AMERICAN HOMEPATIENT INC, 10-Q, 1996-08-14

AMERICAN HOMEPATIENT INC
10-Q, 1996-08-14
HOME HEALTH CARE SERVICES

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<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

CHECK ONE FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 1996
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSACTION PERIOD FROM _________ TO _________.

AMERICAN HOMEPATIENT, INC.
--------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 0-19532 62-1474680
- ------------------------------- ------------ -------------------
(STATE OR OTHER JURISDICTION OF (COMMISSION (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) FILE NUMBER) IDENTIFICATION NO.)

5200 MARYLAND WAY, SUITE 400, BRENTWOOD, TENNESSEE 37027
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

(615) 221-8884
--------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

NONE
- --------------------------------------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT.)

INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
--- ---

14,210,602
- --------------------------------------------------------------------------------
(OUTSTANDING SHARES OF THE ISSUER'S COMMON STOCK AS OF AUGUST 7, 1996)

1
<PAGE> 2
PART I. FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
ASSETS
December 31, June 30,
1995 1996
------------ ------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 4,224,000 $ 6,849,000
Restricted cash 375,000 375,000
Accounts receivable, less allowance for doubtful accounts of
$12,383,000 and $16,916,000, respectively 47,251,000 65,273,000
Inventories 12,974,000 17,289,000
Prepaid expenses and other assets 2,089,000 3,268,000
Deferred tax asset 5,000,000 4,955,000
------------ ------------
Total current assets 71,913,000 98,009,000
------------ ------------

PROPERTY AND EQUIPMENT, at cost 62,258,000 84,366,000
Less accumulated depreciation and amortization (21,597,000) (33,297,000)
------------ ------------
Net property and equipment 40,661,000 51,069,000
------------ ------------

OTHER ASSETS
Excess of cost over fair value of net assets acquired, net 107,234,000 162,666,000
Investment in unconsolidated joint ventures 7,245,000 11,681,000
Deferred costs, net 2,074,000 2,846,000
Other assets 3,389,000 3,580,000
------------ ------------
Total other assets 119,942,000 180,773,000
------------ ------------

$232,516,000 $329,851,000
============ ============
</TABLE>

(Continued)

2
<PAGE> 3
AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(Continued)

<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY

December 31, June 30,
1995 1996
------------ ------------
(unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt and capital leases $ 8,999,000 $ 11,297,000
Trade accounts payable 4,815,000 5,863,000
Income taxes payable 1,459,000 1,235,000
Other payables 767,000 720,000
Accrued expenses:
Payroll and related benefits 4,722,000 4,702,000
Other 4,879,000 6,282,000
------------ ------------
Total current liabilities 25,641,000 30,099,000
------------ ------------

NONCURRENT LIABILITIES
Long-term debt and capital leases, less current portion 84,607,000 101,608,000
Deferred income taxes 2,049,000 2,101,000
Other noncurrent liabilities 788,000 972,000
------------ ------------
Total noncurrent liabilities 87,444,000 104,681,000
------------ ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; authorized 5,000,000
shares; none issued and outstanding --- ---
Common stock, $.01 par value; authorized 35,000,000
shares; issued and outstanding, 11,487,000 and 14,207,000
shares, respectively 115,000 142,000
Paid-in capital 85,802,000 154,944,000
Retained earnings 33,514,000 39,985,000
------------ ------------
Total stockholders' equity 119,431,000 195,071,000
------------ ------------
$232,516,000 $329,851,000
============ ============
</TABLE>

The accompanying notes to interim condensed consolidated financial statements
are an integral part of these balance sheets.

3
<PAGE> 4
AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

<TABLE>
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
------------------------------ -------------------------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Sales and related service revenues $16,806,000 $26,330,000 $29,367,000 $50,812,000
Rentals and other revenues 20,691,000 34,480,000 36,580,000 63,924,000
Earnings from joint ventures 960,000 1,608,000 1,787,000 2,736,000
----------- ----------- ----------- -----------
Total revenues 38,457,000 62,418,000 67,734,000 117,472,000
----------- ----------- ----------- -----------

EXPENSES
Cost of sales and related services, excluding
depreciation and amortization 8,299,000 12,717,000 13,998,000 25,015,000
Operating 18,997,000 32,060,000 34,131,000 59,995,000
General and administrative 2,989,000 4,132,000 5,432,000 7,381,000
Depreciation and amortization 3,230,000 5,604,000 5,563,000 10,549,000
Interest 1,008,000 2,138,000 1,786,000 3,993,000
----------- ----------- ----------- -----------
Total expenses 34,523,000 56,651,000 60,910,000 106,933,000
----------- ----------- ----------- -----------

INCOME FROM OPERATIONS BEFORE INCOME TAXES 3,934,000 5,767,000 6,824,000 10,539,000

PROVISION FOR INCOME TAXES 1,570,000 2,226,000 2,730,000 4,068,000
----------- ----------- ----------- -----------

NET INCOME $ 2,364,000 $ 3,541,000 $ 4,094,000 $ 6,471,000
=========== =========== =========== ===========

WEIGHTED AVERAGE NUMBER OF COMMON SHARES 11,096,000 13,307,000 9,945,000 12,609,000
=========== =========== =========== ===========

INCOME PER SHARE $ 0.21 $ 0.27 $ 0.41 $ 0.51
=========== =========== =========== ===========
</TABLE>

The accompanying notes to interim condensed consolidated financial statements
are an integral part of these statements.

4
<PAGE> 5
AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

<TABLE>
<CAPTION>
For the Six Months Ended June 30
--------------------------------
1995 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income from operations $ 4,094,000 $ 6,471,000
Adjustments to reconcile net income from operations
to net cash provided from (used in) operating activities:
Depreciation and amortization 5,563,000 10,549,000
Equity in earnings of unconsolidated joint ventures (922,000) (1,402,000)
Minority interest 91,000 84,000

Change in assets and liabilities, net of effects
from acquisitions:
Receivables, net (2,395,000) (7,545,000)
Inventories (1,084,000) (545,000)
Prepaid expenses and other (1,545,000) (647,000)
Income taxes payable (5,964,000) 3,000
Trade accounts payable, accrued expenses
and other current liabilities (2,338,000) (3,533,000)
Other assets (197,000) (138,000)
----------- -----------
Net cash provided from (used in) operating activities (4,697,000) 3,297,000
----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (55,708,000) (51,964,000)
Additions to property and equipment, net (7,454,000) (9,470,000)
Distributions to unconsolidated joint ventures,
net of advances (91,000) (2,394,000)
Distributions to minority interest owners (54,000) (9,000)
----------- -----------
Net cash used in investing activities (63,307,000) (63,837,000)
=========== ===========
</TABLE>

(Continued)

5
<PAGE> 6
AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Continued)

<TABLE>
<CAPTION>
For the Six Months Ended June 30
--------------------------------
1995 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt and capital leases (1,553,000) (60,145,000)
Proceeds from issuance of debt 19,315,000 55,800,000
Proceeds from exercise of stock options 1,787,000 2,146,000
Deferred financing costs (613,000) (860,000)
Proceeds from equity offering, net 47,353,000 66,224,000
----------- -----------
Net cash provided from financing activities 66,289,000 63,165,000
----------- -----------

INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (1,715,000) 2,625,000

CASH AND CASH EQUIVALENTS, beginning of period 3,704,000 4,224,000
----------- -----------

CASH AND CASH EQUIVALENTS, end of period $ 1,989,000 $ 6,849,000
=========== ===========

SUPPLEMENTAL INFORMATION:
Cash payments of interest $ 1,729,000 $ 3,640,000
=========== ===========

Cash payments of income taxes $ 8,974,000 $ 4,292,000
=========== ===========
</TABLE>

The accompanying notes to interim condensed consolidated financial statements
are an integral part of these statements.

6
<PAGE> 7
AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 1996 AND 1995

1. ORGANIZATION AND BACKGROUND:

The registrant is a health care services company engaged in the provision of
home health care services. The Company's home health care services consist
primarily of the provision of respiratory and infusion therapies and the rental
and sale of home medical equipment and home health care supplies. For the six
months ended June 30, 1996, such services represented 51%, 18% and 31%,
respectively, of net revenues. As of June 30, 1996, the Company provided these
services to patients primarily in the home through 283 centers in Alabama,
Arizona, Arkansas, Colorado, Connecticut, Florida, Georgia, Illinois, Iowa,
Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota,
Missouri, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North
Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas,
Virginia, and Wisconsin.

2. INCOME PER SHARE:

Net income per share is based on the weighted average number of the Company's
common and common equivalent shares outstanding or subscribed which pertain to
the respective operations included in each period. Common stock equivalents
result from stock options issued to management, employees, and directors as well
as from warrants to acquire common shares issued by the Company.

3. BASIS OF FINANCIAL STATEMENTS:

The interim condensed consolidated financial statements of the Company for the
three and six months ended June 30, 1996 and 1995 included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. In the opinion of management of the
Company, the accompanying unaudited interim consolidated financial statements
reflect all adjustments (consisting of only normally recurring accruals)
necessary to present fairly the financial position at June 30, 1996 and the
results of operations and cash flows for the three and six months ended June 30,
1996 and 1995.

The results of operations for the three and six months ended June 30, 1996 and
1995 are not necessarily indicative of the operating results for the entire
respective years. These interim consolidated financial statements should be
read in conjunction with the audited financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1995.

7
<PAGE> 8
4. ACQUISITIONS:

During 1996 and effective through June 30, 1996, the Company acquired 73 home
health care centers for total consideration of approximately $81 million,
including cash, satisfaction of certain liabilities, and notes payable issued to
sellers with combined annualized revenue of approximately $75 million.

Since January 1, 1995 and effective through the filing date of this Form 10-Q,
American HomePatient has acquired 152 home health care centers.

The terms of the 1995 and 1996 acquisitions, including the consideration paid,
were the result of arm's-length negotiations. The acquisitions were funded via a
combination of cash from Company reserves, seller-financed notes, and draws on
the Company's line of credit.

On May 1, 1996, the Company entered into a second amended and restated Bank
Credit Facility to increase commitments thereunder to $225.0 million. This
Facility includes a $100.0 million five-year term loan and a $125.0 million
five-year revolving line of credit. The various financial and operating
covenants are substantially similar to those under the first amended and
restated Bank Credit Facility. Borrowings under the Bank Credit Facility may be
used for acquisitions and other general corporate purposes, subject to the terms
and conditions of the respective credit and security agreements. Most of the
Company's operating assets have been pledged as security for borrowings under
the Bank Credit Facility. The Bank Credit Facility contains various financial
covenants, the most restrictive of which relate to measurements of stockholders'
equity, leverage ratios, and interest coverage ratios.

5. SECONDARY OFFERING OF COMMON STOCK:

In May 1996, the Company issued 1,650,000 shares of its common stock (on a
pre-split basis; see Note 6) to the public (the "Secondary Offering") at a price
of $42.00 per share before underwriting discounts and expenses. Net of
discounts and expenses, the Company realized approximately $66 million from the
Secondary Offering. Of the Secondary Offering proceeds, approximately $59
million was applied to reduce outstanding borrowings under the Secured Revolving
Line of Credit and the remainder was used to fund acquisitions.

6. 3-FOR-2 STOCK SPLIT DIVIDEND:

The Company completed a 3-for-2 common stock split dividend effective with a
record date at the close of trading on June 28, 1996. All amounts shown in the
financial statements in this Form 10-Q related to common shares outstanding,
weighted average common shares outstanding, and income per share have been
adjusted to reflect this stock split.

7. IMPLEMENTATION OF FINANCIAL ACCOUNTING STANDARDS:

8
<PAGE> 9
required for fiscal years beginning after December 15, 1995. The Company has
adopted SFAS 121 in 1996, and the adoption did not have a material effect on the
Company's financial position.

In October 1995, the FASB issued Statement No. 123 ("SFAS 123") "Accounting for
Stock-Based Compensation." This statement requires new disclosures in the notes
to the financial statements about stock-based compensation plans based on the
fair value of equity instruments granted. Companies also may base the
recognition of compensation cost for instruments issued under stock-based
compensation plans on these fair values. The Company will adopt the disclosure
requirements of SFAS 123 in 1996.

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

GENERAL

The Company's home health care services consist primarily of the provision of
home respiratory therapy, the provision of home infusion therapy and the rental
and sale of home medical equipment and supplies. These services and products
are paid for primarily by Medicare, Medicaid and other third-party payors. The
following table sets forth the percentage of the Company's net revenues
represented by each line of business for the periods presented:

<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1995 1996
---- ----
<S> <C> <C>
Home respiratory therapy services............... 53% 51%
Home infusion therapy services.................. 20 18
Home medical equipment and medical supplies..... 27 31
--- ---
Total....................................... 100% 100%
=== ===
</TABLE>

The Company reports its net revenues as follows: (i) sales and related
services; (ii) rentals and other; and (iii) earnings from hospital joint
ventures. Sales and related services revenues are derived from the provision of
infusion therapies, the sale of home health care equipment and supplies, the
sale of aerosol and respiratory therapy equipment and supplies and services
related to the delivery of these products. Rentals and other revenues are
derived from the rental of home health care equipment, enteral pumps and
equipment related to the provision of respiratory therapies. Because the
Company's hospital joint ventures are not consolidated for financial statement
reporting purposes, earnings from joint ventures represent the Company's equity
in earnings and management and administrative fees for unconsolidated hospital
joint ventures. Cost of sales and related services includes the cost of
equipment, drugs and related supplies sold to patients. Operating expenses
include center labor costs, delivery expenses, occupancy costs, costs related to
rentals other than depreciation, billing center costs, other operating costs and
provision for doubtful accounts. General and administrative expenses include
corporate, area and regional management expenses and costs.

9
<PAGE> 10
Since its inception, the Company has experienced substantial growth. This growth
is primarily attributable to the Company's pursuit of an acquisition strategy
targeting successful, operating home health care businesses, through both 100%
ownership and joint venture partnerships. Since the Company's initial public
offering in November 1991, the Company has expanded operations from 24 home
health care centers in four states to 283 home health care centers in 31 states
as of June 30, 1996. The Company acquired 79 centers during 1995 and 73 centers
during the six months ended June 30, 1996. The Company continues its integration
of recently acquired home health care centers. The Company's experience and
management expertise is applied wherever possible to improve the operating
efficiency of the new centers. Quality methods and ideas from the acquired
centers become part of the systems and procedures of the combined Company.
Profitable services that were not formerly provided are being added where such
opportunities exist. As the Company grows, economies of scale can be realized
in its purchasing of goods and services used in its business and, to some
extent, its management of overhead expenses.

RESULTS OF OPERATIONS

The following table and discussion set forth, for the periods indicated, the
percentage of net revenues represented by the respective financial items:

PERCENTAGE OF NET REVENUES

<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Revenues 100.0% 100.0% 100.0% 100.0%

Costs and expenses:

Cost of sales and related services 21.6 20.4 20.7 21.3
Operating expenses 49.4 51.4 50.4 51.1
General and administrative 7.8 6.6 8.0 6.2
Depreciation and amortization 8.4 9.0 8.2 9.0
Interest 2.6 3.4 2.6 3.4
----- ----- ----- -----
Total costs and expenses 89.8% 90.8% 89.9% 91.0%
----- ----- ----- -----

Income from operations before income taxes 10.2% 9.2% 10.1% 9.0%
===== ===== ===== =====
</TABLE>

The operations of acquired centers are included in the operations of the Company
from the effective date of each acquisition. Because of the substantial
acquisition activity, the comparison of the results of operations between 1996
and 1995 is materially impacted by the operations of these acquired businesses.
For comparative purposes, the Company separates operations into "same-store" and
"acquisitions." An acquired center becomes "same-store" beginning with its
thirteenth month of operations as part of the Company.

10
<PAGE> 11
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995

NET REVENUES. Net revenues increased from $38,457,000 for the quarter ended
June 30, 1995 to $62,418,000 for the same period in 1996, an increase of
$23,961,000, or 62%. Same-store net revenues, including net revenues of
same-store hospital joint ventures managed by the Company and accounted for
under the equity method, increased 10%. Net revenues of same-store hospital
joint ventures contributed 5% of this total same-store growth rate. Following
is a discussion of the components of net revenues:

Sales and Related Services Revenues. Sales and related services revenues
increased from $16,806,000 for the quarter ended June 30, 1995 to
$26,330,000 for the same period in 1996, an increase of $9,524,000, or
57%. This increase is primarily attributable to the acquired home health
care businesses.

Rentals and Other Revenue. Rentals and other revenues increased from
$20,691,000 for the quarter ended June 30, 1995 to $34,480,000 for the same
period in 1996, an increase of $13,789,000, or 67%. This increase is
primarily attributable to the acquired home health care businesses.

Earnings from Joint Ventures. Earnings from joint ventures increased from
$960,000 for the quarter ended June 30, 1995 to $1,608,000 for the same
period in 1996, an increase of $648,000, or 68%. Of this increase,
$310,000 is attributable to net growth in the Company's existing hospital
joint ventures. The remainder of the increase is primarily attributable
to acquired joint ventures.

COST OF SALES AND RELATED SERVICES. Cost of sales and related services
increased from $8,299,000 for the quarter ended June 30, 1995 to $12,717,000 for
the same period in 1996, an increase of $4,418,000. As a percentage of sales
and related services revenues, cost of sales and related services decreased from
49% to 48%. This decrease is attributable to favorable pricing the Company has
been able to negotiate with certain of its product vendors offset in part by a
change in the mix of sales and related services revenue attributable primarily
to the acquired home health care businesses.

OPERATING EXPENSES. Operating expenses increased from $18,997,000 for the
quarter ended June 30, 1995 to $32,060,000 for the same period in 1996, an
increase of $13,063,000, or 69%. This increase is primarily attributable to
operating expenses associated with the acquired home health care businesses. As
a percentage of net revenues, operating expenses increased from 49% to 51%.
This increase is primarily attributable to slightly higher bad debt expense as a
percentage of net revenue in the quarter ended June 30, 1996 compared to the
same period in 1995.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased from
$2,989,000 for the quarter ended June 30, 1995 to $4,132,000 for the same period
in 1996, an increase of $1,143,000, or 38%. This increase is primarily
attributable to increases in expense associated with the acquired home health
care businesses and to increases in corporate office general and administrative
expenses. As a percentage of net revenues, general and administrative expenses
have decreased from 8% to 7%.

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<PAGE> 12
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses increased
from $3,230,000 for the quarter ended June 30, 1995 to $5,604,000 for the same
period in 1996, an increase of $2,374,000. This increase is primarily
attributable to the acquired home health care businesses.

INTEREST. Interest expense increased from $1,008,000 for the quarter ended June
30, 1995 to $2,138,000 for the same period in 1996, an increase of $1,130,000.
The increase is due to additional interest expense associated with increased
borrowings used to fund acquisitions of home health care businesses.

SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995

NET REVENUES. Net revenues increased from $67,734,000 for the six months ended
June 30, 1995 to $117,472,000 for the same period in 1996, an increase of
$49,738,000, or 73%. Same-store net revenues, including net revenues of
same-store hospital joint ventures managed by the Company and accounted for
under the equity method, increased 11%. Same-store hospital joint ventures
contributed 4% of this total same-store growth rate. Following is a discussion
of the components of net revenues:

Sales and Related Services Revenues. Sales and related services revenues
increased from $29,367,000 for the six months ended June 30, 1995 to
$50,812,000 for the same period in 1996, an increase of $21,445,000 or
73%. This increase is primarily attributable to the acquired home health
care businesses.

Rentals and Other Revenue. Rentals and other revenues increased from
$36,580,000 for the six months ended June 30, 1995 to $63,924,000 for the
same period in 1996, an increase of $27,344,000, or 75%. This increase is
primarily attributable to the acquired home health care businesses.

Earnings from Joint Ventures. Earnings from joint ventures increased from
$1,787,000 for the six months ended June 30, 1995 to $2,736,000 for the
same period in 1996, an increase of $949,000, or 53%. Of this increase,
$683,000 is attributable to net growth in the existing hospital joint
ventures. The remainder of the increase is attributable to acquired joint
ventures.

COST OF SALES AND RELATED SERVICES. Cost of sales and related services
increased from $13,998,000 for the six months ended June 30, 1995 to $25,015,000
for the same period in 1996, an increase of $11,017,000, or 79%. As a
percentage of sales and related services revenues, cost of sales and related
services increased from 48% to 49%. This increase reflects a change in the mix
of sales and related service revenues attributable primarily to acquisitions
offset somewhat by favorable pricing the Company has been able to negotiate with
certain of its product vendors.

OPERATING EXPENSES. Operating expenses increased from $34,131,000 for the six
months ended June 30, 1995 to $59,995,000 for the same period in 1996, an
increase of

12
<PAGE> 13
$25,864,000, or 76%. This increase is primarily attributable to operating
expenses associated with the acquired home health care businesses. As a
percentage of net revenues, operating expenses increased from 50% to 51%. This
increase is primarily attributable to slightly higher bad debt expense as a
percentage of net revenue in the six months ended June 30, 1996 compared to the
same period in 1995.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased from
$5,432,000 for the six months ended June 30, 1995 to $7,381,000 for the same
period in 1996, an increase of $1,949,000, or 36%. This increase is primarily
attributable to increases in expense associated with the acquired home health
care businesses and to increases in corporate office general and administrative
expenses. As a percentage of net revenue, general and administrative expenses
have decreased from 8% to 6%.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses increased
from $5,563,000 for the six months ended June 30, 1995 to $10,549,000 for the
same period in 1996, an increase of $4,986,000 or 90%. This increase is
primarily attributable to the acquired home health care businesses.

INTEREST. Interest expense increased from $1,786,000 for the six months ended
June 30, 1995 to $3,993,000 for the same period in 1996, an increase of
$2,207,000. The increase is due to additional interest expense associated with
increased borrowings used to fund acquisitions of home health care businesses.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 1996, the Company's working capital is $67,910,000 and the current
ratio is 3.3 as compared to working capital of $46,272,000 and a current ratio
of 2.8 at December 31, 1995. The Company has current maturities of long-term
debt of approximately $11,297,000 at June 30, 1996.

The Company's future liquidity will continue to be dependent upon the relative
amounts of current assets (principally cash, accounts receivable and
inventories) and current liabilities (principally accounts payable, and accrued
expenses). In that regard, accounts receivable can have a significant impact on
the Company's liquidity. Accounts receivable are generally outstanding for
longer periods of time in the health care industry than many other industries
because of requirements to provide third party payors with additional
information subsequent to billing and the time required by such payors to
process claims. Certain accounts receivable frequently are outstanding for more
than 90 days, particularly where the account receivable relates to services for
a patient (i) receiving a new medical therapy or (ii) covered by Medicare or
Medicaid. Net patient accounts receivable were $44,348,000 and $61,061,000 at
December 31, 1995 and June 30, 1996, respectively. This increase was primarily
attributable to the acquisition of home health care businesses in the first and
second quarters of 1996. This represented an average of approximately 91 and 90
days' sales in accounts receivable at December 31, 1995 and June 30, 1996,
respectively.

Net cash used in operating activities was $4,697,000 for the six months ended
June 30, 1995 and net cash provided from operating activities was $3,297,000 for
the six months ended

13
<PAGE> 14
June 30, 1996. These amounts primarily represent net income plus depreciation
and amortization and provisions for doubtful accounts and changes in the various
components of working capital. Also included in net cash used in operating
activities for the six months ended June 30, 1995 was $5,500,000 for payment of
taxes on the sale of discontinued operations. Net cash used in investing
activities was $63,307,000 and $63,837,000 for the six months ended June 30,
1995 and 1996, respectively. These amounts primarily represent acquisitions of
home health care businesses and property and equipment additions. Net cash
provided from financing activities was $66,289,000 and $63,165,000 for the six
months ended June 30, 1995 and 1996, respectively. These amounts primarily
represent proceeds from the issuance of long-term debt, the issuance of common
stock due to equity offering and stock option exercises, and principal
repayments on debt.

The Company's principal capital requirements are for acquisitions of additional
home health care companies and expansion of the services provided through its
existing home health care centers. The Company has financed and intends to
continue to finance these requirements, its net revenue growth, and working
capital needs with net cash provided by operations and with borrowings under the
Bank Credit Facility. On May 1, 1996, the Company amended and restated the Bank
Credit Facility to increase commitments thereunder to $225.0 million. The Bank
Credit Facility includes a $100.0 million five-year term loan and a $125.0
million five-year revolving line of credit. Borrowings under the Bank Credit
Facility may be used to finance acquisitions and for other general corporate
purposes, subject to the terms and conditions of the credit and security
agreements. Most of the Company's operating assets have been pledged as
security for borrowings under the Bank Credit Facility. Interest is payable on
borrowings under the Bank Credit Facility, at the election of the Company, at
either a "Base Lending Rate" or an "Adjusted Eurodollar Rate" (each as defined
in the Bank Credit Facility), plus a margin from 0% to 1.00% and from 0.5% to
2.00%, respectively. The Company's ability to borrow under the Bank Credit
Facility terminates on May 1, 2001, subject to exceptions set forth therein. As
of June 30, 1996 the weighted average borrowing rate was 6.27%. A commitment
fee of up to .375% per annum (.20% as of June 30, 1996) is payable by the
Company on the undrawn balance. The interest rate and commitment fee vary
depending on a financial ratio as defined in the Bank Credit Facility.

The Bank Credit Facility contains various financial covenants, the most
restrictive of which relate to measurements of stockholders' equity, leverage
ratios and interest coverage ratios. The Company was in compliance with these
covenants at June 30, 1996. The Bank Credit Facility also contains certain
covenants which, among other things, impose certain limitations or prohibitions
on the Company with respect to the incurrence of certain indebtedness, the
creation of security interest on the assets of the Company, the payment of
dividends on and the redemption or repurchase of securities of the Company,
investments, acquisitions, investments in joint ventures, capital expenditures
and sales of Company assets.

The Company's capital expenditures consist of purchases of home health care
rental equipment and routine capital purchases at its regional and corporate
offices. Through June 30, 1996, $9,470,000 of capital expenditures had been
incurred.

14
<PAGE> 15
IMPLEMENTATION OF FINANCIAL ACCOUNTING STANDARDS

In 1995, the Financial Accounting Standards Board ("FASB") issued Statements of
Financial Accounting Standards Number 121 ("SFAS 121") "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
Adoption of SFAS 121 is required for fiscal years beginning after December 15,
1995. The Company has adopted SFAS 121 in 1996, and the adoption did not have a
material effect on the Company's financial position.

Summary

Management believes that available cash, the funding available under the Bank
Credit Facility, and funds generated from operations will be sufficient for the
Company to satisfy its capital expenditures, acquisition activities, working
capital and debt requirements for the next twelve months.

15
<PAGE> 16
PART II. OTHER INFORMATION

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(A) Exhibits. The exhibits filed as part of this Report are listed on the
Index to Exhibits immediately following the signature page.

(B) Reports on Form 8-K. Forms 8-K/A and 8-K/A2 each dated April 28, 1995
were filed with respect to the acquisition of ConPharma Home HealthCare, Inc.
and related financial statements.

Form 8-K dated July 29, 1996 was filed with respect to the acquisition of
Miller Medical Service, Inc. by merger and a related Form 8-K/A1 dated August
8, 1996 was filed with respect to such transaction to correct a typographical
error appearing in the original Form 8-K.

Form 8-K dated May 16, 1996 was filed with respect to the acquisitions of
Delcrest Medical Products, Inc. and HomeCare USA and related financial
statements.

16
<PAGE> 17
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

AMERICAN HOMEPATIENT, INC.

August 14, 1996 By: /s/Mary Ellen Rodgers
------------------------------------------------
Mary Ellen Rodgers
Chief Financial Officer and An Officer Duly
Authorized to Sign on Behalf of the Registrant

<PAGE> 18
INDEX TO EXHIBITS

EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS

3.1 Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 to the Company's Registration Statement No.
33-42777 on Form S-1).
3.2 Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3.2 to the Company's Registration Statement No.
33-42777 on Form S-1).
3.3 Certificate of Amendment to the Certificate of Incorporation of the
Company (incorporated by reference to Registration Statement on Form
S-8 dated February 16, 1993).
3.4 Certificate of Ownership and Merger merging American HomePatient,
Inc. into Diversicare Inc. dated May 11, 1994 (incorporated by
reference to Exhibit 4.4 to the Company's Registration Statement No.
33-89568 on Form S-2).
3.5 Certificate of Amendment to the Certificate of Incorporation of the
Company dated July 18, 1996.
10.1 1991 Non-Qualified Stock Option Plan, as amended (incorporated by
reference to Exhibit 10.25 to the Company's Registration Statement
No. 33-89568 on Form S-2).
10.2 Amendment No. 5 to 1991 Non-Qualified Stock Option Plan.
10.3 Second Amended and Restated Credit Agreement by and among American
HomePatient, Inc., the Banks named therein and Bankers Trust
Company, as the Agent dated as of May 1, 1996.
10.4 Form of Underwriting Agreement (incorporated by reference to Exhibit
1 to the Company's Registration Statement No. 333-3964 on Form S-3).
10.5 Lock-up Agreement dated May 22, 1996 of Morris A. Perlis
10.6 Lock-up Agreement dated May 22, 1996 of Edward K. Wissing
10.7 Lock-up Agreement dated May 22, 1996 of Mary Ellen Rodgers
10.8 Lock-up Agreement dated May 22, 1996 of Thomas E. Mills
10.9 Lock-up Agreement dated May 22, 1996 of Allan C. Silber
10.10 Lock-up Agreement dated May 22, 1996 of Henry T. Blackstock
10.11 Lock-up Agreement dated May 22, 1996 of Joseph F. Furlong III
10.12 Lock-up Agreement dated May 22, 1996 of Thomas A. Dattilo
10.13 Lock-up Agreement dated May 22, 1996 of Edward Sonshine.
10.14 Lock-up Agreement dated May 22, 1996 of Mark Manner.
10.15 Miller Medical Merger Agreement (incorporated by reference to the
Company's Form 8-K dated July 29, 1996).
27 Financial Data Schedule (for SEC use only)

<PAGE> 1
EXHIBIT 3.5

CERTIFICATE OF AMENDMENT TO
CERTIFICATE OF INCORPORATION
OF
AMERICAN HOMEPATIENT, INC.

American HomePatient, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify:

The amendment to the Corporation's Certificate of Incorporation set forth
in the following resolution approved by the Corporation's Board of Directors
and Shareholders was duly adopted in accordance with the provisions of Section
242 of the General Corporation Law of the State of Delaware.

RESOLVED, that the Certificate of Incorporation of the Corporation be
amended by striking Section 1 of Article Fourth in its entirety and
replacing therefor the following:

1. The total number of shares of stock which the Corporation shall
have the authority to issue is thirty five million (35,000,000) shares of
Common Stock having a par value of $0.01 per share, which shares shall not
be subject to any preemptive rights, and five million (5,000,000) shares
of preferred stock having a par value of $0.01 per share.

The foregoing amendment was adopted by the Corporation's Board of
Directors on April 17, 1996 and Shareholders on May 21, 1996.

This Certificate of Amendment is filed by authority of the duly elected
Board of Directors and Shareholders in accordance with Section 242 of the
General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, this Certificate of Amendment has been executed by the
Corporation's authorized officers this 8th day of June, 1996.

AMERICAN HOMEPATIENT, INC.

/s/ Edward K. Wissing
-----------------------------------------
Edward K. Wissing
President and Chief Executive Officer
ATTEST:

/s/ Mary Ellen Rodgers
- -----------------------------
Mary Ellen Rodgers, Secretary

<PAGE> 1
EXHIBIT 10.2

AMENDMENT OF 1991 NONQUALIFIED STOCK OPTION PLAN

AMENDMENT NO. 5 TO
1991 NONQUALIFIED STOCK OPTION PLAN OF
AMERICAN HOMEPATIENT, INC.

Amendment No. 5 to 1991 Nonqualified Stock Option Plan (the "Plan") of
American HomePatient, Inc. (the "Corporation") as approved by the Board of
Directors of the Corporation on March 7, 1996, and as approved by the
Shareholders of the Corporation on May 14, 1996.

The Plan shall be amended by deleting paragraph 3 thereof and replacing it
with a new number 3 so that, as amended, said paragraph 3 shall be and read as
follows:

3. Stock Subject to the Plan. There will be reserved for issuance upon
the exercise of Options 1,841,650 shares of Common Stock, which will be
authorized and unissued Common Stock. If an Option expires or terminates
for any reason without being exercised in full, the shares subject thereto
which have not been purchased will again be available for purposes of the
Plan. The number of shares as to which Options may be granted under the
Plan will be proportionately adjusted, to the nearest whole share, in the
event of any stock dividend, stock split, share combination or similar
recapitalization involving the Common Stock or any spin-off, spin-out or
other significant distribution of assets of stockholders for which the
Corporation receives no consideration. In the event that there is an
insufficient number of authorized shares of Common Stock available to
allow exercise of the Options on the date of any grant hereunder, such
Options will not be exercisable until there are sufficient shares of
Common Stock authorized for issuance.

-End of Amendment-

<PAGE> 1
EXHIBIT 10.3

SECOND AMENDED AND RESTATED
CREDIT AGREEMENT

BY AND AMONG

AMERICAN HOMEPATIENT, INC.,

THE BANKS NAMED HEREIN

AND

BANKERS TRUST COMPANY,
AS THE AGENT

__________________________________

Dated as of May 1, 1996
__________________________________

<PAGE> 2

TABLE OF CONTENTS*

<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.01 DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.02 PRINCIPLES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

SECTION 2. AMOUNT AND TERMS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.01 THE REVOLVING LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.02 THE SWING LINE LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.03 THE TERM LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.04 DISBURSEMENT OF FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.05 PREPAYMENT OF LOANS OUTSTANDING ON EFFECTIVE DATE; NOTES . . . . . . . . . . . . . . . . . . . . . . . 32
2.06 INTEREST ON THE LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.07 INCREASED COSTS; TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.08 USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
2.09 SPECIAL PROVISIONS GOVERNING EURODOLLAR RATE LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . 40
2.10 LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

SECTION 3. FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
3.01 FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

SECTION 4. PREPAYMENTS AND REDUCTIONS IN COMMITMENTS; PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
4.01 SCHEDULED PAYMENTS OF TERM LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
4.02 PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
4.03 APPLICATION OF PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
4.04 GENERAL PROVISIONS REGARDING PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

SECTION 5. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.01 CONDITIONS TO EFFECTIVENESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.02 CONDITIONS TO ALL LOANS AND LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

SECTION 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.01 CORPORATE STATUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.02 CORPORATE POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.03 NO VIOLATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.04 GOVERNMENTAL APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.05 FINANCIAL STATEMENTS; FINANCIAL CONDITION; UNDISCLOSED LIABILITIES; ETC. . . . . . . . . . . . . . . . 66
6.06 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
</TABLE>

__________________________________

* This Table of Contents is provided for convenience only and is not a part
of the attached Credit Agreement.

<PAGE> 3

<TABLE>
<S> <C>
6.07 TRUE AND COMPLETE DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
6.08 USE OF PROCEEDS; MARGIN REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
6.09 TAX RETURNS AND PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
6.10 COMPLIANCE WITH ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
6.11 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
6.12 SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
6.13 COMPLIANCE WITH STATUTES, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
6.14 INVESTMENT COMPANY ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
6.15 PUBLIC UTILITY HOLDING COMPANY ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
6.16 LABOR RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
6.17 PATENTS, LICENSES, FRANCHISES AND FORMULAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
6.18 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
6.19 FRAUD AND ABUSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
6.20 TITLE TO PROPERTIES; LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.21 JOINT VENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.22 ACCOUNTS RECEIVABLE COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.23 SELLER DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.24 SURVIVAL OF RIGHTS CREATED UNDER EXISTING CREDIT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 72
6.25 FOX CHASE MEDICAL EQUIPMENT, INC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

SECTION 7. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
7.01 INFORMATION COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
7.02 BOOKS, RECORDS AND INSPECTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
7.03 MAINTENANCE OF PROPERTY, INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
7.04 CORPORATE FRANCHISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
7.05 COMPLIANCE WITH STATUTES, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
7.06 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
7.07 END OF FISCAL YEARS; FISCAL QUARTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
7.08 PERFORMANCE OF OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
7.09 PAYMENT OF TAXES AND CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
7.10 LICENSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
7.11 FURTHER ASSURANCES; NEW SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
7.12 ACCOUNTS RECEIVABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

SECTION 8. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
8.01 LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
8.02 CONSOLIDATION, MERGER, SALE OF ASSETS, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
8.03 DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
8.04 INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
8.05 ADVANCES, INVESTMENTS AND LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
8.06 TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
8.07 CAPITAL EXPENDITURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
8.08 LEVERAGE RATIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
8.09 MINIMUM CONSOLIDATED NET WORTH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
8.10 MINIMUM INTEREST COVERAGE RATIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
</TABLE>

ii
<PAGE> 4

<TABLE>
<S> <C>
8.11 LIMITATION ON VOLUNTARY PAYMENTS AND MODIFICATIONS OF INDEBTEDNESS; MODIFICATIONS OF CERTIFICATE
OF INCORPORATION, BY-LAWS AND CERTAIN OTHER AGREEMENTS; ETC. . . . . . . . . . . . . . . . . . . 91
8.12 RESTRICTIONS ON SUBSIDIARY DIVIDENDS AND OTHER DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . 92
8.13 BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
8.14 TRANSFER OF COPYRIGHTS, PATENTS AND TRADEMARKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
8.15 JOINT VENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
8.16 COLLECTION BANK AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

SECTION 9. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
9.01 PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
9.02 REPRESENTATIONS, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
9.03 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
9.04 DEFAULT UNDER OTHER AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
9.05 BANKRUPTCY, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
9.06 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
9.07 CREDIT DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
9.08 CHANGES OF CONTROL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
9.09 JUDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
9.10 GOVERNMENTAL POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
9.11 LOSS OF LICENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
9.12 EXCEPTIONS WITH RESPECT TO GOOD STANDING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

SECTION 10. THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
10.01 APPOINTMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
10.02 NATURE OF DUTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
10.03 LACK OF RELIANCE ON THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
10.04 CERTAIN RIGHTS OF THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
10.05 RELIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
10.06 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
10.07 THE AGENT IN ITS INDIVIDUAL CAPACITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
10.08 HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
10.09 RESIGNATION BY THE AGENT AND THE SWING LINE BANK . . . . . . . . . . . . . . . . . . . . . . . . . . 99

SECTION 11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
11.01 PAYMENT OF EXPENSES, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
11.02 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
11.03 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
11.04 BENEFIT OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
11.05 ASSIGNMENTS AND PARTICIPATIONS IN LOANS AND LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . 102
11.06 NO WAIVER; REMEDIES CUMULATIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
11.07 PAYMENTS PRO RATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
11.08 CALCULATIONS; COMPUTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
</TABLE>

iii
<PAGE> 5

<TABLE>
<S> <C>
11.09 GOVERNING LAW; WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
11.10 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
11.11 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
11.12 HEADINGS DESCRIPTIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
11.13 AMENDMENT OR WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
11.14 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
11.15 DOMICILE OF LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
11.16 INTEGRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
11.17 SECURED OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

SCHEDULES

SCHEDULE 1.01(a) Pro Rata Shares, Revolving Commitments
SCHEDULE 2.10(a) Existing Letters of Credit
SCHEDULE 6.05 Undisclosed Liabilities
SCHEDULE 6.06 Litigation
SCHEDULE 6.11 Rights With Respect to Capital Stock
SCHEDULE 6.12 Subsidiaries
SCHEDULE 6.13 Statutory Noncompliance
SCHEDULE 6.17 Trademarks
SCHEDULE 6.18 Material Adverse Changes
SCHEDULE 6.21 Joint Ventures
SCHEDULE 7.03 Insurance
SCHEDULE 8.01 Permitted Liens
SCHEDULE 8.01(xvi) Existing Financing Statements
SCHEDULE 8.04(ii) Existing Indebtedness
SCHEDULE 8.04(xiii) Acquisition Notes

EXHIBITS

EXHIBIT A Form of Notice of Revolver Borrowing
EXHIBIT B Form of Notice of Swing Line Borrowing
EXHIBIT C Form of Notice of Term Borrowing
EXHIBIT D Form of Notice of Conversion/Continuation
EXHIBIT E Form of Notice of Issuance of Letter of Credit
EXHIBIT F-1 Form of Revolving Note
EXHIBIT F-2 Form of Swing Line Note
EXHIBIT F-3 Form of Term Note
EXHIBIT G Subsidiary Guaranty
EXHIBIT H Borrower Pledge Agreement
EXHIBIT I Subsidiary Pledge Agreement
EXHIBIT J Borrower Security Agreement
EXHIBIT K Subsidiary Security Agreement
EXHIBIT L-1 Trademark Security Agreement
</TABLE>

iv
<PAGE> 6

<TABLE>
<S> <C>
EXHIBIT L-2 Form of Subsidiary Trademark Security Agreement
EXHIBIT M Form of Subordination Agreement
EXHIBIT N Form of Collection Bank Agreement
EXHIBIT O Concentration Bank Agreement
EXHIBIT P Form of Assignment and Acceptance Agreement
EXHIBIT Q Form of Compliance Certificate
EXHIBIT R Form of Opinion of Counsel to Borrower
EXHIBIT S Form of Consent to Amendment and Restatement
EXHIBIT T Borrower Partnership Security Agreement
EXHIBIT U Subsidiary Partnership Security Agreement
</TABLE>

v
<PAGE> 7

AMERICAN HOMEPATIENT, INC.

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

This SECOND AMENDED AND RESTATED CREDIT AGREEMENT is dated as
of May 1, 1996 and entered into by and among AMERICAN HOMEPATIENT, INC. (the
"BORROWER"), a corporation organized and existing under the laws of Delaware,
BANKERS TRUST COMPANY and THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE
PAGES HEREOF (each a "BANK" and, collectively, the "BANKS"), and BANKERS TRUST
COMPANY, acting in the manner and to the extent described in Section 10 (in
such capacity, the "AGENT"). Capitalized terms used herein and not otherwise
defined shall have the meanings set forth in Section 1.01 of this Agreement.

R E C I T A L S

WHEREAS, pursuant to that certain Amended and Restated Credit
Agreement dated as of October 26, 1995, as amended by that certain First
Amendment to Amended and Restated Credit Agreement dated as of December 28,
1995 (said Amended and Restated Credit Agreement, as so amended, is referred to
hereinafter as the "EXISTING CREDIT AGREEMENT"), by and among the Borrower,
Bankers Trust Company and the financial institutions listed on the signature
pages thereof (together with other financial institutions that have become
lenders thereunder to the date hereof, the "EXISTING BANKS"), and Bankers Trust
Company, acting as agent for the Existing Banks, the Existing Banks have made
certain credit facilities available to the Borrower in accordance with the
terms thereof.

WHEREAS, the parties hereto desire to amend and restate the
Existing Credit Agreement in its entirety for the purposes of, among other
things, removing certain limitations on, and increasing, the maximum amount
available to be drawn under the loan facilities provided thereunder, resetting
the interest rates and loan amortization schedules thereunder, amending certain
covenants thereunder as described herein, having additional Banks make loans
hereunder, and making certain other amendments to and modifications of the
provisions of the Existing Credit Agreement as provided herein.

<PAGE> 8

A G R E M E N T

NOW, THEREFORE, in consideration of the premises and
agreements, provisions and covenants herein contained, the Borrower, the Banks
and the Agent agree to amend and restate the Existing Credit Agreement in its
entirety as follows:

SECTION 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION.

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

"ACCOUNTS RECEIVABLE" means all accounts receivable pledged as
Collateral.

"ACQUIRED SUBSIDIARIES" means, collectively, Medair
Professional Services, Inc., ProCare Medical Supply Co., Inc., Advanced
HomeCare, Inc., ConPharma, Clovis Medical Supply, Inc., Etex Medical Supplies,
Inc., Mobile Medical Services, Inc., Medical Equipment Service, Inc. and
Stoll's Medical Rentals, Inc., Designated Companies, Inc., General Holdings,
Inc., Home Respiratory Services & Medical Equipment, Inc., The Medical Mart,
Inc. and EMIE Corporation.

"ACQUISITION" means any acquisition of the capital stock of,
or all (or substantially all) of the assets of, any Person or any division of
such Person permitted pursuant to Section 8.02(v).

"ACQUISITION NOTES" means the notes, set forth on SCHEDULE
8.04(XIII) hereto, that represent a portion of the purchase price paid by the
Borrower to acquire certain healthcare entities.

"ADJUSTED EURODOLLAR RATE" means, for any Interest Rate
Determination Date, the rate (rounded upward to the next highest one hundredth
of one percent) obtained by dividing (i) the Eurodollar Rate for that date by
(ii) a percentage equal to 100% minus the stated maximum rate of all reserves
required to be maintained against "EUROCURRENCY LIABILITIES" as specified in
Regulation D of the Board of Governors of the Federal Reserve System (or
against any other category of liabilities that includes deposits by reference
to which the interest rate on Eurodollar Rate Loans is determined or any
category of extensions of credit or other assets that includes loans by a
non-United States office of a bank to United States residents).

2
<PAGE> 9

"AFFECTED BANK" means any Bank affected by any of the events
described in Section 2.09(b) or (c).

"AFFILIATE" means, with respect to any Person, any other
Person (other than an individual) directly or indirectly controlling,
controlled by, or under direct or indirect common control with, such Person;
provided, however, that for purposes of Section 8.06, an Affiliate of the
Borrower shall include any Person (including an individual) that directly or
indirectly owns more than 10% of the Borrower and any officer or director of
the Borrower or any such Person. A Person shall be deemed to control another
Person if such Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of such other Person,
whether through the ownership of voting securities, by contract or otherwise.

"AGENT" has the meaning assigned to that term in the first
paragraph of this Agreement and shall include any successor to the Agent
appointed pursuant to Section 10.09.

"AGREEMENT" means this Second Amended and Restated Credit
Agreement, as it may be amended, amended and restated, supplemented or
otherwise modified from time to time.

"AHPF" means AHP Finance, Inc., a Tennessee corporation.

"AHPI" means American HomePatient of Illinois, Inc., an
Illinois corporation.

"AHPLP" means AHP, L.P., a Tennessee limited partnership.

"AHPN" means AHP of Nevada, Inc., a Nevada corporation.

"AHPPARTNER" means American HomePatient Partner, Inc., a
Nevada corporation.

"AHPT" means American HomePatient, Inc., a Tennessee
corporation.

"AHPTXLP" means American HomePatient of Texas, L.P., a Texas
limited partnership.

"ALLCARE BRANCHES" means the operations and assets of the
Borrower in the State of Texas acquired from Allcare Medical, Inc.

"APPLICABLE BASE MARGIN" means, as of any date of
determination, a percentage per annum as shown below determined by the Leverage
Ratio then

3
<PAGE> 10

in effect; provided that, if the Borrower has failed to provide a Margin Rate
Determination Certificate within the most recent period set forth in Section
5.01 or 7.01, the Applicable Base Margin shall be 1.00% per annum:

<TABLE>
<CAPTION>
===================================================================================================================
LEVERAGE RATIO LEVERAGE RATIO APPLICABLE
(Prior to Equity Offering (After Equity Offering BASE MARGIN
Date) Date)
===================================================================================================================
<S> <C> <C>
x < 0.75 x < 0.75 0.00%
-------------------------------------------------------------------------------------------------------------------
0.75 less than or equal to x < 1.50 0.75 less than or equal to x < 1.75 0.00%
-------------------------------------------------------------------------------------------------------------------
1.50 less than or equal to x < 2.00 1.75 less than or equal to x < 2.25 0.00%
-------------------------------------------------------------------------------------------------------------------
2.00 less than or equal to x < 2.50 2.25 less than or equal to x < 2.50 0.25%
-------------------------------------------------------------------------------------------------------------------
2.50 less than or equal to x < 2.75 2.50 less than or equal to x < 2.75 0.50%
-------------------------------------------------------------------------------------------------------------------
2.75 less than or equal to x < 3.00 2.75 less than or equal to x < 3.00 0.75%
-------------------------------------------------------------------------------------------------------------------
3.00 less than or equal to x < 3.50 3.00 less than or equal to x < 3.50 1.00%
===================================================================================================================
</TABLE>

"APPLICABLE EURODOLLAR MARGIN" means, as of any date of
determination, a percentage per annum as shown below determined by the Leverage
Ratio then in effect; provided that, if the Borrower has failed to provide a
Margin Rate Determination Certificate within the most recent period set forth
in Section 5.01 or 7.01, the Applicable Eurodollar Margin shall be 2.00% per
annum:

4
<PAGE> 11

<TABLE>
<CAPTION>
===================================================================================================================
LEVERAGE RATIO LEVERAGE RATIO APPLICABLE
(Prior to Equity Offering (After Equity Offering EURODOLLAR MARGIN
Date) Date)
===================================================================================================================
<S> <C> <C>
x < 0.75 x < 0.75 0.50%
-------------------------------------------------------------------------------------------------------------------
0.75 less than or equal to x < 1.50 0.75 less than or equal to x < 1.75 0.75%
-------------------------------------------------------------------------------------------------------------------
1.50 less than or equal to x < 2.00 1.75 less than or equal to x < 2.25 1.00%
-------------------------------------------------------------------------------------------------------------------
2.00 less than or equal to x < 2.50 2.25 less than or equal to x < 2.50 1.25%
-------------------------------------------------------------------------------------------------------------------
2.50 less than or equal to x < 2.75 2.50 less than or equal to x < 2.75 1.50%
-------------------------------------------------------------------------------------------------------------------
2.75 less than or equal to x < 3.00 2.75 less than or equal to x < 3.00 1.75%
-------------------------------------------------------------------------------------------------------------------
3.00 less than or equal to x < 3.50 3.00 less than or equal to x < 3.50 2.00%
===================================================================================================================
</TABLE>

"ARLINGTON HEIGHTS FACILITY" means the operations and assets
of the Borrower located in Arlington Heights, Illinois.

"ASSIGNMENT AND ACCEPTANCE" means an Assignment and Acceptance
Agreement entered into by a Bank and an Eligible Assignee, and accepted by the
Agent, substantially in the form annexed hereto as EXHIBIT P.

"BANK" has the meaning assigned to that term in the first
paragraph of this Agreement and shall include each successor and assignee
pursuant to Section 11.05.

"BANKRUPTCY CODE" has the meaning assigned to that term in
Section 9.05.

"BASE LENDING RATE" means, at any time, the higher of, (a) the
Prime Rate and (b) the rate that is 1/2 of 1% in excess of the Federal Funds
Effective Rate.

"BASE RATE LOANS" means Loans maintained or made by the Banks
bearing interest at rates determined by reference to the Base Lending Rate as
provided in Section 2.06.

"BORROWER" has the meaning assigned to that term in the first
paragraph of this Agreement.

5
<PAGE> 12

"BORROWER PARTNERSHIP SECURITY AGREEMENT" means a Borrower
Partnership Security Agreement executed and delivered by the Agent and the
Borrower pursuant to the Existing Credit Agreement or this Agreement,
substantially in the form annexed hereto as EXHIBIT T, as such Borrower
Partnership Security Agreement may be amended, amended and restated,
supplemented or otherwise modified from time to time.

"BORROWER PLEDGE AGREEMENT" means that certain Borrower Pledge
Agreement dated as of October 20, 1994, executed and delivered by the Borrower
and the Agent pursuant to Section 5.01 of the Existing Credit Agreement, a copy
of which is annexed hereto as EXHIBIT H, as such Borrower Pledge Agreement has
heretofore been, and as it hereafter may be, amended, amended and restated,
supplemented or otherwise modified from time to time.

"BORROWER SECURITY AGREEMENT" means that certain Borrower
Security Agreement dated as of October 20, 1994, executed and delivered by the
Borrower and the Agent pursuant to Section 5.01 of the Existing Credit
Agreement, a copy of which is annexed hereto as EXHIBIT J, as such Borrower
Security Agreement has heretofore been, and as it hereafter may be, amended,
amended and restated, supplemented or otherwise modified from time to time.

"BUSINESS DAY" means any day except Saturday, Sunday and any
day that shall be in New York City a legal holiday or a day on which banking
institutions are authorized or required by law or other government action to
close.

"CASH" means money, currency or a credit balance in a Deposit
Account.

"CASH EQUIVALENTS" means, as at any date of determination, (i)
marketable securities (a) issued or directly and unconditionally guaranteed as
to interest and principal by the United States Government or (b) issued by any
agency of the United States the obligations of which are backed by the full
faith and credit of the United States, in each case maturing within one year
after such date; (ii) marketable direct obligations issued by any state of the
United States or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year after such date
and having, at the time of the acquisition thereof, the highest rating
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("MOODY'S"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by any Bank or by any
commercial bank organized under the laws of the United States or any state
thereof or the District of Columbia that (a) is at least

6
<PAGE> 13

"adequately capitalized" (as defined in the regulations of its primary Federal
banking regulator) and (b) has Tier 1 capital (as defined in such regulations)
of not less than $100,000,000; and (v) shares of any money market mutual fund
that (a) has at least 95% of its assets invested continuously in the types of
investments referred to in clauses (i) and (ii) above, (b) has net assets of
not less than $500,000,000, and (c) has the highest rating then obtainable from
either S&P or Moody's.

"CERTIFICATE OF EXEMPTION" has the meaning assigned to that
term in Section 2.09(g)(iii).

"CLASEN" means Clasen Health Services, Inc., a Missouri
corporation.

"CODE" means the Internal Revenue Code of 1986, as amended
from time to time.

"COLLATERAL" means all the personal and mixed property made
subject to a Lien pursuant to the Credit Documents.

"COLLECTION BANK AGREEMENTS" means (i) those certain
Collection Bank Agreements executed and delivered by each of the Borrower or
any of its Subsidiaries and the financial institutions into which the proceeds
of Accounts Receivable of such of the Borrower or its Subsidiaries are
deposited pursuant to Section 8.16 of the Existing Credit Agreement, as each
such Collection Bank Agreement has heretofore been, and as it hereafter may be,
amended, amended and restated, supplemented or otherwise modified from time to
time, and (ii) any Collection Bank Agreements executed on or after the
Effective Date between the Borrower or any of its Subsidiaries and the
financial institutions into which the proceeds of Accounts Receivable of such
of the Borrower or its Subsidiaries are deposited, substantially in the form
annexed hereto as EXHIBIT N, as such agreements may be amended, amended and
restated, supplemented or otherwise modified from time to time.

"COMMITMENTS" means the commitments of Banks to make Loans as
set forth in Sections 2.01, 2.02 and 2.03.

"COMMITMENT FEE PERCENTAGE" means, as of any date of
determination, a percentage per annum determined by the Leverage Ratio then in
effect as specified below:

7
<PAGE> 14

The Commitment Fee Percentage shall equal 0.375% per annum if the Borrower has
failed to provide a Margin Rate Determination Certificate within the most
recent period set forth in Section 5.01 or 7.01.

"COMPLIANCE CERTIFICATE" means a certificate substantially in
the form annexed hereto as EXHIBIT Q delivered to the Agent and Banks by the
Borrower under Section 7.01(f).

"CONCENTRATION BANK AGREEMENT" means either (i) that certain
Concentration Bank Agreement dated as of October 20, 1994, executed and
delivered pursuant to Section 5.01 of the Existing Credit Agreement by the
Borrower, the Agent and NationsBank of Tennessee, N.A., as concentration bank,
a copy of which is annexed hereto as EXHIBIT O, as such Concentration Bank
Agreement has heretofore been, and as it hereafter may be, amended, amended and
restated, supplemented or otherwise modified from time to time (the "EXISTING
CONCENTRATION BANK AGREEMENT"), or (ii) an agreement replacing the Existing
Concentration Bank Agreement, substantially in the form annexed hereto as
EXHIBIT O, entered into by and among the Borrower, the Agent and one of the
Banks, as the concentration bank, and delivered to the Agent and Banks by the
Borrower.

"CONPHARMA" means ConPharma Home HealthCare, Inc., a
Massachusetts corporation.

"CONPHARMA NOTE" has the meaning assigned to such term in the
definition of Corporate Restructuring.

"CONSOLIDATED ADJUSTED EBITDA" means Consolidated EBITDA of
the Borrower and its Subsidiaries at the end of any period of determination and
shall be calculated on a pro forma basis, in accordance with the balance sheets
and related statements of operations provided under Section 7.01(k), (i) as if
any Acquisition that occurred during such period and any related Divestiture
had taken place on the first day of such period, and (ii) if legislation is
enacted providing for a reduction of 10% or more in Medicare's reimbursement
rates for oxygen therapy in effect on January 1, 1996, as if the enactment of
legislation

8
<PAGE> 15

that occurred during such period and any related reduction in reimbursement had
taken place on the first day of such period.

"CONSOLIDATED EBIT" means, as to any Person and for any
period, the Consolidated Net Income of such Person and its Subsidiaries for
such period, before interest expense and provision for taxes and without giving
effect to (i) any extraordinary gains (or extraordinary noncash losses) and
(ii) gains (or losses) from sales of assets (other than sales of inventory in
the Ordinary Course of Business) to the extent that the gain or loss from all
such sales is, in the aggregate, greater than $500,000 for the immediately
prior four-quarter period.

"CONSOLIDATED EBITDA" means, as to any Person and for any
consecutive four-quarter period, the Consolidated EBIT of such Person and its
Subsidiaries and Joint Ventures for such period, adjusted by (i) adding thereto
the amount of all amortization of intangibles and depreciation that was
deducted in arriving at such Consolidated EBIT for such period and (ii)
excluding therefrom amounts attributable to (x) minority interests held by
third Persons and/or their Subsidiaries, (y) the portion of Consolidated EBIT
attributable to operations sold or disposed of in Divestitures during such
period if the Consolidated EBITDA associated with such operations exceeds
$250,000, and (z) Joint Ventures that remain invested in such Joint Ventures
and are not distributed to the Borrower.

"CONSOLIDATED INTEREST EXPENSE" means, for any period, total
interest expense (including that portion attributable to capitalized interest
and capital leases in accordance with generally accepted accounting principles
consistently applied) of the Borrower and its Subsidiaries on a consolidated
basis with respect to all outstanding Indebtedness of the Borrower and its
Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements, but
excluding, however, any amounts referred to in Section 3 payable to the Agent
and Banks on or before the Effective Date.

"CONSOLIDATED NET INCOME" means, as to any Person and for any
period, the net income (or loss) of such Person and its Subsidiaries, after
provisions for taxes, on a consolidated basis for such period taken as a single
accounting period determined in conformity with generally accepted accounting
principles consistently applied.

"CONSOLIDATED NET WORTH" means, as to any Person, the Net
Worth of such Person and its Subsidiaries determined on a consolidated basis
without deduction for any minority interests in any corporation, association,
general partnership or joint venture (including Joint Ventures).

9
<PAGE> 16

"CONSOLIDATED SUBSIDIARIES" means, as to any Person, all
Subsidiaries of such Person that are consolidated with such Person for
financial reporting purposes in accordance with generally accepted accounting
principles consistently applied.

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

"CORPORATE RESTRUCTURING" means, collectively, the
consummation of the following transactions in the following order:

(i) the sale by the Borrower to AHPT of all of the capital stock of the
Acquired Subsidiaries; (ii) the issuance by AHPT to the Borrower of promissory
notes (each a "RESTRUCTURING NOTE" and collectively, the "RESTRUCTURING NOTES")
in the aggregate amount of $58,586,053.00, each Restructuring Note evidencing a
loan to finance the purchase price for an Acquired Subsidiary and being
guarantied by such Acquired Subsidiary and secured by a Lien on such Acquired
Subsidiary's inventory; (iii) the issuance by AHPT to the Borrower of
promissory notes (each an "INTERCOMPANY STOCK PURCHASE TERM NOTE" and
collectively, the "INTERCOMPANY STOCK PURCHASE TERM NOTES") in the aggregate
amount of $8,505,000.00, each Intercompany Stock Purchase Term Note evidencing
a loan previously made by the Borrower to AHPT to enable AHPT to acquire the
stock of Clasen or Extracare and being guarantied by Clasen or Extracare,
respectively, and secured by a Lien on Clasen's or Extracare's inventory,
respectively; (iv) the issuance by AHPT to the Borrower of one or more
promissory notes (the "INTERCOMPANY ASSET PURCHASE TERM NOTES" and, together
with the Intercompany Stock Purchase Term Notes, the "INTERCOMPANY TERM NOTES")
in the aggregate amount of $19,451,073.00, secured by a Lien on

10
<PAGE> 17

AHPT's inventory, evidencing a loan previously made by the Borrower to AHPT to
enable AHPT to acquire the assets of Med- Quip Rentals and Supplies, Inc.,
Pulmonary Associates of Mobile, PA., MedServ Corporation, AMRX of Tallahassee,
Inc. and Health Star Medical, Inc.; (v) the formation of AHPF as a direct
Wholly-Owned Subsidiary of the Borrower; (vi) the contribution of the Arlington
Heights Facility by the Borrower to AHPF (vii) the contribution of the
Restructuring Notes and the Intercompany Term Notes, and the assignment of the
related guarantees and security interests referred to in clauses (ii), (iii)
and (iv) above, by the Borrower to AHPF; (viii) the issuance as a dividend by
ConPharma to AHPT of a promissory note (the "CONPHARMA NOTE") in the principal
amount of $30,037,000.00, secured by a Lien on the inventory of ConPharma; and
(ix) the endorsement and transfer of the ConPharma Note, and the assignment of
the related security interest in ConPharma's inventory, by AHPT to AHPF in
exchange for the cancellation of the Restructuring Note related to the sale of
the stock of ConPharma by the Borrower to AHPT and for the release of the
related guaranty and security interest granted by ConPharma with respect
thereto as described in clause (ii) above.

"CORPORATE RESTRUCTURING GUARANTY/SECURITY AGREEMENT" means
any guaranty, security agreement or guaranty and security agreement pursuant to
which (i) an Acquired Subsidiary guaranties the obligations of AHPT under a
Restructuring Note and/or grants a security interest to the Borrower in its
inventory to secure its obligations under such a guaranty, (ii) Clasen or
Extracare guaranties the obligations of AHPT under an Intercompany Stock
Purchase Term Note and/or grants a security interest to the Borrower in its
inventory to secure its obligations under such a guaranty, (iii) AHPT grants a
security interest to the Borrower in its inventory to secure its obligations
under the Intercompany Asset Purchase Term Notes, or (iv) ConPharma grants a
security interest to AHPT in its inventory to secure its obligations under the
ConPharma Note.

"CREDIT DOCUMENTS" means this Agreement, each Note, the
Letters of Credit, the Subsidiary Guaranty, the Borrower Pledge Agreement, the
Subsidiary Pledge Agreement, the Borrower Security Agreement, the Subsidiary
Security Agreement, the Borrower Partnership Security Agreement, the Subsidiary
Partnership Security Agreement, the Collection Bank Agreements, the
Concentration Bank Agreement, the Consent to Amendment and Restatement, the
Trademark Security Agreement and the Subsidiary Trademark Security Agreement.

"DEFAULT" means any event, act or condition that with notice
or lapse of time, or both, would constitute an Event of Default.

"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or
like account with a bank, savings and loan association, credit union or like

11
<PAGE> 18

organization, other than an account evidenced by a negotiable certificate of
deposit.

"DIVESTITURE" means the resale of any assets or property
acquired in any Acquisition within one year of such Acquisition.

"DOLLARS" and "$" means the lawful money of the United States
of America.

"EFFECTIVE DATE" means the first date upon which all of the
conditions set forth in Section 5.01 of this Agreement shall have been
satisfied or waived.

"ELIGIBLE ASSIGNEE" means (i) (A) a commercial bank organized
under the laws of the United States or any state thereof; (B) a savings and
loan association or savings bank organized under the laws of the United States
or any state thereof; (C) a commercial bank organized under the laws of any
other country or a political subdivision thereof; provided that (x) such bank
is acting through a branch or agency located in the United States or (y) such
bank is organized under the laws of a country that is a member of the
Organization for Economic Cooperation and Development or a political
subdivision of such country; and (D) any other entity that is an "accredited
investor" (as defined in Regulation D under the Securities Act of 1933, as
amended) that extends credit or buys loans as one of its businesses including,
but not limited to, insurance companies, mutual funds and lease financing
companies, and (ii) any Bank and any Affiliate of any Bank or the Issuing Bank;
provided that no Affiliate of the Borrower shall be an Eligible Assignee.

"EQUITY OFFERING" means the issuance of equity Securities by
the Borrower or its Wholly-Owned Subsidiaries resulting in Net Securities
Proceeds in an amount equal to or greater than $50 million.

"EQUITY OFFERING DATE" means the first Business Day following
the date of receipt by the Borrower or its Wholly-Owned Subsidiaries of the Net
Securities Proceeds from an Equity Offering.

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

"ERISA AFFILIATE" means any person (as defined in Section 3(9)
of ERISA) that together with the Borrower or any of its Subsidiaries would be a
member of the same "CONTROLLED GROUP" within the meaning of Section 414(b),
(m), (c) and (o) of the Code.

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<PAGE> 19

"EURODOLLAR RATE" means, for any Interest Rate Determination
Date, the arithmetic average (rounded upwards, if necessary, to the nearest
1/16 of 1%) of the offered quotation, if any, to first class banks in the
Eurodollar market by Bankers Trust Company for Dollar deposits of amounts in
immediately available funds comparable to the principal amount of the
Eurodollar Rate Loan of the Agent for which the Eurodollar Rate is being
determined with maturities comparable to the Interest Period for which such
Eurodollar Rate will apply as of approximately 10:00 A.M. (New York time) two
Business Days prior to the commencement of such Interest Period.

"EURODOLLAR RATE LOANS" means Loans bearing interest at rates
determined by reference to the Eurodollar Rate as provided in Section 2.06.

"EURODOLLAR RATE TAXES" has the meaning assigned to that term
in Section 2.09(g)(i).

"EVENT OF DEFAULT" has the meaning assigned to that term in
Section 9.

"EXISTING BANKS" has the meaning assigned to that term in the
Recitals to this Agreement.

"EXISTING CREDIT AGREEMENT" has the meaning assigned to that
term in the Recitals to this Agreement.

"EXISTING INDEBTEDNESS" has the meaning assigned to that term
in Section 8.04(ii).

"EXISTING NOTES" means the "Revolving Notes" and the "Swing
Line Note" as defined in the Existing Credit Agreement and issued to the
Existing Banks thereunder.

"EXISTING REVOLVING LOANS" means the "Revolving Loans" as
defined in the Existing Credit Agreement and extended to the Borrower
thereunder.

"EXISTING REVOLVING LOAN COMMITMENT" means, with respect to an
Existing Bank, such Existing Bank's "Revolving Loan Commitment" as defined in
the Existing Credit Agreement.

"EXISTING SWING LINE LOANS" means the "Swing Line Loans" as
defined in the Existing Credit Agreement and extended to the Borrower
thereunder.

"EXTRACARE" means Extracare, Inc., a South Carolina
corporation.

13
<PAGE> 20

"FDA" means the United States Food and Drug Administration.

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

"FEES" means all amounts payable pursuant to or referred to in
Section 3.01.

"FIRST AMENDMENT" means that certain First Amendment to
Amended and Restated Credit Agreement dated as of December 28, 1995 by and
among the Borrower, the Banks and the Agent.

"FIRST AMENDMENT EFFECTIVE DATE" has the meaning assigned to
that term in the First Amendment.

"FISCAL YEAR" means the fiscal year of the Borrower and its
Subsidiaries (other than Joint Ventures) ending on December 31 of each calendar
year.

"FOREIGN BANK" has the meaning assigned to that term in
Section 2.09(g)(iii).

"FUNDING DATE" means the date of the funding of a Loan or the
date of the issuance of a Letter of Credit, as applicable.

"GOVERNMENT ACTS" has the meaning assigned to such term in
Section 2.10(h).

"GOVERNMENTAL AUTHORITY" means any nation or government, any
state or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.

14
<PAGE> 21

"GUARANTOR SUBSIDIARY" means each of AHPT, American
HomePatient of Alabama, Inc., American HomePatient of Arkansas, Inc., American
HomePatient of Florida, Inc., American HomePatient of Georgia, Inc.,
Neogenesis, Inc., Provida Services, Inc., American Home Patient Ventures, Inc.,
AHPN, Clasen, Clasen Infusion Services, Inc., AHPLP, Clasen Pharmacy, Inc.,
Southtown Medical and Hospital Supply, Inc., Clasen Home Health Care, Inc.,
Extracare, ProCare Medical Supply Co., Inc., Medair Professional Services,
Inc., Advanced HomeCare, Inc., ConPharma, Critical Care Associates, Inc.,
Critical Care Pharmacy of Rochester, Inc., TPN Pharmacy, Inc., TPN of
Springfield, Inc., Clovis Medical Supply, Inc., Etex Medical Supplies, Inc.,
Mobile Medical Services, Inc., Fox Chase Medical Equipment, Inc., Medical
Equipment Service, Inc., AHPF, AHPI, AHPPartner, AHPTXLP, Stoll's Medical
Rentals, Inc., Designated Companies, Inc., EMIE Corporation, General Holdings,
Inc., Home Respiratory Services & Medical Equipment, Inc., The Medical Mart,
Inc. and each Subsidiary that executes a Subsidiary Guaranty pursuant to
Section 7.11(b), which constitute all of the Subsidiaries of the Borrower, each
of which is a party to a Subsidiary Guaranty, Subsidiary Security Agreement,
Subsidiary Partnership Security Agreement (to the extent required by Section
7.11(b), Subsidiary Pledge Agreement and Collection Bank Agreements (to the
extent required by Section 8.17)."

"HOBBS BRANCH" means the operations and assets of AHPN located
in Hobbs, New Mexico.

"INDEBTEDNESS" means, as to any Person, without duplication,
(i) all indebtedness (including principal, fees and charges) of such Person for
borrowed money or for the deferred purchase price of property or services, (ii)
the maximum undrawn amount of or maximum unreimbursed amount under all letters
of credit issued for the account of such Person and all drafts drawn
thereunder, (iii) all liabilities secured by any Lien on any property owned by
such Person, whether or not such liabilities have been assumed by such Person;
provided that liabilities that are nonrecourse to the credit of the Borrower
and its Subsidiaries, shall be deemed to constitute Indebtedness only in an
amount equal to the lesser of (a) the fair market value (on the date of
determination of Indebtedness for purposes of this Agreement) of such property
or (b) the amount of such liabilities, (iv) the aggregate amount required to be
capitalized under generally accepted accounting principles under leases under
which such Person is the lessee, (v) all Contingent Obligations of such Person
and (vi) the total redemption price (including, without limitation, the
liquidation preference, par value, premium and accrued dividends) of any
preferred stock of such Person with a mandatory redemption date prior to the
Termination Date.

"INTERCOMPANY ACQUISITION NOTE" means any promissory note
evidencing Indebtedness under a loan or advance by AHPF to AHPT permitted under
Section 8.05(xi) to fund an Acquisition by AHPT after the First Amendment

15
<PAGE> 22

Effective Date; provided that the obligations of AHPT under any Intercompany
Acquisition Note shall be expressly subordinated, on terms satisfactory in form
and substance to the Agent, to the Obligations of AHPT under the Subsidiary
Guaranty.

"INTERCOMPANY ACQUISITION GUARANTY/SECURITY AGREEMENT" means
any guaranty, security agreement or guaranty and security agreement pursuant to
which (x) a newly-acquired Subsidiary of AHPT guaranties the obligations of
AHPT under an Intercompany Acquisition Note issued to AHPF in connection with
the Acquisition of such Subsidiary and/or grants a security interest to AHPF in
its inventory to secure its obligations under such a guaranty or (y) AHPT
grants a security interest to AHPF in its inventory to secure its obligations
under an Intercompany Acquisition Note issued to AHPF in connection with an
Acquisition of assets; provided that (i) any such guaranty shall be expressly
subordinated in right of payment, on terms satisfactory in form and substance
to the Agent, to the Obligations of such Subsidiary under the Subsidiary
Guaranty, (ii) any such security interest shall be expressly subordinated, on
terms satisfactory in form and substance to the Agent, to the security interest
in the inventory of such Subsidiary created in favor of the Agent pursuant to
the Subsidiary Security Agreement, and (iii) any such guaranty or security
interest shall be assigned to the Agent on terms satisfactory in form and
substance to the Agent.

"INTERCOMPANY ASSET PURCHASE TERM NOTES" has the meaning
assigned to such term in the definition of Corporate Restructuring.

"INTERCOMPANY STOCK PURCHASE TERM NOTE" has the meaning
assigned to such term in the definition of Corporate Restructuring.

"INTERCOMPANY TERM NOTE" has the meaning assigned to such term
in the definition of Corporate Restructuring.

"INTEREST PAYMENT DATE" means, (i) with respect to any
Eurodollar Rate Loan having an Interest Period of one, two or three months, the
last day of the Interest Period applicable to such Loan or, (ii) in the case of
any Eurodollar Rate Loan having an Interest Period of six months, (a) the date
that is three months after the initial date of the Interest Period applicable
to such Loan and (b) the last day of the Interest Period applicable to such
Loan.

"INTEREST PERIOD" means any period applicable to a Loan as
determined pursuant to Section 2.06(b).

"INTEREST RATE AGREEMENT" means any interest rate swap
agreement, interest rate cap agreement or other similar agreement or

16
<PAGE> 23

arrangement designed to protect the Borrower against fluctuations in interest
rates.

"INTEREST RATE DETERMINATION DATE" means each date for
calculating the Eurodollar Rate for purposes of determining the interest rate
in respect of an Interest Period. The Interest Rate Determination Date shall
be the second Business Day prior to the first day of the related Interest
Period for a Eurodollar Rate Loan.

"ISSUING BANK" means Bankers Trust Company or its Affiliate or
any successor Bank or its Affiliate in the capacity of issuer of Letters of
Credit pursuant to Section 2.10.

"JOINT VENTURE" means a single-purpose corporation,
partnership, joint venture or other similar legal arrangement (whether created
pursuant to contract or conducted through a separate legal entity) now or
hereafter formed by the Borrower or any of its Subsidiaries with another Person
(other than the Borrower or any of its Subsidiaries) in order to conduct a
common venture or enterprise with such other Person.

"LENDING OFFICE" means, with respect to each Bank, the office
of such Bank specified opposite its signature below as its lending office or
such other office of such Bank as such Bank may from time to time specify as
such to the Borrower and the Agent.

"LETTER OF CREDIT" means any of the standby letters of credit
issued (or deemed issued under Section 2.10(a)) or to be issued by the Issuing
Bank for the account of the Borrower pursuant to Section 2.10 and for the
purposes described in Section 2.08(b); provided that, notwithstanding anything
to the contrary contained herein, any such letter of credit may be issued by an
Affiliate of the Issuing Bank; provided, further, that to the extent that a
letter of credit is issued by an Affiliate of the Issuing Bank, such Affiliate
shall, for all purposes under this Agreement, the Credit Documents and all
other instruments and documents referred to herein and therein be deemed to be
the "ISSUING BANK" with respect to such letter of credit.

"LETTER OF CREDIT USAGE" means, as at any date of
determination, the sum of (i) the maximum aggregate amount that is or at any
time thereafter may become available for drawing under all Letters of Credit
then outstanding plus (ii) the aggregate amount of all drawings under Letters
of Credit honored by the Issuing Bank and not theretofore reimbursed by the
Borrower.

"LETTER OF NON-EXEMPTION" has the meaning assigned to that
term in Section 2.09(g)(iii).

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<PAGE> 24

"LEVERAGE RATIO" means the ratio of Total Debt to Consolidated
Adjusted EBITDA on the date of the most recent Margin Rate Determination
Certificate.

"LIEN" means any mortgage, pledge, hypothecation, assignment
for security, deposit arrangement, encumbrance, lien (statutory or other),
preference, priority or other security agreement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing or similar statement or notice filed under
the UCC or any other similar recording or notice statute, any agreement to give
any security interest and any lease having substantially the same effect as any
of the foregoing).

"LOAN" or "LOANS" means one or more of the Term Loans or the
Revolving Loans or the Swing Line Loans.

"MARGIN RATE DETERMINATION CERTIFICATE" means an Officers'
Certificate of the Borrower setting forth in reasonable detail the Total Debt
and the Consolidated Adjusted EBITDA as of the date on which such Officers'
Certificate is delivered (i) pursuant to Section 7.01(j) of the Existing Credit
Agreement or Section 7.01(j) of this Agreement with the financial statements
required pursuant to Section 7.01(a) or (b) of each such agreement or (ii)
pursuant to Section 7.01(j) of this Agreement in connection with an Equity
Offering.

"MARGIN STOCK" has the meaning provided in Regulation U of the
Board of Governors of the Federal Reserve System.

"NET WORTH" means, as to any Person, the sum of its capital
stock, capital in excess of par or stated value of shares of its capital stock,
retained earnings and any other account that, in accordance with generally
accepted accounting principles consistently applied, constitutes stockholders'
equity, excluding any treasury stock.

"NET SECURITIES PROCEEDS" the Cash proceeds (any such
proceeds, net of underwriting discounts and commissions and other reasonable
costs and expenses associated therewith, including reasonable legal fees and
expenses) from the issuance of any Equity Offering after the Effective Date.

"NOTES" means one or more of the Term Notes or the Revolving
Notes or the Swing Line Note.

"NOTICE OF REVOLVER BORROWING" means a notice substantially in
the form of EXHIBIT A annexed hereto with respect to a proposed Revolving Loan.

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<PAGE> 25

"NOTICE OF SWING LINE BORROWING" means a notice substantially
in the form of EXHIBIT B annexed hereto with respect to a proposed Swing Line
Loan.

"NOTICE OF TERM BORROWING" means a notice substantially in the
form of EXHIBIT C annexed hereto with respect to a proposed Term Loan.

"NOTICE OF CONVERSION/CONTINUATION" means a notice
substantially in the form of EXHIBIT D annexed hereto with respect to a
proposed conversion or continuation of a Loan.

"NOTICE OF ISSUANCE OF LETTER OF CREDIT" means a notice in the
form of EXHIBIT E annexed hereto with respect to a proposed issuance of a
Letter of Credit.

"NOTICE OFFICE" means the office of the Agent located at One
Bankers Trust Plaza, 130 Liberty Street, 14th Floor, New York, New York 10006,
Attn: Debra Bertelle, in each case with a copy to 300 South Grand Avenue, 41st
Floor, Los Angeles, California 90071, Attn: Kate Cook, or such other office or
offices as the Agent may hereafter designate in writing as such to the other
parties hereto.

"OBLIGATIONS" means all amounts owing to the Agent or any Bank
pursuant to the terms of this Agreement or any other Credit Document. For the
purposes of the Credit Documents, the Obligations shall include all
"Obligations", as such term is defined in the Existing Credit Agreement, to the
extent such Obligations are not otherwise continued pursuant to this Agreement.

"OFFICERS' CERTIFICATE" means, as applied to any corporation,
association or joint venture, a certificate executed on behalf of such
corporation, association or joint venture, by the Chairman of the Board (if an
officer) or the President or one of its Vice Presidents and by the Chief
Financial Officer or the Chief Accounting Officer or the Treasurer or an
Assistant Treasurer of such corporation or the managing partner (or Person with
equivalent authority) of such association or joint venture; provided that every
Officers' Certificate with respect to the compliance with a condition precedent
to the making of any Loans or issuance of any Letters of Credit hereunder shall
include (i) a statement that the officer or officers or managing partner (or
Person with equivalent authority) making or giving such Officers' Certificate
have read such condition and any definitions or other provisions contained in
this Agreement relating thereto, (ii) a statement that, in the opinion of the
signers, they have made or have caused to be made such examination or
investigation as is necessary to enable them to express an informed opinion as
to whether or not such condition has been complied with, and (iii) a statement
as to whether, in the opinion of the signers, such condition has been complied
with.

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<PAGE> 26

"ORDINARY COURSE OF BUSINESS" means, in respect of any
transaction involving the Borrower or any Subsidiary of the Borrower, the
ordinary course of such Person's business, as conducted by any such Person in
accordance with past practice (including, without limitation, such Person's
past practice of consultation with legal counsel) and undertaken by such Person
in good faith and not for purposes of evading any covenant or restriction in
any Credit Document.

"OSHA" means the United States Occupational Safety and Health
Administration.

"PAYMENT OFFICE" means the office of the Agent located at One
Bankers Trust Plaza, New York, New York 10006, Attention: Commercial Loan
Division Ref: AHP, or such other office as the Agent may hereafter designate
in writing as such to the other parties hereto.

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

"PEORIA BRANCH" means the operations and assets of the
Borrower located in Peoria, Illinois.

"PERMITTED LIENS" has the meaning assigned to that term in
Section 8.01(iii).

"PERSON" means any individual, partnership, joint venture,
firm, corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.

"PERFORMANCE PLAN" has the meaning assigned to that term in Section 7.01(d).

"PLAN" means any multiemployer plan or single-employer plan as
defined in Section 4001 of ERISA, that is maintained or contributed to, or at
any time during the five calendar years preceding the date of this Agreement
was maintained or contributed to, by the Borrower or by a Subsidiary of the
Borrower or an ERISA Affiliate.

"PRIME RATE" means the rate that Bankers Trust Company
announces from time to time as its prime lending rate, and the Prime Rate shall
change when and as such prime lending rate changes. The Prime Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. Bankers Trust Company may make

20
<PAGE> 27

commercial loans or other loans at rates of interest at, above or below the
Prime Rate.

"PRO RATA SHARE" means (i) with respect to all payments,
computations and other matters relating to the Term Loan Commitment or the Term
Loan of any Bank, the percentage obtained by dividing (x) the Term Loan
Exposure of that Bank by (y) the aggregate Term Loan Exposure of all Banks,
(ii) with respect to all payments, computations and other matters relating to
the Revolving Loan Commitment or the Revolving Loans of any Bank or any Letters
of Credit issued or participations therein purchased by any Bank or any
participations in any Swing Line Loans purchased by any Bank, the percentage
obtained by dividing (x) the Revolving Loan Exposure of that Bank by (y) the
aggregate Revolving Loan Exposure of all Banks, and (iii) for all other
purposes with respect to each Bank, the percentage obtained by dividing (x) the
sum of the Term Loan Exposure of that Bank plus the Revolving Loan Exposure of
that Bank by (y) the sum of the aggregate Term Loan Exposure of all Banks plus
the aggregate Revolving Loan Exposure of all Banks, in any such case as the
applicable percentage may be adjusted by assignments permitted pursuant to
Section 11.05. The initial Pro Rata Share of each Bank for purposes of each of
clauses (i), (ii) and (iii) of the preceding sentence is set forth opposite the
name of that Bank in SCHEDULE 1.01(A) annexed hereto and SCHEDULE 1.01(A) shall
be amended and the Banks' Pro Rata Shares shall be adjusted from time to time
to give effect to the addition of any new Banks and any reallocations among
existing Banks necessary to reflect assignments pursuant to Section 11.05. The
sum of the Pro Rata Shares of all Banks at any date of determination shall
equal 100%

"REFUNDED SWING LINE LOANS" has the meaning assigned to that
term in Section 2.02(c).

"REPORTABLE EVENT" means an event described in Section 4043(b)
of ERISA with respect to a Plan as to which the 30-day notice requirement has
not been waived by the PBGC.

"REQUIRED BANKS" means Banks having or holding 51% or more of
the sum of the aggregate Term Loan Exposure of all Banks plus the aggregate
Revolving Loan Exposure of all Banks.

"RESTRUCTURING NOTE" has the meaning assigned to such term in
the definition of Corporate Restructuring.

"REVOLVING LOAN COMMITMENT" or "REVOLVING LOAN COMMITMENTS"
means the commitment or commitments of a Bank or Banks to make Revolving Loans
as set forth in Section 2.01(a).

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<PAGE> 28

"REVOLVING LOAN EXPOSURE" means, with respect to any Bank as
of any date of determination (i) prior to the termination of the Revolving Loan
Commitments, that Bank's Revolving Loan Commitment and (ii) after the
termination of the Revolving Loan Commitments, the sum of (a) the aggregate
outstanding principal amount of the Revolving Loans of that Bank plus (b) in
the event that Bank is an Issuing Bank, the aggregate Letter of Credit Usage in
respect of all Letters of Credit issued by that Bank (in each case net of any
participations purchased by other Banks in such Letters of Credit or any
unreimbursed drawings thereunder) plus (c) the aggregate amount of all
participations purchased by that Bank in any outstanding Letters of Credit or
any unreimbursed drawings under any Letters of Credit plus (d) in the case of
Swing Line Bank, the aggregate outstanding principal amount of all Swing Line
Loans (net of any participations therein purchased by other Banks) plus (e) the
aggregate amount of all participations purchased by that Bank in any
outstanding Swing Line Loans.

"REVOLVING LOANS" means the Revolving Loans made by the Banks
on or after the Effective Date pursuant to Section 2.01(a). The term
"Revolving Loan" shall not include Swing Line Loans.

"REVOLVING NOTES" means the promissory notes of the Borrower
issued in favor of the Banks pursuant to Section 2.05 to evidence the Revolving
Loans, substantially in the form annexed hereto as EXHIBIT F-1, as they may be
amended, supplemented or otherwise modified from time to time.

"SEC" has the meaning assigned to that term in Section
7.01(h).

"SECURITIES" means any stock, shares, partnership interests,
voting trust certificates, certificates of interest or participation in any
profit-sharing agreement or arrangement, options, warrants, bonds, debentures,
notes, or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
"securities" or any certificates of interest, shares or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.

"SUBORDINATION AGREEMENTS" means the Subordination Agreements
executed pursuant to the Existing Credit Agreement among the Borrower, the
Agent and certain holders of the Unsecured Seller Debt, substantially in the
form annexed hereto as EXHIBIT M.

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

22
<PAGE> 29

corporation shall have or might have voting power by reason of the happening of
any contingency which has not occurred by the date of determination) is at the
time owned by such Person and/or one or more Subsidiaries of such Person and
(ii) any partnership, association, joint venture or other entity in which such
Person and/or one or more Subsidiaries of such Person has more than a 50%
equity interest at the time.

"SUBSIDIARY GUARANTY" means that certain Guaranty Agreement
dated as of October 20, 1994, executed and delivered by each Guarantor
Subsidiary for the benefit of the Agent pursuant to Section 5.01 of the
Existing Credit Agreement, a copy of which (executed by each Subsidiary of the
Borrower which is a Guarantor Subsidiary on the Effective Date) is annexed
hereto as EXHIBIT G, as such Guaranty Agreement has heretofore been, and as it
hereafter may be, amended, amended and restated, supplemented or otherwise
modified from time to time.

"SUBSIDIARY PARTNERSHIP SECURITY AGREEMENT" means a Subsidiary
Partnership Security Agreement executed and delivered by the Agent and any
Guarantor Subsidiary required to deliver the same pursuant to Section 7.11(b)
of the Existing Credit Agreement or this Agreement, substantially in the form
annexed hereto as EXHIBIT U, as such Subsidiary Partnership Security Agreement
may be amended, amended and restated, supplemented or otherwise modified from
time to time.

"SUBSIDIARY PLEDGE AGREEMENT" means that certain Subsidiary
Pledge Agreement dated as of October 20, 1994, executed and delivered by the
Agent and each Guarantor Subsidiary pursuant to Section 5.01 of the Existing
Credit Agreement, a copy of which (executed by each Subsidiary of the Borrower
which is a Guarantor Subsidiary on the Effective Date) is annexed hereto as
EXHIBIT I, as such Subsidiary Pledge Agreement has heretofore been, and as it
hereafter may be, amended, amended and restated, supplemented or otherwise
modified from time to time.

"SUBSIDIARY SECURITY AGREEMENT" means that certain Subsidiary
Security Agreement dated as of October 20, 1994, executed and delivered by the
Agent and each Guarantor Subsidiary pursuant to Section 5.01 of the Existing
Credit Agreement, a copy of which (executed by each Subsidiary of the Borrower
which is a Guarantor Subsidiary on the Effective Date) is annexed hereto as
EXHIBIT K, as such Subsidiary Security Agreement has heretofore been, and as it
hereafter may be, amended, amended and restated, supplemented or otherwise
modified from time to time.

"SUBSIDIARY TRADEMARK SECURITY AGREEMENT" means the trademark
security agreement executed by each Guarantor Subsidiary which is not party to
the Trademark Security Agreement and the Agent, substantially in the form

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<PAGE> 30

annexed hereto as EXHIBIT L-2, as such trademark security agreement may be
amended, amended and restated, supplemented or otherwise modified from time to
time.

"SWING LINE LOAN COMMITMENT" has the meaning assigned to that
term in Section 2.02(a).

"SWING LINE BANK" means Bankers Trust Company in its capacity
as the holder of the Swing Line Loan Commitment and any entity that assumes
Bankers Trust Company's rights and obligations with respect thereto pursuant to
Section 11.05.

"SWING LINE LOAN" means one or more of the Loans made by the
Swing Line Bank pursuant to Section 2.02(a). The term "Swing Line Loan" shall
not include Revolving Loans.

"SWING LINE NOTE" means (i) the promissory note of the
Borrower issued pursuant to Section 2.05 on the Effective Date and (ii) any
promissory note issued by the Borrower to any successor Agent and Swing Line
Bank pursuant to the last sentence of Section 10.09(d), in each case
substantially in the form of EXHIBIT F-2 annexed hereto, as they may be
amended, supplemented or otherwise modified from time to time.

"TARGET" means the Person to be acquired, or the Person whose
assets are to be acquired, in any Acquisition.

"TAX" or "TAXES" means any present or future tax, levy,
impost, duty, charge, fee, deduction or withholding of any nature and whatever
called, by whomsoever, on whomsoever and wherever imposed, levied, collected,
withheld or assessed; provided that "TAX ON THE OVERALL NET INCOME" of a Person
shall be construed as a reference to a tax imposed by the jurisdiction (whether
local, state, federal or foreign) in which that Person's principal office
(and/or, in the case of a Bank, its lending office) is located or in which that
Person is deemed to be doing business on all or part of the net income, profits
or gains of that Person (whether worldwide, or only insofar as such income,
profits or gains are considered to arise in or to relate to a particular
jurisdiction, or otherwise).

"TERM LOAN COMMITMENT" means the commitment of a Bank to make
a Term Loan to the Borrower pursuant to Section 2.03, and "TERM LOAN
COMMITMENTS" means such commitments of all Banks in the aggregate.

"TERM LOAN EXPOSURE" means, with respect to any Bank as of any
date of determination (i) prior to the funding of the Term Loans, that Bank's
Term Loan Commitment and (ii) after the funding of the Term Loans, the
outstanding principal amount of the Term Loan of that Bank.

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<PAGE> 31

"TERM LOANS" means the Loans made by Banks to the Borrower
pursuant to Section 2.03.

"TERM NOTES" means any promissory notes of the Borrower issued
in favor of the Banks pursuant to Section 2.05 to evidence the Term Loans of
any Banks, substantially in the form annexed hereto as EXHIBIT F-3, as they may
be amended, supplemented or otherwise modified from time to time.

"TERMINATION DATE" means the earlier of (a) the fifth
anniversary of the Effective Date and (b) the date upon which the Revolving
Loan Commitments are terminated pursuant to Section 4.03 or Section 9.

"TEXAS RESTRUCTURING" means, collectively, the consummation of
the following transactions in the following order:

(i) the formation of AHPI as a direct Wholly-Owned Subsidiary of AHPN;
(ii) the contribution of the Peoria Branch by the Borrower to AHPT, followed by
the contribution of the Peoria Branch by AHPT to AHPN and the contribution of
the Peoria Branch by AHPN to AHPI; (iii) the contribution of the Hobbs Branch
by AHPN to AHPLP and the contribution by AHPT of certain assets to AHPLP
commensurate with AHPT's 1% general partnership interest in AHPLP; (iv) the
contribution by AHPN to AHPI of one-half of AHPN's interest as a limited
partner in AHPLP; (v) the formation of AHPPartner as a direct Wholly-Owned
Subsidiary of AHPT; (vi) the contribution by AHPT to AHPPartner of all of the
capital stock held by AHPT in AHPN; (vii) the contribution of the Allcare
Branches by the Borrower to AHPT; (viii) the contribution by AHPT of all of its
Texas operations and assets (the "TEXAS ASSETS") to AHPPartner; (ix) the
formation of AHPTXLP; (x) the contribution of the Texas Assets by AHPPartner to
AHPTXLP in exchange for a 99% limited partnership interest in AHPTXLP; (xi) the
contribution by AHPT of certain assets to AHPTXLP in exchange for a 1% general
partnership interest in AHPTXLP; (xii) the contribution by AHPPartner to AHPN
of one-half of AHPPartner's interest as a limited partner in AHPTXLP, followed
by the contribution of such limited partnership interest by AHPN to AHPI;
(xiii) approximately one year after the transaction described in clause (xii)
of this definition, the contribution by AHPPartner to AHPN of the remainder of
AHPPartner's interest as a limited partner in AHPTXLP, followed by the
contribution of such limited partnership interest by AHPN to AHPI; and (xiv)
approximately one year after the transaction described in clause (iv) of this
definition, the contribution by AHPN to AHPI of the remainder of AHPN's
interest as a limited partner in AHPLP.

"TOTAL DEBT" means all Indebtedness of the Borrower and its
Subsidiaries on a consolidated basis outstanding on any date of determination,
including, without limitation, any Indebtedness incurred or to be incurred on
such date in connection with an Acquisition, but excluding Indebtedness with
respect to Letters of Credit and Interest Rate Agreements.

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<PAGE> 32

"TOTAL REVOLVING LOAN COMMITMENTS" means, as at any date of
determination, the aggregate principal amount of all Revolving Loan Commitments
then outstanding.

"TOTAL UTILIZATION OF REVOLVING LOAN COMMITMENTS" means, as at
any date of determination, the sum of (i) the aggregate principal amount of all
outstanding Revolving Loans plus (ii) the Letter of Credit Usage plus (iii) the
aggregate principal amount of all Swing Line Loans outstanding at such time;
provided that Total Utilization of Revolving Loan Commitments shall be
determined without duplication of Revolving Loans, the proceeds of which are
used simultaneously to refund other Revolving Loans or Swing Line Loans.

"TRADEMARK SECURITY AGREEMENT" means that certain Trademark
Security Agreement dated as of October 20, 1994, executed and delivered by the
Borrower, the Agent and each Guarantor Subsidiary which is a Guarantor
Subsidiary prior to the Effective Date pursuant to Section 5.01 of the Existing
Credit Agreement, a copy of which is annexed hereto as EXHIBIT L-1, as such
Trademark Security Agreement has heretofore been, and as it hereafter may be,
amended, amended and restated, supplemented or otherwise modified from time to
time.

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

"UNFUNDED CURRENT LIABILITY" means, as to any Plan, the
amount, if any, by which the present value of the accrued benefits under such
Plan as of the close of its most recent plan year determined in accordance with
Section 412 of the Code exceeds the fair market value of the assets allocable
thereto.

"UNSECURED SELLER DEBT" means the Indebtedness represented by
the Acquisition Notes and the Indebtedness permitted by Section 8.04(xii).

"WHOLLY-OWNED SUBSIDIARY" means, as to any Person, (i) any
corporation 100% of whose capital stock is at the time owned by such Person
and/or one or more Wholly-Owned Subsidiaries of such Person and (ii) any
partnership, association, joint venture or other entity in which such Person
and/or one or more Wholly-Owned Subsidiaries of such Person has a 100% equity
interest at such time.

1.02 PRINCIPLES OF CONSTRUCTION.

(a) All references to sections, schedules and exhibits
are to sections, schedules and exhibits in or to this Agreement unless
otherwise specified. The words "hereof," "herein" and "hereunder" and words of
similar

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<PAGE> 33

import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement.

(b) All accounting terms not specifically defined herein
shall be construed in accordance with generally accepted accounting principles
in conformity with those used in the preparation of the financial statements
referred to in Sections 6.05(a). Except in connection with the preparation of
the financial statements and other information required to be delivered by the
Borrower to the Banks pursuant to Sections 7.01(a), (b), (d), (e) and (h),
calculations made with respect to the definitions, covenants and other
provisions of this Agreement shall give effect to adjustments in component
amounts required or permitted by Accounting Principles Board Opinions Nos. 16
and 17 as a result of any Acquisition.

SECTION 2. AMOUNT AND TERMS OF CREDIT.

2.01 THE REVOLVING LOANS.

(a) THE REVOLVING LOANS. Subject to the terms and
conditions of this Agreement and in reliance upon the representations and
warranties of the Borrower set forth herein, each Bank hereby severally agrees,
subject to the limitations set forth below with respect to the maximum amount
of Revolving Loans permitted to be outstanding from time to time, to make
Revolving Loans to the Borrower from time to time during the period from the
Effective Date through but excluding the Termination Date in an amount not
exceeding its Pro Rata Share of the difference between the (i) aggregate
Revolving Loan Commitments (as defined below) then in effect and (ii) the sum
of (a) the aggregate principal amount of Swing Line Loans then outstanding
(excluding Swing Line Loans to be repaid with the proceeds of such Revolving
Loans) and (b) the Letter of Credit Usage for the purposes identified in
Section 2.08. Each Bank's commitment to maintain and make Revolving Loans to
the Borrower pursuant to this Section 2.01(a) is hereby called its "REVOLVING
LOAN COMMITMENT" and such commitments of all the Banks in the aggregate are
herein called the "REVOLVING LOAN COMMITMENTS." The initial amount of each
Bank's Revolving Loan Commitment is set forth in SCHEDULE 1.01(A) and the
aggregate initial amount of all Revolving Loan Commitments is $125,000,000.
The amount of the Revolving Loan Commitments shall be reduced by the amount of
all reductions thereof made pursuant to Section 4.03 or Section 9 through the
date of determination. In no event shall the aggregate principal amount of the
Revolving Loans from any Bank outstanding at any time exceed the amount of its
Revolving Loan Commitment then in effect. Each Bank's Revolving Loan
Commitment shall expire on the Termination Date and all Revolving Loans and all
other amounts owed hereunder with respect to the Revolving Loans, the Revolving
Loan Commitments, or otherwise (including, without limitation, any cash deposit

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<PAGE> 34

required under Section 2.10(a) with respect to any Letter of Credit having an
expiration date subsequent to the Termination Date) shall be paid in full no
later than that date.

Notwithstanding the foregoing provisions of this Section
2.01(a) and the provisions of Section 2.01(b), the extensions of credit under
the Revolving Loan Commitments shall be subject to the following limitations in
the amounts and during the periods indicated:

(i) The amount otherwise available for borrowing under
the Revolving Loan Commitments as of any time of determination (other
than to reimburse the Issuing Bank for the amount of any drawings
under any Letter of Credit honored by the Issuing Bank and not
theretofore reimbursed by the Borrower or to reimburse the Swing Line
Bank for the amount of any Swing Line Loans outstanding) shall be
reduced by the Letter of Credit Usage and the aggregate principal
amount of the Swing Line Loans then outstanding as of such time of
determination;

(ii) In no event shall the Total Utilization of Revolving
Loan Commitments exceed the Total Revolving Loan Commitments then in
effect; and

(iii) Anything contained in this Agreement to the contrary
notwithstanding, the Revolving Loans and the Revolving Loan
Commitments shall be subject to the limitation that for 30 consecutive
days during any twelve-month period the Revolving Loan Commitments
must exceed the Total Utilization of Revolving Loan Commitments by at
least $10,000,000.

Subject to Section 2.09(d), all Revolving Loans under this
Agreement shall be made by the Banks simultaneously and proportionately to
their respective Pro Rata Shares, it being understood that no Bank shall be
responsible for any default by any other Bank in that other Bank's obligation
to make Revolving Loans hereunder nor shall the Revolving Loan Commitment of
any Bank be increased or decreased as a result of the default by any other Bank
in that other Bank's obligation to make Revolving Loans hereunder. Amounts
borrowed by the Borrower under this Section 2.01(a) may be repaid and, through
but excluding the Termination Date, reborrowed.

(b) NOTICE OF REVOLVER BORROWING. Subject to Section
2.01(a), whenever the Borrower desires to borrow Revolving Loans under this
Section 2.01, it shall deliver to the Agent at its Notice Office a Notice of
Revolver Borrowing no later than 12:00 Noon (New York time) one Business Day in
advance of the proposed Funding Date (in the case of a requested Base Rate
Loan) and three Business Days in advance of the proposed Funding Date (in the

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<PAGE> 35

case of a requested Eurodollar Rate Loan). The Notice of Revolver Borrowing
shall specify (a) the proposed Funding Date (which shall be a Business Day),
(b) the amount of the proposed borrowing and that the proposed borrowing shall
be a Revolving Loan, (c) in the case of any Revolving Loans requested to be
made on or within three days after the Effective Date, that such Revolving
Loans shall initially be Base Rate Loans, (d) in the case of Revolving Loans
requested to be made more than three days after the Effective Date, whether
such Revolving Loans are initially to consist of Base Rate Loans or Eurodollar
Rate Loans or a combination thereof, (e) if such Revolving Loans, or any
portion thereof, are initially to be Eurodollar Rate Loans, the amounts thereof
and the initial Interest Periods therefor and (f) that the Total Utilization of
Revolving Loan Commitments (after giving effect to the Revolving Loans then
requested) will not exceed the Total Revolving Loan Commitments then in effect.
Revolving Loans shall be made in an aggregate minimum amount of $1,000,000 and
integral multiples of $100,000 in excess of that amount. Revolving Loans may
be continued as or converted into Base Rate Loans and Eurodollar Rate Loans in
the manner provided in Section 2.06(d); provided that unless the Agent
otherwise consents in writing, the Revolving Loans made during the period from
and including the Effective Date until the date three Business Days after the
Effective Date may not be converted until three Business Days after the
Effective Date. In lieu of delivering the above-described Notice of Revolver
Borrowing, the Borrower may give the Agent telephonic notice by the required
time of any proposed borrowing of Revolving Loans under this Section 2.01;
provided that such notice shall be promptly confirmed in writing by delivery of
a Notice of Revolver Borrowing to the Agent on or prior to the Funding Date of
the requested Revolving Loans.

Neither the Agent nor any Bank shall incur any liability to
the Borrower in acting upon any telephonic notice referred to above that the
Agent believes in good faith to have been given by a duly authorized officer or
other person authorized to borrow on behalf of the Borrower or for otherwise
acting in good faith under this Section 2.01 and upon funding of Revolving
Loans by the Banks in accordance with this Agreement pursuant to any such
telephonic notice, the Borrower shall have effected Revolving Loans hereunder.

Except as provided in Section 2.09(d), a Notice of Revolver
Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu thereof)
shall be irrevocable on and after the related Interest Rate Determination Date,
and the Borrower shall be bound to make a borrowing in accordance therewith.

2.02 THE SWING LINE LOANS.

(a) The Swing Line Bank hereby agrees, subject to the
limitations set forth below with respect to the maximum amount of Swing Line
Loans permitted to be outstanding from time to time and subject to the other
terms and conditions hereof, to make a portion of the Revolving Loan
Commitments

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<PAGE> 36

available to the Borrower from time to time during the period from the Business
Day immediately following the Effective Date to but excluding the second day
prior to the Termination Date by making Swing Line Loans to the Borrower in an
aggregate amount not exceeding the amount of the Swing Line Loan Commitment (as
defined below) to be used for the purposes identified in Section 2.07(a),
notwithstanding the fact that such Swing Line Loans, when aggregated with the
Swing Line Bank's outstanding Revolving Loans may exceed its Revolving Loan
Commitment. The Swing Line Bank's commitment to make Swing Line Loans to the
Borrower pursuant to this Section 2.02(a) is herein called its "SWING LINE LOAN
COMMITMENT," and the original amount of the Swing Line Loan Commitment is
$5,000,000 and may not be increased without the consent of the Swing Line Bank
and the Required Banks. Amounts borrowed under this Section 2.02(a) may be
repaid and reborrowed to but excluding the second day prior to the Termination
Date on which second day all Swing Line Loans and all other amounts owed
hereunder with respect to the Swing Line Loans shall be paid in full by the
Borrower.

Anything contained in this Agreement to the contrary
notwithstanding, the Swing Line Loans and the Swing Line Loan Commitment shall
be subject to the following limitations in the amounts and during the periods
indicated:

(i) in no event shall the Total Utilization of Revolving
Loan Commitments exceed the Total Revolving Loan Commitments then in
effect;

(ii) any reduction of the Revolving Loan Commitments made
pursuant to Section 4.02 that reduces the aggregate Revolving Loan
Commitments to an amount less than the then current amount of the
Swing Line Loan Commitment shall result in an automatic corresponding
reduction of the Swing Line Loan Commitment to the amount of the
Revolving Loan Commitments, as so reduced, without any further action
on the part of the Swing Line Bank; and

(iii) Anything contained in this Agreement to the contrary
notwithstanding, the Swing Line Loans and the Swing Line Loan
Commitment shall be subject to the limitation that for 30 consecutive
days during any twelve-month period the Revolving Loan Commitments
must exceed the Total Utilization of Revolving Loan Commitments by at
least $10,000,000.

(b) Whenever the Borrower desires that the Swing Line
Bank make a Swing Line Loan under Section 2.02(a), it shall deliver to the
Swing Line Bank a Notice of Swing Line Borrowing no later than 12:00 Noon (New
York City time) on the proposed Funding Date (which shall be a Business Day).
The Notice

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<PAGE> 37

of Swing Line Borrowing shall specify (i) the proposed Funding Date, (ii) the
amount of the Swing Line Loan requested (which shall be in the amount of
$100,000 and integral multiples of $10,000 in excess thereof) and (iii) that
the Total Utilization of Revolving Loan Commitments (after giving effect to the
proposed borrowing) does not exceed the Total Revolving Loan Commitments then
in effect. In lieu of delivering the above-described Notice of Swing Line
Borrowing, the Borrower may give the Agent telephonic notice by the required
time of any proposed borrowing of Swing Line Loans under this Section 2.02;
provided that such notice shall be promptly confirmed in writing by delivery of
a Notice of Swing Line Borrowing to the Agent on or prior to the Funding Date
of the requested Loans, which Notice of Swing Line Borrowing may be given by
facsimile.

(c) With respect to any Swing Line Loans that have not
been voluntarily prepaid by the Borrower pursuant to Section 4.02, the Swing
Line Bank may at any time (without regard to whether an Event of Default has
occurred and is continuing) in its sole and absolute discretion, deliver to
each Bank (with a copy to the Borrower), no later than 12:00 Noon (New York
City time) at least one Business Day in advance of the proposed Funding Date, a
notice (which shall be deemed to be a Notice of Revolver Borrowing given by the
Borrower) requesting Banks to make Revolving Loans that are Base Rate Loans on
such Funding Date in an aggregate amount equal to the amount of such Swing Line
Loans (the "REFUNDED SWING LINE LOANS") outstanding on the date such notice is
given that the Swing Line Bank requests the Banks to prepay. Each Bank (other
than the Swing Line Bank) shall make the amount of its Revolving Loan available
to the Agent by depositing the amount thereof in same day funds at the Agent's
Payment Office on the next Business Day. Anything contained in this Agreement
to the contrary notwithstanding, (i) the proceeds of such Revolving Loans made
by the Banks other than the Swing Line Bank shall be delivered immediately to
the Swing Line Bank (and not to the Borrower) and applied to repay a
corresponding portion of the Refunded Swing Line Loans and (ii) on the day such
Revolving Loans are made, the Swing Line Bank's Pro Rata Share of the Refunded
Swing Line Loans shall be deemed to be paid with the proceeds of a Revolving
Loan made by the Swing Line Bank and such portion of the Swing Line Loans
deemed to be so paid shall no longer be outstanding as Swing Line Loans and
shall no longer be due under the Swing Line Note of the Swing Line Bank but
shall be outstanding as Revolving Loans and shall be due under the Revolving
Note of the Swing Line Bank in its capacity as a Bank. If any portion of any
such amount paid (or deemed to be paid) to the Swing Line Bank should be
recovered by or on behalf of the Borrower from the Swing Line Bank in
bankruptcy, by assignment for the benefit of creditors or otherwise, the loss
of the amount so recovered shall be shared ratably among all the Banks in the
manner contemplated by Section 11.07.

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<PAGE> 38

If, as a result of any bankruptcy or similar proceeding with
respect to the Borrower, Revolving Loans are not made pursuant to this Section
2.02(c) in an amount sufficient to repay any amounts owed to the Swing Line
Bank in respect of any outstanding Swing Line Loans or if the Swing Line Bank
shall so request each Bank for any reason, the Swing Line Bank shall be deemed
to have sold without recourse or representation or warranty, and each Bank
shall be deemed to have purchased and hereby agrees to purchase, a
participation in such outstanding Swing Line Loans in an amount equal to its
Pro Rata Share of the unpaid amount thereof together with accrued interest
thereon. Upon one Business Day's notice from the Swing Line Bank, each Bank
(other than the Swing Line Bank) shall deliver to the Swing Line Bank an amount
equal to its respective participation in same day funds at the Agent's Payment
Office. In the event any such Bank fails to make available to the Swing Line
Bank the amount of such Bank's participation as provided in this paragraph, the
Swing Line Bank shall be entitled to recover such amount on demand from such
Bank together with interest thereon at the Base Lending Rate in effect from
time to time.

Anything contained herein to the contrary notwithstanding, the
obligation of each Bank (other than the Swing Line Bank) to make Revolving
Loans for the purpose of repaying any Refunded Swing Line Loans pursuant to the
second preceding paragraph and each such Bank's obligation to purchase a
participation in any unpaid Swing Line Loans pursuant to the immediately
preceding paragraph shall be absolute and unconditional and shall not be
affected by any circumstance, including without limitation (a) any set-off,
counterclaim, recoupment, defense or other right that such Bank may have
against the Swing Line Bank, the Borrower or any other Person for any reason
whatsoever; (b) the occurrence or continuance of an Event of Default; (c) any
adverse change in the business, operations, properties, assets, condition
(financial or otherwise), or prospects of the Borrower or any of its
Subsidiaries; (d) any breach of this Agreement by any party hereto; or (e) any
other circumstance, happening or event whatsoever, whether or not similar to
any of the foregoing; provided, however, that no Bank shall have any obligation
to make a Revolving Loan for the purpose of repaying, or to purchase any
participation in, any Swing Line Loan to the extent such Swing Line Loan
increased the Total Utilization of Revolving Loan Commitments (after giving
effect to the repayment of any Loans with the proceeds of such Swing Line Loan)
and was made even though the Swing Line Bank had actual knowledge that the
conditions to making such Swing Line Loan were not satisfied.

2.03 THE TERM LOANS.

(a) THE TERM LOANS. Subject to the terms and conditions
of this Agreement and in reliance upon the representations and warranties of
the Borrower set forth herein, each Bank severally agrees to lend to the
Borrower on the Effective Date an amount not exceeding its Pro Rata Share of
the Term

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<PAGE> 39

Loan Commitments to be used for the purposes identified in Section 2.08. The
amount of each Bank's Term Loan Commitment is set forth opposite its name on
SCHEDULE 1.01(A) annexed hereto and the aggregate amount of the Term Loan
Commitments is $100,000,000. Each Bank's Term Loan Commitment shall expire
immediately and without further action on the Effective Date if at least
$50,000,000 of Term Loans are not made on that date.

On the Effective Date, the Borrower may borrow either
$50,000,000 or $100,000,000 of Term Loans. In the event the Borrower borrows
only $50,000,000 of Term Loans on the Effective Date, the Borrower may borrow
the remaining $50,000,000 of Term Loans on a delayed draw basis (the "Delayed
Draw Term Loans"); provided that the entire amount, if any, remaining under the
Term Loan Commitments after the Effective Date must be borrowed by the
Borrower, if at all, in a single borrowing on or before December 31, 1996. In
the event the Borrower fails to borrow the Delayed Draw Term Loans on or before
December 31, 1996, the remaining Term Loan Commitments will terminate on that
date. Funds borrowed under this Section 2.03 and subsequently repaid or
prepaid may not be reborrowed.

(b) NOTICE OF TERM LOAN BORROWING. Whenever the Borrower
desires that Banks make Term Loans it shall deliver to Agent a Notice of Term
Borrowing no later than 12:00 Noon (New York City time) at least three Business
Days in advance of the proposed Funding Date (in the case of a Eurodollar Rate
Loan) or at least one Business Day in advance of the proposed Funding Date (in
the case of a Base Rate Loan). The Notice of Term Borrowing shall specify (i)
the proposed Funding Date (which shall be a Business Day), (ii) the amount
requested, (ii) whether such Loans shall be Base Rate Loans or Eurodollar Rate
Loans, and (iii) in the case of any Loans requested to be made as Eurodollar
Rate Loans, the initial Interest Period requested therefor. Term Loans may be
continued as or converted into Base Rate Loans and Eurodollar Rate Loans in the
manner provided in Section 2.06(d). In lieu of delivering the above-described
Notice of Borrowing, the Borrower may give Agent telephonic notice by the
required time of any proposed borrowing under Section 2.03(a); provided that
such notice shall be promptly confirmed in writing by delivery of a Notice of
Borrowing to Agent on or before the applicable Funding Date.

Neither Agent nor any Bank shall incur any liability to the
Borrower in acting upon any telephonic notice referred to above that Agent
believes in good faith to have been given by a duly authorized officer or other
person authorized to borrow on behalf of the Borrower or for otherwise acting
in good faith under this Section 2.03(b), and upon funding of Loans by Banks in
accordance with this Agreement pursuant to any such telephonic notice the
Borrower shall have effected Loans hereunder.

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The Borrower shall notify Agent prior to the funding of any
Loans in the event that any of the matters to which the Borrower is required to
certify in the applicable Notice of Borrowing is no longer true and correct as
of the applicable Funding Date, and the acceptance by the Borrower of the
proceeds of any Loans shall constitute a re- certification by the Borrower, as
of the applicable Funding Date, as to the matters to which the Borrower is
required to certify in the applicable Notice of Borrowing.

2.04 DISBURSEMENT OF FUNDS. Promptly after receipt of a
Notice of Revolver Borrowing or a Notice of Term Borrowing (or telephonic
notice thereof) pursuant to Section 2.01(b) or 2.03(b), but no later than 4:00
p.m. (New York time) on the date of such receipt, the Agent shall notify each
Bank of the proposed borrowing. Each Bank shall make the amount of its
applicable Loan available to the Agent, in same day funds, at its Payment
Office not later than 12:00 Noon (New York time) on the Funding Date. Upon
satisfaction or waiver of the conditions precedent specified in Section 5, as
applicable, the Agent shall make the proceeds of such Loans available to the
Borrower on such Funding Date by causing an amount of same day funds equal to
the proceeds of all such Loans received by the Agent to be credited to the
account of the Borrower at such office of the Agent.

Unless the Agent shall have been notified by any Bank in
writing prior to any Funding Date in respect of any Loans that such Bank does
not intend to make available to the Agent such Bank's applicable Loan on such
Funding Date (which such notice, if so received by the Agent, promptly shall be
communicated to the Borrower), the Agent may assume that such Bank has made
such amount available to the Agent on such Funding Date and the Agent in its
sole discretion may, but shall not be obligated to, make available to the
Borrower a corresponding amount on such Funding Date. If such corresponding
amount is not in fact made available to the Agent by such Bank, the Agent shall
be entitled to recover such corresponding amount on demand from such Bank
together with interest thereon, for each day from such Funding Date until the
date such amount is paid to the Agent, at the customary rate set by the Agent
for the correction of errors among banks for three Business Days and thereafter
at the Base Lending Rate. If such Bank does not pay such corresponding amount
forthwith upon the Agent's demand therefor, the Agent promptly shall notify the
Borrower, and the Borrower immediately shall pay such corresponding amount to
the Agent. Nothing in this Section 2.04 shall be deemed to relieve any Bank
from its obligation to fulfill its Commitments hereunder or to prejudice any
rights that the Borrower may have against any Bank as a result of any default
by such Bank hereunder.

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2.05 PREPAYMENT OF LOANS OUTSTANDING ON EFFECTIVE DATE; NOTES.

(a) On the Effective Date, the Existing Revolving Loans
shall be prepaid with the proceeds of the Term Loans together with a portion of
the proceeds of the initial Revolving Loans. Based on such assumed prepayment
of the Existing Revolving Loans, the Agent shall advise each Bank and each
Existing Bank as to the net amount of payments to be received by, or Loans to
be advanced by, such Bank or Existing Bank on the Effective Date.

(b) On and after the Effective Date, the Existing Notes
shall be of no further force and effect, and the Swing Line Bank and each
Existing Bank that is also a Bank hereunder shall deliver any Existing Notes
issued to such Bank, marked to show their cancellation, to the Borrower. The
Borrower shall execute and deliver (i) to each Bank (or to the Agent for that
Bank) on the Effective Date a Revolving Note substantially in the form of
EXHIBIT F-1 to evidence that Bank's Revolving Loans, in the principal amount of
that Bank's Revolving Loan Commitment and with other appropriate insertions,
(ii) to the Swing Line Bank on the Effective Date a Swing Line Note
substantially in the form of EXHIBIT F-2 annexed hereto to evidence the Swing
Line Bank's Swing Line Loans, in the principal amount of the Swing Line Loan
Commitment and with other appropriate insertions, and (iii ) to each Bank (or
to the Agent for that Bank) on the Effective Date a Term Note substantially in
the form of EXHIBIT F-3 to evidence that Bank's Term Loan, in the principal
amount of that Bank's Term Loan Commitment and with other appropriate
insertions. Each Bank will note on its internal records the amount of each
Loan made by it and each payment in respect thereof and, prior to any transfer
of any of its Notes, will endorse on the reverse side thereof the outstanding
principal amount of the Loans evidenced thereby. Failure to make any such
notation shall not affect the Borrower's obligations in respect of such Loans.

2.06 INTEREST ON THE LOANS.

(a) RATE OF INTEREST. Subject to the provisions of
Sections 2.06(e) and 2.09(g), each Loan shall bear interest on the unpaid
principal amount thereof from the date made through maturity (whether by
acceleration or otherwise) at a rate determined by reference to, (i) if a Term
Loan or Revolving Loan, the Base Lending Rate or the Adjusted Eurodollar Rate,
(ii) if a Swing Line Loan, the Base Lending Rate. The applicable basis for
determining the rate of interest for Revolving Loans shall be selected by the
Borrower initially at the time a Notice of Revolver Borrowing is given pursuant
to Section 2.01(b). The basis for determining the interest rate with respect
to any Revolving Loan may be changed from time to time pursuant to Section
2.06(d). If on any day a Revolving Loan is outstanding with respect to which
notice has not been delivered to the Agent in accordance with the terms of this
Agreement

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specifying the basis for determining the rate of interest, then for that day
that Loan shall bear interest determined by reference to the Base Lending Rate.

(i) The Term Loans and the Revolving Loans shall bear
interest through maturity as follows:

(A) if a Base Rate Loan, then at the sum of the
Base Lending Rate plus the Applicable Base Margin; and

(B) if a Eurodollar Rate Loan, then at the sum of
the Adjusted Eurodollar Rate plus the Applicable Eurodollar Margin;

(ii) The Swing Line Loans shall bear interest at a per
annum rate equal to the Base Lending Rate plus the Applicable Base Margin less
the Commitment Fee Percentage then in effect.

On the Effective Date, the Applicable Eurodollar Margin and
the Applicable Base Margin shall be determined in accordance with the Leverage
Ratio set forth in the Margin Rate Determination Certificate delivered by the
Borrower to the Agent pursuant to Section 5.01(f). Upon delivery of any
subsequent Margin Rate Determination Certificate by the Borrower to the Agent
pursuant to Section 7.01(j), the Applicable Eurodollar Margin and the
Applicable Base Margin shall automatically be adjusted in accordance with the
Leverage Ratio set forth therein, such adjustment to become effective on the
Business Day next succeeding the Business Day on which the Agent received such
Margin Rate Determination Certificate.

(b) INTEREST PERIODS. In connection with each Eurodollar
Rate Loan, the Borrower shall elect an interest period (each an "INTEREST
PERIOD") to be applicable to such Loan, which Interest Period shall be either a
one, two, three or six-month period; provided that:

(i) the initial Interest Period for any Loan shall
commence on the Funding Date of such Loan;

(ii) in the case of immediately successive Interest
Periods, each successive Interest Period shall commence on the day on
which the next preceding Interest Period expires;

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

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<PAGE> 43

(iv) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month;

(v) no Interest Period with respect to any Loan shall
extend beyond the Termination Date;

(vi) no Interest Period with respect to any portion of the
Term Loans shall extend beyond a date on which the Borrower is
required to make a scheduled payment of principal of the Term Loans
unless the sum of (a) the aggregate principal amount of Term Loans
that are Base Rate Loans plus (b) the aggregate principal amount
of Term Loans that are Eurodollar Rate Loans with Interest Periods
expiring on or before such date equals or exceeds the principal amount
required to be paid on the Term Loans on such date; and

(vii) there shall be no more than ten (10) Eurodollar Rate
Loans with different maturities outstanding at any time.

(i) interest on each Base Rate Loan shall be payable
quarterly in arrears on and to the last Business Day of each January,
April, July and October commencing on July 31, 1996, on any prepayment
of any such Loan pursuant to Section 4.02(c) (to the extent accrued on
the amount being prepaid) and at maturity.

(ii) interest on each Eurodollar Rate Loan shall be
payable in arrears on and to (but not including) each Interest Payment
Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity.

(iii) interest on each Swing Line Loan shall be payable
quarterly in arrears (a) on and to the last Business Day of each
January, April, July and October and (b) upon maturity (whether by
acceleration or otherwise).

(d) CONVERSION OR CONTINUATION. Subject to the
provisions of Section 2.09, the Borrower shall have the option (i) to convert
at any time all or any part of the outstanding Loans from Loans bearing
interest at a rate determined by reference to one basis to Loans bearing
interest at a rate determined by reference to an alternative basis, or (ii)
upon the expiration of any Interest Period applicable to a Eurodollar Rate
Loan, to continue all or any

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<PAGE> 44

portion of such Loan equal to $1,000,000 and integral multiples of $100,000 in
excess of that amount as a Eurodollar Rate Loan and the succeeding Interest
Period(s) of such continued Loan shall commence on the last day of the Interest
Period of the Loan to be continued; provided, however, Eurodollar Rate Loans
may only be converted into Base Rate Loans on the expiration date of an
Interest Period applicable thereto; provided further that no outstanding Loan
may be continued as, or be converted into, a Eurodollar Rate Loan when any
Default or Event of Default has occurred and is continuing; and provided
further that the Base Rate Loans made on the Effective Date may not be
converted to Eurodollar Rate Loans prior to three Business Days after the
Effective Date, unless the Agent otherwise consents in writing.

The Borrower shall deliver a Notice of Conversion/Continuation
to the Agent no later than 12:00 Noon (New York time) at least two Business
Days in advance of the proposed conversion/continuation date (in the case of a
conversion to a Base Rate Loan), and at least three Business Days in advance of
the proposed conversion/continuation date (in the case of a conversion to, or a
continuation of, a Eurodollar Rate Loan). A Notice of Conversion/ Continuation
shall certify (i) the proposed conversion/continuation date (which shall be a
Business Day), (ii) the amount of the Loan to be converted/continued, (iii) the
nature of the proposed conversion/continuation, (iv) in the case of a
conversion to, or a continuation of, a Eurodollar Rate Loan, the requested
Interest Period, and (v) that no Default or Event of Default has occurred and
is continuing. In lieu of delivering the above-described Notice of Conversion/
Continuation, the Borrower may give the Agent telephonic notice by the required
time of any proposed conversion/ continuation under this Section 2.06(d);
provided that such notice shall be promptly confirmed in writing by delivery of
a Notice of Conversion/Continuation to the Agent on or before the proposed
conversion/continuation date.

Neither the Agent nor any Bank shall incur any liability to
the Borrower in acting upon any telephonic notice referred to above that the
Agent believes in good faith to have been given by a duly authorized officer or
other person authorized to act on behalf of the Borrower or for otherwise
acting in good faith under this Section 2.06(d) and upon
conversion/continuation by the Agent in accordance with this Agreement,
pursuant to any telephonic notice the Borrower shall have effected such
conversion or continuation, as the case may be, hereunder.

Except as provided in Section 2.09(d), a Notice of
Conversion/Continuation for conversion to, or continuation of, a Eurodollar
Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and
after the related Interest Rate Determination Date, and the Borrower shall be
bound to convert or continue in accordance therewith.

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<PAGE> 45

(e) POST MATURITY INTEREST. Upon the occurrence and
during the continuation of any Event of Default, the outstanding principal
amount of all Loans and, to the extent permitted by applicable law, any
interest payments thereon not paid when due and any fees and other amounts then
due and payable hereunder, shall thereafter bear interest (including
post-petition interest in any proceeding under the Bankruptcy Code or other
applicable bankruptcy laws) payable upon demand at a rate that is 2.00% per
annum in excess of the interest rate otherwise payable under this Agreement
with respect to the applicable Loans (or, in the case of any such fees and
other amounts, at a rate that is 2.00% per annum in excess of the interest rate
otherwise payable under this Agreement for Base Rate Loans; provided that, in
the case of Eurodollar Rate Loans, upon the expiration of the Interest Period
in effect at the time any such increase in interest rate is effective, such
Eurodollar Rate Loans shall thereupon become Base Rate Loans and thereafter
bear interest payable upon demand at a rate that is 2.00% per annum in excess
of the interest rate otherwise payable under this Agreement for Base Rate
Loans. The payment or acceptance of the increased rate provided by this
Section 2.06(e) shall not constitute a waiver of any Event of Default or an
amendment to this Agreement or otherwise prejudice or limit any rights or
remedies of the Agent or any Bank.

(f) COMPUTATION OF INTEREST. Interest on the Loans shall
be computed on the basis of a 360-day year and the actual number of days
elapsed in the period during which it accrues. In computing interest on any
Revolving Loan (or any de facto loan from the Swing Line Bank to a Bank under
Section 2.02(c)), the date of the making of such Loan or the first day of an
Interest Period applicable to such Loan or, with respect to a Base Rate Loan
being converted from a Eurodollar Rate Loan, the date of conversion of such
Eurodollar Rate Loan to such Base Rate Loan, shall be included; and the date of
payment of such Loan or the expiration date of an Interest Period applicable to
such Loan, or with respect to a Base Rate Loan being converted to a Eurodollar
Rate Loan, the date of conversion of such Base Rate Loan to such Eurodollar
Rate Loan, shall be excluded; provided that if a Loan is repaid on the same day
on which it is made, one day's interest shall be paid on that Loan.

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<PAGE> 46

2.07 INCREASED COSTS; TAXES.

(a) INCREASED COSTS. If any Bank shall determine that
the adoption of any applicable law, rule or regulation concerning capital
adequacy or any applicable change therein, or any change in interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by such Bank (or its Lending Office) with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, in each case occurring after the
Effective Date, has or will have the effect of reducing the rate of return on
such Bank's capital as a consequence of its obligation to make a Loan hereunder
to a level below that which such Bank could have achieved but for such
adoption, change or compliance (taking into consideration such Bank's policies
with respect to capital adequacy) by any amount deemed by such Bank to be
material, then from time to time, within fifteen (15) days after demand by such
Bank, the Borrower shall pay to such Bank such additional amounts as shall
compensate such Bank for such reduction. Each Bank shall promptly notify the
Borrower of any of the matters set forth in the preceding sentence. A
certificate as to additional amounts owed any such Bank, showing in reasonable
detail the basis for the calculation thereof, submitted in good faith to the
Borrower and the Agent by such Bank shall be presumed to be correct.

(b) WITHHOLDING OF TAXES.

(i) Payments to Be Free and Clear. All sums payable by
the Borrower under this Agreement and the other Credit Documents shall
be paid free and clear of and (except to the extent required by law)
without any deduction or withholding on account of any Tax (other than
franchise taxes and Taxes on the overall net income of any Bank)
imposed, levied, collected, withheld or assessed by or within the
United States of America or any political subdivision in or of the
United States of America or any other jurisdiction from or to which a
payment is made by or on behalf of the Borrower or by any federation
or organization of which the United States of America or any such
jurisdiction is a member at the time of payment.

(ii) Grossing-up of Payments. If the Borrower or any
other Person is required by law to make any deduction or withholding
on account of any such Tax from any sum paid or payable by the
Borrower to the Agent or any Bank under any of the Credit Documents:

(A) the Borrower shall notify the Agent of any
such requirement or any change in any such requirement as soon
as the Borrower becomes aware of it;

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<PAGE> 47

(B) the Borrower shall pay any such Tax before
the date on which penalties attach thereto, such payment to be
made (if the liability to pay is imposed on the Borrower) for
its own account or (if that liability is imposed on the Agent
or such Bank, as the case may be) on behalf of and in the name
of the Agent or such Bank;

(C) the sum payable by the Borrower in respect of
which the relevant deduction, withholding or payment is
required shall be increased to the extent necessary to ensure
that, after the making of that deduction, withholding or
payment, the Agent or such Bank, as the case may be, receives
on the due date a net sum equal to what it would have received
had no such deduction, withholding or payment been required or
made; and

(D) within 30 days after paying any sum from
which it is required by law to make any deduction or
withholding, and within 30 days after the due date of payment
of any Tax that it is required by clause (B) above to pay, the
Borrower shall deliver to the Agent evidence satisfactory to
the other affected parties of such deduction, withholding or
payment and of the remittance thereof to the relevant taxing
or other authority;

provided that no such additional amount shall be required to be paid
to any Bank under clause (C) above except to the extent that any
change, after the date hereof (in the case of each Bank listed on the
signature pages hereof) or after the date of the assignment under
Section 11.05 by which such Bank became a Bank (in the case of each
other Bank), in any such requirement for a deduction, withholding or
payment as is mentioned therein shall result in an increase in the
rate of such deduction, withholding or payment from that in effect at
the date of this Agreement or at the date of such assignment, as the
case may be, in respect of payments to such Bank.

(iii) Alternatives. Notwithstanding the provisions of Section
2.07(b)(ii), in lieu of paying a Bank such additional moneys as are
required by Section 2.07(b)(ii), the Borrower may exercise any one of
the following options:

(A) If the requirement to make a deduction or
withholding of a Tax referred to in Section 2.07(b)(ii)
relates only to Eurodollar Rate Loans then being requested by
the Borrower pursuant to a Notice of Revolver Borrowing or a
Notice of Conversion/Continuation, the Borrower may by giving
notice (by telephone promptly confirmed in writing) to the
Agent (who shall

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<PAGE> 48

promptly give similar notice to each other Bank) no later than
the date immediately prior to the date on which such
Eurodollar Rate Loans are to be made, withdraw that Notice of
Revolver Borrowing or Notice of Conversion/Continuation and
the Eurodollar Rate Loans then being requested shall be made
by the Banks as Base Rate Loans; or

(B) If the requirement to make a deduction or
withholding of a Tax referred to in Section 2.07(b)(ii)
relates only to Eurodollar Rate Loans outstanding at the time
the requirement is discovered, upon written notice to the
Agent and each Bank, the Borrower may terminate the
obligations of the Banks to make or maintain Loans as, and to
convert Loans into, Eurodollar Rate Loans and, in such event,
the Borrower shall at the end of the then current Interest
Period, convert all of the Eurodollar Rate Loans into Base
Rate Loans in the manner contemplated by Section 2.06(d) but
without satisfying the advance notice requirements therein in
which case the Borrower must take the actions referred to in
Section 2.07(b)(ii) until such conversion; or

(C) If the requirement to make a deduction or
withholding of a Tax referred to in Section 2.07(b)(ii)
relates to Loans other than Eurodollar Rate Loans, the
Borrower may notify each Bank to which such requirement
relates that the Borrower will not make the payments required
under Section 2.07(b)(ii)(C) with respect to such Loans at the
end of the 30 day period described below and each such Bank
will have 30 days in which to notify the Agent (which will
notify the Borrower) that it will continue as a Bank under
this Agreement without such payments or that it refuses so to
continue, and, if any such Bank refuses to continue, (i) the
Borrower shall pay to such Bank, on a date 15 days after
notice of such refusal is made, all interest and fees and
other amounts due and owing to such Bank including amounts due
under Section 2.07(b)(ii) through the end of such 30 day
period (and, to the extent such Bank is the Issuing Bank, any
Letters of Credit shall be returned to the Issuing Bank marked
"cancelled" or Cash shall be deposited with the Issuing Bank
in an amount equal to the maximum amount that may at any time
be drawn on such Letters of Credit) on such date and the
principal amount of all such Loans of such Bank or (ii)
another financial institution that is an Eligible Assignee,
shall purchase for cash such Loans of such Bank and become a
Bank for all purposes under this Agreement and assume all
obligations of such Bank pursuant to an Assignment and
Acceptance that shall have become effective pursuant to
Section 11.05.

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2.08 USE OF PROCEEDS.

(a) LOANS. The proceeds of the Term Loans borrowed on
the Effective Date, together with a portion of the proceeds of the initial
Revolving Loans, shall be applied by the Borrower to prepay all the Existing
Revolving Loans. The proceeds of any subsequent Revolving Loans and any Swing
Line Loans and the proceeds of any Delayed Draw Term Loans shall be applied by
the Borrower for the general corporate purposes of the Borrower and its
Subsidiaries, which may include, without limitation, (i) the reimbursement of
the Issuing Bank of any amounts drawn under any Letter of Credit as provided in
Section 2.10(c), (ii) the reimbursement of the Swing Line Bank of any Swing
Line Loans as provided in Section 2.02(c), (iii) the payment of amounts to be
expended by the Borrower in connection with any Acquisition and (iv) payment of
any fees and expenses associated with the Loans. The Borrower hereby
represents that the proceeds of the Existing Revolving Loans and the Existing
Swing Line Loans were used in compliance with Section 2.07(a) of the Existing
Credit Agreement.

(b) LETTERS OF CREDIT. The Letters of Credit shall be
used for the purpose of supporting (x) workers' compensation liabilities of the
Borrower or its Subsidiaries, (y) the obligations of the Borrower or its
Subsidiaries to third party insurers arising (1) by virtue of the laws of any
jurisdiction requiring third party insurers and (2) in lieu of payments in cash
of insurance obligations or (z) performance, payment, deposit or surety
obligations of the Borrower or its Subsidiaries, in any case if required by law
or governmental rule or regulation, by any landlord under any real estate
lease, or by custom and practice in the business of the Borrower and its
Subsidiaries.

(c) MARGIN REGULATIONS. No portion of the proceeds of
any borrowing under this Agreement shall be used by the Borrower to purchase or
carry any Margin Stock in any manner that might cause the borrowing or the
application of such proceeds to violate Regulation G, Regulation T, Regulation
U or Regulation X of the Board of Governors of the Federal Reserve System or
any other regulation of the Board or to violate the Securities Exchange Act of
1934, in each case as in effect on the date or dates of such borrowing and such
use of proceeds.

2.09 SPECIAL PROVISIONS GOVERNING EURODOLLAR RATE LOANS.

Notwithstanding any other provision of this Agreement, the
following provisions shall govern with respect to Eurodollar Rate Loans as to
the matters covered:

(a) DETERMINATION OF INTEREST RATE. As soon as
practicable after 10:00 A.M. (New York time) on each Interest Rate
Determination Date, the Agent

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<PAGE> 50

shall determine (which determination shall, absent manifest error, be final,
conclusive and binding upon all parties) the interest rate that shall apply to
the Eurodollar Rate Loans for which an interest rate is then being determined
for the applicable Interest Period and shall promptly give notice thereof (in
writing or by telephone confirmed in writing) to the Borrower and each Bank.

(b) SUBSTITUTED RATE OF BORROWING. If on any Interest
Rate Determination Date any Bank (including the Agent) shall have determined
(which determination shall be final and conclusive and binding upon all parties
but, with respect to the following clauses (i) and (ii)(B), shall be made only
after consultation with the Borrower and the Agent) that:

(i) by reason of any changes arising after the date of
this Agreement affecting the Eurodollar market or affecting the
position of that Bank in such market, adequate and fair means do not
exist for ascertaining the applicable interest rate by reference to
the Eurodollar Rate with respect to the Eurodollar Rate Loans as to
which an interest rate determination is then being made; or

(ii) by reason of (A) any change after the date hereof in
any applicable law or governmental rule, regulation or order (or any
interpretation thereof and including the introduction of any new law
or governmental rule, regulation or order) or (B) other circumstances
affecting that Bank or the Eurodollar market or the position of that
Bank in such market (such as for example, but not limited to, official
reserve requirements required by Regulation D of the Board of
Governors of the Federal Reserve System to the extent not given effect
in the Eurodollar Rate), the Eurodollar Rate shall not represent the
effective pricing to that Bank for Dollar deposits of comparable
amounts for the relevant period;

then, and in any such event, that Bank shall be an Affected Bank and it shall
promptly (and in any event as soon as possible after being notified of a
borrowing, conversion or continuation) give notice (by telephone promptly
confirmed in writing) to the Borrower and the Agent (which notice the Agent
shall promptly transmit to each other Bank) of such determination. Thereafter,
the Borrower shall pay to the Affected Bank, upon written demand therefor, such
additional amounts (in the form of an increased rate of, or a different method
of calculating, interest or otherwise as the Affected Bank in its sole
discretion shall reasonably determine) as shall be required to cause the
Affected Bank to receive interest with respect to its Eurodollar Rate Loans for
the Interest Period following that Interest Rate Determination Date at a rate
per annum equal to 1.00% per annum in excess of the effective pricing to the
Affected Bank for Dollar deposits to make or maintain its Eurodollar Rate
Loans. A certificate as to additional amounts owed the Affected Bank, showing
in reasonable detail the

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<PAGE> 51

basis for the calculation thereof, submitted in good faith to the Borrower and
the Agent by the Affected Bank shall be presumed to be correct.

(c) REQUIRED TERMINATION AND PREPAYMENT. If on any date
any Bank shall have reasonably determined (which determination shall be final
and conclusive and binding upon all parties) that the making or continuation of
its Eurodollar Rate Loans has become unlawful or impossible by reason of
compliance by that Bank in good faith with any law, governmental rule,
regulation or order (whether or not having the force of law and whether or not
failure to comply therewith would be unlawful), then, and in any such event,
that Bank shall be an Affected Bank and it shall promptly give notice (by
telephone promptly confirmed in writing) to the Borrower and the Agent (which
notice the Agent shall promptly transmit to each other Bank) of that
determination. Subject to the prior withdrawal of a Notice of Revolver
Borrowing or a Notice of Conversion/Continuation or prepayment of the
Eurodollar Rate Loans of the Affected Bank as contemplated by the following
Section 2.09(d), the obligation of the Affected Bank to make or maintain its
Eurodollar Rate Loans during any such period shall be terminated at the earlier
of the termination of the Interest Period then in effect or when required by
law and the Borrower shall no later than the termination of the Interest Period
in effect at the time any such determination pursuant to this Section 2.09(c)
is made or, earlier, when required by law, repay or prepay the Eurodollar Rate
Loans of the Affected Bank, together with all interest accrued thereon.

(d) OPTIONS OF THE BORROWER. In lieu of paying an
Affected Bank such additional moneys as are required by Section 2.09(b) or the
prepayment of an Affected Bank required by Section 2.09(c), the Borrower may
exercise any one of the following options:

(i) If the determination by an Affected Bank relates only
to Eurodollar Rate Loans then being requested by the Borrower pursuant
to a Notice of Revolver Borrowing or a Notice of
Conversion/Continuation, the Borrower may by giving notice (by
telephone promptly confirmed in writing) to the Agent (who shall
promptly give similar notice to each other Bank) no later than the
date immediately prior to the date on which such Eurodollar Rate Loans
are to be made, withdraw that Notice of Revolver Borrowing or Notice
of Conversion/ Continuation and the Eurodollar Rate Loans then being
requested shall be made by the Banks as Base Rate Loans; or

(ii) Upon written notice to the Agent and each Bank, the
Borrower may terminate the obligations of the Banks to make or
maintain Loans as, and to convert Loans into, Eurodollar Rate Loans
and in such event, the Borrower shall, prior to the time any payment
pursuant to Section 2.09(c) is required to be made or, if the
provisions of Section

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<PAGE> 52

2.09(b) are applicable, at the end of the then current Interest
Period, convert all of the Eurodollar Rate Loans into Base Rate Loans
in the manner contemplated by Section 2.06(d) but without satisfying
the advance notice requirements therein.

(e) COMPENSATION. The Borrower shall compensate each
Bank, upon written request by that Bank (which request shall set forth in
reasonable detail the basis for requesting such amounts), for all reasonable
losses, expenses and liabilities (including, without limitation, any loss
(including interest paid) sustained by that Bank in connection with the
re-employment of such funds), that such Bank may sustain: (i) if for any
reason (other than a default by that Bank) a borrowing of any Eurodollar Rate
Loan does not occur on a date specified therefor in a Notice of Revolver
Borrowing, a Notice of Conversion/Continuation or a telephonic request for
borrowing or conversion/continuation or a successive Interest Period does not
commence after notice therefor is given pursuant to Section 2.06(d), (ii) if
any prepayment of any of its Eurodollar Rate Loans occurs on a date that is not
the last day of an Interest Period applicable to that Loan, (iii) if any
prepayment of any of its Eurodollar Rate Loans is not made on any date
specified in a notice of prepayment given by the Borrower, or (iv) as a
consequence of any other default by the Borrower to repay its Eurodollar Rate
Loans when required by the terms of this Agreement.

(f) QUOTATION OF EURODOLLAR RATE. Anything herein to the
contrary notwithstanding, if on any Interest Rate Determination Date the Agent
is as a matter of general practice not quoting rates to first class banks in
the Eurodollar market for the offering of Dollars for deposit with maturities
comparable to the Interest Period and in amounts comparable to the Eurodollar
Rate Loans requested, the Agent shall contact the other Banks, if any, for
their quotes for rates to first class banks in the Eurodollar market with
respect to the requested Eurodollar Rate Loan, such other Banks to be contacted
in decreasing order of their respective Pro Rata Shares (and in alphabetical
order in the case of two or more Banks having the same Pro Rata Shares). In
the event that none of the Banks are making Eurodollar quotes in the applicable
amount and with the applicable maturity, the Agent shall give the Borrower and
each Bank prompt notice thereof and the Loans requested shall be made as Base
Rate Loans.

(g) EURODOLLAR RATE TAXES. The Borrower agrees that:

(i) Promptly upon notice from any Bank to the Borrower,
the Borrower will pay, prior to the date on which penalties attach
thereto, all present and future income, stamp and other taxes, levies,
or costs and charges whatsoever imposed, assessed, levied or collected
on or in respect of a Loan solely as a result of the interest rate
being determined by reference to the Eurodollar Rate and/or the
provisions of this

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Agreement relating to the Eurodollar Rate and/or the recording,
registration, notarization or other formalization of any thereof
and/or any payments of principal, interest or other amounts made on or
in respect of a Loan when the interest rate is determined by reference
to the Eurodollar Rate (all such taxes, levies, costs and charges
being herein collectively called "EURODOLLAR RATE TAXES");
provided, however, that Eurodollar Rate Taxes shall not include any
other Taxes. The Borrower shall also pay such additional amounts
equal to increases in Taxes payable by that Bank which increases are
attributable to payments made by the Borrower described in the
immediately preceding sentence or this sentence. A certificate as to
additional amounts owed by the Borrower pursuant to this clause (i),
showing in reasonable detail the basis for the calculation thereof,
submitted in good faith to the Borrower and the Agent by any Bank
shall be presumed to be correct. Promptly after the date on which
payment of any such Eurodollar Rate Tax is due pursuant to applicable
law, the Borrower will, at the request of that Bank, furnish to that
Bank evidence, in form and substance satisfactory to that Bank, that
the Borrower has met its obligations under this Section 2.09(g).

(ii) The Borrower will indemnify each Bank against, and
reimburse each Bank on demand for, any Eurodollar Rate Taxes, as
determined by that Bank in its good faith discretion; provided that
such Bank shall provide the Borrower with appropriate receipts
for any payments or reimbursements made by the Borrower pursuant to
this clause (ii) of Section 2.09(g).

(iii) Each Bank organized under the laws of a jurisdiction
outside of the United States (referred to in this Section 2.09(g) as a
"FOREIGN BANK") as to which payments to be made hereunder or under the
Notes are exempt from United States withholding tax or are subject to
such tax at a reduced rate under an applicable statute or tax treaty
shall provide to the Borrower and the Agent (x) a properly completed
and executed Internal Revenue Service Form 4224 or Form 1001 or other
applicable form, certificate or document prescribed by the Internal
Revenue Service of the United States certifying as to such Foreign
Bank's entitlement to such exemption or reduced rate with respect to
payments to be made to such Foreign Bank hereunder and under the Notes
(referred to in this Section 2.09(g) as a "CERTIFICATE OF EXEMPTION")
or (y) a letter from such Foreign Bank stating that it is not entitled
to any such exemption or reduced rate (referred to in this Section
2.09(g) as a "LETTER OF NON-EXEMPTION"). Each Foreign Bank shall
provide such a Certificate of Exemption or a Letter of Non-Exemption
before the Effective Date. Each Foreign Bank that becomes a Bank
pursuant to an Assignment and Acceptance that has become effective
pursuant to Section 11.05 shall provide a Certificate of Exemption or
a Letter of Non-Exemption on the

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date such Foreign Bank becomes a Bank. Until the Borrower and the
Agent have received from such Foreign Bank a Certificate of Exemption,
the accuracy of which shall be reasonably satisfactory to the
Borrower, the Borrower shall, subject to its obligations under
Sections 2.09(g)(i), 2.09(g)(ii) and 2.09(i), be entitled to withhold
taxes from such payments to such Foreign Bank at the statutory rate
applicable to amounts to be paid hereunder to such Foreign Bank.

(iv) Notwithstanding anything to the contrary contained in
this Section 2.09(g), the Borrower shall not be required to pay any
amounts pursuant to this Section 2.09(g) to any Foreign Bank unless
such Foreign Bank has provided to the Borrower, within 60 days after
the receipt by such Foreign Bank of a written request therefor, either
a Certificate of Exemption or a Letter of Non-Exemption.

(h) BOOKING OF EURODOLLAR RATE LOANS. Any Bank may make,
carry or transfer Eurodollar Rate Loans at, to, or for the account of, any of
its branch offices or the office of an Affiliate of that Bank.

(i) INCREASED COSTS. Except as provided in Section
2.09(b) with respect to certain determinations on Interest Rate Determination
Dates, if, after the date hereof by reason of, (x) the introduction of or any
change (including, without limitation, any change by way of imposition or
increase of reserve requirements) in, or in the interpretation of, any law or
regulation, or (y) the compliance with any guideline or request from any
central bank or other governmental authority or quasi-governmental authority
exercising control over banks or financial institutions generally (whether or
not having the force of law):

(i) any Bank (or its applicable lending office) shall be
subject to any tax, duty or other charge with respect to its
Eurodollar Rate Loans or its obligation to make Eurodollar Rate Loans,
or shall change the basis of taxation of payments to any Bank of the
principal of or interest on its Eurodollar Rate Loans or its
obligation to make Eurodollar Rate Loans (except for changes in the
rate of tax on the overall net income of such Bank or its applicable
lending office imposed by the jurisdiction (whether local, state,
federal or foreign) in which such Bank's principal executive office or
applicable lending office is located); or

(ii) any reserve (including, without limitation, any
imposed by the Board of Governors of the Federal Reserve System),
special deposit or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any Bank's
applicable lending office shall be imposed or deemed applicable or any
other condition affecting its Eurodollar Rate Loans or its obligation
to make Eurodollar Rate Loans

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shall be imposed on any Bank or its applicable lending office or the
interbank Eurodollar market,

and as a result thereof there shall be any increase in the cost to such Bank of
agreeing to make or making, funding or maintaining Eurodollar Rate Loans, or
there shall be a reduction in the amount received or receivable by that Bank or
its applicable lending office, then the Borrower shall from time to time, upon
written notice from and demand by that Bank (with a copy of such notice and
demand to the Agent), pay to the Agent for the account of that Bank, within
five Business Days after receipt of such notice and demand, additional amounts
sufficient to indemnify that Bank against such increased cost or reduced
amount. A certificate as to the amount of such increased cost or reduced
amount, submitted to the Borrower and the Agent by that Bank, shall be presumed
to be correct. Any payments to be made by the Borrower under Sections 2.09(b),
2.09(g) or 2.09(i) are to be without duplication.

(j) ASSUMPTIONS CONCERNING FUNDING OF EURODOLLAR RATE
LOANS. Calculation of all amounts payable to a Bank under this Section 2.09
shall be made as though that Bank had actually funded its relevant Eurodollar
Rate Loan through the purchase of a Eurodollar deposit bearing interest at the
Eurodollar Rate in an amount equal to the amount of that Eurodollar Rate Loan
and having a maturity comparable to the relevant Interest Period and through
the transfer of such Eurodollar deposit from an offshore office of that Bank to
a domestic office of that Bank in the United States of America; provided,
however, that each Bank may fund each of its Eurodollar Rate Loans in any
manner it sees fit and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this Section 2.09.

(k) EURODOLLAR RATE LOANS AFTER DEFAULT. Unless the
Agent and the Required Banks shall otherwise agree, after the occurrence of
and during the continuance of a Default or an Event of Default, the Borrower
may not elect to have a Loan be made or maintained as, or converted to, a
Eurodollar Rate Loan after the expiration of any Interest Period then in effect
for that Loan.

(l) AFFECTED BANKS' OBLIGATION TO MITIGATE. Each Bank
agrees that, as promptly as practicable after it becomes aware of the
occurrence of an event or the existence of a condition that would cause it to
be an Affected Bank under Section 2.09(b) or 2.09(c) or that would entitle such
Bank to receive payments under Section 2.09(g) or 2.09(i), it will, to the
extent not inconsistent with such Bank's internal policies, use reasonable
efforts to make, fund or maintain the affected Eurodollar Rate Loans of such
Bank through another lending office of such Bank if as a result thereof the
additional moneys which would otherwise be required to be paid to such Bank
pursuant to Section 2.09(b), 2.09(g) or 2.09(i) would be materially reduced or
the illegality or other adverse circumstances which would otherwise require
prepayment of such

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Loans pursuant to Section 2.09(c) would cease to exist, and if, as determined
by such Bank in its sole discretion, the making, funding or maintaining of such
Loans through such other lending office would not otherwise materially
adversely affect such Loans or such Bank. The Borrower hereby agrees to pay
all reasonable expenses incurred by any Bank in utilizing another lending
office of such Bank pursuant to this Section 2.09(l).

2.10 LETTERS OF CREDIT.

(a) LETTERS OF CREDIT. In addition to the Borrower
requesting that the Banks make Revolving Loans pursuant to Section 2.01(a), the
Borrower may request, in accordance with the provisions of this Section 2.10,
on and after the Effective Date to and excluding the Termination Date, that the
Issuing Bank issue Letters of Credit for the account of the Borrower; provided
that the Borrower shall not request that the Issuing Bank issue (and the
Issuing Bank shall not issue):

(i) any Letter of Credit if, after giving effect to such
issuance, the Total Utilization of Revolving Loan Commitments would
exceed the Total Revolving Loan Commitments then in effect;

(ii) any Letter of Credit if, after giving effect to such
issuance, the Letter of Credit Usage would exceed $5,000,000; or

(iii) any Letter of Credit if, after giving effect to the
issuance, the Total Utilization of Revolving Loan Commitments would
violate the limitation that for 30 consecutive days during any
twelve-month period the Revolving Loan Commitments must exceed the
Total Utilization of Revolving Loan Commitments by at least
$10,000,000.

In no event shall the Issuing Bank issue any Letter of Credit having an
expiration date later than the Termination Date or the date that is one year
after the issuance thereof except as expressly provided herein; provided,
however, that the Issuing Bank may agree to renew any Letter of Credit
automatically annually for a period not to exceed one year if the Issuing Bank
does not cancel such renewal. If the Issuing Bank, in its sole discretion,
determines to issue a Letter of Credit expiring after the scheduled Termination
Date, the Borrower shall be required on the third Business Day immediately
preceding the Termination Date to deposit with the Issuing Bank cash collateral
for the repayment of any drawings under the Letter of Credit, such deposit to
be in an amount equal to the maximum amount that may be drawn under such Letter
of Credit and to be upon such terms and conditions as the Issuing Bank may
require. The issuance of any Letter of Credit in accordance with the
provisions of this Section 2.10 shall require the satisfaction of each
condition set forth in Section 5.02; provided, however, that the obligation of
the Issuing Bank to issue any Letter of Credit is

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<PAGE> 57

subject to the condition that (i) the Issuing Bank believed in good faith that
all conditions under this Section 2.10(a) and Section 5.02 to the issuing of
such Letter of Credit were satisfied at the time such Letter of Credit was
issued or (ii) the satisfaction of any such condition not satisfied had been
waived by the Required Banks prior to or at the time such Letter of Credit was
issued; provided further that the Issuing Bank shall be entitled to rely, and
shall be fully protected in relying, upon any communication, instrument or
document believed by it to be genuine and correct and to have been signed or
sent by the proper person or persons, including, without limitation, an
Officer's Certificate from the Borrower as to the satisfaction of the
conditions under Section 5.02 in determining the satisfaction of any conditions
to the issuance of any Letter of Credit or the Total Utilization of Revolving
Loan Commitments or Letter of Credit Usage then in effect.

The Borrower and the Banks agree that, as of the Effective
Date, any "Letters of Credit", as defined in and issued pursuant to the
Existing Credit Agreement, outstanding as of the Effective Date (including
those letters of credit listed on SCHEDULE 2.10(A) annexed hereto) shall for
all purposes of this Agreement be deemed to have been issued under and pursuant
to the terms of this Agreement.

Immediately upon the issuance of each Letter of Credit, each
Bank shall be deemed to, and hereby agrees to, have irrevocably purchased from
the Issuing Bank a participation in such Letter of Credit and drawings
thereunder in an amount equal to such Bank's Pro Rata Share of the maximum
amount that is or at any time may become available to be drawn thereunder. If
the Issuing Bank issues a Letter of Credit having an expiration date after the
scheduled Termination Date, such participations shall expire without further
action by any Bank on the scheduled Termination Date.

Each Letter of Credit supporting the payment of Indebtedness
may provide that the Issuing Bank may (but shall not be required to) pay the
beneficiary thereof upon the occurrence of a Default or an Event of Default and
the acceleration of the maturity of the Loans or, if payment is not then due to
the beneficiary, provide for the deposit of funds in an account to secure
payment to the beneficiary and that any funds so deposited shall be paid to the
beneficiary of the Letter of Credit if conditions to such payment are satisfied
or returned to the Issuing Bank for distribution to the Banks (or, if all
Obligations shall have been indefeasibly paid in full, to the Borrower) if no
payment to the beneficiary has been made and the final date available for
drawings under the Letter of Credit has passed. Each payment or deposit of
funds by the Issuing Bank as provided in this paragraph shall be treated for
all purposes of this Agreement as a drawing duly honored by the Issuing Bank
under the related Letter of Credit.

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(b) NOTICE OF ISSUANCE. Whenever the Borrower desires to
cause the Issuing Bank to issue a Letter of Credit, it shall deliver to the
Issuing Bank and the Agent a Notice of Issuance of Letter of Credit in the form
of EXHIBIT E no later than 1:00 P.M. (New York time) at least four Business
Days in advance of the proposed date of issuance or such shorter time as may be
acceptable to the Issuing Bank (and the Agent shall promptly notify each Bank
of the proposed issuance of a Letter of Credit). The Notice of Issuance of
Letter of Credit shall specify (i) the proposed date of issuance (which shall
be a Business Day), (ii) the face amount of the Letter of Credit, (iii) the
expiration date of the Letter of Credit, (iv) the name and address of the
beneficiary, (v) such other documents or materials as the Issuing Bank may
reasonably request, and (vi) a precise description of the documents and the
verbatim text of any certificate to be presented by the beneficiary which, if
presented by the beneficiary prior to the expiration date of the Letter of
Credit, would require the Issuing Bank to make payment under the Letter of
Credit; provided that the Issuing Bank, in its sole judgment, may require
changes in any such documents and certificates. In determining whether to pay
any Letter of Credit, the Issuing Bank shall be responsible only to use
reasonable care to determine that the documents and certificates required to be
delivered under that Letter of Credit have been delivered and that they comply
on their face with the requirements of that Letter of Credit. Promptly upon
the issuance of a Letter of Credit, the Issuing Bank shall notify each other
Bank of the issuance and the amount of each such other Bank's respective
participation therein determined in accordance with Section 2.10(a) and such
notice shall be accompanied by a copy of such issued Letter of Credit.

(c) PAYMENT OF AMOUNTS DRAWN UNDER OR NECESSARY TO
COLLATERALIZE LETTERS OF CREDIT. In the event (i) the beneficiary of any
Letter of Credit makes a drawing thereunder or (ii) the Borrower is required
under Section 2.10(a) to cash collateralize any Letter of Credit, the Issuing
Bank immediately shall notify the Borrower and the Agent, and the Borrower
shall reimburse the Issuing Bank or make a deposit with the Issuing Bank, as
appropriate, on the day on which such drawing is honored or such cash
collateral deposit is required in an amount in same day funds equal to the
amount of such drawing or, in the case of such a deposit, the maximum amount
that may be drawn under the applicable Letter of Credit; provided that,
anything contained in this Agreement to the contrary notwithstanding, (i)
unless prior to 1:00 P.M. (New York time) on the date of such drawing or the
date the Borrower is required to make such required deposit of cash collateral,
as applicable, (A) the Borrower shall have notified the Issuing Bank and the
Agent that the Borrower intends to reimburse the Issuing Bank for the amount of
such drawing or to make such deposit with funds other than the proceeds of
Revolving Loans or (B) the Borrower shall have delivered a Notice of Revolver
Borrowing requesting Revolving Loans that are Base Rate Loans in an amount
equal to the amount of such drawing or deposit, the Borrower shall be deemed to
have given

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a Notice of Revolver Borrowing to the Agent requesting the Banks to make
Revolving Loans that are Base Rate Loans on the date on which such drawing is
honored or on which such deposit is required in an amount equal to the amount
of such drawing or deposit, and (ii) if so requested by the Agent, the Banks
shall, on the date of such drawing or required deposit, make Revolving Loans
that are Base Rate Loans in the amount of such drawing or required deposit, the
proceeds of which shall be applied directly by the Agent to reimburse the
Issuing Bank for the amount of such drawing or to make a deposit with the
Issuing Bank in the amount of such required deposit; and provided further that,
if for any reason proceeds of Revolving Loans are not received by the Issuing
Bank on such date in an amount equal to the amount of such drawing or deposit,
the Borrower shall reimburse or make a deposit with the Issuing Bank, on the
Business Day immediately following the date of such drawing or such deposit, in
an amount in same day funds equal to the excess of the amount of such drawing
or deposit over the amount of such Revolving Loans, if any, that are so
received, plus accrued interest on such amount at the rate set forth in Section
2.10(e)(ii).

(d) PAYMENT BY THE BANKS. If the Borrower shall fail to
reimburse the Issuing Bank, for any reason, as provided in Section 2.10(c)
(including, without limitation, reimbursement by the making of Revolving Loans
by the Banks pursuant to the terms of Section 2.10(c)) in an amount equal to
the amount of any drawing honored by the Issuing Bank under a Letter of Credit
issued by it, the Issuing Bank promptly shall notify each Bank of the
unreimbursed amount of such drawing and of such Bank's respective participation
therein based on such Bank's Pro Rata Share. Each Bank shall make available to
the Issuing Bank an amount equal to its respective participation, in same day
funds, at the office of the Issuing Bank specified in such notice, not later
than 1:00 P.M. (New York time) on the Business Day after the date notified by
the Issuing Bank. If any Bank fails to make available to the Issuing Bank the
amount of such Bank's participation in such Letter of Credit as provided in
this Section 2.10(d), the Issuing Bank shall be entitled to recover such amount
on demand from such Bank together with interest at the customary rate set by
the Issuing Bank for the correction of errors among banks for one Business Day
and thereafter at the Base Lending Rate. Nothing in this Section 2.10 shall be
deemed to prejudice the right of any Bank to recover from the Issuing Bank any
amounts made available by such Bank to the Issuing Bank pursuant to this
Section 2.10(d) if it is determined in a final judgment by a court of competent
jurisdiction that the payment with respect to a Letter of Credit by the Issuing
Bank in respect of which payment was made by such Bank constituted gross
negligence or willful misconduct on the part of the Issuing Bank. The Issuing
Bank shall distribute to each other Bank that has paid all amounts payable by
it under this Section 2.10(d) with respect to any Letter of Credit issued by
the Issuing Bank such other Bank's Pro Rata Share of all payments received by
the Issuing Bank from the Borrower or pursuant to the last paragraph of Section
2.10(a), in each case, in

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reimbursement of drawings honored by the Issuing Bank under such Letter of
Credit when such payments are received.

(e) COMPENSATION. The Borrower agrees to pay the
following amounts to the Issuing Bank with respect to each Letter of Credit
issued by it:

(i) with respect to each Letter of Credit, a letter of
credit fee equal to the Applicable Eurodollar Margin per annum (to be
distributed to all the Banks according to their respective Pro Rata
Shares) plus the greater of (A) 0.25% per annum (calculated on the
basis of a 360-day year and the actual number of days elapsed) of the
maximum amount available from time to time to be drawn under such
Letter of Credit and (B) $500, which amounts payable under clauses (A)
and (B) shall be payable to the Issuing Bank quarterly in arrears on
and to the last Business Day of each January, April, July and October;

(ii) with respect to drawings made under any Letter of
Credit, interest, payable on demand, on the amount paid by the Issuing
Bank in respect of each such drawing from the date of the drawing
through the date such amount is reimbursed by the Borrower (including
any such reimbursement out of the proceeds of Revolving Loans pursuant
to Section 2.09(c)) at a rate that is equal to the sum of the Base
Lending Rate and the Applicable Base Margin; provided that if such
amount is not paid on demand, such amount shall bear interest
thereafter at a rate that is equal to 2.00% per annum in excess of the
interest rate otherwise payable under this Agreement for Base Rate
Loans which such rate shall not thereafter be increased pursuant to
Section 2.06(e); and

(iii) with respect to the issuance, amendment or transfer
of each Letter of Credit and each drawing made thereunder, documentary
and processing charges in accordance with the Issuing Bank's standard
schedule for such charges in effect at the time of such issuance,
amendment, transfer or drawing, as the case may be, or as otherwise
agreed to by the Issuing Bank.

Promptly upon receipt by the Issuing Bank of any amount
described in clauses (i) or (ii) of this Section 2.10(e) (other than amounts
specifically designated for distribution to the Issuing Bank) with respect to a
Letter of Credit, the Issuing Bank shall distribute to each Bank its Pro Rata
Share of such amount.

(f) OBLIGATIONS ABSOLUTE. The obligation of the Borrower
to reimburse the Issuing Bank for drawings made under the Letters of Credit
issued by it and to repay any Revolving Loans made by the Banks pursuant to
Section 2.10(c) and the obligations by the Banks under Section 2.10(d) shall be
unconditional and irrevocable and shall be paid strictly in accordance with the

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terms of this Agreement under all circumstances including, without limitation,
the following circumstances:

(i) any lack of validity or enforceability of any Letter
of Credit;

(ii) the existence of any claim, set-off, defense or other
right that the Borrower may have at any time against a beneficiary or
any transferee of any Letter of Credit (or any persons or entities for
whom any such transferee may be acting), the Agent, any Bank or any
other Person, whether in connection with this Agreement, the
transactions contemplated herein or any unrelated transaction
(including any underlying transaction between the Borrower and the
beneficiary for which the Letter of Credit was procured);

(iii) any draft, demand, certificate or any other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect; provided that the Issuing Bank
shall use reasonable care to determine that the documents and
certificates required to be delivered under any Letter of Credit have
been delivered and that they comply on their face with the
requirements of that Letter of Credit;

(iv) payment by the Issuing Bank under any Letter of
Credit against presentation of a demand, draft or certificate or other
document that does not comply with the terms of such Letter of Credit;
provided that the Issuing Bank shall use reasonable care to determine
that the documents and certificates required to be delivered under any
Letter of Credit have been delivered and that they comply on their
face with the requirements of that Letter of Credit;

(v) any adverse change in the business, operations,
property, assets, condition (financial or otherwise) or prospects of
the Borrower or any of its Subsidiaries;

(vi) any breach of this Agreement or any other Credit
Document by the Borrower or any of its Subsidiaries, the Agent or any
Bank (other than the Issuing Bank);

(vii) any other circumstance or happening whatsoever, that
is similar to any of the foregoing; or

(viii) the fact that a Default or an Event of Default shall
have occurred and be continuing;

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provided that the Borrower shall not be required to pay any such amounts to the
extent they arise from the gross negligence or willful misconduct of the
Issuing Bank (as determined by a court of competent jurisdiction).

(g) ADDITIONAL PAYMENTS. IF by reason of:

(i) any change in any applicable law, regulation, rule,
decree or regulatory requirement or any change in the interpretation
or application by any judicial or regulatory authority of any law,
regulation, rule, decree or regulatory requirement, in each case
occurring after the Effective Date; or

(ii) compliance by the Issuing Bank or any Bank with any
direction, request or requirement (whether or not having the force of
law) announced or issued after the Effective Date by any governmental
or monetary authority, including, without limitation, any
announcements or issuances under Regulation D of the Board of
Governors of the Federal Reserve System;

then:

(i) the Issuing Bank or any Bank shall be subject to any
tax, levy, charge or withholding of any nature or to any variation
thereof or to any penalty with respect to the maintenance or
fulfillment of its obligations under this Section 2.10, whether
directly or by such being imposed on or suffered by the Issuing Bank
or any Bank;

(ii) any reserve, special deposit, premium, FDIC
assessment, capital adequacy or similar requirement is or shall be
applicable, imposed or modified in respect of any Letters of Credit
issued by the Issuing Bank or participations therein purchased by any
Bank; or

(iii) there shall be imposed on the Issuing Bank or any
Bank any other condition regarding this Section 2.10, any Letter of
Credit or any participation therein;

and the result of the foregoing is to directly or indirectly increase the cost
to the Issuing Bank or any Bank of issuing, making or maintaining any Letter of
Credit or of purchasing or maintaining any participation therein, or to reduce
the amount receivable in respect thereof by the Issuing Bank or any Bank, THEN
and in any such case the Issuing Bank or such Bank may, at any time within a
reasonable period after the additional cost is incurred or the amount received
is reduced, notify the Borrower and the Agent, and the Borrower shall pay
within five Business Days of the date of such notice such amounts as the
Issuing Bank or such Bank may specify to be necessary to compensate the Issuing
Bank or

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such Bank for such additional cost or reduced receipt, together with interest
on such amount from the date demanded until payment in full thereof at a rate
equal at all times to the Base Lending Rate plus 2.00% per annum. The
determination by the Issuing Bank or any Bank, as the case may be, of any
amount due pursuant to this Section 2.10(g) as set forth in a certificate
setting forth the calculation thereof in reasonable detail, shall be presumed
to be correct.

(h) INDEMNIFICATION; NATURE OF THE ISSUING BANK'S DUTIES.
In addition to amounts payable as elsewhere provided in this Section 2.10, the
Borrower hereby agrees to protect, indemnify, pay and save harmless the Issuing
Bank from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable attorneys' fees and
reasonable allocated costs of internal counsel) that the Issuing Bank may incur
or be subject to as a consequence, direct or indirect, of (i) the issuance of
any Letter of Credit, other than as a result of gross negligence or willful
misconduct of the Issuing Bank or the Issuing Bank's failure to use reasonable
care to determine that the documents and certificates required to be delivered
under such Letter of Credit had been delivered and that they complied on their
face with the requirements of that Letter of Credit as determined by a court of
competent jurisdiction or (ii) the failure of the Issuing Bank to honor a
drawing under any Letter of Credit as a result of any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto government
or governmental authority (all such acts or omissions herein called "GOVERNMENT
ACTS"). Each Bank, proportionately to its Pro Rata Share, severally agrees to
indemnify the Issuing Bank to the extent the Issuing Bank shall not have been
reimbursed by the Borrower or its Subsidiaries, for and against any of the
foregoing claims, demands, liabilities, damages, losses, costs, charges and
expenses to which the Issuing Bank is entitled to reimbursement from the
Borrower.

As between the Borrower and the Issuing Bank, the Borrower
assumes all risks of the acts and omissions of, or misuse of the Letters of
Credit issued by the Issuing Bank by, the respective beneficiaries of such
Letters of Credit. In furtherance and not in limitation of the foregoing, the
Issuing Bank shall not be responsible (absent gross negligence or willful
misconduct (as determined by a court of competent jurisdiction)): (i) for the
form, validity, sufficiency, accuracy, genuineness or legal effect of any
document submitted by any party in connection with the application for and
issuance of such Letters of Credit, even if it should in fact prove to be in
any or all respects invalid, insufficient, inaccurate, fraudulent or forged;
(ii) for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any such Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part, which
may prove to be invalid or ineffective for any reason; (iii) for failure of the
beneficiary of any such Letter of Credit to comply fully with conditions
required in order to draw upon such Letter of Credit; (iv) for errors,

57
<PAGE> 64

omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, whether or not they be in
cipher; (v) for errors in interpretation of technical terms; (vi) for any loss
or delay in the transmission or otherwise of any document required in order to
make a drawing under any such Letter of Credit or of the proceeds thereof;
(vii) for the misapplication by the beneficiary of any such Letter of Credit of
the proceeds of any drawing under such Letter of Credit; and (viii) for any
consequences arising from causes beyond the control of the Issuing Bank,
including, without limitation, any Government Acts. None of the above shall
affect, impair, or prevent the vesting of any of the Issuing Bank's rights or
powers hereunder; provided that, notwithstanding the foregoing, the Issuing
Bank shall use reasonable care to determine that the documents and certificates
required to be delivered under such Letter of Credit have been delivered and
that they comply on their face with the requirements of that Letter of Credit.

In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by the
Issuing Bank under or in connection with the Letters of Credit issued by it or
the related certificates, if taken or omitted in good faith and absent gross
negligence or willful misconduct of the Issuing Bank (as determined by a court
of competent jurisdiction), shall not put the Issuing Bank under any resulting
liability to the Borrower.

Notwithstanding anything to the contrary contained in this
Section 2.10(h), the Borrower shall have no obligation to indemnify the Issuing
Bank in respect of any liability incurred by the Issuing Bank arising solely
out of the gross negligence or willful misconduct of the Issuing Bank as
determined by a court of competent jurisdiction, or out of the wrongful
dishonor by the Issuing Bank of a proper demand for payment made under the
Letters of Credit; provided that the Issuing Bank shall use reasonable care to
determine that the documents and certificates required to be delivered under
any Letter of Credit have been delivered and that they comply on their face
with the requirements of that Letter of Credit.

(i) COMPUTATION OF INTEREST. Interest payable pursuant
to this Section 2.10 shall be computed on the basis of a 360-day year and the
actual number of days elapsed in the period during which it accrues.

SECTION 3. FEES.

3.01 FEES.

(a) AGENCY FEE. The Borrower agrees to pay to the Agent
on the Effective Date an amount separately agreed to by the Agent and the
Borrower.

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<PAGE> 65

(b) COMMITMENT FEE. The Borrower agrees to pay to the
Agent, for distribution to each Bank in proportion to its Pro Rata Share,
commitment fees for the period from and including the Effective Date to but
excluding the Termination Date equal to the average of the daily unused portion
of the Revolving Loan Commitments multiplied by the Commitment Fee Percentage
per annum, such commitment fees to be calculated on the basis of a 360-day year
and the actual number of days elapsed and to be payable quarterly in arrears on
and to the last Business Day of January, April, July and October commencing on
July 31, 1996 and upon the termination of the Revolving Loan Commitments. In
addition, commitment fees equal to the Commitment Fee Percentage multiplied by
any portion of the Term Loan Commitments not borrowed on the Effective Date
shall accrue from the Effective Date through and including the earlier of (i)
the date on which the Borrower exercises the option to borrow the Delayed Draw
Term Loans or (ii) December 31, 1996.

Anything contained in this Agreement to the contrary
notwithstanding, for the purposes of calculating the commitment fees payable by
the Borrower pursuant to this Section 3.01(b), the "UNUSED PORTION OF THE
REVOLVING LOAN COMMITMENTS," as of any date of determination, shall be an
amount equal to the aggregate amount of the Revolving Loan Commitments as of
such date minus the aggregate principal amount of all outstanding Revolving
Loans and the Letter of Credit Usage on such date, and the unused portion of
the Revolving Loan Commitments shall not be reduced by (i) reason of the
Borrower's inability to satisfy the conditions precedent set forth in Section 5
and consequent inability to borrow Loans hereunder or (ii) the aggregate
principal amount of all outstanding Swing Line Loans.

(c) ADMINISTRATIVE FEE. The Borrower agrees to pay to
the Agent an administrative fee in the amount and at the times separately
agreed to by the Agent and the Borrower.

SECTION 4. PREPAYMENTS AND REDUCTIONS IN COMMITMENTS; PAYMENTS.

4.01 SCHEDULED PAYMENTS OF TERM LOANS. The Borrower shall
make principal payments on the Term Loans in installments on the dates and in
the amounts set forth below:

<PAGE> 66

<TABLE>
<CAPTION>
========================================================================================
DATE SCHEDULED PAYMENT IF ENTIRE SCHEDULED PAYMENT IF ONLY $50
$100 MILLION IN TERM LOANS MILLION IN TERM LOANS BORROWED
BORROWED
========================================================================================
<S> <C> <C>
February 1, 1998 $ 2,000,000 $ 1,000,000
----------------------------------------------------------------------------------------
May 1, 1998 2,000,000 1,000,000
----------------------------------------------------------------------------------------
August 1, 1998 2,000,000 1,000,000
----------------------------------------------------------------------------------------
November 1, 1998 2,000,000 1,000,000
----------------------------------------------------------------------------------------
February 1, 1999 4,000,000 2,000,000
----------------------------------------------------------------------------------------
May 1, 1999 4,000,000 2,000,000
----------------------------------------------------------------------------------------
August 1, 1999 4,000,000 2,000,000
----------------------------------------------------------------------------------------
November 1, 1999 8,000,000 4,000,000
----------------------------------------------------------------------------------------
February 1, 2000 8,000,000 4,000,000
----------------------------------------------------------------------------------------
May 1, 2000 8,000,000 4,000,000
----------------------------------------------------------------------------------------
August 1, 2000 8,000,000 4,000,000
----------------------------------------------------------------------------------------
November 1, 2000 8,000,000 4,000,000
----------------------------------------------------------------------------------------
February 1, 2001 20,000,000 10,000,000
----------------------------------------------------------------------------------------
May 1, 2001 20,000,000 10,000,000
========================================================================================
</TABLE>

provided that the scheduled installments of principal of the Term Loans set
forth above shall be reduced in connection with (i) any voluntary prepayments
of the Term Loans in accordance with Section 4.02(a) and (ii) any mandatory
prepayments in accordance with Section 4.02(c); and provided, further that the
Term Loans and all other amounts owed hereunder with respect to the Term Loans
shall be paid in full no later than the Termination Date, and the final
installment payable by the Borrower in respect of the Term Loans on such date
shall be in an amount, if such amount is different from that specified above,
sufficient to repay all amounts owing by the Borrower under this Agreement with
respect to the Term Loans.

4.02 PREPAYMENTS AND REDUCTIONS IN REVOLVING LOAN
COMMITMENTS.

(a) VOLUNTARY PREPAYMENTS. The Borrower shall have the
right to prepay the Loans, without premium or penalty, in whole or in part from
time to time on the following terms and conditions: (i) the Borrower shall
deliver to the Agent at its Notice Office prior notice of its intent to prepay
the Term Loans or the Revolving Loans and the amount of such prepayment no
later than 12:00 Noon (New York time) one Business Day in advance of the
proposed prepayment date (in the case of a Base Rate Loan) and three Business
Days in advance of the proposed prepayment date (in the case of a Eurodollar
Rate Loan), which notice

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<PAGE> 67
the Agent shall promptly transmit to each of the Banks, (ii) Eurodollar Rate
Loans may be prepaid only on the expiration of the Interest Period applicable
thereto and (iii) the Borrower may prepay Swing Line Loans at any time in full
or in part without notice or penalty. Any such voluntary prepayment shall be
applied as specified in Section 4.03(a).

(b) Voluntary Reductions of Revolving Loan Commitments.
The Borrower shall have the right, at any time and from time to time, to
terminate in whole or permanently reduce in part, without premium or penalty,
the Revolving Loan Commitments in an amount up to the amount by which the Total
Revolving Loan Commitments exceed the Total Utilization of Revolving Loan
Commitments. The Borrower shall give not less than three Business Days' prior
written notice to the Agent designating the date (which shall be a Business
Day) of such termination or reduction and the amount of any partial reduction.
Promptly after receipt of a notice of such termination or partial reduction,
the Agent shall notify each Bank of the proposed termination or reduction.
Such termination or partial reduction of the Revolving Loan Commitments shall
be effective on the date specified in the Borrower's notice and shall reduce
the Revolving Loan Commitment of each Bank proportionately to its Pro Rata
Share. Any such partial reduction of the Revolving Loan Commitments shall be
in an aggregate minimum amount of $1,000,000 and integral multiples of $100,000
in excess of that amount unless the remaining amount of the Revolving Loan
Commitments is less than $1,000,000 in which case such reduction shall be in
the amount of the then remaining Revolving Loan Commitments.

(c) Mandatory Prepayments and Mandatory Reductions of
Revolving Loan Commitments. The Loans shall be prepaid and/or the Revolving
Loan Commitments shall be permanently reduced in the amounts and under the
circumstances set forth below, all such prepayments and/or reductions to be
applied as set forth below or as more specifically provided in Section 4.03:

(i) Prepayments and Reductions Due to Issuance of
Debt Securities. No later than the second Business Day
following the date of receipt by the Borrower of the cash
proceeds (net of underwriting discounts and commissions and
other reasonable costs associated therewith) from the issuance
of any debt Securities of the Borrower, the Borrower shall
prepay the Loans and/or the Revolving Loan Commitments shall
be permanently reduced in an aggregate amount equal to 100% of
such net cash proceeds. Concurrently with any prepayment of
the Loans and/or reduction of the Revolving Loan Commitments
pursuant to this Section 4.02(c)(i), the Borrower shall
deliver to Agent an Officers' Certificate demonstrating the
calculation of the net cash proceeds that gave rise to such
prepayment and/or reduction. In the event that the Borrower
shall subsequently determine that the actual net cash

<PAGE> 68

proceeds were greater than the amount set forth in such
Officers' Certificate, the Borrower shall promptly make an
additional prepayment of the Loans (and/or, if applicable, the
Revolving Loan Commitments shall be permanently reduced) in an
amount equal to the amount of such excess, and the Borrower
shall concurrently therewith deliver to Agent an Officers'
Certificate demonstrating the derivation of the additional net
cash proceeds resulting in such excess.

(ii) Prepayments Due to Reductions or Restrictions
of Revolving Loan Commitments. The Borrower shall from time
to time prepay first the Swing Line Loans and second the
Revolving Loans to the extent necessary to give effect to the
limitations set forth in Sections 2.01(a) and 2.02(a).

4.03 Application of Prepayments.

(a) Application of Voluntary Prepayments By Type of Loans
and Order of Maturity. Any voluntary prepayments pursuant to Section 4.02(a)
shall be applied as specified by the Borrower in the applicable notice of
prepayment; provided that in the event the Borrower fails to specify the Loans
to which any such prepayment shall be applied, such prepayment shall be applied
first to repay outstanding Swing Line Loans to the full extent thereof, second
to repay outstanding Revolving Loans to the full extent thereof, and third to
repay outstanding Term Loans to the full extent thereof. Any voluntary
prepayments of the Term Loans pursuant to Section 4.02(a) shall be applied to
reduce the scheduled installments of principal of the Term Loans set forth in
Section 4.01 on a pro rata basis in accordance with the respective outstanding
principal amounts thereof.

(b) Application of Mandatory Prepayments by Type of
Loans. Any amount (the "Applied Amount") required to be applied as a
mandatory prepayment of the Loans and/or a reduction of the Revolving Loan
Commitments pursuant to Section 4.02(c)(i) shall be applied first to prepay the
Term Loans to the full extent thereof, second, to the extent of any remaining
portion of the Applied Amount, to prepay the Swing Line Loans to the full
extent thereof and to permanently reduce the Revolving Loan Commitments by the
amount of such prepayment, third, to the extent of any remaining portion of the
Applied Amount, to prepay the Revolving Loans to the full extent thereof and to
further permanently reduce the Revolving Loan Commitments by the amount of such
prepayment, and fourth, to the extent of any remaining portion of the Applied
Amount, to further permanently reduce the Revolving Loan Commitments to the
full extent thereof.

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<PAGE> 69

(c) Application of Mandatory Prepayments of Term Loans.
Any mandatory prepayments of the Term Loans pursuant to Section 4.02(c)(i)
shall be applied to reduce the scheduled installments of principal of the Term
Loans set forth in Section 4.01 on a pro rata basis in accordance with the
respective outstanding principal amounts thereof.

(d) Application of Prepayments to Base Rate Loans and
Eurodollar Rate Loans. Considering Term Loans and Revolving Loans being
prepaid separately, any prepayment thereof shall be applied first to Base Rate
Loans to the full extent thereof before application to Eurodollar Rate Loans,
in each case in a manner which minimizes the amount of any payments required to
be made by the Borrower pursuant to subsection 2.05.

(e) Application of Prepayments to Principal and Interest.
Except with respect to prepayments of Revolving Loans pursuant to Section
4.02(a), all payments in respect of the principal amount of any Loan shall
include payment of accrued interest on the principal amount being repaid or
prepaid, and all such payments (and, in any event, any payments in respect of
any Loan on a date when interest is due and payable with respect to such Loan)
shall be applied to the payment of interest before application to principal.

4.04 General provisions Regarding Payments.

(a) Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement or any Note
shall be made (i) subject to the second paragraph of Section 4.04(c), in the
case of any Swing Line Loan to the Swing Line Bank, and (ii) to the Agent for
the account of the Bank or the Banks entitled thereto not later than 1:00 P.M.
(New York time), on the date when due and shall be made in Dollars in
immediately available funds at the Payment Office of the Agent. Whenever any
payment to be made hereunder or under any Note shall be stated to be due on a
day that is not a Business Day, the due date thereof shall be extended to the
next succeeding Business Day and such extension of time shall be included in
the computation of the payment of interest hereunder or under any Note or of
the commitment or other fees hereunder, as the case may be; provided, however,
that if the day on which payment relating to a Eurodollar Rate Loan is due is
not a Business Day but is a day of the month after which no further Business
Day occurs in that month, then the due date thereof shall be the next preceding
Business Day. The Borrower and the Swing Line Bank shall give the Agent prompt
notice of each Swing Line Loan and any payment thereof. All voluntary
prepayments shall be made in an aggregate minimum amount of $100,000 and
integral multiples of $10,000 in excess of that amount.

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<PAGE> 70

(b) Net Payments. All payments made by the Borrower
hereunder or under any Note will be made without setoff, counterclaim or other
defense.

(c) Apportionment of Payments. Aggregate principal and
interest payments shall be apportioned among all outstanding Loans to which
such payments relate, and such payments shall be apportioned ratably to the
Banks, proportionately to the Banks' respective Pro Rata Shares. The Agent
promptly shall distribute to each Bank at its primary address set forth below
its name on the appropriate signature page hereof or such other address as any
Bank may request its share of all such payments received by the Agent and the
commitment and loan fees of such Bank when received by the Agent pursuant to
Section 3.01.

Anything contained in this agreement to the contrary
notwithstanding, upon the occurrence and during the continuance of any Event of
Default specified in Section 9 or after the acceleration of the maturity of the
Loans and the other amounts referred to in Section 9 or termination of the
Revolving Loan Commitments, all payments relating to the Loans and the other
Obligations shall be made to the Agent for the account of the Banks and all
amounts received by the Agent that are to be applied to the payment of the
Obligations shall be distributed first to the Swing Line Bank to the extent of
the unpaid principal of, and accrued interest on, Swing Line Loans and second
to the Banks in such a manner that each Bank receives its proportionate share
of such amounts based on the outstanding principal amounts of all Revolving
Loans then outstanding and the amount of all other Obligations then payable.

Section 5. Conditions Precedent.

5.01 Conditions to Effectiveness. This Agreement shall
become effective only upon satisfaction of all of the following conditions:

(a) Execution of Agreement; Credit Documents; Notes. The
Agent shall have received: (i) an original of this Agreement (whether
the same or different copies) duly executed by the Borrower, each Bank
and the Agent, (ii) an original Revolving Note made to the order of
each Bank duly executed by the Borrower in the amount, maturity and as
otherwise provided herein, (iii) an original Swing Line Note made to
the order of the Swing Line Bank duly executed by the Borrower, (iv)
an original Consent to Amendment and Restatement duly executed by each
Guarantor Subsidiary, and (v) to the extent not already received,
signed copies of the other Credit Documents (whether the same or
different copies) duly executed by the parties thereto.

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<PAGE> 71

(b) No Default; Representation and Warranties; Material
Adverse Changes. All representations and warranties of the Borrower
and its Subsidiaries set forth in this Agreement and in each of the
other Credit Documents shall be true, correct and complete in all
material respects on and as of the Effective Date and after giving
effect to the transactions contemplated to occur on such date, and the
Borrower shall have delivered to the Agent an Officer's Certificate,
dated as of the Effective Date, signed by the President or Vice
President of the Borrower, and attested to by the Secretary or any
Assistant Secretary of the Borrower, in form and substance
satisfactory to the Agent, to the effect that on and as of the
Effective Date and after giving effect to the transactions
contemplated to occur on such date, (i) no Default or Event of Default
shall have occurred and be continuing, (ii) all representations and
warranties contained herein and in the other Credit Documents are
true, correct and complete in all material respects and (iii) no
material adverse change has occurred in the business, operations,
properties, assets or condition (financial or otherwise) or prospects
of any of the Borrower and its Subsidiaries taken as whole since
December 31, 1995; provided, however, that the enactment of
legislation providing for a reduction of 20% or less in Medicare's
reimbursement rates in effect on January 1, 1996 for oxygen therapy
shall not be considered a material adverse change for purposes of this
clause (iii).

(i) On the Effective Date, the Agent shall have
received a certificate, dated the Effective Date, signed by the
President or Vice President of the Borrower, and attested to by the
Secretary or any Assistant Secretary of the Borrower, in form and
substance satisfactory to the Agent, certifying (A) resolutions of the
Board of Directors of the Borrower authorizing and approving this
Agreement, the Notes, the other Credit Documents and the transactions
contemplated hereby, (B) the signatures and incumbency of the
Borrower's officers executing this Agreement, the Notes, any other
Credit Documents to which the Borrower is a party and the documents,
instruments or other certificates to be delivered in connection with
this Agreement and the other Credit Documents, and (C) the Certificate
of Incorporation and By-Laws of the Borrower together with copies of
the Certificate of Incorporation and By-Laws of the Borrower and the
resolutions of the Borrower referred to in such certificate. In lieu
of delivering a copy of its Certificate of Incorporation or By-Laws to
the Agent pursuant to the preceding sentence, the Borrower may certify
in its certificate delivered pursuant to this clause (i) that such
Certificate of Incorporation or By-Laws, as the case may be, were
delivered to the Agent pursuant to the Existing Credit Agreement and
that there has been no change in such Certificate of

65
<PAGE> 72

Incorporation or By-Laws, as the case may be, since the date of such delivery.

(ii) On the Effective Date, the Agent shall have
received a certificate, dated the Effective Date, signed by the
President or Vice President of each of the Borrower's Subsidiaries
party to any Credit Document, and attested to by the Secretary or any
Assistant Secretary of such Subsidiary, in form and substance
satisfactory to the Agent, certifying (A) the resolutions adopted by
the Board of Directors of such Subsidiary approving and authorizing
the Consent to Amendment and Restatement, the Subsidiary Guaranty, the
Subsidiary Security Agreement, the Subsidiary Pledge Agreement, the
Trademark Security Agreement, the Subsidiary Trademark Security
Agreement (if such Subsidiary is a party thereto) and the transactions
contemplated thereby and by this Agreement, (B) the signatures and
incumbency of the officers such Subsidiary executing the Credit
Documents to which such Subsidiary is a party and the documents,
instruments or other certificates to be delivered in connection with
this Agreement and the other Credit Documents, and (C) the Articles or
Certificate of Incorporation or other charter documents and By-Laws of
such Subsidiary, together with copies of the Articles or Certificate
of Incorporation or other charter documents and By-Laws of such
Subsidiary and the resolutions of such Subsidiary referred to in such
certificate. In lieu of delivering a copy of its Articles or
Certificate of Incorporation or other charter documents or By-Laws to
the Agent pursuant to the preceding sentence, any of the Borrower's
Subsidiaries may certify in its certificate delivered pursuant to this
clause (ii) that such Articles or Certificate of Incorporation, other
charter documents or By-Laws, as the case may be, were delivered to
the Agent pursuant to the Existing Credit Agreement and that there has
been no change in such Articles or Certificate of Incorporation, other
charter documents or By-Laws, as the case may be, since the date of
such delivery.

(iii) On the Effective Date, the Agent shall have
received copies of the Articles or Certificate of Incorporation or
other charter documents of each of the Borrower and each of the
Borrower's Subsidiaries party to any Credit Document, certified as of
a recent date prior to delivery by the Secretary of State of its
jurisdiction of incorporation, together with a good standing
certificate (except with respect to Stoll's Medical Rentals, Inc.)
from its jurisdiction of incorporation dated a recent date prior to
delivery; provided, however, that the Articles or Certificate of
Incorporation or other charter documents of a Subsidiary need not be
delivered pursuant to this clause (iii) if such Subsidiary certifies
pursuant to clause (ii) above that such Articles or Certificate of
Incorporation or other charter documents were delivered to

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<PAGE> 73

the Agent pursuant to the Existing Credit Agreement and that there has
been no change in such Articles or Certificate of Incorporation or
other charter documents since the date of such delivery.

(iv) All corporate, partnership and legal
proceedings and all instruments and agreements in connection with the
transactions contemplated by this Agreement and the other Credit
Documents shall be satisfactory in form and substance to the Banks,
and the Agent shall have received all information and copies of all
documents and papers, including records of corporate proceedings and
governmental approvals, if any, that any Bank reasonably may have
requested in connection therewith, such documents and papers as
appropriate to be certified by proper corporate, partnership or
governmental authorities.

(d) Perfection of Security Interests. The Borrower and
its Subsidiaries shall have taken or caused to be taken such actions
in such a manner so that the Agent has or maintains a valid and
perfected first priority security interest in all Collateral (subject
to Liens consented to by the Required Banks with respect to such
Collateral and other Liens permitted by Section 8.01) encumbered or to
be encumbered under the Credit Documents. Such actions shall include,
without limitation: (i) the delivery, to the extent not theretofore
delivered, pursuant to the applicable Credit Documents by the Borrower
and its Subsidiaries of such certificates (which certificates shall be
registered in the name of the Agent or properly endorsed in blank for
transfer or accompanied by irrevocable undated stock powers duly
endorsed in blank, all in form and substance satisfactory to the
Agent) representing all of the capital stock required to be pledged
pursuant to the Credit Documents; (ii) the delivery, to the extent not
theretofore delivered, pursuant to the applicable Credit Documents by
the Borrower and its Subsidiaries of such promissory notes (which
promissory notes shall be endorsed to the order of the Agent, all in
form and substance satisfactory to the Agent) representing all of the
pledged debt required to be pledged pursuant to the Credit Documents;
(iii) the delivery, to the extent not theretofore delivered, to the
Agent of Uniform Commercial Code financing statements, or amendments
thereto, executed by the Borrower and its Subsidiaries as to the
Collateral granted by the Borrower and its Subsidiaries for all
jurisdictions as may be necessary or desirable to perfect the Agent's
security interest in such Collateral; and (iv) evidence reasonably
satisfactory to the Agent that all other filings (including, without
limitation, filings with the United States Patent and Trademark
Office), recordings and other actions the Agent deems necessary or
advisable to establish, preserve and perfect the first priority Liens
(subject to Liens permitted under this Agreement or consented to by
the Required Banks with respect to such Collateral)

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<PAGE> 74

granted to the Agent in personal and mixed property shall have been
made.

(e) Margin Rate Determination Certificate. The Borrower
shall have delivered a Margin Rate Determination Certificate
calculated using consolidated financial statements of the Borrower
dated March 30, 1996.

(f) Payment of Fees. The Borrower shall have paid (i)
the Fees required by Section 3.01 to be paid on or prior to the
Effective Date, and (ii) to the Agent and the Banks (as such terms are
defined in the Existing Credit Agreement) all unpaid fees accrued
under the Existing Credit Agreement prior to the Effective Date.

(g) Conversion of Existing Revolving Loans; Payment of
Interest, Fees and Existing Swing Line Loans. On or before the
Effective Date, notwithstanding anything contained in the Existing
Credit Agreement or Section 2.04 of this Agreement to the contrary,
(i) the Borrower shall convert all Existing Revolving Loans
outstanding on the Effective Date as Eurodollar Rate Loans into Base
Rate Loans and, in connection therewith, shall pay to Existing Banks
such amounts as would have been payable pursuant to Section 4.06(b) of
the Existing Credit Agreement if such Eurodollar Rate Loans had been
prepaid on the Effective Date, (ii) the Borrower shall pay to Agent,
for distribution (as appropriate) to Banks, all accrued and unpaid
interest with respect to all Existing Revolving Loans and Existing
Swing Line Loans outstanding on the Effective date, (iii) the Borrower
shall pay to Agent, for distribution (as appropriate) to Banks, all
commitment fees and letter of credit fees which are accrued and unpaid
as of the Effective Date under Sections 3.01(b) and 2.09(e) of the
Existing Credit Agreement, (iv) the Borrower shall repay in full all
Existing Swing Line Loans, and (v) the Borrower shall pay to Agent,
for distribution (as appropriate) to Banks and Agent the fees payable
on the Effective Date referred to at Section 3.01.

(h) Financial Statements. The Agent and the Banks shall
have received audited consolidated balance sheets of the Borrower and
its Consolidated Subsidiaries at December 31, 1993, December 31, 1994
and December 31, 1995 and the related consolidated statements of
operations and statements of cash flows of the Borrower and its
Consolidated Subsidiaries for the Fiscal Years ended on such dates.

(i) Existing and Continuing Indebtedness. The Existing
Indebtedness that shall remain outstanding after the Effective Date
shall be as set forth on Schedule 8.04(ii) annexed hereto, and the
Borrower shall have delivered to the Agent an Officers' Certificate to
such effect.

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<PAGE> 75

(j) Satisfaction of Conditions to Funding. All
conditions precedent to the making of Loans and the issuance of
Letters of Credit described in Section 5.02 shall be satisfied on and
as of the Effective Date with respect to the Term Loans and the
Revolving Loans and Swing Line Loans, if any, to be made, and the
Letters of Credit to be issued, on such date.

(k) No Event of Default. Immediately prior to the
Effective Date, no "Default" or "Event of Default" (as such terms are
defined in the Existing Credit Agreement) shall have occurred and be
continuing.

(l) Opinions of Counsel. On the Effective Date, the
Agent shall have received from Harwell Howard Hyne Gabbert & Manner,
P.C., counsel to the Borrower, an opinion substantially in the form
annexed hereto as Exhibit R, addressed to each of the Banks and dated
the date of delivery, covering such matters incident to the
transactions contemplated herein as the Agent may reasonably request.

All the Notes, certificates, legal opinions and other
documents and papers referred to in this Section 5, unless otherwise specified,
shall be delivered to the Agent for the account of each of the Banks and,
except for the Notes, in sufficient counterparts for each of the Banks and
shall be satisfactory in form and substance to the Banks.

5.02 Conditions to all Loans and Letters of Credit. The
obligations of the Banks to make Term Loans and Revolving Loans, the Swing Line
Bank to make Swing Line Loans and the Issuing Bank to issue Letters of Credit
on each Funding Date are subject to the following further conditions precedent:

(a) The Agent or Issuing Bank shall have received, in
accordance with the provisions of Sections 2.01(b) or 2.10(b), as the
case may be, before that Funding Date, an originally executed Notice
of Revolver Borrowing or Notice of Issuance of Letter of Credit, as
the case may be (or, in the case of a Swing Line Loan, the Swing Line
Bank shall have received an executed Notice of Swing Line Borrowing),
in each case signed by the Chief Executive Officer, the Chief
Financial Officer or the Treasurer of the Borrower or by any officer
of the Borrower designated by the Board of Directors of the Borrower
or any of the above-described officers on behalf of the Borrower in
writing delivered to the Agent. The obligation of the Issuing Bank to
issue any Letter of Credit is subject to the further condition
precedent that on or before the date of issuance of such Letter of
Credit, the Issuing Bank shall have received, in accordance with the
provisions of Section 2.10(b), all other information specified in
Section 2.10(b) and such other documents as the Issuing Bank
reasonably may require in connection with the issuance of such Letter
of Credit.

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(b) As of the Funding Date:

(i) The representations and warranties contained
herein shall be true, correct and complete in all material
respects on and as of that Funding Date to the same extent as
though made on and as of that date taking into account any
amendments to the Schedules or Exhibits hereto as a result of
any disclosures made by the Borrower to the Agent and the
Banks after the Effective Date approved by the Agent and the
Required Banks in their reasonable discretion;

(ii) No event shall have occurred and be
continuing or would result from the consummation of the
borrowing contemplated by such Notice of Revolver Borrowing or
the issuance of such Letter of Credit that would constitute a
Default or an Event of Default;

(iii) The Borrower shall have performed in all
material respects all agreements and satisfied all conditions
that this Agreement provides shall be performed by it on or
before that Funding Date;

(iv) No order, judgment or decree of any court,
arbitrator or governmental authority shall purport to enjoin
or restrain any Bank (or, in the case of a Swing Line Loan,
the Swing Line Bank) from making the Revolving Loans or the
Issuing Bank from issuing the Letter of Credit (or, in the
case of a Swing Line Loan, making a Swing Line Loan); and

(v) The making of the Loans or the issuing of the
Letter of Credit requested on such Funding Date shall not
violate any law, including, without limitation, Regulation G,
Regulation T, Regulation U or Regulation X of the Board of
Governors of the Federal Reserve System.

Section 6. Representations, Warranties and Agreements. In
order to induce the Banks to enter into this Agreement and to maintain and make
the Loans, the Borrower makes the following representations, warranties and
agreements, which shall survive the execution and delivery of this Agreement
and the Notes and the making of the Loans:

6.01 Corporate Status. Each of the Borrower and its
Subsidiaries (i) is a duly organized and validly existing corporation,
partnership or association, as the case may be, in good standing under the laws
of the jurisdiction of its incorporation, (ii) has the power and authority to
own its

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property and assets and to transact the business in which it is engaged, (iii)
is duly qualified as a foreign corporation, partnership or association, as the
case may be, and in good standing in each jurisdiction where its ownership,
leasing or operation of property or the conduct of its business requires such
qualification, except if the failure to be so qualified could not reasonably be
expected to have a material adverse effect on the business, operations,
property, assets, condition (financial or otherwise) or prospects of the
Borrower and its Subsidiaries taken as a whole and (iv) is in compliance with
all requirements of law, including, but not limited to, all federal, state and
local statutes, regulations and ordinances relating to the delivery of
healthcare services of the type provided by the Borrower and its Subsidiaries
and payment therefor, except to the extent that the failure to do so could not
reasonably be expected to have a material adverse effect on the business,
operations, property, assets, condition (financial or otherwise) or prospects
of the Borrower and its Subsidiaries taken as a whole.

6.02 Corporate Power and Authority. The Borrower and each of
its Subsidiaries has the corporate, partnership or other power to execute,
deliver and perform the terms and provisions of each of the Credit Documents to
which it is a party and has taken all necessary corporate, partnership or other
action to authorize the execution, delivery and performance by it of each of
such Credit Documents. The Borrower and each of its Subsidiaries has duly
executed and delivered each of the Credit Documents to which it is party, and
each of such Credit Documents constitutes the legal, valid and binding
obligation of the Borrower or such Subsidiary, as the case may be, enforceable
against the Borrower or such Subsidiary, as the case may be, in accordance with
its terms except as the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting
creditors' rights generally and by general equitable principles (regardless of
whether the issue of enforceability is considered in a proceeding in equity or
at law). The Borrower and each Subsidiary making any Acquisition shall have
the corporate, partnership or other power to consummate such Acquisition upon
the consummation thereof, on the terms set forth in any applicable purchase
agreement, agreement of merger or other operative agreement. Upon the
consummation of any Acquisition, such Acquisition shall have been duly
authorized by all necessary action of the Borrower and any of its Subsidiaries
participating therein.

6.03 No Violation. Neither the execution, delivery or
performance by the Borrower or a Subsidiary of the Borrower of the Credit
Documents to which it is a party, nor compliance by it with the terms and
provisions of any such Credit Documents, nor the consummation of any
Acquisition, upon the consummation thereof, (i) will contravene any provision
of any law, statute, rule or regulation or any order, writ, injunction or
decree of any court or governmental instrumentality (except, in the case of the
consummation of any Acquisition, as could not reasonably be expected to have a
material adverse

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effect on the business, operations, properties, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole),
(ii) will conflict or be inconsistent with or result in any breach of any of
the terms, covenants, conditions or provisions of, or constitute a default
under (except, in the case of the consummation of any Acquisition, as could not
reasonably be expected to have a material adverse effect on the business,
operations, properties, condition (financial or otherwise) or prospects of the
Borrower and its Subsidiaries taken as a whole), or result in the creation or
imposition of (or the obligation to create or impose) any Lien (other than
Liens permitted under Section 8.01) upon any of the property or assets of the
Borrower or any of its Subsidiaries pursuant to the terms of any indenture,
mortgage, deed of trust, credit agreement, loan agreement or any other
agreement, contract or instrument to which the Borrower or any of its
Subsidiaries is a party or by which it or any of its property or assets is
bound or to which it may be subject or (iii) will violate any provision of the
Certificate of Incorporation or By-Laws (or other documents of formation and
governance, as the case may be) of the Borrower or any of its Subsidiaries.

6.04 Governmental Approvals. No order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with (except as have been obtained or made prior to the Effective Date), or
exemption by, any governmental or public body or authority, or any subdivision
thereof, is required to authorize, or is required in connection with, (i) the
execution, delivery and performance by the Borrower or any of its Subsidiaries
of any Credit Document to which the Borrower or any of such Subsidiaries is a
party, (ii) the legality, validity, binding effect or enforceability of any
such Credit Document or (iii) any Acquisition, except filings, approvals and
authorizations that shall have been made or obtained prior to the consummation
of such Acquisition or for which arrangements shall have been made for the
subsequent issuance thereof within four weeks of the closing of such
Acquisition (or, if an additional period is necessary such additional period as
is satisfactory to the Agent) except, in any case, filings, approvals and
authorizations that could not reasonably be expected to have a material adverse
effect on the business, operations, properties, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole.

6.05 Financial Statements; Financial Condition; Undisclosed
Liabilities; etc.

(a) The financial statements delivered to the Existing
Banks pursuant to Sections 7.01(a) and (b) of the Existing Credit Agreement and
to the Banks pursuant to Section 5.01(h) present fairly the consolidated
financial condition of the Borrower and its Consolidated Subsidiaries as at the
respective dates thereof and the consolidated results of operations and changes
in financial condition of the Borrower and its Consolidated Subsidiaries for
each of the

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periods covered thereby, subject (in the case of any unaudited interim
financial statements) to changes resulting from normal year-end adjustments.
All such consolidated financial statements have been prepared in accordance
with generally accepted accounting principles and practices consistently
applied.

(b) Except as fully reflected in the financial statements
described in Section 6.05(a) or in Schedule 6.05, there were as of the
Effective Date no liabilities or obligations with respect to the Borrower or
any of its Subsidiaries of any nature whatsoever (whether absolute, accrued,
contingent or otherwise and whether or not due) that, either individually or in
aggregate, would be material to the Borrower and its Subsidiaries taken as a
whole. Except as set forth in Schedule 6.05, as of the Effective Date the
Borrower does not know of any basis for the assertion against the Borrower or
any of its Subsidiaries of any liability or obligation of any nature whatsoever
that is not fully reflected in the financial statements described in Section
6.05(a) that, either individually or in the aggregate, would be material to the
Borrower and its Subsidiaries taken as a whole.

6.06 litigation. Except as set forth on Schedule 6.06, there
is no action, suit or arbitration or other proceeding pending or, to the best
knowledge of the Borrower, threatened with respect to (i) any Credit Document,
(ii) any tax return, (iii) any Acquisition that has been consummated, if any,
or (iv) any other matter that, if adversely determined, is reasonably likely to
materially and adversely affect the business, operations, property, assets,
condition (financial or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole.

6.07 True and Complete Disclosure. All factual information
(taken as a whole) heretofore or contemporaneously furnished by the Borrower or
on behalf of the Borrower with its knowledge in writing to any Bank (including,
without limitation, all information contained in the Credit Documents) for
purposes of or in connection with this Agreement or any transaction
contemplated herein (including, without limitation, any Acquisition) is, and
all other such factual information (taken as a whole) hereafter furnished by or
on behalf of the Borrower in writing to any Bank will be, true and accurate in
all material respects on the date as of which such information is dated or
certified and not incomplete by omitting to state any fact necessary to make
such information (taken as a whole) not materially misleading at such time in
light of the circumstances under which such information was provided.

6.08 Use of Proceeds; Margin Regulations. All proceeds of
the Loans and any Letters of Credit have been and will be used by the Borrower
for the purposes set forth in Section 2.07; provided that no part of the
proceeds of any Loan or any Letter of Credit was or will be used by the
Borrower to purchase or carry any Margin Stock or to extend credit to others
for the purpose of

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purchasing or carrying any Margin Stock. Neither the making of any Loan or the
issuance of any Letter of Credit nor the use of the proceeds thereof will
violate or be inconsistent with the provisions of Regulations G, T, U or X of
the Board of Governors of the Federal Reserve System.

6.09 Tax Returns and Payments. Each of the Borrower and its
Subsidiaries has filed all tax returns required to be filed by it and has paid
all income taxes payable by it that have become due pursuant to such tax
returns and all other taxes and assessments payable by it that have become due,
other than those not yet delinquent, those being contested in good faith and
those listed on Schedule 6.06.

6.10 Compliance With ERISA. Each Plan is in substantial
compliance with ERISA; no Plan is insolvent or in reorganization; no Plan has
an Unfunded Current Liability, no Plan has an accumulated or waived funding
deficiency or permitted decreases in its funding standard account within the
meaning of Section 412 of the Code; neither the Borrower nor any Subsidiary of
the Borrower nor ERISA Affiliate has incurred any material liability to or on
account of a Plan pursuant to Sections 502(c), (i) or (l), 515, 4062, 4063,
4064, 4071, 4201 or 4204 of ERISA or Chapter 43 of the Code or expects to incur
any liability under any of the foregoing sections; no proceedings have been
instituted to terminate any Plan; no condition exists that presents a material
risk to the Borrower or any of its Subsidiaries of incurring a liability to or
on account of a Plan pursuant to the foregoing provisions of ERISA and the
Code; no Lien imposed under the Code or ERISA on the assets of the Borrower or
any of its Subsidiaries exists or is likely to arise on account of any Plan;
the Borrower and its Subsidiaries may terminate contributions to any other
employee benefit plans maintained by them without incurring any material
liability to any Person interested therein; and no Plan has received notice
from the Internal Revenue Service of the failure of such Plan to qualify under
Section 401(a) of the Code.

6.11 Capitalization. The authorized capital stock of the
Borrower consists of 12,000,000 shares of common stock, $0.01 par value per
share, of which 7,547,676 shares were issued and outstanding as of August 1,
1995 and 1,000,000 shares of preferred stock, $0.01 par value per share, of
which none are issued and outstanding. All such outstanding shares have been
duly and validly issued, are fully paid and non-assessable. The Borrower does
not have outstanding any securities convertible into or exchangeable for its
capital stock or outstanding any rights to subscribe for or to purchase, or any
options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, its capital stock except as described on Schedule 6.11
or as issued under any employee stock option plan of the Borrower and reported
to the Agent each fiscal quarter.

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6.12 Subsidiaries. On the Effective Date, the corporations
listed on Schedule 6.12 and the associations or joint ventures listed on
Schedule 6.21 are the only Subsidiaries of the Borrower. Schedule 6.12 and
Schedule 6.21 correctly set forth, as of the Effective Date, the percentage
ownership (direct and indirect) of the Borrower in each class of capital stock
or partnership interests of each of its Subsidiaries and also identify the
direct owner thereof.

6.13 Compliance with Statutes, etc. Except as disclosed on
Schedule 6.13, each of the Borrower and its Subsidiaries is in compliance with
all applicable statutes, regulations and orders of, and all applicable
restrictions imposed by, all governmental bodies, domestic or foreign, in
respect of the conduct of its business and the ownership of its property
(including applicable statutes, regulations, orders and restrictions relating
to environmental standards and controls), except such noncompliances as would
not, in the aggregate, have a material adverse effect on the business,
operations, property, assets, condition (financial or otherwise) or prospects
of the Borrower and its Subsidiaries taken as a whole.

6.14 Investment Company Act. Neither the Borrower nor any of
its Subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.

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

6.16 Labor Relations. Neither the Borrower nor any of its
Subsidiaries nor, to the best of the Borrower's knowledge at the time of any
Acquisition, the Target of such Acquisition, is engaged in any unfair labor
practice that would (upon giving effect to such Acquisition) have a material
adverse effect on the Borrower and its Subsidiaries taken as a whole. There is
(i) no significant unfair labor practice complaint pending or, to the best
knowledge of the Borrower, threatened against the Borrower or any of its
Subsidiaries or, to the best knowledge of the Borrower at the time of any
Acquisition, the Target of such Acquisition, before the National Labor
Relations Board, and no significant grievance or significant arbitration
proceeding arising out of or under any collective bargaining agreement is so
pending or, to the best knowledge of the Borrower, threatened against the
Borrower or any of its Subsidiaries or, to the best of knowledge of the
Borrower at the time of any Acquisition, the Target of such Acquisition, (ii)
no significant strike, labor dispute, slowdown or stoppage pending or, to the
best knowledge of the Borrower, threatened against the Borrower or any of its
Subsidiaries or, to the best knowledge of the Borrower at the time of any
Acquisition, the Target of

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such Acquisition, and (iii) to the best knowledge of the Borrower, no union
representation question existing with respect to the employees of the Borrower
or any of its Subsidiaries and, to the best knowledge of the Borrower, no union
organizing activities are taking place, except (with respect to any matter
specified in clause (i), (ii) or (iii) above, either individually or in the
aggregate) such as would not (upon giving effect to such Acquisition) have a
material adverse effect on the business, operations, property, assets,
condition (financial or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole.

6.17 Patents, Licenses, Franchises and Formulas. Except as
set forth on Schedule 6.17, each of the Borrower and its Subsidiaries owns all
the patents, trademarks, permits, service marks, trade names, copyrights,
licenses, franchises and formulas, or rights with respect to the foregoing, and
has obtained assignments of all leases and other rights of whatever nature,
necessary for the present conduct of its business. Except as set forth on
Schedule 6.17, no proceedings, claims, actions or oppositions have been
instituted or are pending or, to the best of the Borrower's and its
Subsidiaries' knowledge, after due inquiry, are threatened that challenge the
validity of the Borrower's or its Subsidiaries' use of such patents,
trademarks, permits, service marks, trade names, copyrights, licenses,
franchises and formulas, or rights with respect to the foregoing, that would
result in a material adverse effect on the business, operations, property,
assets, condition (financial or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole.

6.18 No Material Adverse Change. Except as set forth on
Schedule 6.18, since December 31, 1995, there has been no material adverse
change in the business, operations, properties, assets, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole
other than change due to action expressly permitted by the terms of this
Agreement; provided, however, that the enactment of legislation providing for a
reduction of 20% or less in Medicare's reimbursement rates in effect on January
1, 1996 for oxygen therapy shall not be considered a material adverse change
for purposes of this Section.

6.19 Fraud and Abuse. Except as disclosed on Schedule 6.13,
the Borrower and its Subsidiaries, and, to the knowledge of the Borrower and
its Subsidiaries after reasonable inquiry, their respective officers and
directors, and persons who provide professional services under agreements with
the Borrower or any of its Subsidiaries have been and are in material
compliance with federal Medicare and Medicaid statutes, 42 U.S.C. Section
Section 1320a-7, 1320a-7(a), 1320a-7b and 1395nn, as amended, and the
regulations promulgated thereunder or related state and local statutes and
regulations and rules of professional conduct, and have not at anytime:

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(i) knowingly and willfully made or caused to be made a
false statement or representation of a material fact in any
application for any benefit or payment;

(ii) knowingly and willfully made or caused to be made any
false statement or representation of a material fact for use in
determining rights to any benefit or payment;

(iii) presented or caused to be presented a claim for
reimbursement for services under Medicare or Medicaid, or other state
health care programs that is for an item or service that is known or
should be known to be (a) not provided as claimed, or (b) false or
fraudulent;

(iv) failed to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right to
any benefit or payment on its own behalf or on behalf of another, with
intent fraudulently to secure such benefit or payment;

(v) knowingly and willfully illegally offered, paid,
solicited or received any remuneration (including any kickback, bribe,
or rebate), directly or indirectly, overtly or covertly, in cash or in
kind (a) in return for referring an individual to a person for the
furnishing or arranging for the furnishing of any item or service for
which payment may be made in whole or in part by Medicare or Medicaid,
or other state health care programs, or (b) in return for purchasing,
leasing or ordering or arranging for or recommending purchasing,
leasing or ordering any good, facility, service, or item for which
payment may be made in whole or in part by Medicare or Medicaid or
other state health care programs;

(vi) knowingly made a payment, directly or indirectly, to
a physician as an inducement to reduce or limit services to
individuals who are under the direct care of the physician and who are
entitled to benefits under Medicare or Medicaid, or other state health
care programs;

(vii) provided to any person information that is known or
should be known to be false or misleading that could reasonably be
expected to influence the decision when to discharge a hospital
in-patient from the hospital;

(viii) knowingly and willfully made or caused to be made or
induced or sought to induce the made of any false statement or
representation (or omitted to state a fact required to be stated
therein or necessary to make the statements contained therein not
misleading) of a material fact with respect to (a) the conditions or
operations of a facility in order that the facility may qualify for
Medicare or Medicaid or other state health care

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program certification, or (b) information required to be provided
under Section 1124A of the Social Security Act (42 U.S.C. Section
1320a-3);

(ix) knowingly and willfully (a) charged for any Medicaid
service, money or other consideration at a rate in excess of the rates
established by the state, or (b) for services covered (in whole or in
part) by Medicaid, charged, solicited, accepted or received, in
addition to amounts paid by Medicaid, any gift, money, donation or
other consideration (other than a charitable, religious or
philanthropic contribution from an organization or from a person
unrelated to the patient) (y) as a precondition of treating the
patient, or (z) as a requirement for the patient's continued treatment;

(x) completed Certificates of Medical Necessity on behalf
of physicians in violation of the Health Care Financing
Administration's carrier directives prohibiting home health care
providers from so doing;

(xi) violated the federal Food, Drug and Cosmetic Act and
the so-called "pharmacy exemption" contained therein and the FDA's
Compliance Policy Guide Number 7132.16 entitled "Manufacture,
Distribution, and Promotion of Adulterated, Misbranded, or Unapproved
New Drugs for Human Use by State-Licensed Pharmacies;" or

(xii) violated the FDA's guidelines or OSHA regulations
including those in connection with any oxygen filling stations
maintained or operated by the Borrower or any of its Subsidiaries and
29 C.F.R. 1910, 1030 Occupational Exposure to Bloodborne Pathogens;

such that the actions or inactions in the foregoing clauses (i) through (xii),
individually or in the aggregate, would have a material adverse effect on the
business, operations, property, assets, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries, taken as a whole.

6.20 Title to Properties; Liens. The Borrower and its
Subsidiaries have good, sufficient and legal title to all of their respective
properties and assets reflected in the most recent financial statements
delivered pursuant to Sections 7.01(a) and (b) of this Agreement (or, if no
such financial statements have yet been delivered, the most recent financial
statements delivered pursuant to Sections 7.01(a) and (b) of the Existing
Credit Agreement), except for assets disposed of since the date of such
financial statements in the Ordinary Course of Business or as otherwise
permitted under Section 8.02. Except as permitted by this Agreement, all such
properties and assets are free and clear of Liens.

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6.21 Joint Ventures. Except as set forth on Schedule 6.21,
the Borrower and its Subsidiaries are not party to any Joint Venture other than
Joint Ventures permitted under Section 8.05(vi).

6.22 Accounts Receivable Collateral. The Accounts Receivable
and any related reimbursement contracts with the payor of such Accounts
Receivable have not been satisfied, subordinated or rescinded in any manner
(other than settlements in the Ordinary Course of Business with payors of such
Accounts Receivable reached to facilitate collection); such Accounts Receivable
were created through the provision of services or merchandise supplied by
either (a) the Borrower and its Subsidiaries and the related charges were
usual, customary and reasonable, or (b) a Target of an Acquisition prior to
such Acquisition and the Borrower believes, after due investigation, that the
related charges were usual, customary and reasonable; such Accounts Receivable
are owned by the Borrower and its Subsidiaries free and clear of any adverse
claim and the Borrower and its Subsidiaries have the right to assign and
transfer such Accounts Receivable except as such assignment or transfer would
be prohibited by Section 1815(c) of the Social Security Act, 42 U.S.C. Section
1395g(c) and the regulations promulgated thereunder; and there are no
procedures or investigations pending or threatened before any Governmental
Authority seeking a determination or ruling that might affect the validity or
enforceability of a material portion of such Accounts Receivable subject to the
review or jurisdiction of such Governmental Authority.

6.23 Seller Debt. Except as disclosed on Schedule
8.04(XIII), the Acquisition Notes represent unsecured Indebtedness of the
Borrower.

6.24 Survival of Rights Created Under Existing Credit
Agreement. Notwithstanding the modification effected by this Agreement of the
representations, warranties and covenants of the Borrower contained in the
Existing Credit Agreement, the Borrower hereby acknowledges and agrees that any
choses in action or other rights created in favor of the Existing Banks and the
Agent (as defined in the Existing Credit Agreement) and their respective
successors and assigns, if any, arising out of the representations and
warranties of the Borrower contained in or delivered (including representations
and warranties delivered in connection with the making of any loans thereunder)
in connection with the Existing Credit Agreement, including all amendments and
waivers relating thereto, shall survive the execution and delivery of this
Agreement.

6.25 Fox Chase Medical Equipment, Inc. Fox Chase Medical
Equipment, Inc. is an inactive Subsidiary of the Borrower and has no assets and
no liabilities, and dissolution proceedings with respect to Fox Chase Medical
Equipment, Inc. were commenced prior to the Effective Date. Notwithstanding
anything contained herein, any representation or warranty of the Borrower with

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respect to its Subsidiaries contained in Section 6 shall not be deemed made
with respect to Fox Chase Medical Equipment, Inc. to the extent that the
dissolution of such Subsidiary would render such representation or warranty
untrue or inaccurate.

Section 7. Affirmative Covenants. The Borrower covenants and
agrees that on and after the Effective Date and until the Loans and the Notes,
together with interest, Fees and all other Obligations incurred hereunder and
thereunder, are paid in full and all Letters of Credit are cancelled, expired
or otherwise provided for to the satisfaction of the Issuing Bank:

7.01 Information Covenants. The Borrower will furnish to
each Bank:

(a) Quarterly Financial Statements. Within 60 days (or
90 days in the case of the fourth fiscal quarter) after the close of
each quarterly accounting period in each Fiscal Year, the consolidated
balance sheets of the Borrower and its Consolidated Subsidiaries as at
the end of such quarterly period and the related consolidated
statements of operations and statements of cash flows for the elapsed
portion of the Fiscal Year ended with the last day of such quarterly
period and for such quarterly period and setting forth comparative
figures for the related periods in the prior Fiscal Year for the
statements of operations and cash flows, all of which shall be
certified by the Chief Executive Officer or the Chief Financial
Officer of the Borrower, subject to normal year-end audit adjustments
and, promptly, commencing with the quarter ended March 30, 1996, the
financial review provided quarterly to the Board of Directors of the
Borrower.

(b) Annual Financial Statements. Within 90 days after
the close of each Fiscal Year, the consolidated balance sheets of the
Borrower and its Consolidated Subsidiaries as at the end of such
Fiscal Year and the related consolidated statements of operations and
statements of cash flows for such Fiscal Year, in each case setting
forth comparative figures for the preceding fiscal year and certified,
in the case of the consolidated financial statements, without
qualification by independent certified public accountants of
recognized national standing reasonably acceptable to the Required
Banks, together with a report of such accounting firm stating that in
the course of its regular audit of the financial statements of the
Borrower, which audit was conducted in accordance with generally
accepted auditing standards, such accounting firm obtained no
knowledge of any Default or Event of Default related to accounting or
financial reporting matters that has occurred and is continuing or, if
in the

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opinion of such accounting firm such a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof.

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

(d) Performance Plan. On or before February 15 of each
year (beginning February 15, 1997), a performance plan (a "Performance
Plan") for such year, in a form no less detailed than the financial
projections delivered to the Banks prior to the Effective Date
pursuant to the Existing Credit Agreement for the Borrower and its
Subsidiaries as a whole (in each case including forecast consolidated
statements of income and sources and uses of cash and balance sheets)
prepared by the Borrower for each quarter of each Fiscal Year
beginning with the quarter ending March 31, 1997 and for the elapsed
portion of such Fiscal Year ended with the last day of each quarter
accompanied by the statement of the Chief Executive Officer or the
Chief Financial Officer of the Borrower to the effect that, to the
best of such officer's knowledge, the Performance Plan is a reasonable
estimate and forecast for the period covered thereby.

(e) Performance Reports. Within 60 days after the end of
each fiscal quarter (or 90 days after the end of the Fiscal Year), a
performance report, in a form reasonably satisfactory to the Banks,
containing consolidated balance sheets for the Borrower and its
Subsidiaries as a whole as at the end of that quarter and the related
consolidated statements of operations and cash flows for the quarter
and the elapsed portion of the Fiscal Year then ended, and comparing
actual results of operations and financial position to that forecast
in the Performance Plan for the quarter and for the elapsed portion of
the Fiscal Year ended with the last day of that quarter, as the case
may be, setting forth comparative figures for the related periods in
the prior Fiscal Year and stating the reasons for any variance between
the actual results of operations, financial position and cash flows
and forecasted results of operations, financial position and cash
flows and explanations of the variances that are adverse to the
Borrower or any of its Subsidiaries; provided that with respect to the
quarters ended June 30, 1996, September 30, 1996 and December 31,
1996, such comparative figures shall be based upon the financial
projections delivered to the Banks prior to the Effective Date
pursuant to Section 7.01(d) of the Existing Credit Agreement. Such
performance report shall also contain a statement of receivables
(including an aging report) held by the Borrower and its Subsidiaries
as a whole.

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(f) Compliance Certificates. At the time of the delivery
of the financial statements provided for in Sections 7.01(a) and (b)
and the quarterly performance reports provided for in Section 7.01(e),
a Compliance Certificate of the Chief Executive Officer or the Chief
Financial Officer of the Borrower to the effect that, to the best of
such officer's knowledge, no Default or Event of Default has occurred
and is continuing or, if any Default or Event of Default has occurred
and is continuing, specifying the nature and extent thereof, which
Compliance Certificate also shall set forth the calculations required
to establish whether the Borrower was in compliance with those
provisions of Section 8 identified on the Compliance Certificate at
the end of such quarter, fiscal quarter or Fiscal Year, as the case
may be.

(g) Notice of Default, Litigation or Health Care
Compliance. Promptly, and in any event within three Business Days
after any of the Chief Executive Officer, Chief Financial Officer or
Chief Operating Officer of the Borrower obtains knowledge thereof,
notice of (i) the occurrence of any event that constitutes a Default
or an Event of Default, (ii) any litigation or governmental or
arbitration proceeding pending (x) against the Borrower or any of its
Subsidiaries that could reasonably be expected to materially and
adversely affect the business, operations, property, assets, condition
(financial or otherwise) or prospects of the Borrower and its
Subsidiaries, taken as a whole, or (y) with respect to any Credit
Document or any Acquisition then contemplated or already consummated
by the Borrower or its Subsidiaries, (iii) any material adverse
changes in the status of any litigation or other proceeding reported
by the Borrower pursuant to Section 6.06 or this Section 7.01(g), (iv)
any material claim, complaint, notice or request for information
received by the Borrower or any of its Subsidiaries with respect to
compliance with health care regulatory requirements relating to the
delivery of health care services of the type provided by the Borrower
and payment therefor (excluding malpractice claims), including, but
not limited to, any violation or alleged violation of any federal,
state or local statute, regulation, or ordinance relating to the
delivery of medical services and payment therefor, including, but not
limited to, the requirements set forth under federal Medicare and
Medicaid statutes, 42 U.S.C. Section Section 1320a-7, 1320a-7a,
1320a-7b and 1395nn, and the regulations promulgated thereunder and
related state or local statutes or regulations and (v) any other event
that could reasonably be expected to materially and adversely affect
the business, operations, property, assets, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries, taken as
a whole.

(h) Other Reports and Filings. Promptly, copies of all
financial information, proxy materials and other information and
reports, if any, that the Borrower or any of its Subsidiaries shall
file with the Securities and

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Exchange Commission or any governmental agencies substituted therefor
(the "SEC").

(i) Reports of Asset Transfers to Subsidiaries or
Formation of Joint Ventures. No later than 5 Business Days after (A)
any transfer to any Joint Venture that is not a Guarantor Subsidiary
of (i) any assets of the Borrower or any of its Subsidiaries having a
fair market value exceeding $1,000,000 in the aggregate or (ii) any
intangible assets material to the business, operations, properties,
condition (financial or otherwise) or prospects of the Borrower and
its Subsidiaries and (B) the formation of any Joint Venture, the
Borrower shall notify the Agent of the nature of such transaction and
the business purpose therefor.

(j) Margin Rate Determination Certificate. Concurrently
with the delivery of the financial statements required under Sections
7.01(a) and (b), the Borrower shall deliver a Margin Rate
Determination Certificate. In the event the Borrower makes an Equity
Offering, the Borrower may elect to replace the Margin Rate
Determination Certificate then in effect with a supplemental Margin
Rate Determination Certificate which shall remain effective until
Borrower is required to deliver a subsequent Margin Rate Determination
Certificate in accordance with this Section 7.01(j).

(k) Acquisition Financials. Within ten Business Days of
any Acquisition (i) an Officer's Certificate (v) setting forth the
aggregate consideration paid in such Acquisition, (w) setting forth
any anticipated Divestitures, (x) demonstrating compliance with the
requirements of Section 8.02(v), (y) setting forth the amount of any
notes representing Unsecured Seller Debt and (z) attaching copies of
the documentation regarding any Unsecured Seller Debt, (ii) copies of
all consolidated balance sheets and consolidating balance sheets (to
the extent consolidating balance sheets are available) and related
statements of operations and statements of cash flows of the Target
and its Subsidiaries, if any, acquired in such Acquisition, that are
delivered in connection with such Acquisition, and the amount of
Consolidated EBITDA of the Target and its Subsidiaries for each of the
immediately preceding four fiscal quarters that will be included by
the Borrower in its calculation of Consolidated Adjusted EBITDA under
this Agreement, which balance sheets and related statements of
operations and statements of cash flows and historical Consolidated
EBITDA of the Target and its Subsidiaries shall be reasonably
satisfactory in substance to the Agent and the Required Banks (i) to
the extent of any adjustments therein, (ii) if unaudited, or (iii) if
both clauses (i) and (ii) of this Section 7.01(k) are true; provided
that, such financials shall be deemed acceptable to the Required

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Banks unless Banks sufficient to prevent the approval of the Required
Banks shall give notice of disapproval to the Agent within ten
Business Days of the delivery of such financials to Banks.

(l) Other Information. From time to time, such other
information or documents (financial or otherwise) as any Bank
reasonably may request.

7.02 Books, Records and Inspections. The Borrower will, and
will cause each of its Subsidiaries to, keep proper books of record and account
in which full, true and correct entries in conformity with generally accepted
accounting principles consistently applied and all requirements of law shall be
made of all dealings and transactions in relation to its business and
activities. The Borrower will, and will cause each of its Subsidiaries to,
permit officers and designated representatives of the Agent or any Bank to
visit and inspect, under guidance of officers of the Borrower or such
Subsidiary, any of the properties of the Borrower or such Subsidiary, and to
examine the books of record and account of the Borrower or such Subsidiary and
discuss the affairs, finances and accounts of the Borrower or such Subsidiary
with, and be advised as to the same by, its and their officers and independent
accountants, all at such reasonable times and intervals, with such reasonable
notice and to such reasonable extent as the Agent or such Bank may request.

7.03 Maintenance of Property, Insurance. Schedule 7.03 sets
forth a true and complete listing of all insurance maintained by the Borrower
and its Subsidiaries as of the Effective Date and the amounts of such
insurance. The Borrower will, and will cause each of its Subsidiaries to, (i)
keep all property useful and necessary in its business in good working order
and condition, (ii) maintain with financially sound and reputable insurance
companies insurance on all its property and its directors and officers in at
least such amounts and against at least such risks as are described in Schedule
7.03; provided that the Borrower and its Subsidiaries may self-insure against
risks consistent with standard industry practices for companies in the same or
similar businesses, and (iii) furnish to each Bank, within 45 days after the
end of each Fiscal Year and otherwise, upon written request, full information
as to the insurance carried.

7.04 Corporate Franchises. Except as permitted by Section
8.02, the Borrower will, and will cause each of its Subsidiaries to, do or
cause to be done, all things necessary to preserve and keep in full force and
effect its existence and its material rights, franchises, licenses and patents;
provided, however, that nothing in this Section 7.04 shall prevent (a) the
withdrawal by the Borrower or any of its Subsidiaries of its qualification as a
foreign corporation, association or joint venture in any jurisdiction where
such withdrawal would not have a material adverse effect on the business,
operations, property, assets, condition (financial or otherwise) or prospects
of the Borrower and its Subsidiaries taken as a whole, (b) the merger of AHPT,
with and into the

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Borrower under Section 8.02(vii), or (c) the discontinuance of any Subsidiary
of the Borrower if such discontinuance would not have a material adverse effect
on the business, operations, property, assets, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole.

7.05 Compliance With Statutes, Etc. The Borrower will, and
will cause each of its Subsidiaries to, comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business, including, without limitation, the laws and regulations referred to
in Section 6.19, and the ownership of its property (including applicable
statutes, regulations, orders and restrictions relating to environmental
standards and controls), except such noncompliances as could not, in the
aggregate, reasonably be expected to have a material adverse effect on the
business, operations, property, assets, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole.

7.06 ERISA. (a) As soon as possible and, in any event,
within 10 days after the Borrower or any of its Subsidiaries or ERISA
Affiliates knows or has reason to know any of the following, the Borrower will
deliver to each of the Banks a certificate of the Chief Executive Officer or
the Chief Financial Officer of the Borrower setting forth details as to such
occurrence and such action, if any, that the Borrower, such Subsidiary or such
ERISA Affiliate is required or proposes to take, together with any notices
required or proposed to be given to or filed with or by the Borrower, the
Subsidiary, the ERISA Affiliate, the PBGC, a Plan participant or the Plan
administrator with respect thereto: that a Reportable Event has occurred; that
an accumulated funding deficiency has been incurred or an application may be or
has been made to the Secretary of the Treasury for a waiver or modification of
the minimum funding standard (including any required installment payments) or
an extension of any amortization period under Section 412 of the Code with
respect to a Plan; that a Plan has been or may be terminated, reorganized,
partitioned or declared insolvent under Title IV of ERISA; that a Plan has an
Unfunded Current Liability giving rise to a Lien under ERISA or the Code; that
proceedings may be or have been instituted to terminate a Plan; that a
proceeding has been instituted pursuant to Section 515 of ERISA to collect a
delinquent contribution to a Plan; that the Borrower, any of its Subsidiaries
or ERISA Affiliates will or may incur any liability (including any contingent
or secondary liability) to or on account of the termination of or withdrawal
from a Plan under Sections 4062, 4063, 4064, 4201 or 4204 of ERISA; that the
Borrower, any of its Subsidiaries or ERISA Affiliates will or may incur any
liability under Chapter 43 of the Code or under Sections 502(c), (i) or (1) or
4071 of ERISA; that there exists a condition that presents a material risk to
the Borrower, any of its Subsidiaries or ERISA Affiliates of incurring a
liability to or on account of a Plan pursuant to the assertion of a material
claim (other than a routine claim for benefits) against any

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such Plan; or that any Plan has been determined by the Internal Revenue Service
to fail to qualify under Section 401(a) of the Code.

(b) The Borrower will deliver to each of the Banks a
complete copy of the annual report (Form 5500) of each Plan required to be
filed with the Internal Revenue Service.

(c) In addition to any certificates or notices delivered
to the Banks pursuant to the clause (a) of this Section 7.06, copies of annual
reports and any other notices received by the Borrower or any of its
Subsidiaries required to be delivered to the Banks hereunder shall be delivered
to the Banks no later than 10 days after the later of the date such report or
notice has been filed with the Internal Revenue Service or the PBGC, given to
Plan participants or received by the Borrower or such Subsidiary.

7.07 End of Fiscal Years; Fiscal Quarters. The Borrower
shall cause (i) each of its fiscal years, and the fiscal years of each of its
Subsidiaries other than Joint Ventures, to end on December 31 and (ii) each of
its, and each of its Subsidiaries', fiscal quarters to end on March 31, June
30, September 30 and December 31; provided that any Subsidiary acquired
subsequent to the Effective Date that has different fiscal year ends, fiscal
quarter ends or both than those set forth in this Section 7.07 shall conform
such periods to those set forth herein in the ordinary course consistent with
past practice.

7.08 Performance of Obligations. The Borrower will, and will
cause each of its Subsidiaries to, perform all of its obligations under the
terms of each mortgage, indenture, security agreement and other debt instrument
by which it is bound, except such non-performances as could not in the
aggregate, reasonably be expected to have a material adverse effect on the
business, operations, property, assets, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole.

7.09 Payment of Taxes and Claims. The Borrower will, and
will cause each of its Subsidiaries to, pay or cause to be paid all taxes,
assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its franchises, business, income
or property before any material penalty accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable and that by law have or may
become a material Lien upon any of its properties or assets, prior to the time
when any material penalty or fine shall be incurred with respect thereto;
provided that so long as no property or assets (other than money for such
charge or claim and the interest or penalty accruing thereof) of the Borrower
or any of its Subsidiaries is in danger of being lost or forfeited as a result
thereof, no such charge or claim need be paid if it is being contested in good
faith by appropriate proceedings

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promptly instituted and diligently conducted and if such reserve or other
appropriate provision, if any, as shall be required in conformity with
generally accepted accounting principles consistently applied shall have been
made therefor.

7.10 Licensing. The Borrower will and will cause each of its
Subsidiaries to be operated at all times in compliance in all material respects
with all federal, state and local statutes, regulations and ordinances relating
to the licensing of healthcare services of the type provided by the Borrower
and to maintain, at all times, accreditation for no less than 90% of the
branches owned by the Borrower and its Subsidiaries longer than one year with
the Joint Commission on Accreditation of Healthcare Organizations.

7.11 Further Assurances; New Subsidiaries.

(a) At any time and from time to time upon the request of
the Agent, the Borrower shall and shall cause each of its Wholly-Owned
Subsidiaries to execute and deliver such further documents and do such other
acts and things as the Agent reasonably may request in order to effect fully
the purposes of this Agreement and the other Credit Documents and to provide
for payment of the Obligations in accordance with the terms of this Agreement
and the other Credit Documents.

(b) In the event a Person becomes a Subsidiary of the
Borrower (other than as a Joint Venture) after the Effective Date, the Borrower
shall, within 10 Business Days of such event, cause such Subsidiary to execute
and deliver the Subsidiary Guaranty, the Subsidiary Security Agreement, a
Subsidiary Partnership Security Agreement, the Subsidiary Pledge Agreement,
Collection Bank Agreements (to the extent required by Section 8.16) and the
Subsidiary Trademark Security Agreement and such other agreements, pledges,
assignments, documents and certificates (including, without limitation, any
amendments to the Credit Documents) as may be necessary or desirable or as the
Agent may request and do such other acts and things as the Agent reasonably may
request in order to have such domestic Subsidiary guaranty and/or secure the
Obligations and effect fully the purposes of this Agreement and the other
Credit Documents and to provide for payment of the Obligations in accordance
with the terms of this Agreement and the other Credit Documents.

(c) Notwithstanding any provision contained herein or in
any of the Credit Documents, none of the Borrower nor any of its Guarantor
Subsidiaries shall be deemed to be in default under (or to have breached any
provision of) this Agreement or any Credit Document solely by virtue of
permitting to exist any Lien described in Section 8.01(xvi) until such time as
such Lien is required to be terminated under such Section.

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7.12 Accounts Receivable. The Borrower and its Subsidiaries
will submit all necessary documentation and supply all necessary information
for payment of all Accounts Receivable (other than settlements in the Ordinary
Course of Business with payors of such Accounts Receivable reached to
facilitate collection to the payor for each of such Accounts Receivable); will
not subordinate or rescind any of the Accounts Receivable; and will notify
Agent promptly if any procedures or investigations are pending or threatened
before any Governmental Authority seeking a determination or ruling that might
materially and adversely affect the validity or enforceability of a material
portion of such Accounts Receivable subject to the review or jurisdiction of
such Governmental Authority.

Section 8. Negative Covenants. The Borrower covenants and
agrees that on and after the Effective Date and until the Loans and the Notes,
together with interest, Fees and all other Obligations incurred hereunder and
thereunder, are paid in full and all Letters of Credit are cancelled, expired
or otherwise provided for to the satisfaction of the Issuing Bank:

8.01 Liens. The Borrower will not, and will not permit any
of its Subsidiaries to, create, incur, assume or permit to exist any Lien upon
or with respect to any property or assets (real or personal, tangible or
intangible) of the Borrower or any of its Subsidiaries, whether now owned or
hereafter acquired; provided that the provisions of this Section 8.01 shall not
prevent the creation, incurrence, assumption or existence of:

(i) Liens for taxes not yet due, or Liens for taxes being
contested in good faith and by appropriate proceedings for which
adequate reserves have been established the failure to pay which would
not have a material adverse effect on the business, operations,
property, assets, condition (financial or otherwise) or prospects of
the Borrower and its Subsidiaries taken as a whole;

(ii) Liens in respect of property or assets of the
Borrower or any of its Subsidiaries imposed by law, that were incurred
in the Ordinary Course of Business, such as carriers', warehousemen's
and mechanics' liens and other similar Liens arising in the Ordinary
Course of Business and (x) that do not in the aggregate materially
detract from the value of property or assets having a value
individually or in the aggregate in excess of $50,000, or materially
impair the use thereof in the operation of the business of the
Borrower or any of its Subsidiaries or (y) that are being contested in
good faith by appropriate proceedings, which proceedings have the
effect of preventing the forfeiture or sale of the property or assets
subject to any such Lien;

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(iii) Liens in existence on the Effective Date that are
listed, and the property subject thereto described, in Schedule 8.01
(Liens described in this clause (iii), "PERMITTED LIENS");

(iv) Liens in favor of the Agent;

(v) Liens relating to leases and subleases granted to
others not interfering in any material respect with the business of
the Borrower or any of its Subsidiaries;

(vi) Easements, rights-of-way, restrictions, minor defects
or irregularities of title and other similar charges or encumbrances
not interfering in any material respect with the Ordinary Course of
Business of the Borrower or any of its Subsidiaries;

(vii) Liens relating to any interest or title of a lessor
under any lease;

(viii) Liens relating to Interest Rate Agreements permitted
under Section 8.04(xi);

(ix) Liens relating to bankers' liens and other rights of
setoff;

(x) Pledges or deposits in connection with worker's
compensation, unemployment insurance and other social security
legislation;

(xi) Liens on assets purchased using the proceeds of
non-recourse purchase money Indebtedness permitted by Section 8.04(ix);

(xii) Any attachment or judgment Lien not constituting an
Event of Default under Section 9.09;

(xiii) Any deposit arrangement, made in connection with a
transaction to secure performance of obligations in connection with
such transaction, not in excess (either individually or in the
aggregate) of $2,000,000; provided that such deposit arrangement
terminated on the date upon which such performance obligations are
required to be discharged under the terms of the document creating
such deposit arrangement;

(xiv) Liens created to secure Indebtedness of the Borrower
and its Subsidiaries incurred after the Effective Date as permitted in
8.04(xiv);

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(xv) Liens created to secure Indebtedness of the Target of
any Acquisition outstanding on the date of such Acquisition; provided
that such Liens were created prior to the date of such Acquisition and
were not created in contemplation of such Acquisition and provided
that the aggregate amount of such secured Indebtedness outstanding at
any time shall not exceed $10,000,000;

(xvi) Liens consisting of (A) those Uniform Commercial Code
financing statements listed on Schedule 8.01(XVI) annexed hereto;
provided that (1) none of such financing statements shall secure any
outstanding Indebtedness and (2) as soon as practicable but in any
event within sixty days after the Effective Date, the Borrower shall
take all action (including without limitation the filing of
termination statements with the appropriate filing offices) necessary
to terminate such financing statements, or (B) Uniform Commercial Code
financing statements relating to property or assets acquired (whether
in Acquisitions or otherwise) after the Effective Date, so long as
(1) none of such financing statements shall secure any outstanding
Indebtedness and (2) as soon as practicable but in any event within 30
days of the date of any such acquisition, the Borrower shall take all
action (including without limitation the filing of termination
statements with the appropriate filing offices) necessary to terminate
all such financing statements relating to property or assets acquired
in such acquisition;

(xvii) Liens created pursuant to Corporate Restructuring
Guaranty/Security Agreements in connection with the Corporate
Restructuring; and

(xviii) Liens in favor of AHPF created after the First
Amendment Effective Date pursuant to one or more Intercompany
Acquisition Guaranty/Security Agreements.

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

(i) the Borrower and its Subsidiaries may make sales of
inventory in the Ordinary Course of Business and make Divestitures of
inventory;

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(ii) the Borrower and its Subsidiaries may, in the
Ordinary Course of Business, dispose of equipment and capital assets
that are obsolete or in need of replacement and make Divestitures of
equipment and capital assets;

(iii) the Borrower and its Subsidiaries may, in addition to
any sales permitted in clauses (i) and (ii) above, sell (by way of
merger or otherwise) for cash and/or promissory notes permitted under
Section 8.05(xii), the stock, property or assets of any of its
Subsidiaries having an aggregate fair market value (as reasonably
determined by the board of directors of the Person making the sale)
not to exceed $5,000,000 in any calendar year (without regard to
clause (vii) of this Section 8.02);

(iv) any Subsidiary of the Borrower may merge or
consolidate (a) into the Borrower or (b) with any other domestic
Wholly-Owned Subsidiary of the Borrower, so long as such Wholly-Owed
Subsidiary is the surviving corporation, association or joint venture,
and in the case of any merger or consolidation involving a Guarantor
Subsidiary, the Guarantor Subsidiary (or a Subsidiary of the Borrower
that will become a Guarantor Subsidiary on or before consummation of
such merger) is the surviving corporation;

(v) the Borrower and its Wholly-Owned Subsidiaries may
(without regard to the limitations set forth in Section 8.07) acquire
property and assets of other Persons (including any assets or property
acquired in any Acquisition) provided that the aggregate consideration
paid by the Borrower or such Subsidiaries consisting of cash or any
assets of the Borrower or such Subsidiaries (excluding any common
stock of the Borrower and the proceeds of any Divestiture but
including the principal amount of any Indebtedness described in
Section 8.04(xii) incurred in connection with such Acquisition) shall
not, without the prior written consent of the Required Banks, exceed
(if valued at fair market value at the time of such Acquisition, as
reasonably determined by the board of directors of the Person making
such Acquisition) (i) prior to the Equity Offering Date, $15,000,000
per transaction and $75,000,000 in the aggregate over any twelve month
period commencing with the Effective Date (including in such
calculation any consideration paid by the Borrower to acquire any
Joint Venture to the extent the aggregate book value of all Joint
Ventures exceeds $15,000,000) when added to the aggregate amount of
all investments made pursuant to this Section 8.02(v) in such
twelve-month period and (ii) after the Equity Offering Date,
$20,000,000 per transaction and $80,000,000 in the aggregate over any
twelve month period commencing with the Equity Offering Date
(including in such calculation any consideration paid by the Borrower
to acquire any Joint Venture to the extent the aggregate book value of
all Joint Ventures

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exceeds $20,000,000) when added to the aggregate amount of all
investments made pursuant to this Section 8.02(v) in such twelve-month
period; provided further no such per transaction limitation on the
consideration paid by the Borrower in connection with such an
Acquisition shall exist if the ratio of Total Debt to Consolidated
Adjusted EBITDA for the consecutive four-fiscal quarter period ending
as of the last day of the immediately preceding fiscal quarter before
such Acquisition is less than 1.50:1.00, in each case calculated on a
pro forma basis to give effect to such Acquisition, or the Acquisition
is made under clause (vii) of this Section 8.02; provided further that
the ratio of Total Debt to Consolidated Adjusted EBITDA shall be in
compliance with the requirement of Section 8.08, in each case
calculated on a pro forma basis to give effect to such Acquisition;
provided further, that if such acquisition of property and assets is
an acquisition of stock, then such acquisition shall, except with
respect to Joint Ventures, result in the ownership by the Borrower or
a Wholly-Owned Subsidiary of a majority interest in the capital stock
of the entity whose stock is being acquired.

(vi) the Borrower and its Subsidiaries may make capital
expenditures to the extent not in violation of Section 8.07;

(vii) notwithstanding the provisions of clauses (i) through
(vi) of this Section 8.02, AHPT, may merge with and into the Borrower,
provided that the Borrower shall acquire any and all assets of such
entity, and provided such merger will not have a material adverse
effect on (A) the business, operations, property, assets, condition
(financial or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole, (B) the value of the Collateral, or (C)
the ability of the Borrower to pay or the Banks to collect the
Obligations;

(viii) any Subsidiary of the Borrower may be dissolved if
such dissolution will not have a material adverse effect on the
business, operations, property, assets, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as
a whole; and

(ix) the Borrower may transfer the capital stock of the
Acquired Subsidiaries to AHPT in connection with the Corporate
Restructuring;

8.03 Dividends.

(a) The Borrower will not declare or pay any dividends
(other than dividends that are payable solely to the holders of any class of
stock of the Borrower in shares of that class of stock), or return any capital,
to its stockholders or authorize or make any other distribution, payment or
delivery of property or cash to its stockholders as such, or redeem, retire,
purchase or

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<PAGE> 99

otherwise acquire, directly or indirectly, for a consideration, any shares of
any class of its capital stock now or hereafter outstanding (or any options or
warrants issued by the Borrower with respect to its capital stock), or set
aside any funds for any of the foregoing purposes, or permit any of its
Subsidiaries to purchase or otherwise acquire for a consideration any shares of
any class of the capital stock of the Borrower now or hereafter outstanding (or
any options or warrants issued by the Borrower with respect to its capital
stock), except that the Borrower may acquire stock options or restricted stock
from its employees or former employees in an aggregate amount not to exceed
$100,000 in any calendar year.

(b) The Borrower will not permit any of its Subsidiaries
to declare or pay any dividends, or return any capital, to its stockholders or
authorize or make any other distribution, payment or delivery of property or
cash to its stockholders as such, or redeem, retire, purchase or otherwise
acquire, directly or indirectly, for a consideration, any shares of any class
of its capital stock now or hereafter outstanding (or any options or warrants
issued by such Subsidiary with respect to its capital stock), or set aside any
funds for any of the foregoing purposes, or permit any of its Subsidiaries to
purchase or otherwise acquire for a consideration any shares of any class of
the capital stock of such Subsidiary now or hereafter outstanding (or any
options or warrants issued by such Subsidiary with respect to its capital
stock), except that any Subsidiary of the Borrower may pay dividends to the
Borrower or any Wholly-Owned Subsidiary of the Borrower and any Joint Venture
may pay dividends in proportion to the ownership interests therein.

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

(i) Indebtedness of the Borrower and its Subsidiaries
incurred under the Credit Documents;

(ii) Indebtedness listed on Schedule 8.04(II) ("Existing
Indebtedness") and Indebtedness incurred by the Borrower or any of its
Subsidiaries to renew or refinance the Existing Indebtedness of the
Borrower or such Subsidiary; provided that the new Indebtedness shall
not exceed the principal amount of the Existing Indebtedness so
renewed or refinanced and shall not contain any terms or conditions,
taken as a whole, less favorable to the Borrower and the Banks than
the Existing Indebtedness being renewed or refinanced;

(iii) accrued expenses and current trade accounts payable
incurred in the Ordinary Course of Business and obligations under
trade letters of credit incurred by the Borrower or any of its
Subsidiaries in the

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<PAGE> 100

Ordinary Course of Business, that are to be repaid in full not more
than one year after the date on which such Indebtedness is originally
incurred to finance the purchase of goods by the Borrower or such
Subsidiary;

(iv) obligations under letters of credit incurred by the
Borrower or any of its Subsidiaries in the Ordinary Course of Business
in support of obligations incurred in connection with worker's
compensation, unemployment insurance and other social security
legislation;

(v) Indebtedness incurred as a result of loans and
advances permitted under Section 8.05(ii)-(iv);

(vi) obligations under letters of credit incurred by the
Borrower or any of its Subsidiaries in the Ordinary Course of Business
and to the extent consistent with past practice in support of
obligations under leases, bonds posted for judgments being appealed or
as a condition to bringing any action, suit or other proceeding not to
exceed $500,000 other than letters of credit listed on Schedule
8.04(ii);

(vii) nonrecourse Indebtedness payable solely from and
secured solely by life insurance policies and annuities maintained by
the Borrower and its Subsidiaries for their respective officers,
employees and directors;

(viii) surety bonds, performance bonds and other completion
bonds in the Ordinary Course of Business and consistent with past
practice or as required by law;

(ix) non-recourse purchase money Indebtedness not
exceeding the purchase price of the asset so purchased and secured
solely by such asset;

(x) capitalized leases;

(xi) Interest Rate Agreements (and guaranties thereof)
entered into by the Borrower and its Subsidiaries with respect to
Indebtedness in an aggregate notional principal amount not to exceed
$100,000,000;

(xii) the Borrower may become and remain liable with
respect to Unsecured Seller Debt owed to the Person selling the
capital stock or assets of any Target in any Acquisition permitted
under Section 8.02(v); provided such Indebtedness (A) is unsecured,
(B) either (x) does not exceed 25% of the purchase price paid for such
Target or (y) is subordinated to the Indebtedness created by this
Agreement pursuant to the terms of a Subordination Agreement
substantially in the form of Exhibit M, and, in either case, if
guaranteed by any Subsidiary of the Borrower, is

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<PAGE> 101

guaranteed by a guarantee that is subordinate to, and under which such
guarantor does not have any obligation prior to the indefeasible
payment in full of, the Obligations and (C) does not at any time
exceed $35,000,000 in the aggregate for all Unsecured Seller Debt
outstanding at any time; provided, however, that Unsecured Seller Debt
in the principal amount of $3,000,000 outstanding as of the date
hereof and owed to Respro, Inc., a Kentucky corporation, in connection
with a sale of assets by Respro, Inc. to the Borrower need not satisfy
the requirements of either clause (x) or (y) of clause (B) of the
preceding proviso. The covenants, default provisions, remedies
provisions, subordination provisions and all other terms of such
Unsecured Seller Debt shall be reasonably satisfactory in form and
substance to the Agent; provided that if the subordination provisions
in the documentation representing such Unsecured Seller Debt are
substantially in the form of Exhibit M such subordination provisions
shall be deemed satisfactory to the Agent; provided further that if
the documentation representing such Unsecured Seller Debt contains no
covenants and no default provisions other than default provisions with
respect to defaults that arise because of the bankruptcy of the issuer
or guarantor of such debt and default provisions with respect to
defaults that arise because of the failure to pay such Seller Debt
when due, such covenant and default provisions shall be deemed
satisfactory to the Agent;

(xiii) the Acquisition Notes;

(xiv) Indebtedness of the Borrower and its Subsidiaries
incurred after the Effective Date in an aggregate amount outstanding
at any time not in excess of $5,000,000;

(xv) Indebtedness of the Target of any Acquisition
outstanding on the date of such Acquisition; provided that such
Indebtedness was not incurred in contemplation of such Acquisition;

(xvi) Contingent Obligations in respect of any guaranty by
the Borrower or a Subsidiary of the leasehold obligations of any of
their respective Subsidiaries;

(xvii) Indebtedness incurred as a result of loans permitted
under Sections 8.05(x) and 8.05(xi);

(xviii) Indebtedness evidenced by the ConPharma Note; and

(xix) Contingent Obligations created pursuant to the
Corporate Restructuring Guaranty/Security Agreements and any
Intercompany Acquisition Guaranty/Security Agreements.

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<PAGE> 102

8.05 Advances, Investments and Loans. The Borrower will not,
and will not permit any of its Subsidiaries to, lend money or credit or make
advances to any Person, or purchase or acquire any stock or other ownership
interest (other than stock or ownership interests issued as part of the
formation of a Subsidiary of the Borrower for consideration not to exceed
$50,000 in the aggregate with respect to all such Subsidiaries and provided
such Subsidiary becomes a Guarantor Subsidiary within a reasonable time after
such formation), obligations or securities of, or any other interest in, or
make any capital contribution to, any other Person, except that the following
shall be permitted:

(i) the Borrower and its Subsidiaries may each acquire
and hold receivables owing to it, if created or acquired in the
Ordinary Course of Business and payable or dischargeable in accordance
with customary trade terms to the extent consistent with past practice;

(ii) loans and advances by any Subsidiary of the Borrower
to the Borrower; provided such loans or advances are at all times
subordinated to the Obligations of the Borrower on terms satisfactory
to the Required Banks;

(iii) loans and advances by the Borrower to any Guarantor
Subsidiary (or, in connection with any Acquisition, any Subsidiary of
the Borrower that becomes a Guarantor Subsidiary on or before
consummation of such Acquisition) in the Ordinary Course of Business
so long as after giving effect to such loan or advance there shall not
have occurred a Default or an Event of Default;

(iv) loans and advances by any Guarantor Subsidiary to any
other Guarantor Subsidiary in the Ordinary Course of Business so long
as after giving effect to such loan or advance there shall not have
occurred a Default or Event of Default;

(v) the Borrower and its Subsidiaries may make new loans
and advances to officers, employees and agents in the Ordinary Course
of Business (for purposes other than purchasing stock or stock options
or exercising stock options) equal, in the aggregate for the Borrower
and its Subsidiaries, to no more than $100,000 at any one time
outstanding and may make loans to officers, directors and employees in
connection with the purchase or exercise of options for the Borrower's
common stock, provided that no cash is advanced;

(vi) the Borrower and its Subsidiaries may make equity
investments in other Persons engaged in the businesses in which the
Borrower and its Subsidiaries are engaged as of the Effective Date, in
an aggregate amount that, when added to the aggregate consideration
paid

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<PAGE> 103

to acquire assets and property pursuant to Section 8.02(v), does not
exceed the amount specified in Section 8.02(v); provided that the
Borrower shall provide notice to the Agent of all such investments in
accordance with Section 7.01(i) and the aggregate book value of all
investments in all Joint Ventures shall not at any time exceed 30% of
the aggregate book value of the equity of the Borrower; provided
further, that such equity investments shall, except with respect to
Joint Ventures, result in the ownership by the Borrower or such
Subsidiary of a majority interest in the capital stock of the entity
issuing such equity;

(vii) the Borrower and its Subsidiaries may make and own
investments in Cash Equivalents; provided that such Cash Equivalents
are not subject to setoff rights in favor of the financial institution
(other than a Bank) issuing or selling any such Cash Equivalents
arising from any banking relationship of the Borrower and its
Subsidiaries;

(viii) the capital contributions described in clauses (vi)
and (vii) of the definition of Corporate Restructuring and clauses
(ii) through (iv), (vi) through (viii), and (x) through (xiv) of the
definition of Texas Restructuring; provided that the documents
effecting each such capital contribution described in clauses (xiii)
and (xiv) of the definition of Texas Restructuring shall contain an
express acknowledgment, satisfactory in form and substance to the
Agent, by each transferor and transferee of any assets being
contributed pursuant thereto that such assets are being contributed
subject to the existing Lien in favor of the Agent;

(ix) cash capital contributions by the Borrower to AHPF to
fund loans by AHPF to AHPT to finance Acquisitions; provided, that the
amount of any such capital contribution is loaned by AHPF to AHPT as
permitted under Section 8.05(xi);

(x) loans by the Borrower to AHPT evidenced by the
Restructuring Notes and the Intercompany Term Notes;

(xi) loans made after the First Amendment Effective Date
by AHPF to AHPT and evidenced by one or more Intercompany Acquisition
Notes; and

(xii) investments consisting of promissory notes, in an
aggregate principal amount not to exceed $250,000 at any time
outstanding, received as part of the consideration in connection with
sales of stock, property or assets of any of its Subsidiaries
permitted under Section 8.02(iii).

8.06 Transactions with Affiliates. The Borrower will not,
and will not permit any of its Subsidiaries to, enter into any transaction or
series of

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<PAGE> 104

related transactions, whether or not in the Ordinary Course of Business, with
any Affiliate of the Borrower, other than on terms and conditions substantially
as favorable to the Borrower or such Subsidiary as would be obtainable by the
Borrower or such Subsidiary at the time in a comparable arm's-length
transaction with a Person other than an Affiliate.

8.07 Capital Expenditures. Except for expenditures made by
the Borrower and its Subsidiaries during any Fiscal Year to acquire assets in
Acquisitions permitted under Section 8.02(v) or (vii), the Borrower will not,
and will not permit any of its Subsidiaries to, make any expenditure for fixed
or capital assets (including, without limitation, expenditures for product
development and maintenance and repairs that should be capitalized in
accordance with generally accepted accounting principles consistently applied
and including capitalized lease obligations) during any Fiscal Year set forth
below that would cause the aggregate amount of all such expenditures for the
Borrower and its Subsidiaries to exceed the correlative amount set forth below
opposite such Fiscal Year:

<TABLE>
<CAPTION>
=======================================================
Fiscal Year Amount Amount
(Prior to Equity (After Equity
Offering Date) Offering Date)
=======================================================
<S> <C> <C>
1996 $ 24,500,000 $ 26,500,000
------------------------------------------------------
1997 27,500,000 29,500,000
------------------------------------------------------
1998 29,000,000 31,000,000
------------------------------------------------------
1999 32,000,000 34,000,000
------------------------------------------------------
2000 34,500,000 36,500,000
------------------------------------------------------
2001+ 18,250,000 20,250,000
=======================================================
</TABLE>

+ Includes only the two-fiscal quarter period ending
June 30, 2001.

8.08 Leverage Ratio. The Borrower shall not permit the ratio
of Total Debt to Consolidated Adjusted EBITDA for any consecutive four-fiscal
quarter period ending as of the last day of any fiscal quarter of the Borrower
to be more than 3.50:1.00.

8.09 Minimum Consolidated Net Worth. The Borrower will not
permit Consolidated Net Worth of the Borrower and its Subsidiaries at any time
to be less than the sum of $100,000,000, plus 75% of Consolidated Net Income of
the Borrower and its Subsidiaries for each fiscal quarter in which Consolidated
Net Income is a positive number and which ends during the period from the
Effective Date to and including the end of the then most recently ended fiscal

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<PAGE> 105

quarter of the Borrower, plus 100% of any additions to Net Worth from any
issuance of, or any exercise of an option to purchase, or any conversion of any
debt Securities into, any equity Securities of the Borrower on or after the
Effective Date.

8.10 Minimum Interest Coverage Ratio. The Borrower shall not
permit the ratio of (i) Consolidated EBITDA of the Borrower and its
Subsidiaries to (ii) Consolidated Interest Expense for any consecutive
four-fiscal quarter period ending as of the last day of any fiscal quarter of
the Borrower occurring during any of the periods set forth below to be less
than the correlative ratio indicated:

<TABLE>
<CAPTION>
=======================================================================
Minimum
Quarter Ended Interest Coverage Ratio
<S> <C>
March 31, 1996 through September 30, 1998 4.00 : 1.00
-----------------------------------------------------------------------
December 31, 1998 through September 30, 2000 4.50 : 1.00
-----------------------------------------------------------------------
December 31, 2000 and beyond 5.00 : 1.00
=======================================================================
</TABLE>

8.11 Limitation on Voluntary Payments and Modifications of
Indebtedness; Modifications of Certificate of Incorporation, By-Laws and
Certain Other Agreements; etc. The Borrower will not, and will not permit any
of its Subsidiaries to, (i) make any voluntary or optional payment or
prepayment on or redemption or acquisition for value of (including, without
limitation, by way of depositing with the trustee with respect thereto money or
securities before due for the purpose of paying when due) any Indebtedness on
which it is an obligor which payment, prepayment or redemption or acquisition
for value is in excess of $100,000 per year in the aggregate except with
respect to payments or prepayments on or redemptions or acquisitions for value
of the (A) Obligations under the terms of this Agreement or (B) any
Indebtedness for which failure to make such payment, prepayment, redemption or
acquisition for value would constitute a violation of a law or regulation
enacted, adopted or becoming effective after the Effective Date, (C) any trade
payables prepaid in the Ordinary Course of Business to take advantage of
favorable prepayment terms, or (D) Indebtedness of the Target of any
Acquisition permitted pursuant to Section 8.04(xv), (ii) amend or modify, or
permit the amendment or modification of, any provision of any Indebtedness or
of any agreement (including, without limitation, any purchase agreement,
indenture, loan agreement or security agreement) relating to any of the
foregoing other than amendments that (A) only extend the maturity of or lower
the interest rate on Indebtedness and amendments of this Agreement permitted by
its terms or (B) are immaterial and would not have a

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<PAGE> 106

material adverse effect on the business, operations, property, assets,
liabilities (contingent or otherwise), condition (financial or otherwise) or
prospects of the Borrower or any of its Subsidiaries, or (iii) amend, modify or
change the Certificate or Articles of Incorporation (including, without
limitation, by the filing or modification of any certificate of designation) or
the By-Laws (or any other documents of formation and governance, as the case
may be) of the Borrower or any of its Subsidiaries party to any of the Credit
Documents or any Subsidiary of such Subsidiaries (except to reflect a name
change previously noticed to the Agent, except as permitted under Section
8.02(vii) and except to amend the Certificate or Articles of Incorporation or
the By-Laws of a Target as the Borrower deems reasonably necessary, provided
that such amendment shall not adversely affect the Banks' position as creditors
hereunder).

8.12 Restrictions on Subsidiary Dividends and Other
Distributions. The Borrower will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction, other than as set
forth in this Agreement, on the ability of any such Subsidiary to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by the Borrower or any
Subsidiary of the Borrower, or pay any Indebtedness owed to the Borrower or a
Subsidiary of the Borrower, (b) make loans or advances to the Borrower or (c)
transfer any of its properties or assets to the Borrower, except for such
encumbrances or restrictions existing under or by reasons of (i) applicable
law, (ii) this Agreement, (iii) customary provisions restricting subletting or
assignment of any lease governing a leasehold interest of the Borrower or a
Subsidiary of the Borrower that exists on the Effective Date and (iv) customary
provisions restricting transactions with affiliates of Persons party to a Joint
Venture. The Borrower will not, and will not permit any of its Subsidiaries
to, amend, modify or otherwise change the terms of, or permit the modification
of, any provision of any Restructuring Note, any Intercompany Term Note, the
ConPharma Note, any Intercompany Acquisition Note or any Intercompany
Acquisition Guaranty/Security Agreement if the effect of such change is to
change the subordination provisions thereof (or of any guaranty thereof) or to
change any collateral therefor (other than to release such collateral).

8.13 Business. The Borrower will not, and will not permit
any of its Subsidiaries to, engage (directly or indirectly) in any business
other than the business in which it was engaged on the Effective Date and any
business directly related to such business.

8.14 Transfer of Copyrights, Patents and Trademarks. The
Borrower will not, and will not permit any of its Subsidiaries to, transfer any
of their respective copyrights, licenses, patents, trademarks, permits, service
marks, trade names, franchises and formulas, or rights with respect to the

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<PAGE> 107

foregoing, except transfers pursuant to licenses granted in the Ordinary Course
of Business that would not have a material adverse effect on the business,
operations, property, assets, condition (financial or otherwise) or prospects
of the Borrower and its Subsidiaries taken as a whole.

8.15 Joint Ventures. The Borrower shall not, and shall not
suffer or permit any of its Subsidiaries to enter into any Joint Venture, other
than in the Ordinary Course of Business.

8.16 Collection Bank Agreements. The Borrower shall not, and
shall not suffer nor permit any of its Subsidiaries that are not Joint Ventures
to, maintain any Deposit Account with an average daily balance in excess of
$100,000 in any given month, with any financial institution that has not
executed and delivered to the Agent a Collection Bank Agreement. The Borrower
shall not, and shall not permit any of its Subsidiaries that are not Joint
Ventures to, maintain amounts in excess of $3,000,000 in the aggregate at any
time outstanding in Deposit Accounts that are not subject to Collection Bank
Agreements. The Borrower shall not, and shall not permit any of its
Subsidiaries that are not Joint Ventures to, deposit any amount into a Deposit
Account that is the subject of a Collection Bank Agreement that does not
represent proceeds of Collateral.

Section 9. Events of Default. Upon the occurrence of any of
the following specified events (each an "Event of Default");

9.01 Payments. The Borrower shall (i) default in the payment
when due of any principal of any Loan or any Note, (ii) default in the payment
when due of any amount payable to the Issuing Bank in reimbursement of any
drawing under a Letter of Credit, or (iii) default, and such default shall
continue unremedied for two Business Days, in the payment when due of interest
on any Loan, any Fees or any other amounts owing hereunder or under any Note;
or

9.02 Representations, etc. Any representation, warranty or
statement made by the Borrower or any of its Subsidiaries herein or in any
other Credit Document or in any certificate delivered pursuant hereto or
thereto shall prove to be untrue in any material respect on the date as of
which made or deemed made; or

9.03 Covenants. The Borrower shall (i) default in the due
performance or observance by it of any term, covenant or agreement contained in
Sections 2.01(a)(iii), 2.10(a)(iii), 7.01(g)(i) or Section 8 or (ii) default in
the due performance or observance by it of any term, covenant or agreement
(other than those referred to in Sections 9.01 and 9.02 and clause (i) of this
Section 9.03)

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<PAGE> 108

contained in this Agreement and such default shall continue unremedied for a
period of 30 days after written notice to the Borrower by the Agent; or

9.04 Default Under Other Agreements. The Borrower or any of
its Subsidiaries shall (i) default in any payment of Indebtedness in an
aggregate principal amount equal to or exceeding $1,000,000 (other than the
Notes, the Restructuring Notes, the Intercompany Term Notes, the ConPharma Note
and the Intercompany Acquisition Notes) beyond the period of grace (not to
exceed 30 days), if any, provided in the instrument or agreement under which
such Indebtedness was created or (ii) default in the observance or performance
of any agreement or condition relating to Indebtedness in an aggregate
principal amount equal to or exceeding $2,500,000 (other than the Notes, the
Restructuring Notes, the Intercompany Term Notes, the ConPharma Note and the
Intercompany Acquisition Notes) or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause (determined without regard
to whether any notice is required), any such Indebtedness to become due prior
to its stated maturity; or Indebtedness of the Borrower or any of its
Subsidiaries, in an aggregate principal amount equal to or exceeding
$2,500,000, shall be declared to be due and payable, or required to be prepaid
other than by a regularly scheduled required prepayment, prior to the stated
maturity thereof; or

9.05 Bankruptcy, etc. The Borrower or any of its
Subsidiaries shall commence a voluntary case concerning itself under Title 11
of the United States Code entitled "Bankruptcy," as now or hereafter in effect,
or any successor thereto (the "Bankruptcy Code"); or an involuntary case is
commenced against the Borrower or any of its Subsidiaries, and the petition is
not controverted within 10 days, or is not dismissed within 60 days, after
commencement of the case (provided that the Borrower expressly authorizes the
Agent and each Bank to appear in any court conducting any such proceeding
during such 60 day period to preserve, protect and defend their rights under
this Agreement and the other Credit Documents); or a custodian (as defined in
the Bankruptcy Code) is appointed for, or takes charge of, all or substantially
all of the property of the Borrower or any of its Subsidiaries; or the Borrower
or any of its Subsidiaries commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Borrower or any of its
Subsidiaries; or there is commenced against the Borrower or any of its
Subsidiaries any such proceeding that remains undismissed for a period of 60
days; or the Borrower or any of its Subsidiaries is adjudicated insolvent or
bankrupt, or any order of relief or other order approving any such case or
proceeding is entered; or the Borrower or any of its Subsidiaries suffers

102
<PAGE> 109

any appointment of any custodian or the like for it or any substantial part of
its property to continue undischarged or unstayed for a period of 30 days; or
the Borrower or any of its Subsidiaries makes a general assignment for the
benefit of creditors; or any corporate, partnership or other action is taken by
the Borrower or any of its Subsidiaries for the purpose of effecting any of the
foregoing; or

9.06 ERISA. Any Plan shall fail to maintain the minimum
funding standard required for any plan year or part thereof or a waiver of such
standard or extension of any amortization period is sought or granted under
Section 412 of the Code; any Plan is, shall have been or is likely to be
terminated or the subject of a termination proceeding under ERISA; any Plan
shall have an Unfunded Current Liability, or the Borrower or any of its
Subsidiaries or ERISA Affiliates has incurred or is likely to incur a liability
to or on account of a Plan under Sections 502(c), (i) or (l), 515, 4062, 4063,
4064, 4071, 4201 or 4204 of ERISA or Chapter 43 of the Code; and there shall
result from any such event or events the imposition of a Lien upon or the
granting of a security interest in the assets of the Borrower or any of its
Subsidiaries, or a liability or a material risk of incurring a liability to the
PBGC or a Plan or a trustee appointed under ERISA, that will have a material
adverse effect upon the business, operations, property, assets, condition
(financial or otherwise) or prospects of the Borrower and its Subsidiaries
taken as a whole; or

9.07 Credit Documents. Any of the Credit Documents or any
provision thereof shall cease to be in full force and effect for any reason,
other than the satisfaction in full of all Obligations and the termination of
this Agreement, or is declared to be null and void, or any Guarantor Subsidiary
shall default in the due performance or observance of any material term,
covenant or agreement on its part to be performed or observed pursuant to any
of the Credit Documents to which it is a party, or any Guarantor Subsidiary
denies that it has any further liability under any of the Credit Documents to
which it is a party or gives notice to such effect, or any junior creditor
claims or asserts the invalidity or unenforceability of any subordination
provisions of any Unsecured Seller Debt; or

9.08 Changes of Control. (i) Any Person or two or more
Persons acting in concert shall have acquired beneficial ownership (within the
meaning of the Rule 13d-3 under the Securities Exchange Act of 1934), directly
or indirectly, of securities of the Borrower representing 20% or more of the
combined voting power of all securities of the Borrower entitled to vote in the
election of directors; or (ii) during any period of up to 12 consecutive
months, commencing before or after the date of this Agreement, individuals who
at the beginning of such 12-month period were directors of the Borrower shall
cease for any reason to constitute a majority of the Board of Directors of the
Borrower; or (iii) any Person or two or more Persons acting in concert shall
have acquired

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by contract or otherwise, or shall have entered into a contract or arrangement
that upon consummation shall result in its or their acquisition of or control
over, securities of the Borrower representing 20% or more of the combined
voting power of all securities of the Borrower entitled to vote in the election
of directors; or

9.09 Judgments. One or more judgments, decrees or
arbitration awards shall be entered against the Borrower or any of its
Subsidiaries involving in the aggregate for the Borrower and its Subsidiaries a
liability (not paid or fully covered by insurance as to which the insurer has
acknowledged coverage in writing) of $2,000,000 or more, and all such
judgments, decrees or awards shall not have been vacated, discharged or stayed
or bonded pending appeal within 30 days after the entry thereof; or

9.10 Governmental Policies. Any change shall occur in state
or federal laws, rules or governmental regulations or budgetary allocations
that reasonably could be expected to have a material adverse effect on the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole; provided,
however, that the enactment of legislation providing for a reduction of 20% or
less in Medicare's reimbursement rates in effect on October 5, 1995 for oxygen
therapy shall not in and of itself be considered an Event of Default hereunder;
or

9.11 Loss of Licenses. Any Governmental Authority shall
finally revoke or fail to renew any license, permit or franchise of the
Borrower or the Borrower shall for any reason lose any license, permit or
franchise or the Borrower or any of its Subsidiaries shall suffer the
imposition of any restraining order, escrow, suspension or impound of funds in
connection with any proceeding (judicial or administrative) with respect to any
license, permit or franchise which event could reasonably be expected to have a
material adverse effect on the business, operations, properties, assets,
condition (financial or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole; then, and in any such event, and at any time
thereafter, if any Event of Default shall then be continuing, the Agent, upon
the written request of the Required Banks, shall by written notice to the
Borrower, (provided, that, if an Event of Default specified in Section 9.05
shall occur with respect to the Borrower, the result which would occur upon the
giving of written notice by the Agent to the Borrower as hereafter shall occur
automatically without the giving of any such notice) declare the principal of
and any accrued interest in respect of all Loans and the Notes and all
Obligations owing hereunder and thereunder to be, whereupon the same shall
become, forthwith due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower, and the
obligation of each Bank to make any Loan and the obligation of the Issuing Bank
to issue any Letter of Credit shall

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thereupon terminate; provided, that the foregoing shall not affect in any way
the obligations of the Banks to make Revolving Loans to reimburse drawings
under Letters of Credit as provided in Section 2.10(c), to repay Refunded Swing
Line Loans as provided in Section 2.02(c), to purchase participations from the
Swing Line Bank in any unpaid Swing Line Loans as provided in Section 2.02(c),
or to purchase participations from the Issuing Bank in the unreimbursed amount
of any drawings under any Letters of Credit as provided in Section 2.10(d). So
long as any Letter of Credit shall remain outstanding, any amounts received by
the Agent shall be held by the Agent, pursuant to such documentation as the
Agent shall request, as cash collateral for the obligation of the Borrower to
reimburse the Issuing Bank in the event of any drawing under any outstanding
Letters of Credit, and so much of such funds shall at all times remain on
deposit as cash collateral as aforesaid as shall equal the maximum amount
available at any time for drawing under all Letters of Credit (the "Maximum
Available Amount"); provided that in the event of cancellation or expiration of
any Letter of Credit or any reduction in the Maximum Available Amount, the
Agent shall apply the difference between the cash collateral held by the Agent
immediately prior to such cancellation, expiration or reduction and the Maximum
Available Amount immediately after such cancellation, expiration or reduction
first to the payment of any outstanding Obligations, and second to the payment
to whomsoever shall be lawfully entitled to receive such funds.

9.12 Exceptions With Respect to Good Standing.
Notwithstanding anything contained herein or in the other Credit Documents to
the contrary, no Event of Default shall be deemed to have occurred and be
continuing due to the fact that (i) Stoll's Medical Rentals, Inc. is not in
good standing in Connecticut during the period from and including the Effective
Date to the date which is thirty Business Days after the Effective Date;
provided, however, that the Borrower, within five Business Days after Stoll's
Medical Rentals, Inc. is in good standing in Connecticut, shall deliver to the
Agent a good standing certificate with respect to Stoll's Medical Rentals, Inc.
from the State of Connecticut; or (ii) during the period from and including the
Effective Date up to the date which is 60 days after the Effective Date, (A)
American HomePatient, Inc., a Delaware corporation, is not in good standing in
the States of Illinois and Wisconsin, (B) American HomePatient, Inc., a
Tennessee corporation, is not in good standing in the State of Kansas, and (C)
ConPharma HomeHealthCare, Inc. is not in good standing in the State of
Virginia; provided, however, that (x) the Borrower, as soon as practicable but
in any event during such 60-day period, shall cause (1) American HomePatient,
Inc., a Delaware corporation, to be reinstated as a Illinois corporation in
good standing and as a Wisconsin corporation in good standing, (2) American
HomePatient, Inc., a Tennessee corporation, to be reinstated as a Kansas
corporation in good standing and (3) ConPharma Home HealthCare, Inc. to be
reinstated in the State of Virginia, such reinstatements to be effective from
and including the Effective Date, (y) the Borrower shall immediately after such
reinstatement and during such 60-day period cause American HomePatient,

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Inc., a Delaware corporation, American HomePatient, Inc., a Tennessee
corporation, and ConPharma Home HealthCare, Inc. to execute and deliver to the
Agent and the Banks (1) a Consent to Amendment and Restatement substantially in
the form of Exhibit S annexed hereto, and (2) the documents required to be
delivered by Subsidiaries of the Borrower under Sections 5.01(c)(ii) and (iii),
and (z) Harwell Howard Hyne Gabbert & Manner, counsel to the Borrower, shall
deliver to the Agent and the Banks during such 60-day period an opinion on the
good standing of, and the enforceability of the Credit Documents (and the
validity of the security interests created thereunder) with respect to,
American HomePatient, Inc., a Delaware corporation and such other matters as
the Agent may reasonably request.

Section 10. The Agent.

10.01 Appointment. The Banks hereby designate Bankers Trust
Company as the Agent (for purposes of this Section 10, the term "AGENT" shall
include Bankers Trust Company in its capacity as the Agent pursuant to the
other Credit Documents) to act as specified herein and in the other Credit
Documents. Each Bank hereby irrevocably authorizes, and each holder of any
Note by the acceptance of such Note shall be deemed irrevocably to authorize,
the Agent to take such action on its behalf under the provisions of this
Agreement, the other Credit Documents and any other instruments and agreements
referred to herein or therein and to exercise such powers and to perform such
duties hereunder and thereunder as are specifically delegated to or required of
the Agent by the terms hereof and thereof and such other powers as are
reasonably incidental thereto. The Agent may perform any of its duties
hereunder by or through its officers, directors, agents or employees.

10.02 Nature of Duties. The Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement and the
other Credit Documents. Neither the Agent nor any of its officers, directors,
agents or employees shall be liable for any action taken or omitted by it or
them hereunder or under any other Credit Document or in connection herewith or
therewith, unless caused by its or their gross negligence or willful
misconduct. The duties of the Agent shall be mechanical and administrative in
nature; the Agent shall not have by reason of this Agreement or any other
Credit Document a fiduciary relationship in respect of any Bank or the holder
of any Note; and nothing in this Agreement or any other Credit Document,
expressed or implied, is intended to or shall be so construed as to impose upon
the Agent any obligations in respect of this Agreement or any other Credit
Document except as expressly set forth herein.

10.03 Lack of Reliance on the Agent. Independently and
without reliance upon the Agent, each Bank and the holder of each Note, to the
extent it

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deems appropriate, has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of the Borrower in
connection with the making and the continuance of the Loans and the taking or
not taking of any action in connection herewith and (ii) its own appraisal of
the creditworthiness of the Borrower and, except as expressly provided in this
Agreement, the Agent shall have no duty or responsibility, either initially or
on a continuing basis, to provide any Bank or the holder of any Note with any
credit or other information with respect thereto, whether coming into its
possession before the making of the Loans or at any time or times thereafter.
The Agent shall not be responsible to any Bank or the holder of any Note for
any recitals, statements, information, representations or warranties herein or
in any document, certificate or other writing delivered in connection herewith
or for the execution, effectiveness, genuineness, validity, enforceability,
perfection, collectibility, priority or sufficiency of this Agreement or any
other Credit Document or the financial condition of the Borrower or be required
to make any inquiry concerning either the performance or observance of any of
the terms, provisions or conditions of this Agreement or any other Credit
Document, or the financial condition of the Borrower or the existence or
possible existence of any Default or Event of Default.

10.04 Certain Rights of the Agent. If the Agent shall
request instructions from the Required Banks with respect to any act or action
(including failure to act) in connection with this Agreement or any other
Credit Document, the Agent shall be entitled to refrain from such act or taking
such action unless and until the Agent shall have received instructions from
the Required Banks; and the Agent shall not incur liability to any Person by
reason of so refraining. Without limiting the foregoing, no Bank or the holder
of any Note shall have any right of action whatsoever against the Agent as a
result of the Agent acting or refraining from acting hereunder or under any
other Credit Document in accordance with the instructions of the Required Banks
unless the agreement of all Banks is required by the terms of this Agreement.

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

10.06 Indemnification. To the extent the Agent is not
reimbursed and indemnified by the Borrower, the Banks will reimburse and
indemnify the Agent, in proportion to their respective proportionate shares of
the aggregate amount of the Revolving Loan Commitments as of the date of
determination, for and against any and all liabilities, obligations, losses,
damages, penalties,

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claims, actions, judgments, suits, costs, expenses or disbursements of
whatsoever kind or nature which may be imposed on, asserted against or incurred
by the Agent in performing its duties hereunder or under any other Credit
Document, or in any way relating to or arising out of this Agreement or any
other Credit Document; provided that no Bank shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgment,
suits, costs, expenses or disbursements resulting from the Agent's gross
negligence or willful misconduct.

10.07 The Agent in its Individual Capacity. With respect to
its obligation to maintain and make Loans under this Agreement, the Agent shall
have the rights and powers specified herein for a "Bank" and may exercise the
same rights and powers as though it were not performing the duties specified
herein; and the term "Banks," "Required Banks," "Holders of Notes" or any
similar terms shall, unless the context clearly otherwise indicates, include
the Agent in its individual capacity. The Agent may accept deposits from, lend
money to, and generally engage in any kind of banking, trust or other business
with the Borrower or any Affiliate of the Borrower as if it were not performing
the duties specified herein, and may accept fees and other consideration from
the Borrower for services in connection with this Agreement and otherwise
without having to account for the same to the Banks.

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

10.09 Resignation by the Agent and the Swing Line Bank.

(a) The Agent may resign from the performance of all its
functions and duties hereunder and/or under the other Credit Documents at any
time by giving 15 Business Days prior written notice to the Borrower and the
Banks. Such resignation shall take effect upon the appointment of a successor
the Agent pursuant to clauses (b) and (c) below or as otherwise provided below.

(b) Upon any such notice of resignation, the Banks shall
appoint a successor to the Agent hereunder or thereunder who shall be a
commercial bank or trust company reasonably acceptable to the Borrower.

(c) If no successor to the Agent has been appointed
pursuant to clause (b) above by the 20th Business Day after the date such
notice of

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resignation was given by the Agent, the Agent's resignation shall become
effective and the Banks shall thereafter perform all the duties of the Agent
hereunder and/or under any other Credit Document until such time, if any, as
the Banks appoint a successor to the Agent as provided above.

(d) Any resignation of the Agent pursuant to Section
10.09(a) shall also constitute the resignation of Bankers Trust Company or its
successor as Swing Line Bank, and any successor Agent appointed pursuant to
Section 10.09(b) shall, upon its acceptance of such appointment, become the
successor Swing Line Bank for all purposes hereunder. In such event (i) the
Borrower shall prepay any outstanding Swing Line Loans made by the retiring or
removed Agent in its capacity as the Swing Line Bank, (ii) upon such
prepayment, the retiring or removed Agent and the Swing Line Bank shall
surrender the Swing Line Note held by it to the Borrower for cancellation, and
(iii) the Borrower shall issue a new Swing Line Note to the successor Agent and
the Swing Line Bank substantially in the form of Exhibit F-2 annexed hereto, in
the principal amount of the Swing Line Loan Commitment then in effect and with
other appropriate insertions.

10.10 Release of collateral. Without further written
consent or authorization from Banks, Agent may execute any documents or
instruments necessary to release any Lien encumbering any item of Collateral
that is the subject of a sale or other disposition of assets permitted by this
Agreement or to which the Required Banks have otherwise consented.

Section 11. Miscellaneous.

11.01 Payment of Expenses, etc. The Borrower shall: (i)
whether or not the transactions herein contemplated are consummated, pay all
reasonable out-of-pocket costs and expenses (x) of the Agent (including,
without limitation, the reasonable fees and disbursements of O'Melveny & Myers,
special counsel to the Agent) in connection with the preparation, execution,
delivery and syndication of this Agreement and the other Credit Documents and
the Existing Credit Agreement and the documents and instruments referred to
herein and therein and any amendment, waiver or consent relating hereto or
thereto and (y) of the Agent and each of the Banks in connection with the
enforcement of this Agreement and the other Credit Documents and the documents
and instruments referred to herein and therein (including, without limitation,
the reasonable fees and disbursements of O'Melveny & Myers, special counsel to
the Agent, and for each of the Banks whose counsel determines in good faith
that joint representation of such Bank along with the other Banks would or
reasonably could be expected to result in a conflict of interest under
applicable laws or ethical principles) and (z) of any consultants or
accountants chosen by the Required Banks, to investigate, test or review such
matters relating to the

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Borrower and its Subsidiaries as the Agent shall designate; provided that the
fees of such consultants or accountants shall be subject to the prior approval
of the Borrower, which approval shall not be unreasonably withheld; (ii) pay
and hold each of the Banks harmless from and against any and all present and
future stamp and other similar taxes with respect to the foregoing matters and
save each of the Banks harmless from and against any and all liabilities with
respect to or resulting from any delay or omission (other than to the extent
attributable to such Bank) to pay such taxes; and (iii) indemnify the Agent and
each Bank, its officers, directors, employees, representatives and agents from
and hold each of them harmless against any and all liabilities, obligations,
losses, damages, penalties, claims, actions, judgments, suits, costs, expenses
and disbursements incurred by any of them as a result of, or arising out of, or
in any way related to, or by reason of, any investigation, litigation or other
proceeding (whether or not the Agent or any Bank is a party thereto) related to
the entering into and/or performance of this Agreement or any other Credit
Document or the use of the proceeds of any Loans or Letters of Credit hereunder
or the consummation of any transactions contemplated herein or in any other
Credit Document, including, without limitation, the reasonable fees and
disbursements of counsel incurred in connection with any such investigation,
litigation or other proceeding (but excluding any such liabilities,
obligations, losses, etc., to the extent incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified).

11.02 Right of Setoff. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence of an Event of Default, each
Bank is hereby authorized at any time or from time to time, without
presentment, demand, protest or other notice of any kind to the Borrower or to
any other Person, any such notice being hereby expressly waived, to set off and
to appropriate and apply any and all deposits (general or special) and any
other Indebtedness at any time held or owing by such Bank (including without
limitation, by branches and agencies of such Bank wherever located) to or for
the credit or the account of the Borrower against and on account of the
Obligations and liabilities of the Borrower to such Bank under this Agreement
or under any of the other Credit Documents, including, without limitation, all
interests in Obligations purchased by such Bank pursuant to Section 11.05(b),
and all other claims of any nature or description arising out of or connected
with this Agreement or any other Credit Document, irrespective of whether or
not such Bank shall have made any demand hereunder and although said
Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.

11.03 Notices. Except as otherwise expressly provided
herein, all notices and other communications provided for hereunder shall be in
writing (including telegraphic, telex, telecopier or cable communication) and
mailed, telegraphed, telexed, telecopied, cabled or delivered: if to the
Borrower, at its

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address specified opposite its signature below; if to any Bank, at its office
specified opposite its signature below; and if to the Agent, at its Notice
Office; or, as to the Borrower or the Agent, at such other address as shall be
designated by such party in a written notice to the other parties hereto and,
as to each other party, at such other address as shall be designated by such
party in a written notice to the Borrower and the Agent. In addition, a copy
of all notices sent to the Borrower or the Agent in accordance with Sections
7.01(g) or 9 shall also be sent to Harwell Howard Hyne Gabbert & Manner, P.C.,
1800 First American Center, 315 Deaderick Street, Nashville, Tennessee 37238,
Attn: Mark Manner, Esq., and to O'Melveny & Myers, 400 South Hope Street, Los
Angeles, California 90071, Attn: Jonathan Williams. All such notices and
communications shall, when mailed, telegraphed, telexed, telecopied, or cabled
or sent by overnight courier, be effective when deposited in the mails,
delivered to the telegraph company, cable company or overnight courier, as the
case may be, or sent by telex or telecopier, except that notices and
communications to the Agent shall not be effective until received by the Agent.

11.04 Benefit of Agreement. This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto; provided, however, that the
Borrower may not assign or transfer any of its rights or obligations hereunder
without the prior written consent of each Bank.

11.05 Assignments and Participations in Loans and Letters of
Credit.

(a) General. Each Bank shall have the right at any time
to (i) sell, assign, transfer or negotiate to any Eligible Assignee, or (ii)
sell participations to any Eligible Assignee in, all or any part of any Loan or
Loans made by it or its Commitments or its Letters of Credit or participations
therein or any other interest herein or in any other Obligations owed to it;
provided that no such sale, assignment, transfer or participation shall,
without the consent of the Borrower, require the Borrower to file a
registration statement with the SEC, apply to qualify such assignment or
participation of the Loans, Letters of Credit or participations therein or the
other Obligations under the securities laws of any state or otherwise become
subject to any federal or state securities laws requirements with respect
thereto; provided, further that no such sale, assignment or transfer described
in clause (i) above shall be effective unless and until an Assignment and
Acceptance effecting such sale, assignment or transfer shall have been accepted
by the Agent and recorded in the Agent's records as provided in Section
11.05(b)(ii); provided, further that no such sale, assignment, transfer or
participation of any Letter of Credit or any participation therein may be made
separately from a sale, assignment, transfer or participation of a
corresponding interest in the Revolving Loans of the Bank effecting such sale,
assignment, transfer or participation; and provided, further

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that, anything contained herein to the contrary notwithstanding, the Swing Line
Loan Commitment and the Swing Line Loans of the Swing Line Bank may not be
sold, assigned or transferred as described in clause (i) above to any Person
other than a successor Agent and the Swing Line Bank to the extent contemplated
by Section 10.09(d). Except as otherwise provided in this Section 11.05, no
Bank or the Issuing Bank shall, as between the Borrower and such Bank or the
Issuing Bank, be relieved of any of its obligations hereunder as a result of
any sale, assignment, transfer or negotiation of, or any granting of
participations in, all or any part of the Loans, the Commitments, Letters of
Credit or participations therein or the other Obligations owed to such Bank or
the Issuing Bank.

(b) Assignments.

(i) Amounts and Terms of Assignments. Each Loan, Loan
Commitment, Letter of Credit or participation therein or other
Obligation may (A) be assigned in any amount (of a constant and not a
varying percentage) to another Bank, or to an Affiliate of the
assigning Bank or another Bank, with the giving of notice to the
Borrower and the Agent or (B) be assigned in an amount of not less
than $5,000,000 (or such lesser amount as shall constitute the
aggregate amount of the Loans, Commitments, Letters of Credit or
participations therein and other Obligations of the assigning Bank),
to any other Eligible Assignee with the giving of notice to the
Borrower and the Agent and with the consent of the Borrower and the
Agent, in the case of an assignment made by a Bank other than the
Agent, or with the consent of the Borrower, in the case of an
assignment made by the Agent (which consent of the Borrower and the
Agent shall not be unreasonably withheld). To the extent of any such
assignment in accordance with this Section 11.05, the assigning Bank
shall be relieved of its obligations with respect to its Loans,
Commitments, Letters of Credit or participations therein. The parties
to each such assignment shall execute and deliver to the Agent, for
its acceptance and recording in its records, an Assignment and
Acceptance, together with, with respect to assignments that occur
following the Effective Date, a processing and recordation fee of
$3,500 (unless the assignee is a Bank in which case such fee will be
$1,500), and such certificates, documents or other evidence, if any,
with respect to United States federal income tax withholding matters
as the assignee under such Assignment and Acceptance may be required
to deliver to the Agent pursuant to Section 2.09(g)(iii). Upon such
execution, delivery and acceptance, from and after the effective date
specified in such Assignment and Acceptance, (y) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, shall have the rights and obligations of a
Bank hereunder and (z) the assigning Bank thereunder shall, to the
extent

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that rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights and
be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Bank's rights and obligations under this
Agreement, such Bank shall cease to be a party hereto). The
Commitments hereunder shall be modified to reflect the Commitment of
such assignee and any remaining Commitment of such assigning Bank and
new Notes shall, upon surrender of the assigning Bank's Note, be
issued to the assignee and to the assigning Bank, substantially in the
form of Exhibit F-1 annexed hereto with appropriate insertions, to
reflect the new Commitments and/or outstanding Term Loans, as the case
may be, of the assignee and the assigning Bank.

(ii) Acceptance by the Agent; Recordation in Records.
Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and an assignee representing that it is an Eligible
Assignee, together with the processing and recordation fee referred to
in Section 11.05(b)(i) and any certificates, documents or other
evidence with respect to United States federal income tax withholding
matters that such assignee may be required to deliver to the Agent
pursuant to Section 2.09(g)(iii), the Agent shall, if such Assignment
and Acceptance has been completed and is in the form of Exhibit P
hereto and if the Agent and the Borrower have consented to the
assignment evidenced thereby (in each case to the extent such consent
is required pursuant to Section 11.05(b)(i)), (a) accept such
Assignment and Acceptance by executing a counterpart thereof as
provided therein (which acceptance shall evidence any required consent
of the Agent to such assignment), (b) record the information contained
therein in its records, and (c) give prompt notice thereof to the
Borrower. The Agent shall maintain a copy of each Assignment and
Acceptance delivered to and accepted by it as provided in this Section
11.05(b)(ii).

(c) Participations. The holder of any participation,
other than an Affiliate of the Bank granting such participation, shall not be
entitled to require such Bank to take or omit to take any action hereunder
except action directly affecting (i) the extension of the scheduled final
maturity of any Loan allocated to such participation, (ii) a reduction of the
principal amount of or the rate of interest payable on any Loan or payments due
in repayment of draws under Letters of Credit allocated to such participation,
and all amounts payable by the Borrower hereunder shall be determined as if
such Bank had not sold such participation, (iii) the release of the Liens held
by Agent on behalf of the Banks with respect to all or substantially all of the
Collateral, or (iv) a reduction of the amount of any fees payable hereunder to
the extent subject to such participation. The Borrower hereby acknowledges
and agrees that, only for purposes of Sections 2.07, 2.09, 11.02 and 11.07(b),
any participation will give

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rise to a direct obligation of the Borrower to the participant and the
participant shall be considered to be a "Bank"; provided that no participant
shall be entitled to receive any greater amount pursuant to Section 2.07 or
2.09 than the transferor Bank would have been entitled to receive in respect of
the amount of the participation effected by such transferor Bank to such
participant had no such participation occurred.

(d) Assignments to Federal Reserve Banks. In addition to
the assignments and participations permitted under the foregoing provisions of
this Section 11.05, any Bank may assign and pledge all or any portion of its
Loans, the other Obligations owed to such Bank, and its Notes to any Federal
Reserve Bank as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any operating circular issued by
such Federal Reserve Bank; provided that (i) no Bank shall, as between the
Borrower and such Bank, be relieved of any of its obligations hereunder as a
result of any such assignment and pledge and (ii) in no event shall such
Federal Reserve Bank be considered to be a "Bank" or be entitled to require the
assigning Bank to take or omit to take any action hereunder.

(e) Information. Each Bank and the Issuing Bank may
furnish any information concerning the Borrower and its Subsidiaries in the
possession of that Bank or the Issuing Bank from time to time to assignees and
participants (including prospective assignees and participants).

11.06 No Waiver; Remedies Cumulative. No failure or delay on
the part of the Agent or any Bank or the holder of any Note in exercising any
right, power or privilege hereunder or under any other Credit Document and no
course of dealing between the Borrower and the Agent or any Bank or the holder
of any Note shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or under any other Credit
Document preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder or thereunder. The rights, powers
and remedies herein or in any other Credit Document expressly provided are
cumulative and not exclusive of any rights, powers or remedies which the Agent
or any Bank or the holder of any Note would otherwise have. No notice to or
demand on the Borrower in any case shall entitle the Borrower to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Agent or any Bank or the holder of any Note to any
other or further action in any circumstances without notice or demand.

11.07 Payments Pro Rata.

(a) The Agent agrees that promptly after its receipt of
each payment from or on behalf of the Borrower in respect of any Obligations of
the Borrower hereunder, it shall distribute by the next Business Day such
payment

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to the Banks pro rata based upon their respective shares, if any, of the
Obligations with respect to which such payment was received.

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

11.08 Calculations; Computations. The financial statements
to be furnished to the Banks pursuant hereto shall be made and prepared in
accordance with generally accepted accounting principles in the United States
consistently applied throughout the periods involved (except as set forth in
the notes thereto or as otherwise disclosed in writing by the Borrower to the
Banks); provided that, except as otherwise specifically provided herein, all
computations determining compliance with Section 8 shall utilize accounting
principles and policies in conformity with those used to prepare the historical
financial statements delivered to the Existing Banks pursuant to Section 7.01
of the Existing Credit Agreement.

11.09 Governing Law; Waiver of Jury Trial; Service of
Process. THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. THE
AGENT, THE BANKS AND THE BORROWER HEREBY IRREVOCABLY WAIVE ALL RIGHT TO A TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT. The Borrower hereby agrees that
service of all process in any such proceeding in any such court may be made by
registered or certified mail, return receipt requested, to the Borrower at its
address provided on the signature pages hereto, such service being hereby
acknowledged by the Borrower to be sufficient for personal jurisdiction in any
action against the Borrower in any such court and to

115
<PAGE> 122

be otherwise effective and binding service in every respect. Nothing herein
shall affect the right to serve process in any other manner permitted by law or
shall limit the right of the Agent or any Bank to bring proceedings against the
Borrower in the courts of any other jurisdiction.

11.10 Confidentiality. Each Bank shall hold all non-public
information obtained pursuant to the requirements of this Agreement which has
been identified as confidential by the Borrower in accordance with such Bank's
customary procedures for handling confidential information of this nature and
in accordance with safe and sound banking practices, it being understood and
agreed by the Borrower that in any event a Bank may make disclosures to
Affiliates of such Bank or disclosures reasonably required by any bona fide
assignee, transferee or participant in connection with the contemplated
assignment or transfer by such Bank of any Loans or any participations therein
or disclosures required or requested by any governmental agency or
representative thereof or pursuant to legal process; provided that, unless
specifically prohibited by applicable law or court order, each Bank shall
notify the Borrower of any request by any governmental agency or representative
thereof (other than any such request in connection with any examination of the
financial condition of such Bank by such governmental agency) for disclosure of
any such non-public information prior to disclosure of such information; and
provided, further that in no event shall any Bank be obligated or required to
return any materials furnished by the Borrower or any of its Subsidiaries.

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

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

11.13 Amendment or Waiver.

A. No approval, consent, amendment or waiver of this
Agreement or any of the Credit Documents shall be effective unless it is in
writing signed by the Agent and the Required Banks; provided, however, that any
such approval, consent, amendment or waiver that (a) reduces the amount of any
interest, principal, fees or other amounts owing to any Bank hereunder,
including, without limitation, amounts payable under Section 4 (but excluding
any waiver of any increase in the interest rate applicable to the Loans pursuant

116
<PAGE> 123

to Section 2.06(e)); (b) releases any Person (except pursuant to any
Divestitures and as set forth in Section 8.02(iii), (iv) and (vii)) from all or
any portion of its liabilities under the Subsidiary Guaranty; (c) amends any
provisions of this Section 11.13; (d) reduces the percentage specified in the
definition of the term "Required Banks" or changes the definition of "Pro Rata
Share" (it being understood that, with the consent of Required Banks,
additional extensions of credit pursuant to this Agreement may be made on
substantially the same basis as the extensions of the Commitments); (e)
postpones the scheduled final maturity date (but not the date of any scheduled
installment of principal) of any of the Loans or the date on which any interest
or any fees are payable under this Agreement or any of the Credit Documents;
(f) releases all or substantially all of the Collateral (except as set forth in
Sections 8.02(i), (ii) or (iii) or 8.14, or if the sale or disposition of such
Collateral is permitted under any of the Credit Documents), or (g) by the terms
of any provision of this Agreement requires the approval of all the Banks shall
be effective only if it is in writing signed by all the Banks directly
affected; provided, further, that no such approval, consent, amendment or
waiver shall increase the Commitments of any Bank over the amount thereof then
in effect without the consent of such Bank (it being understood that approvals,
consents, amendments or waivers of conditions precedent, covenants, defaults or
events of default or of a mandatory prepayment or reduction in the aggregate
Commitments shall not constitute an increase of the Commitment of any Bank);
provided further that no amendment, modification or waiver of any provision of
this Agreement relating to Swing Line Loans or the Swing Line Commitment shall
be effective without the written concurrence of the Swing Line Bank; and
provided, further, that no amendment, modification or waiver of any provision
of Section 10 or of any other provision of this Agreement expressly requiring
the approval or concurrence of the Agent shall be effective without the written
concurrence of the Agent.

B. If in connection with any proposed approval, consent,
amendment or waiver with respect to any of the provisions of this Agreement as
contemplated by clauses (a) through (g) of the first proviso of Section 11.13A,
the consent of the Required Banks is obtained but the consent of one or more of
the other Banks whose consent is also required is not obtained, then the
Borrower shall have the right, so long as all non-consenting Banks whose
individual consent is required are treated as described in either clause (i) or
(ii) below, to either (i) replace each such non-consenting Bank or Banks with
one or more Replacement Banks (as defined in Section 11.13C) pursuant to
Section 11.13C so long as at the time of such replacement, each such
Replacement Bank consents to the proposed approval, consent, amendment or
waiver, or (ii) terminate such non-consenting Bank's Commitment and repay each
outstanding Loan of such Bank, in accordance with Section 4.02(a); provided
that unless the Commitments that are terminated, and the Loans that are repaid
pursuant to the preceding clause (ii) are immediately replaced in full at such
time through the addition of new Banks or the increase of the Commitments
and/or outstanding

117
<PAGE> 124

Loans of existing Banks (who in each case must specifically consent thereto),
then in the case of any action pursuant to the preceding clause (ii) the
Required Banks (determined before giving effect to the proposed action) shall
specifically consent thereto; provided, further, that in any event the Borrower
shall not have the right to replace a Bank, terminate its Commitment or repay
its Loans solely as a result of the exercise of such Bank's right (and the
withholding of any required consent by such Bank) pursuant to the second
proviso to Section 11.13A.

C. In the event of certain refusals by a Bank as
provided in Section 11.13B to consent to certain proposed approvals,
amendments, consents or waivers with respect to this Agreement which have been
approved by the Required Banks, the Borrower may, upon five Business Days'
written notice to the Agent (which notice the Agent shall promptly transmit to
each of the Banks) repay all Loans, together with accrued and unpaid interest,
fees and other amounts owing to such Bank (a "Replaced Bank") in accordance
with, and subject to the requirements of, said subsection 11.13B so long as (i)
in the case of the repayment of Revolving Loans of any Bank pursuant to this
Section 11.13C the Revolving Loan Commitment of such Bank is terminated
concurrently with such repayment (at which time Schedule 1.01(a) shall be
deemed modified to reflect the changed Revolving Loan Commitments) and (ii) in
the case of the repayment of Loans of any Bank the consents required by Section
11.13B in connection with the repayment pursuant to this Section 11.13C have
been obtained.

(a) At the time of any replacement pursuant to this
subsection 11.13C, the lender replacing such Replaced Bank (the
"Replacement Bank") shall enter into one or more assignment
agreements, in form and substance satisfactory to the Agent, pursuant
to which the Replacement Bank shall acquire all of the Commitments and
outstanding Loans of, and participations in Swing Line Loans and
Letters of Credit by, the Replaced Bank and, in connection therewith,
shall pay to (x) the Replaced Bank in respect thereof an amount equal
to the sum of (A) an amount equal to the principal of, and all accrued
interest on, all outstanding Loans of the Replaced Bank, (B) an amount
equal to all unpaid drawings with respect to Letters of Credit that
have been funded by (and not reimbursed to) such Replaced Bank,
together with all then unpaid interest with respect thereto at such
time, and (C) an amount equal to all accrued, but theretofore unpaid,
fees owing to the Replaced Bank and (y) the appropriate Issuing Bank
an amount equal to such Replaced Bank's Pro Rata Share of any unpaid
drawings with respect to Letters of Credit (which at such time remains
an unpaid drawing), to the extent such amount was not theretofore
funded by such Replaced Bank; and

118
<PAGE> 125

(b) all obligations of the Borrower owing to the Replaced
Bank (excluding those specifically described in clause (a) above in
respect of which the assignment purchase price has been, or is
concurrently being, paid) shall be paid in full to such Replaced Bank
concurrently with such replacement.

Upon the execution of the respective assignment documentation,
the payment of amounts referred to in clauses (a) and (b) above and, if so
requested by the Replacement Bank, delivery to the Replacement Bank of the
appropriate Note or Notes executed by the Borrower, the Replacement Bank shall
become a Bank hereunder and the Replaced Bank shall cease to constitute a Bank
hereunder, except with respect to the Borrower's obligations regarding the
indemnification provisions under this Agreement, which shall survive for the
benefit of such Replaced Bank. Notwithstanding anything to the contrary
contained above, no Issuing Bank may be replaced hereunder at any time while it
has Letters of Credit outstanding hereunder unless arrangements satisfactory to
such Issuing Bank (including the furnishing of a standby letter of credit in
form and substance, and issued by an issuer satisfactory to such Issuing Bank
or the furnishing of cash collateral in amounts and pursuant to arrangements
satisfactory to such Issuing Bank) have been made with respect to such
outstanding Letters of Credit.

11.14 Survival. All indemnities set forth herein including,
without limitation, in Sections 2.07, 10.06 and 11.01 shall survive the
execution and delivery of this Agreement and the Notes and the making and
repayment of the Loans and the Letters of Credit.

11.15 Domicile of Loans. Each Bank may transfer and carry
its Loans at, to or for the account of any office, Subsidiary or Affiliate of
such Bank.

11.16 Integration. This Agreement, together with the
exhibits to this Agreement and the other documents described herein, is
intended by the parties hereto as a complete statement of the terms and
conditions of their agreement.

11.17 Secured Obligations. The Borrower hereby agrees and
confirms that on and after the Effective Date each Credit Document to which the
Borrower is a party, including, as applicable, the Borrower Security Agreement,
the Borrower Pledge Agreement and the Trademark Security Agreement, and all
collateral encumbered thereby shall continue to secure to the fullest extent
possible the payment and performance of all "Secured Obligations" (as defined
in each applicable Credit Document), including without limitation the payment
and performance of all such "Secured Obligations" in respect of the Obligations
of the Borrower now or hereafter existing under or in respect of this Agreement
and the Notes. Without limiting the generality of the foregoing, the Borrower

119
<PAGE> 126

hereby acknowledges and confirms its understanding and intent that, upon the
Effective Date and as a result thereof, the definition of "Obligations"
contained in this Agreement includes the obligations of the Borrower under the
Notes.

The Borrower acknowledges and agrees that any of the Credit
Documents to which it is a party or otherwise bound shall continue in full
force and effect and that all of its respective obligations thereunder shall be
valid and enforceable and shall not be impaired, limited or otherwise affected
by the execution, delivery or effectiveness of this Agreement or any future
amendment or modification of this Agreement. The Borrower represents and
warrants that all representations and warranties contained in each Credit
Document to which it is a party, including the Borrower Security Agreement, the
Borrower Pledge Agreement and the Trademark Security Agreement, are true,
correct and complete in all material respects on and as of the Effective Date
to the same extent as though made on and as of that date, except to the extent
any such representation or warranty specifically relates to an earlier date, in
which case such representation or warranty shall have been true, correct and
complete in all material respects on and as of such earlier date.

The Borrower hereby acknowledges and agrees that on and after
the Effective Date, each reference in the Credit Documents to the "Credit
Agreement", "thereunder", "thereof" and words of like import referring to the
Existing Credit Agreement shall mean and be a reference to this Agreement.

[Remainder of page intentionally left blank]

120
<PAGE> 127

IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.

AMERICAN HOMEPATIENT, INC.,
a Delaware corporation

By:
---------------------------------
Name: Mary Ellen Rodgers
Title:

Notice Address: Maryland Farms Office Park
5200 Maryland Way, Suite 400
Brentwood, Tennessee 37027-5018
Attn: Mary Ellen Rodgers

S-1
<PAGE> 128

BANKERS TRUST COMPANY,
Individually and as the Agent

By:
------------------------------------
Name: Robert R. Telesca
Title: Assistant Vice President

Notice Address: One Bankers Trust Plaza, 14th Floor
New York, New York 10006
Attn: Debra Bertelle

With a copy to: 300 S. Grand Ave., 41st Floor
Los Angeles, California 90071
Attn: Kate W. Cook

Lending Office: Bankers Trust Co.
One Bankers Trust Plaza, 14th Floor
New York, New York 10006

S-2
<PAGE> 129

AMSOUTH BANK OF ALABAMA

By:
-----------------------------------
Name: Allison Sanders
Title: Vice President

Notice Address
and Lending Office: 1900 5th Avenue North, 7th Floor
Birmingham, Alabama 35203
Attn: Allison Sanders

S-3
<PAGE> 130

BANK OF MONTREAL

By:
---------------------------------
Name: Dan Brown
Title:

Notice Address
and Lending Office: 115 S. LaSalle, 12 West
Chicago, Illinois 60603
Attn: Dan Brown

S-4
<PAGE> 131

THE BOATMEN'S NATIONAL BANK OF ST. LOUIS

By:
---------------------------------
Name: David Wilsdorf
Title:

Notice Address
and Lending Office: 800 Market Street, 12th Floor
St. Louis, Missouri 63101
Attn: David Wilsdorf

S-5
<PAGE> 132

FIRST AMERICAN NATIONAL BANK

By:
-----------------------------------
Name: Sandy Hamrick
Title:

Notice Address
and Lending Office: 315 Deaderick Street, 2nd Floor
Nashville, Tennessee 37237
Attn: Sandy Hamrick

S-6
<PAGE> 133

NATIONSBANK OF TENNESSEE, N.A.

By:
-----------------------------------
Name: S. Walker Choppin
Title: Senior Vice President

Notice Address
and Lending Office: One NationsBank Plaza, 5th Floor
Nashville, Tennessee 37239
Attn: S. Walker Choppin

S-7
<PAGE> 134

PNC BANK, KENTUCKY, INC.

By:
------------------------------------
Name: Jefferson M. Green
Title: Vice President

Notice Address
and Lending Office: 500 West Jefferson
Louisville, Kentucky 40202
Attn: Jefferson M. Green
Healthcare Corporate Group

S-8
<PAGE> 135

RABOBANK NEDERLAND, NEW YORK BRANCH

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

Notice Address
and Lending Office: 245 Park Avenue
New York, New York 10167
Attn: Corporate Services Department

with a copy to:

Rabobank Nederland
1 Atlantic Center
1201 West Peachtree, Suite 3450
Atlanta, GA 30309-3450
Attn: Terrell Boyle

S-9
<PAGE> 136

SUNTRUST BANK, NASHVILLE, N.A.

By:
------------------------------------
Name: Karen Ahern
Title: Vice President

Notice Address
and Lending Office: 201 Fourth Avenue North
Nashville, Tennessee 37219
Attn: Karen Ahern

S-10

<PAGE> 1
EXHIBIT 10.5

May 22, 1996

Equitable Securities Corporation
Lehman Brothers
Wheat First Butcher & Singer
BT Securities Corporation
800 Nashville City Center
Nashville, Tennessee 37219

Dear Ladies and Gentlemen:

Reference is made to the Underwriting Agreement, dated May ____, 1996 (the
"Underwriting Agreement"), among American HomePatient, Inc., a Delaware
corporation (the "Company"), AHOM Holdings, Inc., a Delaware corporation, and
Equitable Securities Corporation, Lehman Brothers, Wheat First Butcher & Singer
and BT Securities Corporation, acting as representatives (the
"Representatives") of the several Underwriters name in Schedule I thereto. All
terms not otherwise defined herein shall have the same meanings ascribed to
them in the Underwriting Agreement.

In consideration of the Underwriting Agreement, and pursuant thereto, the
undersigned hereby agrees, not to, without the prior written consent of the
Representatives, directly or indirectly, offer, sell, issue, distribute or
otherwise dispose of any shares of the Common Stock or distribute or otherwise
dispose of any shares of Common Stock or any securities convertible into, or
exercisable or exchangeable for, or any rights to purchase or acquire, shares
of Common Stock, other than the securities offered pursuant to the Underwriting
Agreement, for a period of 90 days after the date hereof.

Very truly yours,

/s/ Morris A. Perlis
--------------------------------------------
Morris A. Perlis, Chairman

<PAGE> 1
EXHIBIT 10.6

May 22, 1996

Equitable Securities Corporation
Lehman Brothers
Wheat First Butcher & Singer
BT Securities Corporation
800 Nashville City Center
Nashville, Tennessee 37219

Dear Ladies and Gentlemen:

Very truly yours,

/s/ Edward K. Wissing
--------------------------------------------
Edward K. Wissing, President,
Chief Executive Officer and Director

<PAGE> 1
EXHIBIT 10.7

May 22, 1996

Equitable Securities Corporation
Lehman Brothers
Wheat First Butcher & Singer
BT Securities Corporation
800 Nashville City Center
Nashville, Tennessee 37219

Dear Ladies and Gentlemen:

Very truly yours,

/s/ Mary Ellen Rodgers
--------------------------------------------
Mary Ellen Rodgers, Senior Vice President,
Chief Financial Officer and Secretary

<PAGE> 1
EXHIBIT 10.8

May 22, 1996

Equitable Securities Corporation
Lehman Brothers
Wheat First Butcher & Singer
BT Securities Corporation
800 Nashville City Center
Nashville, Tennessee 37219

Dear Ladies and Gentlemen:

Very truly yours,

/s/ Thomas E. Mills
--------------------------------------------
Thomas E. Mills, Senior Vice President -
Strategic Alliances

<PAGE> 1
EXHIBIT 10.9

May 22, 1996

Equitable Securities Corporation
Lehman Brothers
Wheat First Butcher & Singer
BT Securities Corporation
800 Nashville City Center
Nashville, Tennessee 37219

Dear Ladies and Gentlemen:

Very truly yours,

/s/ Allan C. Silber
--------------------------------------------
Allan C. Silber, Director

<PAGE> 1
EXHIBIT 10.10

May 22, 1996

Equitable Securities Corporation
Lehman Brothers
Wheat First Butcher & Singer
BT Securities Corporation
800 Nashville City Center
Nashville, Tennessee 37219

Dear Ladies and Gentlemen:

Very truly yours,

/s/ Henry T. Blackstock
--------------------------------------------
Henry T. Blackstock, Director

<PAGE> 1
EXHIBIT 10.11

May 22, 1996

Equitable Securities Corporation
Lehman Brothers
Wheat First Butcher & Singer
BT Securities Corporation
800 Nashville City Center
Nashville, Tennessee 37219

Dear Ladies and Gentlemen:

Very truly yours,

/s/ Joseph F. Furlong III
--------------------------------------------
Joseph F. Furlong III, Director

<PAGE> 1
EXHIBIT 10.12

May 22, 1996

Equitable Securities Corporation
Lehman Brothers
Wheat First Butcher & Singer
BT Securities Corporation
800 Nashville City Center
Nashville, Tennessee 37219

Dear Ladies and Gentlemen:

Very truly yours,

/s/ Thomas A. Dattilo
--------------------------------------------
Thomas A. Dattilo, Director

<PAGE> 1
EXHIBIT 10.13

May 22, 1996

Equitable Securities Corporation
Lehman Brothers
Wheat First Butcher & Singer
BT Securities Corporation
800 Nashville City Center
Nashville, Tennessee 37219

Dear Ladies and Gentlemen:

Very truly yours,

/s/ Edward Sonshine
--------------------------------------------
Edward Sonshine, Director

<PAGE> 1
EXHIBIT 10.14

May 22, 1996

Equitable Securities Corporation
Lehman Brothers
Wheat First Butcher & Singer
BT Securities Corporation
800 Nashville City Center
Nashville, Tennessee 37219

Dear Ladies and Gentlemen:

Very truly yours,

/s/ Mark Manner
--------------------------------------------
Mark Manner, Director

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 7,224
<SECURITIES> 0
<RECEIVABLES> 82,189
<ALLOWANCES> 16,916
<INVENTORY> 17,289
<CURRENT-ASSETS> 98,009
<PP&E> 84,366
<DEPRECIATION> 33,297
<TOTAL-ASSETS> 329,851
<CURRENT-LIABILITIES> 30,099
<BONDS> 101,608
0
0
<COMMON> 142
<OTHER-SE> 194,929
<TOTAL-LIABILITY-AND-EQUITY> 329,851
<SALES> 50,812
<TOTAL-REVENUES> 117,472
<CGS> 25,015
<TOTAL-COSTS> 25,015
<OTHER-EXPENSES> 77,925
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,993
<INCOME-PRETAX> 10,539
<INCOME-TAX> 4,068
<INCOME-CONTINUING> 6,471
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<CHANGES> 0
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<EPS-PRIMARY> 0.51
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</TABLE>