Document:

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                                                                 EXHIBIT 10.141

                             EXECUTION COUNTERPART

THIS SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT IS SUBJECT TO THAT CERTAIN
SUBORDINATION AGREEMENT, DATED AS OF THE DATE HEREOF, AMONG RAMSAY YOUTH
SERVICES, INC., THE GUARANTORS, SUNTRUST BANKS, INC. AND FLEET CAPITAL
CORPORATION, AS AGENT, AS AMENDED FROM TIME TO TIME.

                                SUBORDINATED NOTE
                         AND WARRANT PURCHASE AGREEMENT

                          Dated as of January 25, 2000

                                  by and among

                          RAMSAY YOUTH SERVICES, INC.,
                                 as the Company,

                    THE SUBSIDIARIES OF THE COMPANY SET FORTH
                         ON THE SIGNATURE PAGES HERETO,
                                  as Guarantors

                                       and

                              SUNTRUST BANKS, INC.,
                                as the Purchaser

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                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

<S>       <C>                                                                                                     <C>
ARTICLE 1.        DEFINITIONS.....................................................................................1
         Section 1.1         Definitions..........................................................................1

ARTICLE 2.        ISSUANCE AND PURCHASE OF NOTE AND WARRANT......................................................11
         Section 2.1         Authorization of Issuance of Notes and Warrants.....................................11
         Section 2.2         Purchase and Sale of Note and Warrants..............................................11
         Section 2.3         Allocation of Purchase Price........................................................12
         Section 2.4         Interest on the Notes...............................................................12
         Section 2.5         Amortization and Maturity of Notes; Prepayments; Funding Losses.....................12

ARTICLE 3.        OTHER PROVISIONS RELATING TO THE NOTES.........................................................13
         Section 3.1         Making of Payments..................................................................13
         Section 3.2         Increased Costs.....................................................................14
         Section 3.3         Capital Adequacy....................................................................14
         Section 3.4         Default Rate of Interest............................................................15
         Section 3.5         Calculation of Interest.............................................................15
         Section 3.6         Usury...............................................................................15

ARTICLE 4.        GUARANTY.......................................................................................15

ARTICLE 5.        CONDITIONS PRECEDENT TO PURCHASE OF THE NOTES AND THE WARRANTS.................................18

         Section 5.1         Closing Date Conditions.............................................................18
         Section 5.2         Closing Date Conditions of the Consolidated Companies...............................20

ARTICLE 6.        REPRESENTATIONS AND WARRANTIES.................................................................20
         Section 6.1         Representations and Warranties Generally............................................20
                 6.1.1    Corporate Existence; Subsidiaries......................................................20
                 6.1.2    Authorization; No Conflict.............................................................21
                 6.1.3    Approvals..............................................................................21
                 6.1.4    Tax Returns; Status....................................................................21
                 6.1.5    Binding Obligations....................................................................21
                 6.1.6    Litigation.............................................................................21
                 6.1.7    No Defaults............................................................................22
                 6.1.8    No Material Restrictions...............................................................22
                 6.1.9    Information............................................................................22
                 6.1.10   Financial Statements...................................................................22
                 6.1.11   Title to Properties....................................................................23
                 6.1.12   Compliance with Laws...................................................................23
                 6.1.13   Possession of Franchises, Licenses, Etc................................................23
                 6.1.14   Insurance..............................................................................23
                 6.1.15   Federal Reserve Regulations............................................................24
                 6.1.16   Material Contracts.....................................................................24
                 6.1.17   ERISA..................................................................................24
                 6.1.18   Broker's Fees..........................................................................24
                 6.1.19   Offering of Notes and Warrants.........................................................24
                 6.1.20   Registration Rights....................................................................25
</TABLE>

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<TABLE>
<CAPTION>

<S>       <C>                                                                                                     <C>
                 6.1.21   Solvency...............................................................................25
                 6.1.22   Continuing Business of Company.........................................................25
                 6.1.23   Year 2000 Compliance...................................................................25
                 6.1.24   Disclosure.............................................................................25
         Section 6.2         Representations and Warranties of the Purchaser.....................................26

ARTICLE 7.        AFFIRMATIVE COVENANTS..........................................................................27
         Section 7.1         Preservation of Corporate Existence.................................................27
         Section 7.2         Compliance with Laws................................................................27
         Section 7.3         Maintenance of Insurance............................................................27
         Section 7.4         Visitation Rights...................................................................28
         Section 7.5         Records and Accounts................................................................28
         Section 7.6         Payment of Debts, Taxes.............................................................28
         Section 7.7         Further Assurances..................................................................28
         Section 7.8         Maintenance of Properties...........................................................28
         Section 7.9         Business............................................................................29
         Section 7.10        Reporting Covenants.................................................................29
         Section 7.11        Use of Proceeds.....................................................................30
         Section 7.12        Compliance with Material Contracts..................................................31

ARTICLE 8.        NEGATIVE COVENANTS.............................................................................31
         Section 8.1         Liens and Other Encumbrances........................................................31
         Section 8.2         Investments.........................................................................31
         Section 8.3         Merger and Sale of Assets...........................................................31
         Section 8.4         Creation or Issuance of Stock by Subsidiaries.......................................32
         Section 8.5         Transactions with Affiliates........................................................32
         Section 8.6         Debt................................................................................32
         Section 8.7         Lease Obligations...................................................................33
         Section 8.8         Restricted Payments.................................................................33
         Section 8.9         Sale and Leasebacks.................................................................34
         Section 8.10        Sale or Discount of Receivables.....................................................34
         Section 8.11        Compliance with ERISA...............................................................34
         Section 8.12        Financial Covenants.................................................................34
         Section 8.13        Fiscal Year.........................................................................34
         Section 8.14        Modifications to Material Contracts.................................................34
         Section 8.15        Inconsistent Agreement..............................................................34
         Section 8.16        No Repurchase Agreements............................................................34

ARTICLE 9.        EVENTS OF DEFAULT..............................................................................35
         Section 9.1         Events of Default...................................................................35
         Section 9.2         Remedies on Default.................................................................37

ARTICLE 10.       MISCELLANEOUS..................................................................................37
         Section 10.1        Notices.............................................................................37
         Section 10.2        No Waiver...........................................................................38
         Section 10.3        Expenses............................................................................39
         Section 10.4        Amendments, Etc.....................................................................39
         Section 10.5        Successors and Assigns..............................................................40
         Section 10.6        GOVERNING LAW.......................................................................40
         Section 10.7        Survival of Representations and Warranties..........................................40
</TABLE>

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<TABLE>
<CAPTION>

<S>       <C>                                                                                                     <C>
         Section 10.8        Severability........................................................................40
         Section 10.9        Counterparts........................................................................40
         Section 10.10     Set-Off...............................................................................40
         Section 10.11     Termination of Agreement..............................................................40
         Section 10.12     JURISDICTION AND VENUE................................................................40
         Section 10.13     WAIVER OF JURY TRIAL..................................................................41
         Section 10.14     Entire Agreement......................................................................41

</TABLE>

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EXHIBITS AND SCHEDULES

         Exhibit A -       Form of Note
         Exhibit B -       Form of Warrant Agreement
         Exhibit C -       Form of Warrant
         Exhibit D -       Form of Registration Rights Agreement

         Exhibit E -       Compliance Certificate As To Financial Covenants
         Exhibit F -       Subordination Agreement

         Schedule 6.1.1 -           Subsidiaries
         Schedule 6.1.6 -           Litigation
         Schedule 6.1.16 -          Material Contracts
         Schedule 6.1.20 -          Registration Rights
         Schedule 8.4 -             Issuance of Stock
         Schedule 8.6 -             Existing Debt
         Schedule 8.9 -             Sale/Leaseback Agreement

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                          SUBORDINATED NOTE AND WARRANT
                               PURCHASE AGREEMENT

         THIS SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT dated as of
January 25, 2000 by and between RAMSAY YOUTH SERVICES, INC., a corporation
organized under the laws of the State of Delaware, as issuer of the Subordinated
Note and the Warrants (the "Company"), each of the subsidiaries of the Company
listed on the signature pages hereto, as guarantors (individually, a "GUARANTOR"
and, collectively, the "GUARANTORS") and SUNTRUST BANKS, INC., a corporation
organized under the laws of the State of Georgia (the "Purchaser").

         WHEREAS, the Company has requested that the Purchaser make a certain
subordinated debt investment in the Company, the proceeds of which will be used
by the Company to effect acquisition and expansion, to pay related fees and
expenses, and for general corporate purposes;

         WHEREAS, the Purchaser has agreed to make a $5,000,000 subordinated
debt investment in the Company on the terms and subject to the conditions set
forth herein, such investment to be evidenced by subordinated notes in such
amount from the Company and certain warrants issued by the Company as more fully
described below;

         WHEREAS, the Company has previously entered into that certain Loan and
Security Agreement, dated as of October 30, 1998, as amended, by and among the
Company (formerly known as Ramsey Health Care, Inc.), various subsidiaries of
the Company (such subsidiaries and the Company, collectively the "Borrowers"),
Fleet Capital Corporation, as Agent (in such capacity, the "Agent") for the
lenders party thereto (the "Senior Lenders") and the Senior Lenders, pursuant to
which the Borrowers may borrow up to $22,000,000.

         NOW, THEREFORE, for and in consideration of the mutual premises,
covenants and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:

                                   ARTICLE 1.

                                   DEFINITIONS

         SECTION 1.1 DEFINITIONS. In addition to the other terms defined herein,
the following terms used herein shall have the meanings herein specified (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):

         "ADJUSTED NET EARNINGS FROM OPERATIONS (OR LOSS)" shall mean, with
respect to any fiscal period, the net earnings (or loss) after provision for
income taxes for such fiscal period of the Company, as reflected on the
financial statement of the Company supplied to the Purchaser pursuant to SECTION
7.10, but excluding:
<PAGE>   7

                  (i)      any gain or loss arising from the sale of capital
assets;

                  (ii)     any gain or loss arising from any write-up or
write-down of assets;

                  (iii)    earnings of any subsidiary of the Company accrued
prior to the date it became a Subsidiary;

                  (iv)     earnings of any corporation, substantially all the
assets of which have been acquired in any manner by the Company or any
Subsidiary of the Company, realized by such corporation prior to the date of
such acquisition;

                  (v)      net earnings of any business entity (other than a
domestic Subsidiary of the Company) in which the Company has an ownership
interest unless such net earnings shall have actually been received by the
Company in the form of cash distributions;

                  (vi)     any portion of the net earnings of any Subsidiary of
the Company which for any reason (other than the provisions of this Agreement)
is unavailable for payment of dividends to the Company;

                  (vii)    any restoration to income of any reserve;

                  (viii)   the earnings of any Person to which any assets of any
Consolidated Company shall have been sold, transferred or disposed of, or into
which such Consolidated company shall have merged, or been a party to any
consolidation or other form of reorganization, prior to the date of such
transaction;

                  (ix)     any gain arising from the acquisition of any
Securities or any Borrower;

                  (x)      the effect of the application of the rules of
Purchase Accounting (as set forth in APB No. 16, as amended); and

                  (xi)     1998 year end accruals arising from asset purchase
price adjustments related to the West Virginia University Hospitals Sale and the
Charter Sale;

                  (xii)    any gain from extraordinary or non-recurring items.

         "AFFILIATE" shall mean with respect to any Person (the "Specified
Person"), any Person other than the Specified Person directly or indirectly
controlling, controlled by or under direct or indirect common control with, the
Specified Person. For purposes of this definition, the term "control" when used
with respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, partnership
interests, by contract or otherwise; PROVIDED that the holding by Purchaser of

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the Warrants (or the Stock into which such Warrants are converted) shall not be
deemed to constitute the Purchaser as an Affiliate of the Company hereunder.

         "AGENT" shall have the meaning given to such term in the recitals
hereof, or any successor thereof.

         "AGREEMENT" shall mean this Subordinated Note and Warrant Purchase
Agreement, as the same may be amended, restated, supplemented or modified from
time to time in accordance with the terms hereof.

         "AMORTIZATION" shall mean, for any period, all amortization expense of
the Consolidated Companies determined on a consolidated basis in accordance with
GAAP.

         "APPLICABLE LAW" shall mean all applicable provisions of constitutions,
statutes, rules, regulations and orders of all governmental bodies and all
orders and decrees of all courts, tribunals and arbitrators.

         "BANKRUPTCY CODE" shall mean The Bankruptcy Code of 1978, as amended
and in effect from time to time (11 U.S.C.ss. 101 Et SEQ.).

         "BUSINESS DAY" shall mean any day on which commercial banks located in
Atlanta, Georgia are required or permitted by law to be open for the purpose of
conducting a commercial banking business.

         "CAPITAL LEASE" shall mean, as applied to any Person, any lease of any
property (whether real, personal or mixed) by such Person as lessee which would,
in accordance with GAAP, be required to be classified and accounted for as a
capital lease on a balance sheet of such Person, other than, in the case of the
Company or a Subsidiary, any such lease under which the Company or a wholly
owned Subsidiary is the lessor.

         "CAPITAL LEASE OBLIGATION" shall mean, with respect to any Capital
Lease, the amount of the obligation of the lessee thereunder which would, in
accordance with GAAP, appear on a balance sheet of such lessee in respect of
such Capital Lease.

         "CHANGE IN CONTROL" shall mean (a) any "person" or "group", other than
members of the Controlling Shareholder Group, becoming the "beneficial owner(s)"
(within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934, as amended, and the applicable rules and regulations thereunder) of
shares of Stock of the Company which entitle the holder thereof to control more
than fifty percent (50%) of all voting rights with respect to all shares of
Stock of the Company (excluding preferred stock) without the approval in advance
of the board of directors of the Company; (b) approval by the stockholders of
the Company of a merger, reorganization, consolidation, exchange of shares,
recapitalization, restructuring or other business combination which could result
in the occurrence of any event described in clause (a) of this definition or any
"person" or "group", other than members of the Controlling Shareholder Group,
becoming the "beneficial owner(s)" (within the meaning of Sections 13(d) and
14(d)2 of the Securities Exchange Act of 1934, as amended, and the applicable
rules and regulations thereunder) of shares of Stock of the surviving

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corporation which entitle the holder thereof to control more than fifty percent
(50%) of all voting rights with respect to all shares of Stock of the surviving
corporation (excluding preferred stock) without the approval in advance of the
board of directors of the Company; (c) sale of all or substantially all of the
Company's assets; (d) any Controlling Shareholder or any member of the
Controlling Shareholder's Group selling or otherwise transferring shares of
Stock of the Company held by such Controlling Shareholder or member of the
Controlling Shareholder Group on the Closing Date other than in connection with
a Permitted Transfer; (e) any recapitalization occurring in which any dividends
or other distributions, direct or indirect, on account of any shares of the
Stock of the Company or any of the Subsidiaries are not paid to the Purchaser on
a PARI PASSU basis with all other shareholders of the Company as if the Warrants
had been exercised for or converted into Stock; or (f) after any transaction not
approved in advance by the board of directors of the Company, the Company's
Common Stock is no longer required to be registered under Section 12 of the
Exchange Act.

         "CHARTER SALE" shall mean, the sale by the Company to Charter
Behavioral Health Systems, LLC and affiliates of the Company's contract
management business and Bayou Oaks, Coastal Carolina, The Haven and Desert Vista
psychiatric hospitals and certain transitional care units and other assets
pursuant to that certain Purchase Agreement and purchase and sale contracts of
even date therewith between the Company and Charter Behavioral Health Systems,
LLC and the other parties thereto dated as of June 24, 1998, as amended by
Amendment No. 1 dated as of September 30, 1998.

         "CLOSING DATE" shall mean, January 25, 2000 or such later date that the
conditions set forth in SECTIONS 5.1 and 5.2 hereof are satisfied.

         "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and the rulings issued thereunder.

         "COMMON STOCK" shall mean the Common Stock, par value $0.01 per share,
of the Company.

         "COMPANY" has the meaning set forth in the introductory paragraph
hereof and shall include the Company's successors and assigns.

         "CONSOLIDATED" shall mean consolidation in accordance with GAAP of the
accounts or other items as to which such term applies.

         "CONSOLIDATED COMPANIES" shall mean, collectively, the Company and all
of its Subsidiaries, and "Consolidated Company" shall mean, individually, the
Company or any of its Subsidiaries.

         "CONTROLLING SHAREHOLDER" shall mean Paul J. Ramsay.

         "CONTROLLING SHAREHOLDER GROUP" shall mean, collectively, (i) the
Controlling Shareholder, (ii) any lineal descendants (by birth or adoption) and

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spouse, (iii) any trusts established for the sole benefit of the foregoing, (iv)
any charitable organization and (v) any Affiliate of the Controlling
Shareholder.

         "DEBT" of any Person shall mean, without duplication, (i) indebtedness
of such Person for borrowed money or for the deferred purchase price of property
or services (other than trade accounts payable on customary terms in the
ordinary course of business), (ii) financial obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, (iii) Capital
Lease Obligations, (iv) all obligations of such Person under conditional sale or
other title retention agreements relating to property or assets purchased by
such Person, (v) any obligation or liability of others secured by a Lien (or for
which the holder of such Debt has an existing right, contingent or otherwise, to
be secured by any Lien) on property or assets owned or acquired by such Person,
(vi) all obligations of such Person in respect of interest rate protection
agreements, foreign currency exchange agreements or other interest or exchange
rate hedging agreements, (vii) any letter of credit issued for such Person or
its Subsidiaries as account debtor, or (viii) all obligations under direct or
indirect guaranties in respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a creditor against loss in
respect of obligations of other Persons of the kinds referred to above.

         "DEFAULT" shall mean any event that, with notice or lapse of time or
both, would constitute an Event of Default.

         "DEPRECIATION" shall mean, for any period, all depreciation expense of
the Consolidated Companies determined on a consolidated basis in accordance with
GAAP.

         "DIVIDENDS" shall mean any direct or indirect distribution, dividend or
payment to any Person on account of the Stock of the Company or any of its
Subsidiaries.

         "DOLLAR" and the sign "$" shall mean the lawful money of the United
States of America.

         "EBIT" shall mean, with respect to any fiscal period, the Consolidation
Adjusted Net Earnings From Operations (or Loss) of the Company, before interest
expense and taxes for such period as determined in accordance with GAAP,
excluding the impact, if any, from purchase accounting.

         "EBITDA" with respect to any fiscal period shall mean EBIT PLUS
Depreciation and Amortization expense for such period.

         "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated and rulings issued
thereunder.

         "ERISA AFFILIATE" shall mean any trade or business (whether or not
incorporated) which, together with the Company, is treated as a single employer
under Section 414(b), (c), (m) or (o) of the Code.

         "EVENT OF DEFAULT" means any of the events specified in SECTION 9.1
hereof.

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         "FACILITY FEE" shall mean the non-refundable $125,000 facility fee
payable by the Company in accordance with the terms of the commitment letter of
which $50,000 has been paid by the Company at the time of execution of the
Commitment Letter.

         "FULLY DILUTED BASIS" includes, without duplication, (i) all shares of
Stock of the Company outstanding at the time of determination, (ii) the Stock
issuable upon exercise of all outstanding warrants, options and other rights to
acquire Stock of the Company directly or indirectly and (iii) the Stock of the
Company issuable upon conversion of all securities convertible directly or
indirectly into Stock of the Company.

         "GAAP" shall mean generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or any successor
authority) that are applicable to the circumstances as of the date of
determination, consistently applied and maintained through the periods
indicated.

         "GUARANTY" shall mean any contractual obligation, contingent or
otherwise, of a Person with respect to any Indebtedness or other obligation or
liability of another Person, including without limitation, any such
Indebtedness, obligation or liability directly or indirectly guaranteed,
endorsed, co-made or discounted or sold with recourse by that Person, or in
respect of which that Person is otherwise directly or indirectly liable,
including contractual obligations (contingent or otherwise) arising through any
agreement to purchase, repurchase, or otherwise acquire such Indebtedness,
obligation or liability or any security therefor, or any agreement to provide
funds for the payment or discharge thereof (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise), or to maintain
solvency, assets, level of income, or other financial condition, or to make any
payment other than for value received. The amount of any Guaranty shall be
deemed to be an amount equal to the stated or determinable amount of the primary
obligation in respect of which guaranty is made or, if not so stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.

         "INTANGIBLE ASSETS" shall mean those assets of any Person which are (i)
deferred assets, other than prepaid insurance and prepaid taxes; (ii) patents
and applications therefor, copyrights, trademarks, service marks, trade names,
trademark and trade name registrations and applications, goodwill, franchises,
permits, experimental expenses and other similar assets which would be
classified as "intangible assets" under GAAP; and (iii) treasury stock and any
write-up of the value of any assets after the date of such Person's most recent
year end financial statements provided to the Purchaser prior to the Closing
Date, unless in accordance with GAAP.

         "INTEREST EXPENSE" shall mean, for any period, all interest expense of
the Consolidated Companies (including without limitation, interest expense
attributable to capitalized leases in accordance with GAAP, all capitalized
interest, all commissions, discounts and other fees and charges owed with
respect to banker acceptance financing, and total interest expense (whether
shown as interest expense or as loss and expenses on sale of receivables) under
a receivables purchase facility) determined on a consolidated basis in
accordance with GAAP.

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<PAGE>   12

         "INVESTMENT" shall have the meaning set forth in SECTION 7.2 hereof.

         "LIEN" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any written agreement to give any of the
foregoing), any conditional sale or other title retention agreement and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction.

         "LOAN DOCUMENTS" shall mean, collectively, each of the Transaction
Documents other than the Warrant Documents, in each case either as originally
executed or as the same may from time to time be supplemented, modified,
amended, restated, extended or supplanted.

         "MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on (a)
the properties, operations, business, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries taken as a whole, (b) the
Company's ability to pay the Notes and the other Obligations in accordance with
the terms thereof, or (c) the Company's ability to perform its obligations under
the Transaction Documents to which it is a party.

         "MATERIAL CONTRACT" shall mean any contract or other arrangement (other
than Transaction Documents), whether written or oral, to which the Company or
any of its Subsidiaries is a party as to which the breach, nonperformance,
cancellation or failure to renew by any party thereto could reasonably likely
have a Material Adverse Effect, as the same are listed on SCHEDULE 6.1.16 as of
the Closing Date. The term "Material Contract" shall not include the Senior
Credit Agreement or the Senior Debt Documents.

         "MATURITY DATE" shall mean January 24, 2007.

         MONEY BORROWED shall mean, without duplication, (i) Debt arising from
the lending of money by any Person to the Company or any Subsidiary; (ii) Debt,
whether or not in any such case arising from the lending by any Person of money
to the Company or any Subsidiary, (A) which is represented by notes payable or
drafts accepted that evidence extensions of credit, (B) which constitutes
obligations evidenced by bonds, debentures, notes or similar instruments, or (C)
upon which interest charges are customarily paid (other than accounts payable)
or that was issued or assumed as full or partial payment for Property (as
defined in the Senior Credit Agreement); (iii) Debt that constitutes a Capital
Lease Obligation (as defined in the Senior Credit Agreement); (iv) reimbursement
obligations with respect to letters of credit or guaranties of letters of credit
and (v) Debt of the Company or any Subsidiary under any guaranty of obligations
that would constitute Debt for Money Borrowed under clauses (i) through (iii)
hereof, if owed directly by the Company or any Subsidiary. The calculation of
Money Borrowed shall exclude the Ramsay Group Payable.

         "MULTIEMPLOYER PLAN" shall mean, as of any date, a "multiemployer plan"
as defined in Section 4001(a)(3) of ERISA that is subject to Title IV of ERISA
to which the Company or any ERISA Affiliate is making or accruing an obligation
to make contributions, or has within any of the preceding seven plan years made
or accrued an obligation to make contributions.

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<PAGE>   13

         "NET SECURITIES PROCEEDS" means, with respect to the issuance or sale
by the Company or any Subsidiary of any securities representing Stock or
Indebtedness of such Person, the excess of (a) the gross cash proceeds received
from such issuance and sale, MINUS (b) all reasonable out-of-pocket fees and
expenses incurred in connection with such issuance and sale and paid to Persons
that are not Affiliates of the Company.

         "NOTE" shall mean, collectively, each subordinated promissory note
issued by the Company pursuant to SECTION 2.1 or any other provision hereof, in
substantially the form of EXHIBIT A hereto, maturing on the Maturity Date, or
such earlier date as provided herein, at which time all principal, interest and
other amounts owing hereunder shall be due and payable in full, and bearing
interest as set forth in this Agreement, and each Note delivered in
substitution, amendment, modification, extension or exchange for any such Note
pursuant to the provisions of this Agreement.

         "OBLIGATIONS" shall mean all present and future debt, liabilities and
obligations of the Company owing to the Purchaser, or any Person entitled to
indemnification hereunder, or any of their respective successors, permitted
transferees or permitted assigns, arising under or in connection with this
Agreement, the Notes or any other Loan Document.

         "PERMITTED LIENS" shall mean the following Liens: (a) Liens securing
Senior Debt; (b) Liens for taxes, assessments or other governmental charges or
levies not yet due or which are being actively contested in good faith by
appropriate proceedings if adequate reserves with respect thereto are maintained
on the books of the Company in accordance with GAAP consistently applied; (c)
statutory Liens of landlords and Liens of carriers, warehousemen, mechanics,
materialmen and other Liens imposed by law created in the ordinary course of
business for amounts not yet due or which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves are being
maintained; (d) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with workmen's
compensation, unemployment insurance or other types of social security; (e)
easements, rights-of-way, restrictions and other similar charges or encumbrances
not materially detracting from the value of the properties of the Company or any
of its Subsidiaries or materially interfering with the ordinary conduct of the
business of the Company, any of its Subsidiaries or any of their respective
properties; (f) UCC filings made in connection with the lease of equipment in
the ordinary course of business; (g) Liens securing purchase money indebtedness
permitted by SECTION 8.6(H) which Liens encumber only the asset financed by such
indebtedness; and (h) extensions, renewals or replacements of any Lien referred
to in clause (a) herein.

         "PERMITTED TRANSFER" shall mean the transfer by (i) any member of the
Controlling Shareholder Group of Stock to any other member of the Controlling
Shareholder Group, or (ii) any member of the Controlling Shareholder Group of
Stock to any Person, provided that following any such transfer or transfers
pursuant to clause (ii), the Controlling Shareholder Group, taken as a whole,
shall at no time own less than 95% of the Stock owned by the Controlling
Shareholder Group, taken as a whole, as of the Closing Date.

                                       8
<PAGE>   14

         "PERSON" shall mean an individual, corporation, limited liability
company, partnership, joint venture, trust, unincorporated association, or other
entity, or a government or any political subdivision or agency thereof.

         "PLAN" shall mean any "employee pension benefit plan" maintained by or
on behalf of the Company or any ERISA Affiliate as defined in Section 3(3) of
ERISA, including, but not limited to, any defined benefit pension plan, profit
sharing plan, money purchase pension plan, 401(k) plan, employee stock ownership
plan or Multiemployer Plan.

         "PRINCIPAL OFFICE" means 303 Peachtree Street, Suite 2400, Atlanta,
Georgia 30308, Attention Mr. Robert L. Dudiak.

         "PURCHASER" means, collectively, SunTrust Banks, Inc., a Georgia
corporation, together with its successors and assigns.

         "RAMSAY GROUP" shall mean Paul Ramsay Holdings Pty. Limited, an
Australian corporation, Paul Ramsay Hospitals Pty. Limited, an Australian
corporation, Ramsay Holdings HSA Limited, a Barbados corporation, or any other
Affiliate of the Controlling Shareholder Group from time to time beneficially
holding Stock of the Company.

         "RAMSAY GROUP PAYABLE" shall mean the $600,000 payable of the Company
to the Ramsay Group in connection with the Company's prior purchase of Ramsay
Hospital Corporation of Louisiana, Inc., a Louisiana corporation.

         "REGISTRATION RIGHTS AGREEMENT" means that certain Registration Rights
Agreement, dated as of the date hereof, between the Company and the Purchaser in
its capacity as holder of the Warrants, in substantially the form of EXHIBIT D,
together with all amendments and modifications thereto.

         "REQUIRED PURCHASERS" shall mean Purchasers who individually or
collectively hold more than seventy-five (75%) of the outstanding principal
amount of the Note or Notes.

         "SECURITY" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.

         "SENIOR CREDIT AGREEMENT" shall mean that certain Loan and Security
Agreement, dated as of October 30, 1998, as amended, by and between the Senior
Lenders, the Agent, and the Company, providing for an aggregate credit facility
to the Company of $22,000,000, as the same may be hereafter amended, modified,
restated, supplemented, refinanced or replaced in accordance with SECTION 8.6(F)
and the other provisions hereof.

         "SENIOR DEBT" shall have the meaning ascribed to the term "Senior
Indebtedness" in the Subordination Agreement.

         "SENIOR DEBT DOCUMENTS" shall mean the Senior Credit Agreement and all
other Transaction Documents (as defined in the Senior Credit Agreement).

                                       9
<PAGE>   15

         "SENIOR LENDERS" shall have the meaning given to such term in the
recitals hereof.

         "SOLVENT" shall mean, with respect to any Person at any time, that (i)
each of the fair value and the present fair saleable value of such Person's
assets (including any rights of subrogation or contribution to which such Person
is entitled, under any of the Transaction Documents or otherwise) is greater
than such Person's debts and other liabilities (including contingent, unmatured
and unliquidated debts and liabilities) and the maximum estimated amount
required to pay such debts and liabilities as such debts and liabilities mature
or otherwise become payable; (ii) such Person is able and expects to be able to
pay its debts and other liabilities (including, without limitation, contingent,
unmatured and unliquidated debts and liabilities) as they mature; and (iii) such
Person does not have unreasonably small capital to carry on its business as
conducted and as proposed to be conducted.

         "STOCK" means all shares of capital stock of or in a corporation,
whether voting or non-voting, and including, without limitation, common stock
and preferred stock.

         "SUBORDINATION AGREEMENT" shall mean that certain Subordination
Agreement, dated as of the date hereof, by and among the Agent, for the benefit
of and on behalf of the Senior Lenders, each Senior Lender and the Purchaser,
and acknowledged by the Company, either as originally executed or as hereafter
amended, modified or supplemented with the consent of the Purchaser.

         "SUBORDINATED DEBT" shall mean (i) the Debt evidenced by the Notes, and
(ii) additional Debt incurred by the Company after the Closing Date which is
expressly subordinated to the Obligations in form and substance satisfactory to
the Purchaser in its sole discretion.

         "SUBSIDIARY" shall mean, as to any person, any corporation, limited
liability company, partnership or joint venture, whether now existing or
hereafter organized or acquired: (i) in the case of a corporation, of which at
least a majority of the outstanding shares of stock having by the terms thereof
ordinary voting power to elect a majority of the board of directors of such
corporation (other than stock having such voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned or
controlled by such Person and/or one or more of its Subsidiaries or (ii) in the
case of a limited liability company, partnership or joint venture, in which such
Person or a Subsidiary of such Person is a member, general partner or joint
venturer and of which a majority of the partnership or other ownership interests
are at the time owned by such Person or one or more of its Subsidiaries.

         "TAXES" shall mean any present or future taxes, levies, imposts,
duties, fees, assessments, deductions, withholdings or other charges of whatever
nature, including without limitation, income, receipts, excise, property, sales,
transfer, license, payroll, withholding, social security and franchise taxes now
or hereafter imposed or levied by the United States, or any state, local or
foreign government or by any department, agency or other political subdivision
or taxing authority thereof or therein and all interest, penalties, additions to
tax and similar liabilities with respect thereto.

                                       10
<PAGE>   16

         "TOTAL DEBT TO EBITDA RATIO" shall mean, with respect to the Company
and its Subsidiaries on a consolidated basis, as of any calculation date, the
ratio of (a) Money Borrowed as of such date, to (b) EBITDA for the preceding
four fiscal quarter period then ending.

         "TRANSACTION DOCUMENTS" shall mean, collectively, this Agreement, the
Note, each Warrant, the Warrant Agreement, the Registration Rights Agreement,
the Subordination Agreement and any other agreements of any type or nature in
any way relating to or in furtherance of this Agreement, in each case either as
originally executed or as the same may from time to time be supplemented,
modified, amended, restated, extended or supplanted.

         "WARRANT AGREEMENT" shall mean that certain Warrant Agreement, dated as
of the date hereof, between the Company and the Purchaser in its capacity as
holder of the Warrants, in substantially the form of EXHIBIT B hereto, together
with all amendments and modifications thereto.

         "WARRANT DOCUMENTS" shall mean, collectively, the Warrant Agreement,
the Warrants and the Registration Rights Agreement.

         "WARRANTS" shall mean, collectively, the common stock purchase warrants
issued and delivered by the Company on the Closing Date, in substantially the
form of EXHIBIT C hereto, and each common stock purchase warrant issued and
delivered in substitution or exchange for any Warrant.

         "WEST VIRGINIA UNIVERSITY HOSPITALS SALE" shall mean, the sale by the
Company to West Virginia University Hospitals, Inc. of Chestnut Ridge Hospital
and other assets pursuant to that certain Asset Purchase Agreement between the
Company, Psychiatric Institute of West Virginia, Inc. and West University
Hospitals, Inc. dated as of July 1, 1998, as amended by Amended No. 1 dated as
of September 30, 1998.

                                   ARTICLE 2.

                    ISSUANCE AND PURCHASE OF NOTE AND WARRANT

         SECTION 2.1 AUTHORIZATION OF ISSUANCE OF NOTES AND WARRANTS. The
Company has duly authorized the issuance and sale, on the terms and subject to
the conditions set forth herein, of Notes in the aggregate principal amount of
$5,000,000, to be dated as of the Closing Date. The Company has duly authorized
the issuance and sale, on the terms and subject to the conditions set forth
herein and in the Warrant Agreement, of the Warrant for the purchase of 475,000
shares of the Common Stock of the Company.

         SECTION 2.2 PURCHASE AND SALE OF NOTE AND WARRANTS. Subject to the
terms and conditions contained herein and in reliance upon the representations
and warranties of the Purchaser contained herein, the Company hereby agrees to
sell to the Purchaser and, subject to the terms and conditions set forth herein
and in reliance upon the representations and warranties of the Company contained
herein, Purchaser agrees to purchase from the Company the Notes with the

                                       11
<PAGE>   17

Warrants for an aggregate purchase price of $5,000,000 (the "Purchase
Commitment"). The purchase price paid by the Purchaser for each Note shall be
equal to the principal amount thereof and no additional consideration.

         SECTION 2.3 ALLOCATION OF PURCHASE PRICE. Under both generally accepted
accounting standards consistently applied and the regulations of the Internal
Revenue Service, the issuance to the Purchaser of the Notes and the Warrants for
an aggregate purchase price equal to the aggregate principal amount of such
Notes being so purchased results in the creation of "original issue discount" on
such Notes (which original issue discount may also be deemed to constitute the
value of any Warrant issued in connection with the issuance of such Notes), and
such regulations require the determination of the value of any Warrant so
delivered. Pursuant to generally accepted accounting principles consistently
applied and applicable Treasury Regulations, the Company and the Purchaser agree
that the aggregate amount of such original issue discount and the aggregate
value of the Warrant for 475,000 shares of the Common Stock of the Company is
$461,000, which original issue discount and value of such Warrant shall be
allocated to the Note. The Company and the Purchaser agree to recognize and
adhere to the determinations and allocations of original issue discount and
valuation of each Warrant set forth herein for all federal and state income tax
purposes. In the event of any proposed transfer of any Note by the Purchaser,
the Purchaser shall, prior to such transfer, mark such Note with a legend
pertaining to the original issue discount in the form required by Treasury
Regulation Section 1.1275-3(b)(1).

         SECTION 2.4 INTEREST ON THE NOTES.

                  (a) Interest on the Note shall accrue at a rate per annum
         equal to twelve and one-half percent (12.50%), subject to SECTION 3.5
         below; PROVIDED, HOWEVER, that if the definition of "Senior
         Indebtedness" in the Subordination Agreement is amended such that
         interest, fees, costs and charges accruing subsequent to the
         commencement of an Insolvency Event (as such term is defined in the
         Subordination Agreement) but not allowed as a claim in such Insolvency
         Event are excluded from such definition, then interest on the Note
         shall accrue from the date of such amendment at a rate per annum equal
         to twelve percent (12.00%), subject to SECTION 3.5 below. Interest
         shall be payable (i) on the last Business Day of each calendar quarter,
         commencing on March 31, 2000 and continuing thereafter until such Note
         has been paid in full, (ii) upon any prepayment of any Note to the date
         of prepayment on the amount prepaid and (iii) at maturity of the Notes,
         whether by acceleration or otherwise.

                  (b) After maturity, whether by acceleration or otherwise,
         interest shall accrue on the Notes at the Default Rate set forth in
         SECTION 3.3 below.

         SECTION 2.5 AMORTIZATION AND MATURITY OF NOTES; PREPAYMENTS; FUNDING
                     LOSSES.

                  (a) The principal amount of the Note shall be payable on the
         Maturity Date, unless sooner accelerated in accordance with the terms
         hereof.

                  (b) The Company may prepay the Notes in whole from time to
         time, PROVIDED THAT (i) the Company provides at least thirty (30) days'
         prior written notice to the Purchaser of such prepayment, and (ii) such

                                       12
<PAGE>   18

         prepayment is accompanied by all accrued and unpaid interest on the
         amount prepaid through the date of prepayment and all other amounts
         then owing by the Company hereunder in connection with the Notes.

                  (c) Prepayment of the Notes shall not preclude the Purchaser
         from continuing to own the Warrants or from exercising any of its
         rights pursuant to the Warrants, the Warrant Agreement or the
         Registration Rights Agreement at a later date.

         SECTION 2.6 PREPAYMENT FEE.

                  (a) Upon any prepayment of the Notes in full on or prior to
         the first anniversary of the Closing Date, the Company shall pay to the
         Purchaser prior to or concurrently with such prepayment a prepayment
         fee in an amount equal to three percent (3%) of the amount of such
         prepayment.

                  (b) Upon any prepayment of the Notes in full after the first
         anniversary of the Closing Date and on or prior to the second
         anniversary of the Closing Date, the Company shall pay to the Purchaser
         prior to or concurrently with such prepayment a prepayment fee in an
         amount equal to two percent (2%) of the amount of such prepayment.

                  (c) Upon any prepayment of the Notes in full after the second
         anniversary of the Closing Date and on or prior to the third
         anniversary of the Closing Date, the Company shall pay to the Purchaser
         prior to or concurrently with such prepayment a prepayment fee in an
         amount equal to one percent (1%) of the amount of such prepayment.

                  (d) Upon any prepayment of the Note in full after the third
         anniversary of the Closing Date, the Company shall pay to the Purchaser
         prior to or concurrently with such prepayment a prepayment fee in an
         amount equal to zero percent (0%) of the amount of such prepayment.

         SECTION 2.7 MANDATORY PREPAYMENT. Subject to the prior written consent
of the Senior Lenders (or any requisite percentage thereof), the Company shall,
upon receipt of the Company or any of its Subsidiaries of any Net Securities
Proceeds in excess of $5,000,000, make a mandatory prepayment of the Notes in an
amount equal to twenty-five percent (25%) of the total amount of such Net
Securities Proceeds.

                                   ARTICLE 3.

                     OTHER PROVISIONS RELATING TO THE NOTES

         SECTION 3.1 MAKING OF PAYMENTS. The Company shall make each payment
hereunder and under the Notes not later than 1:00 p.m. (Atlanta, Georgia time)
on the day when due in Dollars in same day funds to the Purchaser at its

                                       13
<PAGE>   19

Principal Office. All payments received after that hour shall be deemed to have
been received by the Purchaser on the next following Business Day.

         SECTION 3.2 INCREASED COSTS. In the event that any change in any
Applicable Law, treaty or governmental regulation, or in the interpretation or
application thereof, or compliance by the Purchaser with any guideline, request
or directive (whether or not having the force of law) from any central bank or
other U.S. financial, monetary or other governmental authority, shall: (a)
subject the Purchaser to any tax of any kind whatsoever with respect to this
Agreement, the Notes or the Warrants or change the basis of taxation of payments
to the Purchaser of principal, interest, fees or any other amount payable
hereunder (except for changes in the rate of tax on the overall net income of
the Purchaser); (b) impose, modify, or hold applicable any reserve, special
deposit, assessment or similar requirement against assets held by, or deposits
in or for the account of, advances or loans by, or other credit extended by or
committed to be extended by any office of the Purchaser, including, without
limitation, pursuant to Regulation D of the Board of Governors of the Federal
Reserve System; or (c) impose on the Purchaser any other condition with respect
to this Agreement, the Notes or the Warrants hereunder; and the result of any of
the foregoing is to increase the cost to the Purchaser of making or maintaining
the Notes or the Warrants or to reduce the amount of any payment (whether of
principal, interest or otherwise) in respect of the Notes or the Warrants, then,
in any case, the Company shall promptly pay from time to time, upon demand of
the Purchaser, such additional amounts as will compensate the Purchaser for such
additional cost or such reduction, as the case may be. The Purchaser shall
certify the amount of such additional cost or reduced amount to the Company, and
such certification shall be conclusive absent manifest error.

         SECTION 3.3 CAPITAL ADEQUACY. If, after the date of this Agreement, the
Purchaser shall have determined that the adoption of any Applicable Law, rule or
regulation regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Purchaser with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on the Purchaser's capital (whether on
this credit facility or otherwise) as a consequence of its obligations hereunder
to a level below that which the Purchaser could have achieved but for such
adoption, change or compliance (taking into consideration the Purchaser's
policies with respect to capital adequacy) by an amount deemed by the Purchaser
to be material, then from time to time, promptly upon demand by the Purchaser,
the Company shall pay the Purchaser such additional amount or amounts as will
compensate the Purchaser for such reduction. A certificate of the Purchaser
claiming compensation under this Section and setting forth the additional amount
or amounts to be paid to it hereunder shall be PRIMA FACIE evidence of the
matters contained therein. In determining any such amount, the Purchaser may use
any reasonable averaging and attribution methods. The Purchaser agrees to make
reasonable efforts to allocate any such cost increase among its similarly
situated customers in good faith and on an equitable basis; provided, however,
that the Purchaser shall not be entitled to such amounts unless similar
assessments are generally imposed by the Purchaser on other borrowers of the
Purchaser that Purchaser determines to be comparable to the Company.

                                       14
<PAGE>   20

         SECTION 3.4 DEFAULT RATE OF INTEREST. If the Company shall fail to pay
on the due date therefor, whether by acceleration or otherwise, any principal
owing under the Notes or any other Obligations, then interest shall accrue on
such unpaid principal or other Obligation from the due date until and including
the date on which such principal is paid in full at a rate per annum that is two
percent (2%) in excess of the rate of interest otherwise payable hereunder (the
"DEFAULT RATE"). Interest calculated at the Default Rate shall be due and
payable upon demand by the Purchaser.

         SECTION 3.5 CALCULATION OF INTEREST. Interest payable on the Notes
shall be calculated on the basis of a year of 360 days and shall be payable for
the actual number of days elapsed. If the date for any payment of principal is
extended (whether by operation of this Agreement, any provision of law or
otherwise), interest shall be payable for such extended time at the rates
provided herein. Whenever any payment hereunder shall be stated to be due on a
day other than a Business Day, such payment shall be due on the next succeeding
Business Day.

         SECTION 3.6 USURY. In no event shall the amount of interest due or
payable on any Obligation, when aggregated with all amounts payable by the
Company under any of the Transaction Documents that are deemed or construed to
be interest, exceed the maximum rate of interest allowed by Applicable Law and,
in the event any such payment is paid by the Company or received by the
Purchaser, then such excess sum shall be credited as a payment of principal,
unless the Company, as applicable, shall notify the Purchaser in writing that it
elects to have such excess sum returned to it forthwith. It is the express
intent of the parties hereto that the Company not pay, and the Purchaser not
receive, directly or indirectly, in any manner whatsoever, interest in excess of
that which may be lawfully paid by the Company under Applicable Law.

                                   ARTICLE 4.

                                    GUARANTY

         SECTION 4.1 THE GUARANTY.

         Each Guarantor hereby jointly and severally guarantees to the
Purchaser, as primary obligor and not as surety, the prompt payment of the
Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration, as a mandatory cash collateralization or otherwise)
strictly in accordance with the terms thereof. Each Guarantor hereby further
agrees that if any of the Obligations are not paid in full when due (whether at
stated maturity, as a mandatory prepayment, by acceleration, or otherwise), the
Guarantors will promptly pay the same, without any demand or notice whatsoever,
and that in the case of any extension of time of payment or renewal of any of
the Obligations, the same will be promptly paid in full when due (whether at
extended maturity, as a mandatory prepayment, by acceleration, as a mandatory
cash collateralization or otherwise) in accordance with the terms of such
extension or renewal.

         Notwithstanding any provision to the contrary contained herein or in
any other of the Transaction Documents, the obligations of the Guarantors under
this Agreement and the other Transaction Documents shall be limited to an

                                       15
<PAGE>   21

aggregate amount equal to the largest amount that would not render such
obligations subject to avoidance under Section 548 of the Bankruptcy Code or any
comparable provisions of any applicable state law.

         SECTION 4.2 OBLIGATIONS UNCONDITIONAL.

         The obligations of the Guarantors under SECTION 4.1 are joint and
several, absolute and unconditional, irrespective of the value, genuineness,
validity, regularity or enforceability of any of the Transaction Documents, or
any other agreement or instrument referred to therein, or any substitution,
release, impairment or exchange of any other guarantee of or security for any of
the Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this SECTION 4.2 that the obligations of each Guarantor
hereunder shall be absolute and unconditional under any and all circumstances.
Each Guarantor agrees that it shall have no right of subrogation, indemnity,
reimbursement or contribution against the Company or any other Guarantor for
amounts paid under this SECTION 4 until such time as the Purchaser has been paid
in full in respect of all Obligations, and no Person or governmental authority
shall have any right to request any return or reimbursement of funds from the
Purchaser in connection with monies received under the Transaction Documents.
Without limiting the generality of the foregoing, it is agreed that, to the
fullest extent permitted by law, the occurrence of any one or more of the
following shall not alter or impair the liability of any Guarantor hereunder
which shall remain absolute and unconditional as described above:

                  (a) at any time or from time to time, without notice to any
         Guarantor, the time for any performance of or compliance with any of
         the Obligations shall be extended, or such performance or compliance
         shall be waived;

                  (b) any of the acts mentioned in any of the provisions of any
         of the Transaction Documents, or any other agreement or instrument
         referred to in the Transaction Documents shall be done or omitted;

                  (c) the maturity of any of the Obligations shall be
         accelerated, or any of the Obligations shall be modified, supplemented
         or amended in any respect, or any right under any of the Transaction
         Documents, or any other agreement or instrument referred to in the
         Transaction Documents shall be waived or any other guarantee of any of
         the Obligations or any security therefor shall be released, impaired or
         exchanged in whole or in part or otherwise dealt with; or

                  (d) any of the Obligations shall be determined to be void or
         voidable (including, without limitation, for the benefit of any
         creditor of any Guarantor) or shall be subordinated to the claims of
         any Person (including, without limitation, any creditor of any
         Guarantor).

With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever, and any requirement that the Purchaser exhaust any right, power or
remedy or proceed against any Person under any of the Transaction Documents, or
any other agreement or instrument referred to in the Transaction Documents, or
against any other Person under any other guarantee of, or security for, any of
the Obligations.

                                       16
<PAGE>   22

         SECTION 4.3 REINSTATEMENT.

         The obligations of each Guarantor under this SECTION 4 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Obligations is rescinded or must be
otherwise restored by any holder of any of the Obligations, whether as a result
of any proceedings in bankruptcy or reorganization or otherwise, and Guarantor
agrees that it will indemnify the Purchaser on demand for all reasonable costs
and expenses (including, without limitation, fees and expenses of counsel)
incurred by the Purchaser in connection with such rescission or restoration,
including any such costs and expenses incurred in defending against any claim
alleging that such payment constituted a preference, fraudulent transfer or
similar payment under any bankruptcy, insolvency or similar law.

         SECTION 4.4 CERTAIN ADDITIONAL WAIVERS.

         Without limiting the generality of the provisions of this SECTION 4,
each Guarantor hereby specifically waives the benefits of O.C.G.A. ss.10-7-24 to
the extent applicable. Each Guarantor further agrees that it shall have no right
of recourse to security for the Obligations, except through the exercise of
rights of subrogation pursuant to SECTION 4.2 and through the exercise of rights
of contribution pursuant to SECTION 4.6.

         SECTION 4.5 REMEDIES.

         Each Guarantor agrees that, to the fullest extent permitted by law, as
between any Guarantor, on the one hand, and the Purchaser, on the other hand,
the Obligations may be declared to be forthwith due and payable as provided in
SECTION 9.2 (and shall be deemed to have become automatically due and payable in
the circumstances provided in said SECTION 9.2) for purposes of SECTION 4.1
notwithstanding any stay, injunction or other prohibition preventing such
declaration (or preventing the Obligations from becoming automatically due and
payable) as against any other Person and that, in the event of such declaration
(or the Obligations being deemed to have become automatically due and payable),
the Obligations (whether or not due and payable by any other Person) shall
forthwith become due and payable by the Guarantors for purposes of SECTION 4.1.

         SECTION 4.6 GUARANTEE OF PAYMENT; CONTINUING GUARANTEE.

         The guarantee in this SECTION 4 is a guaranty of payment and not of
collection, is a continuing guarantee, and shall apply to all Obligations
whenever arising.

         SECTION 4.7 SUBORDINATION OF GUARANTEES.

         Each Guarantor, for itself and its successors, and Purchaser, by its
acceptance of this Agreement, agrees that the obligations of the Guarantors to
the Purchaser pursuant to Article 4 of this Agreement are expressly subordinate
and subject in right of payment to the prior payment in full in cash of all
Senior Debt as provided in the Subordination Agreement.

                                       17
<PAGE>   23

                                   ARTICLE 5.

         CONDITIONS PRECEDENT TO PURCHASE OF THE NOTES AND THE WARRANTS

         SECTION 5.1 CLOSING DATE CONDITIONS. The obligations of the
Consolidated Companies under this Agreement are subject to the satisfaction of
each of the following conditions on the Closing Date:

         (A) NO INJUNCTION, ETC. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain,
or prohibit, or to obtain substantial damages in respect of, or which is related
to or arises out of, this Agreement or the Warrant Agreement or the consummation
of the transactions contemplated hereby or thereby, or which, in Purchaser's
sole discretion, would make it inadvisable to consummate the transactions
contemplated by this Agreement.

         (B) DOCUMENTATION. Purchaser shall have received, on or prior to the
Closing Date, the following, each in the form and substance satisfactory to
Purchaser and its counsel:

                  (1) duly executed counterparts of this Agreement;

                  (2) a Note in the principal amount of $5,000,000;

                  (3) the duly executed Warrant Agreement;

                  (4) the duly executed Warrant for the purchase of 475,000
         shares of the Common Stock of the Company;

                  (5) the duly executed Registration Rights Agreement;

                  (6) a certificate signed by a senior officer of each
         Consolidated Company stating that the representations and warranties
         set forth in SECTION 6.1 hereof are true and correct in all material
         respects on and as of such date with the same effect as though made on
         and as of such date, stating that each Consolidated Company is on such
         date in compliance with all the terms and provisions of the Transaction
         Documents, to which it is a party, to be observed or performed by it,
         and stating that on such date, no Default or Event of Default, has
         occurred or is continuing;

                  (7) (a) copies of the articles of incorporation of the Company
         and all amendments thereto Certified by the Secretary of State of
         Delaware and copies of the articles of incorporation of each other
         Consolidated Company, and all amendments thereto, certified by the
         Secretary of each such Consolidated Company; and (b) good standing
         certificates for each Consolidated Company (other than Ramsay Youth
         Services Puerto Rico, Inc.), issued by the relevant Secretary of State
         and any other States in which each Consolidated Company's qualification
         is required, in each case as of a recent date;

                                       18
<PAGE>   24

                  (8) a certificate of the Secretary or an Assistant Secretary
         of each Consolidated Company, certifying (a) that attached thereto is a
         true and complete copy of the Bylaws of such Consolidated Company, as
         in effect on the date of such certification; (b) that attached thereto
         is a true and complete copy of resolutions adopted by the Board of
         Directors of such Consolidated Company, authorizing the execution,
         delivery and performance of this Agreement and the other Transaction
         Documents to which such Consolidated Company is a party; (c) as to the
         incumbency and genuineness of the signatures of the officers of such
         Consolidated Company executing this Agreement or any of the other
         Transaction Documents;

                  (9) a favorable legal opinion of counsel to each Consolidated
         Company, addressed to the Purchaser, covering such matters relating to
         the transactions contemplated hereby as the Purchaser may request;

                  (10) certified copies of the executed Senior Credit Agreement;

                  (11) copies of all consents and waivers, if any, required
         under the Company's Material Contracts in connection with the
         transactions contemplated hereby, including, without limitation, copies
         of amendments or waivers of any agreements currently prohibiting
         payment of interest on Subordinated Debt unless a default has occurred
         under such agreement;

                  (12) a duly executed solvency certificate of the Company with
         respect to the Consolidated Companies;

                  (13) written instructions from the Company to the Purchaser as
         to the disbursements of the proceeds of such Note;

                  (14) the duly executed Subordination Agreement;

                  (15) evidence satisfactory to the Purchaser that the total
         debt to EBITDA covenant in the Senior Credit Agreement has been amended
         to be 3.5:1.0 until the year 2001;

                  (16) evidence satisfactory to the Purchaser that SunTrust
         Bank, Atlanta has purchased a participating interest in the Senior
         Debt;

                  (17) evidence satisfactory to the Purchaser that the Company
         will earn a minimum of 4 cents per share in the fiscal quarter ending
         December 31, 1999;

                  (18) such other documents, instruments and agreements as
         Purchaser shall reasonably request.

         (C) CORPORATE ACTIONS. All corporate and other action required
hereunder shall be satisfactory.

                                       19
<PAGE>   25

         (D) NO MATERIAL ADVERSE EFFECT. No Material Adverse Effect has occurred
since December 31, 1998.

         (F) NO DEFAULT, ETC. No Default or Event of Default shall exist.

         SECTION 5.2 CLOSING DATE CONDITIONS OF THE CONSOLIDATED COMPANIES. The
obligations of the Consolidated Companies under this Agreement are subject to
the satisfaction of each of the following conditions on the Closing Date:

         (A) NO INJUNCTION, ETC. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain,
prohibit, or to obtain substantial damages in respect of, or which is related to
or arises out of, this Agreement, the Warrant Agreement or the consummation of
the transactions contemplated hereby or thereby, or which, in the Company's
reasonable discretion, would make it inadvisable to consummate the transactions
contemplated by this Agreement.

         (B) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made by the Purchaser contained herein or in any of the other
Transaction Documents shall be true and correct in all material respects with
the same effect as though such representations and warranties had been made on
and as of the Closing Date.

                                   ARTICLE 6.

                         REPRESENTATIONS AND WARRANTIES

         SECTION 6.1 REPRESENTATIONS AND WARRANTIES GENERALLY. Each Consolidated
Company (as to itself and all other Consolidated Companies) hereby represents
and warrants to the Purchaser that the following statements are true and correct
as of the date hereof and as of the Closing Date:

                  6.1.1 CORPORATE EXISTENCE; SUBSIDIARIES. Each of the Company
         and its Subsidiaries is a corporation duly organized, validly existing
         and in good standing under the laws of the state of its incorporation
         and has all requisite corporate power and authority to conduct its
         business and to own its properties. Each of the Company and its
         Subsidiaries has all requisite corporate power and authority to execute
         and deliver and to perform all of its obligations under this Agreement
         and the other Transaction Documents to which it is a party. Each of the
         Company and its Subsidiaries is duly qualified and in good standing as
         a foreign corporation authorized to do business in each jurisdiction
         (other than the jurisdiction of its incorporation) in which the nature
         of its activities or the character of the properties it owns or leases
         makes such qualification necessary and in which the failure to be so
         qualified would have a Material Adverse Effect. Except as set forth on
         Schedule 6.1.1, the Company has no Subsidiaries.

                                       20
<PAGE>   26

                  6.1.2 AUTHORIZATION; NO CONFLICT. The execution, delivery and
         performance by each of the Company and its Subsidiaries of this
         Agreement and each of the other Transaction Documents to which it is a
         party are within the corporate powers of the Company and its
         Subsidiaries, have been duly authorized by all necessary corporate
         action, and do not and will not (a) violate any provision of any
         applicable law, rule or regulation, any judgment, order, or ruling of
         any court or governmental agency applicable to the Company or any of
         its Subsidiaries, the articles of incorporation or bylaws of the
         Company or any of its Subsidiaries or any Material Contract or other
         instrument to which the Company or any of its Subsidiaries is a party
         or by which the Company, any of its Subsidiaries, or any of their
         respective properties is bound, (b) be in conflict with, result in a
         breach of or constitute with notice or lapse of time or both a default
         under any such indenture, agreement or other instrument, or (c) result
         in or require the creation of any material Lien upon or with respect to
         any of the properties of the Company or any of its Subsidiaries, other
         than Liens granted pursuant to the Senior Debt Documents.

                  6.1.3 APPROVALS. No consent of any Person and no authorization
         or approval or other action by, and no notice to or filing with, any
         governmental authority or regulatory body is required in connection
         with the borrowings hereunder or with the execution, delivery,
         performance, validity or enforcement of any Transaction Document
         (including, without limitation, the issuance of the Note or the
         Warrant), which has not been obtained or made as of the date hereof.

                  6.1.4 TAX RETURNS; STATUS. The Company and its Subsidiaries
         have filed all federal, state and other tax returns which are required
         to have been filed, and each has paid all taxes due and payable except
         such as are being actively contested in good faith by appropriate
         proceedings and with respect to which adequate reserves are being
         maintained on the books of the Company in accordance with GAAP
         consistently applied. None of the Company's or its Subsidiaries' tax
         returns are under audit. No tax liens have been filed and, to the
         Company's knowledge, no claims are being assessed with respect to any
         such taxes.

                  6.1.5 BINDING OBLIGATIONS. Each of the Transaction Documents
         to which the Company is a party constitutes a legal, valid and binding
         obligation of the Company, enforceable against the Company in
         accordance with its terms, except as such enforceability may be limited
         by bankruptcy, insolvency, reorganization, moratorium or other similar
         laws affecting the enforcement of creditors' rights generally and by
         general equitable principles (whether enforcement is sought by
         proceedings in equity or at law).

                  6.1.6 LITIGATION. Except as set forth on Schedule 6.1.6, no
         action, suit or proceeding is pending or, to the knowledge of the
         Company, threatened against or affecting the Company, any of its
         Subsidiaries or the properties of the Company or any of its
         Subsidiaries before any court or governmental department, commission,
         board, bureau, agency or instrumentality which, if determined adversely
         to the Company or such Subsidiary, would have a Material Adverse
         Effect, or which questions the validity of any Transaction Document or
         any action taken or to be taken pursuant thereto.

                                       21
<PAGE>   27

                  6.1.7 NO DEFAULTS. Neither the Company nor any of its
         Subsidiaries is in violation of any applicable statute or other law or
         in default under any order, regulation or ruling of any court or other
         tribunal or governmental or administrative authority or agency binding
         on the Company or any of its Subsidiaries, or in default under their
         respective articles of incorporation or bylaws, any material indenture,
         agreement, lease, instrument or other undertaking to which the Company
         or any of its Subsidiaries is a party or by which it or its property or
         assets may be bound or affected, which could have a Material Adverse
         Effect.

                  6.1.8 NO MATERIAL RESTRICTIONS. Neither the Company nor any of
         its Subsidiaries is subject to any charter, corporate or, to the
         knowledge of the Company and its Subsidiaries, other legal restriction,
         or any contract, lease or other agreement, or any judgment, decree,
         order, law, rule or regulation which, in the judgment of the Company,
         currently has a Material Adverse Effect or any effect on the ability of
         the Company to carry out its obligations under any Transaction
         Document.

                  6.1.9 INFORMATION. No certificate, report or other paper
         furnished by the Company to the Purchaser in connection with the
         Transaction Documents, and to the best knowledge of the Company after
         due inquiry, no certificate, report or other paper furnished by any
         other Person at the request of the Company, in connection with the
         Transaction Documents contains as of its effective date any material
         misstatement of fact or fails to state a material fact or any fact
         necessary to make the statements contained therein not misleading in
         any material respect as of such date, and all of the information
         contained therein is true, accurate and complete in all material
         respects as of such date; PROVIDED, HOWEVER, that any projections and
         PRO FORMA financial information contained in the materials referenced
         in the preceding sentence are based upon reasonable estimates of
         management of the Company and reasonable assumptions at the time made,
         it being recognized by the Purchaser that such financial information as
         it relates to future events is not to be viewed as fact and that actual
         results during the period or periods covered by any such financial
         information may differ substantially from the projected results set
         forth therein.

                  6.1.10 FINANCIAL STATEMENTS. (a) The Company has furnished the
         Purchaser with (i) the consolidated balance sheet and related
         consolidated statements of operations, stockholder's equity and cash
         flows of the Company for the year ending December 31, 1998, audited by
         Ernst & Young, and (ii) the internally prepared consolidated balance
         sheet and related consolidated statement of operations of the Company
         for the fiscal quarters ending March 31, 1999, June 30, 1999 and
         September 30, 1999, in each case as certified by the chief financial
         officers of the Company. All such financial statements (including any
         related schedules and/or notes) fairly present in all material respects
         in accordance with GAAP the financial position of the Company as of
         such dates (subject, as to interim statements, to changes resulting
         from audits and normal year end adjustments and the absence of
         footnotes) and reflect all liabilities, direct and contingent, of the
         Company and their respective Subsidiaries required to be shown in
         accordance with such principles (subject, as to interim statements, to

                                       22
<PAGE>   28

         changes resulting from audits and normal year end adjustments and the
         absence of footnotes). There has been no material adverse change in the
         business, financial condition, results of operations or prospects of
         the Company and its Subsidiaries since December 31, 1998, nor to the
         Company's knowledge any other event which could reasonably be expected
         to have a Material Adverse Effect.

                  (b) The unaudited pro forma balance sheet of the Company
         setting forth as of the Closing Date the pro forma financial position
         of the Company, a copy of which has been delivered to the Purchaser,
         fairly presents in all material respects, on a pro forma basis, in
         conformity with generally accepted accounting principles applied on a
         basis consistent with the financial statements referred to in clause
         (a) above (except for adjustments consistent with purchase price
         accounting methods), the financial position of the Company as of such
         date and time. The Company does not have any material contingent
         obligations, contingent liabilities or other obligations which are not
         reflected in the balance sheet referenced above which would be required
         to be reflected in accordance with GAAP (subject, as to interim
         statements, to changes resulting from audits and normal year end
         adjustments and the absence of footnotes) (the "Pro Forma Financial
         Statements").

                  6.1.11 TITLE TO PROPERTIES. Each of the Company and its
         Subsidiaries has good and marketable title to its real properties
         (other than real properties that it leases), and good title to all of
         its other properties and assets, including the properties and assets
         reflected in the balance sheet of the Company (other than properties
         and assets disposed of in the ordinary course of business), subject to
         no Lien of any kind except Permitted Liens. Each of the Company and its
         Subsidiaries enjoys peaceful and undisturbed possession under all
         leases necessary in any material respect for the operation of its
         properties and assets, none of which contains in the reasonable
         judgment of the Company any unusual or burdensome provisions which
         might materially affect or impair the operations of such properties and
         assets. All such leases are valid and subsisting and in full force and
         effect.

                  6.1.12 COMPLIANCE WITH LAWS. Each of the Company and its
         Subsidiaries is in compliance with all applicable laws and regulations,
         including all laws and regulations relating to ERISA and environmental
         matters, except where the failure to comply would not have a Material
         Adverse Effect.

                  6.1.13 POSSESSION OF FRANCHISES, LICENSES, ETC. Each of the
         Company and its Subsidiaries possesses all franchises, certificates,
         licenses, permits and other authorizations from governmental political
         subdivisions or regulatory authorities, and all patents, trademarks,
         service marks, trade names, copyrights, licenses and other rights, free
         from burdensome restrictions, that are necessary for the ownership,
         maintenance and operation of any of its properties and assets as
         currently maintained, and neither the Company nor any of its
         Subsidiaries is in material violation of any thereof except where the
         failure to comply or have any such franchise, certificate, license,
         permits or other authorization would not have a Materially Adverse
         Effect.

                  6.1.14 INSURANCE. The Company has in place, with financially
         sound and reputable insurance companies or associations, casualty,
         public liability and other insurance, including without limitation,
         product liability insurance, in such amounts and covering such risks as

                                       23
<PAGE>   29

         are customarily maintained by other companies operating similar
         businesses in similar locations and of similar size.

                  6.1.15 FEDERAL RESERVE REGULATIONS. The proceeds of the Notes
         will be used solely for the purposes set forth in this Agreement and
         none of such proceeds will be used, directly or indirectly, for the
         purpose of purchasing or carrying any "margin security" or "margin
         stock" or for the purpose of reducing or retiring any debt that
         originally was incurred to purchase or carry a "margin security" or
         "margin stock" or for any other purpose that might constitute this
         transaction a "purpose credit" within the meaning of the regulations of
         the Board of Governors of the Federal Reserve System.

                  6.1.16 MATERIAL CONTRACTS. SCHEDULE 6.1.16 sets forth a
         complete list of all of the Material Contracts of the Company and its
         Subsidiaries. Each of the Material Contracts is in full force and
         effect and, to the best knowledge of the Company, no default exists
         thereunder.

                  6.1.17 ERISA.

                         (1) IDENTIFICATION OF PLANS. Neither the Company or any
                  ERISA Affiliate maintains or contributes to, or has maintained
                  or contributed to, any Plan, other than its 401(k) plan.

                         (2) LIABILITIES. Neither the Company nor any Subsidiary
                  is currently subject to any liability (other than routine Plan
                  expenses or contributions), tax or penalty which liability,
                  tax or penalty is directly or indirectly related to any Plan
                  including, but not limited to, any penalty or liability
                  arising under Title I or Title IV of ERISA, or any tax or
                  penalty under Chapter 43 of the Code, except such liabilities,
                  taxes, or penalties (when taken as a whole) as will not have a
                  Material Adverse Effect; and

                         (3) FUNDING. The Company and each ERISA Affiliate has
                  made full and timely payment of all amounts required to be
                  contributed under the terms of each Plan.

                  6.1.18 BROKER'S FEES. Except for the Facility Fee and except
         for fees owed to SunTrust Equitable Securities, Inc., no broker's or
         finder's fee, commission or similar compensation will be payable with
         respect to the transactions contemplated by this Agreement. No other
         similar fees or commissions will be payable by the Company for any
         other services rendered to any Consolidated Company or any Subsidiaries
         ancillary to the transactions contemplated hereby.

                  6.1.19 OFFERING OF NOTES AND WARRANTS. Neither the Company
         nor, to the best knowledge of the Company, anyone acting on its behalf
         has offered the Notes or the Warrants for sale to, or solicited any
         offer to buy any of the same from, or otherwise approached or
         negotiated in respect thereof with, any person other than the
         Purchaser. Subject to the representations of the Purchaser in SECTION
         6.2, neither the Company nor any of its Subsidiaries nor, to the best
         of knowledge of the Company, anyone acting on their behalf has taken,

                                       24
<PAGE>   30

         or will take, any action which would subject the issuance or sale of
         the Notes and the Warrants to Section 5 of the Securities Act of 1933,
         as amended or the registration or qualification provisions of the blue
         sky laws of any state.

                  6.1.20 REGISTRATION RIGHTS. Except as set forth on Schedule
         6.1.20, as of the Closing Date, except as described in the Warrant
         Agreement and in the Registration Rights Agreement, the Company is
         under no obligation to register under the Securities Act of 1933, as
         amended, or the Trust Indenture Act of 1939, as amended, any of its
         presently outstanding securities or any of its securities that may
         subsequently be issued.

                  6.1.21 SOLVENCY. Before and after giving effect to the
         transactions contemplated by this Agreement, the Company shall be
         Solvent and, after excluding any Debt owed by any Subsidiary Guarantor
         to any other Subsidiary Guarantor from the calculation of Solvent, each
         Subsidiary Guarantor shall be Solvent.

                  6.1.22 CONTINUING BUSINESS OF COMPANY. (a) There exists no
         actual or, to the knowledge of any Consolidated Company, threatened
         termination, cancellation or limitation of, or any material
         modification or change since October 18, 1999, in, (i) the business
         relationships of any Consolidated Company with any customer or group of
         customers of such Consolidated Company whose business individually or
         in the aggregate is material to the operations or financial condition
         of such Consolidated Company, (ii) the business relationships of any
         Consolidated Company with any of its material suppliers or (iii) any
         Material Contract; and each Consolidated Company reasonably anticipates
         that after the consummation of the transactions contemplated by this
         Agreement, all such material customers and suppliers will continue a
         business relationship with such Consolidated Company on a basis no less
         favorable to such Consolidated Company than as heretofore conducted.

                  6.1.23 YEAR 2000 COMPLIANCE. To the Company's best knowledge,
         the operating systems for the Company's computers and all software
         applications that run on its computers are Year 2000 Compliant, except
         where a failure to be Year 2000 Compliance would have a Materially
         Adverse Effect. "Year 2000 Compliant" shall mean neither the
         performance nor functionality of the operating systems for the
         Company's computers and all software applications that run on the
         Company's computers is affected by dates prior to, during, spanning or
         after January 1, 2000, and shall include, but not be limited to (a)
         accurately processing (including, but not limited to calculating,
         comparing and sequencing) date and time data from, into, and between
         the years 1999 and 2000 and leap year calculations, (b) functioning
         without error, interruption or decreased performance relating to such
         date and time data, (c) accurately processing such date and time data
         when used in combination with other technology, if the other technology
         properly exchanges date and time data, (d) accurate date and time data
         century recognition, (e) calculations that accurately use same century
         and multi-century formulas and date and time values, (f) date and time
         data interface values which reflect the correct century, and (g)
         processing, storing, receiving and outputting all date and time data in
         a format that accurately indicates the century of the date and time
         data.

                  6.1.24 DISCLOSURE. To the Company's best knowledge, neither
         this Agreement nor any other document, certificate or statement
         furnished to the Purchaser by or on behalf of the Company in connection

                                       25
<PAGE>   31

         herewith contains any untrue statement of a material fact or omits to
         state a material fact necessary in order to make the statements
         contained herein and therein not misleading. There is no fact of which
         the Company is aware and that is peculiar to the Company and its
         Subsidiaries which materially adversely affects the business, property
         or assets, or financial condition of the Company and its Subsidiaries
         which has not been set forth in this Agreement or in the other
         documents, certificates and statements furnished to the Purchaser by or
         on behalf of the Company or any of its Subsidiaries prior to the date
         hereof in connection with the transactions contemplated hereby.

                  SECTION 6.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
         The Purchaser hereby represents and warrants to the Company and the
         other Consolidated Companies that the following statements are true and
         correct, as of the date hereof and as of the Closing Date.

                  6.2.1 AUTHORITY. The Purchaser has full corporate power and
         authority to execute and deliver this Agreement and to perform all of
         its obligations hereunder the under the other Transaction Documents,
         and no consent or approval of any other person or governmental
         authority is required therefor. The execution and delivery of this
         Agreement by it, the performance by it of its covenants and agreements
         hereunder and the consummation by it of the transactions contemplated
         hereby have been duly authorized by all necessary corporate action.
         This Agreement constitutes a valid and legally binding obligation of
         it, enforceable against it in accordance with its terms, except as such
         enforceability may be limited by bankruptcy, insolvency or other
         similar laws of general application relating to or affecting the
         enforcement of creditors' rights or by general principles of equity.

                  6.2.2 INVESTMENT IN THE COMPANY.

                  (i) The Purchaser understands that the Company proposes to
issue and deliver to the Purchaser the Notes and the Warrants pursuant to this
Agreement without compliance with the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"); that for such purpose
the Company will rely upon the Purchaser's representations and warranties
contained therein; and that such non-compliance with registration is not
permissible unless such representations and warranties are correct.

                  (ii) The Purchaser understands that, under existing rules of
the Securities and Exchange Commission (the "SEC"), the Purchaser may be unable
to sell the Notes or the Warrants except to the extent that the Notes or
Warrants may be sold (i) pursuant to an effective registration statement
covering such sale pursuant to the Securities Act and applicable state
securities laws or an applicable exemption therefrom or (ii) in a bona fide
private placement to a purchaser who shall be subject to the same restrictions
on any resale or (iii) subject to the restrictions contained in Rule 144 under
the Securities Act ("Rule 144").

                                       26
<PAGE>   32

                  (iii) The Purchaser is not relying on the Company respecting
the financial, tax and other economic considerations of an investment in the
Notes or Warrants, and the Purchaser has relied on the advice of, or has
consulted with, only its own advisors.

                  (iv) The Purchaser is familiar with the provisions of Rule 144
and the limitations upon the availability and applicability of such rule.

                  (v) The Purchaser is purchasing the Notes and the Warrants as
an investment for its sole account, and without any present view towards the
resale or other distribution thereof.

                  (vi) The Purchaser is an "accredited investor," within the
meaning of Rule 501 promulgated by the Securities and Exchange Commission under
the Securities Act.

                                   ARTICLE 7.

                              AFFIRMATIVE COVENANTS

         So long as any Note or any other Obligations shall remain outstanding
pursuant to the Loan Documents, unless the Required Purchasers shall otherwise
consent in the manner set forth in SECTION 9.4, each Consolidated Company shall
and shall cause each of its Subsidiaries to:

         SECTION 7.1 PRESERVATION OF CORPORATE EXISTENCE. Do or cause to be done
all things necessary to (a) preserve and maintain its corporate existence and
all material rights and franchises and (b) qualify and remain qualified to
conduct business in each jurisdiction where the nature of the business or
ownership of property by the Company or any of its Subsidiaries may legally
require such qualification and where failure to be so qualified would have a
Material Adverse Effect.

         SECTION 7.2 COMPLIANCE WITH LAWS. Comply with all applicable federal,
state and local laws, rules, regulations and orders of any governmental
authority, noncompliance with which would have a Material Adverse Effect, such
compliance to include, without limitation, (a) paying before the same become
delinquent all material taxes, assessments and governmental charges imposed upon
it or upon its property (unless such taxes, assessments or charges are being
contested in good faith and by proper proceedings diligently pursued, and the
Company has obtained an adequate bond or adequate insurance or established
therefor a reserve of an adequate amount), and (b) complying in all material
respects with all federal, state and local laws, rules, regulations and orders
relating to pollution, reclamation, or protection of the environment, including
laws relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, or hazardous or toxic materials or wastes into air,
water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants or hazardous or toxic materials or wastes.

         SECTION 7.3 MAINTENANCE OF INSURANCE. Maintain with financially sound
and reputable insurance companies or associations casualty, public liability and
other insurance in such amounts and covering such risks as are customarily
maintained by other companies operating similar businesses in similar locations

                                       27
<PAGE>   33

and of similar size, and, at the written request of the Purchaser, provide
evidence of compliance with this covenant to the Purchaser in the form of
certificates of insurance.

         SECTION 7.4 VISITATION RIGHTS. At any reasonable time and from time to
time upon reasonable notice and without unreasonable interruption of the
Company's operations of business (provided that no notice shall be required upon
the occurrence and during the continuance of an Event of Default; provided
further that only one (1) business days' notice shall be required after the
occurrence and during the continuance of a Default), permit the Purchaser or any
agents or representatives of the Purchaser to examine and make copies of and
abstracts from the records and books of account of, and visit the properties of
the Company and its Subsidiaries and discuss the general business affairs of the
Company and its Subsidiaries (including, without limitation, significant changes
in personnel, compensation of employees, business ventures, important
acquisition and disposition of assets and significant litigation) with its
officers and its independent public accountants.

         SECTION 7.5 RECORDS AND ACCOUNTS. Keep true records and books of
account in which entries will be made in accordance with GAAP consistently
applied and maintain accounts and reserves adequate in the opinion of the
Company for all taxes (including income taxes), all depreciation, depletion,
obsolescence and amortization of its properties, all other contingencies and all
other proper reserves.

         SECTION 7.6 PAYMENT OF DEBTS, TAXES. Pay, or cause to be paid, all of
its debts and perform, or cause to be performed, all of its obligations promptly
and in accordance with the respective terms thereof, and promptly pay and
discharge, or cause to be paid and discharged, all taxes, assessments and
governmental charges or levies imposed upon it, upon its income or receipts or
upon any of its assets or properties before the same shall become in default, as
well as pay all lawful claims for labor, materials and supplies or otherwise
that, if not so paid, could or would result in the imposition of a Lien upon
such assets or properties or any part thereof; PROVIDED, that it shall not
constitute an Event of Default hereunder if the Company fails to perform any
such debt (except for any indebtedness serving under or in respect of any Loan
Document), tax, assessment, governmental or other charge, levy or claim that is
being contested in good faith and by proper proceedings diligently pursued, if
the effect of such failure to pay or perform has not been to accelerate the
maturity of any other material debt or obligation of the Company or to subject
any part of the assets and properties of the Company to forfeiture or a Lien,
and if the Company has obtained therefor an adequate bond or adequate insurance
or established therefor a reserve of an adequate amount.

         SECTION 7.7 FURTHER ASSURANCES. Execute and deliver to the Purchaser
such further instruments, provide it with such further data and information and
take such further action as the Purchaser may reasonably request or as may be
reasonably necessary further to effect the purposes of the Loan Documents.

         SECTION 7.8 MAINTENANCE OF PROPERTIES. Cause all of its properties used
or useful in the conduct of its business to be maintained and kept in good
condition, repair and working order, reasonable wear and tear excepted, and
supplied with all necessary equipment and will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
the judgment of the Company may be necessary so that the business carried on in

                                       28
<PAGE>   34

connection therewith may be conducted at all times in the ordinary course of
business consistent with past practice.

         SECTION 7.9 BUSINESS. Remain substantially in the business in which it
is engaged as of the date of this Agreement.

         SECTION 7.10 REPORTING COVENANTS. Deliver to the Purchaser:

                  7.10.1 as soon as available and in any event within one
         hundred fifteen (115) days after the end of each fiscal year of the
         Company, a consolidated audited balance sheet of the Company and its
         Subsidiaries as of the end of such fiscal year and the related
         consolidated audited statements of income, retained earnings and cash
         flow for such fiscal year, setting forth in each case in comparative
         form the figures for the previous fiscal year, all in reasonable detail
         and accompanied by a report thereon of Deloitte & Touche or other
         independent public accountants acceptable to the Purchaser, which
         report will be unqualified as to scope of audit and shall state that
         such consolidated financial statements present fairly the consolidated
         financial condition of the Company and its Subsidiaries as at the end
         of such fiscal year, and the consolidated results of operations and
         statements of cash flow of the Company and its Subsidiaries for such
         fiscal year in accordance with GAAP and that the audit by such
         accountants in connection with such consolidated financial statements
         was made in accordance with GAAP;

                  7.10.2 as soon as available and in any event thirty-five (35)
         days after the end of each fiscal quarter in each fiscal year of the
         Company, a consolidated balance sheet of the Company and its
         Subsidiaries as of the end of such fiscal quarter and the related
         consolidated statements of income, retained earnings and cash flows for
         such fiscal quarter and for the portion of the Company's fiscal year
         ended at the end of such fiscal quarter, setting forth in each case in
         comparative form the figures for the corresponding fiscal quarter and
         the corresponding portion of the Company's previous fiscal year, all
         certified (subject to normal year end adjustments and absence of notes)
         as to fairness of presentation, preparation in accordance with GAAP by
         the chief financial officer of the Company;

                  7.10.3 simultaneously with the delivery of each set of
         financial statements referred to in clauses (a) and (b) above, a
         certificate of the chief financial officer of the Company substantially
         in the form of EXHIBIT E hereto (i) setting forth in reasonable detail
         the calculations required to establish whether the Company was in
         compliance with the requirements of SECTION 7.12, on the date of such
         financial statements and (ii) stating whether there exists on the date
         of such certificate any Default or Event of Default and, if any Default
         or Event of Default then exists, setting forth the details thereof and
         the action which the Company is taking or proposes to take with respect
         thereto;

                  7.10.4 forthwith upon the Company having knowledge of the
         occurrence of any Default or Event of Default hereunder or any "Event
         of Default" under any Senior Debt Documents (as such terms are defined
         in the Senior Debt Documents), a certificate of the president or chief
         financial officer of the Company setting forth the details thereof and
         the action which the Company is taking or proposes to take with respect
         thereto;

                                       29
<PAGE>   35

                  7.10.5 promptly upon the filing thereof or otherwise becoming
         available, copies of all financial statements, annual, quarterly and
         special reports, proxy statements and notices sent or made available
         generally by the Company to its security holders, of all regular and
         periodic reports and all registration statements and prospectuses, if
         any, filed by any of them with any securities exchange, and of all
         press releases and other statements made available generally to the
         public containing material developments in the business or financial
         condition of the Company;

                  7.10.6 promptly after receipt thereof, copies of all financial
         statements of, and all reports and management letters submitted by,
         independent public accountants to the Company in connection with each
         annual, interim, or special audit of the Company's financial
         statements;

                  7.10.7 within thirty (30) days prior to the end of the
         Company's fiscal year, the Company shall deliver to the Purchaser the
         annual budget for the Company and its Subsidiaries, including forecasts
         of the income statement, the balance sheet and a cash flow statement
         for the immediately succeeding year on a month by month basis and
         thereafter, shall promptly deliver any amendment thereto;

                  7.10.8 promptly after the sending thereof, copies of all
         financial statements, reports or other information sent to any holder
         of the Senior Debt;

                  7.10.9 promptly after becoming aware of (i) the occurrence
         thereof, notice of the institution by any Person of any action, suit or
         proceeding or any governmental investigation or any arbitration, before
         any court or arbitrator or any governmental or administrative body,
         agency, or official, against the Company or any of its Subsidiaries or
         material properties of any of the foregoing, and which if adversely
         determined is likely to have a Material Adverse Effect, or (ii) the
         receipt of actual knowledge thereof, notice of the threat of any such
         action, suit, proceeding, investigation or arbitration, each such
         notice under this subsection to specify, if known, the amount of
         damages being claimed or other relief being sought, the nature of the
         claim, the Person instituting the action, suit, proceeding,
         investigation or arbitration, and any other significant features of the
         claim; and

                  7.10.10 such other information respecting the condition or
         operations, financial or otherwise, of the Company or any of its
         Subsidiaries as the Purchaser may from time to time reasonably request,
         including, without limitation budget, projections, and presentations to
         lenders or investor groups.

         SECTION 7.11 USE OF PROCEEDS. Use proceeds from the sale of the Notes
and the Warrant (i) to finance acquisition and expansion, (ii) to partially
repay the Senior Debt, and (iii) for general corporate purposes; and the Company
shall not use any part of such proceeds to purchase or carry, or to reduce or
retire or refinance any credit incurred to purchase or carry, any margin stock
(within the meaning of Regulations U and X of the Board of Governors of the
Federal Reserve System) or to extend credit to others for the purpose of
purchasing or carrying any such margin stock.

                                       30
<PAGE>   36

         SECTION 7.12 COMPLIANCE WITH MATERIAL CONTRACTS. Comply in all material
respects with all material terms and conditions of the Senior Debt Documents and
all other Material Contracts.

                                   ARTICLE 8.

                               NEGATIVE COVENANTS

         For so long as any Note or any of the other Obligations remains unpaid
or unperformed, unless the Required Purchasers (or, if required pursuant to
SECTION 9.4, all Purchasers) shall otherwise consent in the manner set forth in
SECTION 9.4, each Consolidated Company shall not, directly or indirectly, and
shall not allow any Subsidiary to:

         SECTION 8.1 LIENS AND OTHER ENCUMBRANCES. Create, assume, incur or
permit to exist, or to be created, assumed, incurred or permitted to exist,
directly or indirectly, any Lien upon any of its property or assets, whether now
owned or hereafter acquired, or any income or profits therefrom except Permitted
Liens.

         SECTION 8.2 INVESTMENTS. Make any loan or advance, or otherwise acquire
for a consideration, evidences of indebtedness, capital stock or other
securities of any Person or acquire any Subsidiary (an "INVESTMENT"), except
that, so long as no Default or Event of Default then exists or would be caused
thereby, the Company may:

                  (a) make (i) draws to sales persons in the ordinary course of
         business, (ii) net advances to branches in the ordinary course of
         business, and (iii) other loans or advances to officers and employees
         for expenses incurred in the ordinary course of business in an
         aggregate amount at any time outstanding not to exceed $15,000;

                  (b) acquire and own prime commercial paper and certificates of
         deposit in United States commercial banks (whose long-term debt is
         rated "A" or better by Moody's Investors Service or Standard and Poor's
         Corporation), in each case due within one year from the date of
         purchase and payable in the United States in dollars;

                  (c) acquire and own direct obligations of the United States of
         America or any agency thereof, or obligations fully guaranteed as to
         principal and interest by the United States of America or any agency
         thereof, in each case maturing within one year from the date of
         creation of such obligation;

                  (d) endorse negotiable instruments for collection in the
         ordinary course of business;

                  (e) create or form new Subsidiaries pursuant to Section 8.4.

         SECTION 8.3 MERGER AND SALE OF ASSETS. (a) Enter into any transaction
of merger, consolidation, pooling of interest, joint venture, syndicate or other
combination with any other Person other than any merger or consolidation of (i)
any Subsidiary with another Subsidiary of the Company or (ii) of the Company

                                       31
<PAGE>   37

with another Person; PROVIDED THAT (A) the Company is the surviving entity, (B)
the Company is Solvent, (C) the Total Net Worth of the Company equals or exceeds
the Total Net Worth of the Company, immediately preceding such merger or
consolidation, (D) any consideration for stock or assets paid in connection
therewith equals the fair market value of such property and (E) no Change of
Control or other Default or Event of Default exists or is continuing; or

         (b) Sell, lease, transfer or otherwise dispose of a substantial part of
its assets (whether now owned or hereafter acquired) in any single transaction
or series of related transactions, to any Person except for fair consideration
(as determined by the board of directors of the Company) where the net proceeds
of such sale are used to repay Senior Debt, or following the repayment thereof
in full, the Obligations. Nothing set forth in this subsection (b) shall limit
the rights and remedies of the Purchaser under the Transaction Documents upon
the occurrence of a Change of Control.

         SECTION 8.4 CREATION OR ISSUANCE OF STOCK BY SUBSIDIARIES. Create any
Subsidiary other than wholly-owned Subsidiaries of the Company or any other
Consolidated Company (provided that any Subsidiary created shall execute and
deliver to the Purchaser a Guaranty Agreement in substantially the form of
ARTICLE 4 hereof, at the time such Subsidiary is created) or, except as set
forth on Schedule 8.4, permit any Subsidiary (either directly or indirectly by
the issuance of rights or options for, or securities convertible into such
shares) to issue, sell or dispose of any shares of its stock of any class (other
than directors' qualifying shares, if any) except to the Company or another
Subsidiary.

         SECTION 8.5 TRANSACTIONS WITH AFFILIATES. Enter into any material
transaction or series of related transactions (other than the payment of
ordinary fees and expenses of members of the Board of Directors of the Company,
and other than payment of the Ramsay Group Payable) which in the aggregate would
be material, whether or not in the ordinary course of business, with any
Affiliate of the Company or any of its Subsidiaries, other than on terms and
conditions substantially as favorable to the Company or such Subsidiary as would
be obtained by the Company or such Subsidiary at the time in a comparable arm's
length transaction with a Person other than an Affiliate.

         SECTION 8.6 DEBT. Incur, create, assume, guarantee, suffer to exist or
otherwise become liable on or with respect to, directly or indirectly, any Debt,
other than:

                  (a) any Debt owing to Purchaser or an Affiliate of Purchaser,
         including, without limitation, the Senior Debt described in Section 1
         of SCHEDULE 8.6;

                  (b) Debt outstanding on the Closing Date (other than the
         Senior Debt) and listed on SCHEDULE 8.6 hereof;

                  (c) endorsements of negotiable or similar instruments for
         collection or deposit in the ordinary course of business;

                                       32
<PAGE>   38

                  (d) trade payables, current liabilities or similar obligations
         (other than for borrowed money or purchase money obligations) from time
         to time incurred in the ordinary course of business;

                  (e) taxes, assessments, or other governmental charges that are
         not assessed or are being contested in good faith by appropriate action
         promptly initiated and diligently conducted and for which Company shall
         have made adequate reserves for in accordance with generally accepted
         accounting principles;

                  (f) Senior Debt; PROVIDED, HOWEVER, that in no event shall the
         principal amount of the Senior Debt exceed the sum of (i)
         $19,557,233.32 reduced by the amounts of any repayments and commitment
         reductions under the Senior Credit Agreement (after the date hereof) to
         the extent that such payments and reductions may not be reborrowed,
         plus (ii) $2,000,000;

                  (g) additional Subordinated Debt incurred by the Company after
         the Closing Date in an amount not to exceed $5,000,000; PROVIDED THAT
         such Subordinated Debt is on terms and conditions equal to, or more
         favorable to the Company as the Notes; PROVIDED FURTHER THAT after
         giving effect to the creation, incurrence or assumption of such
         Subordinated Debt, the Company is in compliance with the covenants set
         forth in SECTION 8.12 hereof, calculated on a PRO FORMA basis as of the
         last day of the most recent fiscal quarter for which a compliance
         certificate is required to be furnished to the Purchaser pursuant to
         SECTION 6.10(C) hereof, calculated as if such Indebtedness has been
         created, incurred or assumed on the first day of such period;

                  (h) purchase money Debt incurred by the Company in the
         ordinary course of business, provided that, after incurring such Debt,
         the aggregate principal amount of such Debt outstanding shall not
         exceed $750,000 and no Default or Event of Default shall occur
         hereunder;

                  (i) Capital Lease Obligations to the extent the underlying
         Capital Lease is permitted pursuant to the terms of the Senior Credit
         Agreement;

                  (j) Debt not included in paragraphs (a) through (h) above
         which by its terms is unsecured and does not exceed at any time, in the
         aggregate, the sum of $750,000.

         SECTION 8.7 LEASE OBLIGATIONS. Create or suffer to exist any
obligations for the payment of rent for any property under operating leases or
agreements to lease (other than Capital Leases) except for rental obligations of
the Company and its Subsidiaries, on a consolidated basis, not to exceed
$750,000 in any twelve month period.

         SECTION 8.8 RESTRICTED PAYMENTS. Pay or declare any dividend or make
any other distribution on or on account of any class of its stock or other
equity or make cash distributions of equity, or make interest payments on
equity, or redeem, purchase, or otherwise acquire, directly or indirectly, any
shares of its stock or other equity, or make any other payments with respect to
Debt owed to shareholders except: (i) dividends paid, or distributions made, in
the stock of the Company; (ii) dividends paid, or distributions made, in cash
with respect to Stock of the Company to the extent that the holders of the

                                       33
<PAGE>   39

Warrants concurrently receives a special distribution equal to their pro rata
share of such dividend or distribution; (iii) dividends paid, or distributions
made, by a Subsidiary to another Subsidiary or to the Company; or (iv) the
repurchase of its Common Stock from an employee; (v) payment of ordinary fees
and expenses of members of the Board of Directors of the Company; and (vi)
payment of the Ramsay Group Payable.

         SECTION 8.9 SALE AND LEASEBACKS. Except as set forth on Schedule 8.9,
enter into or permit any Subsidiary to enter into any arrangement, with any
lender or investor or under which such lender or investor is a party, providing
for the leasing by the Company or any Subsidiary of real or personal property,
used by the Company or any Subsidiary in the operations of the Company or any
Subsidiary, which has been or is sold or transferred by the Company or any
Subsidiary to such lender or investor or to any Person to whom funds have been
or are to be advanced by such lender or investor on the security of such rental
obligations of the Company or such Subsidiary.

         SECTION 8.10 SALE OR DISCOUNT OF RECEIVABLES. Sell with recourse or
discount or otherwise sell for less than the face value thereof, any of its
notes or accounts receivable.

         SECTION 8.11 COMPLIANCE WITH ERISA. Take or fail to take, nor permit
any ERISA Affiliate to take or fail to take, any action with respect to a Plan
including, but not limited to (i) establishing any Plan, (ii) amending any Plan,
(iii) terminating or withdrawing from any Plan, or (iv) incurring an amount of
unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA, or any
withdrawal liability under Title IV of ERISA, where such action or failure could
reasonably likely have a Material Adverse Effect.

         SECTION 8.12 FINANCIAL COVENANTS. At any time during the term of this
Agreement, fail to comply with the following financial covenants and ratios as
at the dates and for the fiscal periods indicated below:

         (a) TOTAL DEBT TO EBITDA RATIO. The Company's Total Debt to EBITDA
Ratio, calculated on the last day of each fiscal quarter of the Company,
commencing with the quarter ending December 31, 1999, shall not exceed 3.80:1.0.

         SECTION 8.13 FISCAL YEAR. Change its Fiscal Year from that in effect as
of the Closing Date.

         SECTION 8.14 MODIFICATIONS TO MATERIAL CONTRACTS. Permit any Material
Contract to be terminated prior to its stated maturity in the event such
termination would result in a Material Adverse Effect.

         SECTION 8.15 INCONSISTENT AGREEMENT. Enter into any contract or
agreement which would violate the terms hereof or any other Transaction
Document.

         SECTION 8.16 NO REPURCHASE AGREEMENTS. Enter into any agreements to
repurchase any of its Stock upon the death or disability of any of its
shareholders, nor shall it maintain life insurance policies on any of its
shareholders for such purpose.

                                       34
<PAGE>   40

                                   ARTICLE 9.

                                EVENTS OF DEFAULT

         SECTION 9.1 EVENTS OF DEFAULT. Each of the following shall constitute
an Event of Default, whatever the reason for such event and whether or not it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment or order of any court or any order, rule, or regulation of any
governmental or nongovernmental body:

                  (a) failure of the Company to pay any principal or interest on
         any of the Notes or any other amount payable hereunder or under any
         other Loan Document when due; or

                  (b) failure on the part of the Company to perform or observe
         any covenant contained in ARTICLE 8 or SECTIONS 7.1, 7.3 OR 7.10
         hereof; or

                  (c) failure on the part of the Company to perform or observe
         any other term, covenant or agreement contained in this Agreement not
         specifically referred to in this ARTICLE 9, and any such failure
         remains unremedied for 30 days after the earlier of (i) the discovery
         thereof by the Company or (ii) written notice thereof to the Company by
         the Purchaser; or

                  (d) any warranty or representation made by or on behalf of the
         Company contained herein or in any instrument furnished in compliance
         with or in reference to this Agreement is false or misleading in any
         material respect on the date as of which made; or

                  (e) the Company or any of its Subsidiaries shall fail to pay
         its debts generally as they come due, or shall file any petition or
         action for relief under any bankruptcy, reorganization, insolvency or
         moratorium law, or any other law or laws for the relief of, or relating
         to, debtors; or

                  (f) an involuntary petition shall be filed under any
         bankruptcy statute against the Company or any of its Subsidiaries, or a
         custodian, receiver, trustee, assignee for the benefit of creditors (or
         other similar official) shall be appointed to take possession, custody,
         or control of the properties of the Company or any of its Subsidiaries,
         unless such petition or appointment is set aside or withdrawn or ceases
         to be in effect within sixty (60) days from the date of said filing or
         appointment or an order for relief shall be entered in any such
         involuntary action; or

                  (g) the Company or any of its Subsidiaries (i) shall fail to
         make any payment when due (whether by scheduled maturity, required
         prepayment, acceleration or otherwise) with respect to any Debt (other
         than Senior Debt) in excess of $500,000 in the aggregate, or (ii) shall
         fail to perform or observe any other agreement, term or condition
         contained in any agreement under which any Debt described in clause (i)
         is created (or if any other event shall occur and be continuing

                                       35
<PAGE>   41

         thereunder) and the effect of such failure or other event set forth in
         clause (i) or (ii) above is to cause the holders thereof to cause such
         obligation to become due prior to any stated maturity; or

                  (h)      a Change of Control shall occur; or

                  (i) any order or judgment for the payment of money in excess
         of $600,000 shall be rendered against the Company or any of its
         Subsidiaries, and such order or judgment shall continue unsatisfied and
         unstayed for more than thirty (30) days, unless (i) defense of the
         action, suit or proceeding has been tendered to the Company's or such
         Subsidiary's insurance carrier, and (ii) the company's or such
         Subsidiary's insurance carrier has not denied or disputed coverage; or

                  (j) any material default shall occur and be continuing
         pursuant to the terms of any of the other Loan Documents or any Senior
         Debt shall be declared to be due and payable or required to be prepaid,
         redeemed, purchased or defeased, or an offer to prepay, redeem,
         purchase or defease such Debt shall be required to be made, in each
         case prior to the stated maturity thereof and, in each case, other than
         pursuant to the mandatory prepayment or optional prepayment provisions
         of the Senior Debt Documents, or the maturity of any or all of such
         Senior Debt is otherwise accelerated, or the Company or any of its
         Subsidiaries shall fail to pay all or any portion of the Senior Debt in
         full upon the final stated maturity of such Senior Debt; or

                  (k) the Company shall disavow, revoke or terminate any
         Transaction Document to which it is a party or shall otherwise
         challenge or contest in any action, suit or proceeding in any court or
         before any arbitrator or governmental body the validity or
         enforceability of this Agreement, the Notes or any other Transaction
         Document; or

                  (l) a warrant or writ of attachment or execution or similar
         process shall be issued against any property of the Company or any of
         its Subsidiaries which exceeds, individually or together with all other
         such warrants, writs and processes since the Closing Date, $600,000 in
         amount and such warrant, writ or process shall not be discharged,
         vacated, stayed or bonded for a period of 60 days; PROVIDED, HOWEVER,
         that in the event a bond has been issued in favor of the claimant or
         other Person obtaining such attachment or writ, the issuer of such bond
         shall execute a waiver or subordination agreement in form and substance
         satisfactory to the Purchaser pursuant to which the issuer of such bond
         subordinates its right of reimbursement, contribution or subrogation to
         the Obligations and waives or subordinates any Lien it may have on the
         assets of the Company or any Subsidiary; or

                  (m) the Company or any of its Subsidiaries is enjoined,
         restrained or in any way prevented by the order of any court or any
         administrative or regulatory agency from conducting all or any material
         part of its business and such order continues for more than thirty (30)
         days; or

                  (n) the loss, suspension or revocation or failure to renew of,
         any license, permit or Material Contract now held or hereafter acquired
         by the Company or any of its Subsidiaries, if such loss, suspension,

                                       36
<PAGE>   42

         revocation or failure to renew could reasonably likely have a Material
         Adverse Effect; or

                  (o) any order, judgment or decree is entered against the
         Company or any of its Subsidiaries decreeing the dissolution or split
         up of the Company or that Subsidiary and such order remains
         undischarged or unstayed for a period in excess of sixty (60) days; or

         SECTION 9.2 REMEDIES ON DEFAULT. (a) Upon the occurrence and
continuation of an Event of Default (other than an Event of Default described in
SECTION 9.1 (E) and (F)), the Required Purchasers, subject to the Subordination
Agreement, may, in their sole discretion, but shall not be obligated to, declare
all amounts payable by the Company under the Notes to be forthwith due and
payable, including, without limitation, costs of collection (including
reasonable attorneys' fees if collected by or through an attorney at law or in
bankruptcy, receivership or other judicial proceedings) and the same shall
thereupon become immediately due and payable without demand, presentment,
protest or further notice of any kind, all of which are hereby expressly waived,
and may exercise all of its rights and remedies under the Loan Documents or
under applicable law.

                  (b) Upon the occurrence of any Event of Default set forth in
         clause (E) or (F) above, without any notice to the Company or any other
         act by the Required Purchasers, all amounts payable by the Company
         under the Notes, including, without limitation, all costs of collection
         (including reasonable attorneys' fees if collected by or through an
         attorney at law or in bankruptcy, receivership or other judicial
         proceedings) shall be immediately due and payable, without presentment,
         demand, protest or notice of any kind, all of which are hereby
         expressly waived by the Company.

                  (c) No remedy herein conferred or reserved is intended to be
         exclusive of any other available remedy or remedies, but each and every
         such remedy shall be cumulative and shall be in addition to every other
         remedy given under this Agreement or now or hereafter existing at law
         or in equity or by statute. No delay or omission to exercise any right
         or power accruing upon any default, omission or failure of performance
         hereunder shall impair any such right or power or shall be construed to
         be a waiver thereof, but any such right or power may be exercised from
         time to time and as often as may be deemed expedient. In order to
         exercise any remedy reserved to the Purchaser in this Agreement, it
         shall not be necessary to give any notice, other than such notice as
         may be herein expressly required.

                                  ARTICLE 10.

                                 MISCELLANEOUS

         SECTION 10.1 NOTICES. All notices, requests and other communications to
any party hereunder shall be in writing (including telecopier) and shall be
effective (a) if given by mail, when deposited in the mails or (b) if given by
telecopier, when so telecopied. Notices hereunder shall be mailed or telecopied
as follows:

                                       37
<PAGE>   43

         If to the Company or any other Consolidated Company:

         If to the Company:

                  Ramsay Youth Services, Inc.
                  One Alhambra Plaza
                  Suite 750
                  Coral Gables, Florida  33134
                  Attn:  Mr. Marcio C. Cabrera
                  Telecopy Number:  (305) 569-4647
                  Telephone Number: (305) 569-4652

         with a copy to:

                  Torys
                  237 Park Avenue
                  New York, New York 10017
                  Attn:  Joseph J. Romagnoli, Esq.
                  Telecopy Number:  (212) 682-0200
                  Telephone Number: (212) 880-6000

         If to the Purchaser:

                  SunTrust Banks, Inc.
                  303 Peachtree Street, Suite 2400
                  Atlanta, GA 30308
                  Attn:  Mr. Robert L. Dudiak
                  Telecopy Number:   (404) 724-3754
                  Telephone Number: (404) 588-8735

         with a copy to:

                  King & Spalding
                  191 Peachtree Street
                  Atlanta, GA 30303
                  Attn:  Hector E. Llorens, Jr., Esq.
                  Telecopy Number:  (404) 572-4600
                  Telephone Number:  (404) 572-5100

         SECTION 10.2 NO WAIVER. No delay or failure on the part of the
Purchaser or any holder of the Notes and the exercise of any right, power or
privilege granted under this Agreement or any other Transaction Document or
available at law or in equity, shall impair any such right, power or privilege
or be construed as a waiver of any Event of Default or any acquiescence therein.
No single or partial exercise of any such right, power or privilege shall
preclude the further exercise of such right, power or privilege. No waiver shall

                                       38
<PAGE>   44

be valid against the Purchaser unless made in writing and signed by the
Purchaser, and then only to the extent expressly specified therein.

         SECTION 10.3 EXPENSES.

                  (1) The Company agrees to pay on demand all costs, expenses,
         (i) incurred by the Purchaser in connection with the preparation,
         execution and delivery of this Agreement and all other Transaction
         Documents, including the reasonable fees and disbursements of counsel
         for the Purchaser in an amount not to exceed $50,000; (ii) incurred by
         the Purchaser in connection with the preparation, execution and
         delivery of any waiver, amendment or consent by the Purchaser relating
         to the Transaction Documents, including the reasonable costs and fees
         of counsel for the Purchaser; and (iii) incurred by the Purchaser,
         including the reasonable costs and fees of its counsel, in connection
         with the enforcement of the Transaction Documents.

                  (2) The Company agrees to indemnify, pay and hold the
         Purchaser and any holder of any of the Notes and the Warrants and the
         officers, directors, employees and agents of the Purchaser and such
         holders (the "INDEMNIFIED PERSONS") harmless from and against any and
         all liabilities, losses, damages, costs and expenses of any kind
         (including, without limitation, the reasonable fees and disbursements
         of counsel for any Indemnified Person in connection with any
         investigative, administrative or judicial proceeding, whether or not
         such Indemnified Person shall be designated a party thereto) which may
         be incurred by any Indemnified Person, relating to or arising out of
         the enforcement of this Agreement, the Notes, the Warrants or any other
         Transaction Document or any actual or proposed use of proceeds of the
         Note; PROVIDED, that no Indemnified Person shall have the right to be
         indemnified hereunder for its own gross negligence or willful
         misconduct, as determined by a court of competent jurisdiction.

         SECTION 10.4 AMENDMENTS, ETC. Any provision of this Agreement, the
Notes, or any other Loan Document to which the Company is a party may be amended
or waived, if such amendment or waiver is in writing and is signed by the
Company, as the case may be, and the Required Purchasers; PROVIDED THAT, without
the approval in writing of each Purchaser with respect to its Note, no
amendment, modification, supplement, termination, waiver, or consent may be
effective:

                  (a) to amend or modify the principal of such Note, or the
         amount of principal payments or prepayments required hereunder, or the
         rate of interest payable on any Note;

                  (b) to postpone any date fixed for any payment of principal
         of, prepayment of principal of, or any installment of interest on, any
         Note or to extend the term of any Note;

                  (c) to amend or modify the definitions of "Required
         Purchasers," or the provisions of this SECTION 9.4;

Any amendment, modification, supplement, termination, waiver or consent effected
in accordance with this SECTION 9.4 shall apply equally to, and shall be binding
upon, all Purchasers.

                                       39
<PAGE>   45

         SECTION 10.5 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; PROVIDED, that the Company may not assign or
otherwise transfer any of its rights or obligations under this Agreement, the
Notes or any other Transaction Document to any Person without the prior written
consent of the Purchaser. Such assignee shall have, to the extent of such
assignment (unless otherwise provided therein), the same rights, obligations and
benefits as it would have if it were the Purchaser hereunder and under the other
Loan Documents. Notwithstanding the foregoing, the Purchaser may sell or
otherwise grant participations in all or any part of the Notes. The holder of
any such participation, if the participation agreement so provides, shall have
the same rights and benefits of the Purchaser hereunder.

         SECTION 10.6 GOVERNING LAW. THIS AGREEMENT, THE NOTES AND THE WARRANTS
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
GEORGIA (WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAWS).

         SECTION 10.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein or made by or furnished on
behalf of the Company in connection herewith shall survive the execution and
delivery of this Agreement.

         SECTION 10.8 SEVERABILITY. If any part of any provision contained in
this Agreement shall be invalid or unenforceable under applicable law, said part
shall be ineffective to the extent of such invalidity only, without in any way
affecting the remaining parts of said provision or the remaining provisions.

         SECTION 10.9 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which, taken together, shall constitute one and the same instrument.

         SECTION 10.10 SET-OFF. Upon the occurrence and during the continuation
of an Event of Default, each Consolidated Company authorizes the Purchaser,
without notice or demand, to apply any indebtedness due or to become due to such
Consolidated Company from the Purchaser in satisfaction of any of the
indebtedness, liabilities or obligations of such Consolidated Company under this
Agreement or under any other Loan Document, including, without limitation, the
right to set-off against any deposits or other cash collateral of the Company
held by the Purchaser or an Affiliate thereof.

         SECTION 10.11 TERMINATION OF AGREEMENT. This Agreement shall terminate
upon the payment in full of the Notes and all Obligations relating thereto;
provided that, SECTIONS 3.2, 3.3 and 10.3 shall survive the termination of this
Agreement.

         SECTION 10.12 JURISDICTION AND VENUE. EACH CONSOLIDATED COMPANY AGREES,
WITHOUT POWER OF REVOCATION, THAT ANY CIVIL SUIT OR ACTION BROUGHT AGAINST IT AS
A RESULT OF ANY OF ITS OBLIGATIONS UNDER THIS AGREEMENT OR UNDER ANY OTHER
TRANSACTION DOCUMENT TO WHICH IT IS A PARTY MAY BE BROUGHT AGAINST IT EITHER IN
THE IN THE CIRCUIT COURT OF FULTON COUNTY, GEORGIA, OR IN THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA, AND THAT SERVICE OF PROCESS
MAY BE MADE UPON IT IN ANY SUCH SUIT OR ACTION BY SERVICE OF PROCESS AS PROVIDED
BY GEORGIA LAW. EACH CONSOLIDATED COMPANY HEREBY IRREVOCABLY SUBMITS TO THE

                                       40
<PAGE>   46
JURISDICTION OF SUCH COURTS AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTIONS THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF SUCH CIVIL SUIT OR ACTION AND ANY CLAIM THAT SUCH CIVIL SUIT OR
ACTION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH CONSOLIDATED COMPANY
AGREES THAT FINAL JUDGMENT IN ANY SUCH CIVIL SUIT OR ACTION SHALL BE CONCLUSIVE
AND BINDING UPON IT AND SHALL BE ENFORCEABLE AGAINST IT BY SUIT UPON SUCH
JUDGMENT IN ANY COURT OF COMPETENT JURISDICTION.

         SECTION 10.13 WAIVER OF JURY TRIAL. EACH OF THE COMPANY, SUBSIDIARY
GUARANTOR AND PURCHASER KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY
WAIVE THE RIGHT EITHER OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY
LITIGATION, WHETHER IN CONTRACT OR TORT, AT LAW OR EQUITY, BASED HEREON, OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND ANY OTHER
DOCUMENT OR INSTRUMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN)
OR ACTIONS OF ANY PARTY HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
PURCHASER ENTERING INTO THIS AGREEMENT. FURTHER, EACH CONSOLIDATED COMPANY
HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF PURCHASER, NOR THE
PURCHASER'S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT PURCHASER
WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT
TO JURY TRIAL PROVISION, NO REPRESENTATIVE OR AGENT OF THE PURCHASER, NOR
PURCHASER'S COUNSEL HAS THE AUTHORITY TO WAIVE, CONDITION, OR MODIFY THIS
PROVISION.

         SECTION 10.14 ENTIRE AGREEMENT. This Agreement, the Notes, the Warrants
and the other Transaction Documents to which the Company is a party, together
with any exhibits and schedules attached hereto and thereto, constitute the
entire understanding of the parties with respect to the subject matter hereof
and thereof, and any other prior or contemporaneous agreements, whether written
or oral, with respect hereto or thereto are expressly superseded hereby. The
execution of this Agreement, the Notes, the Warrants and the other Transaction
Documents to which the Company is a party by the Company was not based upon any
facts or materials provided by the Purchaser, nor was the Company induced to
execute this Agreement, the Note, the Warrants or the other Transaction
Documents to which the Company is a party by any representation, statement or
analysis made by the Purchaser.

                         [SIGNATURES ON FOLLOWING PAGES]

                                       41
<PAGE>   47

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their authorized officers all as of the day and year first above
written.

                             COMPANY:

                                      RAMSAY YOUTH SERVICES, INC.

                                      By:  ___________________________________
                                           Marcio C. Cabrera
                                           Executive Vice President

                             SUBSIDIARY GUARANTORS:

                                  BETHANY PSYCHIATRIC HOSPITAL, INC.,
                                  an Oklahoma corporation

                                  BOUNTIFUL PSYCHIATRIC HOSPITAL, INC.,
                                  a Utah corporation

                                  EAST CAROLINA PSYCHIATRIC SERVICES
                                  CORPORATION, a North Carolina corporation

                                  GREAT PLAINS HOSPITAL, INC., a Missouri
                                  corporation

                                  GULF COAST TREATMENT CENTER, INC.,
                                  a Florida corporation

                                  H.C. CORPORATION, an Alabama corporation

                                  HAVENWYCK HOSPITAL, INC., a Michigan
                                  corporation

                                  HSA HILL CREST CORPORATION, an
                                  Alabama corporation

                                  HSA OF OKLAHOMA, INC., an Oklahoma
                                  corporation

                                  MICHIGAN PSYCHIATRIC SERVICES, INC.,
                                  a Michigan corporation

                        [SIGNATURE PAGE TO SUBORDINATED
                      NOTE AND WARRANT PURCHASE AGREEMENT]

                                       42
<PAGE>   48

                                  RAMSAY EDUCATIONAL SERVICES, INC.,
                                  a Delaware corporation

                                  RAMSAY HOSPITAL CORPORATION OF LOUISIANA,
                                  INC., a Louisiana corporation

                                  RAMSAY LOUISIANA, INC., a Delaware
                                  corporation

                                  RAMSAY MANAGED CARE, INC., a Delaware
                                  corporation

                                  RAMSAY YOUTH SERVICES OF ALABAMA, INC.,
                                  a Delaware corporation

                                  RAMSAY YOUTH SERVICES OF FLORIDA, INC., a
                                  Delaware corporation

                                  RAMSAY YOUTH SERVICES OF SOUTH CAROLINA, INC.,
                                  a Delaware corporation

                                  RAMSAY YOUTH SERVICES PUERTO RICO, INC.,
                                  a Puerto Rico corporation

                                  RHCI SAN ANTONIO, INC., a Delaware
                                  corporation

                                  TRANSITIONAL CARE VENTURES, INC., a
                                  Delaware corporation

                                  TRANSITIONAL CARE VENTURES (TEXAS), INC.,
                                  a Delaware corporation

                                  By:_____________________________

                                      Marcio C. Cabrera
                                      Vice President

                                        Address For all Subsidiary's:

                                         c/o Ramsay Youth Services
                                         One Alhambra Plaza
                                         Suite 750
                                         Coral Gables, Florida 33134
                                         Attention: Mr. Marcio C. Cabrera

                        [SIGNATURE PAGE TO SUBORDINATED
                      NOTE AND WARRANT PURCHASE AGREEMENT]

                                       43
<PAGE>   49

                         H.C. PARTNERSHIP

                               By:  H.C. CORPORATION, an Alabama
                                     corporation, as a general partner

                                       By:_______________________
                                           Marcio C. Cabrera
                                           Vice President

                               By:  HSA HILL CREST CORPORATION,
                                       an Alabama corporation, as a general
                                       partner

                                       By:_______________________
                                           Marcio C. Cabrera
                                           Vice President

                                           Address for both:

                                           c/o Ramsay Youth Services, Inc.
                                           One Alhambra Plaza
                                           Suite 750
                                           Coral Gables, Florida  33134
                                           Attention: Mr. Marcio C. Cabrera

                        [SIGNATURE PAGE TO SUBORDINATED
                      NOTE AND WARRANT PURCHASE AGREEMENT]

                                       44
<PAGE>   50

                                     PURCHASER:

                                     SUNTRUST BANKS, INC.

                                     By:  ___________________________________
                                          Robert L. Dudiak
                                          Group Vice President

                        [SIGNATURE PAGE TO SUBORDINATED
                      NOTE AND WARRANT PURCHASE AGREEMENT]

                                       45<PAGE>   1
                                                                  Exhibit 10.142

                          REGISTRATION RIGHTS AGREEMENT

         THIS REGISTRATION RIGHTS AGREEMENT is made as of January 25, 2000, by
and between RAMSAY YOUTH SERVICES, INC., a Delaware corporation (the "COMPANY"),
and SUNTRUST BANKS, INC., a Georgia corporation (the "PURCHASER").

                                    RECITALS

         WHEREAS, the Company and the Purchaser are parties to that certain
Subordinated Note and Warrant Purchase Agreement dated as of January 25, 2000
(as amended, supplemented or otherwise modified from time to time, the "PURCHASE
AGREEMENT") providing for, among other things, the purchase by the Purchaser of
Warrants which, in accordance with the terms of the Purchase Agreement, will be
exercisable for shares of Common Stock of the Company; and

         WHEREAS, in connection with the purchase by the Purchaser of the
Warrants, the Company and the Purchaser have entered into that certain Warrant
Agreement dated as of January 25, 2000 (as amended, supplemented or otherwise
modified from time to time, the "WARRANT AGREEMENT") providing for, among other
things, additional terms and conditions regarding the Warrants.

         NOW THEREFORE, in consideration of the foregoing, the parties agree as
follows:

         1. CERTAIN DEFINITIONS. Capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to such terms in the Warrant
Agreement. As used in this Agreement, the following terms shall have the
following respective meanings:

         "ACCEPTANCE NOTICE" shall have the meaning set forth in SECTION
2(b)(ii).

         "AFFILIATE" shall mean, with respect to any Person (the "SPECIFIED
PERSON"), any other Person other than the Specified Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with, the Specified Person. For purposes of this definition, the term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of any Person, whether through the
ownership of voting securities, partnership interests, any contract or
otherwise; PROVIDED, HOWEVER, that the holding by Purchaser of the Warrant
Securities shall not be deemed to constitute Purchaser as an Affiliate of the
Company hereunder.

         "COMMISSION" shall mean the Securities and Exchange Commission of the
United States or any other United States federal agency at the time
administering the Securities Act.

         "HOLDER" shall mean the Purchaser and its transferees as permitted by
SECTION 10 holding Registrable Securities or securities convertible into or
exercisable for Registrable Securities.

                                      -1-
<PAGE>   2

         "INDEMNIFIED PARTY" shall have the meaning set forth in SECTION 7(c).

         "INDEMNIFYING PARTY" shall have the meaning set forth in SECTION 7(c).

         "INITIATING HOLDER" shall mean the Holder who initiates a request for
registration pursuant to SECTION 2(a).

         "OFFER" shall have the meaning set forth in SECTION 2(b)(ii).

         "OTHER HOLDERS" shall mean holders of Company securities, other than
Holders, proposing to distribute their securities pursuant to a registration
under the Securities Act.

         "QUOTED PRICE" of Common Stock on any day is the last reported sales
price of the Common Stock on such day as reported by Nasdaq or, if the Common
Stock is listed on a national securities exchange, the last reported sales price
of the Common Stock on such exchange (which shall be for consolidated trading if
applicable to such exchange) on such day or, if the Common Stock is neither
reported nor listed, the average of the last reported bid and asked prices of
the Common Stock on such day.

         The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.

         "REGISTRABLE SECURITIES" shall mean the Warrant Shares. Shares of
Common Stock or other securities shall cease to be Registrable Securities if (A)
they have been effectively registered under the Securities Act and disposed of
in accordance with the registration statement covering them, (B) they have
become eligible for sale pursuant to Rule 144 (or any similar provision then in
force under the Securities Act), (C) this Agreement is terminated with respect
to the holder of such securities or (D) they are acquired by the Company or any
of its Subsidiaries. The Company shall be required to register only Common Stock
pursuant to this Agreement and, consistent therewith, any Holder shall exercise
or convert, as a condition to participation in any registration under this
Agreement, its Warrant in conjunction with the inclusion of such Warrant Shares
in any registration by the Company contemplated by this Agreement.

                                      -2-
<PAGE>   3

         "REGISTRATION EXPENSES" shall mean all expenses incurred by the Company
in complying with SECTIONS 2 AND 3 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and expenses of counsel for the Company, fees and expenses of one counsel
for all Holders, blue sky fees and expenses, fees and expenses of all
independent certified public accountants of the Company (including, without
limitation, the expenses of any special audit and, in connection with any
underwritten offering, "cold comfort" letters), fees and expenses incurred in
connection with the listing of the securities to be registered on each
securities exchange on which securities of the same class are then listed or the
qualification for trading of the securities to be registered in each
inter-dealer quotation system in which securities of the same class are then
traded, and fees and expenses associated with any NASD filing required to be
made in connection with such registration, but excluding any and all
underwriting discounts and commissions.

         "REGISTRATION NOTICE" shall have the meaning set forth in SECTION 2(A).

         "RULE 145 TRANSACTION" shall mean a transaction described in clause (a)
of Rule 145 promulgated under the Securities Act.

         "SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the sale of Registrable
Securities and all fees and disbursements of counsel for each of the Holders
other than fees and expenses of one counsel for all Holders.

         "SELLING HOLDERS" shall mean each Holder who holds Registrable
Securities included in a registration statement under the Securities Act
pursuant to this Agreement.

         2.       REQUESTED REGISTRATION.

                  (a) REQUEST FOR REGISTRATION. In case the Company shall
receive from an Initiating Holder a written request that the Company effect a
registration or qualification with respect to a public offering of shares of
then outstanding Registrable Securities (a "REGISTRATION NOTICE"), the Company
will as soon as practicable, use its best efforts to effect such registration or
qualification (including, without limitation, appropriate qualification under
applicable blue sky or other state securities laws) as may be so requested and
as would permit or facilitate the sale and distribution of all or such portion
of such Registrable Securities as are specified in such Registration Notice.
Notwithstanding the foregoing, the Company shall not be obligated to effect, or
to take any action to effect, any such registration or qualification pursuant to
this SECTION 2(a):

                      (i) in any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration or qualification unless the Company is already
subject to service in such jurisdiction and except as may be required by the
Securities Act;

                      (ii) during the period starting with the date sixty (60)
days prior to the Company's estimated date of filing of, and ending on the date
six (6) months immediately following the effective date of, any registration
statement pertaining to securities of the Company to be sold by the Company
(other than a registration of securities in a Rule 145 Transaction or with
respect to an employee benefit plan), provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective;

                      (iii) after the Company has effected one registration at
the request of the Holders pursuant to this SECTION 2(a) (in the aggregate for
all Holders), only if a registration statement covering all Registrable
Securities requested by the Initiating Holder to be registered pursuant to this
SECTION 2(a) shall have become effective and, if the method of disposition is a

                                      -3-
<PAGE>   4

firm commitment underwritten public offering, all such Registrable Securities
shall have been sold pursuant thereto;

                      (iv) if any firm of counsel representing the Company in
connection with any such registration shall advise the Company and the Holders
in writing that in their opinion the registration under the Securities Act
contemplated hereby is not necessary to permit the sale in the intended method
of disposition by the Holders, of the Registrable Securities in a transaction
constituting a public offering within the meaning of the Securities Act, then
the Company shall not be required to take any action with respect to such
registration; provided, however, that the provisions of this clause (iv) shall
not apply if the Holder reasonably determines that the Company's failure to take
any action with respect to such registration could result in a sale of such
Registrable Securities under terms and conditions less favorable to Holder than
if the Registrable Securities were registered as provided herein, or if such
failure to register the Registrable Securities could delay the sale of the
Registrable Securities by the Holder.

                      (v) if the Company shall furnish to the Initiating Holder
a certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its stockholders for a registration statement to be filed in the
near future or that a delay is necessary to avoid the disclosure of material
non-public information concerning the Company or its Subsidiaries, then the
Company's obligation to use its best efforts to register or qualify under this
SECTION 2(a) shall be deferred for a period not to exceed ninety (90) days from
the date of receipt of the Registration Notice, PROVIDED, HOWEVER, that the
Company shall not utilize this right more than twice in any twelve (12) month
period; or

Subject to the foregoing clauses (i) through (v), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable, and in any event within sixty (60) days after
receipt of the Registration Notice. The registration statement filed pursuant to
the request of the Initiating Holder may, subject to the provisions of Section
2(c) below, include other securities of the Company, which may be held by Other
Holders.

                                      -4-
<PAGE>   5

         (b)      COMPANY'S RIGHT TO PURCHASE.

                  (i) If, within ten (10) business days following the receipt by
the Company of a Registration Notice, the Company notifies the Holders of its
good faith intention to purchase such Registrable Securities in accordance with
the terms of this SECTION 2(b) and the Company notifies the Holders that the
Company reasonably believes that the Agent will unconditionally consent in
writing to the Company's purchase of such Registrable Securities, then the
Company's obligations to use its best efforts to register or qualify under
SECTION 2(A) shall be deferred for a period not to exceed ten (10) business days
following the receipt by the Holders of the Company's notice of its intent to
purchase such Registrable Securities along with a copy of the Agent's
unconditional written consent to the Company purchasing such Registrable
Securities, unless the Company delivers an Acceptance Notice (as defined in
clause (ii) below) to the Holders along with a copy of the Agent's unconditional
written consent to the Company purchasing such Registrable Securities, in which
case the Company's obligations shall be deferred for a period not to exceed
thirty (30) days following the receipt by the Holders of the Acceptance Notice.

                  (ii) A Holder's request for registration pursuant to SECTION
2(a) shall be an offer by such Holder (the "OFFER") to sell to the Company all
Warrant Shares proposed to be included in such registration by such Holder for a
cash purchase price equal to the product of (A) the average of the Quoted Prices
for the Common Stock for the thirty (30) consecutive trading days commencing
forty-five (45) trading days prior to such Registration Notice multiplied by (B)
the number of Warrant Shares offered to the Company by such Holder. After
receipt by the Company of a Registration Notice pursuant to SECTION 2(a), the
Company shall have ten (10) business days to give written notice of its
intention to accept or reject the Offer and agree to purchase all, but not less
than all, Warrant Shares proposed to be included in such registration. Failure
to respond within such 10-day period shall be deemed notice of rejection. In the
event that the Company notifies the Holders of its intention to accept such
Offer (the "ACCEPTANCE NOTICE"), then the Acceptance Notice, taken in
conjunction with the Offer, shall constitute a valid and legally binding
purchase and sale agreement, and payment in cash for such Warrant Shares shall
be made by the Company within thirty (30) days following the receipt by the
Holders of the Acceptance Notice. If the Company rejects or is deemed to reject
the Offer (or if the Company did not in good faith intend to accept the Offer),
the Company will expeditiously prepare and file a registration statement with
respect to, and use its best efforts to effect the registration of, the
Registrable Securities requested to be registered pursuant to SECTION 2(A).

                  (iii) If the Company gives an Acceptance Notice, it shall
promptly notify each Holder that elected to participate in the Registration
Notice, and the Company shall have no obligation to register the shares of
Registrable Securities as to which the election to participate was made until
subsequently obligated to do so under SECTION 2 or 3.

         (c)      UNDERWRITING. If the Initiating Holder intends to
distribute the Registrable Securities covered by its request by means of an
underwriting, it shall so advise the Company as a part of its request made
pursuant to Section 2(a). If Other Holders having registration rights with the

                                      -5-
<PAGE>   6

Company request inclusion in any such registration, the Selling Holders shall
offer to include the securities of such Other Holders in the underwriting
subject to the applicable provisions of this Section 2. The Selling Holders and
the Company shall (together with all Other Holders proposing to distribute their
securities through such underwriting) enter into underwriting and related
agreements in customary form with the representative of the underwriter or
underwriters selected for such underwriting by the Company. Such underwriting
agreement will contain such representations and warranties by the Company and
such other terms and provisions as are customarily contained in underwriting
agreements with respect to secondary distributions, including, without
limitation, indemnities and contribution to the effect and to the extent
provided in Section 7 hereof and the provision of opinions of counsel and
accountants' letters to the effect and to the extent provided in Section 6
hereof, and the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of the Selling Holders. The Company shall
reasonably cooperate with the Selling Holders and the underwriters in connection
with any underwritten offering. Notwithstanding any other provision of this
Section 2(c), if the representative advises the Selling Holders in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the securities of the Company held by Other Holders shall be
excluded from such registration to the extent so required by such limitation.
If, after the exclusion of such securities, still further reductions are still
required, the number of shares included in the registration by each Selling
Holder shall be allocated ratably among them (based on the number of shares held
by such Selling Holder), by such minimum number of shares as is necessary to
comply with such request; provided, that there shall be no reduction in the
number of shares included in the registration by any Selling Holder until all
shares of Other Holders have been excluded from such registration. No
Registrable Securities or any other securities excluded from the underwriting by
reason of the underwriter's marketing limitation shall be included in such
registration. If any Other Holder who has requested inclusion in such
registration as provided above disapproves of the terms of the underwriting,
such person may elect to withdraw therefrom by written notice to the Company,
the underwriter and the Initiating Holder. The securities so withdrawn shall
also be withdrawn from registration. If the underwriter has not limited the
number of Registrable Securities or other securities to be underwritten, the
Company and officers and directors of the Company may include its or their
securities for its or their own account in such registration if the managing
underwriter of such proposed underwritten offering so agrees and if the number
of Registrable Securities and other securities which would otherwise have been
included in such registration and underwriting will not thereby be limited.

         3.       COMPANY REGISTRATION.

                  (a)      NOTICE OF REGISTRATION. If at any time the Company
shall determine to register any of its equity securities, either for its own
account or the account of a security holder or holders (including, without
limitation, pursuant to SECTION 2), other than (i) a registration relating
solely to employee benefit plans, (ii) pursuant to a registration statement on
Form S-4, or any successor to such Form or (iii) a registration relating solely

                                      -6-
<PAGE>   7

to a Rule 145 Transaction or a registration on any registration form which does
not permit secondary sales or does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of Registrable Securities, the Company will:

                  (i) give prompt (and in any event within twenty business (20)
days before the anticipated filing date of the related registration statement)
written notice thereof to each Holder indicating the proposed offering price and
describing the plan of distribution; and

                  (ii) include in such registration (and any related
qualification under blue sky laws) and, at the request of any Holder, in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made by any Holder within ten (10) business days
after the giving of the written notice from the Company described in clause (i)
above, except as set forth in Section 3(b) below. Such written request by a
Holder shall specify the amount of Registrable Securities intended to be
disposed of by a Holder and may specify all or a part of the Holders'
Registrable Securities.

No registration of Registrable Securities effected under this SECTION 3(a) shall
relieve the Company of its obligation to effect a registration of Registrable
Securities pursuant to SECTION 2(a).

         (b)      UNDERWRITING. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to SECTION 3(A)(I). In such event the right of any Holder to
registration pursuant to this SECTION 3(B) shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided in this
SECTION 3(B). All Holders proposing to distribute their securities through such
underwriting shall, together with the Company and the Other Holders, enter into
an underwriting agreement in customary form with the managing underwriter
selected for such underwriting by the Company. The Company shall use its
reasonable best efforts to cause the managing underwriter of such proposed
underwritten offering to permit the Registrable Securities proposed to be
included in such registration to be included in the registration statement for
such offering on the same terms and conditions as any similar securities of the
Company included therein, except that the Company shall not for any such purpose
be required to qualify generally to do business as a foreign corporation in any
jurisdiction where it is not so qualified, or to subject itself to taxation in
any such jurisdiction, or to execute a general consent to service of process in
effecting such registration, qualification or compliance, unless the Company is
already subject to service in such jurisdiction. Notwithstanding any other
provision of this SECTION 3, the Company shall be entitled to include in the
registration all of the shares which the Company desires to sell for its own
account, and if the managing underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten, the managing
underwriter may limit the Registrable Securities and other securities to be
included in such registration. The Company shall so advise all Selling Holders
and Other Holders, and the number of shares that may be included in the
registration and underwriting by all Selling Holders and Other Holders (the
"Includable Securities") shall be allocated pro rata among them, as nearly as
practicable, as follows: FIRST, Includable Securities shall be allocated among

                                      -7-
<PAGE>   8

the Other Holders, if any, exercising their demand registration rights; SECOND,
the Holders and Other Holders exercising "piggy back" registration rights; and
THIRD, the remainder of the Includable Securities to the remaining Other
Holders. To facilitate the allocation of shares in accordance with the above
provisions, the Company may round the number of shares allocated to any Holder
or Other Holder to the nearest one hundred (100) shares. If any Holder or Other
Holder disapproves of the terms of any such underwriting, such person may elect
to withdraw therefrom by written notice to the Company and the managing
underwriter. Any securities excluded or withdrawn from such underwriting also
shall be withdrawn from such registration, and shall not be transferred prior to
one hundred eighty (180) days after the effective date of the registration
statement relating thereto, or such other shorter period of time as the
underwriters may require.

                  (c)      RIGHT TO TERMINATE REGISTRATION. The Company shall
have the right for any reason to terminate or withdraw any registration
initiated by it under this SECTION 3 prior to the effectiveness of such
registration whether or not any Holder has elected to include Registrable
Securities in such registration and thereafter the Company shall be relieved of
its obligation to register such Registrable Securities in connection with the
registration of such equity securities.

         4.       LIMITATIONS ON REGISTRATION RIGHTS OF OTHERS. Except as set
forth on Schedule 4 attached hereto, the Company represents and warrants that,
except pursuant to this Agreement, it has not granted to any Person the right to
request or require the Company to register any securities issued by the Company.
The Company also covenants and agrees that, from and after the date hereof, the
Company will not, without the prior written consent of holders of a majority of
the then outstanding Warrant Securities, enter into any agreement with any
holder or prospective holder of any securities of the Company that allows such
holder or prospective holder of any securities of the Company to include such
securities in any registration filed under SECTION 2 hereof, unless the rights
granted under the terms of such agreement are expressly subject to the rights of
registration granted to the Holders pursuant to SECTION 2 hereof.

         5.       EXPENSES OF REGISTRATION.

                  (a)      REGISTRATION EXPENSES. The Company shall bear all
Registration Expenses incurred in connection with all registrations pursuant to
SECTIONS 2 and 3. In the event the Initiating Holder withdraws a Registration
Notice or abandons a registration statement, then all Registration Expenses in
respect of such Registration Notice shall be borne, at the Initiating Holders'
option, either by the Initiating Holders or by the Company (in which case, if
borne by the Company, such withdrawn or abandoned registration shall be deemed
to be an effective registration for purposes of SECTION 2(A)(III)).

                  (b)      SELLING EXPENSES. All Selling Expenses relating to
securities registered on behalf of the Holders and Other Holders shall be borne
by the Holders and Other Holders pro rata on the basis of the number of shares
so registered.

         6.       REGISTRATION AND QUALIFICATION. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable

                                      -8-
<PAGE>   9

Securities pursuant to SECTION 2, the Company will use its best efforts to
effect such registration to permit the sale of such Registrable Securities in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto it will, as promptly as is practicable:

                  (a)      before filing a registration statement or prospectus
or any amendments or supplements thereto, furnish to the counsel of the Selling
Holders copies of all documents proposed to be filed, which documents will be
made available on a timely basis, for review by such counsel to the Holders;

                  (b)      prepare and file with the Commission, as soon as
practicable, and use its best efforts to cause to become effective, a
registration statement under the Securities Act relating to the Registrable
Securities to be offered on such form under the Securities Act as the Initiating
Holder or, if not filed pursuant to SECTION 2 hereof, the Company, determines,
and for which the Company then qualifies;

                  (c)      prepare and file with the Commission such amendments
(including post-effective amendments) and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary to
keep such registration statement effective and to comply with the provisions of
the Securities Act with respect to the disposition of all Registrable Securities
covered by such registration statement for a period of one hundred eighty (180)
days or until such time as all of such Registrable Securities have been disposed
of in accordance with the intended methods of disposition set forth in such
registration statement, whichever first occurs.

                  (d)      furnish to the Selling Holders and to any underwriter
of Registrable Securities such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included in
such registration statement (including each preliminary prospectus and any
summary prospectus) and any amendment or supplement thereto, in conformity with
the requirements of the Securities Act, such documents incorporated by reference
in such registration statement or prospectus, and such other documents, as the
Selling Holders or such underwriter may reasonably request, and, if requested, a
copy of any and all transmittal letters or other correspondence to, or received
from, the Commission or any other governmental agency or self-regulatory body or
other body having jurisdiction (including any domestic or foreign securities
exchange) relating to such offering;

                  (e)      make reasonable efforts to obtain the withdrawal of
any order suspending the effectiveness of such registration statement at the
earliest possible moment;

                  (f)      if requested by a Selling Holder, (i) use its
reasonable best efforts to furnish to each Selling Holder and to any underwriter
an opinion of counsel for the Company addressed to each Selling Holder and
underwriter and dated the date of the closing under the underwriting agreement
(if any) (or if such offering is not underwritten, dated the effective date of
the registration statement), (ii) use its reasonable best efforts to furnish to
each Selling Holder a "cold comfort" or "special procedures" letter addressed to
each Selling Holder and signed by the independent public accountants who have
audited the Company's financial statements included in such registration

                                      -9-
<PAGE>   10

statement, (iii) make such representations and warranties to the Selling Holders
and, in connection with any underwritten offering, to the underwriters, in each
such case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) as are customarily
covered in opinions of issuer's counsel and in accountants letters delivered to
underwriters and in underwriting agreements in underwritten public offerings of
securities and such other matters as the Selling Holders may reasonably request
and, in the case of such accountants' letter, with respect to events subsequent
to the date of such financial statements;

                  (g)      immediately notify the Selling Holders in writing (i)
at any time when a prospectus relating to a registration hereunder is required
to be delivered under the Securities Act, of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and (ii) of any request by the Commission or any other regulatory
body or other body having jurisdiction for any amendment of or supplement to any
registration statement or other document relating to such offering, and in
either such case, at the request of a Selling Holder, prepare and furnish to
such Selling Holders a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading;

                  (h)      use its reasonable best efforts to cause all such
Registrable Securities covered by such registration statement to be listed on
each securities exchange and inter-dealer quotation system on which a class of
common equity securities of the Company is then listed, and to pay all fees and
expenses in connection therewith;

                  (i)      upon the transfer of shares by a Selling Holder in
connection with a registration hereunder (other than to an "affiliate" of the
Company as such term is defined in Rule 144(a)), furnish unlegended certificates
representing ownership of the Registrable Securities in such denominations as
shall be requested by the Selling Holders or the underwriters;

                  (j)      subject to Section 2(a)(v), promptly notify the
Selling Holders and the managing underwriter, if any, and if requested by any
such Person, confirm such advice in writing,

                           (i)      of the issuance by the Commission of any
stop order suspending the effectiveness of such registration statement or the
initiation of any proceedings for that purpose,

                                      -10-
<PAGE>   11

                  (ii)     of the Company's becoming aware at any time that the
representations and warranties of the Company contemplated by SECTION 6(F)(III)
above have ceased to be true and correct, and

                  (iii)    of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation or threat of any
proceeding for such purpose;

         (k)      if reasonably requested by the managing underwriter, if
any, or a majority in interest of the Registrable Securities being sold in
connection with an underwritten offering, promptly include in a prospectus
supplement or post-effective amendment to such registration statement such
information as the managing underwriter or such majority in interest of the
Registrable Securities being sold reasonably request to have included therein
relating to the plan of distribution with respect to such Registrable
Securities, including, without limitation, information with respect to the
amount of Registrable Securities being sold to such underwriters and any other
terms of the underwritten (or best-efforts underwritten) offering of the
Registrable Securities to be sold in such offering; and make all required
filings of such prospectus supplement or post-effective amendment to such
registration statement as soon as practicable after the Company is notified of
the matters to be incorporated in such prospectus supplement or post-effective
amendment to such registration statement;

         (l)      prior to any public offering of Registrable Securities,
use its reasonable best efforts to register or qualify or reasonably cooperate
with the Selling Holders, the managing underwriter, if any, and their respective
counsel in connection with the registration or qualification of such Registrable
Securities for offer and sale under the securities or blue sky laws of such
jurisdictions as any Selling Holder or managing underwriter reasonably requests
or as may be required by the Securities Act or applicable rule or regulations
thereunder, and do any and all other facts or things necessary to enable the
disposition in such jurisdictions of the Registrable Securities covered by such
registration statement, except that the Company shall not for any such purpose
be required to qualify generally to do business as a foreign corporation in any
jurisdiction where it is not so qualified, or to subject itself to taxation in
any such jurisdiction, or to execute a general consent to service of process in
effecting such registration, qualification or compliance, unless the Company is
already subject to service in such jurisdiction;

         (m)      reasonably cooperate and assist in any filings required to
be made with the NASD and any performance of any due diligence investigation by
any underwriter (including any "qualified independent underwriter" as required
to be retained in accordance with the rules and regulations of the NASD); and

         (n)      otherwise use its reasonable best efforts to comply with
the Securities Act, the Exchange Act, all applicable rules and regulations of
the Commission and all applicable state blue sky and other securities laws,
rules and regulations.

                                      -11-
<PAGE>   12

         7.       INDEMNIFICATION.

                  (a)      BY THE COMPANY. The Company will indemnify each
Holder, each of its officers and directors, partners, employees, Affiliates and
agents, and each person controlling such Holder within the meaning of Section 15
of the Securities Act, with respect to which registration or qualification has
been effected pursuant to this Agreement, and each underwriter, if any, and each
person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained (or incorporated by reference) in any registration statement,
prospectus, offering circular or other document, or any amendment or supplement
thereto, incident to any such registration or qualification, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation by the
Company of the Securities Act or any rule or regulation promulgated under the
Securities Act applicable to the Company in connection with any such
registration or qualification, and the Company will reimburse each such Holder,
each of its officers, directors, partners, employees, Affiliates and agents, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable to any
such Holder, controlling person or underwriter in any such case to the extent
that any such expense claim, loss, damage, liability or action arises out of or
is based on any untrue statement or omission, or alleged untrue statement or
omission, made or incorporated by reference in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder,
controlling person or underwriter for use therein. If the Holders are
represented by counsel other than counsel for the Company, the Company will not
be obligated under this SECTION 7(a) to reimburse legal fees and expenses of
more than one separate counsel for the Holders.

                  (b)      BY HOLDERS. Each Selling Holder will indemnify the
Company, each of its directors, officers, employees, Affiliates and agents, each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act, and each other Selling Holder and
Other Holder, each of its officers, directors, partners, employees, Affiliates
and agents and each person controlling such Selling Holders and Other Holder
within the meaning of Section 15 of the Securities Act, against all expenses,
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement of a material fact contained (or
incorporated by reference) in any such registration statement, prospectus,
offering circular or other document, or any omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse the Company, such Selling Holders, such Other
Holders, such directors, officers, partners, employees, Affiliates and agents,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,

                                      -12-
<PAGE>   13

damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement or omission is made (or incorporated by reference) in
such registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by such Selling Holder for use therein. Notwithstanding the foregoing,
the liability of each Selling Holder under this subsection (b) shall be limited
in an amount equal to the gross proceeds of the shares sold by such Selling
Holder.

                  (c)      PROCEDURE FOR INDEMNIFICATION. Each party entitled to
indemnification under paragraph (a) or (b) of this SECTION 7 (the "INDEMNIFIED
PARTY") shall, promptly after such Indemnified Party has knowledge of any claim
or the commencement of any action against such Indemnified Party in respect of
which indemnity may be sought, notify the party required to provide
indemnification (the "INDEMNIFYING PARTY") in writing of the claim or the
commencement thereof; provided that the failure of the Indemnified Party to
notify the Indemnifying Party shall not relieve the Indemnifying Party from any
liability which it may have to an Indemnified Party pursuant to the provisions
of this SECTION 7, unless the Indemnifying Party was materially prejudiced by
such failure, and in no event shall such failure relieve the Indemnifying Party
from any other liability which it may have to such Indemnified Party. If any
such claim or action shall be brought against an Indemnified Party, it shall
notify the Indemnifying Party thereof and the Indemnifying Party shall be
entitled to participate therein, and, to the extent that it wishes, jointly with
any other similarly notified Indemnifying Party, to assume the defense thereof
with counsel reasonably satisfactory to the Indemnified Party. After notice from
the Indemnifying Party to the Indemnified Party of its election to assume the
defense of such claim or action, the Indemnifying Party shall not be liable
(except to the extent the proviso to this sentence is applicable, in which event
it will be so liable) to the Indemnified Party under this SECTION 7 for any
legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than reasonable costs of investigation
prior to assumption; provided that each Indemnified Party shall have the right
to employ separate counsel to represent it and assume its defense (in which
case, counsel to the Indemnifying Party shall not represent it) if (i) upon the
written advice of counsel, the representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them (in which case, if such Indemnified Party notifies the Indemnifying
Party in writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party will not have the right to assume the
defense of such claim or action on behalf of such Indemnified Party), or (ii) in
the event the Indemnifying Party has not assumed the defense thereof within
thirty (30) days of receipt of notice of such claim or commencement of action,
in which case the fees and expenses of one such separate counsel shall be paid
by the Indemnifying Party (and, in the event the Holders are an Indemnified
Party, the Indemnifying Party shall, in such event, pay for one separate counsel
for the Holders). If any Indemnified Party employs such separate counsel it will
not enter into any settlement agreement which is not approved by the
Indemnifying Party, such approval not to be unreasonably withheld or delayed. If
the Indemnifying Party so assumes the defense thereof (and by so assuming shall
be solely responsible for liabilities relating to such claim or action, and
shall release the Indemnified Party from such liabilities to the extent
permitted by law, except to the extent the Indemnified Party is not entitled to
be indemnified pursuant to this SECTION 7), it may not agree to any settlement

                                      -13-
<PAGE>   14

of any such claim or action as the result of which any remedy or relief, other
than monetary damages for which the Indemnifying Party shall be responsible
hereunder, shall be applied to or against the Indemnified Party, without the
prior written consent of the Indemnified Party which shall not be unreasonably
withheld or delayed. No Indemnifying Party will consent to entry of any judgment
or enter into any settlement that does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect of such claim or action. In any action
hereunder as to which the Indemnifying Party has assumed the defense thereof
with counsel satisfactory to the Indemnified Party, the Indemnified Party shall
continue to be entitled to participate in the defense thereof, with counsel of
its own choice, but, except as set forth above, the Indemnifying Party shall not
be obligated hereunder to reimburse the Indemnified Party for the costs thereof.
Each Indemnified Party shall furnish such information regarding itself or the
claim in question as an Indemnifying Party may reasonably request in writing and
as shall be reasonably required in connection with the defense of such claim and
litigation recurring therefrom.

                  (d)      CONTRIBUTION. If the indemnification provided for in
this SECTION 7 shall for any reason be unavailable to an Indemnified Party in
respect of any loss, claim, damage or liability, or any action in respect
thereof, then each Indemnifying Party shall, in lieu of indemnifying such
Indemnified Party, contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, claim, damage or liability, or action in respect
thereof, in such proportion as shall be appropriate to reflect the relative
fault of the Indemnifying Party on the one hand and the Indemnified Party on the
other with respect to the statements or omissions which resulted in such loss,
claim, damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations. The relative fault of each Indemnifying Party
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by such Indemnifying Party
on the one hand or the Indemnified Party on the other, the intent of the parties
and their relative knowledge, access to information and opportunity to correct
or prevent such statement or omission, but not by reference to any Indemnified
Party's stock ownership in the Company. In no event, however, shall a Holder of
Registrable Securities be required to contribute in excess of the amount of the
gross proceeds received by such Holder in connection with the sale of
Registrable Securities in the offering which is the subject of such loss, claim,
damage or liability. The amount paid or payable by an Indemnified Party as a
result of the loss, claim, damage or liability, or action in respect thereof,
referenced in this paragraph shall be deemed to include, for purposes of this
paragraph, any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.

                  (e)      NON-SECURITIES ACT CLAIMS. Indemnification or, if
appropriate, contribution, similar to that specified in the preceding provisions
of this SECTION 7 (with appropriate modifications) shall be given by the Company
and each Selling Holder with respect to any required registration or other
qualification of Registrable Securities pursuant to this Agreement under any
federal or state law or regulation or governmental authority other than the
Securities Act.

                                      -14-
<PAGE>   15

         8.       INFORMATION BY HOLDER. Selling Holders shall furnish to the
Company such information regarding such Holders and the distribution proposed by
such Holder as shall be necessary to enable the Company to comply with the
provisions hereof in connection with any registration, qualification or
compliance referenced in this Agreement.

         9.       RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the Commission, which may at any
time permit the sale of the Registrable Securities to the public without
registration, after such time as a public market exists for the Common Stock,
the Company agrees to use its best efforts to:

                  (a)      make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act;

                  (b)      use its reasonable best efforts to file with the
Commission in a timely manner all reports and other documents required of the
Company under the Securities Act and the Securities Exchange Act (at any time
after it has become subject to such reporting requirements); and

                  (c)      so long as there are outstanding any Registrable
Securities, furnish to any Holder forthwith upon request a written statement by
the Company as to its compliance with the reporting requirements of Rule 144 (at
any time after ninety (90) days after the effective date of the Company's first
Qualified Public Offering), and of the Securities Act and the Securities
Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents of the Company and other
information in the possession of or reasonably obtainable by the Company as such
Holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing such Holder to sell any such securities without
registration.

         10.      TRANSFER OF REGISTRATION RIGHTS. The registration rights of
any Holder under SECTION 2 AND 3 of this Agreement may be assigned in connection
with any transfer or assignment by a Holder of Registrable Securities provided
that: (a) such transfer may otherwise be effected in accordance with applicable
securities laws; (b) such transfer is effected in compliance with the
restrictions on transfer contained in the Warrant Agreement and (c) such
transferee shall be bound by all obligations and limitations of this Agreement.

         11.      STANDOFF AGREEMENT. Each Holder agrees that if, in connection
with a secondary offering of the Company's securities after the date hereof, the
Company or the underwriters managing the offering so request, the Holders shall
not offer, sell, make any short sale of, pledge, loan, grant any option for the
purchase of, or otherwise dispose of any Registrable Securities (other than
those included in such registration) without the prior written consent of the
Company or such underwriters, as the case may be, for such period of time (not
to exceed one hundred eighty (180) days) from the effective date of such
registration as may be requested by the Company or the underwriters, provided

                                      -15-
<PAGE>   16

that each member of the Controlling Shareholder Group and each officer and
director of the Company also agree to such restrictions with respect to all
securities of the Company held by such Person.

         12.      MISCELLANEOUS.

                  (a)      SURVIVAL. The respective indemnities, representations
and warranties of the Holders and the Company shall survive any termination of
this Agreement or of the Holders' rights hereunder.

                  (b)      GOVERNING LAW. This Agreement will be governed by and
construed in accordance with the laws of the State of Georgia without giving
effect to the conflicts of law principles thereof.

                  (c)      AMENDMENTS AND WAIVERS. Any term of this Agreement
may be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
at least a majority of the Registrable Securities; PROVIDED, HOWEVER, no such
waiver shall be construed to effect a continuing waiver of the provision being
waived and no such waiver shall constitute a waiver in any other instance or for
any other purpose or impair the right of the party against whom such waiver is
claimed to require full compliance with such provision in all other instances or
for all other purposes, unless such waiver by its own terms explicitly provides
to the contrary. Any amendment or waiver effected in accordance with this
paragraph will be binding upon each holder of any securities purchased under
this Agreement at the time outstanding (including securities for which such
securities are exercisable or into which such securities are convertible), each
future holder of all such securities and the Company.

                  (d)      SEVERABILITY. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.

                  (e)      NOTICES. All notices, requests and other
communications to any party hereunder shall be in writing (including telecopier)
and shall be effective (a) if given by mail, three (3) days after having been
deposited in the mail, postage prepaid, (b) if given by reputable overnight
courier service, one (1) day after having been delivered to such overnight
delivery service, or (c) if given by telecopier, when the sender receives
written confirmation from its telecopier that the transmission was successful.
Notices hereunder shall be mailed or telecopied as follows:

                                      -16-
<PAGE>   17

         If to the Company:

                  Ramsay Youth Services, Inc.
                  One Alhambra Plaza, Suite 750
                  Coral Gables, Florida 33134
                  Attention:  Marcio C. Cabrera
                  Telecopy Number:  (305) 569-4647
                  Telephone Number: (305) 569-4562

         with a copy to:

                  Torys
                  237 Park Avenue
                  New York, New York 10017
                  Attention:  Joseph J. Romagnoli, Esq.
                  Telecopy Number:  (212) 682-0200
                  Telephone Number: (212) 880-6000

         If to SunTrust:

                  SunTrust Banks, Inc.
                  303 Peachtree Street, Suite 2400
                  Atlanta, Georgia  30308
                  Attention: Mr. Robert L. Dudiak
                  Telecopy Number:  (404) 827-6514
                  Telephone Number: (404) 588-8735

         with a copy to:

                  King & Spalding
                  191 Peachtree Street
                  Atlanta, Georgia  30303
                  Attention: Hector E. Llorens, Jr., Esq.
                  Telecopy Number: (404) 572-5145
                  Telephone Number: (404) 572-4753

or, as to each party at such other address as shall be designated by such party
in a written notice to the other parties delivered in compliance with this
SECTION 12(E).

                  (f)      COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, any of which need not contain the
signatures of more than one party, but all such counterparts then together shall
constitute one and the same agreement.

                                      -17-
<PAGE>   18

                  (g)      DESCRIPTIVE HEADINGS; INTERPRETATION. The descriptive
headings of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement. The use of the word "including" in this
Agreement shall be by way of example rather than by limitation.

                  (h)      SPECIFIC PERFORMANCE. The Company recognizes that the
rights of the Holders under this Agreement are unique and, accordingly, the
Holders shall, in addition to such other remedies as may be available to any of
them at law or in equity, have the right to enforce their rights hereunder by
actions for injunctive relief and specific performance to the extent permitted
by law. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate. This Agreement is
not intended to limit or abridge any rights of the Holders that may exist apart
from this Agreement.

                                      -18-
<PAGE>   19

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

                                          COMPANY:

                                          RAMSAY YOUTH SERVICES, INC.

                                          By: ______________________________
                                                 Marcio C. Cabrera
                                                 Executive Vice President

                [SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

                                      -19-
<PAGE>   20

                                           PURCHASER:

                                           SUNTRUST BANKS, INC.

                                           By: ______________________________
                                                  Robert L. Dudiak
                                                  Group Vice President

                [SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

                                      -20-

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