with
     different  fixed rates of interest as  determined by the Debtor in its sole
     discretion.  Following  execution and delivery of this Note Agreement,  the
     Trustee  shall  register  the name and address of the  Noteholder,  and the
     terms of the related  Note, in the Note Register only after the Trustee has
     been  notified  in writing by the Debtor that the Debtor has  received  and
     forwarded to the Trustee the Note issuance  proceeds equal to the aggregate
     issue price of the Note plus,  in the case of Notes  registered in the name
     of a Clearing  Agency,  accrued interest on such Note from the first day of
     the month in which the Note is issued to but not  including the date in the
     month on  which  the Note is  issued.  The  Notes  bear  interest  at their
     respective stated fixed rates of interest per annum. The interest on a Note
     will begin to accrue on its Date of Issue; provided,  that Notes registered
     in the name of a Clearing  Agency  will begin to accrue  interest  from the
     first day of the month in which the Note is issued. The interest accrued on
     a Note in a  calendar  month  will be paid on the next  following  Interest
     Payment Date in accordance  with Section 5.11(f) prior to the maturity date
     of the Note to the Noteholders as of each related Record Date.  Interest on

                                       10
<PAGE>
     each Note will be  calculated  on the basis of a three  hundred sixty (360)
     day year  consisting  of  twelve  (12) - thirty  (30) day  months.  If,  in
     accordance with this Note Agreement,  the Trustee holds in the Note Payment
     Account on a date set for redemption or the stated  maturity of one or more
     Notes, money or securities,  if permitted  hereunder,  sufficient to pay in
     full the Notes to be  redeemed  on that  date,  then on and after that date
     such Notes  shall cease to be  outstanding  and  interest,  if any, on such
     Notes shall cease to accrue;  provided,  if such Notes are to be  redeemed,
     notice  of such  redemption  has been  duly  given  pursuant  to this  Note
     Agreement or provision therefor satisfactory to the Trustee has been made.

          (f)  PAYMENTS AT  MATURITY.  Principal on a Note is due and payable in
     full on its original  stated  maturity date (the  "Maturity  Date") unless,
     between the tenth Business Day and fifth Business day prior to the Maturity
     Date of the Note, the Debtor has given written  direction to the Trustee to
     exchange the Note, and the Trustee has received written  notification  from
     the Debtor that the Noteholder  intends to exchange all or a portion of the
     Note for a new Note  having,  in the  case of Notes  issued  on or prior to
     February 14, 2002,  terms and  conditions  identical to the Note  exchanged
     and, in the case of Notes  issued  after  February 14, 2002 with a Clearing
     Agency as the Noteholder, having terms and conditions identical to the Note
     exchanged  except for the  interest  rate on the Notes and a Maturity  Date
     determined as set forth in Section 2.01(d).  If, between the tenth Business
     Day and the fifth  Business Day prior to the Maturity  Date of a Note,  the
     Trustee has received the notification and written direction  referred to in
     the preceding sentence, or receives notification and written direction that
     only a portion of the principal  amount of the Note will be exchanged,  the
     Trustee shall exchange the Noteholder's  Note (or portion thereof set forth
     in the notice and written  direction) for a new Note having, in the case of
     Notes  issued  on or prior to  February  14,  2002,  terms  and  conditions
     identical  to the Note  exchanged  and, in the case of Notes  issued  after
     February 14, 2002 with a Clearing  Agency as the  Noteholder,  having terms
     and  conditions  identical  to the Note  exchanged  except with  respect to
     changes  necessary  to reflect any payment of a portion of principal on the
     Maturity  Date,  any  change in the  interest  rate for Notes and  having a
     Maturity Date  determined as set forth in Section  2.01(d)  without further
     action on the part of the Noteholder;  provided,  however, that Notes shall
     only be exchanged  pursuant to this sub-section (f) if the Debtor furnishes
     a then  current  prospectus  containing  audited  financial  statements  as
     required by the rules and  regulations of the U.S.  Securities and Exchange
     Commission, as then in effect, and a state blue sky qualification, or valid
     exemption  therefrom,  is in effect with  respect to the state in which the
     applicable  Beneficial  Owner(s)  of  the  Note  resides,  and  the  Debtor
     furnishes a certificate to the Trustee to the forgoing effect or represents
     the same in the notice referred to above. If such current prospectus is not
     available or such blue sky  qualification  or exemption is not effective on
     the Maturity  Date,  the maturing Note shall be paid on the Maturity  Date.
     Any notice received by the Trustee  modifying a previous notice received by
     the  Trustee  with  respect  to a Note  under this  Section  2.01(f)  shall
     supersede  and restate the  previous  notice in its  entirety  and shall be
     controlling if received by the Trustee within the time period  specified in
     this Section  2.01(f).  If a Noteholder  wishes to renew a maturing Note as
     provided above,  written notice from the Noteholder or the Beneficial Owner
     of the Note must be given to the  Debtor at least 90  calendar  days but no
     more than 120  calendar  days  prior to the  Maturity  Date.  If the Debtor
     determines,  at its  option,  not to renew such Note then the Debtor  shall

                                       11
<PAGE>
     give  written  notice  to such  effect  to such  requesting  Noteholder  or
     Beneficial  Owner not less than 20 days nor more  than 60 days  before  the
     Maturity Date in accordance with Section 2.05.

          (g) DEPOSIT OF NOTE PROCEEDS.  With respect to the gross proceeds from
     initial sale of beneficial  interests in a Note, the Debtor agrees to cause
     each Broker/Dealer or other brokerage firm for which the Broker/Dealer acts
     as agent selling for such beneficial  interest to forward to the Debtor the
     gross  proceeds  promptly  upon  receipt  by  the  Broker/Dealer  or  other
     brokerage  firm. The Debtor shall remit the gross proceeds from the initial
     sale of each such  beneficial  interest by wire transfer to the Trustee for
     deposit  into the  Concentration  Account not later than the  Business  Day
     following the date such proceeds are received by the Debtor and  constitute
     cleared  funds  in the  Debtor's  accounts.  In  connection  with  the wire
     transfer to the Trustee,  the Debtor shall provide to the Trustee a written
     statement  setting forth with respect to each class of Note for which gross
     proceeds  are being wired to the  Trustee:  (i) the name of the Person that
     will be the Noteholder and their Clearing  Agency  Participant  number,  if
     applicable,  and (ii) the class, principal balance,  interest rate, Date of
     Issue, Maturity Date, and amount of gross proceeds received by class by the
     Debtor with respect to the Note. Upon receipt of such gross  proceeds,  the
     Trustee shall deposit such proceeds into the Concentration Account.

     SECTION 2.02. REGISTRATION, TRANSFER AND EXCHANGE OF NOTES.

          (a) The Trustee shall cause to be kept at its Corporate Trust Office a
     Note Register (the "Note  Register") in which,  subject to such  reasonable
     regulations  as it  may  prescribe,  the  Trustee  shall  provide  for  the
     recordation  of Notes and of  transfers,  pledges and exchanges of Notes as
     herein  provided.  Each  Note  shall be held,  transferred,  and  exchanged
     either, at the option of the Debtor with notice to the Trustee, through the
     book-entry  facilities  of the  Trustee in  accordance  with its  customary
     procedures or in accordance with the procedures  specified in Section 2.06;
     provided,  that if no  election  is made,  each Note  shall be  transferred
     through the provisions of Section 2.06.

          (b) At the  option of the  Noteholders,  Notes may be  transferred  to
     another Broker/Dealer or Clearing Agency Participant or exchanged for other
     Notes in the same series and of the same class in authorized  denominations
     evidencing the same aggregate principal amount,  interest rate and maturity
     (subject to Section 2.01(f)) in accordance with the customary procedures of
     the Trustee or the Clearing Agency with respect to the transfer or exchange
     of book-entry obligations.  All Notes canceled by the Trustee in connection
     with a transfer  or  exchange  of Notes shall not be entitled to payment of
     principal and shall have no further legal rights or effect.

     SECTION 2.03.  REGISTRATION,  TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS
                    IN NOTES.

          (a) By its  acceptance of Notes  whether upon  original  issue or upon
     transfer or assignment  thereof,  except in the case of Notes registered in
     the  name  of  a  Clearing   Agency  as  provided  in  Section  2.06,  each
     Broker/Dealer  accepts and agrees to be bound by the following  provisions.
     Except as provided below and except in the case of the Notes  registered in
     the name of a Clearing Agency as provided in Section 2.06, the Notes issued

                                       12
<PAGE>
     to a Broker/Dealer shall at all times remain registered in the name of that
     Broker/Dealer or its nominee and at all times:

               (i)  registration  of the  Notes  may not be  transferred  by the
          Trustee except to another Broker/Dealer;

               (ii) the  Broker/Dealer  and any  brokerage  firm for  which  the
          Broker/Dealer  acts as agent with respect to the Notes shall  maintain
          book-entry records with respect to the holders of beneficial interests
          in such Notes and with  respect to  ownership  and  transfers  of such
          interests;

               (iii)  ownership and transfers of  registration  and exchanges of
          the  Notes on the  books of the  Broker/Dealer  shall be  governed  by
          applicable rules and procedures established by the Broker/Dealer;

               (iv) the  Broker/Dealer may collect its usual and customary fees,
          charges and expenses  with respect to the  registration  of ownership,
          transfer, and exchange of interests in the Notes;

               (v)  the  Trustee  shall  deal  with  the   Broker/Dealer   as  a
          representative of the holders of beneficial interests in its Notes for
          purposes  of  exercising  the  rights of  Noteholders  under this Note
          Agreement,   and  requests  or  directions  from,  or  votes  of,  the
          Noteholder with respect to any matter shall not be deemed inconsistent
          if made with respect to (or in separate proportions  corresponding to)
          different holders of beneficial interests in the Notes.

               (vi) the Trustee may rely and shall be fully protected in relying
          upon  information  requested  by  the  Trustee  and  furnished  by the
          Broker/Dealer,  with respect to its holders of beneficial interests in
          a Note and  furnished  by a brokerage  firm for which it acts as agent
          with respect to the Note with respect to Persons shown on the books of
          such brokerage firms as holders of beneficial interests in the Note.

          (b) All transfers by a Broker/Dealer of beneficial interests in a Note
     shall  be  made  in  accordance  with  the  procedures  established  by the
     Broker/Dealer   or  other  brokerage  firm   representing  the  holders  of
     beneficial  interests in the Note, as applicable.  Each Broker/Dealer shall
     only transfer beneficial interests in a Note of the holders thereof that it
     represents  or of  brokerage  firms for which it acts as agent with respect
     the Notes in accordance with the Broker/Dealer's customary procedures.

          (c) The Trustee shall not have any duty to monitor,  maintain  records
     concerning  (or  determine  compliance  with  any  of the  restrictions  on
     transfer  applicable  to) holders of  beneficial  interests in a Note.  The
     Trustee shall not have any liability for the accuracy of the records of the
     Broker/Dealers  or the brokerage firms for which they act as agents, or any
     actions or omissions of such the Broker/Dealers or the brokerage firms.

                                       13
<PAGE>
     SECTION 2.04.  PERSONS  DEEMED  OWNERS.  Prior to notice to the Trustee for
registration of the transfer of a Note, the Trustee and any agent of the Trustee
may treat the Person in whose name any Note is  registered  in the Note Register
as the owner of such Note for the  purpose  of  receiving  payments  and for all
other  purposes  whatsoever,  and  none of the  Trustee,  nor any  agent  of the
Trustee, shall be affected by notice to the contrary.  Brokerage firms for which
a  Noteholder  acts as agent  and  holders  of  beneficial  interests  in a Note
represented  by the  Noteholder or the brokerage firm shall have no rights under
this Note Agreement with respect to such Notes. The rights of Beneficial  Owners
of a Note shall be limited to those  established by law and  agreements  between
such Beneficial  Owners and the  Broker/Dealers,  Clearing  Agencies or Clearing
Agency Participants, as the case may be, that are the Noteholders of record with
respect to such Beneficial Owners' Notes.

     SECTION 2.05. REDEMPTION.

          (a) The Debtor,  at its option,  at any time may redeem one or more of
     the  Outstanding  Notes in whole or in part. If the Debtor elects to redeem
     all or part of any Note,  it shall  notify  the  Trustee  in writing of the
     redemption  date and the  principal  amount  of Notes to be  redeemed.  The
     Debtor  shall give the notice to the Trustee  provided  for in this Section
     2.05 in the case of any  redemption of the Notes,  at least 25 days but not
     more than 65 days before the redemption  date unless a shorter notice shall
     be satisfactory to the Trustee.

          (b) If less  than all the  Notes are to be  redeemed,  (i) the  Debtor
     shall designate in writing to the Trustee the Notes or portions  thereof to
     be redeemed or (ii) if the Debtor does not so  designate  or such method is
     prohibited by the rules of any securities  exchange or quotation  system on
     which the Notes are then  listed or quoted,  the Trustee  shall  select the
     Notes to be redeemed  pro rata or by lot among  classes of Notes and by lot
     within each class.  The Debtor or the Trustee  shall make the  selection at
     least 20 days, but not more than 60 days,  before the redemption  date from
     Outstanding Notes not previously  called for redemption.  The Debtor or the
     Trustee may select for redemption Notes or portions of the principal amount
     of Notes that have  denominations  of $5,000 or larger but only in integral
     multiples of $1,000 of initial principal amounts. If the Trustee designates
     Notes or portions  thereof for  redemption,  the Trustee  shall  notify the
     Debtor promptly of the Notes or portions thereof to be redeemed.

          (c) At least 20 days but not  more  than 60 days  before a  redemption
     date,  the Trustee shall mail a notice of redemption by  first-class  mail,
     postage  prepaid,  to each  Noteholder of Notes (or portion  thereof) to be
     redeemed.  The notice  shall  identify  the Notes to be redeemed  and shall
     state:

               (i) the redemption date;

               (ii) the Redemption Price;

               (iii) the name and address of the Trustee as paying agent;

                                       14
<PAGE>
               (iv) if fewer than all the Outstanding  Notes are to be redeemed,
          the certificate  number and principal  amounts of the particular Notes
          to be redeemed; and

               (v) that interest,  if any, on Notes (or portions thereof) called
          for redemption will cease to accrue on and after the redemption date.

          (d) The  notice,  if mailed in the manner  herein  provided,  shall be
     conclusively  presumed  to  have  been  duly  given,  whether  or  not  the
     Noteholder  receives such notice. In any case,  failure to give such notice
     by  mail  or  any  defect  in the  notice  to the  Noteholder  of any  Note
     designated  for  redemption  as a whole or in part  shall  not  affect  the
     validity of the  proceedings  for the  redemption of any other Note. At the
     Debtor's  request,  the Trustee  shall give the notice of redemption in the
     Debtor's name. All redemption notices shall be at the Debtor's expense.

          (e) Once notice of redemption is given  pursuant to this Section 2.05,
     the Notes or portion  of the Notes  called  for  redemption  become due and
     payable  on the  redemption  date  and at the  Redemption  Price.  Upon the
     redemption date, such Notes shall be paid at the Redemption Price stated in
     the notice.

          (f) Prior to 11:00 a.m.,  Mountain  Time, on one Business Day prior to
     the  redemption  date,  the Debtor shall  deposit with the Trustee into the
     Note Payment  Account  immediately  available  funds  sufficient to pay the
     Redemption  Price of all Notes or  portion of the Notes to be  redeemed  on
     that date other than Notes or portions of Notes called for redemption which
     prior  thereto  have  been  delivered  by the  Debtor  to the  Trustee  for
     cancellation,  and on or after the redemption date (unless the Debtor shall
     default in the payment of the Notes at the Redemption Price),  interest, if
     any, on the Notes or portion of Notes called for redemption  shall cease to
     accrue and, except as provided in Section 8.02 below, to be entitled to any
     benefit or security under this Note Agreement,  and the Noteholders thereof
     shall have no right in respect of such Notes (or  portion  thereof)  except
     the right to receive the  Redemption  Price  thereof.  The Trustee shall as
     promptly as practicable return to the Debtor from amounts on deposit in the
     Note  Payment  Account  all funds so  deposited  by the Debtor that are not
     required to be paid to Noteholders as the Redemption Price.

          (g) Upon  partial  redemption  of a Note,  the Trustee  shall make the
     appropriate   entries  on  the  Note  Register  to  evidence  such  partial
     redemption and a new authorized  denomination  equal in principal amount to
     the unredeemed portion of the Note.

          (h) Pursuant to this Note Agreement,  any amounts held under this Note
     Agreement  which are  available  to redeem Notes may instead be used by the
     Trustee at the direction of the Debtor to purchase Outstanding Notes at the
     same times and subject to the same conditions (except as to price) as apply
     to the  redemption of Notes.  Any Notes  purchased  shall be retired by the
     Trustee and shall no longer be deemed Outstanding hereunder.

                                       15
<PAGE>
     SECTION 2.06. Book-Entry Notes.

     Unless  otherwise  provided  in  Sections  2.02 and 2.03 and in any related
supplement  with  respect to a series of Notes,  upon  original  issuance,  each
series of Notes shall be issued in the form of  typewritten  Notes  representing
the Book-Entry  Notes to be delivered to the depository (or to be held on behalf
of the Clearing Agency by the Trustee) specified in such supplement (which shall
be the Clearing Agency), by or on behalf of such series.

     Unless  otherwise  provided  in the related  supplement,  the Notes of each
series  initially  shall be  registered  in the Note Register in the name of the
nominee of the Clearing Agency for such Book-Entry  Notes and shall be delivered
to the Trustee or, pursuant to such Clearing Agency's instructions,  held by the
Trustee's agent as custodian for the Clearing Agency.

     Unless  and  until   Definitive   Notes  are  issued   under  the   limited
circumstances  described in Section 2.08, no Beneficial  Owner shall be entitled
to receive a Definitive Note  representing  such Beneficial  Owner's interest in
such Note.  Unless and until Definitive Notes have been issued to the Beneficial
Owners pursuant to Section 2.08:

          (a) the  provisions  of this  Section  2.06 shall be in full force and
     effect with respect to each such series;

          (b) the Trustee shall be entitled to deal with the Clearing Agency and
     the Clearing  Agency  Participants  for all purposes of this Note Agreement
     and any  related  supplement  (including  the payment of  principal  of and
     interest   on  the  Notes  of  each   such   series)   as  the   authorized
     representatives of the Beneficial Owners;

          (c) to the extent that the  provisions  of this Section 2.06  conflict
     with any other  provisions of this Note  Agreement,  the provisions of this
     Section 2.06 shall control with respect to each such series;

          (d) the  rights of  Beneficial  Owners of each  such  series  shall be
     exercised  only through the  Clearing  Agency and the  applicable  Clearing
     Agency  Participants  and shall be limited to those  established by law and
     agreements  between such  Beneficial  Owners and the Clearing Agency and/or
     the Clearing  Agency  Participants.  Pursuant to the  depository  agreement
     applicable to a series,  unless and until  Definitive  Notes of such series
     are issued pursuant to Section 2.08, the initial Clearing Agency shall make
     book-entry transfers among the Clearing Agency Participants and receive and
     transmit  distributions  of  principal  and  interest  on the Notes to such
     Clearing Agency Participants; and

          (e) whenever  this Note  Agreement  requires or permits  actions to be
     taken based upon instructions or directions of the Noteholders evidencing a
     specified percentage of the Outstanding Notes, the Clearing Agency shall be
     deemed to represent such percentage only to the extent that it has received
     instructions  to such effect from the  Beneficial  Owners  and/or  Clearing
     Agency  Participants  owning or representing,  respectively,  such required
     percentage of the  beneficial  interest in the Notes and has delivered such
     instructions to the Trustee.

                                       16
<PAGE>
     SECTION 2.07. Notices to Clearing Agency.

     Unless and until  Definitive  Notes  shall have been  issued to  Beneficial
Owners pursuant to Section 2.08, whenever a notice or other communication to the
Noteholders is required under this Note  Agreement,  the Trustee shall give such
notice or communication to the Clearing Agency, as applicable,  for distribution
to Beneficial  Owners and shall have no obligation to distribute  such notice or
other communication directly to the Beneficial Owners.

     SECTION 2.08. Definitive Notes.

          (a) If:

               (i) (A) the  Debtor  advises  the  Trustee  in  writing  that the
          Clearing Agency is no longer willing or able to properly discharge its
          responsibilities  as Clearing  Agency with  respect to the  Book-Entry
          Notes of a given  series  and (B) the  Debtor is unable to locate  and
          reach an agreement on satisfactory terms with a qualified successor;

               (ii) the Debtor,  at its  option,  advises the Trustee in writing
          that it elects to terminate the book-entry system through the Clearing
          Agency with respect to such series; or

               (iii) after the  occurrence  of an Event of  Default,  Beneficial
          Owners  aggregating a majority of the Outstanding Notes of such series
          advise the  Trustee and the  applicable  Clearing  Agency  through the
          applicable   Clearing   Agency   Participants   in  writing  that  the
          continuation of a book-entry system is no longer in the best interests
          of the Beneficial Owners of such series,

then,  unless the Debtor and,  with  respect to clause  (iii)  above  only,  the
affected  Beneficial  Owners elect to utilize the  book-entry  facilities of the
Trustee as provided in Section  2.02 and 2.03 hereof,  the Trustee  shall notify
all Beneficial  Owners of such series of the occurrence of such event and of the
availability of Definitive Notes to Beneficial  Owners of such series requesting
the same. Upon surrender to the Trustee of the Notes of such series  accompanied
by registration  instructions  from the applicable  Clearing Agency,  the Debtor
shall execute, and the Trustee shall authenticate and deliver,  Definitive Notes
of such series and shall  recognize the  registered  holders of such  Definitive
Notes as  Noteholders  under  this Note  Agreement.  Neither  the Debtor nor the
Trustee shall be liable for any delay in delivery of such instructions,  and the
Debtor and the  Trustee  may  conclusively  rely on, and shall be  protected  in
relying on, such instructions.

          (b) Upon the issuance of Definitive Notes of any series as provided in
     Section 2.08(a), all references herein to obligations imposed upon or to be
     performed by the applicable  Clearing  Agency shall be deemed to be imposed
     upon and performed by the Trustee to the extent  applicable with respect to
     such  Definitive  Notes,  and the Trustee shall  recognize  the  registered
     holders  of the  Definitive  Notes of such  series as  Noteholders  of such
     series hereunder. Definitive Notes will be transferable and exchangeable at
     the offices of the Trustee.

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                                   ARTICLE III

                                    SECURITY

     SECTION 3.01. GRANT OF SECURITY.

          (a) The Debtor,  to secure the  obligations  described in Section 3.02
     below, hereby does grant, convey, pledge,  transfer,  assign and deliver to
     the Trustee  for the equal and  proportionate  benefit and  security of all
     present  and  future  registered  Noteholders  a first and  prior  security
     interest  in, all of the Debtor's  right,  title and interest in and to the
     following, whether now or hereafter existing and/or arising or acquired:

               (i) All  Receivables,  whether  eligible or ineligible,  that are
          identified  on a  certificate  in  the  form  of  Exhibit  A-1  hereto
          delivered  to the Trustee  and  Servicer  in  connection  with (A) the
          disbursement of funds from the Concentration Account by the Trustee at
          the direction of Debtor to purchase the Receivables identified on such
          certificate  or (B)  the  replacement  of  Receivables  that  are  not
          Eligible Receivables pursuant to Section 4.02;

               (ii) All collections in respect of such Receivables and all funds
          as may be held by the  Trustee  or  Servicer  from time to time in the
          Accounts together with all certificates and instruments,  if any, from
          time to time  evidencing  such Accounts,  and funds on deposit and all
          investments  made  with  such  funds,  all  claims  thereunder  or  in
          connection therewith, and interest,  dividends,  moneys,  instruments,
          securities and other  property from time to time received,  receivable
          or otherwise distributed in respect of any or all of the foregoing;

               (iii) All  moneys,  cash,  credits,  contract  rights,  and other
          obligations of any kind now or hereafter  existing  and/or arising out
          of or in  connection  with  the  Receivables  and  all  rights  now or
          hereafter  existing in and to all agreements and contracts securing or
          otherwise relating to any such Receivables;

               (iv) The rights of the Debtor  (but not its  obligations)  in, to
          and under the Purchase Documents  including,  without limitation,  the
          rights of the Debtor (A) to enforce  the  Purchase  Documents  and the
          agreements pursuant to which the Lock Box Accounts are established and
          maintained  against  the  respective  Health  Care  Providers  and the
          obligations  thereunder  and (B) to cause the Health Care Providers to
          repurchase   Receivables   purchased  under  the  respective  Purchase
          Document  as to which there has  occurred a breach of  representation,
          warranty or covenant in accordance with the provisions of the Purchase
          Documents;

               (v) All of the Debtor's rights,  (but not its obligations) in, to
          and under the  Servicing  Agreement,  including any rights (if any) of
          Debtor in and to Servicer's  software programs and billing systems, if
          any;

               (vi) The Accounts;

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<PAGE>
               (vii) All products  and proceeds of any and all of the  foregoing
          and,  to  the  extent  not  otherwise  included,  all  payments  under
          insurance  (whether or not the Debtor is the loss payee  thereof),  or
          any  indemnity,  warranty  or  guaranty,  payable by reason of loss or
          damage to or otherwise with respect to any of the foregoing; and

               (viii)  Subject  to  Section  3.01(b)  below,  any and all  other
          property,  rights and interests of every kind or description that from
          time to time  hereafter is granted,  conveyed,  pledged,  transferred,
          assigned or delivered to the Trustee as additional security hereunder.

          (b) The Debtor,  to secure the  obligations  described in Section 3.02
     below, hereby does grant, convey, pledge,  transfer,  assign and deliver to
     the Trustee  for the equal and  proportionate  benefit and  security of all
     present  and  future  registered  Noteholders  a first  and prior or junior
     security interest in, all of the Debtor's right,  title and interest in and
     to the  following,  whether now or  hereafter  existing  and/or  arising or
     acquired:

               (i) All of the stock and other  tangible and  intangible  assets,
          moneys,  rights,  and properties  related to the  healthcare  industry
          (including,   without  limitation,   HMO's,  PPO's,  and  third  party
          administrators)  that may be purchased by the Debtor from time to time
          from funds disbursed from the  Concentration  Account,  which shall be
          identified  on a  certificate  in  the  form  of  Exhibit  A-2  hereto
          (including the type of Asset being purchased  pursuant to this Section
          3.01(b))  provided to the Trustee by the Debtor (the "Assets"),  which
          certificate shall certify the value of each of the Assets set forth on
          the  certificate  and the  basis  for the  valuation  thereof  and the
          priority of the lien granted hereunder to the Trustee;

               (ii) All collections and  distributions  in respect of the Assets
          and all funds as may be held or  controlled by the Trustee or Servicer
          from time to time in the  Concentration  Account from  collections and
          distributions in respect of the Assets, together with all certificates
          and instruments, if any, from time to time evidencing such collections
          and  distributions,  and such collections and distributions on deposit
          and all investments made with such collections and distributions,  all
          claims in  connection  therewith,  and  interest,  dividends,  moneys,
          instruments, securities and other property from time to time received,
          receivable  or otherwise  distributed  in respect of any or all of the
          foregoing;

               (iii) All  moneys,  cash,  credits,  contract  rights,  and other
          obligations of any kind now or hereafter  existing  and/or arising out
          of or in  connection  with the Assets and all rights now or  hereafter
          existing in and to all agreements and contracts  securing or otherwise
          relating to any such Assets; and

               (iv) All  products  and  proceeds  of any and all of the  assets,
          moneys,  rights, and properties  described in Section 3.01(b)(i) above
          and,  to  the  extent  not  otherwise  included,  all  payments  under
          insurance  (whether or not the Debtor is the loss payee  thereof),  or

                                       19
<PAGE>
          any  indemnity,  warranty  or  guaranty,  payable by reason of loss or
          damage to or otherwise with respect to any of the foregoing.

          (c) All of the moneys,  rights,  and properties  described in Sections
     3.01(a) and 3.01(b) are  referred to as the  "Collateral"  unless  released
     from the lien of this Note Agreement pursuant to the terms hereof.

     SECTION 3.02. PLEDGE TO SECURE OBLIGATIONS.

     This Note Agreement secures the Notes and enforcement of the payment of the
Notes in accordance with their terms, and all other sums payable hereunder or on
the Notes (whether now or hereafter existing,  whether for principal,  interest,
fees,  expenses  or  otherwise,  whether  matured  or  unmatured,   absolute  or
contingent),  and for the  performance of and compliance  with the  obligations,
covenants,  and  conditions of this Note  Agreement,  as if all the Notes at any
time  Outstanding  had  been  executed  and  delivered  simultaneously  with the
execution and delivery of this Note Agreement (collectively, the "Obligations");
provided  however,  that pursuant to the terms of a supplemental  note agreement
under  which a series of Notes is issued,  the Assets and  Receivables  acquired
from the  proceeds  of such series of Notes and the  related  Collateral  can be
pledged to secure  only that series of Notes and the other  related  Obligations
and not any other  series of Notes or its  related  Obligations,  in which  case
Collateral pledged to secure other series of Notes and their related Obligations
shall not secure the series of Notes issued pursuant to such  supplemental  note
agreement or other related Obligations.

     SECTION 3.03. COLLATERAL TRANSFERS AND OTHER LIENS.

     Subject to Section 3.04 below, the Debtor shall not:

          (a) Assign (by operation of law or otherwise) or otherwise  dispose of
     any of the Collateral or any interest therein; or

          (b)  Create or suffer to exist any lien,  security  interest  or other
     charge or  encumbrance  upon or with  respect to any of the  Collateral  to
     secure debt of any person or entity,  except (i) for the security  interest
     created by this Note  Agreement and (ii) with respect to  Collateral  other
     than the  Receivables,  any  security  interest  set forth on the  schedule
     describing the other Collateral provided pursuant to Section 3.01(b) to the
     Trustee  upon  disbursement  of funds  from the  Concentration  Account  in
     connection with the acquisition of the other Collateral.

     SECTION 3.04. SALE OF COLLATERAL.

          (a)  Collateral may be sold,  transferred or otherwise  disposed of by
     the Debtor  free from the lien of this Note  Agreement  and any  applicable
     supplemental  note  agreement  at any time,  provided  that the Trustee has
     received  from the Debtor a written  statement of the gross  proceeds to be
     derived from the sale and the Person to which the  Collateral is to be sold
     or transferred and certifying to the Trustee  substantially  in the form of
     Exhibit B:

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<PAGE>
               (i) the disposition  price is equal to or in excess of the amount
          disbursed  from the  Concentration  Account to acquire the  Collateral
          (less any  principal  amounts  received by the Trustee with respect to
          such Collateral); or

               (ii) the  disposition  price is lower than the  amount  disbursed
          from the  Concentration  Account to acquire the  Collateral  (less any
          principal  amounts  received  by the  Trustee  with  respect  to  such
          Collateral),  and (A) the  Revenues  expected to be received  from the
          remaining  Collateral (after giving effect to such disposition)  would
          be at least equal to the Revenues required to timely pay the principal
          and interest on the Outstanding  Notes, or (B) the Debtor shall remain
          able to pay debt  service  on the Notes and make  payment on any other
          Obligations  on a timely  basis  (after  giving  effect to such  sale,
          transfer or other disposition)  whereas it would not have been able to
          do so on a timely basis if it had not sold, transferred or disposed of
          the  Collateral  at  such  discounted  amount,  or (C)  the sum of the
          amounts on deposit in the Accounts  (less moneys in any Account  which
          the Debtor, Servicer, or Administrator is then entitled to receive but
          which  has not  yet  been  removed  from  the  Account)  plus  the Net
          Collectible  Amount of the  Receivables  and the fair market  value of
          other  Collateral will be at least equal to one hundred percent (100%)
          of the aggregate principal amount of the then Outstanding  Obligations
          plus accrued  interest  after giving effect to such sale,  transfer or
          other disposition.

          (b) The Trustee,  following  receipt of the  foregoing  and such other
     certificates  as may be required by this Note  Agreement or any  applicable
     supplemental note agreement, shall release such Collateral from the lien of
     this Note  Agreement  upon the receipt of the gross proceeds set forth on a
     certification  substantially  in the  form of  Exhibit  B and  deliver  all
     documents  evidencing the Debtor's  ownership of the collateral as directed
     in writing by the Debtor at the expense of the Debtor.

          (c) Gross  proceeds to be received upon any  disposition of Collateral
     may consist of cash, Permitted  Investments,  and/or Eligible  Receivables.
     The Trustee shall deposit all of such gross proceeds into the Concentration
     Account.

     SECTION 3.05. RESPONSIBILITIES OF DEBTOR.

          (a) If any  other  Collateral  (or  the  Debtor's  ownership  interest
     therein)  shall be evidenced  by a promissory  note,  other  instrument  or
     chattel paper, the Debtor shall promptly deliver  possession thereof to the
     Trustee duly endorsed and  accompanied by the duly executed  instruments of
     transfer or assignment. The Debtor shall promptly deliver possession to the
     Trustee  of such  other  original  documents  relating  to the  Collateral,
     possession of which are  necessary to perfect the security  interest of the
     Trustee in the Collateral under this Note Agreement.

          (b)  With  respect  to  the  acquisition  of  Assets,  as a  condition
     precedent to the disbursement of funds pursuant to Section  5.11(a)(ii)(E),
     the  Debtor  shall  deliver  at  Debtor's  expense  an  opinion  of counsel
     reasonably  acceptable  to the  Trustee  to  the  effect  that  immediately
     following the acquisition of the Assets,  the Trustee will have a perfected

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<PAGE>
     security  interest  therein,  which  security  interest  is  subject to the
     provisions of this Note Agreement.

          (c) The  Debtor  shall  keep its  chief  place of  business  and chief
     executive  office and the office where it keeps its records  concerning the
     Collateral  at the Debtor's  notice  address set forth in Section 10.03 or,
     upon thirty (30) days prior  written  notice to the Trustee,  at such other
     locations  specified in a written  notice to the  Trustee.  The Debtor will
     hold and preserve its records  concerning such Collateral,  and will permit
     representatives  of the Trustee and the Noteholders  upon reasonable  prior
     notice during normal business hours to inspect and make abstracts from such
     records  relating  to  the  Collateral  as  well  as  any  contract,  other
     agreements,  documents,  instruments  or chattel  paper that  relate to the
     Collateral.

          (d) The Debtor  agrees to take or cause to be taken such  actions  and
     execute such documents (including, without limitation, the delivery of such
     legal  opinions as may  reasonably  be requested by the Trustee in form and
     substance  reasonably  acceptable  to the  Trustee  and the  filing  in the
     applicable  public  recording  office  of  all  necessary  UCC-1  financing
     statements  or  chattel  mortgage  agreements,  which  may be made  through
     blanket filings covering  Collateral and after-acquired  Collateral pledged
     to the Trustee under this Note  Agreement)  naming the Debtor as debtor and
     the  Trustee  as  secured  party  and any  amendments  to  UCC-1  financing
     statements as are necessary to perfect and protect the Trustee's  interests
     in the Collateral on behalf of the Noteholders and the proceeds thereof and
     all other items described in Section 3.01. The Trustee shall be responsible
     at the Debtor's  expense to file all required  continuation  statements for
     the UCC-1 financing statements then on file against the Debtor with respect
     to the Collateral.

          (e) With  respect to  Receivables  pledged to the Trustee from time to
     time, the Debtor shall be  responsible at the Debtor's  expense to file all
     required continuation statements for the UCC-1 financing statements then on
     file  listing  Medical  Capital  Management,  Inc. as the  creditor and the
     Health Care Provider or other seller of the  Receivable to Medical  Capital
     Management, Inc. as the debtor.

          (f) The Debtor  authorizes  the  filing by the  Trustee of any and all
     UCC-1  financing  statements  with respect to the Collateral or amendments,
     continuation  statements,  or termination  statements for any related UCC-1
     financing statement as may be necessary to perfect the security interest of
     the Trustee in the Collateral  under the applicable  UCC. In the event that
     the  Debtor  fails  to file  UCC-1  financing  statements  or  continuation
     statements  as required  pursuant to Sections  3.05(d) or (e),  the Trustee
     shall file such  statements  pursuant to Section 3.05(d) (and may file such
     statements  pursuant to Section 3.05(e)) promptly after actual knowledge of
     such  failure  is  obtained  by any  officer  within  the  Corporate  Trust
     Department of the Trustee.

          (g) The Debtor will provide to the Trustee a schedule in an electronic
     form readable by the Trustee listing all of the (i) Collateral then pledged
     to the Trustee and each of the related UCC-1 financing  statements  showing
     the Trustee as secured  party,  the location  where each was filed,  filing
     number assigned by the applicable public recording agency,  date of filing,
     and the  Debtor's  name  appearing  as  debtor  thereon  and (ii) the UCC-1

                                       22
<PAGE>
     financing  statement  filed with  respect to each of the  Receivables  then
     pledged to the Trustee  showing the Debtor as secured  party,  the location
     where  it was  filed,  filing  number  assigned  by the  applicable  public
     recording agency,  date of filing, and the debtor's name appearing thereon.
     The schedule  shall be provided to the Trustee within 15 days after the end
     of each calendar quarter. The Trustee shall hold such schedule in its files
     and shall have no  obligation  to review,  examine,  inspect,  or otherwise
     determine the accuracy of the information set forth therein.

     SECTION 3.06. CONTINUING SECURITY INTEREST.

     This  Agreement  shall  create  a  continuing   security  interest  in  the
Collateral  and shall (a) remain in full force and effect until  payment in full
of all Notes,  (b) be binding upon the Debtor,  its successors and assigns,  and
(c) inure to the benefit of the Trustee,  the  Noteholders,  and any participant
and their respective successors, transferees, and assigns.

     SECTION 3.07. FURTHER ASSURANCES.

          (a) The Debtor  agrees  from time to time,  at  Debtor's  expense,  to
     promptly  execute  and  deliver  all  further   instruments  and  documents
     (including,  without  limitation,  legal  opinions  in form  and  substance
     reasonably  acceptable to the Trustee),  and take all further action,  that
     may be necessary or desirable,  or that the Trustee may reasonably request,
     in order to perfect and protect any security  interest granted or purported
     to be granted  hereby or to enable the Trustee to exercise  and enforce its
     rights and remedies hereunder with respect to any Collateral.  Debtor shall
     from time to time at Trustee's  request  provide  promptly to it a current,
     accurate  and  complete  list  of all  Health  Care  Providers  (and  their
     respective  addresses)  from whom  Debtor  has  acquired  any  Receivables.
     Insofar as any property and/or documents which may be Collateral hereunder,
     the Debtor  will sign and  deliver to the  Trustee on demand  such forms of
     financing  statements  as may be  required  by the  Trustee,  will  pay any
     related  filing fees,  and will file, or cause to be filed,  such financing
     statements  in  the  applicable  jurisdictions.  The  Trustee's  rights  as
     specified  herein or therein shall be in  furtherance of and/or in addition
     to, but not in  limitation  of, the Trustee's  rights under any  applicable
     law.

          (b) The Debtor hereby  authorizes  the Trustee in connection  with the
     lapse or imminent lapse of any previously filed financing statement to file
     one or more financing or continuation  statements,  and amendments  thereto
     relative  to all  or  part  of  the  then  Collateral  (including,  without
     limitation, the financing or continuation statements referred to in Section
     3.05(e))  without the  signature of the Debtor where  permitted by law. The
     Debtor agrees to reimburse the Trustee for the expense of any such filings,
     including its legal fees and expenses incurred in connection herewith.

          (c) The Debtor will furnish to the Trustee and the  Noteholders,  from
     time to time,  statements and schedules further  identifying and describing
     the Collateral and such other reports in connection  with the Collateral as
     the Trustee or the  Noteholders may reasonably  request,  all in reasonable
     detail.

                                       23
<PAGE>
                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

     SECTION 4.01.  REPRESENTATIONS  AND WARRANTIES.  The Debtor  represents and
warrants as follows:

          (a) The  Debtor  owns  the  Collateral  free and  clear  of any  lien,
     security  interest,  charge or  encumbrance,  except  (i) for the  security
     interest  created by this Note Agreement and any financing  statement filed
     in favor of the Trustee in  connection  herewith  and (ii) with  respect to
     Collateral other than  Receivables,  any security interest set forth on the
     schedule  describing  such other  Collateral  provided  pursuant to Section
     3.01(b) to the Trustee upon  disbursement  of funds from the  Concentration
     Account in connection  with the  acquisition of such other  Collateral.  No
     effective  financing  statement  or  other  instrument  similar  in  effect
     covering  all or any  part of the  Collateral  is on file in any  recording
     office,  except  (i) such as may have  been  filed in favor of the  Trustee
     relating to this Note  Agreement  and (ii) with respect to Assets,  such as
     may have been filed in connection  with any security  interest set forth on
     the schedule  describing such other Collateral provided pursuant to Section
     3.01(b) to the Trustee upon  disbursement  of funds from the  Concentration
     Account in connection with the acquisition of such other Collateral.

          (b) This Note Agreement  creates a valid security interest in favor of
     the Trustee in the Collateral, securing the payment of the Obligations, and
     all  filings  have been  made that are  necessary  in any  jurisdiction  to
     perfect in favor of the Trustee for the  benefit of the  Noteholders  (i) a
     first priority  security  interest in the Receivables and (ii) with respect
     to other  Collateral a first or junior  priority  security  interest as set
     forth on the schedule  describing the other Collateral provided pursuant to
     Section  3.01(b)  to the  Trustee  upon  disbursement  of  funds  from  the
     Concentration  Account  in  connection  with the  acquisition  of the other
     Collateral.

          (c) Except as contemplated by this Note Agreement,  no  authorization,
     approval  or other  actions  by,  and no  notice  to or  filing  with,  any
     governmental authority or regulatory body is required by either (i) for the
     grant by the Debtor of the security  interest granted  hereunder or for the
     execution,  delivery or performance of this Note Agreement by the Debtor or
     (ii) for the perfection of or the exercise by the Trustee of its rights and
     remedies hereunder.

          (d) All of the  Receivables are "accounts" with the meaning of Article
     9 of the Uniform Commercial Code.

     SECTION 4.02. REPLACEMENT OF DEFECTIVE COLLATERAL.

          (a) Upon  discovery  by the Debtor,  or upon actual  knowledge  of the
     Trustee,  of a breach of any of the such  representations and warranties in
     Section  4.01  which  materially  and  adversely  affects  the value of the
     Collateral  or the interest of the  Noteholders,  or which  materially  and
     adversely  affects the interests of the  Noteholders in the related item of

                                       24
<PAGE>
     Collateral as determined by the Administrator in the reasonable exercise of
     its discretion, the party discovering such breach shall give prompt written
     notice to the  other.  The  Debtor  shall  within  ninety  (90) days of the
     earlier  of its  discovery  or its  receipt  of notice  of any  breach of a
     representation  or  warranty,  promptly  cure such  breach in all  material
     respects  or (i) if the  defective  item  of  Collateral  is a  Receivable,
     replace the defective  item of Collateral  with Eligible  Receivables as to
     which the Debtor is entitled to receive in the  aggregate  at least as much
     from the related  Approved Payor as under the defective  Receivable or (ii)
     if the defective  item of  Collateral is not a Receivable,  replace it with
     Collateral of  substantially  equivalent fair market value as determined by
     the Administrator,  or (iii) prepay principal on Outstanding Notes pursuant
     to Section 2.05 in an amount at least equal to the funds disbursed from the
     Concentration Account to purchase the defective item of Collateral.

          (b) It is understood and agreed that the obligations of the Debtor set
     forth  in this  Section  4.02 to cure or  substitute  a  defective  item of
     Collateral or prepay Notes  constitute the sole remedies of the Trustee and
     the Noteholders  hereunder  respecting a breach of the  representations and
     warranties  contained  in Section  4.01.  Any cause of action  against  the
     Debtor  relating  to or  arising  out of a  material  defect in a  document
     relating to  Collateral  or arising out of a breach of any  representations
     and  warranties  made  in  Section  4.01  shall  accrue  as to any  item of
     Collateral  upon (i)  discovery  of such  defect or breach by any party and
     notice  thereof  to the  Debtor,  (ii)  failure  by the Debtor to cure such
     defect or breach or replace such  defective  collateral  or prepay Notes as
     provided  in this  Section  4.02,  and (iii)  demand upon the Debtor by the
     Trustee or a majority of the Noteholders of the aggregate  principal amount
     of then  Outstanding  Notes  to  take  the  actions  described  in  Section
     4.02(b)(ii).

          (c) Neither the Debtor nor the Trustee  shall have any duty to conduct
     any  affirmative  investigation  as to  the  occurrence  of  any  condition
     requiring the  prepayment of Notes or  replacement of any defective item of
     Collateral  pursuant  to this  Section  or the  eligibility  of any item of
     Collateral for purposes of this Note Agreement.

          (d) In  connection  with a  prepayment  of Notes or  replacement  of a
     defective  item of  Collateral  pursuant to this Section  4.02,  the Debtor
     shall  amend  and  deliver  to  the  Trustee  the  applicable  schedule  of
     Collateral  provided  to  the  Trustee  and  an  executed   Certificate  of
     Replacement  Collateral  substantially in the form of Exhibit A-3 hereto to
     reflect (i) the removal of the applicable item of defective Collateral from
     the terms of this Note Agreement and (ii) if applicable, the replacement of
     the defective item of  Collateral.  Upon the Debtor's  compliance  with the
     terms of this Section  4.02,  the Trustee shall cause the lien of this Note
     Agreement and any  applicable  supplemental  note  agreement to be released
     with respect to the item of defective collateral and promptly return to the
     Debtor all documents evidencing the item of defective Collateral.

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<PAGE>
                                    ARTICLE V

                  TRUSTEE; COMMUNICATIONS AND REPORTS; ACCOUNTS

     SECTION 5.01.  CERTAIN  DUTIES OF TRUSTEE.  In addition to the other duties
set forth in this Note  Agreement,  the Trustee as trustee  for the  Noteholders
shall:

          (a) NOTES.  Record the  transfer  or  exchange of Notes as provided in
     Article II hereof;

          (b) RELEASE. The Trustee shall upon written request from the Debtor in
     the form of Exhibit B hereto and  subject  to the  provisions  of this Note
     Agreement,  take all actions reasonably  necessary to effect the release of
     any  Collateral  from the lien of this Note  Agreement or any  supplemental
     note agreement to the extent the terms hereof permit the sale,  disposition
     or transfer of such Collateral.

          (c) POWER OF ATTORNEY.  The Debtor hereby  irrevocably  appoints,  and
     hereby does appoint, the Trustee both as trustee for the Noteholders and as
     the Debtor's Attorney-in-Fact with full authority in the place and stead of
     the Debtor and in the name of Debtor,  the Trustee or otherwise,  from time
     to time in the Trustee's  discretion,  effective  upon the occurrence of an
     Event of Default,  to take any action and to execute any  instrument  which
     the Trustee may deem necessary or advisable to enforce, collect and dispose
     of the Collateral and to enforce the Transaction  Documents,  including the
     authority to:

               (i) ask, demand, collect, sue for, recover, compound, receive and
          give  acquaintance  and receipts for money due and to become due under
          or in respect to any of the Collateral;

               (ii) receive,  endorse,  collect any drafts or other instruments,
          documents and chattel  paper,  in connection  with clause (a) above or
          otherwise;

               (iii)  file  any  claims  or take any  action  or  institute  any
          proceedings  which the Trustee may deem necessary or desirable for the
          collection of any of the  Collateral or otherwise to enforce the right
          to the Trustee for the benefit of the Noteholders  with respect to any
          of the Collateral; and

               (iv)  notify the  Servicer,  any  Health  Care  Provider  and any
          Approved  Payor of Debtor's  collateral  assignment  and/or grant of a
          security interest in the Receivables to the Trustee for the benefit of
          the Noteholders  and cause such Persons to remit payments  directly to
          the Trustee and its designee.

The Debtor hereby  acknowledges,  consents and agrees that the power of attorney
granted  pursuant to this  Section  5.01(c) is  irrevocable  and coupled with an
interest.

     SECTION  5.02.   CORPORATE  TRUSTEE  REQUIRED;   ELIGIBILITY;   CONFLICTING
INTERESTS.  There  shall at all  times be a  Trustee  hereunder  which  shall be
eligible to act as Trustee  under TIA  Section  310(a) and shall have a combined
capital  and  surplus of at least  $50,000,000.  If such  corporation  publishes

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<PAGE>
reports of condition at least annually,  pursuant to law or the  requirements of
federal,  state,  territorial  or District of Columbia  supervising or examining
authority,  then for the purposes of this Section 5.02, the combined capital and
surplus  of such  corporation  shall be deemed to be its  combined  capital  and
surplus as set forth in its most recent report of condition so published.  If at
any  time  the  Trustee  shall  cease  to be  eligible  in  accordance  with the
provisions of this Section 5.02, it shall correct such  ineligibility  or resign
immediately in the manner and with the effect  hereinafter  specified in Section
5.03.  Neither the Debtor nor any Person  directly or indirectly  controlling or
controlled  by, or under common control with, the Debtor shall serve as Trustee.

     SECTION 5.03. REPLACEMENT OF TRUSTEE.

          (a) The  Trustee  may resign by so  notifying  the  Debtor;  provided,
     however, no such resignation shall be effective until a qualified successor
     Trustee has accepted its  appointment  pursuant to this Section  5.03.  The
     Noteholders of a majority in aggregate  Outstanding principal amount of the
     Notes may remove the Trustee by so notifying  the Trustee and may appoint a
     successor Trustee. The Debtor shall remove the Trustee if:

               (i) the Trustee  fails to comply  with,  or ceases to be eligible
          under, Section 5.02 hereof;

               (ii) the Trustee is adjudged bankrupt or insolvent;

               (iii) a receiver or public officer takes charge or control of the
          Trustee or its property or affairs; or

               (iv) the Trustee  otherwise in the Debtor's  reasonable  judgment
          becomes incapable of acting.

          (b) If the Trustee resigns or is removed or if a vacancy exists in the
     office of Trustee for any reason,  the Debtor shall  promptly  appoint,  by
     resolution of its Board of Directors,  a successor Trustee. Every successor
     Trustee appointed  hereunder shall execute,  acknowledge and deliver to the
     Debtor  and  to  the  retiring   Trustee  an  instrument   accepting   such
     appointment,  and  thereupon  the  resignation  or removal of the  retiring
     Trustee shall become  effective  and such  successor  Trustee,  without any
     further act, deed or  conveyance,  shall become vested with all the rights,
     powers,  trusts and duties of the retiring Trustee;  but, on the request of
     the Debtor or the successor  Trustee,  such retiring  Trustee  shall,  upon
     payment of its  charges  (including  all  unpaid  amounts  due and  owing),
     execute and deliver an instrument  transferring  to such successor  Trustee
     all the rights,  powers and trusts of the  retiring  Trustee and shall duly
     assign,  transfer  and deliver to such  successor  Trustee all property and
     money held by such  retiring  Trustee  hereunder.  Upon request of any such
     successor  Trustee,  the Debtor shall execute any and all  instruments  for
     more  fully and  certainly  vesting  in and  confirming  to such  successor
     Trustee all such  rights,  powers and trusts.  No successor  Trustee  shall
     accept its appointment unless at the time of such acceptance such successor
     Trustee shall be eligible under this Note Agreement.

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<PAGE>
          (c) If no successor  Trustee has been  appointed by the date specified
     or within a period of ninety  (90) days from the  receipt  of the notice by
     the Debtor,  whichever period is the longer,  (i) the Trustee may appoint a
     temporary  successor Trustee having the qualifications  provided in Section
     5.02 hereof or (ii) the retiring Trustee,  the Debtor or the Noteholders of
     a  majority  in  aggregate  Outstanding  principal  amount of the Notes may
     request a court of competent  jurisdiction  to appoint a Trustee having the
     qualifications  provided in Section 5.02  hereof.  In the event a temporary
     successor Trustee is appointed  pursuant to (i) above, the Board may remove
     such temporary successor Trustee and appoint a successor thereto.

     SECTION 5.04. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEBTOR. The Trustee
shall comply with TIA Section 311(a), excluding any creditor relationship listed
in TIA Section  311(b).  A Trustee who has  resigned  or been  removed  shall be
subject to TIA  Section  311(a) to the extent  indicated  therein.  The  Trustee
hereunder,  or any successor Trustee,  in its individual or other capacity,  may
become  the owner or pledgee of Notes and may  otherwise  deal with the  Debtor,
with the same rights it would have if it were not the  Trustee.  The Trustee may
act as  depository  for, and permit any of its officers or directors to act as a
member of, or act in any other  capacity in respect to, any committee  formed to
protect the rights of the Noteholders or to effect or aid in any  reorganization
growing out of the enforcement of the Notes or of this Note  Agreement,  whether
or not any such  committee  shall  represent the  Noteholders of more than sixty
percent (60%) of the collective  aggregate  principal  amount of the Outstanding
Notes.

     SECTION  5.05.   COMMUNICATION  BY  NOTEHOLDERS  WITH  OTHER   NOTEHOLDERS.
Noteholders  may   communicate   pursuant  to  TIA  Section  312(b)  with  other
Noteholders with respect to their rights under this Note Agreement or the Notes.
The  Debtor,  the  Trustee,  and anyone  else shall have the  protection  of TIA
Section 312(c).

     SECTION 5.06.  REPORTS BY TRUSTEE TO  NOTEHOLDERS.  Within thirty (30) days
after each  twelve  (12)  month  interval  beginning  with the date of this Note
Agreement,  the  Trustee  shall  mail to each  Noteholder  a brief  report  that
complies  with TIA  Section  313(a),  if required by such  Section  313(a).  The
Trustee also shall comply with TIA Section 313(b).  A copy of each report at the
time of its  mailing  to  Noteholders  shall  be  filed  with  the SEC and  each
securities exchange on which the Notes are listed. The Debtor agrees to promptly
notify the Trustee  whenever the Notes become listed on any securities  exchange
and of any delisting thereof.

     SECTION 5.07. REPORTS BY DEBTOR. The Debtor will:

          (a) file with the Trustee,  within  fifteen (15) days after the Debtor
     is required to file the same with the Securities  and Exchange  Commission,
     copies of the annual  reports and of the  information,  documents and other
     reports  (or  copies  of  such  portions  of any of  the  foregoing  as the
     Securities  Exchange  Commission  may  from  time  to  time  by  rules  and
     regulations  prescribe)  which the Debtor may be  required to file with the
     Securities and Exchange  Commission pursuant to Section 13 or Section 15(d)
     of the  Securities  Exchange  Act of  1934,  as  amended  (the  "Securities
     Exchange Act");

          (b) file with the Trustee and the Securities and Exchange  Commission,
     in accordance  with rules and  regulations  prescribed from time to time by
     the Securities Exchange Commission, such additional information,  documents

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<PAGE>
     and reports with respect to  compliance  by the Debtor with the  conditions
     and  covenants of this Note  Agreement as may be required from time to time
     by such rules and regulations; and

          (c) transmit by mail to the Noteholders, within thirty (30) days after
     the  filing  thereof  with the  Trustee,  in the  manner  and to the extent
     provided  in  TIA  Section  313(c),  such  summaries  of  any  information,
     documents  and  reports  required  to be filed by the  Debtor  pursuant  to
     clauses  (a) and (b) of this  Section  5.07 as may be required by rules and
     regulations  prescribed  from time to time by the  Securities  and Exchange
     Commission.

     SECTION 5.08.  STATEMENT AS TO  COMPLIANCE.  The Debtor will deliver to the
Trustee, within one hundred twenty (120) days after the end of each fiscal year,
a written  certificate,  signed in the name of the Debtor by its Chairman of the
Board,  a Vice  Chairman,  its President or a Vice  President and one other such
officer of the  Debtor,  and  delivered  to the  Trustee in which one of the two
officers  signing such  certificate is either the principal  executive  officer,
principal  financial  officer or  principal  accounting  officer of the  Debtor,
stating  whether or not to the knowledge of the signers thereof the Debtor is in
compliance  with  all  conditions  and  covenants  under  this  Note  Agreement,
including, without limitation, whether all additional information, documents and
reports  required  to be filed  pursuant  to  Section  5.07 have  been  filed as
required  by  Section  5.07,  (all  without  regard  to any  period  of grace or
requirement   of  notice   provided   hereunder)   and,  in  the  event  of  any
noncompliance,  specifying such  noncompliance and the nature and status thereof
of which the signers may have knowledge.

     SECTION 5.09. PERFORMANCE BY THE TRUSTEE.

          (a) The Trustee hereby accepts the trusts imposed upon it by this Note
     Agreement,  and agrees to perform said trusts, but only upon and subject to
     the following terms and conditions.

               (i) Except during the continuance of an Event of Default of which
          an officer in the  Corporate  Trust  Department  of Trustee has actual
          knowledge, the Trustee undertakes to perform such duties and only such
          duties as are  specifically  set forth in this Note  Agreement and the
          Transaction Documents to which it is a party, and no implied covenants
          or  obligations  shall be read into this Note  Agreement  against  the
          Trustee.  The  Trustee  shall not be  obligated  to perform any of the
          obligations  or duties of the Debtor  thereunder or to take any action
          to collect or enforce any Receivable,  Asset,  Transaction Document or
          other claim for payment assigned hereunder,  except as the Trustee may
          elect to undertake on behalf of the Noteholders upon full and adequate
          indemnification  acceptable  to the  Trustee for any and all costs and
          liabilities that may result from such collection or enforcement.

               (ii) In the  absence of bad faith on its part,  the  Trustee  may
          conclusively  rely,  as  to  the  truth  of  the  statements  and  the
          correctness of the opinions  expressed  therein,  upon certificates or
          opinions  furnished to the Trustee and conforming to the  requirements
          of this Note  Agreement;  but in the case of any such  certificates or

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<PAGE>
          opinions which by any provisions  hereof are specifically  required to
          be  furnished  to the  Trustee,  the Trustee  shall be under a duty to
          examine the same to  determine  whether or not they conform as to form
          with the  requirements  of this Note Agreement and whether or not they
          contain the statements required under this Note Agreement.

               (iii) In case an Event of Default has occurred and is continuing,
          the Trustee,  in exercising the rights and powers vested in it by this
          Note  Agreement,  shall use the same degree of care and skill in their
          exercise  as  a  prudent  person  would  exercise  or  use  under  the
          circumstances in the conduct of his or her own affairs.

          (b) If the Debtor fails to perform any agreement contained herein, the
     Trustee may itself perform,  or cause  performance of, such agreement,  and
     the  expenses of the  Trustee  incurred in  connection  therewith  shall be
     payable by the Debtor under Section 5.10.

          (c) The Trustee  shall pay the interest on the  Notes(s)  when due and
     payable and in accordance  with Section  2.01(f) the principal on the Notes
     when they mature from the cash available in the Note Payment  Account.  The
     Trustee  has no duty or  obligation  to pay the Notes  from its own  funds,
     assets or corporate  capital or to make inquiry  regarding,  or investigate
     the use of,  amounts  disbursed from the Note Payment  Account  pursuant to
     Section 5.11(c)(iv).

          (d) Except for the safe custody of any  Collateral  in its  possession
     and the accounting for moneys actually  received by it hereunder,  if it is
     reasonably  determined  by the Trustee that it may incur costs,  damages or
     liability for which it has no adequate source of payment or indemnity,  the
     Trustee  shall have no duty as to the Notes or any  Collateral or as to the
     taking of any necessary  steps to preserve or exercise  rights  against any
     Persons or any other right pertaining to any Collateral.

     SECTION 5.10. INDEMNITY AND EXPENSES.

          (a)  The  Debtor  agrees  to  indemnify  each of the  Trustee  and the
     Noteholders  from and against any and all  claims,  losses and  liabilities
     growing out of or resulting  from this Note Agreement or any other security
     held by the Trustee with  respect to the Notes,  except  claims,  losses or
     liabilities  resulting from such indemnified  party's negligence or willful
     misconduct.

          (b) The Debtor  will pay upon  demand to the Trustee the amount of any
     and  all   reasonable   expenses,   including  the   reasonable   fees  and
     disbursements  of its counsel  and of any  experts  and  agents,  which the
     Trustee  may  incur,  acting  in good  faith,  in  connection  with (i) the
     custody,  collection from, or other realization upon, any of the Collateral
     upon the  occurrence  of an  Event of  Default,  (ii)  the  exercise  of or
     enforcement  of any of the rights of the  Trustee  hereunder,  or (iii) the
     failure by the Debtor to perform or observe any of the material  provisions
     hereof.

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<PAGE>
          (c) The  Debtor's  payment  obligations  pursuant to this Section 5.10
     shall survive the discharge of this Note Agreement. When the Trustee incurs
     expenses after the  occurrence of an Event of Default  specified in Section
     7.01(g) or (h),  the  expenses  are  intended  to  constitute  expenses  of
     administration  under Title 11, United States Code, or any similar  Federal
     or state law for the relief of debtors.

     SECTION 5.11.  ACCOUNTS;  PAYMENTS ON NOTES. The Trustee as trustee for the
Noteholders  shall  establish,  maintain and administer  each of the Accounts as
follows:

          (a) CONCENTRATION ACCOUNT.

               (i) DEPOSITS:  The Trustee  shall deposit into the  Concentration
          Account:

                    (A)  Pursuant  to Section  2.01(g),  the  proceeds  from the
               issuance of Notes;

                    (B) The gross proceeds received pursuant to Section 3.04;

                    (C) All  amounts  wired to the  Trustee  pursuant to Section
               5.11(b),  amounts  remitted  by the  Debtor  pursuant  to Section
               5.11(d),  all proceeds  derived from the Collateral and all other
               amounts to be  deposited  therein  upon receipt of a direction in
               writing from the Debtor;

               (ii)  WITHDRAWALS.  To the  extent  funds  are  available  in the
          Concentration   Account,   the  Trustee   shall   withdraw   from  the
          Concentration  Account  and  pay,  remit,  or  transfer  as  and  when
          instructed  by the  Debtor in  writing  (except  as to  amounts  under
          clauses (A) and (C) below) or  otherwise  as directed by an order of a
          court of competent jurisdiction the following amounts in the following
          order of priority (any funds not so  transferred or paid are to remain
          in the Concentration  Account until  subsequently  applied pursuant to
          this Section 5.11(a)(ii)):

                    (A) To pay to the  Trustee,  the  amount  of its fee due and
               payable for performing services under this Note Agreement and any
               supplemental  note agreements and expenses incurred in connection
               therewith relating to the Notes (Series I);

                    (B) Any amounts specifically identified by the Debtor or the
               Servicer in writing (I) deposited in the Concentration Account by
               the  Debtor,  or  transferred  to the  Trustee  from  a Lock  Box
               Account,  in error, (II) deposited in the  Concentration  Account
               with  respect to property  that does not  constitute  Collateral,
               Permitted Investments, proceeds from the issuance of the Notes or
               proceeds thereof, or (III) deposited in the Concentration Account
               with  respect  to  Assets  that  are  pledged  to  secure  Senior
               Indebtedness  to the extent that such monies are  required by the
               terms of the Senior Indebtedness to be held in a separate trust;

                                       31
<PAGE>
                    (C) To transfer  to the Note  Payment  Account,  the amounts
               specified in Section 5.11(c)(i);

                    (D) Following each deposit pursuant to Section 5.11(a)(i)(A)
               or each exchange of a Note pursuant to Section  2.01(f),  to pay,
               as  directed  by  the  Debtor  in  writing,   to  the  applicable
               Broker/Dealer  or other selling agent any related sales  expenses
               and  commissions or to the Debtor to reimburse the Debtor for its
               payment of such sales expenses and commissions;

                    (E) As  directed in writing by the Debtor from time to time,
               amounts  for the  purchase of Eligible  Receivables,  Assets,  or
               both,  provided  that the Trustee has received a duly  authorized
               and executed certification  substantially in the form of Exhibits
               A-1 or A-2, as applicable, to this Note Agreement;

                    (F) As  certified  in writing  by the Debtor to the  Trustee
               from time to time,  the fee then  payable  to  Administrator  for
               services performed under the Administration Agreement and the fee
               payable  to  the  Servicer  for  services   performed  under  the
               Servicing Agreement;

                    (G) To pay to the Debtor,  the amount of the reserve account
               balance of a Health Care  Provider  that the Debtor  certifies to
               the  Trustee in writing  that the  Debtor is  required  to return
               pursuant to the related Purchase Documents;

                    (H) To  pay  amounts  to  the  Debtor  pursuant  to  Section
               5.11(h);

                    (I) Invest  the  remaining  amounts  promptly  in  Permitted
               Investments as provided in Section 5.11(e); and

                    (J)  Withdraw  and pay to the  Debtor  all of the  remaining
               amounts upon termination of this Note Agreement.

          (b)  FUNDS  FROM  LOCK BOX  ACCOUNTS.  The  Debtor  shall  cause  each
     custodian  or trustee of a Lock Box Account to sweep the funds in each Lock
     Box  Account  and wire such funds to the  Trustee on each  Business  Day on
     which such custodian or trustee and the Trustee is open for business.

          (c) NOTE PAYMENT ACCOUNT. The Trustee shall:

               (i) No later  than  three  Business  Days  prior  to an  Interest
          Payment Date or Maturity Date, the Trustee shall calculate all amounts
          then due in accordance with Section  5.11(d)(ii) and withdraw from the
          Concentration  Account  such amounts  that,  when added to the amounts
          then on deposit in the Note Payment  Account,  are  sufficient  to pay
          principal  and interest  pursuant to Section  5.11(c)(iv)  on the next
          following  Interest Payment Date or Maturity Date, as applicable,  and
          deposit  all  such  amounts  withdrawn  pursuant  to this  clause  (i)
          immediately into the Note Payment Account, provided, however, that the

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<PAGE>
          Trustee may, but is not  obligated  to, make  calculations  of accrued
          interest due on the next following  Interest Payment Date and withdraw
          related amounts from the  Concentration  Account and deposit them into
          the Note Payment  Account more  frequently  during the calendar  month
          preceding  the  Interest  Payment  Date  (except  that no portion of a
          principal payment on a Maturity Date may be withdrawn pursuant to this
          clause  (i) before  three  Business  Days in  advance of the  Maturity
          Date);

               (ii) Deposit amounts received pursuant to Section 5.11(d)(ii);

               (iii) Deposit amounts received pursuant to Section 2.05(f);

               (iv) From amounts  then on deposit in the Note  Payment  Account,
          withdraw amounts first to pay to the Noteholders of Outstanding  Notes
          on each Interest Payment Date the interest then due and payable on the
          Notes  and  second,   subject  to  Section  2.01(f),  to  pay  to  the
          Noteholders of Outstanding  Notes on their Maturity Date or other date
          set for  redemption of  Outstanding  Notes all principal  then due and
          payable pursuant to the terms of such Notes, this Note Agreement,  and
          any applicable supplemental note agreement;

               (v) Invest the remaining in the Note Payment Account  promptly in
          Permitted Investments as provided in Section 5.11(e); and

               (vi)  Withdraw and pay to the Debtor all  remaining  amounts upon
          termination of this Note Agreement.

          (d) DEBTOR TO REMIT FUNDS; SCHEDULE OF PAYMENTS.

               (i) All  Revenues  received by the Debtor,  if any, in respect of
          the  Collateral  shall be  immediately  remitted  to the  Trustee  for
          deposit into the  Concentration  Account,  which Revenues shall at all
          times be segregated from other funds of the Debtor.

               (ii)  At  the  written  request  of  the  Trustee,  interest  and
          principal  that is due and payable on any Note shall be  deposited  by
          the Debtor  into the Note  Payment  Account to the extent the  Trustee
          determines (after taking into  consideration the withdrawals,  if any,
          to be made pursuant to Section  5.11(c)(i)  and the deposits,  if any,
          made pursuant to Section  5.11(c)(iii)) that amounts on deposit in the
          Note Payment Account on the date the payment of interest or principal,
          or both,  is due and  payable  will  not be  sufficient  to make  such
          payment in full.  Such deposit into the Note Payment  Account shall be
          made by the  Debtor no later than one  Business  Day prior to the date
          such payment is due and payable.  The Trustee  shall  provide  written
          notice to the Debtor no later than  three (3)  Business  Days prior to
          the date that the payment of interest or  principal,  or both,  is due
          and payable  stating  the amount  then on deposit in the Note  Payment
          Account  and the amount of any such  insufficiency.  In the absence of
          any  manifest  error in such  statement  or objection by the Debtor no

                                       33
<PAGE>
          later than one Business Day prior to the due date of such payment, the
          Trustee's calculations shall be deemed final and conclusive.

          (e) INVESTMENT OF FUNDS HELD BY TRUSTEE.

               (i) The  Trustee  shall  invest  money held for the credit of any
          Account or  subaccount  held by the Trustee  hereunder  as directed in
          writing (or oral direction confirmed in writing) by the Debtor, to the
          fullest extent practicable and reasonable,  in Permitted  Investments.
          Such direction by the Debtor shall not conflict with the obligation of
          the Trustee to make timely payments  pursuant to Section  5.11(c)(iv).
          In the absence of any such  direction  and to the extent  practicable,
          the Trustee  shall invest  amounts held  hereunder in those  Permitted
          Investments described in clause (i) of the definition of the Permitted
          Investments.  All income and earning on such investments shall be held
          in the  Account  to which the  Permitted  Investment  is  related  and
          withdrawn  pursuant to the applicable  provisions of Section 5.11. The
          Trustee  and the Debtor  hereby  agree that unless an Event of Default
          shall have  occurred  hereunder,  the Debtor shall be entitled to, and
          shall,  provide  written  direction  or oral  direction  confirmed  in
          writing to the Trustee with respect to any discretionary acts required
          or permitted of the Trustee  under any  Permitted  Investment  and the
          Trustee  shall not take such  discretionary  acts without such written
          direction.

               (ii)  The  Permitted  Investments  held by the  Trustee  shall be
          deemed at all times to be part of the related  Account or  subaccounts
          or combination thereof, and the Trustee shall inform the Debtor of the
          details of all such  investments.  Upon  direction in writing from the
          Debtor,  the Trustee shall use reasonable  efforts to sell at the best
          price obtainable, or present for redemption,  any Permitted Investment
          whenever it shall be  necessary  to provide  money to meet any payment
          from the  applicable  Account.  The Trustee shall advise the Debtor in
          writing,  on or before the tenth (10th) day of each calendar month (or
          (A) if such day is not a Business Day, on the next following  Business
          Day or (B) such later date as  reasonably  consented to by the Debtor)
          of all investments  held for the credit of each Account in its custody
          under  the  provisions  of this  Note  Agreement  as of the end of the
          preceding  month and the market value thereof in  accordance  with the
          Trustee's customary bank statements.

               (iii)  Money in any  Account  may be pooled  for the  purpose  of
          making investments.  Notwithstanding the foregoing,  the Trustee shall
          not be responsible or liable for any losses on investments  made by it
          hereunder or for keeping all Accounts held by it fully invested at all
          times,  its only  responsibility  being to comply with the  investment
          instructions of the Debtor.

          (f)  PAYMENT  OF   INTEREST   AND   PRINCIPAL.   Pursuant  to  Section
     5.11(c)(iv),  the Trustee shall pay interest and principal due on the Notes
     from the funds on deposit in the Note Payment Account.  Such payments shall
     be made on the  date due to the  registered  Noteholder  on the  applicable
     Record Date.  Each  payment of interest and  principal on any Note shall be
     paid in immediately  available funds to each  Noteholder's  address located

                                       34
<PAGE>

     inside the United  States as  provided  to the  Trustee  in  writing.  Each
     registered  Noteholder shall be responsible for the proper  calculation and
     payment of principal and interest to the holders of beneficial interests in
     the related Note and the Trustee shall have no responsibility therefor.

          (g) PAYMENTS TO BENEFICIAL OWNERS. Each payment with respect to a Note
     shall be paid to the Noteholder.  Each Noteholder  shall be responsible for
     remitting  payments  made by the  Trustee  with  respect to the Note to the
     holders of  beneficial  interests in the Note that it represents or to each
     brokerage  firm  for  which it acts as agent  with  respect  to the Note in
     accordance with its normal procedures. Each such brokerage firm or Clearing
     Agency  shall  be  responsible  for  disbursing  funds  to the  holders  of
     beneficial  interests in the Note that it represents in accordance with its
     normal  procedures.  None of the Trustee,  the Debtor, the Administrator or
     the Servicer  shall have any  responsibility  therefor  except as otherwise
     provided by this Note Agreement.

          (h) EXCESS  FUNDS.  As directed in writing by the Debtor,  the Trustee
     shall  distribute  a portion of the monies on deposit in the  Concentration
     Account to the  Debtor  free of the lien of this Note  Agreement,  provided
     that no  distribution  under  this  paragraph  shall be made to the  Debtor
     unless the Debtor  certifies to the Trustee  before the  distribution  that
     immediately after taking into account any such distribution, the sum of (i)
     the amounts on deposit in the  Concentration  Account  (less  moneys in the
     Concentration Account which the Debtor,  Servicer, or Administrator is then
     entitled  to  receive  but  which  have  not  yet  been  removed  from  the
     Concentration  Account)  and (ii) the then Net  Collectible  Amount  of the
     Receivables  and the fair  market  value of  other  Collateral  is will be,
     immediately  after such  transfer,  at least equal to one  hundred  percent
     (100%)  of  the  aggregate   principal   amount  of  the  then  Outstanding
     Obligations  plus accrued  interest.  For purposes of this Section 5.11(h),
     the fair market value of the Collateral other than the Receivables shall be
     certified  in writing to the  Trustee  by the  Debtor and  determined  in a
     manner reasonably acceptable to the Trustee at the expense of the Debtor.

          (i)  RIGHTS TO  PAYMENTS.  The  rights of the  Noteholders  to receive
     payments in respect of their  Notes,  and all rights and  interests  of the
     Noteholders  in and to such  payments,  shall be as set  forth in this Note
     Agreement.  Neither  the  Noteholders  of any  class of Notes nor any party
     hereto shall in any way be responsible or liable to the  Noteholders of any
     other class of Notes in respect of amounts properly previously  distributed
     on the Notes.

          (j) Any amounts which the Debtor requests the Trustee to wire pursuant
     to this Note  Agreement  shall be wired by the  Trustee as  directed by the
     Debtor on the day the executed  certification  or other request in form and
     substance as required by this Note  Agreement is received by the Trustee if
     such  certification or request is received before 11:00 a.m. Mountain Time,
     and if not so received, on the next following Business Day.

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<PAGE>
                                   ARTICLE VI

                                   SENIOR DEBT

     SECTION 6.01. SENIOR INDEBTEDNESS.

          (a) Nothing in this Note  Agreement  shall  restrict  the right of the
     Debtor to issue  Senior  Indebtedness  or any other  indebtedness  on terms
     deemed  acceptable by the Debtor in its sole discretion,  provided that (i)
     the terms of this Note  Agreement and any  supplemental  note agreement may
     only be amended or modified pursuant to Article IX and (ii) the priority of
     the lien held by the  Trustee  in any monies or  property  to be pledged to
     secure  the  Senior   Indebtedness  shall  not  be  modified,   changed  or
     subordinated except pursuant to Section 9.03.

          (b) "Senior  Indebtedness"  is indebtedness of the Debtor in which the
     instrument  creating or evidencing  the  indebtedness  or the assumption or
     guarantee thereof expressly provides that such indebtedness shall be senior
     in right of payment to the Notes or indebtedness  which is senior by law in
     right  of  payment  to  the  Notes,  including,   without  limitation,  all
     deferrals,   renewals,   extensions  or  refundings   of,  or   amendments,
     modifications   or  supplements   to,  the  foregoing.   The  term  "Senior
     Indebtedness"  shall not include (i)  indebtedness  evidenced by the Notes,
     (ii)  indebtedness  of the Debtor to any subsidiary  parent or affiliate of
     the Debtor,  a majority of the voting stock of which is owned,  directly or
     indirectly,   by  the  same  Persons,   (iii)  accounts  payable  or  other
     indebtedness  to trade  creditors  created  or assumed by the Debtor in the
     ordinary course of business unless required by law to be senior in right of
     payment to the Notes,  and (iv) any  particular  indebtedness  in which the
     instrument  creating or evidencing  the same or the assumption or guarantee
     thereof expressly  provides that such  indebtedness  shall not be senior in
     right of payment to, or is pari passu with,  or is  subordinated  or junior
     to, the Notes.

     SECTION 6.02. NOTEHOLDERS' RIGHTS NOT IMPAIRED. Subject to the right of any
Senior Indebtedness to be repaid from the income,  assets, and properties of the
Debtor to the extent not pledged to the Trustee hereunder,  nothing contained in
this Article VI or elsewhere in this Note  Agreement or in the Notes is intended
to or shall impair,  as between the Debtor,  its creditors and the  Noteholders,
the obligation of the Debtor to pay to the  Noteholders  the amounts due to them
hereunder as and when the same shall become due and payable in  accordance  with
the terms of this Note Agreement,  nor shall anything herein prevent the Trustee
or the Noteholder of any Note from exercising all remedies  otherwise  permitted
by applicable law upon default under this Note Agreement, subject to the rights,
if any, under this Article VI of the holders of Senior Indebtedness.

     SECTION  6.03.   ACCEPTANCE  BY   NOTEHOLDERS.   Each  Noteholder  by  such
Noteholder's  acceptance  of Notes  acknowledges  and agrees that the  foregoing
provisions  are, and are intended to be, an inducement  and a  consideration  to
each holder of any Senior  Indebtedness,  whether such Senior  Indebtedness  was
created,  assumed or  acquired  before or after the  issuance  of the Notes,  to
acquire and continue to hold, or to continue to hold,  such Senior  Indebtedness
and such  holder of Senior  Indebtedness  shall be deemed  conclusively  to have
relied on such  provisions in acquiring and continuing to hold, or in continuing

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<PAGE>
to hold,  such Senior  Indebtedness,  and no  amendment or  modification  of the
provisions  contained herein shall diminish the rights of such holder or holders
unless such holder or holders shall have agreed in writing thereto.  Each Person
holding any Note  whether upon  original  issue or upon  transfer or  assignment
thereof, accepts and agrees to be bound by such provisions of this Article VI.

                                   ARTICLE VII

                                     DEFAULT

     SECTION 7.01.  EVENTS OF DEFAULT.  With respect to the Notes (Series I) and
except as provided in Section 6.01, each of the following events and occurrences
shall constitute an "Event of Default" under this Note Agreement:

          (a) Debtor shall default in the payment or prepayment  when due of any
     principal  or interest on any Note (Series I), or Debtor shall fail to make
     any payment or deposit when  required  hereunder  with respect to the Notes
     (Series  I), and such  default or failure  shall  continue  unremedied  for
     fifteen (15) days;

          (b) Subject to Section 4.02,  any  representation  or warranty made by
     Debtor in any Transaction Document securing the Notes (Series I) shall have
     been  incorrect in any  material  respect  when made or  confirmed,  or any
     certificate or determination of Debtor furnished hereunder or in connection
     with the Notes  (Series I) was false or  misleading  as of the date made in
     any  material  respect,  and which  within 30 days of notice by the Trustee
     fails to cure such inaccuracy;

          (c) Debtor materially breaches any other covenant or provision of this
     Note  Agreement  with  respect  to the  Notes  (Series  I) and such  breach
     continues unremedied for a period of 30 days after receipt of notice from a
     Noteholder or the Trustee;

          (d) Debtor  materially  breaches any of the terms,  conditions  or its
     obligations in the Servicing Agreement or the Administration Agreement with
     respect to the Notes (Series I) and such breach continues  unremedied for a
     period  of  thirty  (30)  days  after  notice  from  the  Servicer  or  the
     Administrator, as applicable;

          (e)  Any  judgment  against  the  Debtor  or any  attachment,  levy or
     execution  against any material  portion of its  respective  properties for
     which an amount in excess of  twenty  five  percent  (25%) of the  Debtor's
     total assets shall remain unpaid,  or shall not be discharged of record, or
     bonded,  for a period of ninety (90) days or more after its entry, issue or
     levy, as the case may be;

          (f) The Debtor shall be unable,  or generally fail to pay, or admit in
     writing its inability or  unwillingness  to pay its debts as they mature or
     become due;

          (g) The Debtor shall make any assignment for the benefit of creditors,
     or a trustee,  receiver or liquidator  shall be appointed for the Debtor or
     for any of their property,  or the  commencement of any case or proceedings
     by the Debtor under any  bankruptcy,  reorganization,  arrangement of debt,
     insolvency, readjustment of debt, receivership,  liquidation or dissolution

                                       37
<PAGE>
     law or statute or the commencement of any such case or proceedings  without
     the consent of the Debtor and such proceeding  shall continue  undischarged
     for a period of ninety (90) days;

          (h)  Debtor  ceases  to do  business  for  any  reason  whatsoever  or
     institutes any proceeding for its dissolution or termination;

          (i) A  moratorium  shall be agreed to or  declared  in  respect of any
     indebtedness of Debtor, or any governmental  authority or agency shall have
     seized, compulsorily purchased or appropriated all or a substantial part of
     the assets of Debtor; or

          (j) It becomes unlawful for Debtor to perform any material  obligation
     hereunder or under other documents executed in connection herewith.

     SECTION 7.02.  NOTEHOLDER'S  DIRECTION UPON DEFAULT. If an Event of Default
shall occur and be continuing,  (a) the Trustee may, in its sole  discretion and
(b)  subject to Section  7.02(c),  the  Trustee  shall upon  written  request of
Noteholders of Outstanding  Applicable  Notes evidencing more than fifty percent
(50%) of the principal due on the  Outstanding  Applicable  Notes,  by notice to
Debtor declare all Applicable Notes together with accrued interest and any other
sum payable  hereunder,  to be  immediately  due and payable (and the same shall
thereupon become due and payable without presentment,  demand, protest or notice
of any kind, other than are hereby expressly  required by this Section 7.02, all
of which are hereby  expressly  waived by Debtor).  Upon such  acceleration,  in
addition to the other remedies set forth in Section 7.03:

          (a) The Trustee may liquidate all funds in the Accounts related to the
     Applicable Notes (and all related funds that may thereafter be deposited in
     such  Accounts) and the  Permitted  Investments  related to the  Applicable
     Notes.  Upon  such  liquidation,   the  proceeds  realized  from  any  such
     liquidation  shall be applied by the Trustee on the next  Interest  Payment
     Date on which the Applicable  Notes are  Outstanding in the following order
     of priority:

               (i) First,  to the payment of all of  Trustee's  fees,  costs and
          expenses  incurred  by it or  incurred  by  acting  on  behalf  of the
          Noteholders  of the  Applicable  Notes in  enforcing  Its  rights  and
          remedies hereunder (including, without limitation, its attorneys' fees
          and expenses);

               (ii) Second, to the payment of Senior  Indebtedness to the extent
          that such  proceeds  are  required by an order of a court of competent
          jurisdiction court to be used to pay the Senior Indebtedness;

               (iii) Third,  to the payment of any unpaid fee that is payable to
          (A) the bank acting as the  custodian  for the Lock Box  Account  with
          respect to the Applicable Notes and (B) the Servicer and Administrator
          for  services   performed  under  the  Servicing   Agreement  and  the
          Administration  Agreement  with  respect  to the  Collateral  for  the
          Applicable Notes following its pledge to the Trustee hereunder;

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<PAGE>
               (iv)  Fourth,  to the payment of all of the costs and expenses of
          the  Noteholders of the Applicable  Notes incurred in enforcing  their
          rights and remedies hereunder  (including,  without limitation,  their
          attorneys'  fees and expenses) or under the other related  Transaction
          Documents;

               (v) Fifth,  to the payment to the  Noteholders  of the Applicable
          Notes,  pro rata,  the amount then owing or unpaid  under the Note for
          interest and then principal; and

               (vi) Sixth,  to the extent  available,  to the payment to Debtor,
          its successors or assigns,  or to whomever may be lawfully entitled to
          receive same any remaining proceeds of such liquidation.

          (b) The Trustee  shall apply all  payments  received  thereafter  with
     respect to the  Receivables  or other  Collateral  securing the  Applicable
     Notes in the order of priority set forth in Paragraph 7.02(a) above.

          (c) Upon  providing  to the  Trustee  adequate  indemnity  for  costs,
     expenses  and  liability,  the  Trustee  shall  take  any and  all  actions
     permitted by law to realize upon their security  interest in the Collateral
     securing the Applicable Notes and otherwise exercise remedies and undertake
     all actions as may be desirable or necessary to recover all amounts due and
     owing Noteholders of the Applicable Notes;

          (d) The Trustee may, and upon the written  instruction  of Noteholders
     of Outstanding Applicable Notes evidencing more than fifty percent (50%) of
     the principal due on the Outstanding  Applicable Notes shall,  exercise all
     of the Debtor's  rights,  but not its  obligations,  under the terms of the
     Servicing  Agreement,  the  Purchase  Agreement  and the other  Transaction
     Documents with respect to the Applicable Notes; and

          (e) The Trustee may, and upon the written  instruction  of Noteholders
     of Outstanding Applicable Notes evidencing more than fifty percent (50%) of
     the  principal due on the  Outstanding  Applicable  Notes shall,  waive the
     Event of Default,  except  failure to pay  principal and interest when due,
     provided that no waiver of any Event of Default  shall  constitute a waiver
     of any other or any  succeeding  Event of Default or of the  continuance of
     the Event of Default so waived except in  accordance  with the terms of the
     waiver.

     SECTION 7.03. REMEDIES.

          (a)  Pursuant  to the  Debtor's  collateral  assignment  of all of its
     interest in the  Collateral  to the Trustee,  and pursuant to the Servicing
     Agreement,  Debtor agrees that the Trustee may, upon occurrence of an Event
     of Default,  collect, at the Debtor's expense, all amounts due or to become
     due under the Collateral  securing the Applicable Notes. In connection with
     such  collections,  the Debtor  agrees  that the Trustee may take or direct
     such action as the  Trustee  may deem  necessary  or  advisable  to enforce
     collection or liquidation of such Collateral.

                                       39
<PAGE>
          (b) If an Event of Default occurs and is  continuing,  the Trustee may
     recover judgment in its own name and as trustee of an express trust against
     the Debtor for the whole amount owing with respect to the Applicable  Notes
     and the amounts provided for in Section 5.10.

          (c) Upon the  occurrence  of any Event of Default,  Trustee  may,  and
     shall upon the  direction  of the  Noteholders  as provided in Section 7.02
     above,  exercise  any of the  rights  provided  for in this Note  Agreement
     (including Section 7.02) or other Transaction  Document with respect to the
     Applicable Notes, or at law or equity, including,  without limitation,  all
     the rights and remedies of a secured party under the UCC. The Trustee shall
     be obligated to act only upon receipt of full and adequate  indemnification
     from  Noteholders  of the  Applicable  Notes  for  any and  all  costs  and
     liabilities  that  may  result  from  exercise  of such  remedies  prior to
     undertaking any thereof.

          (d) At any time  after a  declaration  of  acceleration  has been made
     pursuant to Section 7.02 and before a judgment or decree for payment of the
     money  due has  been  obtained  by the  Trustee  as  provided  herein,  the
     Noteholders  of Outstanding  Applicable  Notes  evidencing  more than fifty
     percent (50%) of the principal due on the Outstanding  Applicable Notes, by
     written  notice to the Debtor and the  Trustee,  may rescind and annul such
     declaration and its consequences if:

               (i) the  Debtor  has paid or  deposited  with the  Trustee  a sum
          sufficient to pay:

                    (A) all overdue  installments of interest on such Applicable
               Notes,

                    (B) the principal of and premium, if any, on such Applicable
               Notes which have become due otherwise than by such declaration of
               acceleration  and interest  thereon at the respective rates borne
               by such Applicable Notes,

                    (C) to the extent that  payment of such  interest is lawful,
               interest upon overdue  installments of interest at the respective
               rates borne by such Applicable Notes, and

                    (D) all sums paid or advanced by the Trustee  hereunder  and
               the reasonable compensation, expenses, disbursements and advances
               of the  Trustee,  its agents  and  counsel,  in each  case,  with
               respect to such Applicable Notes; and

               (ii) all  Events of  Default,  other than the  nonpayment  of the
          principal  of such  Applicable  Notes  which have become due solely by
          such acceleration,  have been cured or waived as provided in this Note
          Agreement.

     No such rescission shall affect any subsequent  default or impair any right
     consequent thereon.

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<PAGE>
     SECTION 7.04. TRUSTEE MAY FILE PROOFS OF CLAIM.

          (a)  In  case  of  the  pendency  of  any  receivership,   insolvency,
     liquidation,   bankruptcy,    reorganization,    arrangement,   adjustment,
     composition  or other  judicial  proceeding  relative  to the Debtor or any
     other obligor upon the Notes or the property of the Debtor or of such other
     obligor or their  creditors,  the  Trustee  (irrespective  of  whether  the
     principal of the Notes of any class or series shall then be due and payable
     as therein  expressed or by  declaration or otherwise and  irrespective  of
     whether  the  Trustee  shall  have made any  demand on the  Debtor  for the
     payment  of overdue  principal,  premium,  if any,  or  interest)  shall be
     entitled and empowered, by intervention in such proceeding or otherwise:

               (i) to file  and  prove a claim  for the  whole  amount,  or such
          lesser  amount as may be  provided  for in the  Applicable  Notes,  of
          principal  and  interest,  if any,  owing and unpaid in respect of the
          Applicable  Notes and to file such other papers or documents as may be
          necessary  or  advisable  in order to have the  claims of the  Trustee
          (including  any  claim  for  the  reasonable  compensation,  expenses,
          disbursements  and advances of the Trustee and its agents and counsel)
          and of the Noteholders allowed in such judicial proceeding; and

               (ii) to collect and receive any money or other  property  payable
          or  deliverable on any such claims and to distribute the same; and any
          custodian,  receiver, assignee, trustee, liquidator,  sequestrator (or
          other  similar  official) in any such  judicial  proceeding  is hereby
          authorized  by each  Noteholder  to make such payments to the Trustee,
          and if the  Trustee  shall  consent  to the  making  of such  payments
          directly to the Noteholder, to pay to the Trustee any amount due to it
          for the reasonable compensation,  expenses, disbursements and advances
          of the Trustee and any predecessor Trustee,  their agents and counsel,
          and any other amounts due the Trustee or any predecessor Trustee.

          (b) Nothing herein  contained shall be deemed to authorize the Trustee
     to authorize  or consent to or accept or adopt on behalf of any  Noteholder
     any  plan  of  reorganization,   arrangement,   adjustment  or  composition
     affecting the Applicable Notes or the rights of any Noteholder  thereof, or
     to authorize the Trustee to vote in respect of the claim of any  Noteholder
     of an Applicable Note in any such proceeding.

          (c)  In  any  proceedings   brought  by  the  Trustee  (and  also  any
     proceedings involving the interpretation of any provision of this Indenture
     to which  the  Trustee  shall be a  party),  the  Trustee  shall be held to
     represent all the Noteholders of the Applicable  Notes, and it shall not be
     necessary to make any  Noteholder  of the  Applicable  Notes parties to any
     such proceedings.

     SECTION  7.05.  NOTICE OF  DEFAULTS.  Within  ninety  (90)  days  after the
occurrence of any default  hereunder with respect to the Applicable  Notes,  the
Trustee  shall  transmit  in the manner and to the  extent  provided  in Section
313(c) of the TIA notice of such default hereunder known to the Trustee,  unless
such default  shall have been cured or waived.  Such default shall be treated as
known to the Trustee  only when actual  knowledge of such default is obtained by
any officer  within the Corporate  Trust  Department of the Trustee,  including,

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<PAGE>
without  limitation,  any Vice President,  Assistant Vice President,  Secretary,
Assistant Secretary or any other officer of the Trustee  customarily  performing
functions similar to those performed by any of the above designated officers and
also, with respect to a particular  matter,  any other officer of the Trustee to
whom  such  matter  is  referred  because  of such  officer's  knowledge  of and
familiarity with the particular subject.  Except in the case of a default in the
payment of the principal of or interest with respect to any Applicable  Note, or
in the payment of any sinking fund  installment  with respect to the Notes,  the
Trustee  shall be  protected  in  withholding  such  notice if and so long as an
authorized  officer of the Trustee in good faith determines that the withholding
of such notice is in the  interest of the  Noteholders.  The second  sentence of
this Section 7.05 shall be in lieu of the proviso to Section  315(b) of the TIA,
and such provision is hereby  expressly  excluded from this Note  Agreement,  as
permitted by the TIA. For the purpose of this Section 7.05,  the term  "default"
means any event which is, or after notice or lapse of time or both would become,
an Event of Default with respect to the Applicable  Notes. The Trustee shall not
give notice of a default in the  payment of the  principal  of or interest  with
respect to any Applicable  Note until at least sixty (60) days have passed since
its occurrence.

     SECTION 7.06.  TRUSTEE MAY ENFORCE CLAIMS WITHOUT  POSSESSION OF NOTES. All
rights of action and claims under this Note  Agreement or the  Applicable  Notes
may be prosecuted  and enforced by the Trustee  without the possession of any of
the  Applicable  Notes or the  production  thereof  in any  proceeding  relating
thereto,  and any such proceeding  instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment shall,
after  provision  for the  payment  of the  reasonable  compensation,  expenses,
disbursements  and advances of the Trustee,  its agents and counsel,  be for the
ratable  benefit of the  Noteholders  in respect of which such judgment has been
recovered.

     SECTION 7.07. LIMITATION ON SUITS.

          (a) No Holder of any Applicable Note shall have any right to institute
     any proceeding, judicial or otherwise, with respect to this Note Agreement,
     or for the  appointment  of a receiver or trustee,  or for any other remedy
     hereunder, unless:

               (i) such  Noteholder has  previously  given written notice to the
          Trustee of a continuing  Event of Default  with respect to  Applicable
          Notes of the same series;

               (ii) the Noteholders of Outstanding  Applicable  Notes evidencing
          not less than twenty five percent  (25%) of the  principal  due on the
          Outstanding  Applicable  Notes shall have made written  request to the
          Trustee to institute  proceedings  in respect of such Event of Default
          in its own name as Trustee hereunder;

               (iii) such Noteholder or Noteholders  have offered to the Trustee
          reasonable indemnity against the costs, expenses and liabilities to be
          incurred in compliance with such request;

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<PAGE>
               (iv) the  Trustee  for sixty (60) days after its  receipt of such
          notice,  request and offer of indemnity  has failed to  institute  any
          such proceeding; and

               (v) no direction  inconsistent with such written request has been
          given to the Trustee  during such 60-day period by the  Noteholders of
          Outstanding  Applicable Notes evidencing more than fifty percent (50%)
          of the principal due on the Outstanding Applicable Notes;

          (b) One or more  Noteholders  shall not have any  right in any  manner
     whatever  by virtue  of, or by  availing  of,  any  provision  of this Note
     Agreement  to  affect,  disturb  or  prejudice  the  rights  of  any  other
     Noteholders,  or to obtain or to seek to obtain priority or preference over
     any other  Noteholders  or to enforce any right under this Note  Agreement,
     except in the manner herein  provided and for the equal and ratable benefit
     of all the Noteholders.

                                  ARTICLE VIII

                          TERMINATION OF NOTE AGREEMENT

     SECTION  8.01.  DEPOSIT OF PAYMENT.  When the Debtor has  delivered  to the
Trustee a statement  that it does not intend to authorize any further  series or
classes of Notes under this Note Agreement and all Outstanding Notes have become
due and payable and the Debtor  deposits with the Trustee funds, as permitted by
the terms of this Note Agreement  including all  supplemental  note  agreements,
sufficient to pay at their stated  maturity the principal and accrued and unpaid
interest of all Outstanding  Notes,  and the Debtor deposits with the Trustee or
pays, or adequate provision has been made for, all other sums payable under this
Note Agreement and all supplemental  note  agreements,  then this Note Agreement
and all  supplemental  note  agreements  and the trusts  created  thereby shall,
subject to Section 5.10 above, cease to be of force and further effect and shall
terminate. The Trustee shall join in the execution of a document prepared by the
Debtor and reasonably acceptable to the Trustee  acknowledging  satisfaction and
discharge of this Note Agreement and all supplemental note agreements on request
of the Debtor.

     SECTION 8.02. APPLICATION OF FUNDS. The Trustee shall hold in trust for the
benefit of the Noteholders all amounts  deposited  pursuant to Section 8.01 (and
all investments of such amounts). The Trustee shall apply such deposited amounts
first in accordance with Section 5.11(a) and then 5.11(c) this Note Agreement.

     SECTION 8.03. REINSTATEMENT.  If the Trustee is unable to apply any amounts
deposited in accordance  with Section 8.01 by reason of any order or judgment of
any  court  or  governmental  authority  enjoining,   restraining  or  otherwise
prohibiting  such  application,  then the Debtor's  obligations  under this Note
Agreement  shall be revived and  reinstated  as though no deposit  had  occurred
pursuant to this  Article  VIII,  until such time as the Trustee is permitted to
apply all such amounts in accordance with Section 8.02; provided,  however, that
if the  Debtor  makes  any  payment  of  principal  of or  interest  on any Note
following the  reinstatement of its obligations,  the Debtor shall be subrogated
to the rights of the  Noteholders  to receive such payment from the amounts held
by the Trustee after payment in full to the Noteholders.

                                       43
<PAGE>
     SECTION 8.04.  UNCLAIMED  FUNDS. The Trustee shall return to the Debtor any
money held by it for the  payment of any amount  with  respect to the Notes that
remains  unclaimed one year subsequent to the due date of such payment provided,
the Trustee  before being  required to make any such return,  shall mail to each
such Noteholder  notice that such money remains unclaimed and that, after a date
specified  therein,  which shall not be less than thirty (30) days from the date
of mailing,  any unclaimed  money then remaining will be returned to the Debtor.
After return to the Debtor,  Noteholders  entitled to the money must look to the
Debtor for payment as general creditors unless an applicable  abandoned property
law designates another Person.

                                   ARTICLE IX

                   AMENDMENTS AND SUPPLEMENTAL NOTE AGREEMENTS

     SECTION 9.01.  GENERAL.  Subject to Sections 9.02 and 9.03 below, this Note
Agreement may be amended only by an instrument in writing  signed by the Trustee
and the Debtor which may waive any  provision of this Note  Agreement.  Upon the
execution of any amendment or supplemental note agreement under this Article IX,
this  Note  Agreement  shall  be  modified  in  accordance  therewith,  and such
amendment  or  supplemental  note  agreement  shall  form a part  of  this  Note
Agreement  for all purposes;  and every Note  theretofore  or thereafter  issued
hereunder shall be bound thereby.

     SECTION 9.02. AMENDMENT WITHOUT CONSENT OF NOTEHOLDERS.  The Debtor and the
Trustee may, without the consent of or notice to any of the  Noteholders,  enter
into or amend any note agreement(s)  supplemental to this Note Agreement for any
one or more of the following purposes:

          (a) to cure any  ambiguity  or formal  defect or omission in this Note
     Agreement;

          (b) to grant to or confer  upon the  Trustee  for the  benefit  of the
     Noteholders  any  additional   benefits,   rights,   remedies,   powers  or
     authorities  that  may  lawfully  be  granted  to  or  conferred  upon  the
     Noteholders or the Trustee;

          (c) to subject to this Note Agreement additional revenues,  properties
     or collateral;

          (d) modify,  amend or supplement this Note Agreement in such manner as
     to permit the qualification of this Note Agreement or any supplemental note
     agreement under the TIA or any similar federal statute  hereafter in effect
     or to permit the  qualification  of the Notes for sale under the securities
     laws of the United  States of America or of any of the states of the United
     States of America, and, if they so determine, to add to this Note Agreement
     or any  indenture  supplemental  hereto such other  terms,  conditions  and
     provisions as may be permitted by the TIA or similar federal statute;

          (e) to  evidence  the  appointment  of a separate or  co-Trustee  or a
     co-registrar  or  transfer  agent  or  the  succession  of  a  new  Trustee
     hereunder;

                                       44
<PAGE>
          (f) to provide for the  issuance or  redemption  of Notes  pursuant to
     this Note  Agreement,  including the creation of  appropriate  Accounts and
     subaccounts with respect to such Notes;

          (g) to  amend  this  Note  Agreement  to  allow  for any  Notes  to be
     supported  by a  letter  of  credit  or  insurance  policy  or a  liquidity
     agreement;

          (h) to make any other change which, in the judgment of the Trustee, is
     not to the material prejudice of the Noteholders;

          (i) to provide for the  assumption of the Debtor's  obligations to the
     Noteholders  of the Notes in case of a merger or  consolidation  or sale of
     all or substantially all of the Debtor's assets;

          (j) to provide for the creation, terms and provisions of any series of
     Notes (other than Notes (Series I)) as provided in Article III ;

     provided,  however,  that  nothing in this Article IX shall  permit,  or be
     construed as permitting,  any modification of the trusts,  powers,  rights,
     duties,  remedies,  immunities  and  privileges of the Trustee  without the
     prior written approval of the Trustee, which approval shall be evidenced by
     execution of a supplemental note agreement.

     SECTION  9.03.   AMENDMENT  WITH  CONSENT  OF  NOTEHOLDERS.   Exclusive  of
amendments and supplemental note agreements  covered by Section 9.02 and subject
to the terms and provisions  contained in this Section 9.03, the  Noteholders of
Outstanding  Notes evidencing more than fifty percent (50%) of the principal due
on the Outstanding  Notes shall have the right, from time to time, to consent to
and  approve  the  execution  by the Debtor  and the  Trustee of such other Note
Agreement  supplemental hereto as shall be deemed necessary and desirable by the
Trustee  for  the  purpose  of  modifying,  altering,  amending,  adding  to  or
rescinding, in any particular,  any of the terms or provisions contained in this
Note Agreement or in any supplemental note agreement; provided, however, if such
modified,  altered,  amended,  added or  rescinded  provision  applies only to a
particular  series  of  Notes,  or the  rights  of  the  Noteholders  of  only a
particular  series  would  be  modified,  the  consent  of  the  Noteholders  of
Outstanding  Notes evidencing more than fifty percent (50%) of the principal due
on the Outstanding  Notes of only such series shall be required,  and,  provided
further,  that  nothing in this  Article IX shall  permit,  or be  construed  as
permitting:

          (a) without the consent of all Noteholders affected thereby,

               (i) an extension of the  maturity  date of the  principal of or a
          change in the interest rate on any Note other than in accordance  with
          the terms of this Note Agreement;

               (ii) a  reduction  in the  principal  amount  due on any  Note or
          alteration of the manner or rate of accrual of interest thereon;

               (iii) a privilege or priority of any Note over any other Note;

                                       45
<PAGE>
               (iv) a reduction in the aggregate  principal  amount of the Notes
          required for consent to a supplemental note agreement or modification,
          alteration,   amendment,  addition  to  or  rescission  of  this  Note
          Agreement; or

               (v) the creation of any lien on the Collateral securing the Notes
          except as otherwise provided herein; or

               (vi) any modification of the trusts, powers, rights, obligations,
          duties, remedies, immunities and privileges of the Trustee without the
          prior written approval of the Trustee.

It shall not be necessary for the consent of the Noteholders  under this Article
IX to approve the particular form of any proposed amendment or supplemental note
agreement,  but it shall be  sufficient  if such consent  approves the substance
thereof.

     SECTION  9.04.  SENIOR  INDEBTEDNESS.  An  amendment or  supplemental  note
agreement  under this Article IX may not make any change that adversely  affects
the  rights  under  Article  VI  of  any  holder  of  Senior  Indebtedness  then
outstanding unless the requisite holders of such Senior Indebtedness  consent to
such change pursuant to the terms of such Senior  Indebtedness,  as evidenced in
writing and delivered to the Trustee.

     SECTION 9.05.  NOTICE TO  NOTEHOLDERS.  After an amendment or  supplemental
note agreement under this Article IX becomes  effective,  the Trustee shall mail
to each  Noteholder a notice briefly  describing  the amendment or  supplemental
note agreement.

     SECTION  9.06.  COMPLIANCE  WITH TIA.  Every  supplemental  note  agreement
executed  pursuant  to this  Article  IX  shall  comply  with the TIA as then in
effect, if then required to so comply.

     SECTION 9.07. RIGHTS OF NOTEHOLDERS NOT IMPAIRED. Notwithstanding any other
provision of this Note  Agreement,  but subject to Article VI, Section  7.02(e),
and  Section  10.02 , the right of any  Noteholder  to  receive  payment  of the
principal amount,  Redemption Price or interest, if any, in respect of the Notes
held by such  Noteholder,  on or after the respective due dates expressed in the
Notes or any date of  redemption,  or to bring suit for the  enforcement  of any
such  payment  on or after  such  respective  dates,  shall not be  impaired  or
affected adversely without the consent of each such Noteholder.

                                    ARTICLE X

                                  MISCELLANEOUS

     SECTION  10.01.  GOVERNING  LAW.  This  Agreement  shall be governed by and
construed in accordance  with the internal law of the State of Colorado  without
regard to applicable conflicts of law principles.

     SECTION  10.02.  WAIVER.  The Debtor  hereby waives notice of acceptance of
this Note Agreement and also presentment, demand, protest and notice of dishonor
of any and all of its Obligations  herein or in the Notes, or other  Transaction
Documents,  and promptness in commencing suit against any party hereto or liable

                                       46
<PAGE>
thereon,  and in giving any notice to or of making any claim or demand hereunder
upon the Debtor. No failure on the part of Trustee to exercise,  and no delay in
exercising, any right hereunder or with respect to the obligations shall operate
as a waiver  thereof;  nor shall any  single or partial  exercise  of any rights
hereunder or with respect to the Obligations preclude any other right. No waiver
of any Event of Default shall constitute a waiver of any other or any succeeding
Event of Default or of the  continuance of the Event of Default so waived except
in accordance  with the terms of the waiver.  The remedies  herein  provided are
cumulative and not exclusive of any remedies provided by law or equity.

     SECTION 10.03. NOTICES.

          (a) Any notice  hereunder  shall be in writing and shall be personally
     delivered or transmitted by facsimile,  postage  prepaid  registered  mail,
     return receipt  requested,  or overnight  delivery service addressed to the
     party receiving such notice at the following address:

     If to Debtor:

     Medical Capital Management, Inc.
     2100 South State College Blvd.
     Anaheim, CA 92806

     Telephone:  1-714-935-3100
     Facsimile:  1-714-935-3114

     If to Trustee:

     Zions First National Bank
     717 17th Street,
     Suite 301
     Denver, CO 80202

     Attention: Corporate Trust Administration

     Telephone:  720-947-7470
     Facsimile:  720-947-7480

     All  notices  and  other  communications  shall be deemed to have been duly
     given on the date of delivery if  delivered  personally,  the date five (5)
     days  after if  transmitted  by mail,  in the  case of a  telecopy,  telex,
     telegram,  or cable, at the time sent, provided that any notice to be given
     to the Noteholder or the Trustee shall be effective only when received. Any
     party may change its address for proposes  hereof by written  notice to the
     other.

          (b) The  Debtor or the  Trustee  by notice to the other may  designate
     additional or different addresses for subsequent notices or communications.
     Failure to mail a notice or  communication to a Noteholder or any defect in
     it shall not  affect its  sufficiency  with  respect to other  Noteholders.
     Except as otherwise provided, if a notice or communication is mailed in the
     manner  provided  above,  it is duly given,  whether or not received by the

                                       47
<PAGE>
     addressee.   If  the  Debtor  mails  a  notice  or   communication  to  the
     Noteholders, it shall mail a copy to the Trustee.

     SECTION 10.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any
request or  application  by the Debtor to the  Trustee to take any action  under
this Note Agreement, the Debtor shall furnish to the Trustee:

          (a) a  written  certificate  signed  in the name of the  Debtor by its
     Chairman of the Board, a Vice Chairman,  its President or a Vice President,
     and  delivered to the Trustee  stating that, in the opinion of the signers,
     all  conditions  precedent,  if any,  provided  for in this Note  Agreement
     relating to the proposed action have been complied with; and

          (b) an opinion of counsel reasonably acceptable to the Trustee stating
     that, in the opinion of such counsel,  all such  conditions  precedent have
     been complied with;

provided  that in the case of any such  request or  application  as to which the
furnishing of such documents is  specifically  required by any provision of this
Note Agreement relating to such particular application or request, no additional
certificate or opinion need be furnished.

     SECTION  10.05.   STATEMENTS  REQUIRED  IN  CERTIFICATE  OR  OPINION.  Each
officers'  certificate  or opinion of counsel with respect to compliance  with a
covenant or condition provided for in this Note Agreement shall include:

          (a) a statement that each individual making such officers' certificate
     or opinion of counsel has read such covenant or condition;

          (b) a brief statement as to the nature and scope of the examination or
     investigation  upon which the  statements  or  opinions  contained  in such
     officers' certificate or opinion of counsel are based;

          (c) a statement  that, in the opinion of each such  individual,  he or
     she has made such  examination or  investigation  as is necessary to enable
     him or her to  express  an  informed  opinion  as to  whether  or not  such
     covenant or condition has been complied with; and

          (d) a statement that, in the opinion of such individual, such covenant
     or condition has been complied with.

     SECTION 10.06. SEVERABILITY.  Any provision of this Note Agreement which is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating  the remaining  provisions of this Note  Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.

     SECTION  10.07.  TIA.  This Note  Agreement  is hereby made subject to, and
shall be governed  by, the  provisions  of the TIA required to be part of and to
govern  indentures  qualified  under  the TIA.  If any  provision  in this  Note
Agreement or any supplemental note agreement limits, qualifies or conflicts with

                                       48
<PAGE>
another  provision in this Note  Agreement or any  supplemental  note  agreement
which is required to be included in an indenture  qualified  under the TIA, such
required provision shall control.

     SECTION 10.08.  NONLIABILITY  OF DIRECTORS;  NO GENERAL  OBLIGATION.  It is
hereby  expressly made a condition of this Note  Agreement that any  agreements,
covenants,  or  representations  herein  contained  or contained in the Notes or
supplemental note agreements do not and shall never constitute or give rise to a
personal or pecuniary  liability or charge against the incorporators,  officers,
employees,  agents,  or  directors  of the  Debtor.  Nothing  contained  in this
Section,  however,  shall relieve the Debtor from the observance and performance
of the several covenants and agreements on its part herein contained.

     SECTION 10.09. SCOPE OF DEBTOR'S LIABILITY. Anything herein to the contrary
notwithstanding:

          (a)  The  Debtor  shall  remain  liable  under  the  Notes,  Servicing
     Agreement  and the other  Transaction  Documents  and all other  agreements
     included in the  Collateral  to the extent set forth therein to perform all
     of its duties and obligations thereunder to the same extent as if this Note
     Agreement has not been executed; and

          (b) The exercise by the Trustee of any of the rights  hereunder  shall
     not  release  the Debtor  from any of its duties or  obligations  under the
     Note, the  Receivables,  the Assets,  other  Transaction  Documents and all
     other agreements included in the Collateral.

     SECTION 10.10. ASSIGNMENT. Except as set forth in Section 5.03, the Trustee
may assign or transfer  this Note  Agreement or transfer  therewith the whole or
any part of the security  hereunder  only with the prior written  consent of the
Noteholders  holding Notes  evidencing more than 50% of the principal due on the
Notes.  The Debtor shall not be entitled to transfer its rights and  obligations
hereunder  without the prior written  consent of the Trustee and the  Noteholder
holding Notes evidencing more than 50% of the principal due on the Notes.

     SECTION 10.11. WHEN THE DEBTOR MAY MERGE OR TRANSFER ASSETS.

          (a) The Debtor  shall not  consolidate  with or merge with or into any
     other Person (other than in a merger or  consolidation  in which the Debtor
     is the surviving Person), unless:

               (i)  the  Person  (if  other  than  the  Debtor)  formed  by such
          consolidation  or into which the Debtor is merged or the Person  which
          acquires by conveyance, transfer or lease the properties and assets of
          the  Debtor  substantially  as an  entirety  shall  be a  corporation,
          limited liability company,  partnership or trust organized and validly
          existing  under the laws of the United  States or any State thereof or
          the District of Columbia, and shall expressly assume by a supplemental
          note  agreement,  executed  and  delivered  to  the  Trustee  in  form
          reasonably  satisfactory to the Trustee,  the due and punctual payment
          of the  Obligations  and  Redemption  Price,  if  any,  on the  Notes,
          according to their tenor, and the due and punctual  performance of all
          of the  covenants  and  obligations  of the Debtor under the Notes and
          this Note Agreement,  and shall have provided for conversion rights in
          accordance with this Note Agreement; and

                                       49
<PAGE>
               (ii)  immediately  after giving  effect to such  transaction,  no
          Event of Default  or any event,  condition  or  occurrence  that after
          notice or lapse of time or both,  would constitute an Event of Default
          shall have occurred and be continuing

          (b) The successor  Person formed by such  consolidation  or into which
     the Debtor is merged  shall  succeed to, and be  substituted  for,  and may
     exercise  every  right and power of, the Debtor  under this Note  Agreement
     with the same  effect as if such  successor  had been  named as the  Debtor
     herein; and thereafter,  except in the case of a lease, the Debtor shall be
     discharged from all obligations and covenants under this Note Agreement and
     the Notes.

     SECTION 10.12.  SECTION REFERENCES.  All references to Articles,  Sections,
Subsections,  or Clauses in this note  Agreement  are a reference to an Article,
Section, Subsection or Clause of this Note Agreement unless otherwise stated.

                                       50
<PAGE>
     IN WITNESS WHEREOF,  the parties hereto have caused this Second Amended and
Restated Note Agreement to be duly executed by their authorized  representatives
as of the date first written above.

DEBTOR:                                MEDICAL CAPITAL MANAGEMENT, INC.

                                       By: /s/ Joseph J. Lampariello
                                           -------------------------------------
                                           Name:  Joseph J. Lampariello
                                           Title: Chief Operating Officer

TRUSTEE:                               ZIONS FIRST NATIONAL BANK, as Trustee

                                       By: /s/ Elizabeth Ann Croucher
                                           -------------------------------------
                                           Name:  Elizabeth Ann Croucher
                                           Title: Assistant Vice President

                                       51
<PAGE>
                                   EXHIBIT A-1

                       RECEIVABLE ACQUISITION CERTIFICATE

     This  Receivable  Acquisition  Certificate  is  submitted  pursuant  to the
provisions  of Section  5.11(a)(ii)(E)  of the Second  Amended and Restated Note
Issuance and Security Agreement,  dated as of April 10, 2002, (the "Agreement"),
between Medical Capital Management,  Inc., a Delaware corporation (the "Debtor")
and Zions First National Bank, as Trustee (the "Trustee"). All capitalized terms
used in this  Certificate  and not otherwise  defined herein shall have the same
meanings given to such terms in the Agreement.  In your capacity as Trustee, you
are  hereby  authorized  and  requested  to  disburse  to the  Debtor the sum of
$____________ for the acquisition of Eligible  Receivables.  With respect to the
Eligible Receivables so to be acquired, the Debtor hereby certifies as follows:

     1. The receivables to be acquired are Eligible Receivables,  and the wiring
instructions and related information are specified in Schedule A attached hereto
(the "Acquired  Eligible  Receivables") and the information  therein is true and
correct.

     2. If applicable, the requirements of Section 3.04 of the Agreement will be
met upon the acquisition of the Acquired Eligible Receivables.

     3. Each Acquired Eligible Receivable is an Eligible  Receivable  authorized
so to be acquired by the Agreement.

     4. You have been previously,  or are herewith,  provided with the following
items:

          (a) a copy of the Purchase Documents between the Debtor and the seller
     of the Acquired  Eligible  Receivables  (the  "Seller") with respect to the
     Acquired  Eligible  Receivables  (original copy maintained on file with the
     Debtor on behalf of the Trustee); and

          (b) instruments  duly assigning the Acquired  Eligible  Receivables to
     the Trustee pursuant to the Note Agreement.

     5. The Debtor is not, on the date hereof, in default under the Agreement or
in the  performance of any of its covenants and agreements  made in the Purchase
Documents  relating  to the  Acquired  Eligible  Receivables,  and,  to the best
knowledge of the Debtor,  the Seller is not in default in the performance of any
of its covenants and agreements made in the Purchase Documents applicable to the
Acquired  Eligible  Receivables,   and  the  Agreement  and  the  covenants  and
agreements  made in the Purchase  Documents are  enforceable in accordance  with
their terms,  except as enforceability may be limited by applicable  bankruptcy,
insolvency,  reorganization,  moratorium  or other similar laws now or hereafter
effect affecting the enforcement of creditors' rights general and except as such
enforceability   may  be  limited  by  general  principles  of  equity  (whether
considered in a proceeding at law or in equity).
<PAGE>
     6. All of the conditions  specified in the Purchase Agreement applicable to
the Acquired  Eligible  Receivables and the Agreement for the acquisition of the
Acquired  Eligible  Receivables  and  the  disbursement  hereby  authorized  and
requested have been satisfied.

     7. If an Eligible Receivable currently pledged to the Trustee is being sold
in exchange for an Acquired  Eligible  Receivable,  the final expected  maturity
date of such Acquired Eligible Receivable shall be substantially similar to that
of the  Eligible  Receivable  being  sold and such  sale and  exchange  will not
adversely  affect  the  ability  of the  Trustee to make  timely  principal  and
interest payments under the Agreement on the Notes.

     8. The proposed use of moneys in the  Concentration  Account as directed by
the Debtor to acquire the Acquired  Eligible  Receivables is in compliance  with
the provisions of the Agreement.

     9. The  Administrator  has  conducted  such UCC  searches  as it has deemed
prudent with respect to such Acquired  Eligible  Receivables,  and such searches
indicate that such Acquired Eligible Receivables are free and clear of all liens
and  security  interests.  The  Debtor or the  Administrator  on your  behalf is
retaining such UCC searches.

     10. The Debtor will use the funds  disbursed  pursuant to this  Certificate
solely in connection with the  acquisition  and pledge of the Acquired  Eligible
Receivables pursuant to the Agreement.

     The  undersigned  is  authorized  to sign and deliver this  Certificate  on
behalf of the Debtor.

     WITNESS my hand this _____ day of ___________.

                                        MEDICAL CAPITAL MANAGEMENT, INC.

                                        By _____________________________________
                                        Name ___________________________________
                                        Title __________________________________

                                     A-1-2
<PAGE>
                            SCHEDULE A TO EXHIBIT A-1

                          ACQUIRED ELIGIBLE RECEIVABLES

LIST OF ACQUIRED ELIGIBLE RECEIVABLES

[INSERT INFORMATION]

                               WIRING INSTRUCTIONS

We hereby authorize and request you to wire funds per the following instructions
to Medical  Capital  management,  Inc. for the purpose of acquiring the Acquired
Eligible Receivables:

         Face Amount      Adjusted Value     Advance       Amount to be
       of Receivables     of Receivables     Amount      Wired at Closing
       --------------     --------------     ------      ----------------
       $                  $                  $           $

Wire Instructions:

     Account #
     ABA#

Withhold anticipated shortfall $__________
<PAGE>
                                   EXHIBIT A-2

                  NON-RECEIVABLE ASSET ACQUISITION CERTIFICATE

     This Non-Receivable Asset Acquisition  Certificate is submitted pursuant to
the provisions of Section 5.11(a)(ii)(E) of the Second Amended and Restated Note
Issuance and Security Agreement,  dated as of April 10, 2002, (the "Agreement"),
between Medical Capital Management,  Inc., a Delaware corporation (the "Debtor")
and Zions First National Bank, as Trustee (the "Trustee"). All capitalized terms
used in this  Certificate  and not otherwise  defined herein shall have the same
meanings given to such terms in the Agreement.  In your capacity as Trustee, you
are  hereby  authorized  and  requested  to  disburse  to the  Debtor the sum of
$____________ for the acquisition of Assets. With respect to the Assets so to be
acquired, the Debtor hereby certifies as follows:

     1. The Assets to be acquired  are  eligible as  Collateral,  and the wiring
instructions and related information are specified in Schedule A attached hereto
(the "Acquired Assets") and the information therein is true and correct.

     2. Each  Acquired  Asset is an Asset  authorized  so to be  acquired by the
Agreement.

     3. You have been previously,  or are herewith,  provided with the following
items:

          (a) a copy of the  agreement  between the Debtor and the seller of the
     Acquired Assets pursuant to which the Acquired Assets are being purchased;

          (b)  instruments  duly  assigning  the Acquired  Assets to the Trustee
     pursuant to the Agreement;

          (c) an opinion from counsel  reasonably  acceptable  to the Trustee to
     the effect that the Trustee will have a perfected  security interest in the
     Acquired Assets upon their acquisition by the Debtor;

          (d) copies of all applicable Bills of Sale or Assignments  relating to
     the Acquired Assets; and

          (e) to the extent the Acquired Assets are stock in a corporation,  the
     applicable  stock  certificates  endorsed in blank and  accompanying  stock
     powers.

     4. The Debtor is not, on the date hereof, in default under the Agreement or
in the  performance of any of its covenants and agreements  made in the purchase
agreement  relating to the Acquired  Assets,  and, to the best  knowledge of the
Debtor,  the seller of the Acquired  Assets is not in default in the performance
of any of its covenants and agreements made in the purchase agreement applicable
to the Acquired Assets,  and the Agreement and the covenants and agreements made
in the purchase agreement are enforceable in accordance with their terms, except
as  enforceability  may  be  limited  by  applicable   bankruptcy,   insolvency,
reorganization,  moratorium  or  other  similar  laws  now or  hereafter  effect
affecting  the  enforcement  of  creditors'  rights  general  and except as such
<PAGE>
enforceability   may  be  limited  by  general  principles  of  equity  (whether
considered in a proceeding at law or in equity).

     5. All of the conditions  specified in the purchase agreement applicable to
the Acquired Assets and the  disbursement  hereby  authorized and requested have
been satisfied.

     6. The proposed use of moneys in the  Concentration  Account as directed by
the Debtor to acquire the Acquired  Assets is in compliance  with the provisions
of the Agreement.

     7. The Debtor has  conducted  such UCC searches [and searches of records of
other applicable governmental authorities covering ownership or lien matters] as
it has deemed  prudent with respect to such Acquired  Assets,  and such searches
indicate that such Acquired  Assets are free and clear of all liens and security
interests,  except those listed on Schedule A hereto.  The Debtor on your behalf
is retaining such UCC and other searches.

     8. The Debtor will use the funds  disbursed  pursuant  to this  Certificate
solely in  connection  with the  acquisition  and pledge of the Acquired  Assets
pursuant to the Agreement.

     The  undersigned  is  authorized  to sign and deliver this  Certificate  on
behalf of the Debtor.

     WITNESS my hand this _____ day of ___________.

                                        MEDICAL CAPITAL MANAGEMENT, INC.

                                        By _____________________________________
                                        Name ___________________________________
                                        Title __________________________________

                                     A-2-2
<PAGE>
                            SCHEDULE A TO EXHIBIT A-2

                                 ACQUIRED ASSETS

                                                           TRUSTEE LIEN
LIST         VALUE         BASIS FOR VALUATION         PRIORITY/OTHER LIENS
----         -----         -------------------         --------------------

[INSERT INFORMATION]

                               WIRING INSTRUCTIONS

We hereby authorize and request you to wire funds per the following instructions
to Medical  Capital  management,  Inc. for the purpose of acquiring the Acquired
Assets:

                                 Amount to be
Gross Purchase Price           Fees and Expenses           Wired at Closing
--------------------           -----------------           ----------------
$                              $                           $

Wire Instructions:

     Account #
     ABA
<PAGE>
                                   EXHIBIT A-3

                       COLLATERAL REPLACEMENT CERTIFICATE

     This  Collateral  Replacement  Certificate  is  submitted  pursuant  to the
provisions of Section 4.02 of the Second  Amended and Restated Note Issuance and
Security  Agreement,  dated as of April 10,  2002,  (the  "Agreement"),  between
Medical  Capital  Management,  Inc., a Delaware  corporation  (the "Debtor") and
Zions First National Bank, as Trustee (the  "Trustee").  All  capitalized  terms
used in this  Certificate  and not otherwise  defined herein shall have the same
meanings given to such terms in the Agreement.  With respect to the  replacement
Collateral, the Debtor hereby certifies as follows:

     1. The replacement  Collateral  constitutes [Eligible Receivables or assets
eligible as Collateral], and information specified in Schedule A attached hereto
(the "Replacement Collateral") and the information therein is true and correct.

     2. If applicable, the requirements of Section 3.04 of the Agreement will be
met upon the acquisition of the Replacement Collateral.

     3. Each item of Replacement  Collateral is an Eligible  Receivable or Asset
authorized so to be acquired by the Agreement.

     4. You have been previously,  or are herewith,  provided with the following
items:

          (a) a copy of the [Purchase  Documents] [or other document pursuant to
     which the  Replacement  Collateral  is acquired by the Debtor]  between the
     Debtor and the seller of the  Replacement  Collateral  (the  "Seller") with
     respect to the  Replacement  Collateral  (original copy  maintained on file
     with the Debtor on behalf of the Trustee);

          (b)  instruments  duly  assigning  the  Replacement  Collateral to the
     Trustee pursuant to the Note Agreement; and

          (c) [if the  Replacement  Collateral is not a  Receivable]  an opinion
     from counsel in form and substance reasonably  acceptable to the Trustee to
     the effect that that the Trustee will have a perfected security interest in
     the Replacement Collateral upon their acquisition by the Debtor.

     5. The Debtor is not, on the date hereof, in default under the Agreement or
in the  performance of any of its covenants and agreements made in the [Purchase
Documents] [or other document  pursuant to which the  Replacement  Collateral is
acquired by the Debtor] relating to the Replacement Collateral, and, to the best
knowledge of the Debtor,  the Seller is not in default in the performance of any
of its  covenants and  agreements  made in the  [Purchase  Documents]  [or other
document pursuant to which the Replacement Collateral is acquired by the Debtor]
applicable to the  Replacement  Collateral,  and the Agreement and the covenants
and agreements made in the [Purchase  Documents] [or other document  pursuant to
which the  Replacement  Collateral is acquired by the Debtor] are enforceable in
accordance  with  their  terms,  except  as  enforceability  may be  limited  by
applicable bankruptcy, insolvency,  reorganization,  moratorium or other similar
<PAGE>
laws now or hereafter  effect  affecting the  enforcement  of creditors'  rights
general and except as such  enforceability  may be limited by general principles
of equity (whether considered in a proceeding at law or in equity).

     6. All of the  conditions  specified in the [Purchase  Documents] [or other
document pursuant to which the Replacement Collateral is acquired by the Debtor]
applicable to the  Replacement  Collateral and the Agreement for the acquisition
of the Replacement Collateral requested have been satisfied.

     7. If an Eligible Receivable currently pledged to the Trustee is being sold
in exchange for Replacement Collateral constituting an Eligible Receivable,  the
final  expected   maturity  date  of  such   Replacement   Collateral  shall  be
substantially  similar to that of the  Eligible  Receivable  being sold and such
sale and exchange will not  adversely  affect the ability of the Trustee to make
timely principal and interest payments under the Agreement on the Notes.

     [IF  REPLACEMENT  COLLATERAL IS  RECEIVABLES,  ADD THE  FOLLOWING:]  8. The
Administrator  has  conducted  such UCC  searches as it has deemed  prudent with
respect to such  Replacement  Collateral,  and such searches  indicate that such
Replacement  Collateral  is free and clear of all liens and security  interests.
The Debtor or the Administrator on your behalf is retaining such UCC searches.

     [IF REPLACEMENT  COLLATERAL IS NOT RECEIVABLES,  ADD THE FOLLOWING:] 8. The
Debtor  has  conducted  such UCC  searches  [and  searches  of  records of other
applicable  governmental  authorities  covering ownership or lien matters] as it
has  deemed  prudent  with  respect  to such  Replacement  Collateral,  and such
searches  indicate that such  Replacement  Collateral  are free and clear of all
liens and security  interests,  except  those  listed on Schedule A hereto.  The
Debtor on your behalf is retaining such UCC and other searches.

     The  undersigned  is  authorized  to sign and deliver this  Certificate  on
behalf of the Debtor.

     WITNESS my hand this _____ day of ___________.

                                        MEDICAL CAPITAL MANAGEMENT, INC.

                                        By _____________________________________
                                        Name ___________________________________
                                        Title __________________________________

                                     A-3-2
<PAGE>
                            SCHEDULE A TO EXHIBIT A-3

                          ACQUIRED ELIGIBLE RECEIVABLES

LIST OF REPLACEMENT COLLATERAL

[INSERT INFORMATION]
<PAGE>
                                    EXHIBIT B

               SALE OF COLLATERAL AND RELEASE OF LIEN CERTIFICATE

This Sale of Collateral and Release of Lien Certificate is submitted pursuant to
the  provisions of Section 3.04 of the Second Amended and Restated Note Issuance
and Security  Agreement,  dated as of April 10, 2002 (the "Agreement"),  between
Medical  Capital  Management,  Inc., a Delaware  corporation  (the "Debtor") and
Zions First National Bank, as Trustee (the  "Trustee").  All  capitalized  terms
used in this  Certificate  and not otherwise  defined herein shall have the same
meanings given to such terms in the Agreement.

Pursuant to Section 3.04, the Debtor intends to sell the Collateral set forth on
the attached Schedule I (the "Sale Collateral") to [NAME] (the "Purchaser").  In
your  capacity as Trustee,  you are hereby  authorized  and directed to take all
actions reasonably requested by the Debtor to release the lien to which the Sale
Collateral is subject under the Agreement and to transfer the Sale Collateral to
the Purchaser. The gross proceeds from the sale will be $________, consisting of
________.  The gross proceeds from the sale shall be deposited directly with the
Trustee and the Trustee  shall  deposit  such  proceeds  into the  Concentration
Account.  With  respect to the sale of the Sale  Collateral,  the Debtor  hereby
certifies to the Trustee as follows [INCLUDE ONE OF THE FOLLOWING]:

[the disposition price is equal to or in excess of the amount disbursed from the
Concentration Account to acquire the Sale Collateral (less any principal amounts
received by the Trustee with respect to such Sale Collateral).]; or

[the disposition price is lower than the amount disbursed from the Concentration
Account to acquire the Sale Collateral  (less any principal  amounts received by
the Trustee with respect to such Sale Collateral), and (A) the Revenues expected
to be  received  from the  remaining  Collateral  (after  giving  effect to such
disposition)  would be at least equal to the Revenues required to timely pay the
principal and interest on the Outstanding  Notes, or (B) the Debtor shall remain
able to pay debt service on the Notes and make payment on any other  Obligations
on a  timely  basis  (after  giving  effect  to such  sale,  transfer  or  other
disposition)  whereas it would not have been able to do so on a timely  basis if
it had  not  sold,  transferred  or  disposed  of the  Sale  Collateral  at such
discounted  amount,  or (C) the sum of the  amounts on  deposit in the  Accounts
(less moneys in any Account which the Debtor, Servicer, or Administrator is then
entitled to receive but which has not yet been removed  from the  Account)  plus
Net  Collectible  Amount of the  Receivables  and the fair market value of other
Collateral will be at least equal to one hundred percent (100%) of the aggregate
principal amount of the then Outstanding Obligations plus accrued interest after
giving  effect  to  such  sale,  transfer  or  other  disposition  of  the  Sale
Collateral.]
<PAGE>
     The  undersigned  is  authorized  to sign and deliver this  Certificate  on
behalf of the Debtor.

     WITNESS my hand this _____ day of ___________.

                                        MEDICAL CAPITAL MANAGEMENT, INC.

                                        By _____________________________________
                                        Name ___________________________________
                                        Title __________________________________

                                      B-2EXHIBIT 10.1

     NINTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT AND WAIVER OF DEFAULTS

     This  Amendment,  dated as of April 10,  2002,  is made by and  between  FM
PRECISION GOLF  MANUFACTURING  CORP., a Delaware  corporation,  and FM PRECISION
GOLF SALES CORP., a Delaware corporation  (collectively,  jointly and severally,
the "Borrower"),  and WELLS FARGO BUSINESS CREDIT, INC., a Minnesota corporation
(the "Lender").

                                    Recitals

     The  Borrower  and the  Lender  have  entered  into a Credit  and  Security
Agreement  dated as of October 9, 1998, as amended by that certain  Amendment to
Credit and Security  Agreement  and Waiver of Defaults  dated April 13, 1999, as
amended by that certain Second Amendment to Credit and Security  Agreement dated
November 10,  1999,  as amended by that  certain  Third  Amendment to Credit and
Security  Agreement  dated March 24,  2000,  as amended by that  certain  Fourth
Amendment to Credit and Security  Agreement  dated August 3, 2000, as amended by
that certain Fifth Amendment to Credit and Security  Agreement dated November 8,
2000,  as  amended  by that  certain  Sixth  Amendment  to Credit  and  Security
Agreement dated March 9, 2001, as amended by that certain  Seventh  Amendment to
Credit and  Security  Agreement  dated May 30,  2001 as amended by that  certain
Eighth  Amendment to Credit and Security  Agreement and Waiver of Defaults dated
November 15, 2001 (collectively, the "Credit Agreement"). Capitalized terms used
in these recitals have the meanings given to them in the Credit Agreement unless
otherwise specified.

     The Borrower has  requested  that certain  amendments be made to the Credit
Agreement,  which  the  Lender  is  willing  to make  pursuant  to the terms and
conditions set forth herein.

     NOW,  THEREFORE,  in  consideration  of the  premises  and  of  the  mutual
covenants and agreements herein contained, it is agreed as follows:

     1.  DEFINED  TERMS.  Capitalized  terms  used in this  Amendment  which are
defined in the Credit Agreement shall have the same meanings as defined therein,
unless otherwise defined herein.

     2. AMENDMENTS. The Credit Agreement is hereby amended as follows:

          (a) The definition of "Borrowing Base" contained in Section 1.1 of the
Credit Agreement is hereby deleted in its entirety and replaced as follows:

     "Borrowing Base" means, at any time the lesser of:

          (a)  the Maximum Line; or

          (b)  subject  to  change  from  time  to  time  in the  Lender's  sole
               discretion, the sum of:

                                      -1-
<PAGE>
               (A)  the  lesser  of (x) 85% of  Eligible  Accounts,  or (y)
                    $6,500,000.00, plus

               (B)  during the Foreign  Accounts  Eligibility  Period,  the
                    lesser of (A) 85% of Eligible  Foreign  Accounts or (B)
                    $500,000.00, plus

               (C)  the lesser of (x) 60% of Eligible Inventory  (exclusive
                    of   Eligible   Raw   Materials   Inventory),   or  (y)
                    $2,500,000.00 from March 1 through September 30 of each
                    year and  $3,000,000.00  from  October  1 of each  year
                    through February 28 of each subsequent year, plus

               (D)  the  lesser  of  (x)  50%  of  Eligible  Raw  Materials
                    Inventory, or (y) $500,000.00, plus

               (E)  On   November  1,  2001  an   overadvance   (the  "2001
                    Overadvance   Limit")   in  an  amount  not  to  exceed
                    $400,000.00.   The   2001   Overadvance   Limit   shall
                    automatically  be  reduced  to  $300,000.00  on July 1,
                    2002, to  $200,000.00 on August 1, 2002, to $100,000.00
                    on  September  1, 2002 and to $0.00 on October 1, 2002.
                    In each year thereafter,  if but only if Lender, in its
                    sole   and   absolute   discretion,   elects   to  make
                    overadvance  Revolving  Advances,  in any given  fiscal
                    year,  commencing  on December 1 2002 and on November 1
                    in each year  thereafter,  an overadvance in the amount
                    not to exceed  $500,000.00 (the  "Overadvance  Limit").
                    The 2002 Overadvance  Limit and each Overadvance  Limit
                    thereafter   shall   be   automatically    reduced   to
                    $400,000.00  on  March 1 of the  immediately  following
                    year,  to  $300,000.00  on  April 1 of the  immediately
                    following   year,  to  $200,000.00  on  May  1  of  the
                    immediately  following  year  and to $0.00 on June 1 of
                    the immediately  following  year. No Overadvance  Limit
                    shall exist at any time from June 1 through  October 31
                    in any year subsequent to 2002.

          (b) There is hereby added to Section 1.1 of the Credit Agreement a new
definition which provides for "Eligible Foreign Accounts" as follows:

               "Eligible  Foreign  Accounts"  means Accounts due and owing by an
          Account  debtor located  outside the United States;  but excluding any
          Accounts having any of the following characteristics:

                                      -2-
<PAGE>
                    (i) (A) That  portion  of  Accounts  unpaid  90 days or more
               after the invoice date, or 60 days or more after stated due date;

                    (ii) That portion of Accounts that is disputed or subject to
               a claim of offset or a contra account;

                    (iii) That  portion of Accounts  not yet earned by the final
               delivery of goods or rendition of services, as applicable, by the
               Borrower to the customer;

                    (iv) That  portion of Accounts  for which an invoice has not
               been sent to the applicable account debtor;

                    (v) Accounts owed by any unit of government;

                    (vi) Accounts  owed by an account  debtor that is insolvent,
               the  subject  of  bankruptcy  proceedings  or  has  gone  out  of
               business;

                    (vii)  Accounts  owed by an  Owner,  Subsidiary,  Affiliate,
               Officer or employee of the Borrower;

                    (viii)  Accounts  not subject to a duly  perfected  security
               interest in the  Lender's  favor or which are subject to any Lien
               in favor of any Person other than the Lender;

                    (ix) That  portion of Accounts  that has been  restructured,
               extended, amended or modified;

                    (x) That portion of Accounts that  constitutes  advertising,
               finance charges, service charges or sales or excise taxes;

                    (xi) That portion of Accounts owed by any one Account debtor
               that would permit  Revolving  Advances  supported by such Account
               debtor's Accounts to exceed $300,000 at any one time;

                    (xii) Accounts denominated in any currency other than United
               States dollars,  Canadian dollars,  French francs,  Swiss francs,
               German marks,  Japanese yen,  United Kingdom  pounds  sterling or
               Euros;

                    (xiii)  Accounts  with respect to which the Borrower has not
               instructed   the  Account  debtor  to  pay  the  Account  to  the
               Collateral Account or Lockbox;

                    (xiv)  Accounts  owed by debtors  located in  countries  not
               acceptable to the Lender in its sole discretion;

                                      -3-
<PAGE>
                    (xv)  Accounts  owed by an  account  debtor,  regardless  of
               whether  otherwise  eligible,  if 20% or more of the total amount
               due under  Accounts from such debtor is ineligible  under clauses
               (i), (ii) or (ix) above;

                    (xvi)  Accounts  owed by an Account  debtor,  regardless  of
               whether otherwise  eligible,  in excess of 15% of total Accounts;
               and

                    (xvii) Accounts otherwise deemed  unacceptable to the Lender
               in its sole discretion.

          (c) The definition of "Foreign Accounts  Eligibility Period" contained
in  Section  1.1 of the Credit  agreement  is hereby  deleted  and  replaced  as
follows:

          "Foreign Accounts  Eligibility Period" means the period beginning
          May 1 of each year and ending April 30 of the succeeding year.

          (d)  The   definitions   of  "Capital   Expenditures   Floating  Rate,
"Overadvance Floating Rate",  "Revolving Floating Rate" and "Term Floating Rate"
contained in Section 1.1 of the Credit Agreement are hereby deleted and replaced
as follows:

          "Capital  Expenditures  Floating Rate" means an annual rate equal
          to the sum of the Prime  Rate plus  four and  one-quarter  of one
          percent  (4.25%).  The Capital  Expenditures  Floating Rate shall
          automatically  be reduced  to an annual  rate equal to the sum of
          the Prime Rate plus one and one-quarter of one percent (1.25%) on
          the first day of the first full month following  Lender's receipt
          of  Borrower's  2003 fiscal  year  audited  financial  statements
          complying  with  Section  6.1(a)  below,  if but only if (i) said
          financial  statements indicate that the Borrower and the Covenant
          Entities  have  achieved  a Net Income  for the  Borrower's  2003
          fiscal year of not less than  $600,000.00  (exclusive of non-cash
          expenses  resulting from the conversion in Borrower's 2003 fiscal
          year  of an  amount,  which  when  added  to the  amount  of debt
          converted to equity in  Borrower's  2002 fiscal year, is not more
          than  $1,675,000  of  subordinated  debt to equity at the rate of
          $.25 of debt per  share of  Common  Stock of the  Guarantor,  the
          "Non-Cash  Expenses"),  (ii) said financial  statements  indicate
          that the  Borrower  and the  Covenant  Entities  increased  their
          aggregate  Net Worth  during  Borrower's  2003 fiscal year by not
          less than $600,000.00  (exclusive of the Non-Cash Expenses),  and
          (iii)  there is not a then  existing  Event of Default or Default
          Period. The Capital Expenditures  Floating Rate shall change when
          and as the Prime Rate changes.

          "Overadvance Floating Rate" means an annual rate equal to the sum
          of the  Prime  Rate  plus  six  and  one-quarter  of one  percent
          (6.25%). The

                                      -4-
<PAGE>
          Overadvance  Floating Rate shall  automatically  be reduced to an
          annual  rate  equal to the sum of the Prime  Rate plus  three and
          one-quarter  percent  (3.25%)  on the first day of the first full
          month following  Lender's  receipt of Borrower's 2003 fiscal year
          audited financial statements complying with Section 6.1(a) below,
          if but only if (i) said  financial  statements  indicate that the
          Borrower and the Covenant Entities have achieved a Net Income for
          the  Borrower's  2003  fiscal  year of not less than  $600,000.00
          (exclusive  of  the  Non-Cash  Expenses),   (ii)  said  financial
          statements  indicate that the Borrower and the Covenant  Entities
          increased their aggregate Net Worth during Borrower's 2003 fiscal
          year by not less  than  $600,000.00  (exclusive  of the  Non-Cash
          Expenses),  and  (iii)  there  is not a then  existing  Event  of
          Default or Default Period.  The  Overadvance  Floating Rate shall
          change when and as the Prime Rate changes.

          "Revolving  Floating  Rate" means an annual rate equal to the sum
          of the  Prime  Rate  plus  four and  one-quarter  of one  percent
          (4.25%).  The  Revolving  Floating  Rate shall  automatically  be
          reduced to an annual rate equal to the sum of the Prime Rate plus
          one and one-quarter percent (1.25%) on the first day of the first
          full month following  Lender's  receipt of Borrower's 2003 fiscal
          year audited financial  statements  complying with Section 6.1(a)
          below, if but only if (i) said financial statements indicate that
          the Borrower and the Covenant Entities have achieved a Net Income
          for the Borrower's 2003 fiscal year of not less than  $600,000.00
          (exclusive  of  the  Non-Cash  Expenses),   (ii)  said  financial
          statements  indicate that the Borrower and the Covenant  Entities
          increased their aggregate Net Worth during Borrower's 2003 fiscal
          year by not less  than  $600,000.00  (exclusive  of the  Non-Cash
          Expenses),  and  (iii)  there  is not a then  existing  Event  of
          Default or Default  Period.  The  Revolving  Floating  Rate shall
          change when and as the Prime Rate changes.

          "Term Floating Rate" means an annual rate equal to the sum of the
          Prime Rate plus four and  three-quarters  of one percent (4.75%).
          The Term  Floating  Rate  shall  automatically  be  reduced to an
          annual  rate  equal  to the sum of the  Prime  Rate  plus one and
          three-quarter  of one  percent  (1.75%)  on the  first day of the
          first full month  following  Lender's  receipt of Borrower's 2003
          fiscal year audited financial  statements  complying with Section
          6.1(a)  below,  if but  only  if (i)  said  financial  statements
          indicate  that  the  Borrower  and  the  Covenant  Entities  have
          achieved a Net Income for the Borrower's  2003 fiscal year of not
          less than $600,000.00 (exclusive of the Non-Cash Expenses),  (ii)
          said  financial  statements  indicate  that the  Borrower and the
          Covenant  Entities  increased  their  aggregate  Net Worth during
          Borrower's  2003  fiscal  year  by  not  less  than   $600,000.00
          (exclusive  of the Non-Cash  Expenses),  and (iii) there is not a
          then existing Event

                                      -5-
<PAGE>
          of Default or Default Period. The Term Floating Rate shall change
          when and as the Prime Rate changes.

          (e) There is hereby added a new Section 2.8(i) to the Credit Agreement
which provides as follows:

          (i) DEFAULT  PERIOD  INTEREST.  In the event any event of default
          occurs under Sections 6.12,  6.13,  6.14, 6.15 or 7.10 applicable
          to any  fiscal  quarter  or  year  end of  Borrower  through  and
          including May 31, 2002 then, in addition to the interest  payable
          pursuant to Sections  2.8(a),  2.8(b),  2.8(c),  2.8(d),  2.8(f),
          2.8(g) and 2.8(h) above,  effective  retroactively to February 1,
          2002, the outstanding  principal  balances of the Revolving Note,
          the  Term  Note  and  the   Capital   Expenditures   Note   shall
          automatically  additionally bear interest at an annual rate equal
          to one percent  (1.0%).  The interest  accruing  pursuant to this
          Section 2.8(i) is collectively referred to as the "Default Period
          Interest".

          (f) There is hereby added a new Section 2.9(g) to the Credit Agreement
which provides as follows:

          (g) Foreign Account  Eligibility  Fee. The Borrower agrees to pay
          the Lender a quarterly  Foreign  Account  Eligibility  Fee in the
          amount of $1,250.00.  Such quarterly fee shall be due and payable
          in  advance  on the  first  day of  each  fiscal  quarter  of the
          Borrower.

          (g)  Section  5.12 of the  Credit  Agreement  is  hereby  deleted  and
replaced as follows:

          Section 5.12 ENVIRONMENTAL MATTERS.

               (a) DEFINITIONS.  As used in this Agreement,  the following terms
          shall have the following meanings:

                    (i) "Environmental  Law" means any federal,  state, local or
               other governmental statute,  regulation, law or ordinance dealing
               with the protection of human health and the environment.

                    (ii) "Hazardous Substances" means pollutants,  contaminants,
               hazardous substances,  hazardous wastes,  petroleum and fractions
               thereof,  and  all  other  chemicals,   wastes,   substances  and
               materials   listed  in,   regulated  by  or   identified  in  any
               Environmental Law.

               (b)  The  Premises  were  acquired  by  Borrower  from  Brunswick
          Corporation.  In accordance  with the  provisions  of the  Connecticut

                                      -6-
<PAGE>
          Transfer  Act,  Brunswick  Corporation  accepted   responsibility  for
          environmental remediation of the site. Other than Hazardous Substances
          for which  Brunswick  has  assumed  responsibility  and except for the
          information  in  subparagraph  5.12(f) below,  to the Borrower's  best
          knowledge,  there are not  present  in, on or under the  Premises  any
          Hazardous  Substances  in  such  form or  quantity  as to  create  any
          liability  or  obligation  for either the Borrower or the Lender under
          common law of any jurisdiction or under any Environmental  Law, and no
          Hazardous Substances have ever been stored, buried,  spilled,  leaked,
          discharged, emitted or released in, on or under the Premises in such a
          way as to  create  any such  liability,  except  for  those  Hazardous
          Substances  identified in the April 1996 Phase II  Environmental  Site
          Assessment of the Premises by GZA GeoEnvironmental,  Inc. with respect
          to  which  Brunswick   Corporation  is   contractually   obligated  to
          remediate.

               (c) To the  Borrower's  best  knowledge,  the  Borrower  has  not
          disposed  of  Hazardous  Substances  in such a manner as to create any
          liability under any Environmental Law.

               (d) Except for the ongoing actions by Brunswick Corporation under
          the  Connecticut  Transfer  Act and except as noted in the  concluding
          three sentences of this subparagraph  5.12(d),  there are no requests,
          claims, notices, investigations,  demands, administrative proceedings,
          hearings or  litigation,  relating  in any way to the  Premises or the
          Borrower,  alleging  liability  under,  violation of, or noncompliance
          with  any   Environmental   Law  or  any  license,   permit  or  other
          authorization issued pursuant thereto that have not been appropriately
          resolved  to the  satisfaction  of the  administrative  agency  having
          jurisdiction  over  the  matter.   Provided,   however,  there  is  an
          outstanding  Notice of  Violation  for  noncompliance  with a State of
          Connecticut water discharge permit. The Borrower has taken appropriate
          steps to resolve this issue with the State of Connecticut and had made
          changes in its discharge  system to prevent  further  violations.  The
          Borrower's financial statements make provisions for cost of the system
          and the fine that might be imposed.

               (e) Except as set forth in  Section  5.12(d),  to the  Borrower's
          best  knowledge,  the  Borrower's  businesses are and have in the past
          always been conducted in accordance  with all  Environmental  Laws and
          all licenses,  permits and other  authorizations  required pursuant to
          any  Environmental  Law and  necessary  for the lawful  and  efficient
          operation of such businesses are in the Borrower's  possession and are
          in full force and effect. No permit,  for which a renewal  application
          has not  been  submitted,  required  under  any  Environmental  Law is

                                      -7-
<PAGE>
          scheduled  to expire  within  12 months  (other  than  those  that are
          renewed  on an  annual  basis)  and  there is no  threat  known to the
          Borrower  that any such  permit  currently  held by  Borrower  will be
          withdrawn,   terminated,  limited  or  materially  changed.  Provided,
          however,  that the water discharge  permit  referenced in subparagraph
          5.12(d) will be materially changed from the previous permit.

               (f) To the Borrower's best knowledge,  the Premises is not listed
          on the National  Priorities  List,  or any similar  federal,  state or
          local list, schedule, log, inventory or database.  Provided,  however,
          the  premises  have  been  listed on the  Comprehensive  Environmental
          Response, Compensation and Liability Information System.

               (g) The  Borrower  has  delivered  to  Lender  all  environmental
          assessments  in Borrower's  possession or which Borrower has knowledge
          of, audits, reports,  permits, licenses and other documents describing
          or relating in any way to the Premises or Borrower's businesses (while
          under the ownership of the Borrower).

          (h) Effective April 1, 2002,  Section 6.13 of the Credit  Agreement is
hereby deleted and replaced as follows:

          Section 6.13 NET WORTH. The Borrower covenants that as of May 31,
          2001,  the aggregate  consolidated  Net Worth of FMM, FMS and the
          Covenant Entities was $13,841,589.69. The Borrower covenants that
          said  aggregate  consolidated  Net  Worth  as of the  end of each
          future fiscal  quarter end shall increase by not less than (or in
          the event a decrease is  allowed,  decrease by not more than) the
          amounts  set  forth  below  as  measured  from  the   immediately
          preceding fiscal year ending aggregate consolidated Net Worth.

          Quarter Ending                     Net Worth Increase (Decrease)
          --------------                     -----------------------------
          February 28, 2002                  ($3,200,000.00)
          May 31, 2002                       ($2,700,000.00)
          August 31, 2002                    ($50,000.00)
          November 30, 2002 and each
          November 30 thereafter             ($300,000.00)
          February 28, 2003 and each
          February 28 thereafter             ($100,000.00)

                                      -8-
<PAGE>
          May 31, 2003 and each May 31
          thereafter                         $600,000.00
          August 31, 2003 and each
          August 31 thereafter               $0.00

          For purposes of calculating  the above covenants for the quarters
          ending  February 28, 2002 and May 31, 2002 only, the  calculation
          of  the  Net  Worth  Decrease  shall  be  exclusive  of  goodwill
          impairment,  non-cash  increase  in the  valuation  allowance  on
          deferred  income tax assets,  amortization  of non-cash  expenses
          associated  with the issuance of warrants to the Johnston  Family
          Charitable  Foundation  on October 26,  2001,  non-cash  expenses
          resulting from the conversion of  subordinated  debt (owed to the
          Johnston  Family  Charitable  Foundation  arising  pursuant to an
          instrument dated October 26, 2001), to equity,  non-cash expenses
          resulting  from  modifications  to "in the money" options held by
          employees  who lost their jobs in  connection  with the corporate
          restructuring  approved on September 25, 2001  (collectively  the
          "Fiscal   Year  2002   Non-Cash   Expenses").   For  purposes  of
          calculating   the  above   covenants  for  the  quarters  in  the
          Borrower's  2003 fiscal year only, the Net Worth Increase and Net
          Worth Decrease, as applicable, shall be exclusive of amortization
          (not to exceed  $300,000.00) of non-cash expenses associated with
          the  issuance  of  warrants  to the  Johnston  Family  Charitable
          Foundation on October 26, 2001 (the "Non-Cash Warrant  Expenses")
          and the Non-Cash Expenses.

               (i) Section 6.14 of the Credit Agreement is hereby deleted in its
entirety and replaced as follows:

          Section 6.14 NET INCOME. The Borrower covenants that FMM, FMS and
          the Covenant Entities shall achieve an aggregate consolidated Net
          Income of at least (or,  in the event a Net Loss is  allowed  for
          such fiscal quarter,  a Net Loss of not more than) the amount set
          forth  below  for  each  fiscal  quarter  as  measured  from  the
          immediately preceding fiscal year end.

          Quarter Ending                              Net Income (Loss)
          --------------                              -----------------
          February 28, 2002                           ($3,200,000.00)
          May 31, 2002                                ($2,700,000.00)
          August 31, 2002                             ($50,000.00)
          November 30, 2002 and each
          November 30 thereafter                      ($300,000.00)

                                       -9-
<PAGE>
          February 28, 2003 and each
          February 28 thereafter                       ($100,000.00)
          May 31, 2003 and each May 31
          thereafter                                   $600,000.00
          August 31, 2003 and each
          August 31 thereafter                         $0.00

          For purposes of calculating  the above covenants for the quarters
          ending  February 28, 2002 and May 31, 2002 only, the  calculation
          of the Net Loss  shall  exclude  the  Fiscal  Year 2002  Non-Cash
          Expenses. For purposes of calculating the above covenants for the
          quarters in the Borrower's  2003 fiscal year only, the Net Income
          and Net Loss, as applicable,  shall exclude the Non-Cash  Warrant
          Expenses and the Non-Cash Expenses.

               (j) Section 6.15 of the Credit Agreement is hereby deleted in its
entirety and replaced as follows:

          Section 6.15 MONTHLY NET INCOME/NET LOSS. The Borrower  covenants
          that  beginning with March 1, 2002, and continuing for each month
          thereafter,  FMM, FMS and the Covenant  Entities shall achieve an
          aggregate  consolidated  Net  Income  of not less than (or in the
          event a Net Loss is  allowed  for such  month,  a Net Loss of not
          more than) the amounts set forth below for each month as measured
          from the last day of the immediately preceding month.

          Month                                            Net Income/(Net Loss)
          -----                                            ---------------------
          March, 2002                                      ($50,000.00)
          April, 2002                                      $150,000.00
          May, 2002                                        $150,000.00
          June of 2002 and each June thereafter            $0.00
          July of 2002 and each July thereafter            $0.00
          August of 2002 and each August thereafter        ($300,000.00)
          September of 2002 and each September
          thereafter                                       ($150,000.00)
          October of 2002 and each October thereafter      ($200,000.00)
          November of 2002 and each November thereafter    ($100,000.00)

                                      -10-
<PAGE>
          December of 2002 and each December thereafter    ($350,000.00)
          January, 2003 and each January thereafter        ($50,000.00)
          February, 2003 and each February thereafter      $0.00
          March, 2003 and each March thereafter            $0.00
          April, 2003 and each April thereafter            $0.00
          May, 2003 and each May thereafter                $0.00

          For purposes of  calculating  the above  covenants for the months
          through and until May 31, 2002 only,  the  calculation of the Net
          Income/Net  Loss  shall  exclude  the Fiscal  Year 2002  Non-Cash
          Expenses. For purposes of calculating the above covenants for the
          months of June through October in the Borrower's 2003 fiscal year
          only, the  calculation  of the Net Income/Net  Loss shall exclude
          the Non-Cash Warrant Expenses and the Non-Cash Expenses.

          3. NO OTHER CHANGES.  Except as explicitly  amended by this Amendment,
all of the terms and  conditions  of the Credit  Agreement  shall remain in full
force and effect and shall apply to any advance or letter of credit thereunder.

          4. THE  EQUIPMENT  APPRAISAL.  Lender  shall  have the  right to cause
Borrower's Equipment to be appraised by an appraiser  satisfactory to the Lender
(the "Appraisal"). Borrower shall, upon demand, reimburse Lender for any and all
costs incurred by Lender in connection with the Appraisal.

          5. WAIVER OF DEFAULTS. The Borrower has indicated that for the quarter
ending  February  28,  2002,  the  Borrower  was in  default  of  the  following
provisions of the Credit Agreement (collectively, the "Existing Defaults"):

               (a) The  Borrower  and the Covenant  Entities  have  exceeded the
permitted  Net  Worth  Decrease  in  violation  of  Section  6.13 of the  Credit
Agreement.

               (b) The Borrower and the Covenant Entities have failed to achieve
the required Net Income in violation of Section 6.14 of the Credit Agreement.

               (c) The  Borrower  and the Covenant  Entities  have  exceeded the
permitted Net Loss in violation of Section 6.15 of the Credit Agreement.

Upon the terms and subject to the  conditions set forth in this  Amendment,  the
Lender hereby waives the Existing Defaults.  This waiver shall be effective only
in this  specific  instance and for the specific  purpose for which it is given,
and this waiver shall not entitle the Borrower to any other or further waiver in
any similar or other circumstances.

                                      -11-
<PAGE>
          6.  DEFAULT  WAIVER  FEE.  The  Borrower  shall pay the Lender a fully
earned,  non-refundable  fee in the amount of $15,000.00 in consideration of the
waiver  set forth in  Section  5 above.  Said fee  shall be due and  payable  on
October 1, 2002.

          7. CONDITIONS PRECEDENT.  This Amendment,  and the waiver set forth in
Paragraph 5 hereof,  shall be effective  when the Lender shall have  received an
executed original hereof, together with each of the following, each in substance
and form acceptable to the Lender in its sole discretion:

               (a)  Subordination  Agreements,   properly  acknowledged  by  the
Borrower and Covenant  Entities and properly executed on behalf of the Borrower,
the Covenant  Entities and Richard and Jayne Johnston,  Trustees of the Johnston
Family Living Trust (the "Trust"),  Christopher A. Johnston,  Charles S. Mechem,
Jr., John C. Lauchnor and DWR Custodian for Kenneth Warren Attorney at Law f/b/o
Kenneth J. Warren VIP+ Profit Sharing Plan dated March 24, 1997, Account No. 362
050358 036.

               (b) The  Acknowledgment  and  Agreement of Guarantor set forth at
the end of this Amendment, duly executed by the Guarantor.

               (c) A Certificate of the Secretary of the Borrower  certifying as
to (i) the  resolutions of the board of directors of the Borrower  approving the
execution and delivery of this Amendment,  (ii) the fact that the certificate of
incorporation and bylaws of the Borrower,  which were certified and delivered to
the Lender pursuant to the Certificate of Authority of the Borrower's  secretary
or  assistant  secretary  dated as of  October  9, 1998 in  connection  with the
execution and delivery of the Credit Agreement continue in full force and effect
and have not been  amended  or  otherwise  modified  except  as set forth in the
Certificate to be delivered,  and (iii) certifying as to the officers and agents
of the  Borrower  who have been  authorized  to sign and to act on behalf of the
Borrower  and setting  forth the sample  signatures  of each of the officers and
agents of the Borrower  authorized to execute and deliver this Amendment and all
other documents, agreements and certificates on behalf of the Borrower.

               (d) A guaranty  (the "Trust  Guaranty"),  properly  executed  and
notarized by the Trust which  Guaranty  shall be  applicable to the repayment of
the Overadvance to the extent set forth in the Guaranty.

               (e) An opinion of the  Borrower's  counsel as to the  matters set
forth in  Paragraphs  8(a) and 8(b)  hereof and as to such other  matters as the
Lender shall require.

               (f) An opinion of the Trust counsel  (licensed to practice law in
the State of Wyoming) as to the  enforceability and validity of the Guaranty and
as to such other matters as Lender shall require.

               (g) An amendment to the Trust Agreement applicable to the Trust.

               (h) Evidence satisfactory to Lender than any and all indebtedness
owed by  Borrower,  the  Covenant  Entities and Royal  Precision,  Inc.,  to the
Johnston Family  Charitable  Foundation has been fully and finally  converted to
equity.

               (i) Such other matters as the Lender may require.

                                      -12-
<PAGE>
          8. REPRESENTATIONS AND WARRANTIES.  The Borrower hereby represents and
warrants to the Lender as follows:

               (a) The Borrower has all requisite power and authority to execute
this  Amendment  and to  perform  all of its  obligations  hereunder,  and  this
Amendment has been duly  executed and delivered by the Borrower and  constitutes
the  legal,  valid  and  binding  obligation  of the  Borrower,  enforceable  in
accordance with its terms.

               (b) The  execution,  delivery and  performance by the Borrower of
this Amendment have been duly authorized by all necessary  corporate  action and
do not (i) require any  authorization,  consent or approval by any  governmental
department,  commission,  board, bureau, agency or instrumentality,  domestic or
foreign,  (ii) violate any  provision of any law,  rule or  regulation or of any
order, writ,  injunction or decree presently in effect,  having applicability to
the Borrower, or the certificate of incorporation or by-laws of the Borrower, or
(iii) result in a breach of or  constitute a default under any indenture or loan
or credit  agreement or any other  agreement,  lease or  instrument to which the
Borrower is a party or by which it or its properties may be bound or affected.

               (c)  All of  the  representations  and  warranties  contained  in
Article V of the Credit  Agreement  are  correct on and as of the date hereof as
though  made  on  and  as  of  such  date,   except  to  the  extent  that  such
representations and warranties relate solely to an earlier date.

          9.  REFERENCES.  All  references  in the  Credit  Agreement  to  "this
Agreement"  shall be deemed to refer to the Credit  Agreement as amended hereby;
and any and all  references  in the Security  Documents to the Credit  Agreement
shall be deemed to refer to the Credit Agreement as amended hereby.

          10. NO OTHER  WAIVER.  Except as set forth in Paragraph 5 hereof,  the
execution of this Amendment and acceptance of any documents related hereto shall
not be deemed to be a waiver of any Default,  Event of Default or Default Period
under the  Credit  Agreement  or breach,  default or event of default  under any
Security Document or other document held by the Lender,  whether or not known to
the Lender and whether or not existing on the date of this Amendment.

          11.  RELEASE.   The  Borrower,   and  the  Guarantor  by  signing  the
Acknowledgment   and  Agreement  of  Guarantor  set  forth  below,  each  hereby
absolutely and  unconditionally  releases and forever discharges the Lender, and
any  and  all  participants,   parent  corporations,   subsidiary  corporations,
affiliated corporations,  insurers, indemnitors, successors and assigns thereof,
together  with all of the present  and former  directors,  officers,  agents and
employees of any of the foregoing, from any and all claims, demands or causes of
action of any kind,  nature or description,  whether arising in law or equity or
upon contract or tort or under any state or federal law or otherwise,  which the
Borrower or such  Guarantor  has had,  now has or has made claim to have against
any such person for or by reason of any act,  omission,  matter,  cause or thing
whatsoever  arising from the beginning of time to and including the date of this
Amendment,  whether  such  claims,  demands  and causes of action are matured or
unmatured or known or unknown.

                                      -13-
<PAGE>
          12.  REPAYMENT  TO THE TRUST.  In the event the Trust pays  amounts to
Lender  pursuant  to the terms of the  Trust  Guaranty  (collectively  "Guaranty
Payments"), the Borrower shall have the right to repay such amounts to the Trust
if but only if:

               (a) The  aggregate of all payments made to the Trust by Borrower,
the Covenant  Entities and Royal  Precision,  Inc. does not exceed the aggregate
amount of the Guaranty Payments.

               (b) No Borrower  default has occurred and is  continuing  or will
occur as a result of or immediately following any such payment.

               (c) After giving effect to any and all payments made to the Trust
by the Borrower, the Covenant Entities and Royal Precision,  Inc. the sum of the
Revolving  Advances and the L/C Amounts  under the Credit  Agreement  and the RG
Credit  Agreement  does not  exceed  Aggregate  Availability  under  the  Credit
Agreement and the RG Credit Agreement.

          13. COSTS AND EXPENSES.  The Borrower  hereby  reaffirms its agreement
under the  Credit  Agreement  to pay or  reimburse  the Lender on demand for all
costs and expenses incurred by the Lender in connection with the Loan Documents,
including  without  limitation all reasonable  fees and  disbursements  of legal
counsel.  Without  limiting  the  generality  of  the  foregoing,  the  Borrower
specifically  agrees to pay all fees and  disbursements of counsel to the Lender
for the services performed by such counsel in connection with the preparation of
this Amendment and the documents and instruments incidental hereto. The Borrower
hereby  agrees that the Lender may, at any time or from time to time in its sole
discretion and without further authorization by the Borrower, make a loan to the
Borrower under the Credit Agreement,  or apply the proceeds of any loan, for the
purpose of paying any such fees,  disbursements,  costs and expenses and the fee
required under Paragraph 6 hereof.

          14. MISCELLANEOUS. This Amendment and the Acknowledgment and Agreement
of Guarantor may be executed in any number of  counterparts,  each of which when
so  executed  and  delivered  shall  be  deemed  an  original  and all of  which
counterparts, taken together, shall constitute one and the same instrument.

                                      -14-
<PAGE>
     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Amendment to be
duly executed as of the date first written above.

                                      WELLS FARGO BUSINESS CREDIT, INC.,
                                      a Minnesota corporation

                                      By
                                         ---------------------------------------

                                         Its
                                             -----------------------------------

                                      FM PRECISION GOLF MANUFACTURING CORP.,
                                      a Delaware corporation

                                      By /s/ John C. Lauchnor
                                         ---------------------------------------
                                         John C. Lauchnor, President

                                      FM PRECISION GOLF SALES CORP.,
                                      a Delaware corporation

                                      By /s/ John C. Lauchnor
                                         ---------------------------------------
                                         John C. Lauchnor, President

                                      -15-
<PAGE>
                    ACKNOWLEDGMENT AND AGREEMENT OF GUARANTOR

     The  undersigned,  a guarantor of the  indebtedness  of FM  Precision  Golf
Manufacturing   Corp.,  and  FM  Precision  Golf  Sales  Corp.,   each  Delaware
corporations  (collectively,  jointly and severally,  the  "Borrowers") to Wells
Fargo Business Credit,  Inc., (the "Lender")  pursuant to a Guaranty dated as of
October  9,  1998 (the  "Guaranty"),  hereby  (i)  acknowledges  receipt  of the
foregoing  Amendment;  (ii) consents to the terms (including  without limitation
the release set forth in paragraph 11 of the Amendment)  and execution  thereof;
(iii)  reaffirms  its  obligations  to the Lender  pursuant  to the terms of its
Guaranty;  and (iv)  acknowledges  that the Lender may amend,  restate,  extend,
renew or otherwise modify the Credit Agreement and any indebtedness or agreement
of the  Borrower,  or enter into any  agreement  or extend  additional  or other
credit  accommodations,  without  notifying  or  obtaining  the  consent  of the
undersigned  and without  impairing the liability of the  undersigned  under the
Guaranty  for all of the  Borrowers'  present  and  future  indebtedness  to the
Lender.

                                        ROYAL PRECISION, INC., a Delaware
                                        corporation

                                        By /s/ John C. Lauchnor
                                           -------------------------------------
                                           John C. Lauchnor, President

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