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                                                                   EXHIBIT 10.23

               PALESTINE PRINCIPAL HEALTHCARE LIMITED PARTNERSHIP

              AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP

         THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP is made and
entered into as of June 30, 1997 by and among PHC OF DELAWARE, INC. formerly
known as Principal Hospital Company (the "Original General Partner"), a Delaware
corporation with its principal place of business at 109 Westpark Drive, Suite
180, Brentwood, TN 37027, Attn: President, as the original general partner,
Palestine-Principal G.P., Inc. (the "General Partner"), a Texas corporation with
its principal place of business at 109 Westpark Drive, Suite 180, Brentwood, TN
37027, Attn: President, as the substituted general partner, and those other
persons identified on Schedule A as limited partners (the "Limited Partners"),

                                   WITNESSETH:

         WHEREAS, the Original General Partner and Palestine-Principal, Inc. and
Mother Frances Hospital Regional Health Care Center as the original limited
partners (together, the "Original Limited Partners") formed the Partnership
pursuant to that certain Agreement of Limited Partnership dated July 17, 1996
(the "Original Partnership Agreement"); and

         WHEREAS, the Original General Partner desires to resign as the general
partner of the Partnership, the General Partner desires to be admitted as the
substituted general partner of the Partnership, and the Original Limited
Partners consent and agree to such resignation and substitution; and

         WHEREAS, the Original General Partner, the General Partner and the
Original Limited Partners desire to amend and restate the Original Partnership
Agreement.

         NOW, THEREFORE, in consideration of the mutual promises, covenants and
undertakings hereinafter contained, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Original
General Partner, the General Partner and the Original Limited Partners amend and
restate the Original Partnership Agreement as follows:

                                    ARTICLE I

                                     General

         1.1.     Formation.

         The Original General Partner and the Original Limited Partners formed
the Partnership under and pursuant to the Texas Revised Limited Partnership Act
(the "Act"), caused a Certificate of Limited Partnership to be filed in the
Office of the Secretary of State of Texas on July 17, 1996, and have complied
with all other legal requirements to form and operate the Partnership. Except as
stated in this Agreement, the Act shall govern the rights and liabilities of the
Partnership.

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         1.2.     Withdrawal of the Original General Partner. Effective upon the
full execution of this Agreement, the Original General Partner will withdraw
from the Partnership with no further claim or right to any interest in the
Partnership as general partner, and the General Partner shall be admitted as the
substituted general partner of the Partnership.

         1.3.     Name.

         The name of the Partnership shall be Palestine Principal Healthcare
Limited Partnership. The business of the Partnership may be conducted under any
name or names chosen by the General Partner in its discretion from time to time
and reflected in an amendment to the Certificate of Limited Partnership duly
recorded in the Office of the Secretary of State of Texas.

         1.4.     Term.

         The term of the Partnership began on the date of the filing of the
Certificate of Limited Partnership with the Office of the Secretary of State of
Texas, and shall continue until December 31, 2036 unless earlier terminated in
accordance with the provisions hereof or as provided by law.

         1.5.     Registered Office and Registered Agent.

         The registered office of the Partnership shall be located at 350 St.
Paul Street, Suite 2900, Dallas, Texas 75201, and the Partnership's registered
agent for service of process at such location shall be CT Corporation System.
The location of the Partnership's registered office and identity of the
registered agent may be changed from time to time by the General Partner,
without the necessity of obtaining consent from any Limited Partners, upon
filing a statement of change with the Office of the Secretary of State of Texas
in the manner provided in the Act.

         1.6.     Filings.

         The General Partner and the Limited Partners, acting either directly or
through the General Partner as attorney-in-fact or through such person or
persons as the General Partner may appoint as attorney-in-fact, shall sign and
file such additional and further certificates, affidavits and other documents,
and amendments thereto, as may be necessary to enable the Partnership to
continue to conduct its business.

         1.7.     Purpose.

         The purpose of the Partnership shall be (i) to own and operate the
Project; and (ii) to conduct such other activities as may be necessary or
appropriate to promote the business of the Partnership, it being agreed that
each of the foregoing is an ordinary part of the Partnership's business;
provided however, the Partnership shall not engage in any activities which are
not in conformance with the Ethical and Religious Directives for Catholic Health
Care Services as approved by the National Conference of Catholic Bishops or are
inconsistent with the mission and philosophy of the Sisters of the Holy Family
of Nazareth.

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         1.8.     Powers.

         The Partnership shall have all powers reasonably necessary to achieve
its purposes hereunder. Without limiting the foregoing, the Partnership is
expressly authorized to do the following:

                  (a)      acquire, by purchase or otherwise, the Project;

                  (b)      take and hold property, real, personal and mixed, in
         the Partnership's name;

                  (c)      enter into any agreement with any person, firm or
         corporation, including the General Partner, or any Affiliate of the
         General Partner, requiring such person to perform services for the
         Partnership or to assist the General Partner in the management of the
         Partnership or its business, provided approval of the Partners is
         received and further provided:

                           i)       the compensation to be paid to the General
                  Partner or any of its Affiliate shall be consistent with the
                  provisions of this Agreement,

                           ii)      the services to be performed shall be
                  appropriate for the management of the Partnership or its
                  business, and

                           iii)     the agreement shall be no less favorable to
                  the Partnership than it would be if negotiated on an
                  arm's-length basis with an independent third party;

                  (d)      borrow money from third parties, the General Partner
         or Affiliates of the General Partner, but excluding other limited
         partnerships sponsored by Affiliates of the General Partner, and issue
         evidences of indebtedness in furtherance of any or all of the purposes
         of the Partnership, and secure the same by grant of security interests
         in assets of the Partnership,

                  (e)      open and maintain one or more Partnership bank
         accounts in which all monies received by the Partnership shall be
         deposited;

                  (f)      lease, sell, exchange, refinance or grant an option
         for the sale of all or any portion of the real or property of the
         Partnership, including the Project, at such rental, price or amount,
         for cash, securities or other property, and upon such terms as the
         General Partner may deem appropriate;

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                  (g)      execute and deliver deeds, deeds of trust, notes,
         leases, subleases, mortgages, bills of sale, financing statements,
         security agreements, easements and any and all other instruments
         appropriate to the conduct of the Partnership's business and the
         financing thereof;

                  (h)      lend its funds or make guarantees of others upon such
         terms as the General Partner shall determine, but excluding loans to,
         or guarantees of, the General Partner and any of its affiliates,
         including other limited partnerships sponsored by Affiliates of the
         General Partner;

                  (i)      retain counsel, accountants, financial advisers and
         other professional personnel; and

                  (j)      engage in such other activities and incur such other
         expenses as may be necessary or appropriate for the furtherance of the
         Partnership's purposes, and execute, acknowledge and deliver any and
         all instruments necessary to the foregoing.

         1.9.     Principal Place of Business.

         The principal place of business of the Partnership shall be located at
4000 South Loop 256, Palestine, TX 75802, Attn: President. The General Partner
may from time to time by notice to all Partners change the address of the
principal place of business of the Partnership.

         1.10.    Liability of Partners.

         No Limited Partner, by virtue of being a limited partner hereunder,
shall be personally liable for the debts, liabilities or obligations of the
Partnership beyond the extent of such Limited Partner's capital contribution,
together with the undistributed share of net profits of the Partnership from
time to time credited to such Limited Partner's capital account. The amount of
cash and other property contributed by a Limited Partner are the only
contributions that a Limited Partner shall be required to make to the
Partnership for the satisfaction of the debts, liabilities or obligations of the
Partnership.

         The General Partner shall not be personally liable to any Limited
Partner for repayment of capital contributions of the Limited Partner or, except
as expressly provided in this Agreement, have any obligation to make any advance
or contribution of capital to the Partnership. The General Partner, however, is
liable for all recourse obligations, unlike Limited Partners, who have no such
personal liability, either to third parties, to the Partnership or to other
Partners, except as stated above or otherwise required by the Act.

         1.11.    Definitions.

         As used herein, the following terms have the indicated meanings:

                  (a)      "Act" shall have the meaning set forth in Section 1.1
         hereof.

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                  (b)      "Adverse Terminating Event" means, with respect to
         any Class C Limited Partner, any Class B Limited Partner or any person
         who owns an interest in a Qualified P.C. or a Qualified Retirement Plan
         which is a Class B Limited Partner, any of the following:

                           1.       The Class C Limited Partner, the Class B
                  Limited Partner or person who owns an interest in a Qualified
                  P.C. or a Qualified Retirement Plan which is a Class B Limited
                  Partner has breached the terms and conditions of this
                  Agreement, including without limitation, violating the
                  restrictions with respect to ownership of an interest in a
                  Competing Business as set forth in Article 11 or the transfer
                  restrictions set forth in Article 5, as determined in the
                  reasonable discretion of the General Partner; or

                           2.       The Class C Limited Partner, the Class B
                  Limited Partner or such person who owns an interest in a
                  Qualified P.C. or a Qualified Retirement Plan which is a Class
                  B Limited Partner has disrupted the affairs of the Partnership
                  or has acted adversely to the best interests of the
                  Partnership, as determined in the reasonable discretion of the
                  General Partner.

                  (c)      "Affiliate" means (i) any person directly or
         indirectly controlling, controlled by or under common control with
         another person; (ii) any person owning or controlling ten percent (10%)
         or more of the outstanding voting securities of such other person;
         (iii) any officer, director or partner of such person; and (iv) if such
         other person is an officer, director or partner, any company for which
         such person acts in any such capacity.

                  (d)      "Capital Account" shall have that meaning assigned
         pursuit to Section 2.4 hereof.

                  (e)      "Capital Contribution" means the amount contributed
         to the Partnership by each Partner.

                  (f)      "Class A Limited Partners" shall mean (i) PPI and
         Mother Frances, (ii) any permitted transferees of PPI and Mother
         Frances who do not otherwise qualify as Class B Limited Partners, and
         (iii) any Person who is hereafter admitted as a Class A Partner. "Class
         A Limited Partner" means any one of the Class A Limited Partners.

                  (g)      "Class B Limited Partners" means those Limited
         Partners who are Qualified Purchasers. "Class B Limited Partner" means
         any one of the Class B Limited Partners.

                  (h)      "Class C Limited Partners" means those Limited
         Partners who are management level employees of the Partnership or the
         General Partner, or any Affiliate thereof. "Class C Limited Partner"
         means any one of the Class C Limited Partners.

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                  (i)      "Code" means the Internal Revenue Code of 1986, as
         amended.

                  (j)      "Distributable Cash" means, for the applicable
         period, net income of the Partnership (other than capital
         contributions), plus depreciation and amortization, plus or minus an
         amounts retained as a reserve in the sole discretion of the General
         Partner, minus principal payments on long term debt, all as determined
         in accordance in accordance with generally accepted accounting
         principles.

                  (k)      "General Partner" means Palestine-Principal G.P.,
         Inc., a Texas corporation, together with any additional or substitute
         General Partner admitted pursuant to the provisions of this Agreement.

                  (l)      "Limited Partners" means the persons admitted
         pursuant to the provisions of this Agreement, but excluding assignees
         of Limited Partners as to which the General Partner has not consented
         to substitution.

                  (m)      "Management Agreement" means the management agreement
         of even date herewith between the Original General Partner and the
         Partnership, as the same may be amended and/or assigned by the Original
         General Partner from time to time.

                  (n)      "Mother Frances" means Mother Frances Hospital
         Regional Health Care Center.

                  (o)      "Original General Partner" means PHC of Delaware,
         Inc. formerly known as Principal Hospital Company, a Delaware
         corporation.

                  (p)      "Partners" means collectively the General Partner and
         the Limited Partners. Reference to a "Partner" shall mean any one of
         the Partners.

                  (q)      "Partnership" means the Limited Partnership continued
         by this Agreement.

                  (r)      "Partnership Capital" means the total of the Capital
         Contributions of the Partners, as hereinafter set forth, as adjusted to
         reflect income, gains, losses, withdrawals and distributions. Capital
         contributions of property shall be valued at net fair market value as
         of the date of contribution.

                  (s)      "Percentage Interest" means, as to a Partner, the
         percentage obtained by dividing the Units of such Partner by an amount
         equal to the total Units of all Partners; provided, however, if the
         Class B Limited Partners, as a class, own more than nineteen percent
         (19%) of the total Units outstanding at any time, then the aggregate
         Percentage Interest of the Class B Limited Partners shall be nineteen
         percent (19%) and the Percentage Interest of the General Partner and
         the other Limited Partners, as a class, shall be eighty one percent
         (81%). In such

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         event, each Partner's Percentage Interest shall be equal to the
         percentage obtained by dividing the number of Units owned by such
         Partner by the number of Units owned by all of the Partners in the same
         class as such Partner (with the Class B Limited Partners being treated
         as one class and the General Partner and the other Limited Partners
         being treated as one class), multiplied by eighty one percent (81%)
         with respect to the General Partner and the Class A Limited Partners
         and multiplied by nineteen percent (19%) with respect to the Class B
         Limited Partners. The Partners hereby agree that their Percentage
         Interests shall constitute their interests in the Partnership profits
         for purposes of determining their respective shares of the
         Partnership's "excess nonrecourse liabilities" (within the meaning of
         section 1.752-3(a)(3) of the Regulations).

                  (t)      "PPI" shall mean Palestine-Principal, Inc.

                  (u)      "Project" shall mean Memorial Hospital, a 103 bed
         general hospital in Palestine, Texas.

                  (v)      "Qualified P.C." shall mean a professional
         corporation, a professional limited liability company, a professional
         registered limited liability partnership or other professional
         partnership, all of whose members, shareholders or partners are
         physicians who are members of the medical staff of the Project (as
         defined in the medical staff bylaws of the Project, as amended from
         time to time).

                  (w)      "Qualified Purchasers" means physicians who are
         members of the medical staff of the Project (as defined in the medical
         staff bylaws of the Project, as amended from time to time) and
         Qualified P.C.s. In addition, the term Qualified Purchaser shall also
         include any Qualified Retirement Plan. "Qualified Purchaser" means any
         one of the Qualified Purchasers.

                  (x)      "Qualified Retirement Plan" shall mean any 401(k) or
         other retirement plan which is wholly owned by one or more Qualified
         Purchasers or a Qualified P.C.

                  (y)      "Retirement" means a Class B Limited Partner who
         attains the age of sixty-two (62) and who is no longer engaged in the
         practice of medicine, either full-time or part-time, in the State of
         Texas.

                  (z)      "Securities Act" means the Securities Act of 1933, as
         amended, or any similar law then in effect.

                  (aa)     "Terminating Event" means, with respect to any
         Class C Limited Partner, any Class B Limited Partner, or any person who
         owns an interest in a Qualified P.C. or a Qualified Retirement Plan
         which is a Class B Limited Partner, any of the following:

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                           1.       The Class C Limited Partner, the Class B
                  Limited Partner or such person who owns an interest in a
                  Qualified P.C. or a Qualified Retirement Plan which is a Class
                  B Limited Partner has died or become permanently disabled; or

                           2.       The Class C Limited Partner, the Class B
                  Limited Partner or such person who owns an interest in a
                  Qualified P.C. or a Qualified Retirement Plan which is a Class
                  B Limited Partner is taking or acquiescing to the taking of
                  any action seeking relief under, or advantage of, any
                  applicable debtor relief, liquidation, receivership,
                  conservatorship, bankruptcy, moratorium, rearrangement,
                  insolvency, reorganization or similar law affecting the rights
                  or remedies of creditors generally, as in effect from time to
                  time. For the purpose of this definition, the term
                  "acquiescing" shall include, without limitation, the failure
                  to file within the time specified by law, an answer or
                  opposition to any proceeding commenced against such Class C
                  Limited Partner, Class B Limited Partner or such person who
                  owns an interest in a Qualified P.C. or a Qualified Retirement
                  Plan which is a Class B Limited Partner under any such law and
                  a failure to file, within thirty (30) days after its entry, a
                  petition, answer or motion to vacate or to discharge any
                  order, judgment or decree providing for any relief under any
                  such law.

                  (bb)     "Trailing EBITDA" means the earnings before income
         taxes, depreciation and amortization of the Partnership for the most
         recently ended fiscal year of the Partnership, all of which components
         shall be determined in accordance with generally accepted accounting
         principles using the accrual method of accounting applied on a basis
         consistent with the preceding period (using the Partnership's current
         accounting policies).

                  (cc)     "Valuation Amount" means the product of the
         Partnership's Trailing EBITDA for the most recently completed fiscal
         year multiplied by five (5), less any Partnership debt, including
         without limitation capital leases, all as determined in accordance with
         generally accepted accounting principles using the accrual method of
         accounting applied on a basis consistent with the preceding period
         (using the Partnership's current accounting policies).

                  (dd)     "Valuation Price" means the Valuation Amount divided
         by the number of Units outstanding as of the date of the Valuation
         Amount.

                                   ARTICLE II

                              Capital Contributions

         2.1.     Capital Contributions.

         The capital contributed or agreed to be contributed by each Partner is
set forth in Schedule A attached to this Agreement.

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         2.2.     Additional Capital Contributions.

                  2.2.1.   If the General Partner and the Class A Limited
         Partners unanimously determine that the Partnership requires additional
         capital contributions, each of the Partners shall contribute the funds
         required according to such Partner's Percentage Interest. The total
         amount and timing of such additional capital contributions shall be
         determined by the General Partner and the Class A Limited Partners.
         Unless otherwise specified by the General Partner and the Class A
         Limited Partners in the determination of additional capital
         contribution, the General Partner shall specify the payment date for
         additional capital contributions upon ten days prior written notice to
         the Partners consistent with such determination.

                  2.2.2.   Notwithstanding the foregoing, at the election of
         Mother Frances, PPI shall contribute the entire additional capital
         contribution on behalf of Mother Frances, in which event such
         additional capital contribution shall be treated as a loan to Mother
         Frances followed by a contribution of capital by Mother Frances.
         Amounts up to $250,000 treated as loaned by PPI to Mother Frances shall
         bear interest at the Prime Rate plus one percent (l%), and amounts
         exceeding $250,000 shall bear interest at the Prime Rate plus one and
         one-half percent (1 1/2%).

                  2.2.3.   Notwithstanding the foregoing, no Class B Limited
         Partner shall be required to make such additional capital contribution,
         provided that if any Class B Limited Partner elects not to make such
         additional capital contribution (a "Noncontributing Partner"), PPI
         shall have the right to contribute to the Partnership the amount of
         cash that the Noncontributing Partner or Partners failed to contribute.

                  2.2.4.   The Partners shall have thirty (30) days from the
         General Partner's request in which to elect to make or not make such
         additional capital contributions. Effective as of the end of such
         thirty (30) day period, the Partners' Percentage Interests shall be
         adjusted, as follows: each Partner's Percentage Interest thereafter
         shall be equal to a fraction (converted to a percentage), the numerator
         of which is equal to such Partner's "Base Amount" and the denominator
         of which is equal to the sum of the Base Amounts of all the Partners.
         For purposes hereof, each Partner's Base Amount shall be equal to the
         sum of (1) the amount of cash contributed to the Partnership by such
         Partner in respect of the current call for capital (including amounts
         contributed under Section 2.2.3), plus (2) the product of (x) the
         Partner's Percentage Interest (as in effect immediately before the
         capital call in question) multiplied by (y) the Valuation Amount of as
         of the date of such capital call. The number of Units held by each
         Partner shall be adjusted automatically to reflect any change in the
         Partners' Percentage Interests under this Section.

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                  2.2.5.   The provisions of this Section 2.2 constitute an
         agreement among the Partners only and are not intended to create any
         right or interest on behalf of any person who is not a Partner or
         require any Partner to make a capital contribution for the benefit of
         any person who is not a Partner.

         2.3.     Withdrawal and Return of Contributions.

         No Partner shall have the right to withdraw his contribution or to
receive any funds or property of the Partnership except as specifically provided
in this Agreement. No Partner shall have the right to demand and receive
property other than cash in return for his contributions.

         2.4.     Effect of Transfer of Partnership Interest.

         The Partnership will maintain for each Partner an account to be
designated its "capital account," which will be determined and maintained
throughout the full term of the Partnership, in accordance with the capital
accounting rules of Treasury Regulation Section 1.704-1 (b)(2)(iv) including any
amendments thereto or successor regulations.

         2.5.     No Interest on Capital.

         No interest shall be paid on capital contributions or on balances in
capital accounts.

         2.6.     Effect of Transfer of Partnership Interest.

         Upon the transfer by any Partner of any or all of its Partnership
interest, pursuant to the provisions of Article V or Article VI of this
Agreement, the proportionate amount of its respective capital account balance,
determined in accordance with Section 2.4 hereof, shall be transferred to the
transferee of such Partnership interest; provided, however, that no transfer of
any Partnership interest shall, in and of itself, relieve the transferor of any
obligation to the Partnership, including, but not limited to, such transferor's
obligation, if any, to contribute to the capital of the Partnership.

                                   ARTICLE III

                  Allocation of Income and Loss: Cash Distributions

         3.1.     Distribution of Distributable Cash.

         Distributable Cash shall be apportioned among and distributed to the
Partners in proportion to their Percentage Interest. The first such distribution
shall be made on or before May 31, 1997. The second such distribution shall be
made on or before August 31, 1997. The third such distribution shall be made on
or before November 30, 1997. Thereafter, distributions shall be made on or
before the last day of each January, April, July and October.

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         3.2.     Profits and Losses.

         "Profits" and "Losses" means for each fiscal year or other period, an
amount equal to the Partnership's taxable income or loss for such year or
period, determined in accordance with Code Section 703(a). For this purpose, all
items of income, gain, loss or deduction required to be stated separately
pursuant to Code Section 703(a)(1) shall be included in taxable income or loss,
with the following adjustments:

                  (a)      Any income of the Partnership that is exempt from
         federal income tax and not otherwise taken into account in computing
         Profits or Losses pursuant to this Section 3.3 shall be added to such
         taxable income or loss; and

                  (b)      Any expenditures of the Partnership described in Code
         Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
         expenditures pursuit to Treasury Regulation Section
         1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing
         Profits or Losses pursuant this Section 3.3 shall be subtracted from
         such taxable income or loss.

         3.3.     Allocation of Profits and Losses.

                  3.3.1.   Except to the extent provided in Sections 3.4 hereof,
         the Profits of the Partnership shall be allocated as follows:

                           (a)      First, to the Partners in proportion to
                  their negative capital accounts until all negative capital
                  accounts are eliminated;

                           (b)      Next, to the Partners until their capital
                  accounts are in proportion to their Percentage Interest;

                           (c)      All remaining Profits shall be allocated to
                  the Limited Partners and the General Partner in proportion to
                  their Percentage Interest.

                  3.3.2.   The Losses of the Partnership shall be allocated to
         the Limited Partners and the General Partner in proportion to their
         Percentage Interest.

         3.4.     Special Allocations.

                  3.4.1.   In the event the Limited Partners unexpectedly
         receive any adjustments, allocations, or distributions described in
         Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
         1.704-1(b)(2)(ii)(d)(5), or 1.704-1 (b)(2)(ii)(d)(6), items of
         Partnership income and gain shall be specially allocated to the Limited
         Partners in an amount and manner sufficient to eliminate, to the extent
         required by the Treasury Regulations, the negative capital account
         created by such adjustments, allocations or distributions as quickly as
         possible. For purposes of the preceding sentence, Partners' Capital
         Accounts shall be reduced for the items described in Treasury
         Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5), and (6). The
         provisions of this Section 3.4.1 are intended to comply with the
         requirements of

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         Treasury Regulation Section 1.704-1(b), including any amendments or
         successor regulations thereto, and shall be so interpreted.

                  3.4.2.   If there is a net decrease in Partnership minimum
         gain as defined in Regulation Section 1.704-2(d) during a Partnership
         taxable year, then each Partner must be allocated items of income and
         gain for each year in an amount equal to such Partner's share of the
         net decrease in Partnership minimum gain as computed under Regulation
         Section 1 .704-2(g)(2). The provisions of this Section 3.4.2 are
         intended to comply with the requirements of Regulation Section 1.704-2,
         including any amendments or successor regulations thereto, and shall be
         so interpreted.

                  3.4.3.   Notwithstanding any provision of this Article to the
         contrary, to the extent allocations of loss or deductions to a Limited
         Partner would cause such Limited Partner to have a negative Capital
         Account balance, or increase the negative balance in a Limited
         Partner's Capital Account, such loss or deduction shall be allocated
         among those Limited Partners with positive Capital Account balances to
         the extent thereof and in proportion thereto, with any remaining loss
         or deduction being allocated to the General Partner. For the purposes
         of this Section 3.4.3 distributions made prior to or contemporaneous
         with any allocation to a Limited Partner shall be reflected in such
         Partner's Capital Account prior to making such allocation to such
         Partner, and a Partner's Capital Account shall be credited to the
         extent (i) such Partner is unconditionally obligated to make additional
         contributions to the Partnership; (ii) such Partner is unconditionally
         obligated to fund a deficit in his Capital Account upon liquidation;
         and (iii) such Partner is deemed to be obligated to restore his Capital
         Account balance pursuant to Regulation Sections 1.704-2(s)(1) and
         1.704-2(i)(5).

                  3.4.4.   In no event shall the General Partner's interest in
         each item of income, gain, loss, deduction or credit be less than one
         percent (1%) of each such item at all times during the existence of the
         Partnership.

         3.5.     Allocation for Purposes of Nonrecourse Liabilities.

         Solely for purposes of Regulation Sections 1.752-3(a)(3), Partnership
profits shall be allocated to the Limited Partners and the General Partner in
proportion to their Percentage Interest.

         3.6.     Modification.

         The General Partner, without the consent of the Limited Partners, may
modify the provisions of Article III hereof or any other provisions of this
Agreement if, after consultation with counsel to the Partnership, the General
Partner determines that such modification is necessary to (i) cause the
allocations conned in Article III to have substantial economic effect or
otherwise be respected for federal income tax purposes under Section 704 of the
Code; (ii) cause the allocation of Profits and Losses under Article III hereof
to conform, in accordance with the requirements of Section 704 of the Code, to
the distributions provided in Article III; or (iii) cause

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the provisions of the Agreement to comply with any applicable legislation,
regulation or rule enacted or promulgated after the date of this Agreement,
which change is necessary to enable the Partnership to carry out its purposes in
the manner contemplated by this Agreement. Any such amendment shall be so as to
cause the least significant deviation from the provisions of this Agreement as
originally set forth.

         3.7.     Consequences of Distributions.

         Upon the determination to distribute funds in any manner expressly
provided in this Article III, made in good faith, the General Partner shall
incur no liability on account of such distribution, even though such
distribution may have resulted in the Partnership retaining insufficient funds
for the operation of its business which insufficiency resulted in loss to the
Partnership or necessitated the borrowing of funds by the Partnership.

         3.8.     Partner Admission Date: Allocation of Profits. Losses and
                  Distributions in Respective Partnership Interest Transferred.

         A purchaser of the Partnership interest of a Limited Partner shall
become a Limited Partner on the date on which that both (a) its capital
contribution has been received, and (b) its subscription has been accepted by
the General Partner. If all or any portion of a Partnership interest is
transferred during any fiscal year of the Partnership, Profits or Losses
attributable to such Partnership interest for such fiscal year shall be divided
and allocated between a transferor and the transferee based on the time each
such party was, according to the books and records of the Partnership, the owner
of record of the Partnership interest transferred during the year in which the
transfer occurs utilizing any permissible convention selected by the General
Partner.

         3.9.     Distributions of Cash on New Issuances of Class B Units.

         If additional Class B Limited Partner Units ("Class B Units") are
issued by the Partnership pursuant to Section 5.11 below, the cash paid to the
Partnership for such Units shall be distributed by the Partnership to PPI or the
current Class B Limited Partners, all as more fully set forth in this Section
3.9. The Partners agree that any such issuance and distributions constitute, and
shall be reported as, a sale by the Partners receiving such cash to the newly
admitted Class B Limited Partners.

                  (a)      In the event that, immediately prior to the issuance
         of the additional Units the aggregate Percentage Interest of the Class
         B Limited Partners is less than nineteen percent (19%), PPI shall be
         deemed to have sold to the newly admitted Class B Limited Partners a
         portion of the Units then held by PPI, such portion to be determined as
         follows:

                           i)       If the number of Units issued to the newly
                  admitted Class B Limited Partners, when added to the number of
                  Units held by the current Class B Limited Partners, does not
                  exceed nineteen percent (19%) of the total number of Units
                  held by all Partners immediately

                                       13

<PAGE>   14

                  prior to the issuance of the new Class B Units, PPI shall be
                  deemed to have sold to the newly admitted Class B Limited
                  Partners the Units purchased by such Partners pursuant to
                  Section 5.11. In such event, the cash paid to the Partnership
                  by the newly admitted Class B Limited Partners shall be
                  distributed to PPI and the number of Units deemed held by PPI
                  shall be correspondingly reduced.

                           ii)      If the number of Units issued to the newly
                  admitted Class B Limited Partners, when added to the number of
                  Units held by the current Class B Limited Partners exceeds
                  nineteen percent (19%) of the total number of Units held by
                  all Partners, then, the following procedure shall be
                  implemented:

                                    1.       The number of each Partner's Units
                           shall be multiplied by a fraction, the numerator of
                           which is the aggregate number of Units outstanding
                           after the issuance of the Units to the newly admitted
                           Class B Partners, and the denominator of which is the
                           aggregate number of Units outstanding prior the
                           issuance of the Units to the newly admitted Class B
                           Partners.

                                    2.       PPI and all of the current Class B
                           Limited Partners shall be deemed to have sold a
                           portion of their Units, as adjusted, in accordance
                           with the following formula:

                                             a.       PPI shall be deemed to
                                    have sold to the newly admitted Class B
                                    Limited Partners, the number of Units it
                                    holds, as adjusted, which is in excess of
                                    the product of (i) eighty-one percent (81%)
                                    minus the aggregate Percentage Interest of
                                    the General Partner and Mother Francis, and
                                    (ii) the aggregate number of Units
                                    outstanding after the issuance of the Units
                                    to the newly admitted Class B Limited
                                    Partners, and the number of Units deemed
                                    held by PPI shall be correspondingly
                                    reduced.

                                             b.       The existing Class B
                                    Limited Partners shall be deemed to have
                                    sold the remaining number of Units issued to
                                    the newly admitted Class B Limited Partners,
                                    and the number of Units deemed held by the
                                    existing Class B Limited Partners.

                                    3.       The cash paid to the Partnership by
                           the newly admitted Class B Limited Partners shall be
                           distributed to PPI and the existing Class B Limited
                           Partners in proportion to the number of Units they
                           are deem to have sold to the newly admitted Class B
                           Limited Partners.

                                       14

<PAGE>   15

                           iii)     By way of illustration, if PPI owns 94
                  Units, Mother Frances owns 5 units, and the General Partner
                  owns 1 Unit, and at such time, new Class B Limited Partners
                  are issued 15 new Class B Units, PPI would be deemed to have
                  sold 15 Units to the new Class B Limited Partners
                  (representing the reduction in its Percentage Interest from
                  ninety four percent (94%) to seventy nine percent (79%). Based
                  upon the foregoing, the cash paid by the new Class B Limited
                  Partners shall be distributed by the Partnership to PPI.

                           iv)      By way of further illustration, if the
                  General Partner owns 1 Unit, Mother Frances owns 5 Units, the
                  current Class B Limited Partners own 15 Units, and PPI owns 79
                  Units, at such time, new Class B Limited Partners are issued
                  10 new Class B Units, then:

                                    1.       The number of Units owned by the
                           General Partner shall be increased to 1.1 (1 times
                           110/100), the number of Units owned by Mother Frances
                           shall be increase to 5.5 (5 times 110/100), the
                           number of Units owned by the existing Class B Limited
                           Partners shall be increased to 16.5 (15 times
                           110/100) and the number of Units owned by PPI shall
                           be increased to 86.9 (79 times 110/100).

                                    2.       PPI shall be deemed to have sold
                           4.4 Units to the newly admitted Class B Limited
                           Partners (86.9 minus (75 times 110)).

                                    3.       The existing Class B Limited
                           Partners shall be deemed to have sold 5.6 Units to
                           the newly admitted Class B Limited Partners (10 minus
                           4.4).

                                    4.       Forty-four percent (4.4/10) of the
                           cash paid to the Partnership by the newly admitted
                           Class B Limited Partners shall be distributed to PPI
                           and fifty-six percent (56%) of the cash paid to the
                           Partnership by the newly admitted Class B Limited
                           Partners shall be distributed to the existing Class B
                           Limited Partners.

                                    5.       After such transaction, the
                           Percentage Interests of the Partners shall be as
                           follows:

<TABLE>
                           <S>                                      <C>                  <C>
                           General Partner                              1%               (1.1/110)
                           Mother Frances                               5%               (5.5/110)
                           Class B Limited Partners
                              Existing                               9.90                (10.9/110)
                              Newly Admitted                         9.09%               (10/110)
                                                                    -----
                                    Total                              19%               (20.9/110)

                           PPI                                         75%               (82.5/110)
</TABLE>

                                       15
<PAGE>   16

                  (b)      If the old Class B Limited Partners own nineteen
         percent (19%) or more of the total number of Units outstanding at the
         time new Class B Units are issued pursuant to Section 5.11, the old
         Class B Limited Partners shall be deemed to have sold a portion of
         their interests in the Partnership to the new Class B Limited Partners
         and all of the cash contributed by the new Partners shall be
         distributed solely to the old Class B Limited Partners.

                  (c)      In the event that PPI or the Class B Limited Partners
         are deemed to have sold a portion of their Units or interest in the
         Partnership pursuant to this Section 3.9, the new Class B Limited
         Partner shall be deemed to have acquired or assumed a corresponding
         portion of the Capital Accounts(s) of PPI or such Class B Limited
         Partners, and neither the old Limited Partners' nor the new Limited
         Partners' Capital Accounts shall be increased or decreased by the
         amount of cash contributed to, or distributed by, the Partnership.

                  (d)      All sales deemed made by, and all distributions
         required to be made to, PPI or the old Class B Limited Partners shall
         be apportioned among such Partners on the basis of the number of (i)
         the Class A Units or (ii) the Class B Units owned by them,
         respectively.

         3.10.    Distributions of Cash on New Issuances of Class C Units.

         If additional Class C Limited Partner Units ("Class C Units") are
issued by the Partnership, PPI shall be deemed to have sold to the newly
admitted Class C Limited Partners the Units purchased by such Partners pursuant
to Section 5.12, below. In such event, the cash paid to the Partnership by the
newly admitted Class C Limited Partners shall be distributed to PPI and the
number of Units deemed held by PPI shall be correspondingly reduced. The new
Class C Limited Partner shall be deemed to have acquired or assumed a
corresponding portion of the Capital Account of PPI, and neither PPI's nor the
new Class C Limited Partners' Capital Accounts shall be increased or decreased
by the amount of cash contributed to, or distributed by, the Partnership.

                                   ARTICLE IV

              Rights, Duties and Obligations of the General Partner

         4.1.     General Partner to Manage Business.

                                       16

<PAGE>   17

         Subject to Section 4.8 hereof, the General Partner shall manage and
control the business of the Partnership with full, exclusive and complete
discretion in the management and control of said business, and shall make all
decisions affecting said business. The Limited Partners, as such, shall not and
shall have no right or power to take part in the control of the business,
affairs and/or operations of the Partnership. The General Partner may, from time
to time, delegate any or all of such responsibilities to third parties which,
under the General Partner's supervision, will perform such acts and services for
the Partnership as the General Partner may approve.

         4.2.     Powers of the General Partner.

         Subject to Section 4.8 hereof, the General Partner shall have all
powers necessary or desirable to carry out the purposes, business and objectives
of the Partnership and its duties as set forth herein and all of the power and
authority in connection therewith as may be specifically stated in this
Agreement or as may be otherwise provided by law. The General Partner
specifically has the power and authority to execute agreements, at the
Partnership's expense and in its name, for the acquisition of the Project and
the Financing in connection therewith.

         4.3.     Tax Matters Partner.

         The General Partner shall serve as the Tax Matters Partner pursuit to
Section 6231(a)(7)(A) of the Code, and shall take such action as may be required
to register such status with the Internal Revenue Service. The Tax Matters
Partner ("TMP") is responsible for all administrative and judicial proceedings
for the assessment and collection of tax deficiencies or the read of tax
overpayments arising out of a Partner's distributive share of items of income,
deduction, credit and/or of any other Partnership item (as that term is defined
in the Code or in regulations issued by the Internal Revenue Service) allocated
to the Partners affecting any Partner's tax liability. The TMP shall promptly
give notice to all Partners of any administrative or judicial proceedings
pending before the Internal Revenue Service involving any Partnership item and
the progress of any such proceeding. Such notice shall be in compliance with
such regulations as are issued by the Internal Revenue Service. The TMP shall
have all the powers provided to a tax matters partner in Sections 6221 through
6233 of Code, including the specific power to extend the statute of limitations
with respect to any matter which is attributable to any Partnership item or
affecting any item pending before the Internal Revenue Service and to select the
forum to mitigate any issue or liability arising from Partnership items. The TMP
may resign his position by giving thirty (30) days written notice to all
Partners, whereupon the Partners shall designate a new TMP. The TMP shall be
entitled to reimbursement for any and all reasonable expenses incurred with
respect to any administrative and/or judicial proceedings affecting the
Partnership.

         4.4.     Duties of the General Partner.

                  4.4.1.   The General Partner shall use its best efforts to
         carry out the purposes, business and objectives of the Partnership;
         shall devote such time to Partnership business as shall be reasonably
         required to carry out such purposes, business and objectives; and shall
         use its best efforts to assure the efficient management and operation
         of the Partnership.

                                       17

<PAGE>   18

                  4.4.2.   The General Partner shall supervise the preparation
         and filing of the tax returns of the Partnership; shall, on behalf of
         the Partnership, make such tax elections and determinations as appear
         to be appropriate; and shall advise the Limited Partners of their
         shares of tax liabilities.

                  4.4.3.   The General Partner shall cause the Partnership at
         all times to maintain such insurance, in such amounts and against such
         other risks, as the General Partner deem advisable to protect the
         Partnership.

                  4.4.4.   The General Partner shall maintain separate Financial
         accounts so that the funds of the Partnership shall be kept separate
         and will not be commingled with any other funds.

         4.5.     Compensation of the General Partner and its Affiliates.

         The General Partner shall receive no compensation for its services as
General Partner, except that the General Partner shall be entitled to its
interest in Profits, Losses, and Cash Flow as set forth elsewhere in this
Agreement. The General Partner shall be entitled to receive repayment of any
moneys lent the Partnership, together with interest, if any, provided in
connection with any such loan. The General Partner shall be entitled to receive
reimbursement for expenses as set forth in Article IX hereof. Affiliates of the
General Partner shall be entitled to receive reasonable compensation for
services rendered to the Partnership, provided the Class A Partners approve the
terms of the services and compensation and the requirements of Section 1.8(c)
are met.

         4.6.     Other Interests of Partners.

         Except as set forth in Article XI, any Partner may engage in other
business including business of a nature which is the same as or similar to the
business of this Partnership without duty or obligation to account to the
Partnership in connection therewith. Any Partner may, in his individual
capacity, lend money to or otherwise deal with the Partnership and shall have no
liability or obligation to the Partnership in connection with such dealings
unless the dealings are manifestly unfair or the benefits received by such
Partner are unreasonable.

         4.7.     Amendment of Partnership Agreement.

         Except as set forth below, no amendment to this Agreement shall be made
without the consent of the Class A Partners. Notwithstanding the foregoing,
amendments to reflect any one or more of the following events may be made by the
General Partner when required in order to carry out the other provisions of this
Agreement and to comply with law and no such amendments shall require the vote,
approval or written consent of any of the other Partners:

         (a)      Transfer of any limited partnership interest pursuant to
                  Article V or VI.

         (b)      Change in the name of the Partnership, the location of the
                  principal place

                                       18

<PAGE>   19

                  of business of the Partnership, the name or place of residence
                  of a Partner, the location of the Partnership's registered
                  office or the identity of the Partnership's registered agent.

         (c)      Substitution of a Limited Partner pursuant to Article V or VI.

         (d)      Correction of a nonsubstantive error in this Agreement; and

         (e)      Amendments necessary to cause the Agreement to comply with
                  applicable law, regulation or rule; including, but not limited
                  to, any amendment deemed necessary by the General Partner to
                  permit the Partnership to be treated as a partnership for
                  federal income tax purposes.

         4.8.     Major Decisions Requiring Unanimous Partner Approval.

         Notwithstanding anything herein to the contrary, the following
described actions shall be referred to as "Major Decisions" and shall require
the affirmative approval of all of the Partners:

         (a)      Any act in contravention of this Agreement.

         (b)      Any act which would make it impossible to carry on the
                  ordinary business of the Partnership, except as otherwise
                  provided in this Agreement.

         (c)      The knowing performance of any act that would subject any
                  Limited Partner to liability as a General Partner in any
                  jurisdiction.

         4.9.     Certain Decision Requiring Approval of Class A Limited
                  Partners.

         Notwithstanding anything herein to the contrary, the following
described actions shall require the affirmative approval of the General Partner
and the Class A Limited Partners.

         (a)      The replacement, modification, consolidation, refinancing or
                  extension of any mortgage or other Financing instrument
                  covering any property owned by the Partnership.

         (b)      Confessing a judgment against the Partnership in connection
                  with any threatened or pending legal action.

         (c)      Dissolution or liquidation of the Partnership.

         (d)      The sale, lease, or transfer of all or substantially all of
                  the Partnership's assets.

         (e)      The filing of a voluntary petition or initiation of
                  proceedings to have the Partnership adjudicated bankrupt or
                  insolvent, or the consent to the institution of bankruptcy or
                  insolvency proceedings against the

                                       19

<PAGE>   20

                  Partnership, or the filing of a petition seeking or consenting
                  to reorganization or relief of the Partnership as debtor under
                  any applicable federal or state law relating to bankruptcy,
                  insolvency, or other relief for debtors with respect to the
                  Partnership; or the seeking or consent to the appointment of
                  any trustee, receiver, conservator, assignee, sequestrator,
                  custodian, liquidator (or other similar official) of the
                  Partnership or of all or my substantial part of the properties
                  and assets of the Partnership, or the making of any general
                  assignment for the benefit of creditors of the Partnership, or
                  admitting in writing the inability of the Partnership to pay
                  its debts generally as they become due or the declaration of a
                  moratorium on the Partnership debt or the taking any action in
                  furtherance of any such action.

         (f)      Amendment, modification or alteration of this Agreement,
                  except as permitted in section 4.7.

         (g)      Merger or consolidation with any other entity.

         (h)      Approval of Medical Staff Bylaws for the Project.

         (i)      Credentialing of physicians on the medical staff of the
                  Project.

         (j)      Approval of managed care contracts relating to the Project
                  with over 5,000 covered lives.

         (k)      Approval of a Charity Care Policy for the Project.

         (l)      Approval of the annual budget for the Project.

         (m)      Approval of the administrator/CEO for the Project.

         (n)      Amendment of the Management Agreement.

         (o)      Admission of an additional or substitute general partner.

         4.10.    Liability of General Partner to Partnership or to Limited
                  Partners.

         The General Partner, its employees, agents and assigns, shall not be
liable to the Limited Partners or to the Partnership for any loss suffered which
arises out of an act or omission of the General Partner, its employees, agents
and assigns, if, in good faith, it was determined by the General Partner that
such act or omission was in the best interests of the Partnership and such act
or omission did not constitute negligence or fraud. The General Partner, its
employees, agents and assigns, shall be indemnified by the Partnership against
any and all claims, demands and losses whatsoever if: (i) the indemnitee
conducted itself in good faith; and (ii) reasonably believed (a) in the case of
conduct in its official capacity with the Partnership, that its conduct was in
its best interests and (b) in all other cases, that its conduct was at least not
opposed to its best interests; and (iii) in the case of any criminal proceeding,
it had no reasonable cause to believe its conduct was unlawful.

                                       20

<PAGE>   21
                                    ARTICLE V

                    Admission and Withdrawal of Partners and
                       Transfers of Partnership Interests

                  5.1.     Transfers of Partnership Interests.

                  The transfer of an interest in the Partnership shall mean the
transfer, alienation, sale, assignment, pledge or other disposition or
encumbrance of all or any part of an existing interest in the Partnership,
whether voluntarily or involuntarily, whether for or without consideration, and
includes a transfer by death or incompetency of a Partner, by operation of law,
by bankruptcy of a Partner, by foreclosure or judicial sale or otherwise. In the
event of the transfer of all or any part of the interest in the Partnership of a
Partner in accordance with this Agreement, this Agreement shall be amended as
necessary to reflect the transfer of the interest.

                  5.2.     Permissible Transfers/Withdrawals.

                  No transfer or assignment of a Partnership interest shall be
made except on the following conditions:

                           (a)      Any Class A Limited Partner may, without the
                  consent of any other Partner, freely transfer all or any part
                  of its Partnership interest to the General Partner or any
                  other Class A Limited Partner;

                           (b)      PPI may, without consent of any other
                  Partner, freely transfer a portion of its Partnership interest
                  to a Class B Limited Partner or a Qualified Purchaser provided
                  that subsequent to such transfer the Percentage Interest of
                  all Class B Limited Partners does not exceed nineteen percent
                  (19%) in the aggregate;

                           (c)      PPI may, without consent of any other
                  Partner, freely transfer a portion of its Partnership interest
                  to any person eligible as a Class C Limited Partner;

                           (d)      Any Partner may, with the consent of the
                  General Partner, which consent may be withheld for any reason
                  in the sole discretion of General Partner, may transfer all or
                  any portion of its Partnership interest to any other Partner;
                  and

                           (e)      Any Partner may transfer all or a portion of
                  its Partnership interest to another person or entity in
                  accordance with the provisions of this Article V.

In the event that any Partner shall at any time attempt to transfer its interest
in the Partnership or withdraw from the Partnership in violation of the
provisions of this Agreement, such transfer or withdrawal shall be considered
void ab initio, and the Partnership shall, in addition to all other rights and
remedies at law and in equity, be entitled to a decree or order restraining and
enjoining such transfer or withdrawal, and the offending Partner shall not plead
in defense thereto that there would be an adequate remedy at law, it being
expressly acknowledged and agreed that

                                       21
<PAGE>   22

damages at law will be an inadequate remedy for a breach or threatened breach of
the provisions concerning transfer or withdrawal set forth in this Agreement.

                  5.3.     Bankruptcy, Resignation, Dissolution, Liquidation or
                           Removal of the General Partner.

                  Upon the bankruptcy, resignation, dissolution, liquidation,
conversion or removal of a General Partner, the Partnership shall dissolve
pursuant to Section 7.1 of this Agreement unless a substitute General Partner is
elected by the unanimous vote of the Limited Partners within sixty (60) days and
such Limited Partners vote to continue the business of the Partnership.

                  5.4.     Dissolution of Limited Partner.

                  The bankruptcy, dissolution, liquidation, or termination of a
Limited Partner shall not cause the termination or dissolution of the
Partnership and the business of the Partnership shall continue. Upon any such
occurrence, the trustee or receiver of such Limited Partner shall have all the
rights of such Limited Partner for the purpose of settling or managing its
estate or property, subject to satisfying conditions precedent to the admission
of such assignee as a substitute Limited Partner. The transfer by such trustee
or receiver of any Partnership interest shall be subject to all of the
restrictions hereunder to which such transfer would have been subject if such
transfer had been made by such bankrupt, dissolved, liquidated or terminated
Limited Partner.

                  5.5.     Provisions Intended to Ensure Compliance with
                           Securities Laws.

                           5.5.1.   Restrictions on Transfer. In addition to the
                  provisions of Section 5.2 hereof, Partnership interests are
                  not transferable except pursuant to (i) public offerings
                  registered under the Securities Act, (ii) Rule 144 of the
                  Securities and Exchange Commission (or any similar rule then
                  in force) if such rule is available, and (iii) subject to the
                  conditions specified in Section 5.5.2 hereof any other legally
                  available means of transfer.

                           5.5.2.   Procedure for Transfer. In connection with
                  the transfer of any Partnership interests (other than a
                  transfer referred to in clauses (i) or (ii) of Section 5.5.1
                  above), the holder thereof will deliver written notice to the
                  General Partner describing in reasonable detail the transfer
                  or proposed transfer, together with an opinion (reasonably
                  satisfactory to the General Partner) of counsel which (to the
                  General Partner's reasonable satisfaction) is knowledgeable in
                  securities law matters to the effect that such transfer of
                  Partnership interests may be effected without registration of
                  such Partnership interests under the Securities Act.

                                       22
<PAGE>   23

                  5.6.     No Transfer Which Violates Safe Harbors.

                  The General Partner may prevent, in its sole discretion, any
transfer that would cause the Partnership not to satisfy any safe harbor
provided in Internal Revenue Service Notice 88-75 or subsequent administrative
or legislative provision permitting the Partnership to avoid being a "publicly
traded partnership" under Section 7704 of the Code.

                  5.7.     Additional General Partner: Transfer of General
                           Partner's and PPI's Interest.

                  No additional General Partner shall be admitted to the
Partnership without the prior written consent of all of the Limited Partners.
The General Partner shall not transfer its interest in the Partnership without
the consent of all of the Limited Partners. Notwithstanding the foregoing, the
General Partner may transfer its Partnership interest to a substitute General
Partner without the consent of the Limited Partners if (a) PPI is selling its
entire Partnership interest in the same transaction; and (ii) Mother Frances has
the right to sell its Partnership interest in the same transaction for a price
equivalent to that received by PPI, adjusted pro rata based on their respective
Partnership interests. PPI shall not transfer its interest in the Partnership
without the consent of Mother Frances, unless Mother Frances has the right to
sell its entire Partnership interest in the same transaction for a price
equivalent to that received by PPI, adjusted pro rata based on their respective
partnership interests.

                  5.8.     Transferees as Substitute Partners.

                           5.8.1.   A party who acquires an interest in the
                  Partnership and who becomes a substitute Partner as herein
                  provided shall succeed to all of the rights and powers of a
                  Partner with respect to the interest in the Partnership which
                  is acquired. A party who does not become a substitute Partner
                  shall be entitled only to receive the share of profits and
                  losses and the share of distributions of cash and the return
                  of capital contributions to which the Partner from whom he
                  acquired his interest in the Partnership would have been
                  entitled with respect to the interest in the Partnership which
                  is acquired but, notwithstanding any other provision in this
                  Agreement to the contrary, shall have no right to require any
                  information or account of Partnership transactions, no right
                  to inspect the Partnership books and no other rights and
                  powers of a Partner. A party who does not become a substitute
                  Partner shall nevertheless be subject to all of the provisions
                  of this Agreement and to all of the restrictions and
                  liabilities under this Agreement with respect to the interest
                  acquired.

                           5.8.2.   A Transferee of a General Partner's interest
                  may become a substitute General Partner only in accordance
                  with Section 5.7 hereof. In the event of the transfer of a
                  limited partnership interest in accordance with this
                  Agreement, the transferee may become a substitute Limited
                  Partner only with the written consent of the General Partner
                  which may be withheld in its sole discretion, and upon
                  satisfaction of the following conditions:

                           (a)      The receipt by the General Partner of a
                                    written instrument setting

                                       23
<PAGE>   24

                                    forth the intention of the transferor that
                                    the transferee become a substituted Limited
                                    Partner;

                           (b)      The receipt by the General Partner of such
                                    information, documents and fees as the
                                    General Partner may deem necessary or
                                    desirable to effect the admission of the
                                    transferee as a substitute Limited Partner,
                                    including, without limitation, an opinion of
                                    counsel satisfactory to the General Partner
                                    that such substitution will not violate the
                                    provisions of any applicable securities
                                    laws, rules or regulations.

                  5.9.     Permitted Transfers by Mother Frances.

                  Notwithstanding anything in this Agreement to the contrary,
Mother Frances shall have the right to transfer its Partnership interest to
Trinity Mother Frances Health System or to an Affiliate that is one hundred
percent (100%) owned though stock ownership (or governed through membership
rights in the case of a not-for-profit organization) by one or more members of
the Trinity Mother Frances Health System group, otherwise Mother Frances shall
not transfer any Partnership interest except in accordance with the following
procedures:

                           5.9.1.   Right of First Refusal. For fifteen (15)
                  days Mother Frances shall grant to PPI a right of first
                  refusal (the "First Refusal") to purchase Mother Frances's
                  Partnership interest at a price equal to a bona fide written
                  offer to Mother Frances by an independent third party.

                           5.9.2.   Notice of Intent to Sell. The First Refusal
                  shall be granted by written notice of intention to make a bona
                  fide disposition by Mother Frances stating the offer to sell,
                  the Partnership interest offered, purchase price therefor
                  which shall be the terms on which Mother Frances proposes to
                  dispose of its Partnership interest, and the name and address
                  of the on to whom Mother Frances desires to transfer the
                  Partnership interests.

                           5.9.3.   Notice of Exercise. The First Refusal may be
                  exercised only by actual delivery to Mother Frances, prior to
                  the termination of the time period, of a notice of exercise.

                           5.9.4.   Closing. The closing of the purchase of the
                  Partnership interest pursuit to the right of first refusal
                  described in this Section 5.9 shall take place on the date
                  designated by PPI in the notice of exercise described in
                  clause 5.9.3 above, which date shall not be more than sixty
                  (60) days nor less than five (5) days after the delivery of
                  such notice. At the closing, Mother Frances shall deliver to
                  PPI duly executed instruments transferring Mother Frances's
                  Partnership interest to PPI against payment of the purchase
                  price by a delivery of a check or wire transfer of funds to an
                  account designated by Mother Frances. PPI will be entitled to
                  receive customary representations and warranties from Mother
                  Frances regarding such sale.

                                       24
<PAGE>   25

                           5.9.5.   Failure to Exercise Right of First Refusal.
                  If PPI does not exercise its First Refusal, Mother Frances may
                  transfer its Partnership interest to the purchaser at the
                  purchase price and on the terms described in the notice
                  delivered pursuit to clause 5.9.3 above.

                  5.10.    Partners' Representations and Warranties.

                           5.10.1.  Partners' Investment Representations. Each
                  Partner hereby represents that he or it is acquiring the
                  Partnership interests set forth in Schedule A for its own
                  account with the present intention of holding such securities
                  for investment purposes and that it has no intention of
                  selling such securities in a public distribution in violation
                  of federal or state securities laws; provided that nothing
                  contained herein will prevent the Partners and the subsequent
                  holders of such securities from transferring such securities
                  in compliance with the provisions of Article V hereof.

                           5.10.2.  Other Representations and Warranties of the
                  Partners. Each Partner hereby severally represents and
                  warrants to and covenants and agrees with the Partnership
                  that:

                                    a.       Such Partner has had an opportunity
                           to ask questions and receive answers concerning the
                           terms and conditions of the securities purchased
                           hereunder and has had full access to such other
                           information concerning the Partnership as such
                           Partner may have requested and that in making its
                           decision to invest in the securities being purchased
                           hereunder he or it is not in any way relying on the
                           fact that any other party has decided to be a Partner
                           hereunder or to invest in the securities;

                                    b.       Such Partner is an "accredited
                           investor" as defined in Rule 501(a) under the
                           Securities Act;

                                    c.       Such Partner is able to bear the
                           economic risk of its investment in the Partnership
                           purchased hereunder for an indefinite period of time,
                           including the risk of a complete loss of such
                           Partner's investment in the Partnership.

                  5.11     Admission of Additional Class B Limited Partners.
Subject to approval of the Class A Limited Partners, the General Partner may
issue limited partnership interests in the Partnership, not to exceed nineteen
percent (19%), to Persons who are Qualified Purchasers and admit them to the
Partnership as additional Limited Partners, which in all instances shall comply
with applicable securities laws. The terms of each issuance must be approved by
the Class A Limited Partners. The General Partner will not permit any Person to
become an additional Class B Limited Partner unless such Person certifies in
writing to the General Partner that the Person is a Qualified Purchaser and
agrees to be bound by the terms of this Agreement. The General Partner shall do
all things necessary to comply with the Act and is authorized to do all things
it deems to be necessary or advisable in connection with the Partnership for
admitting any additional Limited Partner, including, but not limited to,
complying with any statute, rule,

                                       25
<PAGE>   26

regulation or guideline issued by any federal, state or other governmental
agency.

                  5.12     Admission of Additional Class C Limited Partners.
Subject to approval of the Class A Limited Partners, the General Partner may
issue limited partnership interests in the Partnership to individuals who are
eligible as Class C Limited Partners and admit them to the Partnership as
additional Limited Partners, which in all instances shall comply with applicable
securities laws. The terms of each issuance must be approved by the Class A
Limited Partners. The General Partner will not permit any individual to become
an additional Class C Limited Partner unless such individual agrees to be bound
by the terms of this Agreement. The General Partner shall do all things
necessary to comply with the Act and is authorized to do all things it deems to
be necessary or advisable in connection with the Partnership for admitting any
additional Limited Partner, including, but not limited to, complying with any
statute, rule, regulation or guideline issued by any federal, state or other
governmental agency.

                                   ARTICLE VI

               Special Put/Call Rights in Favor of Mother Frances

                  6.1.     Call Right. So long as this Agreement shall be in
effect Mother Frances shall have the right to acquire additional Class A Units
from the Partnership sufficient for Mother Frances to own ten percent (10%) of
the Partnership interests of the Partnership on the following terms:

                           6.1.1.   Price. The price Mother Frances shall pay
                  for such additional Class A Units shall be, for each one
                  percent (1%) interest in the Partnership, one percent (1%) of
                  the sum of (i) the net working capital of the Partnership as
                  shown on the most recently available balance of the
                  Partnership prior to the date such Class A Units are issued
                  plus (ii) the greater of (x) $21,900,000 or (y) the product
                  obtained by multiplying (five) 5 times Trailing EBITDA, less
                  (iii) the debt of the Partnership as shown on such balance
                  sheet.

                           6.1.2.   Mechanics of Exercise. If Mother Frances
                  desires to exercise its Call Right, it shall deliver notice to
                  the General Partner during the first or seventh months after
                  the annual audited financial statements of the Partnership are
                  delivered to Mother Frances with respect to the prior year and
                  simultaneously tender the price for the additional Class A
                  Units in cash.

                           6.1.3.   Termination of Call Rights. If Mother
                  Frances exercises its right to put its Partnership interests
                  to PPI or the Partnership pursuant to Section 6.2, its rights
                  under this Section 6.1 shall forthwith cease.

                  6.2.     Put Right. Commencing July 1, 1998, Mother Frances
shall have the right to put its original five percent (5%) Partnership interest
in the Partnership (or so much thereof as shall be remaining in the event of the
issuance of Class B Units pursuant to Section 5.11) either to PPI or the
Partnership (at the option of PPI) on the following terms:

                                       26
<PAGE>   27

                           6.2.1.   Price. The price PPI or the Partnership
                  shall pay to Mother Frances for such Partnership interest
                  shall be five percent (5%) of the sum of (i) the net working
                  capital of the Partnership as shown on the most recently
                  available balance of the Partnership prior to the date such
                  Partnership interest is issued plus (ii) the greater of (x)
                  $21,900,000 or (y) the product obtained by multiplying 5 times
                  Trailing EBITDA, less (iii) the debt of the Partnership as
                  shown on such balance sheet.

                           6.2.2.   Mechanics of Exercise. If Mother Frances
                  desires to exercise its Put Right, it shall deliver notice to
                  the General Partner during the ninety (90) days after the
                  annual audited financial statements of the Partnership are
                  delivered to Mother Frances with respect to the prior year,
                  and the Partnership or PPI shall pay the price for such
                  additional Partnership interest in cash within thirty (30)
                  days.

                           6.2.3.   Termination of Put Rights. If Mother Frances
                  exercises its right to purchase additional Partnership
                  interest pursuant to Section 6.1, its rights under this
                  Section 6.2 shall forthwith cease.

                  6.3.     Adjustment of Percentage Interest. In the event of
the exercise of the Call Right or Put Right under this Article, the Percentage
Interests of the Class A and the Class B Limited Partners shall be adjusted in
proportion to the number of Units owned by them of the date of the transfer
pursuant to this Article.

                                   ARTICLE VII

        Special Put/Call Rights with Respect to Class B and Class C Units

                  7.1      Partnership's and General Partner's Right of First
Refusal with Respect to Class B Limited Partners. Subject to the restrictions on
transfer set forth in Article 5, if any Class B Limited Partner receives or
obtains an offer from a Qualified Purchaser or another Partner to acquire in any
manner all or any part of its interest in the Partnership which offer the Class
B Limited Partner intends to accept, the Class B Limited Partner shall promptly
notify the General Partner in writing of the offer received, including the name
of the offeror, the number of whole or partial Units offered to be purchased,
the proposed purchase price and the other terms and conditions of the offer. The
Partnership shall have the option for a period of sixty (60) days from the day
the General Partner receives notice of such offer to purchase such Class B
Limited Partner's interest in the Partnership on the same terms and conditions
contained in the offer. The Partnership may exercise its option by notifying the
Class B Limited Partner proposing to sell prior to the end of such sixty (60)
day period of its exercise of the option and shall thereafter purchase such
Class B Limited Partner's interest within the subsequent sixty (60) day period
(unless such exercise is subsequently revoked). If the Partnership does not
exercise its option, the General Partner shall have the option to purchase such
Class B Limited Partner's interest in the Partnership on the same terms and
conditions within the subsequent thirty (30) day period. If the Partnership and
the General Partner fail to or both indicate in writing that they will not
exercise the option, within the periods provided above, or if either the
Partnership or the General

                                       27
<PAGE>   28

Partner exercises the option but fails to effect the purchase within the
prescribed period, the Class B Limited Partner, in accordance with and subject
to the provisions of Article 5, may convey or dispose of the part of the
Partner's interest in the Partnership that was the subject of the offer but only
at the price, terms and conditions, and to the party specified in the offer
notice to the General Partner. If terms and conditions more favorable to the
proposed purchaser than, or in any material manner different from, those offered
to the Partnership and the General Partner should be agreed to by the Class B
Limited Partner, the Partnership and the General Partner shall again have the
option to purchase the selling Limited Partner's interest in the Partnership
which is subject to the more favorable or different purchase terms in accordance
with this Section 7.1. Neither the General Partner nor the Partnership shall be
liable or accountable to any Class B Limited Partner which attempts to transfer
its interest in the Partnership for any loss, damage, expense, cost, or
liability resulting from the Partnership's or General Partner's exercise or
failure to exercise the purchase option under this Section 7.1, delay in
notifying the Class B Limited Partner of the Partnership's or the General
Partner's intention not to exercise the purchase option, or its enforcement of
the requirements of this Section 7.1 in the event that it elects not to exercise
the purchase option. The Partnership's or the General Partner's failure to
exercise the purchase option or to indicate in writing that it is electing not
to exercise the option shall not be deemed a consent of the General Partner to
allow any third party transferee to become a Substituted Limited Partner, such
consent being controlled by the provisions of Section 5.7.

                  7.2.     Occurrence of Terminating Event or Adverse
                           Terminating Event.

                           7.2.1    In the event a Terminating Event shall occur
                  with respect to any Class C Limited Partner, any Class B
                  Limited Partner or any person who owns an interest in a
                  Qualified P.C. or a Qualified Retirement Plan which is a Class
                  B Limited Partner, such Class C Limited Partner, Class B
                  Limited Partner or such Class C Limited Partner's or Class B
                  Limited Partner's successor or other legal representative
                  shall give written notice thereof to the Partnership within
                  thirty (30) days of the occurrence of such event. Upon the
                  receipt of such written notice, the Partnership shall have the
                  right, but not the obligation, for the ensuing sixty (60) days
                  to purchase such Class C Limited Partner's or Class B Limited
                  Partner's interest in the Partnership. If the Partnership has
                  not received written notice of a Terminating Event with
                  respect to any Class C Limited partner, any Class B Limited
                  Partner or any person who owns an interest in a Qualified P.C.
                  or a Qualified Retirement Plan which is a Class B Limited
                  Partner as required under this Section 7.2.1, the Partnership
                  will have the right to purchase such Class C Limited Partner's
                  or Class B Limited Partner's interest in the Partnership for
                  sixty (60) days after the Partnership has actual knowledge of
                  the occurrence of any such event and gives written notice
                  thereof to such Class C Limited partner or such Class B
                  Limited Partner. Notwithstanding anything to the contrary in
                  this Agreement, the failure of a Class C Limited Partner or a
                  Class B Limited Partner to notify the Partnership of the
                  occurrence of a Terminating Event as required under this
                  Section 7.2.1 shall not constitute the occurrence of an
                  Adverse Terminating Event.

                           7.2.2    In the event the General Partner determines
                  that an Adverse Terminating Event has occurred with respect to
                  any Class C Limited Partner, any

                                       28
<PAGE>   29

                  Class B Limited Partner or any person who owns an interest in
                  a Qualified P.C. or a Qualified Retirement Plan which is a
                  Class B Limited Partner, the Partnership shall give written
                  notice thereof to such Partner and, for a period of sixty (60)
                  days from the date of such notice, the Partnership shall have
                  the right, but not the obligation, to purchase such Partner's
                  interest in the Partnership.

                           7.2.3    In the event the Partnership does not elect
                  to exercise its right to purchase such Partner's interest in
                  the Partnership pursuant to subsections (a) or (b) above, then
                  the General Partner shall have the right, but not the
                  obligation, within the immediate subsequent thirty (30) day
                  period following the time period indicated in Section 7.2.1
                  hereof to purchase such Partner's interest, pursuant to the
                  same terms provided in Section 7.3 hereof, for Partnership
                  purchases of such Partner's interest.

                  7.3      Payment for Partnership Interest.

                           7.3.1    If any Class C Limited Partner's or any
                  Class B Limited Partner's interest in the Partnership is
                  purchased because of the occurrence of a Terminating Event,
                  the amount the Partnership will pay for each Unit owned by
                  such Partner shall be equal to the Valuation Price.

                           7.3.2    If the Partnership purchases any Class C
                  Limited Partner or any Class B Limited Partner's interest in
                  the Partnership as a result of an Adverse Terminating Event,
                  the amount to be paid by the Partnership to such Partner shall
                  be equal to the lesser of (i) the Valuation Price multiplied
                  by the number of such Partners Units, or (ii) the amount paid
                  by such Partner to acquire his Units less any distributions
                  other than distributions of Distributable Cash Flow, including
                  without limitation any deemed distributions, any distributions
                  pursuant to Section 3.9 and any returns of capital, but not
                  less than one (1) dollar.

                           7.3.3    If the Partnership purchases any Class C
                  Limited Partner's or any Class B Limited Partner's interest in
                  the Partnership as provided in this Section 7.3, the
                  Partnership shall pay any such amounts owed therefor to such
                  Partner or its successor in a lump sum or, at the sole and
                  absolute discretion of the General Partner, in up to sixty
                  (60) equal monthly payments with interest at the Prime Rate on
                  the unpaid principal balance. If the General Partner exercises
                  its discretion for the Partnership to pay for a Partnership
                  interest in monthly installments, the first such installment
                  will be paid to the Partner or his successor in interest on
                  the first day of the month after thirty (30) days have expired
                  since the Partner's interest in the Partnership has been
                  purchased. Each subsequent installment shall be paid on the
                  first day of each successive month until the full amount owed
                  to the Partner or his successor in interest has been paid. The
                  Partnership may pre-pay in whole or in part the amount owed
                  without penalty. The Partnership's obligation to pay the
                  Partner in monthly installments under this Section 7.3 will be
                  evidenced by a nonrecourse promissory note executed by the
                  General Partner on behalf of the Partnership.

                                       29
<PAGE>   30

                  7.4.     Subsequent Legislation. If any Class C Limited
Partner's or any Class B Limited Partners are prohibited from owning an interest
in the Partnership as a result of the enactment of any statute, regulation or
other law or the judicial or administrative interpretation of any existing or
future statute, regulation or other law, the General Partner shall attempt to
restructure the Partnership in order to comply with such enactment or
interpretation. If any Class B Limited Partner shall be so prohibited from
owning an interest in the Partnership and the Partnership cannot be so
restructured, the Partnership will purchase all the Class B Limited Partners'
interests in the Partnership as provided in this Section 7.4. Additionally, if
the enactment of any statute, regulation or other law or the judicial or
administrative interpretation of any existing or future statute, regulation or
law shall have the effect of limiting reimbursement of health care costs through
government or other payor programs or otherwise materially and adversely affects
the manner in which the Partnership or its Affiliates shall operate their
businesses, the General Partner shall attempt to restructure the Partnership to
eliminate the adverse effect and if the Partnership cannot be so restructured,
the General Partner, at its sole and absolute discretion, shall have the option
to cause the Partnership to purchase all of the Class C Limited Partners' and or
Class B Limited Partners' interests in the Partnership as provided in this
Section 7.4. The Partnership shall pay each such Partner for his interest in the
Partnership the Valuation Price of such interest. Such amount will be paid to
each such Partner, at the sole and absolute discretion of the General Partner,
in a lump sum, in sixty (60) equal monthly payments with interest on the unpaid
principal balance at the Prime Rate. If the General Partner exercise its
discretion to pay for a Partnership interest in sixty (60) monthly installments,
the first such installment shall be paid to such Limited Partner on the first
day of the month after thirty (30) days have expired since the Partner's
interest in the Partnership had been terminated, with subsequent installments
paid on the first day of each successive month thereafter until paid in full.
The Partnership may pre-pay in whole or in part the amount owed without penalty.
The Partnership's obligation to pay the such Partners in sixty (60) equal
monthly installments under this Section 7.4 will be evidenced by nonrecourse
promissory notes executed by the General Partner on behalf of the Partnership.

                  7.5.     Divorce of Class C Limited Partner or a Class B
Limited Partner. In the event of a divorce of a Class C Limited P, a Class B
Limited Partner or a person who owns an interest in a Qualified P.C. or a
Qualified Retirement Plan which is a Class B Limited Partner in which all or any
part of the divorcing Partner's or person's interest in the Partnership is
awarded to the spouse, the divorcing Partner or person shall have the first and
prior right to purchase from the spouse the interest or portion thereof to be
transferred to the spouse. In the event the divorcing Partner or person is
unable or unwilling to purchase such interest within sixty (60) days of the
order or settlement agreement effecting the award, the Partnership shall have
the exclusive right to purchase such interest for a period of sixty (60) days
after the expiration of such prior sixty (60) day period or the earlier receipt
by the Partnership of written notice from the divorcing Partner or person that
he is unable or unwilling to purchase such interest. The Partnership shall give
written notice to the spouse of its election to purchase such interest within
such sixty (60) day period. In the event of the purchase by either the divorcing
Partner or person or the Partnership, the purchase price for such interest shall
be the Valuation Price, multiplied by that percentage of the interest of the
divorcing Partner or person which was awarded to the spouse. The last day of the
month in which the order or settlement agreement effecting the award was dated
will be the time used as the reference time for determining the last ended
period for purposes of the Valuation Price; the purchase price so determined
will be payable in the manner

                                       30
<PAGE>   31

described in Section 7.3.3.

                  7.6      Repurchase of Excess Interest. In the event any Class
B Limited Partner at any time owns more one than one percent (1%) of the
Partnership interests, the Partnership shall have the exclusive right to
purchase that portion of such Partnership interest which exceeds one percent
(1%) of the Partnership interest (the "Excess Interest") for a period of sixty
(60) days after the Partnership receives notice of the ownership of such Excess
Interest. The Partnership shall give written notice to such Class B Limited
Partner of its election to purchase such Excess Interest within such sixty (60)
day period. The purchase price for such Excess Interest shall be the lesser of
a) the Valuation Price multiplied by the Excess Interest or b) the purchase
price paid by such Class B Limited Partner for that portion or portions of such
Class B Limited Partners Partnership interest which caused such Class B Limited
Partner's Partnership interest to be in excess of one percent (1%) of the
Partnership interests multiplied by the Excess Interest. The last day of the
month in which such Class B Limited Partner became the owner of such Excess
Interest will be the time used as the reference time for determining the last
ended period for purposes of the Valuation Price. For the purpose of this
Section 7.6, the Partnership interests of any individual Class B Limited Partner
shall be aggregated with the Partnership interests of any Class B Limited
Partner which is a Qualified P.C. or a Qualified Retirement Plan in which the
individual Class B Limited Partner has any interest, and the interests of any
Class B Limited Partner which is a Qualified P.C. shall be aggregated with the
interests of any Class B Limited Partner which is Qualified Retirement Plan in
which such Qualified P.C. or any individual Qualified Purchaser, whether or not
a Class B Limited Partner, has any interest.

                  7.7      Put and Call Provisions. At anytime following the
third anniversary of the acquisition of a Partnership interest by a Class B
Limited Partner, such Class B Limited Partner shall have the right, upon sixty
(60) days prior written notice to the Partnership, to require the Partnership to
repurchase such Partnership interest. The purchase price for such Partnership
interest shall be the lesser of (i) the Valuation Price multiplied by the number
of such Class B Limited Partner's Units, or (ii) the amount paid by the Class B
Limited Partner to acquire his Units less any distributions other than
distributions of Distributable Cash Flow, including without limitation any
deemed distributions, any distributions pursuant to Section 3.9 and any returns
of capital, but not less than one (1) dollar. At anytime following the third
anniversary of the acquisition of a Partnership interest by a Class B Limited
Partner, the Partnership, at the sole discretion of the General Partner, shall
have the right, upon sixty (60) days prior written notice to the any Class B
Limited Partner, to require such Class B Limited Partner to sell such
Partnership interest to the Partnership. The purchase price for such Partnership
interest shall be the Valuation Price multiplied by the number of such Class B
Limited Partner's Units. The last day of the month in which the notice of the
exercise of the provisions of this Section either by a Class B Limited Partner
or the Partnership will be the time used as the reference time for determining
the last ended period for purposes of the Valuation Price.

                                       31
<PAGE>   32

                  7.8      Federal Income Tax Treatment. In the event the
Partnership exercises the right to purchase any Partner's interest in the
Partnership under this Article VII, one hundred percent (100%) of all payments
made by the Partnership to such Partner hereunder in consideration for such
Partner's Partnership interest will, for Federal income tax purposes, be
classified as a Code Section 736(b) payment except for such Partner's share of
the Partnership's "unrealized receivables," as defined in Code Section 751(c)
which will be classified as a Code Section 736(a)(1) payment. The General
Partner shall conclusively determine or cause to be determined any such
Partner's share of "unrealized receivables." Neither the Partnership nor the
General Partner shall be liable to any Person for any inaccuracy in determining
any such Partner's share of the Partnership's "unrealized receivables."

                                  ARTICLE VIII

                           Dissolution and Termination

                  8.1.     Events Causing Dissolution and Termination.

                  The Partnership shall be dissolved upon (1) the expiration of
the term of the Partnership stated in this Agreement; (2) the sale of all of the
assets of the Partnership and the distribution of the net proceeds therefrom;
(3) at any time with the written consent of the General Partner and of all of
the Class A Limited Partners; (4) the resignation, dissolution and liquidation
or conversion of the General Partner if no substitute General Partner is elected
within sixty (60) days as provided in Section 5.3; and (5) any other event as
may be provided by law. The Partnership shall be terminated when the winding up
of Partnership affairs has been completed following dissolution.

                  8.2.     Winding Up Affairs on Dissolution.

                  Upon dissolution of the Partnership, the General Partner, or
the persons required or permitted by law to carry out the winding up of the
affairs of the Partnership, shall promptly notify all Partners of such
dissolution; shall wind up the affairs of the Partnership; shall prepare and
file all instruments or documents required by law to be filed to reflect the
dissolution of the Partnership; and, after paying or providing for the payment
of all liabilities and obligations of the Partnership, shall distribute the
assets of the Partnership as provided by law and the terms of this Agreement.

                  8.3.     Distributions in Accordance with Capital Accounts.

                  Notwithstanding any other provision of this Agreement, upon
liquidation of the Partnership (or any Partner's interest in the Partnership)
liquidating distributions shall be made, in all cases,in accordance with the
Partners' positive capital account balances determined after all adjustments to
the Partners' capital accounts for the taxable year. Such distribution shall be
made within the time periods required by Treasury Regulation Section 1.704-1(b).
In the event that upon liquidation of the Partnership, the General Partner has a
deficit balance in its capital account, the General Partner shall contribute to
the capital of the Partnership an amount of money equal to the lesser of (a)
such deficit balance, or (b) the excess of 1.01 percent of the total capital

                                       32
<PAGE>   33

contributions by the Limited Partners to the Partnership over the total amount
of capital contributions made to the Partnership by the General Partner. Any
amounts contributed by the General Partner shall be added to the amounts
described above and shall be distributed in the manner provided in this Section
6.4.

                                   ARTICLE IX

                                 Fiscal Matters

                  9.1.     Books and Records.

                  The General Partner shall maintain full and accurate books of
the Partnership at its principal place of business or at such other place as may
be designated from time to time by the General Partner, showing all receipts and
expenditures assets and liabilities, profits and losses, and all other records
necessary for recording the Partnership's business and affairs. Each Partner and
its duly authorized representatives shall at all time have access to and may
inspect and copy any of such books and records.

                  9.2.     Fiscal Year.

                  The fiscal year of the Partnership shall end on December 31 of
each year.

                  9.3.     Reports to Partners.

                  The General Partner shall cause to be prepared at the
Partnership's expense, and shall deliver to each Partner the following reports:

                           9.3.1.   Within seventy-five (75) days after the end
                  of each Fiscal Year, all information necessary for the
                  preparation of the Limited Partners' federal income tax
                  returns;

                           9.3.2.   Any Partner may obtain, at such Partner's
                  expense, such other reports on the Partnership's operations
                  and conditions as such Partner may reasonably request, which
                  reports shall be mailed by the General Partner within one (1)
                  month after notice of such Partner's request.

                  9.4.     Bank Accounts and Temporary Investments.

                  All funds of the Partnership shall be deposited in its name in
such checking, savings or other accounts as shall be designated by the General
Partner from time to time separate and apart from, and not commingled with, the
accounts of any other persons, including the accounts of the General Partner or
its Affiliates. Withdrawals therefrom shall be made upon such signature or
signatures as the General Partner may designate.

                                       33
<PAGE>   34

                  9.5.     Accounting Decisions.

                  All decisions as to accounting matters shall be made by the
General Partner in accordance with generally accepted accounting principles
consistency applied, unless another method of accounting not in accordance with
generally accepted accounting principles is selected for tax reporting purposes.

                                    ARTICLE X

                           Expenses of the Partnership

                  10.1.    Reimbursement of Expenses Incurred by the General
                           Partner.

                  All expenses of the Partnership's business should be billed
directly to and paid by the Partnership. The General Partner shall be reimbursed
by the Partnership for all direct expenses incurred by it to unrelated third
parties in connection with the Partnership's business, including legal,
accounting, and financial services.

                                   ARTICLE XI

                      Special Covenant of Class C Limited Partners and Class B
Limited Partners

                  11.1.    Non-Ownership Provision. Each Class C Limited Partner
and Class B Limited Partner agrees that while he is a Partner and for two (2)
years thereafter neither he nor any of his Affiliates shall, directly or
indirectly, hold an ownership interest in any health care facility (which shall
include, without limitation, general acute care hospitals, specialty hospitals,
comprehensive rehabilitation facilities, rehabilitation agencies, diagnostic
imaging centers, inpatient or outpatient psychiatric or substance abuse
facilities, ambulatory or other types of surgery centers and/or home health
agencies) that is located within the greater of a) fifty (50) miles of the
Project or b) Anderson County Texas and counties contiguous thereto. ("Competing
Business") without the prior written consent of the General Partner. Each such
Partner expressly agrees that neither he nor any of his Affiliates shall violate
the terms of this Section 11.1 while such Limited Partner is a limited partner
of the Partnership and for a period of two (2) years thereafter. Notwithstanding
anything to the contrary in this Section 11.1, no such Partner will be in
violation of this Section 11.1 if such Partner or any Affiliate of such Partner
held an ownership interest in a Competing Business on or before January 1, 1997
and such Partner or Affiliate provided written notice thereof to the General
Partner prior to his admission as a Partner. Nothing in this Section 11.1 is
intended to prevent a Class B Limited Partner from practicing medicine, being a
member of the medical staff of, or referring patients to, any other hospital or
health care facility.

                  11.2.    Limitation. If a court shall hold that the duration
and/or scope (geographic or otherwise) of the agreement contained in Section
11.1 is unreasonable, then, to the extent permitted by law, the court may
prescribe a duration and/or scope (geographic or otherwise) that is reasonable
and judicially enforceable. The parties agree to accept such determination,
subject

                                       34
<PAGE>   35

to their rights of appeal, which the parties hereto agree shall be substituted
in place of any and every offensive part of Section 11.1, and as so modified,
Section 11.1 of this Agreement shall be as fully enforceable as if set forth
herein by the parties in the modified form.

                                   ARTICLE XII

                               General Provisions

                  12.1.    Notices.

                  All notices, consents, waivers, directions, requests, votes or
other instruments or communications provided for under this Agreement shall be
in writing, signed by the party giving the same, and shall be deemed properly
given when actually received, if delivered in person, or when mailed, if sent by
registered or certified United States mail, postage prepaid, addressed: (a) in
the case of the Partnership, to the Partnership at the principal place of
business of the Partnership; or (b) in the case of any Partner individually, to
such Partner at his address set forth in Schedule A hereto. Each Partner may, by
written notice to all other Partners, specify any other address for the receipt
of such instruments or communications.

                  12.2.    Power of Attorney.

                  Subject to the requirements of this Agreement, each Partner,
by the execution of this Agreement, hereby irrevocably constitutes and appoints
the General Partner, its successor and assigns, as its true and lawful attorney
and agent, with full power and authority in his name, place and stead to swear
to, execute, acknowledge, deliver, file and record in any appropriate public
office any certificate or other instrument which may be necessary, desirable or
appropriate to qualify or to continue the Partnership as a limited partnership
in the State of Texas; any amendment to this Agreement or to any certificate or
other instrument which may be necessary, desirable or appropriate to reflect the
admission of a Partner, the withdrawal of a Partner or the transfer of all or
any part of the interest of a Partner in the Partnership or any additional
capital contributions or withdrawal of capital contributions by a Partner; any
conveyance of Partnership property; any mortgage or other encumbrance of
Partnership property and related documents; any note or other instrument
evidencing a Partnership obligation and related documents; and any certificates
or instrument which may be appropriate, necessary or desirable to reflect the
dissolution and termination of the Partnership. The power of attorney granted
hereby shall not be affected by disability of the principal, shall be deemed to
be coupled with an interest and shall survive the death or incompetency of any
Partner and the transfer by any Partner of its interest as Partner in the
Partnership.

                  12.3.    Meetings.

                  Meetings of all Partners may be called by the General Partner
and/or any Limited Partner. Upon receipt of a written request stating the
purpose(s) of the meeting, the General Partner shall provide all Partners within
ten (10) days after receipt of said request, written notice of the meeting, and
the purpose thereof to be held on a date not less than fifteen (15) nor more
than sixty (60) days after receipt of said request. Any such meetings shall be
held at the principal

                                       35
<PAGE>   36

place of business of the Partnership.

                  12.4.    Integration.

                  This Agreement embodies the entire agreement and understanding
among the Partners and supersedes all prior agreements and understandings, if
any, among and between the Partners relating to the subject matter hereof.

                  12.5.    Applicable Law.

                  This Agreement and the rights of the Partners shall be
governed by and construed and enforced in accordance with the laws of the State
of Texas.

                  12.6.    Counterparts.

                  This Agreement may be executed in several counterparts and all
counterparts so executed shall constitute one agreement binding on all the
parties hereto, notwithstanding that all the parties are not signatory to the
original or the same counterpart, except that no counterpart shall be authentic
unless signed by the General Partner.

                  12.7.    Severability.

                  In case any one or more of the provisions contained in this
Agreement or any application thereof shall be invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein and any other application thereof shall not in any
way be affected or impaired thereby.

                  12.8.    Binding Effect.

                  Except as herein otherwise provided to the contrary, this
Agreement shall be binding upon, and inure to the benefit of, the Partners and
their respective heirs, executors, administrators, successors and assigns.

                  12.9.    Waiver of Action of Partition.

                  The Partners agree that the property of the Partnership is not
and will not be suitable for partition and that all the property of the
Partnership should be dealt with as a single, integral unit. Accordingly, each
of the Partners hereby irrevocably waives any and all rights that it may have to
maintain an action for partition of any of the property of the Partnership,
either as a partition in kind or a partition by sale.

                                       36
<PAGE>   37
         IN WITNESS WHEREOF, the undersigned, being all of the Partners of the
partnership, have executed and acknowledged this Agreement as of the day first
above written.

                                  ORIGINAL GENERAL PARTNER:

                                  PHC OF DELAWARE, INC.
                                  formerly known as
                                  Principal Hospital Company,
                                  a Delaware corporation

                                  By: /s/ John M. Rutledge
                                      ------------------------------------------
                                      John M. Rutledge

                                  Title: Vice President and COO

                                  SUBSTITUTED GENERAL PARTNER:

                                  PALESTINE-PRINCIPAL G.P., INC.,
                                  a Texas corporation

                                  By: /s/ John M. Rutledge
                                      ------------------------------------------
                                      John M. Rutledge

                                  Title: Vice President and COO

                                  CLASS A LIMITED PARTNERS:

                                  PALESTINE-PRINCIPAL, INC.,
                                  a Tennessee corporation

                                  By: /s/ John M. Rutledge
                                      ------------------------------------------
                                      John M. Rutledge

                                  Title: Vice President and COO

                                  MOTHER FRANCES HOSPITAL REGIONAL
                                  HEALTH CARE CENTER,
                                  a Texas not-for-profit corporation

                                  By:  /s/ William Bellenfant
                                      ------------------------------------------
                                  Title: President

                                      37
<PAGE>   38

                                       MOTHER FRANCES HOSPITAL REGIONAL
                                       HEALTH CARE CENTER,
                                       a Texas not-for-profit corporation

                                       By: /s/ William Bellenfant
                                          --------------------------------------
                                       Title: President

                                       38
<PAGE>   39

                                   Schedule A

               PALESTINE PRINCIPAL HEALTHCARE LIMITED PARTNERSHIP

                     NAMES, ADDRESSES, CAPITAL CONTRIBUTIONS
                         OF PARTNERS AND NUMBER OF UNITS

                  The names and addresses of the Partners are set forth below.
The amounts contributed or to be contributed by each Partner as its capital
contribution to the Partnership and the number of Units owned by each Limited
Partner are also set forth below opposite its name:

<TABLE>
<CAPTION>
Name and Address                             Capital               Percentage                   Units
                                           Contribution             Interest
<S>                                        <C>                     <C>                          <C>
GENERAL PARTNER:

Palestine-Principal G.P., Inc.              $  100,000                  1%                        10
109 Westpark Drive, Suite 180
Brentwood, TN 37027
Attn: President

CLASS A LIMITED PARTNERS:

Palestine-Principal, Inc.                   $9,400,000                 94%                       940
109 Westpark Drive, Suite 180
Brentwood, TN 37027
Attn: President

Mother Frances Hospital                     $  500,000                  5%                        50
Regional Health Care Center
800 Fast Dawson
Tyler, TX 75701
Attn: President

CLASS B LIMITED PARTNERS:

None

CLASS C LIMITED PARTNERS:

None
</TABLE>

                                       39<PAGE>   1
                                                                   EXHIBIT 10.35

                           PROVINCE HEALTHCARE COMPANY

                              AMENDED AND RESTATED
                      1997 LONG-TERM EQUITY INCENTIVE PLAN

                                    RECITALS

         WHEREAS, Principal Hospital Company ("Principal"), the corporate
predecessor of the Company, established the Principal Hospital Company 1997
Long-Term Equity Incentive Plan (the "Plan"), effective March 3, 1997, by action
of its board of directors and the Plan was subsequently approved by its
shareholders; and

         WHEREAS, the Plan was initially established with a reservation of
200,000 shares of the no-par common stock of Principal ("Stock") for issuance
under the Plan, and as a result of a three-for-one split of Stock that occurred
in March, 1997, the number of shares available for issuance under the Plan was
automatically increased in proportion to the stock split; and

         WHEREAS, the Plan was amended on September 24, 1997, to increase the
number of shares of Stock available for issuance under the Plan by 1,155,000,
resulting in a total of 1,755,000 shares, and such amendment was approved by the
shareholders of Principal; and

         WHEREAS, as a result of the merger of Principal with and into the
Company on February 4, 1998, pursuant to which Principal exchanged 1.83 shares
of Stock for each share of the common stock of the Company, par value $.01 per
share, ("Common Stock"), the Company assumed all of the rights and obligations
of Principal under the Plan and the number of shares of Common Stock available
for issuance under the Plan was adjusted to 959,016 shares; and

         WHEREAS, the Company, with approval of its shareholders, amended the
Plan effective March 24, 1998 in order to change the name of the Plan to the
"Province Healthcare Company 1997 Long-Term Equity Incentive Plan" and to
increase the number of shares authorized for issuance under the Plan to a total
of 1,209,016 shares; and

         WHEREAS, the Company, with approval of its shareholders, amended the
Plan effective on each of March 31, 1999 and March 14, 2000 in order to increase
the number of shares authorized for issuance under the Plan to a total of
2,609,016 shares and 3,609,016 shares, respectively; and

         WHEREAS, the Company desires to amend and restate the Plan for the sole
purpose of consolidating the various adjustments and amendments to the Plan
described above;

         NOW, THEREFORE, by action of the Board of Directors as permitted under
Section 16 of the Plan, the text of the Plan is hereby amended and restated to
read in its entirety as follows:

<PAGE>   2

1. Purpose.

         This plan shall be known as the Province Healthcare Company Amended and
Restated 1997 Long-Term Equity Incentive Plan (the "Plan"). The purpose of the
Plan shall be to promote the long-term growth and profitability of Province
Healthcare Company and its Subsidiaries by (i) providing certain directors,
officers and key employees of, and certain other key individuals who perform
services for, the Company and its Subsidiaries with incentives to maximize
stockholder value and otherwise contribute to the success of the Company and
(ii) enabling the Company to attract, retain and reward the best available
persons for positions of substantial responsibility. Grants of incentive or
nonqualified stock options, stock appreciation rights ("SARs"), either alone or
in tandem with options, restricted stock, performance awards, or any combination
of the foregoing may be made under the Plan.

2. Definitions.

         (a) "Board of Directors" and "Board" mean the board of directors of the
Company.

         (b) "Cause" means the occurrence of one of the following events:

             (i) Conviction of a felony or any crime or offense lesser than a
felony involving the property of the Company or a Subsidiary; or

             (ii) Conduct that has caused demonstrable and serious injury to the
Company or a Subsidiary, monetary or otherwise; or

             (iii) Willful refusal to perform or substantial disregard of duties
properly assigned, as determined by the Company; or

             (iv) Breach of duty of loyalty to the Company or a Subsidiary or
other act of fraud or dishonesty with respect to the Company or a Subsidiary.

         (c) "Change in Control" means the occurrence of one of the following
events:

             (i) if any "person" or "group" as those terms are used in Sections
13(d) and 14(d) of the Exchange Act, other than an Exempt Person, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 50% or more of
the combined voting power of the Company's then outstanding securities; or

             (ii) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board and any new directors whose
election by the Board or nomination for election by the Company's stockholders
was approved by at least two-thirds of the directors then still in office who
either were directors at the beginning of the period or whose election was
previously so approved, cease for any reason to constitute a majority thereof;
or

                                       2
<PAGE>   3

             (iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation (A) which would result in all or a portion of the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (B) by which the corporate
existence of the Company is not affected and following which the Company's chief
executive officer and directors retain their positions with the Company (and
constitute at least a majority of the Board); or

             (iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Company's assets, other than a sale to
an Exempt Person.

         (d) "Code" means the Internal Revenue Code of 1986, as amended.

         (e) "Committee" means the Compensation Committee of the Board, or if no
such committee of the Board exists, means the Board. The membership of the
Committee shall be constituted so as to comply at all times with the applicable
requirements of Rule 16b-3 under the Exchange Act and Section 1 62(m) of the
Code.

         (f) "Common Stock" means the Common Stock, without par value, of the
Company, and any other shares into which such stock may be changed by reason of
a recapitalization, reorganization, merger, consolidation or any other change in
the corporate structure or capital stock of the Company.

         (g) "Company" means Province Healthcare Company, a Delaware
corporation, or any corporate successor thereto as contemplated by Section 15.

         (h) "Competition" is deemed to occur if a person whose employment with
the Company or its Subsidiaries has terminated obtains a position as a full-time
or part-time employee of, as a member of the board of directors of, or as a
consultant or advisor with or to, or acquires an ownership interest in excess of
5% of, a corporation, partnership, firm or other entity that engages in any of
the businesses of the Company or any Subsidiary with which the person was
involved in a management role at any time during his or her last five years of
employment with or other service for the Company or any Subsidiaries.

         (i) "Disability" means a disability that would entitle an eligible
participant to payment of monthly disability payments under any Company
disability plan or as otherwise determined by the Committee.

         (j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

         (k) "Exempt Person" means (i) Golder, Thoma, Cressey, Rauner Inc., (ii)
any person, entity or group under the control of any party included in clause
(i), or (iii) any employee

                                       3
<PAGE>   4

benefit plan of the Company or a trustee or other administrator or fiduciary
holding securities under an employee benefit plan of the Company.

         (l) "Fair Market Value" of a share of Common Stock of the Company
means, as of the date in question, the officially-quoted closing selling price
of the stock (or if no selling price is quoted, the bid price) on the principal
securities exchange on which the Common Stock is then listed for trading
(including for this purpose the Nasdaq National Market) (the "Market") for the
immediately preceding trading day or, if the Common Stock is not then listed or
quoted in the Market, the Fair Market Value shall be the fair value of the
Common Stock determined in good faith by the Board; provided, however, that when
shares received upon exercise of an option are immediately sold in the open
market, the net sale price received may be used to determine the Fair Market
Value of any shares used to pay the exercise price or withholding taxes and to
compute the withholding taxes.

         (m) "Incentive Stock Option" means an option conforming to the
requirements of Section 422 of the Code and any successor thereto.

         (n) "Non-Employee Director" has the meaning given to such term in Rule
16b-3 under the Exchange Act.

         (o) "Nonqualified Stock Option" means any stock option other than an
Incentive Stock Option.

         (p) "Other Company Securities" mean securities of the Company other
than Common Stock, which may include, without limitation, unbundled stock units
or components thereof, debentures, preferred stock, warrants and securities
convertible into or exchangeable for Common Stock or other property.

         (q) "Retirement" means retirement as defined under any Company pension
plan or retirement program or termination of one's employment on retirement with
the approval of the Committee.

         (r) "Subsidiary" means a corporation or other entity of which
outstanding shares or ownership interests representing 50% or more of the
combined voting power of such corporation or other entity entitled to elect the
management thereof, or such lesser percentage as may be approved by the
Committee, are owned directly or indirectly by the Company.

3. Administration.

         The Plan shall be administered by the Committee; provided that the
Board may, in its discretion, at any time and from time to time, resolve to
administer the Plan, in which case the term "Committee" shall be deemed to mean
the Board for all purposes herein. The Committee shall consist of at least two
directors. Subject to the provisions of the Plan, the Committee shall be
authorized to (i) select persons to participate in the Plan, (ii) determine the
form and substance of grants made under the Plan to each participant, and the
conditions and restrictions, if any, subject to which such grants will be made,
(iii) modify the terms of grants made under the Plan,

                                       4
<PAGE>   5

(iv) interpret the Plan and grants made thereunder, (v) make any adjustments
necessary or desirable in connection with grants made under the Plan to eligible
participants located outside the United States and (vi) adopt, amend, or rescind
such rules and regulations, and make such other determinations, for carrying out
the Plan as it may deem appropriate. Decisions of the Committee on all matters
relating to the Plan shall be in the Committee's sole discretion and shall be
conclusive and binding on all parties. The validity, construction, and effect of
the Plan and any rules and regulations relating to the Plan shall be determined
in accordance with applicable federal and state laws and rules and regulations
promulgated pursuant thereto. No member of the Committee and no officer of the
Company shall be liable for any action taken or omitted to be taken by such
member, by any other member of the Committee or by any officer of the Company in
connection with the performance of duties under the Plan, except for such
person's own willful misconduct or as expressly provided by statute.

         The expenses of the Plan shall be borne by the Company. The Plan shall
not be required to establish any special or separate fund or make any other
segregation of assets to assume the payment of any award under the Plan, and
rights to the payment of such awards shall be no greater than the rights of the
Company's general creditors.

4. Shares Available for the Plan.

         An aggregate of 3,609,016 shares of Common Stock (the "Shares") may be
issued pursuant to the Plan. Such Shares may be in whole or in part authorized
and unissued, or shares which are held by the Company as treasury shares. If any
grant under the Plan expires or terminates unexercised, becomes unexercisable or
is forfeited as to any Shares, such unpurchased or forfeited Shares shall
thereafter be available for further grants under the Plan. In any one calendar
year, the Committee shall not grant to any one participant options or SARs to
purchase a number of shares of Common Stock in excess of 114,754. The number of
shares of Common Stock referenced in this paragraph are subject to adjustment as
provided in Section 15.

         Without limiting the generality of the foregoing provisions of this
Section 4 or the generality of the provisions of Sections 3, 6 or 17 or any
other section of this Plan, the Committee may, at any time or from time to time,
and on such terms and conditions (that are consistent with and not in
contravention of the other provisions of this Plan) as the Committee may, in its
sole discretion, determine, enter into agreements (or take other actions with
respect to the options) for new options containing terms (including exercise
prices) more (or less) favorable than the outstanding options.

5. Participation.

         Participation in the Plan shall be limited to those directors
(including Non-Employee Directors), officers (including non-employee officers)
and key employees of, and other key individuals performing services for, the
Company and its Subsidiaries selected by the Committee (including participants
located outside the United States). Nothing in the Plan or in any grant
thereunder shall confer any right on a participant to continue in the employ of
or the performance of services for the Company or shall interfere in any way
with the right of the Company to terminate the employment or performance of
services of a participant at any time.

                                       5
<PAGE>   6

By accepting any award under the Plan, each participant and each person claiming
under or through him or her shall be conclusively deemed to have indicated his
or her acceptance and ratification of, and consent to, any action taken under
the Plan by the Company, the Board or the Committee.

         Incentive Stock Options or Nonqualified Stock Options, SARs, alone or
in tandem with options, restricted stock awards, performance awards, or any
combination thereof, may be granted to such persons and for such number of
Shares as the Committee shall determine (such individuals to whom grants are
made being sometimes herein called "optionees" or "grantees," as the case may
be). Determinations made by the Committee under the Plan need not be uniform and
may be made selectively among eligible individuals under the Plan, whether or
not such individuals are similarly situated. A grant of any type made hereunder
in any one year to an eligible participant shall neither guarantee nor preclude
a further grant of that or any other type to such participant in that year or
subsequent years.

6. Incentive and Nonqualified Options.

         The Committee may from time to time grant to eligible participants
Incentive Stock Options, Nonqualified Stock Options, or any combination thereof;
provided that the Committee may grant Incentive Stock Options only to eligible
employees of the Company or its subsidiaries (as defined for this purpose in
Section 424(f) of the Code). The options granted shall take such form as the
Committee shall determine, subject to the following terms and conditions.

         It is the Company's intent that Nonqualified Stock Options granted
under the Plan not be classified as Incentive Stock Options, that Incentive
Stock Options be consistent with and contain or be deemed to contain all
provisions required under Section 422 of the Code and any successor thereto, and
that any ambiguities in construction be interpreted in order to effectuate such
intent. If an Incentive Stock Option granted under the Plan does not qualify as
such for any reason, then to the extent of such nonqualification, the stock
option represented thereby shall be regarded as a Nonqualified Stock Option duly
granted under the Plan, provided that such stock option otherwise meets the
Plan's requirements for Nonqualified Stock Options.

         (a) Price. The price per Share deliverable upon the exercise of each
option ("exercise price") shall be established by the Committee, except that in
the case of the grant of any Incentive Stock Option, the exercise price may not
be less than 100% of the Fair Market Value of a share of Common Stock as of the
date of grant of the option, and in the case of the grant of any Incentive Stock
Option to an employee who, at the time of the grant, owns more than 10% of the
total combined voting power of all classes of stock of the Company or any of its
Subsidiaries, the exercise price may not be less than 110% of the Fair Market
Value of a share of Common Stock as of the date of grant of the option, in each
case unless otherwise permitted by Section 422 of the Code.

         (b) Payment. Options may be exercised, in whole or in part, upon
payment of the exercise price of the Shares to be acquired. Payment shall be
made (i) in the form of cash (including cashiers check or wire transfer), (ii)
by delivery of eligible shares of Common Stock, as defined below, ("Eligible
Shares") (iii) with the assistance of a broker (reasonably acceptable

                                       6
<PAGE>   7

to the Committee) through a credit transaction involving Shares to be acquired
on exercise, as permitted under Regulation T of the Federal Reserve Board, or
(iv) by any combination of the foregoing.

         For purposes of this Section 6(b), Common Stock shares are Eligible
Shares if they have been held by the grantee free of any risk of forfeiture to
the Company for at least six months or, upon approval by the Committee, were
acquired as an investment by the grantee through a purchase on the open market.
Eligible Shares shall be delivered to the Company either by (A) physical
delivery of the certificate(s) for all such Eligible Shares tendered in payment
of the price, accompanied by duly executed instruments of transfer in a form
acceptable to the Company, or (B) direction to the grantee's broker to transfer,
by book entry, such Eligible Shares from a brokerage account of the grantee to a
brokerage account specified by the Company. No grantee may tender shares of
Common Stock having a Fair Market Value exceeding the aggregate exercise price
payable with respect to the option being exercised (plus any applicable taxes).

         (c) Terms of Options. The term during which each option may be
exercised shall be determined by the Committee, but, except as otherwise
provided herein, in no event shall an option be exercisable in whole or in part,
in the case of a Nonqualified Stock Option or an Incentive Stock Option (other
than as described below), more than ten years from the date it is granted or, in
the case of an Incentive Stock Option granted to an employee who at the time of
the grant owns more than 10% of the total combined voting power of all classes
of stock of the Company or any of its Subsidiaries, if required by the Code,
more than five years from the date it is granted. All rights to purchase Shares
pursuant to an option shall, unless sooner terminated, expire at the date
designated by the Committee. The Committee shall determine the date on which
each option shall become exercisable and may provide that an option shall become
exercisable in installments. The Shares constituting each installment may be
purchased in whole or in part at any time after such installment becomes
exercisable, subject to such minimum exercise requirements as may be designated
by the Committee. Unless otherwise provided herein or in the terms of the
related grant, an optionee may exercise an option only if he or she is, and has
continuously since the date the option was granted, been a director, officer or
employee of or performed other services for the Company or a Subsidiary. Prior
to the exercise of an option and delivery of the Shares represented thereby, the
optionee shall have no rights as a stockholder with respect to any Shares
covered by such outstanding option (including any dividend or voting rights).

         (d) Limitations on Grants. If required by the Code, the aggregate Fair
Market Value (determined as of the grant date) of Shares for which an Incentive
Stock Option is exercisable for the first time during any calendar year under
all equity incentive plans of the Company and its Subsidiaries (as defined in
Section 422 of the Code) may not exceed $100,000.

         (e) Termination; Change in Control.

             (i) If a participant ceases to be a director, officer or employee
of, or to perform other services for, the Company and any Subsidiary due to
death or Disability, all of the

                                       7
<PAGE>   8

participant's options and SARs shall become fully vested and exercisable and
shall remain so for a period of one year from the date of such death or
Disability, but in no event after the expiration date of the options or SARs.
Notwithstanding the foregoing, if the Disability giving rise to the termination
of employment is not within the meaning of Section 422(e)(3) of the Code, the
participant's Incentive Stock Options shall terminate 90 days after the date of
termination of employment.

             (ii) If a participant ceases to be a director, officer or employee
of, or to perform other services for, the Company and any Subsidiary upon the
occurrence of his or her Retirement, (A) all of the participant's options and
SARs that were exercisable on the date of Retirement shall remain exercisable
for, and shall otherwise terminate at the end of, a period of up to three years
after the date of Retirement, but in no event after the expiration date of the
options or SARs; provided that the participant does not engage in Competition
during such three-year period unless he or she receives written consent to do so
from the Board or the Committee, and (B) all of the participant's options and
SARs that were not exercisable on the date of Retirement shall be forfeited
immediately upon such Retirement. Notwithstanding the foregoing, Incentive Stock
Options not exercised by such participant within 90 days after Retirement will
cease to qualify as Incentive Stock Options and will be treated as Nonqualified
Stock Options under the Plan if required to be so treated under the Code.

             (iii) If a participant ceases to be a director, officer or employee
of, or to perform other services for, the Company or a Subsidiary due to Cause,
all of the participant's options and SARs shall be forfeited immediately upon
such cessation, whether or not then exercisable.

             (iv) Unless otherwise determined by the Committee, if a participant
ceases to be a director, officer or employee of, or to otherwise perform
services for, the Company or a Subsidiary for any reason other than death,
Disability, Retirement or Cause, (A) all of the participant's options and SARs
that were exercisable on the date of such cessation shall remain exercisable
for, and shall otherwise terminate at the end of, a period of 90 days after the
date of such cessation, but in no event after the expiration date of the options
or SARs; provided that the participant does not engage in Competition during
such 90-day period unless he or she receives written consent to do so from the
Board or the Committee, and (B) all of the participant's options and SARs that
were not exercisable on the date of such cessation shall be forfeited
immediately upon such cessation.

             (v) If there is a Change in Control of the Company, all of the
participant's options and SARs shall become fully vested and exercisable
immediately prior to such Change in Control and shall remain so until the
expiration date of the options and SARs.

         (f) Grant of Reload Options. The Committee may provide (either at the
time of grant or exercise of an option), in its discretion, for the grant to a
grantee who exercises all or any portion of an option ("Exercised Options") and
who pays all or part of such exercise price with shares of Common Stock, of an
additional option (a "Reload Option") for a number of shares of Common Stock
equal to the sum (the "Reload Number") of the number of shares of

                                       8
<PAGE>   9

Common Stock tendered or withheld in payment of such exercise price for the
Exercised Options plus, if so provided by the Committee, the number of shares of
Common Stock, if any, tendered or withheld by the grantee or withheld by the
Company in connection with the exercise of the Exercised Options to satisfy any
federal, state or local tax withholding requirements. The terms of each Reload
Option, including the date of its expiration and the terms and conditions of its
exercisability and transferability, shall be the same as the terms of the
Exercised Option to which it relates, except that (i) the grant date for each
Reload Option shall be the date of exercise of the Exercised Option to which it
relates and (ii) the exercise price for each Reload Option shall be the Fair
Market Value of the Common Stock on the grant date of the Reload Option.

7. Stock Appreciation Rights.

         The Committee shall have the authority to grant SARs under this Plan,
either alone or to any optionee in tandem with options (either at the time of
grant of the related option or thereafter by amendment to an outstanding
option). SARs shall be subject to such terms and conditions as the Committee may
specify.

         No SAR may be exercised unless the Fair Market Value of a share of
Common Stock of the Company on the date of exercise exceeds the exercise price
of the SAR or, in the case of SARs granted in tandem with options, any options
to which the SARs correspond. Prior to the exercise of the SAR and delivery of
the cash and/or Shares represented thereby, the participant shall have no rights
as a stockholder with respect to Shares covered by such outstanding SAR
(including any dividend or voting rights).

         SARs granted in tandem with options shall be exercisable only when, to
the extent and on the conditions that any related option is exercisable. The
exercise of an option shall result in an immediate forfeiture of any related SAR
to the extent the option is exercised, and the exercise of an SAR shall cause an
immediate forfeiture of any related option to the extent the SAR is exercised.

         Upon the exercise of an SAR, the participant shall be entitled to a
distribution in an amount equal to the difference between the Fair Market Value
of a share of Common Stock on the date of exercise and the exercise price of the
SAR or, in the case of SARs granted in tandem with options, any option to which
the SAR is related, multiplied by the number of Shares as to which the SAR is
exercised. The Committee shall decide whether such distribution shall be in
cash, in Shares having a Fair Market Value equal to such amount, in Other
Company Securities having a Fair Market Value equal to such amount or in a
combination thereof.

         All SARs will be exercised automatically on the last day prior to the
expiration date of the SAR or, in the case of SARs granted in tandem with
options, any related option, so long as the Fair Market Value of a share of
Common Stock on that date exceeds the exercise price of the SAR or any related
option, as applicable. An SAR granted in tandem with options shall expire at the
same time as any related option expires and shall be transferable only when, and
under the same conditions as, any related option is transferable.

                                       9
<PAGE>   10

8. Restricted Stock.

         The Committee may at any time and from time to time grant Shares of
restricted stock under the Plan to such participants and in such amounts as it
determines. Each grant of restricted stock shall specify the applicable
restrictions on such Shares, the duration of such restrictions (which shall be
at least six months except as otherwise provided in the third paragraph of this
Section 8), and the time or times at which such restrictions shall lapse with
respect to all or a specified number of Shares that are part of the grant.

         The participant will be required to pay the Company the aggregate par
value of any Shares of restricted stock (or such other amount as the Board may
determine to constitute capital under Section 154 of the Delaware General
Corporation Law, as amended) within ten days of the date of grant, unless such
Shares of restricted stock are treasury shares. Unless otherwise determined by
the Committee, certificates representing Shares of restricted stock granted
under the Plan will be held in escrow by the Company on the participant's behalf
during any period of restriction thereon and will bear an appropriate legend
specifying the applicable restrictions thereon, and the participant will be
required to execute a blank stock power therefor. Except as otherwise provided
by the Committee, during such period of restriction the participant shall have
all of the rights of a holder of Common Stock, including but not limited to the
rights to receive dividends and to vote, and any stock or other securities
received as a distribution with respect to such participant's restricted stock
shall be subject to the same restrictions as then in effect for the restricted
stock.

         Except as otherwise provided by the Committee, immediately prior to a
Change in Control or at such time as a participant ceases to be a director,
officer or employee of, or to otherwise perform services for, the Company and
its Subsidiaries due to death, Disability or Retirement during any period of
restriction, all restrictions on Shares granted to such participant shall lapse.
At such time as a participant ceases to be a director, officer or employee of,
or to otherwise perform services for, the Company or its Subsidiaries for any
other reason, all Shares of restricted stock granted to such participant on
which the restrictions have not lapsed shall be immediately forfeited to the
Company.

9. Performance Awards.

         Performance awards may be granted to participants at any time and from
time to time as determined by the Committee. The Committee shall have complete
discretion in determining the size and composition of performance awards so
granted to a participant and the appropriate period over which performance is to
be measured (a "performance cycle"). Performance awards may include (i) specific
dollar-value target awards (ii) performance units, the value of each such unit
being determined by the Committee at the time of issuance, and/or (iii)
performance Shares, the value of each such Share being equal to the Fair Market
Value of a share of Common Stock.

         The value of each performance award may be fixed or it may be permitted
to fluctuate based on a performance factor (e.g., return on equity) selected by
the Committee.

         The Committee shall establish performance goals and objectives for each
performance cycle on the basis of such criteria and objectives as the Committee
may select from

                                       10
<PAGE>   11

time to time, including, without limitation, the performance of the participant,
the Company, one or more of its Subsidiaries or divisions or any combination of
the foregoing. During any performance cycle, the Committee shall have the
authority to adjust the performance goals and objectives for such cycle for such
reasons as it deems equitable.

         The Committee shall determine the portion of each performance award
that is earned by a participant on the basis of the Company's performance over
the performance cycle in relation to the performance goals for such cycle. The
earned portion of a performance award may be paid out in Shares, cash, Other
Company Securities, or any combination thereof, as the Committee may determine.

         A participant must be a director, officer or employee of, or otherwise
perform services for, the Company or its Subsidiaries at the end of the
performance cycle in order to be entitled to payment of a performance award
issued in respect of such cycle; provided, however, that, except as otherwise
determined by the Committee, if a participant ceases to be a director, officer
or employee of, or to otherwise perform services for, the Company and its
Subsidiaries upon his or her death, Retirement, or Disability prior to the end
of the performance cycle, the participant shall earn a proportionate portion of
the performance award based upon the elapsed portion of the performance cycle
and the Company's performance over that portion of such cycle.

         In the event of a Change in Control, a participant shall earn no less
than the portion of the performance award that the participant would have earned
if the performance cycle(s) had terminated as of the date of the Change in
Control.

10. Withholding Taxes.

         (a) Participant Election. Unless otherwise determined by the Committee,
a participant may elect to deliver shares of Common Stock (or have the Company
withhold shares acquired upon exercise of an option or SAR or deliverable upon
grant or vesting of restricted stock, as the case may be) to satisfy, in whole
or in part, the amount the Company is required to withhold for taxes in
connection with the exercise of an option or SAR or the delivery of restricted
stock upon grant or vesting, as the case may be. Such election must be made on
or before the date the amount of tax to be withheld is determined. Once made,
the election shall be irrevocable. The fair market value of the shares to be
withheld or delivered will be the Fair Market Value as of the date the amount of
tax to be withheld is determined. In the event a participant elects to deliver
shares of Common Stock (or have shares of Common Stock withheld) pursuant to
this Section 10(a), only a whole number of shares of Common Stock may be
delivered or withheld in payment of the exercise price of options.

         (b) Company Requirement. The Company may require, as a condition to any
grant or exercise under the Plan or to the delivery of certificates for Shares
issued hereunder, that the grantee make provision for the payment to the
Company, either pursuant to Section 10(a) or this Section 10(b), of any federal,
state or local taxes of any kind required by law to be withheld with respect to
any grant or any delivery of Shares. The Company, to the extent permitted or
required by law, shall have the right to deduct from any payment of any kind
(including salary or

                                       11
<PAGE>   12

bonus) otherwise due to a grantee, an amount equal to any federal, state or
local taxes of any kind required by law to be withheld with respect to any grant
or to the delivery of Shares under the Plan, or to retain or sell without notice
a sufficient number of the Shares to be issued to such grantee to cover any such
taxes, the payment of which has not otherwise been provided for in accordance
with the terms of the Plan.

11. Written Agreement; Vesting.

         Each employee to whom a grant is made under the Plan shall enter into a
written agreement with the Company that shall contain such provisions, including
without limitation vesting requirements, consistent with the provisions of the
Plan, as may be approved by the Committee. Unless the Committee determines
otherwise and except as otherwise provided in Sections 6, 7, 8 and 9 in
connection with a Change of Control or certain occurrences of termination, no
grant under this Plan may be exercised. and no restrictions relating thereto may
lapse, within six months of the date such grant is made.

12. Transferability.

         Unless the Committee determines otherwise, no option, SAR, performance
award, or restricted stock granted under the Plan shall be transferable by a
participant otherwise than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code. Unless
the Committee determines otherwise, an option, SAR, or performance award may be
exercised only by the optionee or grantee thereof or his guardian or legal
representative; provided that Incentive Stock Options may be exercised by such
guardian or legal representative only if permitted by the Code and any
regulations promulgated thereunder.

13. Listing, Registration and Qualification.

         If the Committee determines that the listing, registration or
qualification upon any securities exchange or under any law of Shares subject to
any option, SAR, performance award or restricted stock grant is necessary or
desirable as a condition of, or in connection with, the granting of same or the
issue or purchase of Shares thereunder, no such option or SAR may be exercised
in whole or in part, no such performance award may be paid out and no Shares may
be issued unless such listing, registration or qualification is effected free of
any conditions not acceptable to the Committee.

         It is the intent of the Company that the Plan comply in all respects
with Section 162(m) of the Code, that awards made hereunder comply in all
respects with Rule 16b-3 under the Exchange Act, that any ambiguities or
inconsistencies in construction of the Plan be interpreted to give effect to
such intention and that if any provision of the Plan is found not to be in
compliance with Section 162(m), such provision shall be deemed null and void to
the extent required to permit the Plan to comply with Section 162(m), as the
case may be.

                                       12
<PAGE>   13

14. Transfer of Employee.

         The transfer of an employee from the Company to a Subsidiary, from a
Subsidiary to the Company, or from one Subsidiary to another shall not be
considered a termination of employment; nor shall it be considered a termination
of employment if an employee is placed on military or sick leave or such other
leave of absence which is considered by the Committee as continuing intact the
employment relationship.

15. Adjustments.

         In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, distribution of assets,
or any other change in the corporate structure or shares of the Company, the
Committee shall make such adjustment as it deems appropriate in the number and
kind of Shares or other property reserved for issuance under the Plan, in the
number and kind of Shares or other property covered by grants previously made
under the Plan, and in the exercise price of outstanding options and SARs. Any
such adjustment shall be final, conclusive and binding for all purposes of the
Plan. In the event of any merger, consolidation or other reorganization in which
the Company is not the surviving or continuing corporation or in which a Change
in Control is to occur all of the Company's obligations regarding options, SARs
performance awards, and restricted stock that were granted hereunder and that
are outstanding on the date of such event shall, on such terms as may be
approved by the Committee prior to such event, be assumed by the surviving or
continuing corporation or canceled in exchange for property (including cash).

         Without limitation of the foregoing, in connection with any transaction
of the type specified by clause (iii) of the definition of a Change in Control
in Section 2(c), the Committee may, in its discretion, (i) cancel any or all
outstanding options under the Plan in consideration for payment to the holders
thereof of an amount equal to the portion of the consideration that would have
been payable to such holders pursuant to such transaction if their options had
been fully exercised immediately prior to such transaction, less the aggregate
exercise price that would have been payable therefor, or (ii) if the amount that
would have been payable to the option holders pursuant to such transaction if
their options had been fully exercised immediately prior thereto would be less
than the aggregate exercise price that would have been payable therefor, cancel
any or all such options for no consideration or payment of any kind. Payment of
any amount payable pursuant to the preceding sentence may be made in cash or, in
the event that the consideration to be received in such transaction includes
securities or other property, in cash and/or securities or other property in the
Committee's discretion.

16. Termination and Modification of the Plan.

         The Board of Directors or the Committee, without approval of the
stockholders, may modify or terminate the Plan, except that no modification
shall become effective without prior approval of the stockholders of the Company
if stockholder approval would be required for continued compliance with the
performance-based compensation exception of Section 162(m) of the Code or any
listing requirement of the principal stock exchange on which the Common Stock is
then listed.

                                       13
<PAGE>   14

17. Amendment or Substitution of Awards under the Plan.

         The terms of any outstanding award under the Plan may be amended from
time to time by the Committee in its discretion in any manner that it deems
appropriate (including, but not limited to, acceleration of the date of exercise
of any award and/or payments thereunder or of the date of lapse of restrictions
on Shares); provided that, except as otherwise provided in Section 15, no such
amendment shall adversely affect in a material manner any right of a participant
under the award without his or her written consent. The Committee may, in its
discretion, permit holders of awards under the Plan to surrender outstanding
awards in order to exercise or realize rights under other awards, or in exchange
for the grant of new awards, or require holders of awards to surrender
outstanding awards as a condition precedent to the grant of new awards under the
Plan.

18. Commencement Date; Termination Date.

         The date of commencement of the Plan shall be March 3, 1997, subject to
approval by the shareholders of the Company. Unless previously terminated upon
the adoption of a resolution of the Board terminating the Plan, the Plan shall
terminate at the close of business on March 3, 2007; provided that the Board
may, prior to such termination, extend the term of the Plan for up to five years
for the grant of awards other than incentive Stock Options. No termination of
the Plan shall materially and adversely affect any of the rights or obligations
of any person, without his consent, under any grant of options or other
incentives theretofore granted under the Plan.

19. Governing Law.

         The corporate laws of the Company's jurisdiction of incorporation shall
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Plan shall be governed by the internal laws of the State
of Tennessee, without giving effect to any choice of law provisions.

         IN WITNESS WHEREOF, the undersigned officer has executed this amendment
and restatement of the Plan on this the 31st day of August, 2000 and certifies
that this amendment and restatement of the Plan was duly approved and adopted by
action of the Board of Directors of the Company taken on August 31, 2000.

                                    PROVINCE HEALTHCARE COMPANY

                                    By:  /s/ Howard T. Wall III
                                         ---------------------------------------
                                    Its: Secretary
                                         ---------------------------------------

                                       14

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