10-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended June 30, 2002

OR

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

Commission File Number 000-25769

Accredo Health, Incorporated

(Exact name of company as specified in its charter)

Delaware	62-1642871
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1640 Century Center Pkwy, Suite 101, Memphis, Tennessee 38134

(Address, including Zip Code, of principal executive offices)

Registrant’s telephone number, including area code:  (901) 385-3688

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to section 12(g) of the Act:

Common Stock, $.01 par value

(Title of Class)

     Indicate by check mark whether the Company (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 Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Company’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

      The aggregate market value of the voting stock held by non-affiliates of the Company was $1,174,900,500 as of September 23, 2002, based upon the closing price of such stock as reported on the Nasdaq National Market System (“Nasdaq Stock Market”) on that day (assuming for purposes of this calculation, without conceding, that all executive officers and directors are affiliates). There were 31,514,233 shares of common stock, $.01 par value, outstanding at September 23, 2002.

DOCUMENTS INCORPORATED BY REFERENCE

      Parts of the Registrant’s Proxy Statement for its 2002 Annual Meeting of Stockholders are incorporated by reference in Part III of this Annual Report.

TABLE OF CONTENTS

PART I
	Item 1. Business
RISK FACTORS
	Item 2. Properties
	Item 3. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
PART II
	Item 5. Market for Company’s Common Equity and Related Stockholder Matters.
	Item 6. Selected Consolidated Financial Data
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 7A. Quantitative and Qualitative Disclosures about Market Risk
	Item 8. Financial Statements and Supplementary Data
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
	Item 10. Directors and Executive Officers of the Company
	Item 11. Executive Compensation
	Item 12. Security Ownership of Certain Beneficial Owners and Management
	Item 13. Certain Relationships and Related Transactions
PART IV
	Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
REPORT OF INDEPENDENT AUDITORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURES
EXHIBIT INDEX
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED PLEDGE AGREEMENT
AMENDED AND RESTATED SECURITY AGREEMENT
SUBSIDIARIES
CONSENT OF ERNST & YOUNG LLP
SECTION 906 CERTIFICATION OF THE CEO
SECTION 906 CERTIFICATION OF THE CFO

PART I

      Some of the information in this report contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “intend,” “estimate” and “continue” or similar words. You should read statements that contain these words carefully for the following reasons:

•  the statements discuss our future expectations;

•  the statements contain projections of our future earnings or of our financial condition; and

•  the statements state other “forward-looking” information.

      We believe it is important to communicate our expectations to our investors. There may be events in the future, however, that we are not accurately able to predict or over which we have no control. The risk factors beginning on page 14 hereof, as well as any cautionary language in this report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Examples of these risks, uncertainties and events include the availability of new drugs, the demand for our services, our ability to expand through joint ventures and acquisitions, our ability to maintain existing pricing arrangements with suppliers, the impact of government regulation, reliance on key payor relationships, our need for additional capital, the seasonality of our operations and our ability to implement our strategies and objectives.

      Before you invest in our common stock, you should be aware that the occurrence of any of the events described in the risk factors, elsewhere in this report and other events that we have not predicted or assessed could have a material adverse effect on our earnings, financial condition and business. In such case, the trading price of our common stock could decline and you may lose all or part of your investment.

Item  1. Business

Overview

      We are one of the largest providers of specialized pharmacy services in the United States. We provide these services on behalf of biopharmaceutical manufacturers to patients with chronic diseases, and we are paid for our products and services in two ways. We are paid for dispensing medications to patients similar to a typical retail pharmacy and we are also often paid by the manufacturer to provide additional services. Our services help simplify the difficult and often challenging medication process for patients with a chronic disease and help ensure that patients receive and take their medication as prescribed. Our services benefit biopharmaceutical manufacturers by accelerating patient acceptance of new drugs, facilitating patient compliance with the prescribed treatment, addressing difficult reimbursement issues and capturing valuable clinical information about a new drug’s effectiveness.

      Our services include specialized pharmacy services, clinical services, reimbursement services and delivery services. We provide overnight, temperature-controlled delivery of all drugs and supplies necessary for patients to self-administer their drug dosages safely and effectively in the privacy of their homes. Our pharmacists and customer service staff talk frequently with patients over the telephone, help them comply with prescribed treatment schedules and educate them about ways to manage their complex diseases more effectively. Our reimbursement specialists manage the complicated paperwork that is required to collect payment for the patient’s medication from insurance companies and managed care plans.

      We sell a limited number of drugs to our patients. We mainly focus our services on injectable drugs that:

•  are used on a recurring basis to treat chronic and potentially life-threatening diseases;

•  are expensive, with annual costs generally ranging from approximately $8,000 to $300,000 per patient;

•  are complex and clinically challenging with the potential for side effects or adverse reactions; and

•  require temperature control or other specialized handling.

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      We have agreements with fourteen biopharmaceutical manufacturers to buy drugs and to provide varying degrees of specialized pharmacy services for our twenty primary product lines. Although most of our agreements that involve specialized pharmacy services are not exclusive, we generally are a recommended provider of the manufacturer’s drug to patients and physicians. These agreements also contain favorable pricing from the manufacturer and in many cases compensate us for our specialized services and provide for an annual review of our acquisition cost of drugs.

      We also buy drugs for our acute business which we intend to exit by December 31, 2002. These arrangements do not include requirements that we provide specialized pharmacy services.

      Accredo Health, Incorporated, was incorporated in Delaware in 1996. Our principal executive offices are located at 1640 Century Center Parkway, Suite 101, Memphis, Tennessee 38134. Our telephone number at that address is 901-385-3688.

Recent Events

      On June 13, 2002, we acquired substantially all of the assets of the Specialty Pharmaceuticals Services Division, or SPS business, of Gentiva Health Services, Inc. The aggregate purchase price paid was $462.3 million (including $12.2 million of acquisition related costs) and consisted of $215.6 million in cash and 5,060,976 shares of our common stock valued at $246.7 million. As part of the acquisition, we acquired 100% of the outstanding stock of three Gentiva subsidiaries that were engaged exclusively in the SPS business. We did not acquire Gentiva’s home health care services business.

      When operated by Gentiva, the SPS business incorporated both Gentiva’s chronic and acute businesses. Since our acquisition of the SPS business, we have not retained certain drugs for chronic diseases which are not related to our primary business. We have also reorganized the chronic and acute portions of the business. The acute business involves the administration of antibiotics, chemotherapy, nutrients and other prescription drugs that require mixing using aseptic techniques and a laminar hood, and are for patients with acute or episodic diseases. We view the acute business as inconsistent with our strategy and focus, and we are pursuing strategic options for the acute portion of the SPS business and we intend to exit this acute business by December 31, 2002.

Services

      We offer the following products and services:

      Sale and Delivery of Drugs. We sell and provide timely delivery of drugs and ancillary supplies directly to the patient or the patient’s physician in packaging specially designed to maintain appropriate temperatures. The package typically contains all of the supplies required for administration in the patient’s home or in other alternate sites. Substantially all products are shipped from our three primary pharmacy locations in Memphis, Nashville, Tennessee and Pittsburgh, Pennsylvania. We also maintain over 27 satellite pharmacy locations across the United States. We ship our products primarily via FedEx.

      Specialized Pharmacy Services. We offer customized services to biopharmaceutical manufacturers designed to meet specific needs that arise at various stages in the life cycles of their products.

      Prior to product launch, we offer:

•  consulting services related to strategic pricing decisions;

•  analyses and information to assist manufacturers in evaluating payor mix and pricing strategies for their new drugs;

•  testing of a manufacturer’s packaging to assess maintenance of product temperatures and to determine whether the packaging system will meet the product’s unique needs during normal shipping conditions;

•  advice on injection and infusion supplies related to the drug therapy and assistance in procuring supplies and customized packaging for infusion supply kits; and

•  clinical guidelines that assist nurses and caregivers in learning how to safely and effectively administer a drug, including sterilization techniques, supplies needed and infusion time required.

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      Following product launch, we offer:

•  clinical hotlines that allow the physician or patient caregiver to inquire about product usage, adverse drug reactions and other clinical questions;

•  reimbursement hotlines for patients and health care professionals;

•  support for manufacturers’ patient assistance programs for patients without the financial ability to otherwise acquire needed drugs and services;

•  replacement drug and supply programs that replenish patients’ inventory of products or supplies that become damaged;

•  home care coordination programs that provide patient assistance in training, identify home care providers and transfer clinical information to all caregivers; and

•  triage services that refer patients to the appropriate provider based on the patients’ insurance provider network.

      Results of our interaction with patients, which is primarily via telephone, are coded to protect privacy and tracked to compile valuable information, including side effects, drug interactions, administration problems, supply issues, physician prescription habits and reasons for therapy discontinuation and non-compliance.

      We will also report on adverse drug reactions, log the occurrence, and complete an initial preliminary report of the occurrence to assist manufacturers in completing adverse event reports in a timely manner. We can also create a wide variety of additional reports that can be customized to meet specific manufacturers’ needs. Examples of reports include sales by physician, sales by zip code, sales trending, first time patient orders, Medicaid and Medicare sales, inventory status and reasons for patient discontinuations. Due to the nature of the data we collect, we have established procedures designed to ensure compliance with laws regarding confidentiality of patient information.

      Clinical Services. We work with the patient and the patient’s physician to implement the prescribed plan of care. Each patient is assigned to a team consisting of a pharmacist, a customer service representative and a reimbursement specialist, and with certain therapies, a Registered Nurse. Generally, each patient’s team members specialize only in that patient’s disease and work only with payors and providers in that patient’s geographic region. In helping to implement the prescribed plan of care; we:

•  help patients understand their medication and treatment program;

•  help patients manage potential side effects and adverse reactions that may occur so that patients are less likely to discontinue therapy;

•  help coordinate backup care in the event of a medical emergency; and

•  help patients establish an inventory management and record keeping system.

      In addition, we assist patients and their families in coping with a variety of difficult and emotional social challenges presented by their diseases, participate in patient advocacy organizations, assist in the formation of patient support groups, advocate legislation to advance patient interests and publish newsletters for our patients.

      Reimbursement Services. By focusing on specific chronic diseases, we have developed significant expertise in managing reimbursement issues related to the patient’s condition and treatment program. Due to the long duration and high cost of therapy generally required to treat chronic disorders, the availability of adequate health insurance is a continual concern for chronically ill patients and their families. Generally, we contact the payor prior to each shipment to determine the patient’s health plan coverage and the portion of costs that the payor will reimburse. Our reimbursement specialists review issues such as pre-certification or other prior approval requirements, lifetime limits, pre-existing condition clauses, and the availability of special state programs. By identifying coverage limitations as part of an initial consultation, we can assist the patient in planning for alternate coverage, if necessary. From time to time, we negotiate with payors to facilitate or

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expand coverage for the chronic diseases we serve. In addition, we accept assignment of benefits from numerous payors, which substantially eliminates the claims submission process for most patients.

Disease Markets and Related Products

      Many of the biopharmaceutical drugs that we sell, including growth hormones, IVIG and other blood-related products, are available from multiple sources. Currently, we sell and provide our specialty services primarily with respect to twenty products. The drugs we sell with respect to seven core disease markets account for over 85% of our revenues. These seven disease markets and the drugs that we sell to service these markets are described below.

      With respect to drugs that we sell for our seven core disease markets, Synagis®, Ceredase® and Cerezyme® are only available from single sources. We have also agreed with Biogen to not sell drugs that compete with AVONEX® for the treatment of Multiple Sclerosis. There are other drugs that we do not sell that are similar to or that compete with some of the other drugs that we sell.

      Pulmonary Arterial Hypertension. Pulmonary Arterial Hypertension (PAH) is a chronic pulmonary disease for which there is no known cure. Patients with this disease experience an increase in pulmonary artery pressure that results in symptoms such as dyspnea, angina, palpitations and syncope. Generally, PAH impacts adults between the ages of 20 and 40. It is estimated that 1 to 2 out of every 1 million Americans will develop Primary Pulmonary Hypertension, a common form of PAH, and approximately 400 persons per year in the United States will be diagnosed with some form of PAH. Once diagnosed, PAH patients receive therapy for the remainder of their lifetime or until they receive a lung transplant. This disease is treated with one, or a combination, of the following three products:

•  Flolan®, which is an epoprosternol sodium product manufactured by GlaxoSmithKline;

•  Tracleer™, which is a bosentan product manufactured by Actelion Pharmaceuticals, Ltd.; and

•  Remodulin®, which is a treprostinil sodium product manufactured by United Therapeutics Corporation.

      We have agreements with GlaxoSmithKline for the sale of Flolan®, United Therapeutics Corporation for the sale of Remodulin®, and Actelion Pharmaceuticals U.S., Inc. for the sale of Tracleer^TM. These Agreements have multiple year terms, may be terminated without cause on 90 to 365 days prior notice and obligate us to provide varying degrees of specialized services. We are the only specialized pharmacy that offers all three FDA approved treatment options for PAH patients.

      Hemophilia. Hemophilia is an inherited, genetic, lifelong bleeding disorder caused by the absence or inactivity of an essential blood clotting protein or “factor.” Two major disease categories exist, hemophilia A, or Factor VIII deficiency, and hemophilia B, or Factor IX deficiency. It is estimated that there are approximately 20,000 people with hemophilia in the United States, and presently there is no known cure. Individuals with hemophilia may suffer from bleeding episodes that can occur spontaneously or as a result of physical activity or trauma. While small surface cuts can usually be treated with a pressure bandage, the most frequent complication of hemophilia is internal bleeding into muscles and joints, which can cause arthritis and debilitating orthopedic problems. More serious complications include internal bleeding in the head, neck, spinal cord or internal organs, which can cause death.

      Hemophilia is generally treated by infusing anti-hemophilic factor concentrates intravenously when the symptoms of a bleed are detected. This therapy is generally administered by the patient or his or her family members, without the assistance of a nurse, in response to bleeding episodes. Approximately 60% of the persons with hemophilia in the United States have a severe form of the disorder as measured by the level of factor naturally present in the body. In general, the more severe the factor deficiency, the more frequently the bleeding episodes may occur. On average, someone with severe hemophilia will need to infuse factor weekly. In many individuals with severe hemophilia, factor therapy is administered prophylactically to maintain high enough circulating factor levels to minimize the risk of bleeding.

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      Many hemophilia patients contracted hepatitis or human immunodeficiency virus, commonly known as HIV, as a result of contaminated blood derivative therapies they received prior to the mid-1980’s. It is estimated that approximately one-half of the hemophilia population who received anti-hemophilic factor prior to the mid-1980’s was exposed to HIV and is at risk of developing acquired immune deficiency syndrome, commonly known as AIDS. We offer medications used in treating AIDS as a convenience to our hemophilia patients that have contracted HIV. In the early 1990’s, recombinant clotting factor, a biotechnological alternative to plasma-derived factor, was introduced and to date has proved to be as effective as the blood-derived products with virtually no risk of viral transmission. Current utilization reflects increased use of recombinant and monoclonal products by physicians because of the advantages of increased purity. However, issues related to the development of inhibitors, or antibodies that neutralize the infused factor products and prevent clotting, may slow the increase in utilization rates of these products.

      There are currently six major suppliers of FDA-approved products used for treating hemophilia. We purchase products from all six suppliers. Historically, no supplier has been responsible for a majority of our hemophilia product purchases. However, due to product shortages, the majority of our hemophilia product was purchased in the fiscal year ended June 30, 2002 from Baxter Healthcare Corporation.

      We have entered into a Hemophilia Product Volume Commitment Agreement with Baxter Healthcare Corporation naming us as a non-exclusive Hemophilia Specialty Pharmacy Provider of hemophilia products to home care patients in the United States and Puerto Rico. The agreement provides for minimum purchase commitments by us and our acquisition cost of the drugs is based upon the volume of product purchased by us. The agreement expires December 31, 2004, but will remain in effect for successive two (2) year terms unless terminated by either party. The agreement may be terminated upon notice given six (6) months prior to the expiration of the term and may also be terminated by either party for cause upon thirty (30) days prior written notice and opportunity to cure. If Baxter undertakes to sell or distribute hemophilia products directly to home care patients, we have the right to terminate the agreement upon written notice.

      Multiple Sclerosis. Multiple Sclerosis is a progressive neurological disease in which the body loses the ability to transmit messages among nerve cells, leading to a loss of muscle control, paralysis and, in some cases, death. Patients with active relapsing Multiple Sclerosis experience an uneven pattern of disease progression characterized by periods of stability interrupted by flare-ups of the disease. Industry sources estimate that Multiple Sclerosis affects between 250,000 and 350,000 people in the United States, approximately two-thirds of whom are women. Disease onset typically occurs in young adults between the ages of 20 and 40. Of the patients diagnosed with Multiple Sclerosis in the United States, about 90% of patients initially have relapsing Multiple Sclerosis and about half of those patients go on to develop a progressive form of the disease. About 10% of patients exhibit a progressive form of the disease at onset. Industry sources estimate that of the persons currently affected by Multiple Sclerosis in the United States, approximately 50% have a relapsing form of the disease, and approximately 50% have a progressive form. There are currently four FDA-approved products used for treating relapsing Multiple Sclerosis:

•  AVONEX®, which is manufactured by Biogen, Inc.;

•  Betaseron®, which is manufactured by Chiron Corporation; and

•  Copaxone®, which is manufactured by Teva Pharmaceutical Industries Limited.

•  Rebif®, which is manufactured by Serono, S.A..

      AVONEX®, which is generally administered via a single intramuscular injection once per week, is used by a majority of such patients in the United States currently on drug therapy.

      Effective January 2000, we entered into amended and restated agreements with Biogen for a three year term pursuant to which we dispense AVONEX® and provide various services and information to Biogen. These agreements were amended and restated effective September 1, 2002. The new agreements are for a term ending December 31, 2005. Our agreements with Biogen are terminable by either party for any reason with 90 days prior notice. In addition, our agreements provide that as long as we are the only preferred home delivery service provider approved by Biogen (other than providers to Medicaid patients in some states), we

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may not, without Biogen’s approval, sell any products that compete with AVONEX® for the treatment of Multiple Sclerosis. We do not have exclusive rights to sell AVONEX®, and Biogen has reserved the right under our agreement to sell AVONEX® directly or to appoint other providers of home delivery pharmacy services for AVONEX®, but any such action would eliminate our exclusivity obligations.

      Gaucher Disease. Gaucher Disease is a seriously debilitating, sometimes fatal, genetic disorder caused by a deficiency of an important enzyme in the body called glucocerebrosidase. This deficiency results in the accumulation of the glucocerebroside lipid in the cells of organs in the body. The disease is characterized by an enlarged liver or spleen, anemia, bleeding problems, fatigue, bone and joint pain and other orthopedic complications such as repeated fractures and bone erosion. Type I Gaucher Disease is the most common form of Gaucher Disease, affecting about 90% of all Gaucher patients. Genzyme’s Ceredase® and Cerezyme® products are the only FDA-approved products used for treating Type I Gaucher Disease.

      We have a longstanding relationship with Genzyme relating to Ceredase® and Cerezyme®. Ceredase® and Cerezyme® are administered by intravenous infusion. Dosing frequencies vary, but a typical dosing regimen involves administration once every two weeks. Pursuant to our current agreement with Genzyme, we dispense Ceredase® and Cerezyme® in the United States and provide various information and other services to Genzyme. The pricing of Ceredase® and Cerezyme® under our agreement with Genyzme, as well as the scope and pricing of services that we provide, are subject to periodic adjustment. Our agreement with Genzyme automatically renews on an annual basis unless either party provides 90 days prior notice of non-renewal, and is terminable by either party for any reason with 60 days prior notice. In addition, the agreement provides that, during the term of the agreement and for a period of five years after its termination, we may not sell any prescription drug for the treatment of Gaucher Disease other than Ceredase® and Cerezyme®. We do not have exclusive rights to sell Ceredase® or Cerezyme®. Genzyme has reserved the right under the agreement to sell these products directly or to appoint other distributors of these products.

      Growth Hormone-Related Disorders. A major treatable cause of growth delay in children is growth hormone deficiency. It is estimated that there are approximately 20,000 pediatric patients in the United States who are candidates for growth hormone therapy. The market for growth hormone products is relatively mature, and currently five manufacturers sell eleven FDA-approved growth hormone products for a variety of indications. However, a majority of patients currently being treated with growth hormone products use one of Genentech’s growth hormone products, Protropin®, Nutropin®, Nutropin AQ® or Nutropin Depot™, the first long-acting dosage form of recombinant human growth hormone. Genentech began shipping Nutropin Depot™ to distributors in June 2000.

      We have purchasing relationships with all five manufacturers of growth hormone products used in the United States, including a longstanding relationship with Genentech. Typically, patients or family members administer growth hormone products at home without the presence of a nurse. Most growth hormone products require administration by injection several times per week, and in some cases daily. In contrast, Nutropin Depot™ may be administered as infrequently as monthly or bi-monthly. We have entered into an amended and restated national distribution agreement with Genentech in which we also provide compliance programs, nursing coordination, various information and other services relating to Genentech’s human growth hormone products, Protropin®, Nutropin®, Nutropin AQ® and Nutropin Depot™ in the United States. The pricing of Protropin®, Nutropin®, Nutropin AQ® and Nutropin Depot™ under the distribution agreement, as well as the scope and pricing of the services provided by us, are subject to adjustment depending on the Company meeting certain performance criteria. The distribution agreement has a term expiring December 31, 2002. The agreement may be terminated by Genentech upon a change of control of Nova Factor and may be terminated by either party for cause following a 60-day right to cure or in the event of bankruptcy, insolvency or similar events affecting the other party. We do not have exclusive rights to distribute Protropin®, Nutropin®, Nutropin AQ® and Nutropin Depot™. Genentech has reserved the right under our agreement to sell these drugs directly or to appoint other distributors of these drugs.

      Autoimmune Disorder. Autoimmune disorders describe a group of chronic diseases in which the body treats its own tissues or cells as if they were foreign substances and produces antibodies to attack and destroy those tissues or cells. Most autoimmune disorders currently are incurable and tend to become progressively

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severe. Various therapies, including intravenous immunoglobin, (IVIG), are administered to minimize the effects of autoimmune disorders and the severity of their associated symptoms. Although typically administered via infusion in a hospital or physician’s office, IVIG can be administered at home by patients who require repeated treatment.

      Prior to October 1999, we did not offer IVIG products on a retail basis. In an effort to improve the overall effectiveness of a patient’s medication, many physicians prescribe IVIG in combination with existing drug therapies to treat chronic diseases such as Multiple Sclerosis and rheumatoid arthritis. This trend contributed to our decision to make two acquisitions in fiscal year 2000 through which we gained access to the retail IVIG market. We subsequently acquired two other IVIG distributors in May 2001 and December 2001. Because IVIG is collected and processed from human donors, the IVIG product market can be somewhat limited by supply constraints. We have supply contracts with all five major suppliers of IVIG in the United States. Historically, no supplier is responsible for a majority of our IVIG product purchases.

      Respiratory Syncytial Virus. Respiratory Syncytial Virus (RSV) is a serious lower respiratory tract disease that primarily attacks pediatric patients. RSV is the most common cause of pneumonia and bronchiolitis in infants and children. Approximately two-thirds of infants are infected with RSV during the first year of life, and almost all have been infected by age two. It has been estimated that, nationwide, there are approximately 300,000 children at risk of RSV each year and approximately 90,000 hospitalizations due to RSV infections.

      Synagis® (palivizumab), a drug manufactured by MedImmune, Inc. has been shown to significantly reduce RSV hospitalizations in pediatric patients at risk of the disease. Clinical studies have shown that preventive treatment with Synagis® was associated with a 55% reduction in overall hospitalizations due to RSV. Physicians prescribe Synagis® to immunize infants who are at high risk for serious lung impairment. Synagis® is typically administered by intramuscular injection once a month over a six month period.

      Respiratory syncytial virus is seasonal, with the disease striking primarily during the period of October through April. We renewed our relationship with MedImmune for the 2001-2002 respiratory syncytial virus season by executing a new distribution agreement on October 1, 2001. The distribution agreement with MedImmune renews on an annual basis upon the mutual consent of the parties and is terminable by either party for any reason on 30 days notice. We do not have the exclusive right to sell Synagis®, although we were the national preferred assignment of benefits distributor of the drug for the 2001-2002 respiratory syncytial virus season. We have recently renewed our agreement with MedImmune to continue as the national preferred assignment of benefits distributor for the 2002-2003 season.

Suppliers

      We primarily dispense, growth hormones, IVIG and other blood-related products, and the drugs obtained from the following sources:

•  Actelion Pharmaceuticals U.S., Inc., with respect to Tracleer™;

•  Allergan, Inc., with respect to Botox®;

•  Aventis, with respect to Lovenox®, Rilutek® and Oncaspar®;

•  Bio-Technology General Corp., with respect to Delatestryl® and Oxandrin®;

•  Biogen, Inc., with respect to AVONEX®;

•  Centocor, Inc., with respect to Remicade®;

•  Enzon, Inc., with respect to Adagen®;

•  Genzyme Corporation, with respect to Ceredase® and Cerezyme®;

•  GlaxoSmithKline, with respect to Flolan®;

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•  Immunex Corporation, with respect to Enbrel®;

•  InterMune, Inc., with respect to ActImmune®;

•  MedImmune, Inc. with respect to Synagis®;

•  Rare Disease Therapeutics, Inc., with respect to Orfadin®; and

•  United Therapeutics Corporation, with respect to Remodulin®.

      Although there are four other manufacturers of FDA-approved growth hormone products, Genentech’s products collectively enjoy a market share that exceeds the aggregate of all other individual manufacturers of growth hormone products. Accordingly, in the event that one or more of our current suppliers of products (other than IVIG and other blood-related products) were to cease selling products to us, our business, financial condition and results of operations would be materially and adversely affected.

      Our agreements with our key suppliers generally may be canceled by either party, without cause, upon between 30 and 90 days prior notice. In addition, our agreements with our suppliers generally provide that during the term of the agreements (and, in some instances, for as much as five years after termination of the agreements), we may not distribute any competing products. We do not have any exclusive rights to dispense our products, and our suppliers have generally reserved the right under their agreements with us to distribute their products directly or to appoint other distributors of their products. See “Risk Factors — We are highly dependent on our relationships with a limited number of biopharmaceutical manufacturers.” and “Business — Disease Markets and Related Products.”

      We have supply relationships with all six major suppliers of clotting factor and all five major suppliers of IVIG in the United States, and historically no supplier has been responsible for a majority of our hemophilia or IVIG product purchases. However, due to product shortages, the majority of our hemophilia product was purchased for the year ended June 30, 2002 from Baxter Healthcare Corporation.

Relationships with Medical Centers

      At June 30, 2002, we had joint ventures with four medical centers (or their affiliates):

•  Children’s Home Care located in Los Angeles, California;

•  Alternative Care Systems, Inc. located in Dallas, Texas;

•  Cook Children’s Home Health located in Ft. Worth, Texas;

•  Children’s Hospital located in Washington D.C.

      In our typical joint venture arrangement, we and the medical center (or its affiliate) form a joint venture entity to which we provide specialized pharmacy services. Under the terms of the joint venture agreement, we manage the sales, marketing, and provision of specialty pharmacy services in exchange for a monthly management fee and the reimbursement of some expenses. We share in the profits and losses of the joint venture entity with the medical center in proportion to our respective capital contributions and receive a management fee for our management services. The agreements generally have initial terms of between one and five years and contain restrictive covenants and rights of first refusal.

      In addition to joint venture relationships, we have entered into management agreements with other childrens hospitals and adult medical centers (or their affiliates) to provide specialized pharmacy services.

      Under our management agreements, we provide goods and services used in the hospitals’ or joint ventures’ specialized pharmacy business, including drugs and related supplies, patient education, clinical consultation, and reimbursement services. While the payment terms under such management agreements may vary, we are generally reimbursed for our costs and are paid a monthly management fee generally calculated as a percentage of revenues. These agreements usually have terms of between one and five years and are terminable by either party, with or without cause, with between one and twelve months prior notice. See “Risk Factors — If our relationships with some medical centers are disrupted, our business could be harmed.”

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Payors

      The following table sets forth the approximate percentages of the Company’s gross patient revenue attributable to various payor categories for the fiscal years ended June 30, 2000, 2001 and 2002. This table reflects the acquisition of the SPS business only since June 14, 2002. The percentage of the SPS business reimbursed by Medicare and Medicaid was higher than the comparable percentage of Accredo’s business. Therefore, we anticipate that our future payor mix will reflect an increase in the percentage of revenue attributable to Medicare and Medicaid and a decrease in the percentage of revenue attributable to private payors.

		Year Ended			Year Ended			Year Ended
		June 30, 2000			June 30, 2001			June 30, 2002(2)
Private payors (including self pay)(1)			82	%		81	%		79	%
Medicaid and other state programs			16	%		17	%		19	%
Medicare and other federal programs			2	%		2	%		2	%
	Total		100	%		100	%		100	%

(1)	Includes sales to private physician practices, whose ultimate payor is typically Medicare, which accounted for approximately 5%, 4% and 3% of gross patient revenue, respectively, for the fiscal years ended June 30, 2000, 2001 and 2002.
(2)	Excludes acute business operated by our SPS business.

      In fiscal year 2002, Aetna, Inc. and its affiliates (“Aetna”) accounted for approximately 15% of the Company’s revenue. The Company entered into a Specialty Pharmacy Mail Service Vendor Agreement with Aetna effective May 1, 2000. Our Agreement has an initial term of three years ending April 30, 2003 and renews on an annual basis thereafter. Either party may terminate the Agreement on 90 days notice. Except for Aetna, no private payor accounted for 10% or more of the Company’s revenue and due to the SPS acquisition, we anticipate that Aetna will account for less than 10% of our revenues in the future.

      The primary trend in the United States health care industry is toward cost containment. The increasing prevalence of managed care, centralized purchasing decisions, consolidation among and integration of health care providers, and competition for patients has affected, and continues to affect, pricing, purchasing, and usage patterns in health care. Decisions regarding the use of a particular drug treatment are increasingly influenced by large private payors, including managed care organizations, pharmacy benefit managers, group purchasing organizations, regional integrated delivery systems, and similar organizations, and are based increasingly on economic considerations including product cost and whether a product reduces the cost of treatment. Efforts by payors to eliminate, contain or reduce costs through coverage exclusions, lower reimbursement rates, greater claims scrutiny, closed provider panels, restrictions on required formularies, claim delays or denials and other similar measures could have a material adverse effect on our business, financial condition and results of operations.

      Some payors set lifetime limits on the amount reimbursable to patients for medical costs. Some of our patients may reach these limits because of the high cost of their medical treatment and associated pharmaceutical regimens. Some payors may attempt to further control costs by selecting some firms to be their exclusive providers of pharmaceutical or other medical product benefits. If any such arrangements were with our competitors, we would be unable to be reimbursed for purchases made by such patients.

      We derive a significant portion of our revenue from governmental programs such as Medicare and Medicaid. Such programs are highly regulated and subject to frequent and substantial changes and cost containment measures. In recent years, changes in these programs have limited and reduced reimbursement to providers. According to a Kaiser Family Foundation report released on September 19, 2002, 45 states reported they took actions to decrease Medicaid spending on 2002, and 41 reported they would take additional actions to decrease Medicaid spending in 2003.

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      Federal and state proposals are pending that would impose further limitations on governmental payments and that could increase patient co-payments and deductibles. Many government payors, including Medicare and Medicaid, pay us directly or indirectly at the drug’s average wholesale price (AWP) or at a percentage off AWP. The Department of Health and Human Services, Office of Inspector General (OIG) has raised concerns since 1992 about how certain manufacturers have established AWP for certain Medicare covered drugs. Federal and state agencies continue to examine perceived discrepancies between reported AWP of drugs and the actual manufacturers selling price.

      In February 2000, First DataBank, Inc., which reports AWP to Medicaid programs, announced that it will report based on market prices rather than prices submitted by manufacturers. As a result, a number of state Medicaid agencies have lowered the amount of reimbursement that they pay for certain drugs, including clotting factor. Medicare also announced that it would implement lower prices for certain drugs effective October 1, 2000. The proposal to include clotting factor and cancer drugs in the lower Medicare pricing was withdrawn.

      In September 2001, the OIG issued a report titled “Medicaid’s Use of Revised Average Wholesale Prices,” which in part summarized the results of a joint investigation conducted by the United States Department of Justice and the National Association of Medicaid Control Fraud Units of actual wholesale pricing data for 51 drugs. The report concluded the current method of determining AWP was “fundamentally flawed.” In response to this report, the Centers for Medicare and Medicaid Services (CMMS) indicated it would continue to look for administrative and legislative solutions to the problem of accurately determining AWP. Information from this report regarding lower calculations of AWP was made available to First DataBank, and at least thirty states have implemented these new calculations in whole or in part in their reimbursement methodologies. On September 16, 2002, the OIG revised its August, 2001 report entitled “Medicaid Pharmacy — Actual Acquisition Costs of Brand Name Prescription Drug Products”. In its revised report, OIG estimates that pharmacies receive an average 17% discount on drugs purchased from wholesalers. We expect that these developments will reduce prices and margins on some of the drugs that we distribute.

      There has been an increase in the number of suits instituted by private consumer groups against drug manufacturers over prescription drug pricing. In December 2001, the Prescription Access Litigation Project, or PAL, a coalition of consumer groups, filed suit in Boston, Massachusetts, against 28 drug manufacturers alleging, in part, fraud through manipulating the AWP. The eventual effect of such suits, if any, on the AWP is unknown.

      Recently, several proposals have been made in Congress to enlarge prescription drug coverage. The U.S. Congress has also been studying the accuracy of average wholesale prices as an appropriate benchmark for setting rates of reimbursement. In September, 2002, the Bush administration proposed deep reductions in Medicare payments for a wide range of drugs provided as outpatient services by Hospitals. Among the drugs included in this proposal are AVONEX®, Remicade® and hemophilia products. We are not directly affected by this proposal as Medicare only reimburses for AVONEX® and Remicade® dispensed in a hospital or physician clinic. However, if this proposal is adopted, we cannot predict whether state Medicaid programs would adopt similar pricing.

      A number of states are considering legislation designed to reduce their Medicaid expenditures and provide universal coverage and additional care for some populations, including proposals to impose additional taxes on providers to help finance or expand such programs. Some states may require us to maintain a licensed pharmacy in their states in order to qualify for reimbursement under state-administered reimbursement plans. Any of these changes could result in significant reductions in payment levels for drugs handled and services provided by us, which would have a material adverse effect on our business, financial condition and results of operations.

      At least thirteen states have implemented “preferred drug list” programs, under which drugs would not appear on an approved and reimbursable Medicaid formulary unless the Medicaid programs receive significant discounts or other concessions. The drug industry has instituted litigation to halt these programs but the outcome of this litigation is unknown. If the states prevail in these lawsuits, then this could result in reductions

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in the reimbursement we receive from Medicaid programs for our services and could materially and adversely affect our business, financial condition and results of operations.

      Hemophilia treatment centers may purchase factor from manufacturers at a discount under a government program established in 1992 which extended the Medicaid best price rebate program to hemophilia treatment centers. Manufacturers that sell outpatient drugs to hemophilia treatment centers agree with the Department of Health and Human Services that they will not charge a price for covered outpatient drugs that is higher than a statutorily set amount. We do provide contract pharmacy services to several hemophilia treatment centers, but we do not directly own or operate a hemophilia treatment center that is eligible for this special pricing. This places us at a competitive disadvantage as a provider of factor, except where our affiliated medical centers are eligible for the special pricing. Under the Department’s guidelines, an eligible hemophilia treatment center may obtain factor at this special pricing and use a contract pharmacy to dispense it to the center’s patients. However, if a hemophilia treatment center does not comply with the Department’s guidelines or sells factor bought at this special pricing to patients who are not patients of the center, it may incur civil penalties or liability to drug manufacturers for the amount of the discount that the center received from the manufacturer.

Competition

      The specialty pharmacy industry is highly competitive and is undergoing consolidation. The industry is fragmented, with many public and private companies focusing on different product or customer niches. Some of our current and potential competitors include:

•  specialty pharmacy distributors, such as Caremark Therapeutic Services, and Priority Healthcare Corporation;

•  specialty pharmacy divisions of national wholesale drug distributors;

•  pharmacy benefit management companies;

•  hospital-based pharmacies;

•  retail pharmacies;

•  home infusion therapy companies;

•  manufacturers that sell their products both to distributors and directly to users, including clinics and physician offices;

•  comprehensive hemophilia care centers; and

•  other alternative site health care providers.

      Some of our competitors have greater financial, technical, marketing and managerial resources than we have.

      While competition is often based primarily on price and quality of care and service, it can also be affected by the ability to develop and maintain relationships with patients and referral sources, depth of product line, technical support systems, specific patient requirements and reputation. There can be no assurance that competitive pressures will not have a material adverse affect on our business, financial condition and results of operations.

Government Regulation

      Federal and state governments heavily regulate the drug and medical supply industry. Manufacturers, distributors, health care providers and patients are all subject to these regulations. Particular government attention currently focuses on:

•  manufacturer calculated and reported average wholesale pricing

•  the payment of inducements for patient referrals;

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•  prohibited financial relationships with physicians;

•  joint venture and management arrangements;

•  product discounts;

•  inducements given to patients; and

•  professional licensing.

The laws are very broad, the regulations are complicated, and in many cases the courts interpret them differently. This makes compliance difficult. Federal and state civil and criminal fines and penalties may be imposed on persons who violate these laws. While we structure our transactions in a manner we believe complies with all laws, a violation could result in fines or criminal penalties, which could reduce our profitability. The following are particular areas of government regulation that apply to our business.

      Licensing and Registration. A number of state laws require that we be licensed as an in-state pharmacy. We also currently ship prescription drugs to many other states that require us to be licensed as an out-of-state pharmacy. We believe that we substantially comply with all state licensing laws applicable to our business.

      Some pharmacy associations and state boards of pharmacy are attempting to protect local pharmacies by restricting the activities of out-of-state pharmacies. In addition, some states impose limits on financial incentives paid to insurance companies and other payors offering managed drug programs. Restrictions on our operations imposed by these laws could reduce our profitability.

      Laws enforced by the federal Drug Enforcement Agency, as well as some similar state agencies, require our pharmacy locations to individually register in order to handle controlled substances, including prescription drugs. A separate registration is required at each principal place of business where the applicant manufactures, distributes, or dispenses controlled substances. Federal and state laws also require that we follow specific labeling and record-keeping requirements for controlled substances. We maintain federal and state controlled substance registrations for each of our facilities that require it, and follow procedures intended to comply with all such record-keeping requirements.

      Pharmacists and Nursing Licenses. Our nurses must obtain state licenses to provide teaching services and the hands on nursing which we provide to some of our patients, and our pharmacists must obtain state licenses to dispense drugs. Our pharmacists and nurses are licensed in those states where their activity requires it. Pharmacists and nurses must also comply with professional practice rules. We believe that the activities undertaken by our nurses or pharmacists comply with all applicable laws or rules governing the practice of pharmacy, nursing or medicine.

      Pharmacy Counseling. Federal law requires that states offering Medicaid prescription drug benefits implement a drug use review program. The program requires “before and after” drug use reviews, the use of predetermined standards, and patient education. Its purpose is to improve the quality of care by ensuring drug prescriptions are medically necessary, and not likely to cause adverse effects. Participating states must develop standards for pharmacy counseling. These standards apply as well to non-resident pharmacies like us. We believe our pharmacists monitor these requirements, and provide the necessary counseling.

      Federal Mail Order. Federal law imposes standards for:

•  the labeling, packaging and repackaging, advertising and adulteration of prescription drugs; and

•  the dispensing of controlled substances and prescription drugs.

      The Federal Trade Commission and the United States Postal Service regulate mail order drug sellers. The law requires truth in advertising, a reasonable supply of drugs to fill orders, and a right to a refund if an order cannot be filled within thirty days. We believe that we substantially comply with all of these requirements.

      Prescription Drug Marketing Act. This federal law exempts many drug and medical devices from federal labeling and packaging requirements, as long as they are not adulterated or misbranded and were prescribed by

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a physician. The law also prohibits the sale, purchase or trade of drug samples that are not intended for sale or intended to promote the sale of the drug. Records must be kept of drug sample distribution, and proper storage and maintenance methods used. To the extent that this law applies to us, we believe that we comply with the documentation, record-keeping and storage requirements.

      Anti-Kickback and Self-Referral. We are subject to the federal Medicare Anti-Kickback law that prohibits offering, paying, soliciting or receiving, directly or indirectly, in cash or in kind, remuneration to induce or in exchange for:

•  the referral of patients covered by Medicare, Medicaid or other government healthcare reimbursement programs; or

•  the leasing, purchasing, ordering or arranging for or recommending the lease, purchase or order of any item, good, facility or service covered by the programs.

Violations by individuals or entities are punishable by criminal fines, civil penalties, imprisonment, or exclusion from participation in the reimbursement programs. Sanctions imposed under this law on us, our business partners (such as drug suppliers), or our customers could reduce our business and our profits.

      Many states have similar state laws, which, if violated, could result in similar penalties. Courts have not applied the Anti-Kickback law or similar state laws consistently, and some courts have found a violation if only one purpose of an otherwise acceptable arrangement was to induce referrals.

      The Department of Health and Human Services, DHHS, published a set of “safe harbor” regulations and continues to publish clarifications to the safe harbors. Arrangements that fully comply with a safe harbor are deemed not to violate the Anti-Kickback law. We have several business arrangements (for example, our joint venture and management arrangements with medical centers, service arrangements with physicians and product pricing arrangements with suppliers) that do not satisfy all of the requirements necessary to fall within the safe harbors. Failure to satisfy a safe harbor does not mean that a transaction is necessarily illegal. The law requires the government to evaluate the intent in each situation. We believe our business arrangements comply with the Anti-Kickback law, the Health Insurance Portability and Accountability Act and similar state laws. However, if we are found to violate any of these laws, we could suffer penalties, fines, or possible exclusion, which could reduce our revenues and profits.

      Health Insurance Portability and Accountability Act — Administrative Simplification. Under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, Congress required the adoption of rules to establish standards and requirements for the electronic transmission of certain health information. The U.S. Department of Health and Human Services, or HHS, has published two sets of final regulations to date implementing healthcare transactions and privacy standards under HIPAA. The first set of final regulations requires “covered entities” to use uniform standards, including data reporting, formatting, and coding, for common healthcare transactions.

      The second set of final regulations imposes new standards relating to the privacy of individually identifiable health information. These standards require covered entities to comply with rules governing the use and disclosure of protected health information. The standards also require covered entities to enter into certain contractual provisions with any business associate to whom individually identifiable information is disclosed. Under these final regulations, we will be a covered entity for purposes of HIPAA. A third set of regulations under HIPAA, which have not yet been finalized, will establish minimum security requirements for covered entities to protect health information.

      We have submitted a plan to the Secretary of HHS describing how we will come into compliance with the Electronic Health Care Transactions and Conduct Standards of HIPAA, and we will be required to comply with the uniform standards for data reporting, formatting, and coding by October 16, 2003. We will also be required to comply with the standards relating to the privacy of individually identifiable health information by April 14, 2003.

      In some cases, we will also have to comply with applicable state regulations regarding privacy and medical information.

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      In addition to its administrative simplification provisions, HIPAA also imposes criminal penalties for fraud against any healthcare benefit program, for theft or embezzlement involving healthcare and for false statements in connection with the payment of any health benefits. These HIPAA fraud and abuse provisions apply not only to federal programs, but also to private health benefit programs. HIPAA also broadened the authority of the Department of Health and Human Services Office of Inspector General, or OIG, to exclude participants from federal healthcare programs. Although we do not know of any current violations of the fraud and abuse provisions of HIPAA, if we were found to be in violation of these provisions, the government could seek penalties against us including exclusion from participation in government payor programs. Significant fines could cause liquidity problems and adversely affect our results of operations.

      OIG Fraud Alerts and Advisory Opinions. The Office of Inspector General of DHHS periodically issues Fraud Alerts and Advisory Opinions identifying practices it believes may violate federal fraud and abuse laws. One Fraud Alert addresses joint venture and contractual arrangements between health care providers. Another concerns prescription drug marketing practices. Drug marketing activities may implicate the federal fraud and abuse laws because the cost of drugs are often reimbursed by Medicare and Medicaid. According to the Fraud Alert, questionable practices may include payments to pharmacists to recommend a particular drug or product. One Advisory Opinion indicates that management fees calculated as a percentage of net revenues, where marketing services are included, could implicate the federal fraud and abuse laws if the fee is intended to induce patient referrals. We believe our business arrangements comply with federal fraud and abuse laws. However, if we are found to have violated any of these laws, we could suffer penalties, fines or possible exclusion from the Medicare, Medicaid or other governmental programs, which could adversely affect our results of operations.

      State Consumer Protection Laws. A number of states are involved in enforcement actions involving pharmaceutical marketing programs, including programs offering incentives for pharmacists to dispense one product rather than another. State consumer protection laws generally prohibit false advertising, deceptive trade practices and the like. A number of the states have requested that the FDA exercise greater regulatory oversight in the area of pharmaceutical promotional activities by pharmacists. It is not possible to determine whether the FDA will act in this regard or what effect, if any, FDA involvement would have on our operations.

      The Stark Law. Federal law prohibits physicians from making a referral for certain health items or services if they, or their family members, have a financial relationship with the entity receiving the referral. No bill may be submitted in connection with a prohibited referral. Violations are punishable by civil monetary penalties upon both the person making the referral and the provider rendering the service. Such persons or entities are also subject to exclusion from Medicare and Medicaid. The Stark Law applies to our products and services, and we believe our relationships comply with the law. However, if our practices are found to violate the Stark Law, we may be subject to sanctions or be required to alter or discontinue some of our practices. This could reduce our revenues or profits.

      Beneficiary Inducement. HIPAA penalizes the offering of remuneration or other inducements to beneficiaries of federal health care programs to influence the beneficiaries’ decision to seek specific governmentally reimbursable items or services, or to choose a particular provider. HIPAA excludes items provided to promote the delivery of preventive care. The statutory exception would apply where “such care is provided or directly supervised by the medical provider that has provided the incentive.”

      The OIG recently issued final regulations concerning inducements to beneficiaries. Under the new regulations, permissible incentives are those given in connection with preventive care, including pre and post natal care, and services described in the U.S. Preventive Service Task Force’s Guide to Preventive Care. OIG also believes that items of nominal value given to beneficiaries are permissible even if not related to preventive care. However, permissible incentives would not include cash or cash equivalents. We from time to time provide some items at no charge to our patients in connection with their drug therapies, not all of which are included on the list of items specifically stated not to violate the new regulations. However, we believe that those items are allowed by the underlying statute. A determination that we violated the regulations or the statute, however, could result in sanctions that reduce our revenue or profits.

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      The False Claims Act. We are also subject to federal and state laws prohibiting individuals or entities from knowingly and willfully making claims for payment to Medicare, Medicaid, or other third party payors that contain false or fraudulent information. These laws provide for both criminal and civil penalties. Health care providers who submit claims which they knew or should have known were false, fraudulent, or for items or services that were not provided as claimed, may be excluded from Medicare and Medicaid participation, required to repay previously collected amounts, and subject to substantial civil monetary penalties.

      Government Investigations. The government increasingly examines arrangements between health care providers and potential referral sources to ensure that they are not designed to exchange remuneration for patient care referrals. Investigators are increasingly willing to look behind formalities of business transactions to determine the underlying purpose of payments. Enforcement actions have increased and are highly publicized. To our knowledge, we are not currently the subject of any investigation. Any future investigation may cause publicity that would cause potential customers to avoid us, reducing potential revenues and profits.

      In addition to investigations and enforcement actions initiated by governmental agencies, we could be the subject of an action brought under the False Claims Act by a private individual on behalf of the government. Actions under the False Claims Act, commonly known as “whistleblower” lawsuits are generally filed under seal to allow the government adequate time to investigate and determine whether it will intervene in the action, and defendant health care providers are often without knowledge of such actions until the government has completed its investigation and the seal is lifted.

      Confidentiality. Federal and state laws protect confidentiality of medical records and information. We maintain medical records for each patient to whom we dispense drugs. We are thus subject to some of these medical record and patient confidentiality laws. In addition, we expect to become subject to DHHS rules recently proposed to ensure integrity and confidentiality of patient data. These rules, if adopted, would require mandatory security standards for entities which maintain or transmit health information electronically. Compliance with new standards to safeguard electronic medical records could be expensive, harming our results of operations. The HIPAA statute imposes criminal penalties on wrongful disclosure of protected health information. We maintain procedures and provide training to our employees in an effort to comply with all of the medical record and patient confidentiality laws to which we are subject. We intend to comply with the privacy provisions of HIPPA privacy regulations. While we attempt to comply with all confidentiality requirements, a violation of any confidentiality law could subject us to sanctions that could reduce revenues or profits.

      Balanced Budget Act. Each state operates a Medicaid program funded in part by the Federal government. The states may customize their programs within federal limitations. Each state program has its own payment formula and recipient eligibility criteria. In recent years, changes in Medicare and Medicaid programs have resulted in limitations on, and reduced levels of, payment and reimbursement for a substantial portion of health care goods and services. For example, the federal Balanced Budget Act of 1997 (even after the restoration of some funding in 1999) will continue to cause significant reductions in spending levels for the Medicare and Medicaid programs. A more recent example is the action of a number of state Medicaid agencies to reduce their reimbursement rates in response to the new AWP prices published by First Data Bank. Medicare also adopted new AWP pricing for some drugs effective October 1, 2000, although this pricing does not apply to drugs that we currently sell.

      Laws governing Medicare, Medicaid, CHAMPUS and other governmental programs may change, and various administrative rulings, interpretations and determinations make compliance difficult. Any changes may materially increase or decrease program payments or the cost of providing services. Final determinations of government program reimbursement often require years, because of audits, providers’ rights of appeal and numerous technical requirements. We believe we make adequate provision for adjustments. However, future reductions in reimbursement could reduce our revenues and profits.

      Reform. The U.S. health care industry continues to undergo significant change. We anticipate that Congress and state legislatures will continue to review and assess alternative health care delivery systems and payment methods and that public debate of these issues will likely continue in the future. We cannot predict

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which, if any, reform proposals will be adopted. Future changes in the nature of the health care system could reduce revenues and profits.

Employees

      As of June 30, 2002, including those who work in our acute business which we will exit by December 31, 2002, we had 2062 full-time and 729 part-time employees. Our employees include approximately 198 full-time and 32 part-time pharmacists. Our employees are not represented by a labor union, and we believe we have good relations with our employees.

Liability Insurance

      Providing health care services and products entails an inherent risk of liability. In recent years, participants in the health care industry have become subject to an increasing number of lawsuits, many of which involve large claims and significant defense costs. We may from time to time be subject to such suits as a result of the nature of our business. We maintain general liability insurance, including professional and product liability, in an amount deemed adequate by our management. There can be no assurance, however, that claims in excess of, or beyond the scope of, our insurance coverage will not arise. In addition, our insurance policies must be renewed annually. Although we have not experienced difficulty in obtaining insurance coverage in the past, there can be no assurance that we will be able to do so in the future on acceptable terms or at all.

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RISK FACTORS

      You should carefully consider the risks and uncertainties we describe below before investing in Accredo. The risks and uncertainties described below are not the only risks and uncertainties that could develop. Other risks and uncertainties that we have not predicted or evaluated could also affect our company.

      If any of the following risks occur, our earnings, financial condition or business could be materially harmed, and the trading price of our common stock could decline, resulting in the loss of all or part of your investment.

We are highly dependent on our relationships with a limited number of biopharmaceutical suppliers and the loss of any of these relationships could significantly impact our ability to sustain or grow our revenues.

      We derive a substantial majority of our revenue and profitability from our relationships with Biogen, Genzyme, MedImmune and Genentech. The table below shows the concentration of our revenue derived from these relationships as a percentage of revenue for the fiscal year ended June 30, 2002. In fiscal year ended June 30, 2002, the majority of our hemophilia product was acquired from Baxter Healthcare Corporation. As a result of the additional revenue we receive from the acquisition of the SPS business, we expect the products we distribute that are manufactured by Biogen and Genzyme to constitute a smaller percentage of our total revenue, however we will continue to significantly rely on these relationships.

	Percentage of
	Revenue
Biogen		31	%
Genzyme		18	%
MedImmune		10	%
Genentech		6	%

      Our agreements with these suppliers are short-term and cancelable by either party without cause on 60 to 90 days prior notice. These agreements also generally limit our ability to handle competing drugs during and, in some cases, after the term of the agreement, but allow the supplier to distribute through channels other than us. Further, these agreements provide that pricing and other terms of these relationships be periodically adjusted for changed market conditions or required service levels. Any termination or adverse adjustment to any of these relationships could have a material adverse effect on a significant portion of our business, financial condition and results of operations.

Our ability to grow could be limited if we do not expand our existing base of drugs or if we lose patients.

      We focus almost exclusively on a limited number of complex and expensive drugs that serve small patient populations. The concentration of our revenue related to these diseases and the associated drugs is shown in the table below as a percentage of revenue for the fiscal year ending June 30, 2002. As a result of the acquisition of the SPS business, for future periods we expect Pulmonary Arterial Hypertension to significantly increase as a percentage of our revenue, while Multiple Sclerosis and Gaucher Disease will decrease as a percentage of revenue due to the larger revenue base.

	Percentage of
	Revenue
Multiple Sclerosis		31	%
Hemophilia and Autoimmune Disorders		27	%
Gaucher Disease		18	%
Respiratory Syncytial Virus		10	%
Growth Hormone-Related Disorders		9	%
Pulmonary Arterial Hypertension		2	%

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      Due to the small patient populations that use the drugs we handle, our future growth is highly dependent on expanding our base of drugs. Further, a loss of patient base or reduction in demand for any reason of the drugs we currently handle could have a material adverse effect on a significant portion of our business, financial condition and results of operation.

Our business would be harmed if demand for our products and services is reduced.

      Reduced demand for our products and services could be caused by a number of circumstances, including:

•  patient shifts to treatment regimens other than those we offer;

•  new treatments or methods of delivery of existing drugs that do not require our specialty products and services;

•  a recall of a drug;

•  adverse reactions caused by a drug;

•  the expiration or challenge of a drug patent;

•  competing treatment from a new drug or a new use of an existing drug;

•  the loss of a managed care or other payor relationship covering a number of high revenue patients;

•  the cure of a disease we service; or

•  the death of a high-revenue patient.

There is substantial competition in our industry, and we may not be able to compete successfully.

      The specialty pharmacy industry is highly competitive and is continuing to become more competitive. Most of the drugs, supplies and services that we provide are also available from our competitors. Our current and potential competitors include:

•  other specialty pharmacy distributors;

•  specialty pharmacy divisions of wholesale drug distributors;

•  pharmacy benefit management companies;

•  hospital-based pharmacies;

•  retail pharmacies;

•  home infusion therapy companies;

•  manufacturers that sell their products both to distributors and directly to users;

•  comprehensive hemophilia treatment centers; and

•  other alternative site health care providers.

      Many of our competitors have substantially greater resources and more established operations and infrastructure than we have. We are particularly at risk from any of our suppliers deciding to pursue its own distribution and services and not outsource these needs to companies like us. A significant factor in effective competition will be an ability to maintain and expand relationships with managed care companies, pharmacy benefit managers and other payors who can effectively determine the pharmacy source for their enrollees.

If any of our relationships with medical centers are disrupted or cancelled, our business could be harmed.

      We have joint venture relationships with four medical centers that provide services primarily related to hemophilia, growth hormone-related disorders and respiratory syncytial virus. For the fiscal years ended June 30, 2000, 2001 and 2002, we received approximately 12%, 4% and 4%, respectively, of our income before income taxes from equity in the net income of unconsolidated joint ventures.

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      Since April 2000, we have owned 80% of one of our joint ventures with Children’s Home Care, Inc. and the financial results of this joint venture are included in our consolidated financial results. This consolidated joint venture represented approximately 10% of our income before income taxes for the fiscal years ended June 30, 2001 and 2002.

      We also provide pharmacy management services to several medical centers. During 2002, one of our joint ventures with a medical center was changed to a management relationship.

      Our agreements with medical centers have terms of between one and five years, and may be cancelled by either party without cause upon notice of between one and twelve months. Adverse changes in our relationships with those medical centers could be caused, for example, by:

•  changes caused by consolidation within the hospital industry;

•  changes caused by regulatory uncertainties inherent in the structure of the relationships; or

•  restrictive changes to regulatory requirements.

      Any termination or adverse change of these relationships could have a material adverse effect on our business, financial condition and results of operations.

If additional providers obtain access to favorably priced drugs we handle, our business could be harmed.

      We are not eligible to participate directly in the federal pricing program of the Public Health Service, commonly known as PHS, which allows hospitals and hemophilia treatment centers to obtain discounts on clotting factor. Increased competition from hospitals and hemophilia treatment centers may reduce our profit margins.

Our acquisition and joint venture strategy may not be successful, which could cause our business and future growth prospects to suffer.

      As part of our growth strategy, we continue to evaluate joint venture and acquisition opportunities, but we cannot predict or provide assurance that we will complete any future acquisitions or joint ventures. Acquisitions and joint ventures involve many risks, including:

•  difficulty in identifying suitable candidates and negotiating and consummating acquisitions on attractive terms;

•  difficulty in assimilating the new operations;

•  increased transaction costs;

•  diversion of our management’s attention from existing operations;

•  dilutive issuances of equity securities that may negatively impact the market price of our stock;

•  increased debt; and

•  increased amortization expense related to intangible assets that would decrease our earnings.

      We could also be exposed to unknown or contingent liabilities resulting from the pre-acquisition operations of the entities we acquire, such as liability for failure to comply with health care or reimbursement laws. We also face exposure if Gentiva is not able to fulfill its indemnification obligations under the terms of our asset purchase agreement. The purchase price we paid to Gentiva for the SPS business was distributed directly to the shareholders of Gentiva, and should any significant payment be required, Gentiva may not have sufficient funds and may not be able to obtain the funds to satisfy its potential indemnification obligation to us. We may suffer impairment of assets or have to bear a liability for which we are entitled to indemnification but are unable to collect.

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Fluctuations in our quarterly financial results may cause our stock price to decline.

      Our results of operations may fluctuate on a quarterly basis, which could adversely affect the market price of our common stock. Our results may fluctuate as a result of:

•  lower prices paid by Medicare or Medicaid for the drugs that we sell, including lower prices resulting from recent revisions in the method of establishing average wholesale price (“AWP”);

•  below-expected sales or delayed launch of a new drug;

•  price and term adjustments with our drug suppliers;

•  increases in our operating expenses in anticipation of the launch of a new drug;

•  product shortages;

•  inaccuracies in our estimates of the costs of ongoing programs;

•  the timing and integration of our acquisitions;

•  changes in governmental regulations;

•  the annual renewal of deductibles and co-payment requirements that affect patient ordering patterns;

•  our provision of drugs to treat seasonal illnesses, such as respiratory syncytial virus;

•  physician prescribing patterns;

•  general political and economic conditions;

•  interest rate fluxuations; and

•  adverse experience in collection of accounts receivable.

Our business would be harmed if the biopharmaceutical industry reduces research, development and production of the types of drugs that are compatible with the services we provide.

      Our business is highly dependent on continued research, development, manufacturing and marketing expenditures of biopharmaceutical companies, and the ability of those companies to develop, supply and generate demand for drugs that are compatible with the services we provide. Our business would be materially and adversely affected if those companies stopped outsourcing the services we provide or failed to support existing drugs or develop new drugs. Our business could also be harmed if the biopharmaceutical industry undergoes any of the following developments:

•  supply shortages;

•  adverse drug reactions;

•  drug recalls;

•  increased competition among biopharmaceutical companies;

•  an inability of drug companies to finance product development because of capital shortages;

•  a decline in product research, development or marketing;

•  a reduction in the retail price of drugs from governmental or private market initiatives;

•  changes in the Food and Drug Administration (“FDA”) approval process; or

•  governmental or private initiatives that would alter how drug manufacturers, health care providers or pharmacies promote or sell products and services.

20

Our business could be harmed if the supply of any of the products that we distribute becomes scarce.

      The biopharmaceutical industry is susceptible to product shortages. Some of the products that we distribute, such as IVIG and blood-related products, are collected and processed from human donors. Accordingly, the supply of these products is highly dependent on human donors and their availability has been constrained from time to time. For example, an industry wide recombinant factor VIII product shortage existed for some time, as a result of the manufacturers being unable to increase production to meet rising global demand, and has only recently returned to normal levels. In addition, the SPS business has historically reported that its revenue growth was negatively impacted by some product shortages of recombinant coagulation therapy, which is used in the treatment of hemophilia, as well as by Bayer Corporation’s decision in 1999 to begin directly distributing Prolastin®, an intravenous therapy used in the treatment of the hereditary disorder Alpha 1 Antirypsin Deficiency. These drugs affected by product shortages accounted for approximately 14% of the revenues of the SPS business (including the acute business) for the year ended December 31, 2001. If these products, or any of the other drugs that we distribute, are in short supply for long periods of time, our business could be harmed.

If some of the drugs that we provide lose their “orphan drug” status, we could face more competition.

      Our business could also be adversely affected by the expiration or challenge to the “orphan drug” status that has been granted by the FDA to some of the drugs that we handle. When the FDA grants “orphan drug” status, it will not approve a second drug for the same treatment for a period of seven years unless the new drug is chemically different or clinically superior. The “orphan drug” status applicable to drugs related to the seven core disease states that we handle expires (or expired) as follows:

•  Nutropin® expires October 2002 (growth hormone disorders in children) and December 2003 (Turners Syndrome);

•  Flolan® expires September 2002 (PPH) and April 2007 (secondary pulmonary hypertension due to intrinsic pulmonary vascular disease);

•  AVONEX® expires May 2003;

•  Nutropin® Depot expires July 2007;

•  Tracleer™ expires November 2008;

•  Remodulin® expires May 2009.

      A number of other drugs that we sell have had orphan drug status which has expired. The loss of orphan drug status or approval of new drugs notwithstanding orphan drug status, could result in competitive drugs entering the market, which could harm our business. For example, despite the orphan drug status of AVONEX®, the FDA recently approved a competitive drug called Rebif®, which we do not currently expect to handle.

Recent investigations into reporting of average wholesale prices could reduce our pricing and margins.

      Many government payors, including Medicare and Medicaid, pay us directly or indirectly at the drug’s average wholesale price (or AWP) or at a percentage off AWP. We have also contracted with a number of private payors to sell drugs at AWP or at a percentage off AWP. AWP for most drugs is compiled and published by a private company, First DataBank, Inc. In February 2000, First DataBank published a Market Price Survey of 437 drugs, which was significantly lower than the historic AWP for a number of the clotting factor and IVIG products that we sell.

      Various federal and state government agencies have been investigating whether the reported AWP of many drugs, including some that we sell, is an appropriate or accurate measure of the market price of the drugs. There are also several whistleblower lawsuits pending against various drug manufacturers that have been reported in the business press. These government investigations and lawsuits involve allegations that manufacturers reported artificially inflated AWP prices of various drugs to First DataBank. Bayer

21

Corporation, one of the Company’s suppliers of clotting factor, agreed to pay $14 million in a settlement with the federal government and 45 states regarding these charges. Bayer also entered into a 5 year corporate integrity agreement with the government, in which Bayer agreed to provide average selling prices of its drugs to the government. In a separate action involving alleged inflated pricing, TAP Pharmaceutical Products agreed to pay federal and state governments $875 million to settle charges associated with the marketing of Lupron. Several other manufacturers have announced that they are also the subject of investigations. U.S. attorneys in Boston and Philadelphia have recently issued subpoenas to more than a dozen corporations requesting information related to TAP. Those receiving subpoenas include Express Scripts, Inc., Caremark Rx, Inc. and Wellpoint Health Networks, Inc.

      A number of state Medicaid agencies have revised their payment methodology as a result of the Market Price Survey. The Centers for Medicare and Medicaid Services (“CMMS”) had also announced that Medicare intermediaries should calculate the amount that they pay for certain drugs by using the lower prices on the First DataBank Market Price Survey. However, the proposal to include clotting factor in the lower Medicare pricing was withdrawn. Instead, CMMS has announced that it will seek legislation that would establish payments to cover the administrative costs of suppliers of clotting factor as a supplement to lower AWP pricing for factor.

      On September 21, 2001, the United States House Subcommittees on Health and Oversight & Investigations held hearings to examine how Medicare reimburses providers for the cost of drugs. In conjunction with that hearing, the U.S. General Accounting Office issued its Draft Report recommending that Medicare establish payment levels for part-B prescription drugs and their delivery and administration that are more closely related to their costs, and that payments for drugs be set at levels that reflect actual market transaction prices and the likely acquisition costs to providers.

      We cannot predict the eventual results of the government investigations, lawsuits and the changes made by First DataBank. If reduced average wholesale prices for the drugs that we sell are ultimately adopted as the standard by which we are paid by government payors or private payors, this could have a material adverse effect on our business, financial condition and results of operation, including reducing the pricing and margins on certain of our products.

Our business could be harmed by changes in Medicare or Medicaid.

      Changes in the Medicare, Medicaid or similar government programs or the amounts paid by those programs for our services may adversely affect our earnings. For example, these programs could revise their pricing based on new methods of calculating the AWP for drugs we handle or could implement reimbursement methodology based on some value other than AWP. As a result of the acquisition of the SPS business, we expect the percentage of our revenues attributable to federal and state programs to increase. Any reductions in amounts reimbursable by government programs for our services or changes in regulations governing such reimbursements could materially and adversely affect our business, financial condition and results of operations.

Our business will suffer if we lose relationships with payors.

      We are highly dependent on reimbursement from non-governmental payors. For the fiscal years ended June 30, 2000, 2001 and 2002, we derived approximately 82%, 81% and 79% respectively of our gross patient revenue from non-governmental payors (including self-pay), which included 5%, 4% and 3%, respectively for those periods, from sales to private physician practices whose ultimate payor is typically Medicare. In fiscal year 2002, one private payor, Aetna, Inc. and affiliates accounted for approximately 15% of the Company’s revenue.

      Many payors seek to limit the number of providers that supply drugs to their enrollees. For example, we were selected by Aetna, Inc. as one of three providers of injectable medications. From time to time, payors with whom we have relationships require that we and our competitors bid to keep their business, and there can be no assurance that we will be retained or that our margins will not be adversely affected when that happens. The loss of a payor relationship, for example, our relationship with Aetna (which is terminable on 90 days

22

notice), or an adverse change in the financial condition of a payor like Aetna, could result in the loss of a significant number of patients and have a material adverse effect on our business, financial condition and results of operations.

We incurred additional debt to acquire the specialty pharmaceutical services (“SPS”) business of Gentiva Health Services, Inc. which may limit our future financial flexibility.

      The current level of our debt will have several important effects on our future operations, including, among others:

•  A significant portion of our cash flow from operations will be dedicated to the payment of principal and interest on the debt and will not be available for other purposes;

•  Our debt covenants will require us to meet financial tests, and may impose other limitations that may limit our flexibility in planning for and reacting to changes in our business, including possible acquisition opportunities;

•  Our ability to obtain additional financing for working capital, capital expenditures, acquisitions, general corporate and other purposes may be limited;

•  Failure to meet our debt covenants could result in foreclosure by our lenders;

•  We may be at a competitive disadvantage to similar companies that have less debt; and

•  Our vulnerability to adverse economic and industry conditions may increase.

The failure to integrate successfully the SPS business acquired from Gentiva may prevent us from achieving the anticipated potential benefits of the acquisition and may adversely affect our business.

      We face significant challenges in consolidating functions, integrating the procedures, operations and product lines of the SPS business in a timely and efficient manner, and retaining key personnel of the SPS business. The integration of the SPS business is complex and requires substantial attention from management. The diversion of management attention and any difficulties encountered in the transition and integration process could have a material adverse effect on our revenues, level of expenses and operating results.

We rely heavily on a single shipping provider, and our business would be harmed if our rates are increased or our provider is unavailable.

      Almost all of our revenues result from the sale of drugs we deliver to our patients and principally all of our products are shipped by a single carrier, FedEx. We depend heavily on these outsourced shipping services for efficient, cost effective delivery of our product. The risks associated with this dependence include:

•  any significant increase in shipping rates;

•  strikes or other service interruptions by our primary carrier, FedEx, or by another carrier that could affect FedEx; or

•  spoilage of high cost drugs during shipment, since our drugs often require special handling, such as refrigeration.

Disruptions in commercial activities such as those following the September 2001 terrorist attacks on the U.S. may adversely impact our results of operations, our ability to raise capital or our future growth.

      Our operations have been and could again be harmed by terrorist attacks on the U.S. For example, transportation systems and couriers that we rely upon to deliver our drugs have been and could again be disrupted, thereby causing a decrease in our revenues. In addition, we may experience a rise in operating costs, such as costs for transportation, courier services, insurance and security. We also may experience delays in payments from payors, which would harm our cash flow. The U.S. economy in general may be adversely affected by terrorist attacks or by any related outbreak of hostilities. Any such economic downturn could

23

adversely impact our results of operations, impair our cost of or ability to raise debt or equity capital or impede our ability to continue growing our business.

Our business could be harmed if payors decrease or delay their payments to us.

      Our profitability depends on payment from governmental and non-governmental payors, and we could be materially and adversely affected by cost containment trends in the health care industry or by financial difficulties suffered by non-governmental payors. Cost containment measures affect pricing, purchasing and usage patterns in health care. Payors also influence decisions regarding the use of a particular drug treatment and focus on product cost in light of how the product may impact the overall cost of treatment. Further, some payors, including large managed care organizations and some private physician practices, have recently experienced financial trouble. The timing of payments and our ability to collect from payors also affects our revenue and profitability. If we are unable to collect from payors or if payors fail to pay us in a timely manner, it could have a material adverse effect on our business and financial condition.

If we are unable to manage our growth effectively, our business will be harmed.

      Our rapid growth over the past several years has placed a strain on our resources, and if we cannot effectively manage our growth, our business, financial condition and results of operations could be materially and adversely affected. We have experienced a large increase in the number of our employees, the size of our programs and the scope of our operations. Our ability to manage this growth and be successful in the future will depend partly on our ability to retain skilled employees, enhance our management team and improve our management information and financial control systems.

We could be adversely affected by an impairment of the significant amount of goodwill on our financial statements.

      Our formation and our acquisitions have resulted in the recording of a significant amount of goodwill on our financial statements. The goodwill was recorded because the fair value of the net assets acquired was less than the purchase price. There can be no assurance that we will realize the full value of this goodwill. We evaluate on an on-going basis whether events and circumstances indicate that all or some of the carrying value of goodwill is no longer recoverable, in which case we would write off the unrecoverable goodwill in a charge to our earnings. As of June 30, 2002, we had goodwill, net of accumulated amortization, of approximately $334.9 million, or 36% of total assets and 71% of stockholders’ equity.

      Since our growth strategy may involve the acquisition of other companies, we may record additional goodwill in the future. The possible write-off of this goodwill could negatively impact our future earnings. We will also be required to allocate a portion of the purchase price of any acquisition to the value of non-competition agreements, patient base and contracts that are acquired. The amount allocated to these items could be amortized over a fairly short period. As a result, our earnings and the market price of our common stock could be negatively impacted.

We rely on a few key employees whose absence or loss could adversely affect our business.

      We depend on a few key executives, and the loss of their services could cause a material adverse effect to our company. We do not maintain “key person” life insurance policies on any of those executives. As a result, we are not insured against the losses resulting from the death of our key executives. Further, we must be able to attract and retain other qualified, essential employees for our technical operating and professional staff, such as pharmacists and nurses. If we are unable to attract and retain these essential employees, our business could be harmed.

We may need additional capital to finance our growth and capital requirements, which could prevent us from fully pursuing our growth strategy.

      In order to implement our growth strategy, we will need substantial capital resources and will incur, from time to time, short- and long-term indebtedness, the terms of which will depend on market and other

24

conditions. We cannot be certain that existing or additional financing will be available to us on acceptable terms, if at all. As a result, we could be unable to fully pursue our growth strategy. Further, additional financing may involve the issuance of equity securities that would reduce the percentage ownership of our then current stockholders.

Our industry is subject to extensive government regulation and noncompliance by us or our suppliers could harm our business.

      The marketing, sale and purchase of drugs and medical supplies is extensively regulated by federal and state governments, and if we fail or are accused of failing to comply with laws and regulations, we could suffer a material adverse effect on our business, financial condition and results of operations. Our business could also be materially and adversely affected if the suppliers or clients we work with are accused of violating laws or regulations. The applicable regulatory framework is complex, and the laws are very broad in scope. Many of these laws remain open to interpretation, and have not been addressed by substantive court decisions.

      The health care laws and regulations that especially apply to our activities include:

•  The federal “Anti-Kickback Law” prohibits the offer or solicitation of compensation in return for the referral of patients covered by almost all governmental programs, or the arrangement or recommendation of the purchase of any item, facility or service covered by those programs. The Health Insurance Portability and Accountability Act of 1996, or HIPAA, created new violations for fraudulent activity applicable to both public and private health care benefit programs and prohibits inducements to Medicare or Medicaid eligible patients. The potential sanctions for violations of these laws range from significant fines, to exclusion from participation in the Medicare and Medicaid programs, to criminal sanctions. Although some “safe harbor” regulations attempt to clarify when an arrangement will not violate the Anti-Kickback Law, our business arrangements and the services we provide may not fit within these safe harbors. Failure to satisfy a safe harbor requires analysis of whether the parties intended to violate the Anti-Kickback Law. The finding of a violation could have a material adverse effect on our business.

•  The Department of Health and Human Services recently issued regulations implementing the Administrative Simplification provision of HIPAA concerning the maintenance and transmission and security of electronic health information, particularly individually identifiable information. The new regulations, when effective, will require the development and implementation of security and transaction standards for all electronic health information and impose significant use and disclosure obligations on entities that send or receive individually identifiable electronic health information. Failure to comply with these regulations, or wrongful disclosure of confidential patient information could result in the imposition of administrative or criminal sanctions, including exclusion from the Medicare and state Medicaid programs. In addition, if we choose to distribute drugs through new distribution channels such as the Internet, we will have to comply with government regulations that apply to those distribution channels, which could have a material adverse effect on our business.

•  The Ethics in Patient Referrals Act of 1989, as amended, commonly referred to as the “Stark Law,” prohibits physician referrals to entities with which the physician or their immediate family members have a “financial relationship.” A violation of the Stark Law is punishable by civil sanctions, including significant fines and exclusion from participation in Medicare and Medicaid.

•  State laws prohibit the practice of medicine, pharmacy and nursing without a license. To the extent that we assist patients and providers with prescribed treatment programs, a state could consider our activities to constitute the practice of medicine. If we are found to have violated those laws, we could face civil and criminal penalties and be required to reduce, restructure, or even cease our business in that state.

•  Pharmacies and pharmacists must obtain state licenses to operate and dispense drugs. Pharmacies must also obtain licenses in some states to operate and provide goods and services to residents of those states. Our entities that provide nursing for our patients and our nurses must obtain licenses in certain

25

	states to conduct our business. If we are unable to maintain our licenses or if states place burdensome restrictions or limitations on non-resident pharmacies or nurses, this could limit or affect our ability to operate in some states which could adversely impact our business and results of operations.
•	Federal and state investigations and enforcement actions continue to focus on the health care industry, scrutinizing a wide range of items such as joint venture arrangements, referral and billing practices, product discount arrangements, home health care services, dissemination of confidential patient information, clinical drug research trials and gifts for patients.
•	The False Claims Act encourages private individuals to file suits on behalf of the government against health care providers such as us. Such suits could result in significant financial sanctions or exclusion from participation in the Medicare and Medicaid programs.

The market price of our common stock may experience substantial fluctuations for reasons over which we have little control.

      Our common stock is traded on the Nasdaq National Market. The market price of our common stock could fluctuate substantially based on a variety of factors, including the following:

•  future announcements concerning us, our competitors, the drug manufacturers with whom we have relationships or the health care market;

•  changes in government regulations;

•  overall volatility of the stock market;

•  changes in earnings estimates by analysts; and

•  changes in operating results from quarter to quarter.

      Furthermore, stock prices for many companies fluctuate widely for reasons that may be unrelated to their operating results. These fluctuations, coupled with changes in our results of operations and general economic, political and market conditions, may adversely affect the market price of our common stock.

Some provisions of our charter documents may have anti-takeover effects that could discourage a change in control, even if an acquisition would be beneficial to our stockholders.

      Our certificate of incorporation, our bylaws and Delaware law contain provisions that could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders.

We may not benefit from a portion of the SPS business.

      We have not historically distributed many of the drugs represented by the SPS business of Gentiva. Following the acquisition, we only retained the twenty products that make up our primary business. We do not otherwise intend to sell the other chronic drugs sold by the SPS business or the drugs represented by the acute portion of the SPS business on a long term basis. We are assessing strategic options related to the acute portion of the SPS business. However, we may not be able to find an available or acceptable strategic alternative for the acute business, and may have to sell the business for less than its fair value or shut down the acute business, which could cause us to incur additional expenses. As we exit the acute business, our ability to collect the acute accounts receivable could be adversely affected. For these reasons, we have not assigned any value to the acute portion of the SPS business we acquired. In addition, our assessment of the strategic alternatives for the acute portion of the SPS business or the actions required to shut down the acute business could divert management time and company resources which could be better served elsewhere.

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Item 2.     Properties

Facilities

      Our corporate headquarters are located in Memphis, Tennessee and our other principal facilities are located in Nashville, Tennessee, Charlotte, North Carolina, Warrendale, Pennsylvania, Pittsburgh, Pennsylvania and Overland Park, Kansas. In addition, we have many smaller satellite pharmacy locations in other states.

      Memphis, Tennessee. We currently lease approximately 148,000 square feet of space in an office/warehouse business park in Memphis. The lease on this space will expire in March 2007, but we have an option to extend our lease terms for one additional five-year period.

      Nashville, Tennessee. We currently lease approximately 31,000 square feet of space in Nashville. Our lease expires in December 2005.

      Charlotte, North Carolina. We currently lease approximately 25,000 square feet of space in Charlotte, North Carolina. Our lease expires in July 2006.

      Warrendale, Pennsylvania. We currently lease approximately 29,000 square feet of space in Warrendale, Pennsylvania. Our lease expires in March 2005.

      Pittsburgh, Pennsylvania. We currently lease approximately 38,000 square feet of space in Pittsburgh, Pennsylvania. Our lease expires in September 2007.

      Overland Park, Kansas. We currently lease approximately 122,000 square feet of space in Overland Park, Kansas. Our lease expires in August 2005.

Item 3.     Legal Proceedings

      From time to time, we are involved in lawsuits, claims, audits and investigations arising in the normal course of our business. In our opinion, in the aggregate these lawsuits, claims, audits and investigations should not have a material adverse effect on our business, financial condition, or results of operations. In addition, the SPS business has several lawsuits and claims related to its historic operation by Gentiva, which are being controlled by Gentiva and for which we are entitled to indemnification from liability by Gentiva.

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Item  4.      Submission of Matters to a Vote of Security Holders

      a) The Company held a special meeting of stockholders on June 12, 2002 at its offices in Memphis, TN. Stockholders holding 87.1% of the issued and outstanding shares of the Company’s Common Stock were either present in person or were represented by proxy.

      c) The following matters were voted upon at the meeting:

      1. Proposal to approve the issuance of Accredo Health common stock in the acquisition of the specialty pharmaceutical services division of Gentiva Health Services, Inc. contemplated by the asset purchase agreement, dated as of January 2, 2002, by and among Accredo Health, Incorporated, Gentiva Health Services, Inc and those identified subsidiaries of Gentiva.

Voted For		Voted Against		Abstained		Non-Votes
	20,317,541		103,066		308,306		2,128,248

      2. Proposal to approve the Accredo Health, Incorporated 2002 Long-Term Incentive Plan.

Voted For		Voted Against		Abstained		Non-Votes
	18,083,753		2,518,083		127,077		2,128,248

      3. Proposal to approve an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 50,000,000 to 100,000,000.

Voted For		Voted Against		Abstained		Non-Votes
	19,333,328		2,722,745		130,827		670,261

      4. Proposal to approve the authority of the proxies to vote in their discretion upon any motion submitted to a vote of the stockholders to adjourn or postpone the special meeting to another time and place for the purpose of soliciting additional proxies.

Voted For		Voted Against		Abstained		Non-Votes
	11,557,155		10,242,383		387,362		670,261

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PART II

Item  5.      Market for Company’s Common Equity and Related Stockholder Matters.

Price Range of Common Stock

      The Company’s common stock is traded on the Nasdaq National Market System under the symbol “ACDO.” The following table sets forth the quarterly high and low sales prices as reported on the Nasdaq National Market System for the fiscal years ended June 30, 2001 and 2002.

Fiscal Years 2001 and 2002	High		Low
Fourth Quarter ended June 30, 2002	$	64.82	$	42.00
Third Quarter ended March 31, 2002		57.89		38.02
Second Quarter ended December 31, 2001		41.80		29.76
First Quarter ended September 30 2001		39.25		27.60
Fourth Quarter ended June 30, 2001		39.95		26.06
Third Quarter ended March 31, 2001		35.54		23.50
Second Quarter ended December 31, 2000		37.21		23.25
First Quarter ended September 30 2000		34.67		19.83

Holders

      As of September 23, 2002, the approximate number of registered stockholders was 24,479 including 1,779 stockholders of record and approximately 22,700 persons or entities holding common stock in nominee name.

Dividend Policy

      We have never paid any cash dividends on our capital stock. We currently anticipate that all of our earnings will be retained to finance the growth and development of our business, and therefore, do not anticipate that any cash dividend will be declared or paid on our common stock in the foreseeable future. Any future declaration of dividends will be subject to the discretion of our Board of Directors and their review of our earnings, financial condition, capital requirements and surplus, contractual restrictions to pay such dividends and other factors they deem relevant.

Securities Authorized for Issuance Under Equity Compensation Plans

      The following table summarizes our equity compensation plans as of June 30, 2002:

						(c)
						Number of shares
						remaining available
		(a)		(b)		for future issuance
		Number of shares to		Weighted-average		under equity
		be issued upon		exercise price of		compensation plans
		exercise of		outstanding		(excluding
		outstanding options,		options, warrants		securities reflected
Plan Category		warrants and rights		and rights		in column (a))
Equity compensation plans approved by stockholders			2,990,594	$	30.26		1,359,287
Equity compensation plans not approved by stockholders			0		0		0
	Total		2,990,594				1,359,287

Sales of Unregistered Securities

      None.

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Item 6.     Selected Consolidated Financial Data

SELECTED FINANCIAL DATA

      You should read the following selected financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K. The selected financial data as of and for the fiscal years ended June 30, 1998, 1999, 2000, 2001 and 2002 have been derived from our audited financial statements. The information set forth below is not necessarily indicative of the results of future operations.

			Years Ended June 30,
			1998			1999			2000			2001			2002(2)
			(in thousands, except per share data)
Statements of Operations Data:
Revenues:
	Net patient revenue		$	170,002		$	244,158		$	335,601		$	446,007		$	633,249
	Other revenue			9,806			12,277			15,432			14,985			18,257
	Equity in net income of joint ventures			1,150			1,919			2,002			1,148			2,067
		Total revenues		180,958			258,354			353,035			462,140			653,573
Operating expenses:
	Cost of sales			154,046			220,517			300,973			395,365			544,902
	General and administrative			12,489			17,637			23,831			29,871			45,571
	Bad debts			3,165			4,739			6,117			6,131			5,833
	Restructuring charge			—			—			—			—			3,893
	Depreciation and amortization			3,861			3,911			3,397			4,263			3,675
		Total operating expenses		173,561			246,804			334,318			435,630			603,874
Operating income				7,397			11,550			18,717			26,510			49,699
Interest expense (income), net				3,552			3,165			2,136			(2,770	)		(359	)
Income before minority interest in income of consolidated joint venture, income taxes and extraordinary item				3,845			8,385			16,581			29,280			50,058
Minority interest in income of cons. joint venture				—			—			(177	)		(692	)		(1,273	)
Income before income taxes and extraord. Item				3,845			8,385			16,404			28,588			48,785
Income tax expense				2,420			4,003			6,508			11,333			19,025
Income before extraordinary item				1,425			4,382			9,896			17,255			29,760
Extraordinary item for early extinguishment of debt, net of income tax benefit				—			(1,254	)		—			—			—
Net income				1,425			3,128			9,896			17,255			29,760
Mandatorily redeemable cumulative preferred stock dividends				(2,043	)		(1,617	)		—			—			—
Net income (loss) to common stockholders			$	(618	)	$	1,511		$	9,896		$	17,255		$	29,760

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	Years Ended June 30,
	1998			1999			2000		2001		2002(2)
	(in thousands, except per share data)
Diluted earnings per common share:
Income before extraordinary item	$	0.11		$	0.28		$	0.45	$	0.66	$	1.09
Extraordinary item		—			(0.08	)		—		—		—
Preferred stock dividends		(0.16	)		(0.10	)		—		—		—
Net income (loss) to common stockholders(1)	$	(0.05	)	$	0.10		$	0.45	$	0.66	$	1.09
Cash dividends declared on common stock	$	—		$	—		$	—	$	—	$	—

	June 30,
	1998		1999		2000		2001		2002
Balance Sheet Data:
Cash and cash equivalents	$	5,087	$	5,542	$	10,204	$	54,520	$	42,913
Working capital		23,377		28,906		35,639		88,288		309,780
Total assets		114,049		146,746		205,229		289,244		924,829
Long-term debt		36,418		20,500		37,000		—		224,688
Mandatorily redeemable cumulative preferred stock		29,792		—		—		—		—
Stockholders’ equity		12,801		64,127		77,544		189,170		471,054

(1)	Historical diluted loss per share for the period ended June 30, 1998 has been calculated using the same denominator as used for basic loss per share because the inclusion of dilutive securities in the denominator would have an anti-dilutive effect.
(2)	Our results for the fiscal year ended 2002 include the operations of the SPS business from June 14, 2002 through June 30, 2002.

Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

      The following discussion and analysis should be read in conjunction with the “Selected Financial Data” and our Financial Statements and the Notes thereto included elsewhere in this Annual Report on Form 10-K. The discussion in this Form 10-K contains forward-looking statements that involve risks and uncertainties, such as statements regarding our plans, objectives, expectations and intentions. The cautionary statements made in this Form 10-K should be read as being applicable to all forward-looking statements wherever they appear in this Report. Our actual results could differ materially from those discussed here. Factors that could cause or contribute to such differences include those discussed in Item 1 under the heading “Risk Factors,” as well as those discussed elsewhere herein.

Overview

      We provide specialized contract pharmacy services for the treatment of patients with costly, chronic diseases. We derive revenues primarily from the sale of drugs to patients.

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      The following table presents the percentage of our total revenue generated from sales and services provided with respect to the diseases that we primarily serviced in the years ended June 30:

	2000			2001			2002
Multiple Sclerosis		37	%		38	%		31	%
Hemophilia and Autoimmune Disorders		21	%		21	%		27	%
Gaucher Disease		30	%		23	%		18	%
Respiratory Syncytial Virus		1	%		6	%		10	%
Growth Hormone-Related Disorders		7	%		9	%		9	%
Pulmonary Arterial Hypertension		—			—			2	%

      As a result of the additional revenue that we receive from the acquisition of the SPS business, these percentages will change. We expect the products we sell that are manufactured by Biogen and Genzyme to constitute a smaller percentage of our total revenue and the products that we sell for Pulmonary Arterial Hypertension to constitute a higher percentage of our total revenue.

      Sales and services with respect to Multiple Sclerosis, Gaucher Disease, Respiratory Syncytial Virus, Pulmonary Arterial Hypertension and growth hormone-related disorders are dependent upon our preferred relationships with Biogen, Genzyme, MedImmune, GlaxoSmithKline, Actelion Pharmaceuticals U.S., United Therapeutics and Genentech. Our agreements with these manufacturers describe the services to be provided by us, including contract pharmacy, information, clinical, reimbursement and customized delivery services. These agreements generally:

•  allow the manufacturer to distribute directly or through other parties; and

•  are short-term and may be cancelled by either party, without cause, upon between 30 and 90 days prior notice.

      These agreements vary in level of exclusivity and scope of services provided. We typically purchase products at prices at or below the manufacturers’ average wholesale sales prices, and our resulting contribution margins vary for each product line. Pricing is customized to reflect specific services to be provided by us and is subject to periodic adjustments to reflect changing market conditions. A few of these agreements limit our ability to supply competing drugs during (and in some cases up to five years after) the term of the agreement.

      We purchase drugs for hemophilia and autoimmune disorders from all available sources on a volume discount basis. We are one of the national assignment of benefits providers selected by MedImmune, Inc. to distribute drugs for respiratory syncytial virus. During 2002, we began providing specialized contract pharmacy services for the treatment of patients with pulmonary arterial hypertension. We distribute all three of the drug therapies for this disease.

      We recognize revenue at the time we ship drugs or when we have performed the contractual service. While we may experience revenue changes from price fluctuations on our existing product lines, our revenue growth will depend principally on the introduction of new drugs and on volume growth in existing drug lines.

      We have five joint venture agreements with various medical centers (or their affiliates) in which we own 50% of each venture and one joint venture agreement with a medical center affiliate in which we own 80% of the joint venture. Many of our patient populations have diseases that are discovered before or during adolescence and require ongoing care from physician specialists, many of whom are based at pediatric, academic and other acute care medical centers. To date, these ventures have primarily derived revenues from the treatment of patients with hemophilia, growth hormone-related disorders and respiratory syncytial virus. We share profits and losses with our joint venture partners in equal proportion to our respective equity ownership. We account for our interests in the net income or loss in our 50% owned joint ventures under the equity method of accounting, and in our 80% owned joint venture under the consolidated method of accounting. Our equity interest in the net income of the 50% owned joint ventures represented approximately

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12%, 4% and 4% of our income before income taxes for the years ended June 30, 2000, 2001 and 2002, respectively.

      Cost of sales include drug acquisition costs, pharmacy and warehouse personnel costs, freight and other direct costs associated with the delivery of our products and costs of clinical services provided. General and administrative expenses include the personnel costs of the reimbursement, sales, marketing, administrative and support staffs as well as corporate overhead and other general expenses. Bad debts include our provision for patient accounts receivable which prove to be uncollectible after routine collection efforts have been exhausted. We typically hire personnel and incur legal, recruiting, marketing and other expenses in anticipation of the commercial launch of a new biopharmaceutical drug. In some instances, a portion of these expenses are reimbursed to us by the biopharmaceutical manufacturer. We have not historically capitalized any of these start-up expenses.

      Due to the increasing sensitivity to drug cost within governmental and non-governmental payors, we are continuously susceptible to reimbursement and operating margin pressures. In recent years, pharmacy benefit managers and other non-governmental payors have aggressively attempted to discount their reimbursement rates for our products. This aggressive discounting has resulted in some reduced margins for some of our products and services.

      Many government payors, including Medicare and Medicaid, pay us directly or indirectly for some of the drugs that we sell at the drugs’ average wholesale price (“AWP”) or a percentage discount off AWP. Recent government investigations into the reporting of AWP by drug manufacturers have lead First DataBank, Inc. to publish a Market Price Survey of 437 drugs that significantly reduces reimbursement for a number of the clotting factor and IVIG products we sell.

      A number of state Medicaid agencies now pay us for clotting factor at the prices shown on the Market Price Survey or at a percentage discount off those prices. Other states have not changed their pricing structure or have changed back to their pre-Market Price Survey reimbursement rates. In addition, the Health Care Financing Administration (“HCFA”) had previously announced that Medicare intermediaries should calculate the amount that they pay for clotting factor and 49 other drugs by using the lower prices on the First DataBank Market Price Survey. However, the Medicare intermediaries have not adopted the lower pricing policy to date. It is possible that all of the Medicare intermediaries could adopt the lower pricing at anytime.

      Both federal and state legislators are continuing to scrutinize the healthcare industry for the purpose of reducing healthcare costs. While we are unable to predict what, if any, future healthcare-reform legislation may be enacted at the federal or state level, we expect continuing pressure to limit expenditures by governmental healthcare programs, which could impact the amount of revenue we receive. Approximately 18%, 19% and 21% of gross patient revenues (excluding the acute business acquired from Gentiva) for the years ended June 30, 2000, 2001 and 2002, respectively, was from Medicare and state-sponsored Medicaid programs. With the purchase of the SPS Division the percentage of our revenue reimbursed by Medicare and Medicaid will be higher than the comparable percentages experienced by Accredo prior to the acquisition.

Acquisition

      On June 13, 2002, we acquired the Specialty Pharmaceutical Services Division (“SPS business”) of Gentiva Health Services, Inc. We acquired substantially all of the assets used in the SPS business including 100% of the outstanding stock in three of Gentiva’s subsidiaries that were exclusively in the business conducted by the SPS business. The SPS business provides specialized contract pharmacy and related services relating to the treatment of patients with certain costly chronic diseases. In addition to the diseases previously served by us, the SPS business is also a leading provider of contract pharmacy and related services to patients with pulmonary arterial hypertension. As a result of the acquisition, we have become the leading provider of specialized contract pharmacy and related services, measured by revenue. The aggregate purchase price was $462.3 million (including $12.2 million of acquisition related costs) and consisted of $215.6 million of cash and 5,060,976 shares of common stock valued at $246.7 million. The results of the SPS business have been included in the consolidated financial statements since June 14, 2002.

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Results of Operations

      The following table sets forth for the periods indicated, the percentages of total revenues represented by the respective financial items:

			Years Ended June 30,
			2000			2001			2002
Revenues:
	Net patient revenue			95.0	%		96.5	%		96.9	%
	Other revenue			4.4			3.2			2.8
	Equity in net income of joint ventures			0.6			0.3			0.3
		Total revenues		100.0			100.0			100.0
Operating expenses:
	Cost of sales			85.2			85.6			83.4
	General and administrative			6.8			6.5			7.0
	Bad debts			1.7			1.3			0.9
	Restructuring charge			—			—			0.6
	Depreciation and amortization			1.0			.9			.5
		Total operating expenses		94.7			94.3			92.4
Operating income				5.3			5.7			7.6
Interest income (expense), net				(0.6	)		.6			.1
Income before minority interest and income taxes				4.7			6.3			7.7
Minority interest				.1			.1			.2
Income before income taxes				4.6			6.2			7.5
Income tax expense				1.8			2.5			2.9
Net income				2.8	%		3.7	%		4.6	%

Fiscal Year Ended June 30, 2002 Compared to Fiscal Year Ended June 30, 2001

      Revenues. Total revenues increased 41% from $462.1 million to $653.6 million from fiscal year 2001 to fiscal year 2002. Acquisitions completed during 2002 accounted for $57.6 million of the increase in total revenues. Net patient revenues increased 42% from $446.0 million to $633.2 million from fiscal year 2001 to fiscal year 2002. Acquisitions completed during 2002 accounted for $55.8 million of the increase in net patient revenues. In fiscal year 2002, we experienced growth in our products for the treatments of multiple sclerosis, growth hormone disorders, hemophilia and Gaucher disease and autoimmune disorders as a result of volume growth with the addition of new patients, additional sales of product to existing patients and acquisitions. We also had a significant increase in our seasonal drug Synagis® for the treatment of Respiratory Synctial Virus as a result of increased patient volume. We also benefited from the addition of new and expanded contracts with managed care organizations.

      Cost of Sales. Cost of sales increased 38% from $395.4 million to $544.9 million from fiscal year 2001 to fiscal year 2002, which is commensurate with the increase in our revenues discussed above. As a percentage of revenues, cost of sales decreased from 85.6% to 83.4% from fiscal year 2001 to fiscal year 2002 resulting in gross margins of 14.4% in fiscal year 2001 and 16.6% in fiscal year 2002. Gross margins for the individual products have remained relatively stable; however, a change in product mix resulted in an increase in the composite gross margin in fiscal year 2002. The primary drivers were increased revenues from hemophilia factor, intravenous immunoglobulin (“IVIG”) for the treatment of autoimmune disorders and Flolan® for the treatment of pulmonary hypertension, which have lower acquisition costs as a percentage of revenue than most of the other products we distribute.

      General and Administrative. General and administrative expenses increased from $29.9 million to $45.6 million, or 53%, from fiscal year 2001 to fiscal year 2002. Acquisitions completed during 2002 accounted for $5.5 million of the increase in general and administrative expenses. The balance of the increase was

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primarily the result of increased salaries and benefits associated with the expansion of our reimbursement, sales and marketing, administrative and support staffs and the addition of office space and related furniture and fixtures to support the revenue growth. General and administrative expenses represented 6.5% and 7.0% of revenues for fiscal years 2001 and 2002, respectively.

      Bad Debts. Bad debts decreased from $6.1 million to $5.8 million from fiscal year 2001 to fiscal year 2002. As a percentage of revenues, bad debt expense decreased from 1.3% to 0.9% from fiscal year 2001 to fiscal year 2002. The decrease in bad debts as a percentage of revenues is primarily due to the increased percentage of our revenues that was reimbursed by prescription card benefits versus major medical benefit plans. The majority of the reimbursement for both AVONEX® and Synagis® is being provided by prescription card benefit plans, and therefore is subject to much lower co-payment and deductible amounts (typically $15-$30 per prescription) resulting in lower bad debt.

      Restructuring Charge. In connection with the acquisition of the SPS business, we recorded a restructuring charge of $3.9 million. The charge includes a $3.6 million write-off (of which $3.2 million is non-cash) of a software application we were developing that will not be implemented as a result of the decision to enhance and implement company wide the software application acquired with the SPS business. The restructuring charge also includes $.3 million for future lease commitments that will be abandoned once the facility integration plan related to the acquisition has been completed.

      Depreciation and Amortization. Depreciation expense increased from $1,509,000 to $2,338,000 from fiscal year 2001 to fiscal year 2002 as a result of purchases of property and equipment associated with our revenue growth and the expansion of our leasehold facility improvements. Amortization expense associated with goodwill and other intangible assets decreased from $2,754,000 to $1,337,000 from fiscal year 2001 to fiscal year 2002 due to the adoption of Statement of Financial Accounting Standards (“SFAS”) 142, Goodwill and Other Intangible Assets, during the first quarter of fiscal year 2002. The application of the non-amortization of goodwill provisions resulted in a reduction in amortization expense (net of income taxes) of approximately $1.5 million or $0.06 per diluted share.

      Interest Income/Expense, Net. Interest income, net decreased from $2,770,000 to $359,000 from fiscal year 2001 to fiscal year 2002. The decrease is due to a decrease in the average amount of cash invested during the year primarily as a result of cash used for acquisitions and earn-out payments related to prior year acquisitions and a decrease in the interest rate earned on the amounts invested. In addition, we incurred $230 million in debt on June 13, 2002 to acquire the SPS business of Gentiva Health Services.

      Income Tax Expense. Our effective tax rate decreased from 39.6% to 39.0% from fiscal year 2001 to fiscal year 2002. The decrease in the effective tax rate is primarily due to the adoption of the non-amortization provisions of SFAS 142 discussed above. The difference between the recognized effective tax rate and the statutory tax rate is primarily attributed to state income taxes.

Fiscal Year Ended June 30, 2001 Compared to Fiscal Year Ended June 30, 2000

      Revenues. Total revenues increased 31% from $353.0 million to $462.1 million from fiscal year 2000 to fiscal year 2001. Net patient revenues increased 33% from $335.6 million to $446.0 million from fiscal year 2000 to fiscal year 2001. In fiscal year 2001, we experienced growth in our products for the treatments of multiple sclerosis, growth hormone disorders, hemophilia autoimmune disorders and Gaucher disease as a result of volume growth with the addition of new patients and additional sales of product to existing patients. We also had a significant increase in our seasonal drug Synagis® for the treatment of Respiratory Synctial Virus as a result of increased patient volume. Our sales of intravenous immunoglobulin (“IVIG”) increased due to the acquisition of Pharmacare Resources, Inc., which added approximately $3.1 million in revenues during the year ended June 30, 2001. We also benefited from the addition of new and expanded contracts with managed care organizations. In June 2000, we were selected by Aetna U.S. Healthcare to be a preferred distributor of injectable medications to Aetna U.S. Healthcare members and participating physicians.

      Equity in net income of joint ventures decreased $854,000 from fiscal year 2000 to fiscal year 2001 primarily due to the acquisition of an additional 30% interest in the joint venture Childrens Hemophilia

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Services effective April 1, 2000. The results of operations of the joint venture have been consolidated with our results of operations since the date of acquisition and, therefore, are no longer recorded using the equity method of accounting.

      Cost of Sales. Cost of sales increased 31% from $301.0 million to $395.4 million from fiscal year 2000 to fiscal year 2001, which is commensurate with the increase in our revenues discussed above. As a percentage of revenues, cost of sales increased from 85.2% to 85.6% from fiscal year 2000 to fiscal year 2001 resulting in gross margins of 14.8% in fiscal year 2000 and 14.4% in fiscal year 2001. Gross margins for the individual products have remained relatively stable; however, a change in product mix resulted in a decrease in the composite gross margin in fiscal year 2001. The primary drivers were increased revenues from Synagis® for the treatment of Respiratory Synctial Virus and AVONEX® for the treatment of multiple sclerosis, which have higher acquisition costs as a percentage of revenue than most of the other products we distribute.

      General and Administrative. General and administrative expenses increased from $23.8 million to $29.9 million, or 26%, from fiscal year 2000 to fiscal year 2001. This increase was primarily the result of increased salaries and benefits associated with the expansion of our reimbursement, sales and marketing, administrative and support staffs and the addition of office space and related furniture and fixtures to support the revenue growth. General and administrative expenses represented 6.8% and 6.5% of revenues for fiscal years 2000 and 2001, respectively.

      Bad Debts. Bad debts were $6.1 million in both fiscal years 2000 and 2001. As a percentage of revenues, bad debt expense decreased from 1.7% to 1.3% from fiscal year 2000 to fiscal year 2001. The decrease in bad debts as a percentage of revenues is primarily due to the increased percentage of our revenues that was reimbursed by prescription card benefits versus major medical benefit plans. The majority of the reimbursement for both AVONEX® and Synagis® is being provided by prescription card benefit plans, and therefore is subject to much lower co-payment and deductible amounts (typically $15-$30 per prescription) resulting in lower bad debt. AVONEX® and Synagis® represented 44% of our revenues in fiscal year 2001 compared to 38% in fiscal year 2000.

      Depreciation and Amortization. Depreciation expense increased from $1,094,000 to $1,509,000 from fiscal year 2000 to fiscal year 2001 as a result of purchases of property and equipment associated with our revenue growth and the expansion of our leasehold facility improvements. Amortization expense associated with goodwill and other intangible assets increased from $2,303,000 to $2,754,000 from fiscal year 2000 to fiscal year 2001 due to acquisitions made during fiscal years 2000 and 2001.

      Interest Income/Expense, Net. Interest expense, net amounted to $2,136,000 in fiscal year 2000 compared to interest income, net of $2,770,000 in fiscal year 2001. This change amounting to $4,906,000 is due to the repayment of our debt with the proceeds of the stock offering completed during the first quarter of fiscal year 2001, the investment of the excess proceeds from the offering and the sale of an interest rate swap for $350,000.

      Income Tax Expense. Our effective tax rate decreased from 39.7% to 39.6% from fiscal year 2000 to fiscal year 2001. The difference between the recognized effective tax rate and the statutory tax rate is primarily attributed to approximately $816,000 and $788,000 of nondeductible amortization expense in fiscal years 2000 and 2001, respectively, and state income taxes.

Liquidity and Capital Resources

      As of June 30, 2002 and June 30, 2001, we had working capital of $309.8 million and $88.3 million, respectively. Our net cash provided by operating activities was approximately $34.1 million for the year ended June 30, 2002 and $23.2 million for the year ended June 30, 2001. These increases are due primarily to our net income growth and the timing of the collection of receivables, inventory purchases and payments of accounts payable and accrued expenses.

      Net cash used by investing activities was $266.0 million for the year ended June 30, 2002 and $33.1 million for the year ended June 30, 2001. Cash used by investing activities in the year ended June 30, 2002 consisted primarily of $256.2 million for acquisitions most of which related to the acquisition of the SPS

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business, $8.9 million for purchases of property and equipment, $2.0 million for net sales of marketable securities and $2.9 million of undistributed earnings from our joint ventures. Cash used by investing activities in fiscal 2001 consisted primarily of $27.1 million for acquisitions, $2.6 million for purchases of property and equipment, $2.0 million for net purchases of marketable securities and $1.3 million of undistributed earnings from our joint ventures.

      Net cash provided by financing activities was $220.2 million for the year ended June 30, 2002 and $54.2 million for the year ended June 30, 2001. Cash provided by financing activities for the year ended June 30, 2002 consisted primarily of $223.9 million of net borrowings on our credit facility, which was used to acquire the SPS business in June 2002. Cash provided by financing activities for the year ended June 30, 2001 consisted primarily of $88.3 million of net proceeds from the common stock offering plus $3.1 million from the proceeds of stock option exercises less $37.2 million of net repayments on the revolving line of credit.

      Historically, we have funded our operations and continued internal growth through cash provided by operations. Capital expenditures amounted to $8.9 million in fiscal year 2002 and $2.6 million in fiscal year 2001. We anticipate that our capital expenditures for the fiscal year ending June 30, 2003 will consist primarily of additional computer hardware, a fully integrated pharmacy and reimbursement software system and costs to build out and furnish additional space needed to meet the needs of our growth. We expect the cost of our capital expenditures in fiscal year 2003 to be approximately $17.0 million, exclusive of any acquisitions of businesses. We expect to fund these expenditures through cash provided by operating activities and/or borrowings under the revolving credit agreement with our bank. In addition, in connection with our acquisition of BioPartners in Care, Inc. made during fiscal year 2002, we may be obligated to make up to $16 million in earn-out payments during the next twelve months.

      During 2002, we amended and restated our $60 million revolving credit facility with Bank of America, N.A. and other participating banks to increase the size of the credit facility to $325 million. The credit facility consists of a $125 million revolving commitment expiring June 2007, a $75 million term loan (Tranche A Term Loan) due in periodic principal payments through March 2007, and a $125 million term loan (Tranche B Term Loan) due in periodic principal payments through March 2009. As of June 30, 2002, the total amount outstanding under the credit facility was $230 million, which included $30 million under the revolving credit facility, the $75 million Tranche A Term Loan and the $125 million Tranche B Term Loan.

      Amounts outstanding under the credit agreement bear interest at varying rates based upon a London Inter-Bank Offered Rate (LIBOR) or prime rate of interest (as selected by us), plus a variable margin rate based upon our leverage ratio as defined by the credit agreement.

      Our obligations under the credit agreement are secured by a lien on substantially all of our assets, including a pledge of all of the common stock or partnership interest of each of our subsidiaries in which we own an 80% or more interest.

      The credit agreement contains financial covenants, including requirements to maintain certain ratios with respect to leverage, fixed charge coverage, net worth and asset coverage each as defined in the agreement. The credit agreement also includes customary affirmative and negative covenants, including covenants relating to transactions with affiliates, uses of proceeds, restrictions on subsidiaries, limitations on indebtedness, limitations on mergers, acquisitions and asset dispositions, limitations on investments, limitations on payment of dividends and stock repurchases, and other distributions. The credit agreement also contains customary events of default, including events relating to changes in control of our company.

      The credit agreement also requires us to enter into an interest rate swap agreement within 60 days of June 13, 2002 to protect against fluctuations in interest rates. The credit agreement requires the interest rate swap to provide coverage in an amount equal to at least 50% of the outstanding principal amount of the loans. On July 17, 2002, we entered into an interest rate swap agreement effectively converting for a period of one year $120 million of floating-rate borrowings to fixed-rate borrowings with a fixed rate of 2.175%, plus the applicable margin rate as determined by the credit agreement.

      Previously, we had effectively converted, for the period through October 31, 2001, $25.0 million of floating-rate borrowings to fixed-rate borrowings. We had secured a 5.5% fixed interest rate (exclusive of the

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margin rate) using an interest rate swap agreement. On August 21, 2000, in conjunction with the repayment of the outstanding principal balance of our revolving line of credit, we surrendered our swap agreement and received $350,000 in consideration for the early termination of the agreement.

      While we anticipate that our cash from operations, along with the short-term use of the revolving credit facility will be sufficient to meet our internal operating requirements and growth plans for at least the next 12 months, we expect that additional funds may be required in the future to successfully continue our growth beyond such period. We may be required to raise additional funds through sales of equity or debt securities or seek additional financing from financial institutions. There can be no assurance, however, that financing will be available on terms that are favorable to us or, if obtained, will be sufficient for our needs.

      The following table sets forth a summary of our contractual cash obligations as of June 30, 2002. The long-term debt is reflected on our balance sheet, while the lease commitments are disclosed as future obligations in the notes to the financial statements.

      Payments due for the year ending June 30 (in thousands):

			2003		2004		2005		2006		2007		Thereafter
Long-term debt:
	Revolving credit facility		$	—	$	—	$	—	$	—	$	30,000	$	—
	Tranche A term loan			3,750		15,000		16,875		22,500		16,875		—
	Tranche B term loan			1,562		1,250		1,250		1,250		15,781		103,907
Operating leases				7,165		5,914		4,692		2,166		587		—
		Total	$	12,477	$	22,164	$	22,817	$	25,916	$	63,243	$	103,907

Critical Accounting Policies and Estimates

      Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. In preparing our financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates and judgments on an ongoing basis. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates, and different assumptions or conditions may yield different estimates.

      Management has discussed the development and selection of the following accounting policies and estimates with the Audit Committee of our Board of Directors and with our independent auditors.

Allowance for Doubtful Accounts

      The procedure for estimating the allowance for doubtful accounts requires significant judgment and assumptions. Our primary collection risks are for patient co-payments and deductibles. The risk of collection varies based upon the product, the payor and the patient’s ability to pay the amounts not reimbursed by the payor. Some of the drugs we distribute are primarily reimbursed by prescription card benefit plans, which reimbursement is subject to lower co-payment and deductible amounts (typically $10-$15 per prescription). Other drugs are primarily reimbursed through major medical benefit plans, which reimbursement is subject to higher deductible amounts. We estimate the allowance for doubtful accounts based upon our historical experience of collecting the patient co-payments and deductibles. However, economic and other factors could result in collections that differ from our estimates. We continually review the estimation process and make changes to the estimates as necessary.

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Allowance for Contractual Discounts

      We are reimbursed for the drugs we sell by many different payors including insurance companies, Medicare and all of the state Medicaid programs. The revenues and related accounts receivable are recorded net of payor contractual discounts to reflect the estimated net billable amounts for the products delivered. We estimate the allowance for contractual discounts on a payor-specific basis, given our interpretation of the contract terms or applicable regulations. However, the reimbursement rates are often subject to interpretation that could result in payments that differ from our estimates. Additionally, updated regulations and contract negotiations occur frequently, necessitating our continual review and assessment of the estimation process.

Medical Claims Reserves

      We maintain self-insured medical and dental plans for employees. Claims expense is accrued under these plans as the incidents that give rise to them occur. We use a third-party administrator to process all such claims. Unpaid claim accruals are estimated based on historical costs of settlement and average lag times. We believe that the estimation methodology used effectively captures our medical claims costs, however, payments could differ from our estimates due to changes in the healthcare cost structure or changes in the volume of claims filed.

Impact of Recently Issued Accounting Standards

      In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations, which requires all business combinations initiated after June 30, 2001 to be accounted for under the purchase method. SFAS No. 141 also sets forth guidelines for applying the purchase method of accounting in the determination of intangible assets, including goodwill acquired in a business combination, and expands financial disclosures concerning business combinations completed after June 30, 2001. The application of SFAS No. 141 did not effect any of our previously reported amounts included in goodwill or other intangible assets.

      Effective July 1, 2001, we early adopted SFAS No. 142, Goodwill and Other Intangible Assets, which establishes new accounting and reporting requirements for goodwill and other intangible assets. Under SFAS 142, all goodwill amortization ceased effective July 1, 2001 and goodwill was tested for impairment. Impairment tests are required to be performed at the date of adoption of SFAS 142 and at least annually thereafter. Absent any impairment indicators, we perform our annual impairment tests during the fourth quarter. The impairment tests performed at adoption and in the fourth quarter of 2002 resulted in no adjustment to the carrying value of goodwill.

      In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No. 144 supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. SFAS No. 144 removes goodwill from its scope and clarifies other implementation issues related to SFAS No. 121. SFAS No. 144 also provides a single framework for evaluating long-lived assets to be disposed of by sale. The provisions of this statement will be effective in our fiscal year 2003. We do not expect the application of this new accounting standard to have a material effect on our financial position or results of operations.

      In April 2002, the FASB issued SFAS No. 145, Recission of FASB Statements No. 4, 44 and 62, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS No. 145 requires gains and losses on extinguishment of debt to be classified as income or loss from continuing operations rather than as extraordinary items as previously required under SFAS No. 4. SFAS No. 145 also amends SFAS No. 13 to require certain modifications to capital leases treated as a sale-leaseback and modifies the accounting for sub-leases when the original lessee remains a secondary obligor or guarantor. The provisions of this Statement are generally effective for years beginning after May 15, 2002.

      In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, Liability Recognition for Certain Employer Termination Benefits

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and Other Costs to Exit an Activity. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under EITF 94-3, a liability for an exit cost was recognized at the date of an entity’s commitment to an exit plan. The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002.

Impact of Inflation

      Changes in prices charged by the biopharmaceutical manufacturers for the drugs we dispense, along with increasing labor costs, freight and supply costs and other overhead expenses, affect our cost of sales and general and administrative expenses. Historically, we have been able to pass all, or a portion, of the effect of such increases to the biopharmaceutical manufacturers pursuant to negotiated adjustments made under our preferred distribution agreements. As a result, changes due to inflation have not had significant adverse effects on our operations.

Forward Looking Information

      Certain matters discussed in the preceding pages of this Form 10-K, particularly regarding implementation of the our strategy, development of new drugs by the pharmaceutical and biotechnology industries, anticipated growth and revenues, anticipated working capital and sources of funding for growth opportunities, expenditures, interest, costs and income constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (See Item 1 — “Risk Factors”).

Item  7A.      Quantitative and Qualitative Disclosures about Market Risk

      Our exposure to the impact of financial market risk is significant. Our primary financial market risk exposure consists of interest rate risk related to interest that we are obligated to pay on our variable-rate debt.

      We use derivative financial instruments to manage some of our exposure to rising interest rates on our variable-rate debt, primarily by entering into variable-to-fixed interest rate swaps. We have fixed the interest rate through July 21, 2003 on $120.0 million of our variable-rate debt through the use of a variable-to-fixed interest rate swap. As a result, we will not benefit from any decrease in interest rates nor will we be subjected to any detriment from rising interest rates on this portion of our debt during the period of the swap agreement. Accordingly, a 100 basis point decrease in interest rates along the entire yield curve would not increase pre-tax income by $1.2 million for the year as would be expected without this financial instrument. However, a 100 basis point increase in interest rates along the entire yield curve would also not decrease pre-tax income by $1.2 million for the same period as a result of using this derivative financial instrument.

      For the remaining portion of our variable-rate debt, we have not hedged against our interest rate risk exposure. As a result, we will benefit from decreasing interest rates, but we will also be harmed by rising interest rates on this portion of our debt. Accordingly, if we maintain our current level of total debt, a 100 basis point decrease in interest rates along the entire yield curve would result in an increase in pre-tax income of approximately $1.1 million for the year. However, a 100 basis point increase in interest rates would result in a decrease in pre-tax income of $1.1 million for the same period.

      Actual changes in rates may differ from the hypothetical assumptions used in computing the exposures in the examples cited above.

Item  8.      Financial Statements and Supplementary Data

      The Consolidated Financial Statements and financial statement schedule in Part IV, Item 14(a)(1) and (2) of the report are incorporated by reference into this Item 8.

Item  9.      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

      None.

40

PART III

Item 10.     Directors and Executive Officers of the Company

      The information required by this item will appear in, and is incorporated by reference from, the sections entitled “Proposals for Stockholder Action — Election of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Management” and “Compensation Committee Interlocks and Insider Participation” included in the Company’s definitive Proxy Statement relating to the 2002 Annual Meeting of Stockholders.

Item 11.     Executive Compensation

      The information required by this item will appear in the section entitled “Executive Compensation” included in the Company’s definitive Proxy Statement relating to the 2002 Annual Meeting of Stockholders, which information, other than the Compensation Committee Report and Performance Graph required by Items 402(k) and (l) of Regulation S-K, is incorporated herein by reference.

Item 12.     Security Ownership of Certain Beneficial Owners and Management

      Securities Authorized for Issuance Under Equity Compensation Plans in Part II, Item 5, of the report are incorporated by reference into this Item 12.

      The information required by this item will appear in, and is incorporated by reference from, the section entitled “Security Ownership of Directors, Officers and Principal Stockholders” included in the Company’s definitive Proxy Statement relating to the 2002 Annual Meeting of Stockholders.

Item 13.     Certain Relationships and Related Transactions

      The information required by this item will appear in, and is incorporated by reference from, the sections entitled “Compensation Committee Interlocks and Insider Participation” and “Certain Relationships and Related Transactions” included in the Company’s definitive Proxy Statement relating to the 2002 Annual Meeting of Stockholders.

41

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)  Document filed as part of this Report:

		Page
(1)	Financial Statements:
	Report of Independent Auditors		F-1
	Consolidated Balance Sheets at June 30, 2001 and 2002		F-2
	Consolidated Statements of Income for the years ended June 30, 2000, 2001 and 2002		F-3
	Consolidated Statements of Stockholders’ Equity for the years ended June 30, 2000, 2001 and 2002		F-4
	Consolidated Statements of Cash Flows for the years ended June 30, 2000, 2001 and 2002		F-5
	Notes to Consolidated Financial Statements		F-6
(2)	Financial Statement Schedules:
	Schedule II — Consolidated Schedule — Valuation and Qualifying Accounts		F-22
	All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted
(3)	The Index of Exhibits Required by Item 601 of Regulation S-K included herewith, which is incorporated herein by reference

(b)	We filed a report on Form 8-K dated June 5, 2002 to report an amendment reflecting an increase in available credit in our bank financing commitment letter that was associated with our Registration Statement on Form S-4 that was filed on May 10, 2002.
	We filed a report on Form 8-K dated June 13, 2002 to report that Accredo Health, Incorporated acquired substantially all of the assets of the specialty pharmaceutical services business (“SPS Business”) of Gentiva Health Services, Inc., pursuant to the Asset Purchase Agreement entered into by the parties on January 2, 2002.

42

REPORT OF INDEPENDENT AUDITORS

Board of Directors

Accredo Health, Incorporated

      We have audited the accompanying consolidated balance sheets of Accredo Health, Incorporated (the “Company”) as of June 30, 2001 and 2002, and the related consolidated statements of income, stockholders’ equity and cash flows for each of the three years in the period ended June 30, 2002. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

      We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Accredo Health, Incorporated at June 30, 2001 and 2002, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2002, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

      As discussed in Notes 2 and 7 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 141, Business Combinations and No. 142, Goodwill and Other Intangible Assets, in 2002.

/s/ Ernst & Young LLP

Memphis, Tennessee

August 16, 2002

F-1

ACCREDO HEALTH, INCORPORATED

CONSOLIDATED BALANCE SHEETS

(000’s omitted, except share data)

				June 30,
				2001			2002
ASSETS
Current assets:
	Cash and cash equivalents			$	54,520		$	42,913
	Marketable securities				2,000			—
	Receivables:
		Patient accounts			87,760			417,011
		Allowance for doubtful accounts			(10,808	)		(81,758	)
					76,952			335,253
		Due from affiliates			2,440			2,255
		Other			13,275			22,555
					92,667			360,063
	Inventories				30,711			120,809
	Prepaid expenses and other current assets				537			3,470
	Deferred income taxes				4,703			5,954
			Total current assets		185,138			533,209
Property and equipment, net					8,195			23,796
Other assets:
	Joint venture investments				2,809			4,637
	Goodwill, net				89,499			334,919
	Other intangible assets, net				3,603			28,268
			Total assets	$	289,244		$	924,829

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable		$	88,611	$	185,047
	Accrued expenses			7,168		31,369
	Income taxes payable			1,071		1,701
	Current portion of long-term debt			—		5,312
		Total current liabilities		96,850		223,429
Long-term debt				—		224,688
Deferred income taxes				2,122		4,383
Minority interest in consolidated joint venture				1,102		1,275
Stockholders’ equity:
	Undesignated preferred stock, 5,000,000 shares authorized, no shares issued			—		—
	Common stock, $.01 par value; 100,000,000 shares authorized; 25,954,232 shares in 2001 and 31,329,054 shares in 2002 issued and outstanding			259		313
	Additional paid-in capital			161,091		413,161
	Retained earnings			27,820		57,580
		Total stockholders’ equity		189,170		471,054
		Total liabilities and stockholders’ equity	$	289,244	$	924,829

See accompanying notes.

F-2

ACCREDO HEALTH, INCORPORATED

CONSOLIDATED STATEMENTS OF INCOME

(000’s omitted, except share data)

			Years Ended June 30,
			2000			2001			2002
Revenues:
	Net patient revenue		$	335,601		$	446,007		$	633,249
	Other revenue			15,432			14,985			18,257
	Equity in net income of joint ventures			2,002			1,148			2,067
		Total revenues		353,035			462,140			653,573
Operating expenses:
	Cost of sales			300,973			395,365			544,902
	General and administrative			23,831			29,871			45,571
	Bad debts			6,117			6,131			5,833
	Restructuring charge			—			—			3,893
	Depreciation			1,094			1,509			2,338
	Amortization			2,303			2,754			1,337
		Total operating expenses		334,318			435,630			603,874
Operating income				18,717			26,510			49,699
Other income (expense):
	Interest expense			(2,459	)		(467	)		(662	)
	Interest income			323			3,237			1,021
				(2,136	)		2,770			359
Income before minority interest in income of consolidated joint venture and income taxes				16,581			29,280			50,058
Minority interest in income of consolidated joint venture				(177	)		(692	)		(1,273	)
Income before income taxes				16,404			28,588			48,785
Income tax expense				6,508			11,333			19,025
		Net income	$	9,896		$	17,255		$	29,760
Net income per common share:
	Basic		$	0.48		$	0.69		$	1.13
	Diluted		$	0.45		$	0.66		$	1.09
Weighted average shares outstanding:
	Basic			20,764,780			24,994,496			26,365,141
	Diluted			22,174,828			26,125,529			27,279,750

See accompanying notes.

F-3

ACCREDO HEALTH, INCORPORATED

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(000’s omitted, except share data)

			Common				Additional					Total
			Stock		Common		Paid-In			Retained		Stockholders’
			Shares		Stock		Capital			Earnings		Equity
Balance at June 30, 1999				20,423,447	$	204	$	63,254		$	669	$	64,127
	Issuance of common stock:
		Exercise of stock options		630,721		6		1,093			—		1,099
		Employee stock purchase plan		106,284		1		769			—		770
	Tax benefit of exercise of stock options			—		—		1,536			—		1,536
	Compensation resulting from stock transactions, net of income tax benefit			—		—		116			—		116
	Net income			—		—		—			9,896		9,896
Balance at June 30, 2000				21,160,452		211		66,768			10,565		77,544
	Issuance of common stock:
		Public offering		4,140,000		41		88,886			—		88,927
		Exercise of stock options		625,059		6		2,436			—		2,442
		Employee stock purchase plan		28,721		1		651			—		652
	Costs related to public offering			—		—		(605	)		—		(605	)
	Tax benefit of exercise of stock options			—		—		2,840			—		2,840
	Compensation resulting from stock transactions, net of income tax benefit			—		—		115			—		115
	Net income			—		—		—			17,255		17,255
Balance at June 30, 2001				25,954,232		259		161,091			27,820		189,170
	Issuance of common stock:
		In connection with an acquisition		5,060,976		51		246,672			—		246,723
		Exercise of stock options		284,961		2		2,195			—		2,197
		Employee stock purchase plan		28,885		1		895			—		896
	Tax benefit of exercise of stock options			—		—		2,204			—		2,204
	Compensation resulting from stock transactions, net of income tax benefit			—		—		104			—		104
	Net income			—		—		—			29,760		29,760
Balance at June 30, 2002				31,329,054	$	313	$	413,161		$	57,580	$	471,054

See accompanying notes.

F-4

ACCREDO HEALTH, INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(000’s omitted)

		Years Ended June 30,
		2000			2001			2002
Operating activities
Net income		$	9,896		$	17,255		$	29,760
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization		3,397			4,263			3,675
	Restructuring charge		—			—			3,893
	Provision for losses on accounts receivable		6,117			6,131			5,833
	Deferred income taxes		(1,158	)		(872	)		949
	Compensation resulting from stock transactions		185			185			164
	Tax benefit of exercise of stock options		1,536			2,840			2,204
	Minority interest in income of consolidated joint venture		177			692			1,273
Changes in operating assets and liabilities, net of effect from business acquisitions:
	Patient receivables and other		(13,419	)		(18,050	)		(34,703	)
	Due from affiliates		(990	)		(806	)		185
	Inventories		(11,950	)		2,192			(34,577	)
	Prepaid expenses and other current assets		(406	)		115			(1,945	)
	Accounts payable and accrued expenses		23,618			9,439			56,804
	Income taxes payable		896			(218	)		589
Net cash provided by operating activities			17,899			23,166			34,104
Investing activities
Purchases of marketable securities			—			(13,500	)		(6,000	)
Proceeds from sales and maturities of marketable securities			—			11,500			8,000
Purchases of property and equipment			(4,452	)		(2,635	)		(8,858	)
Business acquisitions and joint venture investments			(24,480	)		(27,088	)		(256,172	)
Change in joint venture investments, net			(1,707	)		(1,343	)		(2,927	)
Net cash used in investing activities			(30,639	)		(33,066	)		(265,957	)
Financing activities
Proceeds from (payment of) notes payable and line of credit			16,000			(37,200	)		223,889
Payment of deferred financing costs			—			—			(6,737	)
Issuance of common stock			1,869			92,021			3,094
Payment of costs related to public offering			(467	)		(605	)		—
Net cash provided by financing activities			17,402			54,216			220,246
Increase (decrease) in cash and cash equivalents			4,662			44,316			(11,607	)
Cash and cash equivalents at beginning of year			5,542			10,204			54,520
Cash and cash equivalents at end of year		$	10,204		$	54,520		$	42,913
Supplementary cash flow disclosures
Income taxes paid		$	5,235		$	9,593		$	15,279
Interest paid		$	2,529		$	555		$	395

See accompanying notes.

F-5

ACCREDO HEALTH, INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business

      The consolidated financial statements and related notes to the consolidated financial statements include the accounts of Accredo Health, Incorporated (the Company), its wholly-owned subsidiaries and its 80% owned joint venture. Significant intercompany accounts have been eliminated in consolidation.

      The Company provides specialized pharmacy and related services pursuant to agreements with biotechnology drug manufacturers relating to the treatment of patients with certain costly chronic diseases. Because of the unique needs of patients suffering from chronic diseases, biotechnology drug manufacturers have recognized the benefits of customized programs to facilitate alternate site drug administration, ensure compliance with treatment regimens, provide reimbursement assistance and capture valuable clinical and patient demographic information. The Company addresses the needs of the manufacturers by providing specialized services that facilitate product launch and patient acceptance including the collection of timely drug utilization and patient compliance information, patient education and monitoring through the use of written materials and telephonic consultation, reimbursement expertise and overnight drug delivery.

      The Company has designed its specialty services to focus primarily on biotechnology injectable drugs that: (i) are used on a recurring basis to treat chronic, and potentially life threatening diseases; (ii) are expensive; and (iii) require temperature control or other specialized handling as part of their distribution process. Currently, the Company provides specialized contract pharmacy and related services that address the needs of patients with chronic diseases including: Multiple Sclerosis, Gaucher Disease, hemophilia, pulmonary arterial hypertension, growth hormone-related disorders, primary immune deficiencies, auto-immune disorders and respiratory syncytial virus.

2. Significant Accounting Policies

Cash Equivalents

      The Company considers all highly liquid investments with an initial maturity of three months or less to be cash equivalents.

Marketable Securities

      The Company has classified all of its investments in marketable securities as held-to-maturity. Debt securities are classified as held-to-maturity when there is the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at amortized cost, adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion and the interest earned on the securities are included in interest income. Investments with an original maturity of less than three months are included in cash equivalents.

Concentrations of Risks

      The Company’s primary concentration of credit risk is patient accounts receivable, which consists of amounts owed by various governmental agencies, insurance companies and private patients. The Company manages the receivables by regularly reviewing its accounts and contracts and by providing appropriate allowances for uncollectible amounts. Significant concentrations of gross patient accounts receivable consist of the following at June 30:

	2001			2002
Medicare		2	%		7	%
Medicaid		21	%		13	%

F-6

ACCREDO HEALTH, INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Concentration of credit risk relating to accounts receivable is limited to some extent by the diversity and number of patients and payors and the geographic dispersion of the Company’s operations. The Company grants credit without collateral to its patients and payors.

      The Company derives a substantial portion of its revenue from the sale of drugs provided by a limited number of biopharmaceutical suppliers. The table below shows the concentration of the Company’s revenue derived from the sale of drugs provided by these suppliers for the years ended June 30:

	2000			2001			2002
Biogen		37	%		38	%		31	%
Genzyme		30	%		23	%		18	%
MedImmune		1	%		6	%		10	%
Genentech		4	%		5	%		6	%

      The Company derived approximately 15% of its revenue from a single non-governmental payor in the years ended June 30, 2001 and 2002.

      Cash, cash equivalents and marketable securities are placed with major high credit quality financial institutions and issuers. Management believes that there is minimal credit risk associated with these financial institutions and issuers.

Inventories

      Inventories are stated at the lower of cost, determined by the first-in, first-out method, or market.

Fair Value of Financial Instruments

      The carrying value of accounts receivable, accounts payable and long-term debt approximates fair value of these financial instruments at June 30, 2001 and 2002.

Property and Equipment

      Property and equipment is stated at cost. Provisions for depreciation are computed primarily by the straight-line method based on the estimated useful lives of the related assets of 2 to 7 years.

Goodwill and Other Intangible Assets

      Goodwill represents the excess of the cost of businesses acquired over fair value of net tangible and identifiable intangible assets at the date of acquisition. Prior to the adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”), goodwill was amortized using the straight-line method over their estimated useful lives of 40 years. Since adoption of SFAS 142 in July 2001, amortization of goodwill was discontinued and is reviewed at least annually for impairment. Accumulated amortization of goodwill was $7.0 million at June 30, 2001. Other intangible assets consist primarily of non-compete agreements and acquired patient relationships in connection with business acquisitions. Other intangibles are being amortized using the straight-line method over their estimated useful lives of 2 to 10 years for the non-compete agreements and 4 to 8 years for acquired patient relationships.

Income Taxes

      Deferred income taxes are provided for the tax effect of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. The liability method is used to account for income taxes, which requires deferred taxes to be recorded at the statutory rate to be in effect when the taxes are paid.

F-7

ACCREDO HEALTH, INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Valuation of Long-Lived Assets

      Management periodically evaluates carrying values of long-lived assets, including property and equipment, to determine whether events and circumstances indicate that these assets have been impaired. An asset is considered impaired when undiscounted cash flows to be realized from such asset are less than its carrying value. In that event, a loss is determined based on the amount the carrying value exceeds the fair market value of such asset.

Stock-Based Compensation

      The Company recognizes stock-based compensation using the intrinsic value method as permitted by Financial Accounting Standards Board Statement (FASB) No. 123, Accounting for Stock-Based Compensation (Statement 123). Accordingly, no compensation expense is recorded for employee stock-based awards issued at market value at the date such awards are granted. For employee stock-based awards issued below market value at the date such awards are granted, the intrinsic value of the options is amortized over the vesting period.

Revenue Recognition

      Net patient revenues are from the sales of biopharmaceutical drugs to patients and are reported at the net amount billed to patients, third-party payors and others in the period the products are delivered. The Company has agreements with certain third-party payors that provide for payments to the Company at amounts discounted from its established rates.

      Approximately 18%, 19% and 21% of gross patient revenues for the years ended June 30, 2000, 2001 and 2002, respectively, is from participation in the Medicare and state-sponsored Medicaid programs.

      The Company from time to time enters into management contracts with hemophilia treatment centers, medical centers and joint ventures in which the Company has an interest. Pursuant to these contracts, the Company will provide certain billing, pharmacy dispensing, inventory management, shipping, reimbursement, collection and other management services in exchange for fees that range from a reimbursement of the Company’s costs to a percentage of the managed entities billed charges, less contractual allowances. These agreements are for terms of up to five years and are usually cancelable on short notice. Revenue from the management contracts is recognized when the services are rendered and is included in other revenue.

Shipping and Handling Costs

      Shipping and handling costs are included in cost of sales.

Interest Rate Swap Agreements

      The Company enters into interest rate swap agreements as a means of managing its interest rate exposure. The differential to be paid or received is recognized over the life of the agreement as an adjustment to interest expense.

Earnings Per Share

      The Company presents earnings per share in accordance with FASB Statement No. 128, Earnings Per Share. All per share amounts have been calculated using the weighted average number of shares outstanding during each period. Diluted earnings per share are adjusted for the impact of common stock equivalents using the treasury stock method when the effect is dilutive.

F-8

ACCREDO HEALTH, INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Use of Estimates

      The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Estimates are used primarily in recording the allowance for doubtful accounts, self-insurance accruals and impairment tests on goodwill.

Risk Management

      The Company maintains a self-insured medical and dental plan for employees. Claims are accrued under these plans as the incidents that give rise to them occur. Unpaid claim accruals are based on the estimated ultimate cost of settlement, including claim settlement expenses. The Company has entered into a reinsurance agreement with an independent insurance company to limit its losses on claims. Under the terms of this agreement, the insurance company will reimburse the Company for individual claims generally in excess of $100,000 and when total claims exceed an aggregate amount based on the number of covered lives. These reimbursements are included in general and administrative expense in the accompanying consolidated statements of income.

Recent Accounting Pronouncements

      In June 2001, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations, which requires all business combinations initiated after June 30, 2001 to be accounted for under the purchase method. SFAS No. 141 also sets forth guidelines for applying the purchase method of accounting in the determination of intangible assets, including goodwill acquired in a business combination, and expands financial disclosures concerning business combinations completed after June 30, 2001. The application of SFAS No. 141 did not affect any of our previously reported amounts included in goodwill or other intangible assets.

      Effective July 1, 2001, we early adopted SFAS No. 142, Goodwill and Other Intangible Assets, which establishes new accounting and reporting requirements for goodwill and other intangible assets. Under SFAS No. 142, all goodwill amortization ceased effective July 1, 2001 and goodwill was tested for impairment. Impairment tests are required to be performed at the date of adoption of SFAS No. 142 and at least annually thereafter. Absent any impairment indicators, we perform our annual impairment tests during the fourth quarter. The impairment tests performed at adoption and in the fourth quarter of 2002 resulted in no adjustment to the carrying value of goodwill.

      In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No. 144 supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. SFAS No. 144 removes goodwill from its scope and clarifies other implementation issues related to SFAS No. 121. SFAS No. 144 also provides a single framework for evaluating long-lived assets to be disposed of by sale. The provisions of this statement will be effective in our fiscal year 2003. We do not expect the application of this new accounting standard to have a material effect on our financial position or results of operations.

      In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 62, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS No. 145 requires gains and losses on extinguishment of debt to be classified as income or loss from continuing operations rather than as extraordinary items as previously required under SFAS No. 4. SFAS No. 145 also amends SFAS No. 13 to require certain modifications to capital leases treated as a sale-leaseback and modifies the accounting for sub-leases when the original lessee remains a secondary obligor or guarantor. The provisions of this Statement are generally effective for years beginning after May 15, 2002.

F-9

ACCREDO HEALTH, INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under EITF 94-3, a liability for an exit cost was recognized at the date of an entity’s commitment to an exit plan. The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002.

3. Business Acquisitions

      On October 20, 1999, the Company acquired the majority of the operating assets of the specialty pharmacy businesses operated by certain affiliates of Home Medical of America, Inc. (“HMA”), a company engaged in the sale and distribution of blood clotting factors and growth hormone products. This transaction was accounted for using the purchase method of accounting. The price paid by the Company for this acquisition was $7,765,000. The Company also paid an additional $482,000 for a related earn-out payment based upon the achievement of certain revenue goals in the six-month period ended April 30, 2000, resulting in a total purchase price of $8,247,000. The total value of tangible assets acquired was $234,000 and no indebtedness was assumed. The excess of the total purchase price, including acquisition costs of $91,000, over the fair value of the tangible assets acquired was allocated as follows: $7,713,000 to goodwill and $300,000 to acquired patient relationships. The Company also paid $500,000 as consideration for an agreement from HMA and certain of its other affiliates not to compete for a period of five years.

      The Company acquired all of the outstanding stock of Sunrise Health Management, Inc. (“Sunrise”) from its shareholders effective December 1, 1999. Sunrise is headquartered in Norcross, Georgia, and is a provider of pharmaceutical care for certain chronic, long-term patient populations, including those requiring intravenous immunoglobulin (“IVIG”), clotting factor and growth hormone. This transaction was accounted for using the purchase method of accounting. The price paid by the Company for this acquisition was $13,724,000. The Company also paid an additional $1,000,000 for a related earn-out payment based upon the achievement of certain financial results for the six-month period ended May 31, 2000, resulting in a total purchase price of $14,724,000. Total assets acquired and liabilities assumed were $1,903,000 and $882,000, respectively. The excess of the total purchase price, including acquisition costs of $45,000, over the fair value of the net assets acquired of $1,021,000 was allocated as follows: $13,057,000 to goodwill and $646,000 to acquired patient relationships. The Company also paid $500,000 as consideration for an agreement with the selling shareholders and a prior officer of Sunrise not to compete with the Company in certain product lines for a period of ten years.

      Effective April 1, 2000, the Company acquired an additional 30% interest in one of its joint ventures, Childrens Hemophilia Services, increasing its ownership in the joint venture to 80%. Childrens Hemophilia Services is located in Los Angeles, California, and is a provider of blood clotting factors and ancillary supplies to hemophilia patients. This transaction was accounted for using the purchase method of accounting. The price paid by the Company for this acquisition was $2,086,000. Total assets acquired and liabilities assumed were $1,788,000 and $479,000, respectively. The excess of the purchase price over the fair value of the net assets acquired of $1,309,000, which amounted to $777,000, was allocated to goodwill. The Company also paid an additional $417,000 in 2001 and $417,000 in 2002 for earn-out payments based upon the achievement of targeted earnings during the twelve-month periods ended November 2000 and 2001, respectively, as specified in the purchase agreement for the acquisition of the original 50% interest.

      The Company acquired all of the outstanding stock of Pharmacare Resources, Inc. (“Pharmacare”) and its sister company, NCL Management, Inc. effective May 1, 2001. Pharmacare is headquartered in Elmsford, New York, and is a provider of pharmaceutical care for certain chronic, long-term patient populations, including those requiring intravenous immunoglobulin (“IVIG”). This transaction was accounted for using

F-10

ACCREDO HEALTH, INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the purchase method of accounting. The price paid by the Company for this acquisition was $25,074,000. The Company also paid an additional $6,325,000 for a related earn-out payment based upon the achievement of certain financial results for the twelve-month period ended December 31, 2001, resulting in a total purchase price of $31,399,000. Total assets acquired and liabilities assumed were $3,659,000 and $1,030,000, respectively. The excess of the total purchase price, including acquisition costs of $63,000, over the fair value of the net assets acquired of $2,629,000 was allocated as follows: $28,153,000 to goodwill and $617,000 to acquired patient relationships. The Company also paid $500,000 as consideration for an agreement with the selling shareholders not to compete with the Company in certain product lines for a period of six years.

      The Company acquired all of the outstanding stock of BioPartners in Care, Inc. (“BioPartners”) from its shareholders effective December 1, 2001. BioPartners is headquartered in Dayton, Ohio, and is a provider of pharmaceutical care for certain chronic, long-term patient populations, including those requiring hemophilia clotting factor and intravenous immunoglobulin. As a result of the acquisition, the Company was able to increase its market share for the distribution of these products. The purchase price paid by the Company for this acquisition was $36,588,000. In addition, the Company will make an earn-out payment of up to $16,000,000 if BioPartners achieves certain financial results in the twelve-month period ending December 31, 2002. Total assets acquired and liabilities assumed were $15,160,000 and $11,750,000, respectively. The excess of the total purchase price, including acquisition costs of $263,000, over the fair value of the net assets acquired of $3,410,000 was allocated as follows: $32,475,000 to goodwill and $703,000 to acquired patient relationships. The acquired patient relationship intangible is being amortized over 5 years. The entire amount allocated to goodwill is expected to be deductible for tax purposes. Any additional earn-out payments made under this purchase agreement will be treated as additional purchase cost and added to goodwill. The Company also paid $1,000,000 as consideration for an agreement with the selling shareholders not to compete with the Company in certain product lines for periods of five to seven years.

      The results of these acquisitions have been included in the Company’s results from their respective dates of acquisition.

      On June 13, 2002, the Company acquired the Specialty Pharmaceutical Services Division (“SPS division”) of Gentiva Health Services, Inc. (“Gentiva”). The Company acquired substantially all of the assets used in the SPS division including 100% of the outstanding stock in three of Gentiva’s subsidiaries that were engaged exclusively in the business conducted by the SPS division. The results of the SPS division’s operations have been included in the consolidated financial statements since June 14, 2002. The SPS division provides specialized contract pharmacy and related services relating to the treatment of patients with certain costly chronic diseases. In addition to the diseases served by the Company, the SPS division is also a leading provider of contract pharmacy and related services to patients with pulmonary hypertension. As a result of the acquisition, the Company is expected to be the leading provider of specialized contract pharmacy and related services.

      The aggregate purchase price paid was $462.3 million (including $12.2 million of acquisition related costs) and consisted of $215.6 million of cash and 5,060,976 shares of common stock valued at $246.7 million. The value of the common stock issued was determined in accordance with Emerging Issues Task Force (“EITF”) issue 99-12, “Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business Combination.” Accordingly, January 31, 2002, became the measurement date, as this was the first date on which the number of shares became fixed without subsequent revision. The value per share was based upon the average market price over the period including two days before and after the measurement date.

F-11

ACCREDO HEALTH, INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed at the date of acquisition of the SPS division (in thousands).

Cash				$	19
Receivables:
	Patient accounts, net of allowance for doubtful accounts of $68,949				223,173
	Other				1,991
Inventories					50,087
Prepaid expenses and other current assets					836
			Total current assets		276,106
Property and equipment					12,086
Other assets:
	Intangible assets subject to amortization (5.1 year weighted-average useful life):
		Acquired patient relationships (5.0 year weighted-average useful life)			15,163
		Non-compete agreements (6.4 year weighted-average useful life)			2,000
	Goodwill				206,203
	Other				129
			Total assets acquired		511,687
Accounts payable					39,577
Accrued expenses					9,842
			Total liabilities assumed		49,419
Net assets acquired				$	462,268

      The entire amount allocated to goodwill is expected to be deductible for tax purposes.

      The purchase price allocation is preliminary due to the plans to exit the acute pharmacy business, which could have an impact on the allocation. The Company plans to exit the acute pharmacy business acquired as part of the SPS division by December 2002. The Company’s intentions are to retain the accounts receivable of the acute pharmacy business and dispose of the other assets of the business, which are immaterial. The Company has accounted for the acute division in accordance with EITF 87-11, “Allocation of Purchase Price to Assets to be Sold.” In accordance with EITF 87-11, the expected net proceeds from the sale of the acute division, the expected results of the acute operations during the period from acquisition to disposal and the expected interest expense during the holding period on the incremental debt incurred to finance the acute business have been recorded as an adjustment to the purchase price. Any difference between the actual and expected results will result in an adjustment to goodwill, unless the adjustment results from a post-acquisition event. The results of operations of the acute division, amounting to a $4,000 loss during the period ended June 30, 2002, are excluded from the Company’s results of operations in the accompanying financial statements. The amount of interest expense allocated to the acute pharmacy business was $53,000, net of tax benefit, during the period ended June 30, 2002.

      The pro forma results of operations for the years ended June 30, 2000, 2001 and 2002, as if the 2000 and 2001 acquisitions had occurred on July 1, 1999, and the 2002 acquisitions (including the results of the acute

F-12

ACCREDO HEALTH, INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

pharmacy business of the SPS division) had occurred on July 1, 2000, are as follows (in thousands, except per share data):

		2000		2001		2002
Total revenues		$	372,191	$	1,229,841	$	1,401,192
Net income			11,450		28,998		40,279
Net income per common share:
	Basic	$	.55	$	.96	$	1.29
	Diluted	$	.52	$	.93	$	1.25

4.  Restructuring Charge

      In connection with the acquisition of the SPS division, the Company recorded a restructuring charge of $3,893,000 ($2,355,000, or $0.09 per diluted share, after tax). The charge includes a $3,553,000 write-off (of which $3,193,000 is non-cash) of a software application that was being developed by the Company that will not be implemented as a result of the decision to enhance and implement company-wide the software application acquired with the SPS division. The restructuring charge also includes $340,000 for future lease commitments that will be abandoned once the facility integration plan related to the acquisition has been completed.

5.  Marketable Securities

      At June 30, 2001, all of the Company’s investments in marketable securities were investment-grade corporate debt instruments. The estimated fair value of the marketable securities approximated the amortized cost, which amounted to $16.5 million as of June 30, 2001, of which $14.5 million were classified as cash equivalents. All of the investments matured within one year from June 30, 2001. There were no marketable securities at June 30, 2002.

6. Property and Equipment

      Property and equipment consists of the following at June 30 (in thousands):

	2001			2002
Equipment	$	7,032		$	17,762
Furniture and fixtures		5,027			12,255
		12,059			30,017
Accumulated depreciation		(3,864	)		(6,221	)
	$	8,195		$	23,796

F-13

ACCREDO HEALTH, INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

7. Goodwill and Other Intangible Assets

      Amortized intangible assets consist of the following at June 30 (in thousands):

	2001				2002
	Gross Carrying		Accumulated		Gross Carrying		Accumulated
	Amount		Amortization		Amount		Amortization
Patient relationships	$	3,206	$	1,558	$	19,072	$	2,333
Non-compete agreements		2,500		672		5,900		1,126
Deferred financing costs		475		348		7,211		456
	$	6,181	$	2,578	$	32,183	$	3,915

      Estimated amortization expense consists of the following for the years ending June 30 (in thousands):

2003	$	6,032
2004		5,955
2005		5,453
2006		5,191
2007		4,599

      The change in the carrying amount of goodwill consists of the following (in thousands):

Balance as of June 30, 2001	$	89,499
Goodwill acquired during the year		245,420
Balance as of June 30, 2002	$	334,919

      On July 1, 2001, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets. The Company is providing transitional, pro-forma disclosure in the table below for net income and earnings per share for the comparative periods as if SFAS No. 142 had been adopted in those periods (in thousands, except share data).

		2000		2001		2002
Reported net income		$	9,896	$	17,255	$	29,760
Add goodwill amortization expense, net of tax benefit			1,283		1,500		—
Adjusted net income		$	11,179	$	18,755	$	29,760
Basic earnings per share:
	Reported net income	$	.48	$	.69	$	1.13
	Add goodwill amortization expense, net of tax benefit		.06		.06		—
	Adjusted net income	$	.54	$	.75	$	1.13
Diluted earnings per share:
	Reported net income	$	.45	$	.66	$	1.09
	Add goodwill amortization expense, net of tax benefit		.06		.06		—
	Adjusted net income	$	.51	$	.72	$	1.09

F-14

ACCREDO HEALTH, INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

8. Long-Term Debt

      Long-term debt consists of the following at June 30 (in thousands):

	2001		2002
Revolving credit facility	$	—	$	30,000
Tranche A term loan		—		75,000
Tranche B term loan		—		125,000
		—		230,000
Less amounts due within one year		—		5,312
	$	—	$	224,688

      On June 13, 2002, the Company amended and restated its credit agreement with Bank of America, N.A. and other participating banks to increase the size of the credit facility to $325 million. The credit facility consists of a $125 million revolving commitment expiring June 2007, a $75 million term loan (“Tranche A Term Loan”) due in periodic principal payments through March 2007, and a $125 million term loan (“Tranche B Term Loan”) due in periodic principal payments through March 2009. Amounts outstanding under the credit agreement bear interest at varying rates based upon a LIBOR or prime rate of interest at the periodic election of the Company, plus a variable margin rate based on the Company’s leverage ratio as defined by the credit agreement. The combination of a variable rate margin and LIBOR base rate resulted in an effective rate of 4.36% at June 30, 2002. The credit facility is secured by substantially all assets of the Company. The banks’ security interest in a portion of the Company’s inventory is subordinate to the liens on that inventory under the terms of a security agreement between the Company and one of its vendors. The same vendor has a security interest in certain accounts receivable of the Company which is subordinate to the rights of the banks. At June 30, 2002, the balance outstanding under this credit facility was $230,000,000. There were no borrowings at June 30, 2001.

      The credit agreement contains financial covenants which require the Company to maintain certain ratios with respect to leverage, fixed charge coverage, net worth, and asset coverage. The credit agreement also requires the Company to enter into an interest rate swap agreement within 60 days of June 13, 2002, to protect against fluctuations in interest rates. The agreement requires the interest rate swap to provide coverage in an amount equal to at least 50% of the outstanding principal amount of the loans. On July 17, 2002, the Company entered into an interest rate swap agreement effectively converting for a period of one year $120 million of floating-rate borrowings to fixed-rate borrowings with a fixed rate of 2.175%, plus the applicable margin rate as determined by the credit agreement.

      The Company entered into an interest rate swap agreement with a bank in October 1997 in order to fix a portion of its interest rate exposure on a line of credit. The terms of the agreement were revised and extended on January 21, 1999, and required the Company to pay a fixed interest rate of 5.5% on a $25 million notional amount and receive the 30-day LIBOR rate in exchange. On August 21, 2000, the Company surrendered the swap agreement and received $350,000 in consideration for the early termination of the agreement.

F-15

ACCREDO HEALTH, INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Principal maturities of long-term debt consist of the following for the years ending June 30 (in thousands):

2003	$	5,312
2004		16,250
2005		18,125
2006		23,750
2007		62,656
After 2007		103,907
	$	230,000

9. Income Taxes

      The liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

      Income tax expense (benefit) consists of the following for the years ended June 30 (in thousands):

		2000			2001			2002
Current:
	Federal	$	6,634		$	10,574		$	15,434
	State		1,032			1,631			2,642
			7,666			12,205			18,076
Deferred:
	Federal		(1,004	)		(769	)		764
	State		(154	)		(103	)		185
			(1,158	)		(872	)		949
		$	6,508		$	11,333		$	19,025

      The provision for income taxes differed from the amount computed by applying the statutory federal income tax rates for the years ended June 30 due to the following (in thousands):

	2000		2001		2002
Income tax expense at statutory rate	$	5,619	$	10,006	$	17,075
State income tax expense, net of federal income tax benefit		577		992		1,838
Goodwill amortization		279		276		19
Other		33		59		93
Income tax expense	$	6,508	$	11,333	$	19,025

      Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

F-16

ACCREDO HEALTH, INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Significant components of the Company’s deferred tax assets and liabilities at June 30 are as follows (in thousands):

		2001			2002
Deferred tax assets:
	Accounts receivable reserves	$	4,010		$	4,878
	Accrued expenses		545			752
	Joint venture investments		49			122
	Other		99			202
			4,703			5,954
Deferred tax liabilities:
	Property and equipment		(330	)		(318	)
	Intangible assets		(1,628	)		(3,736	)
	Joint venture investments		(164	)		(329	)
			(2,122	)		(4,383	)
Net deferred tax assets		$	2,581		$	1,571

      Management has evaluated the need for a valuation allowance for the deferred tax assets and believes it is more likely than not that the assets will ultimately be realized through future taxable income from operations.

10. Commitments

      The Company leases office space and equipment under various operating leases. Rent expense for all operating leases was approximately $1,227,000, $1,575,000 and $2,838,000 for the years ended June 30, 2000, 2001 and 2002, respectively.

      Future minimum payments, by year and in the aggregate, under non-cancelable operating leases with initial terms of one year or more consist of the following at June 30, 2002 (in thousands):

2003	$	7,165
2004		5,914
2005		4,692
2006		2,166
2007		587
Thereafter		—
	$	20,524

      In connection with the acquisition of BioPartners made during fiscal year 2002, the Company may be obligated to make up to $16,000,000 in earn-out payments during the next twelve months.

11. Investment in Joint Ventures

      Texas Health Pharmaceutical Resources, Teddy Bear Home Care/ Drug Therapies, Children’s Memorial Home Hemophilia Services, Childrens Home Services, Childrens Biotech Pharmacy Services and Childrens National Hemophilia Care are partnerships in which the Company has a 50% ownership interest. The Company uses the equity method of accounting for these joint ventures. Amounts due from these joint ventures to the Company are classified as due from affiliates in the accompanying consolidated balance sheets.

F-17

ACCREDO HEALTH, INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The portion of the Company’s retained earnings at June 30, 2001 and 2002 attributable to undistributed earnings of these joint ventures is $2,088,000 and $3,916,000, respectively.

      On October 1, 1999, the Company entered into a joint venture agreement with Children’s Hospital in Washington, DC, to market, sell, provide and distribute Synagis® and growth hormone and related services and supplies. The term of the joint venture is for a period of five years unless terminated at an earlier date pursuant to the terms of the agreement. Both companies contributed $40,000 in capital to the joint venture and will share equally in the assets, liabilities, profits and losses. In conjunction with the formation of this joint venture, the Company also entered into a management, service and sales agreement with the joint venture, whereby the Company will provide specialty pharmacy and management services to the joint venture in exchange for a management fee and the reimbursement of certain expenses.

      On August 15, 2000, the Company entered into a joint venture agreement with Children’s Hospital in Washington, DC, to market, sell, provide and distribute hemophilia clotting factor and related services and supplies. The term of the joint venture is for a period of five years unless terminated at an earlier date pursuant to the terms of the agreement. Both companies contributed $50,000 in capital to the joint venture and will share equally in the assets, liabilities, profits and losses. In conjunction with the formation of this joint venture, the Company also entered into a management, service and sales agreement with the joint venture, whereby the Company will provide specialty pharmacy and management services to the joint venture in exchange for a management fee and the reimbursement of certain expenses.

      The Company received fees for management services from the joint ventures of $819,000, $1,193,000 and $1,184,000 for the years ended June 30, 2000, 2001 and 2002, respectively, which are recorded as other revenues in the accompanying consolidated statements of income.

      Summary financial information for affiliated joint ventures (20 percent to 50 percent owned) accounted for by the equity method is as follows as of and for the years ended June 30 (in thousands):

	2000		2001		2002
Current assets	$	6,229	$	8,753	$	12,394
Property and equipment and other assets		84		69		55
Current liabilities		3,130		4,114		4,090
Total revenues		20,637		23,359		26,963
Net income		4,057		2,315		4,131

12. Defined Contribution Retirement Plan

      The Company sponsors a qualified, defined contribution retirement plan under Section 401(k) of the Internal Revenue Code in which substantially all employees qualify for participation. The Company matches employee contributions, as defined in the plan. The Company made annual matching contributions of approximately $152,000, $189,000 and $234,000 for the years ended June 30, 2000, 2001 and 2002, respectively.

13. Stockholders’ Equity

Common Stock

      On August 17, 2000, the Company completed a stock offering of 3,600,000 shares of its common stock. An additional 540,000 shares of common stock were sold on September 12, 2000 pursuant to the exercise of the underwriters’ over-allotment option. All shares were issued at a price of $22.67 per share. Net proceeds to the Company, after deducting underwriting discounts and commissions and other expenses of the offering, were $88.3 million.

F-18

ACCREDO HEALTH, INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      In fiscal 2000 and 2001, the Company effected stock splits in the form of a stock dividend. All share and per share data in the consolidated financial statements and the notes hereto have been retroactively adjusted for the splits.

      On June 13, 2002, the Company issued 5,060,976 shares of its common stock to the shareholders of Gentiva in connection with the acquisition of the SPS division.

Preferred Stock

      In April 1999, the Company’s Board of Directors and Stockholders authorized the establishment of a new class of undesignated preferred stock.

14. Employee Stock Purchase Plan

      In April 1999, the Company’s Board of Directors adopted and the stockholders approved the Accredo Health, Incorporated 1999 Employee Stock Purchase Plan (the ESPP). Under the ESPP, employees may purchase shares of common stock at 85% of market price on the first day of an offering period (usually consisting of a six-month period beginning January 1 or July 1) or the last day of an offering period, whichever is lower. The shares are purchased at the end of each period with funds withheld from employees’ pay during the period. A total of 303,750 shares of the Company’s common stock have been reserved for issuance under the ESPP. Participation in the ESPP commenced on the effective date of the Company’s initial public offering in April 1999. There were 106,284, 28,721 and 28,885 shares of common stock issued during the years ended June 30, 2000, 2001 and 2002, respectively, pursuant to this employee stock purchase plan.

15. Stock Option Plans

      The Company’s Amended and Restated Stock Option and Restricted Stock Purchase Plan authorizes the grant of options to selected employees, officers and directors for up to 2,171,250 shares of the Company’s common stock. As of June 30, 2002, options to purchase 2,167,786 shares of stock have been granted under this plan. All options granted have ten-year terms and generally vest and become fully exercisable over a period of four years of continued employment.

      The Company’s 1999 Long-Term Incentive Plan authorizes the grant of options to selected employees, officers and directors for up to 1,125,000 shares of the Company’s common stock. As of June 30, 2002, options to purchase 1,088,860 shares of stock have been granted under this plan under terms similar to those discussed above.

      The Company’s 2002 Long-Term Incentive Plan authorizes the grant of options to selected employees, officers and directors for up to 2,600,000 shares of the Company’s common stock. As of June 30, 2002, options to purchase 1,280,317 shares of stock have been granted under this plan. All options granted have ten-year terns and generally vest and become fully exercisable over a period of four years of continued employment.

      Pro forma information regarding net income is required by Statement 123 and has been determined as if the Company had accounted for its employee stock options under the fair value method of Statement 123. Significant assumptions used by the Company in the Black-Scholes option pricing model computations are as follows for the years ended June 30:

	2000		2001		2002
Risk-free interest rate		5.81% to 6.59%		4.57% to 6.14%		3.56% to 4.41%
Dividend yield		0%		0%		0%
Volatility factor		.72		.70		.65
Weighted-average expected life		3.19 years		4.0 years		4.0 years
Estimated turnover		0%		0%		8%

F-19

ACCREDO HEALTH, INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The Black-Scholes option model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

      For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting period. The Company’s pro forma information for the years ended June 30 is as follows (in thousands, except share data):

	2000		2001		2002
Net income “as reported”	$	9,896	$	17,255	$	29,760
Pro forma net income	$	8,784	$	14,874	$	25,900
Pro forma basic earnings per share	$	0.42	$	0.60	$	0.98
Pro forma diluted earnings per share	$	0.40	$	0.57	$	0.96

      A summary of the Company’s stock option activity and related information for the periods ended June 30 follows:

	2000					2001					2002
				Weighted-					Weighted-					Weighted-
				Average					Average					Average
				Exercise					Exercise					Exercise
	Options			Price		Options			Price		Options			Price
Outstanding at beginning of period		2,101,678		$	1.90		1,780,947		$	3.97		1,796,775		$	13.52
Granted		334,294			12.92		746,393			28.10		1,521,031			45.81
Exercised		(630,716	)		1.75		(625,067	)		3.91		(284,961	)		7.72
Forfeited		(24,309	)		5.92		(105,498	)		12.30		(42,251	)		29.98
Outstanding at end of period		1,780,947		$	3.97		1,796,775		$	13.52		2,990,594		$	30.26
Exercisable at end of year		1,092,495		$	3.13		973,029		$	4.56		1,057,271		$	10.42
Weighted-average fair value of options granted during the year	$	6.68				$	16.03				$	23.94

	Options Outstanding
							Options Exercisable
			Weighted-
			Average		Weighted-				Weighted-
	Number		Remaining		Average		Number		Average
Range of Exercise prices	Outstanding		Contractual		Exercise		Exercisable		Exercise
(150% increment)	at 6/30/02		Life		Price		at 6/30/02		Price
$ 1.33 –  1.33		502,128		4.0 years	$	1.33		502,128	$	1.33
2.67 –  2.67		172,731		5.7 years		2.67		172,731		2.67
7.11 –  7.11		18,835		6.5 years		7.11		10,678		7.11
12.89 – 13.06		137,905		7.4 years		12.92		85,911		12.91
23.25 – 33.73		695,821		8.4 years		28.06		185,823		27.81
35.36 – 47.62		1,463,174		9.9 years		46.43		100,000		35.36
$ 1.33 – 47.62		2,990,594		8.2 years	$	30.26		1,057,271	$	10.42

F-20

ACCREDO HEALTH, INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

16. Quarterly Financial Information (Unaudited)

      Quarterly financial information for the years ended June 30, 2001 and 2002, is summarized below (in thousands, except share data):

		2002
		First		Second		Third		Fourth
		Quarter		Quarter		Quarter		Quarter
Total revenues		$	126,648	$	160,186	$	178,497	$	188,242
Operating income			9,409		11,833		14,974		13,483
Income before income taxes			9,604		11,805		14,679		12,697
Net income			5,877		7,217		8,988		7,678
Net income per common share:
	Basic		0.23		0.28		0.34		0.28
	Diluted		0.22		0.27		0.33		0.27

		2001
		First		Second		Third		Fourth
		Quarter		Quarter		Quarter		Quarter
Total revenues		$	99,577	$	113,870	$	124,280	$	124,413
Operating income			5,368		6,175		7,213		7,754
Income before income taxes			5,593		6,900		7,913		8,182
Net income			3,364		4,167		4,789		4,935
Net income per common share:
	Basic		0.15		0.16		0.19		0.19
	Diluted		0.14		0.16		0.18		0.18

F-21

ACCREDO HEALTH, INCORPORATED

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

(In Thousands)

Col. A		Col. B		Col. C					Col. D			Col. E
				Additions
				Charged to		Charged to
		Balance at		Costs and		Other						Balance at
Description		Beginning of Period		Expenses		Accounts			Deductions			End of Period
Year ended June 30, 2000:
	Allowance for doubtful accounts	$	5,300	$	6,117	$	76	(1)	$	3,098	(2)	$	8,395
Year ended June 30, 2001:
	Allowance for doubtful accounts		8,395		6,131		—			3,718	(2)		10,808
Year ended June 30, 2002:
	Allowance for doubtful accounts		10,808		5,833		69,412	(1)		4,295	(2)		81,758

(1)	Allowance as a result of acquisitions
(2)	Uncollectible accounts written off, net of recoveries

F-22

SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Memphis, State of Tennessee, on the 30th day of September, 2002.

ACCREDO HEALTH, INCORPORATED

By:  /s/ DAVID D. STEVENS

David D. Stevens

Chairman of the Board and

Chief Executive Officer

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints David D. Stevens, John R. Grow and Joel R. Kimbrough and either of them (with full power in each to act alone) as true and lawful attorneys-in-fact with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

      Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons in the capacities and on the dates indicated.

/s/ DAVID D. STEVENS David D. Stevens	Chairman of the Board, Chief Executive Officer and Director (Principal Executive Officer)	September 30, 2002
/s/ JOEL R. KIMBROUGH Joel R. Kimbrough	Senior Vice President, Chief Financial Officer Treasurer (Principal Financial and Accounting Officer)	September 30, 2002
/s/ JOHN R. GROW John R. Grow	President and Director	September 30, 2002
/s/ KENNETH R. MASTERSON Kenneth R. Masterson	Director	September 30, 2002
/s/ KENNETH J. MELKUS Kenneth J. Melkus	Director	September 30, 2002
/s/ KEVIN L. ROBERG Kevin L. Roberg	Director	September 30, 2002
/s/ DICK R. GOURLEY Dick R. Gourley	Director	September 30, 2002

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David D. Stevens, certify that:

1.	I have reviewed this annual report on Form 10-K of Accredo Health, Incorporated;
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.

/s/ DAVID D. STEVENS

David D. Stevens

Chief Executive Officer

Date: September 30, 2002

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Joel R. Kimbrough, certify that:

1.	I have reviewed this annual report on Form 10-K of Accredo Health, Incorporated;
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.

/s/ JOEL R. KIMBROUGH

Joel R. Kimbrough

Chief Financial Officer

Date: September 30, 2002

EXHIBIT INDEX

Exhibit
Number			Description of Exhibits
	2.1	—	Asset Purchase Agreement, dated as of January 2, 2002, by and between Accredo Health, Incorporated, Gentiva Health Services, Inc. and the Sellers named therein (incorporated by reference to Annex A of the joint proxy statement-prospectus included in our Registration Statement on Form S-4 (File Number 333-82396)).
	3.1	—	Amended and Restated Certificate of Incorporation of Accredo Health, Incorporated (incorporated by reference to Exhibit 3.1 to our Registration Statement on Form S-1 (File Number 333-62679)).
	3.2	—	Certificate of Amendment of the Certificate of Incorporation of Accredo Health, Incorporated (incorporated by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2000).
	3.4	—	Amended and Restated Bylaws of Accredo Health, Incorporated (incorporated by reference to Exhibit 3.2 to our Registration Statement on Form S-1 (File Number 333-62679)).
	4.1	—	Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to our Registration Statement on Form S-1 (File Number 333-62679)).
	10.1	—	Accredo Health 1999 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.6 to our Registration Statement on Form S-1 (File Number 333-62679)).
	10.2	—	Accredo Health, Incorporated 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.6 to our Registration Statement on Form S-1 (File Number 333-62679)).
	10.3	—	Accredo Health 1999 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.7 to our Registration Statement on Form S-1 (File Number 333-62679)).
	10.4	—	Nova Holdings, Inc. and its Subsidiaries Stock Option and Restricted Purchase Plan, as amended and restated (incorporated by reference to Exhibit 10.8 to our Registration Statement on Form S-1 (File Number 333-62679)).
	10.5	—	Registration Rights Agreement dated May 31, 1996 among the Company, Welsh, Carson, Anderson & Stowe VII, L.P. and certain other investors (incorporated by reference to Exhibit 10.10 to our Registration Statement on Form S-1 (File Number 333-62679)).
	10.6	—	Amendment Number One to the Registration Rights Agreement dated October 27, 1997 among the Company, Welsh, Carson, Anderson & Stowe VII, L.P. and certain other investors (incorporated by reference to Exhibit 10.11 to our Registration Statement on Form S-1 (File Number 333-62679)).
	10.7	—	Amendment Number Two to the Registration Rights Agreement dated July 24, 1998 among the Company, Welsh, Carson, Anderson & Stowe VII, L.P. and certain other investors (incorporated by reference to Exhibit 10.12 to our Registration Statement on Form S-1 (File Number 333-62679)).
	10.8	—	Stock Purchase Agreement dated as of June 5, 1997 among Dianne R. Martz, A.B. Charlton, III, the Company and Horizon Health Systems, Inc. (incorporated by reference to Exhibit 10.17 to our Registration Statement on Form S-1 (File Number 333-62679)).
	10.9	—	Non-Disclosure and Non-Compete Agreement dated as of June 5, 1997 by and among Horizon Health Systems,  Inc., the Company and Dianne R. Martz (incorporated by reference to Exhibit 10.18 to our Registration Statement on Form S-1 (File Number 333-62679)).
	10.10	—	Grant Agreement dated as of June 5, 1997 by and between Kyle Callahan and the Company (incorporated by reference to Exhibit 10.19 to our Registration Statement on Form S-1 (File Number 333-62679)).

Exhibit
Number			Description of Exhibits
	10.11	—	Subscription and Restriction Agreement dated as of June 5, 1997 by and between the Company and Kyle Callahan (incorporated by reference to Exhibit 10.20 to our Registration Statement on Form S-1 (File Number 333-62679)).
	10.12	—	Refunds Payable Escrow Agreement dated June 5, 1997 among First American National Bank, Nova Holdings, Inc. and Dianne Martz and A.B. Charlton, III (incorporated by reference to Exhibit 10.26 to our Registration Statement on Form S-1 (File Number 333-62679)).
	10.13	—	Amended and Restated Credit Agreement dated as of June 13, 2002 among Accredo Health, Incorporated as Borrower, Certain Subsidiaries of the Borrower as Guarantors and The Lenders Named Therein and Bank of America, N.A. as Agent.
	10.14	—	Amended and Restated Pledge Agreement dated as of June 13, 2002 by and among the parties identified as “Pledgors” and Bank of America, N.A. as collateral agent.
	10.15	—	Amended and Restated Security Agreement dated as of June 13, 2002 by and among the parties identified as “Grantors” and Bank of America, N.A. as collateral agent.
	10.16	—	ISDA Master Agreement dated August 7, 1997 between NationsBank of Tennessee, N.A. and Nova Holdings, Inc. (incorporated by reference to Exhibit 10.40 to our Registration Statement on Form S-1 (File Number 333-62679)).
	10.17	—	Amended and Restated General Partnership Agreement of Children’s Hemophilia Services (incorporated by reference to Exhibit 10.61 to our Registration Statement on Form S-1 (File Number 333-62679)).
	10.18	—	Amendment Number One to Amended and Restated General Partnership Agreement of Children’s Hemophilia Services and Restrictive Agreement dated January 5, 2000 (incorporated by reference to Exhibit 10.28 to our Annual Report on Form 10-K for the fiscal year ended June 30, 2000).
	10.19	—	First Amendment to Amended and Restated General Partnership Agreement of Children’s Hemophilia Services dated June 30, 2000 (incorporated by reference to Exhibit 10.29 to our Annual Report on Form 10-K for the fiscal year ended June 30, 2000).
	10.20	—	Hemophilia Therapy Business Management, Services and Sales Agreement, dated November 10, 1998 between Horizon Health Systems, Inc., a Tennessee corporation, and Children’s Hemophilia Services, a California general partnership (The Company has obtained confidential treatment with respect to certain portions of this Exhibit.) (incorporated by reference to Exhibit 10.63 to our Registration Statement on Form S-1 (File Number 333-62679)).
	10.21	—	Amended and Restated Distribution and Services Agreement effective as of January 1, 2000 by and between Biogen, Inc. and Nova Factor, Inc. (The Company has obtained confidential treatment with respect to certain portions of this Exhibit.) (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2000).
	10.22	—	Additional Services Agreement dated January 1, 2000 by and between Biogen, Inc. and Nova Factor, Inc. (The Company has obtained confidential treatment with respect to certain portions of this Exhibit.) (incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2000).
	10.23	—	Amendment to Amended and Restated Distribution and Services Agreement and Additional Services Agreement dated as of May 1, 2001 between Biogen, Inc. and Nova Factor, Inc. (The Company has obtained confidential treatment with respect to certain portions of this Exhibit.) (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2001).
	10.24	—	Amended and Restated Distribution Agreement, dated January 1, 1998, by and between Nova Factor, Inc. and Genzyme Corporation (The Company has obtained confidential treatment with respect to certain portions of this Exhibit.) (incorporated by reference to Exhibit 10.65 to our Annual Report on Form 10-K for the fiscal year ended June 30, 1999).

Exhibit
Number			Description of Exhibits
	10.25	—	Incentive Stock Option Agreement of David Stevens dated May 31, 1996 (incorporated by reference to Exhibit 10.46 to our Registration Statement on Form S-1 (File Number 333-62679)).
	10.26	—	Incentive Stock Option Agreement of Joel R. Kimbrough dated May 31, 1996 (incorporated by reference to Exhibit 10.47 to our Registration Statement on Form S-1 (File Number 333-62679)).
	10.27	—	Incentive Stock Option Agreement of John R. Grow dated May 31, 1996 (incorporated by reference to Exhibit 10.48 to our Registration Statement on Form S-1 (File Number 333-62679)).
	10.28	—	Incentive Stock Option Agreement of Kyle Callahan dated September 3, 1997 (incorporated by reference to Exhibit 10.49 to our Registration Statement on Form S-1 (File Number 333-62679)).
	10.29	—	Non-Qualified Stock Option Agreement of Patrick J. Welsh dated February 9, 1998 (incorporated by reference to Exhibit 10.50 to our Registration Statement on Form S-1 (File Number 333-62679)).
	10.30	—	Non-Qualified Stock Option Agreement of Ken Melkus dated February 9, 1998 (incorporated by reference to Exhibit 10.51 to our Registration Statement on Form S-1 (File Number 333-62679)).
	10.31	—	Incentive Stock Option Agreement of Kyle Callahan dated February 9, 1998 (incorporated by reference to Exhibit 10.52 to our Registration Statement on Form S-1 (File Number 333-62679)).
	10.32	—	Non-Qualified Stock Option Agreement of Kenneth R. Masterson dated April 30, 1998 (incorporated by reference to Exhibit 10.54 to our Registration Statement on Form S-1 (File Number 333-62679)).
	10.33	—	Incentive Stock Option Agreement of Thomas W. Bell, Jr. dated July 10, 1998 (incorporated by reference to Exhibit 10.55 to our Registration Statement on Form S-1 (File Number 333-62679)).
	10.34	—	Non-Qualified Stock Option Agreement of Patrick J. Welsh dated November 10, 1999 (incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 1999).
	10.35	—	Non-Qualified Stock Option Agreement of Kenneth J. Melkus dated November 10, 1999 (incorporated by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 1999).
	10.36	—	Non-Qualified Stock Option Agreement of Kenneth R. Masterson dated November 10, 1999 (incorporated by reference to Exhibit 10.5 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 1999).
	10.37	—	Non-Qualified Stock Option Agreement of Kevin L. Roberg dated November 10, 1999 (incorporated by reference to Exhibit 10.6 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 1999).
	10.38	—	Non-Qualified Stock Option Agreement of Kevin L. Roberg dated November 18, 1999 (incorporated by reference to Exhibit 10.7 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 1999).
	10.39	—	Non-Qualified Stock Option Agreement of Patrick J. Welsh dated November 1, 2000 (incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2000).
	10.40	—	Non-Qualified Stock Option Agreement of Kevin L. Roberg dated November 1, 2000 (incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2000).

Exhibit
Number			Description of Exhibits
	10.41	—	Non-Qualified Stock Option Agreement of Kenneth J. Melkus dated November 1, 2000 (incorporated by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2000).
	10.42	—	Non-Qualified Stock Option Agreement of Kenneth R. Masterson dated November 1, 2000 (incorporated by reference to Exhibit 10.5 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2000).
	10.43	—	Non-Qualified Stock Option Agreement of Dick R. Gourley dated November 1, 2000 (incorporated by reference to Exhibit 10.6 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2000).
	10.44	—	Non-Qualified Stock Option Agreement of Dick R. Gourley dated November 16, 2000 (incorporated by reference to Exhibit 10.7 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2000).
	10.45	—	Non-Qualified Stock Option Agreement of Patrick J. Welsh dated November 1, 2001 (incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2001).
	10.46	—	Non-Qualified Stock Option Agreement of Kevin L. Roberg dated November 1, 2001 (incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2001).
	10.47	—	Non-Qualified Stock Option Agreement of Kenneth J. Melkus dated November 1, 2001 (incorporated by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2001).
	10.48	—	Non-Qualified Stock Option Agreement of Kenneth R. Masterson dated November 1, 2001 (incorporated by reference to Exhibit 10.5 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2001).
	10.49	—	Non-Qualified Stock Option Agreement of Dick R. Gourley dated November 1, 2001 (incorporated by reference to Exhibit 10.6 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2001).
	10.50	—	Incentive Stock Option Agreement of David Stevens dated November 1, 2000 (incorporated by reference to Exhibit 10.8 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2000).
	10.51	—	Incentive Stock Option Agreement of John R. Grow dated November 1, 2000 (incorporated by reference to Exhibit 10.9 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2000).
	10.52	—	Incentive Stock Option Agreement of Joel R. Kimbrough dated November 1, 2000 (incorporated by reference to Exhibit 10.10 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2000).
	10.53	—	Incentive Stock Option Agreement of Thomas W. Bell, Jr. dated November 1, 2000 (incorporated by reference to Exhibit 10.11 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2000).
	10.54	—	Incentive Stock Option Agreement of Kyle J. Callahan dated November 1, 2000 (incorporated by reference to Exhibit 10.12 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2000).
	10.55	—	Employment Agreement dated as of September 1, 1999 between Accredo Health, Incorporated and David D. Stevens (incorporated by reference to Exhibit 10.55 to our Annual Report on Form 10-K for the fiscal year ended June 30, 2000).
	10.56	—	Employment Agreement dated as of September 1, 1999 between Accredo Health, Incorporated and John R. Grow (incorporated by reference to Exhibit 10.56 to our Annual Report on Form 10-K for the fiscal year ended June 30, 2000).

Exhibit
Number			Description of Exhibits
	10.57	—	Employment Agreement dated as of September 1, 1999 between Accredo Health, Incorporated and Joel R. Kimbrough (incorporated by reference to Exhibit 10.57 to our Annual Report on Form 10-K for the fiscal year ended June 30, 2000).
	10.58	—	Employment Agreement dated as of September 1, 1999 between Accredo Health, Incorporated and Kyle J. Callahan (incorporated by reference to Exhibit 10.58 to our Annual Report on Form 10-K for the fiscal year ended June 30, 2000).
	10.59	—	Employment Agreement dated as of September 1, 1999 between Accredo Health, Incorporated and Thomas W. Bell, Jr. (incorporated by reference to Exhibit 10.59 to our Annual Report on Form 10-K for the fiscal year ended June 30, 2000).
	10.60	—	Amendment Number One to Employment Agreement effective as of September 1, 2000 between Accredo Health, Incorporated and David D. Stevens (incorporated by reference to Exhibit 10.13 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2000).
	10.61	—	Amendment Number One to Employment Agreement effective as of September 1, 2000 between Accredo Health, Incorporated and John R. Grow (incorporated by reference to Exhibit 10.14 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2000).
	10.62	—	Amendment Number One to Employment Agreement effective as of September 1, 2000 between Accredo Health, Incorporated and Joel R. Kimbrough (incorporated by reference to Exhibit 10.15 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2000).
	10.63	—	Amendment Number One to Employment Agreement effective as of September 1, 2000 between Accredo Health, Incorporated and Kyle J. Callahan (incorporated by reference to Exhibit 10.16 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2000).
	10.64	—	Amendment Number One to Employment Agreement effective as of September 1, 2000 between Accredo Health, Incorporated and Thomas W. Bell, Jr. (incorporated by reference to Exhibit 10.17 to our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2000).
	21.1	—	Subsidiaries
	23.1	—	Consent of Ernst & Young LLP
	24.1	—	Power of Attorney (contained on the signature pages of this report)
	99.1	—	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002
	99.2	—	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002

EX-10.13

                     AMENDED AND RESTATED CREDIT AGREEMENT


                           Dated as of June 13, 2002


                                     among


                         ACCREDO HEALTH, INCORPORATED,
                                  as Borrower,


                     CERTAIN SUBSIDIARIES OF THE BORROWER,
                                 as Guarantors,


                            THE LENDERS NAMED HEREIN


                                      and


                              JPMORGAN CHASE BANK,
                              as Syndication Agent


                      WACHOVIA BANK, NATIONAL ASSOCIATION
                                      and
                   FIRST TENNESSEE BANK NATIONAL ASSOCIATION,
                           as Co-Documentation Agents


                             BANK OF AMERICA, N.A.,
                            as Administrative Agent


                                  Arranged by:

                        BANC OF AMERICA SECURITIES LLC,
                  as Sole Lead Arranger and Sole Book Manager

                                TABLE OF CONTENTS



                                                                                                   Page
                                                                                                
SECTION 1 DEFINITIONS............................................................................    1
         1.1      Definitions....................................................................    1
         1.2      Computation of Time Periods....................................................   26
         1.3      Accounting Terms...............................................................   26

SECTION 2 CREDIT FACILITIES......................................................................   26
         2.1      Commitments....................................................................   26
         2.2      Method of Borrowing............................................................   28
         2.3      Interest.......................................................................   28
         2.4      Repayment......................................................................   29
         2.5      Notes..........................................................................   30
         2.6      Additional Provisions relating to Letters of Credit............................   30
         2.7      Additional Provisions relating to Swingline Loans..............................   34

SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES.........................................   35
         3.1      Default Rate...................................................................   35
         3.2      Continuation and Conversion....................................................   35
         3.3      Prepayments....................................................................   36
         3.4      Reduction and Termination of Commitments.......................................   38
         3.5      Fees...........................................................................   39
         3.6      Capital Adequacy...............................................................   39
         3.7      Limitation on Eurodollar Loans.................................................   40
         3.8      Illegality.....................................................................   40
         3.9      Requirements of Law............................................................   40
         3.10     Treatment of Affected Loans....................................................   41
         3.11     Taxes..........................................................................   42
         3.12     Funding Losses.................................................................   43
         3.13     Pro Rata Treatment.............................................................   44
         3.14     Sharing of Payments............................................................   45
         3.15     Payments, Computations, etc....................................................   45
         3.16     Evidence of Debt...............................................................   47
         3.17     Treatment of Affected Lenders..................................................   48

SECTION 4 GUARANTY...............................................................................   48
         4.1      The Guaranty...................................................................   48
         4.2      Obligations Unconditional......................................................   49
         4.3      Reinstatement..................................................................   50
         4.4      Certain Additional Waivers.....................................................   50
         4.5      Remedies.......................................................................   50
         4.6      Rights of Contribution.........................................................   50
         4.7      Guarantee of Payment; Continuing Guarantee.....................................   51

SECTION 5 CONDITIONS.............................................................................   51
         5.1      Closing Conditions.............................................................   51



                                       i

                                                                                                 
         5.2      Conditions to all Extensions of Credit.........................................   54

SECTION 6 REPRESENTATIONS AND WARRANTIES.........................................................   55
         6.1      Financial Condition............................................................   55
         6.2      No Changes or Restricted Payments..............................................   56
         6.3      Organization; Existence; Compliance with Law...................................   56
         6.4      Power; Authorization; Enforceable Obligations..................................   57
         6.5      No Legal Bar...................................................................   57
         6.6      No Material Litigation and Disputes............................................   57
         6.7      No Defaults....................................................................   58
         6.8      Ownership and Operation of Property............................................   58
         6.9      Intellectual Property..........................................................   58
         6.10     Taxes..........................................................................   58
         6.11     ERISA..........................................................................   58
         6.12     Governmental Regulations, etc..................................................   60
         6.13     Subsidiaries...................................................................   60
         6.14     Purpose of Extensions of Credit................................................   60
         6.15     Environmental Matters..........................................................   60
         6.16     No Material Misstatements......................................................   61
         6.17     Labor Matters..................................................................   62
         6.18     Collateral Documents...........................................................   62
         6.19     Location of Real Property and Leased Premises..................................   62
         6.20     Fraud and Abuse................................................................   62
         6.21     Licensing and Accreditation....................................................   63
         6.22     Solvency.......................................................................   63
         6.23     No Other Broker's Fees.........................................................   63
         6.24     Transaction....................................................................   64

SECTION 7 AFFIRMATIVE COVENANTS..................................................................   64
         7.1      Information Covenants..........................................................   64
         7.2      Preservation of Existence and Franchises.......................................   67
         7.3      Books and Records..............................................................   67
         7.4      Compliance with Law............................................................   67
         7.5      Payment of Taxes and Other Lawful Claims.......................................   67
         7.6      Insurance......................................................................   68
         7.7      Maintenance of Property........................................................   68
         7.8      Use of Proceeds; Margin Stock..................................................   68
         7.9      Audits/Inspections.............................................................   69
         7.10     Financial Covenants............................................................   69
         7.11     Additional Guarantors; Foreign Subsidiaries....................................   70
         7.12     Pledged Assets.................................................................   70
         7.13     Interest Rate Protection.......................................................   70
         7.14     Landlord Lien Waivers..........................................................   70

SECTION 8 NEGATIVE COVENANTS.....................................................................   71
         8.1      Indebtedness...................................................................   71
         8.2      Liens..........................................................................   72




                                       ii

                                                                                                 
         8.3      Nature of Business.............................................................   72
         8.4      Merger and Consolidation, Dissolution and Acquisitions.........................   72
         8.5      Asset Dispositions.............................................................   73
         8.6      Investments....................................................................   74
         8.7      Restricted Payments............................................................   74
         8.8      Modifications and Payments in respect of Funded Debt...........................   74
         8.9      Transactions with Affiliates...................................................   74
         8.10     Fiscal Year....................................................................   75
         8.11     Limitation on Restricted Actions; No Further Negative Pledges..................   75
         8.12     Ownership of Subsidiaries......................................................   75
         8.13     Sale Leasebacks................................................................   75

SECTION 9 EVENTS OF DEFAULT......................................................................   76
         9.1      Events of Default..............................................................   76
         9.2      Acceleration; Remedies.........................................................   78

SECTION 10 ADMINISTRATIVE AND COLLATERAL AGENT...................................................   78
         10.1     Appointment and Authorization..................................................   78
         10.2     Delegation of Duties...........................................................   79
         10.3     Liability......................................................................   79
         10.4     Reliance.......................................................................   80
         10.5     Notice of Default..............................................................   80
         10.6     Credit Decision; Disclosure of Information.....................................   81
         10.7     Indemnification................................................................   81
         10.8     Individual Capacity............................................................   82
         10.9     Successor......................................................................   82
         10.10    Other Agents; Lead Managers....................................................   82

SECTION 11 MISCELLANEOUS.........................................................................   83
         11.1     Notices........................................................................   83
         11.2     Right of Set-Off; Adjustments..................................................   83
         11.3     Successors and Assigns.........................................................   83
         11.4     No Waiver; Remedies Cumulative.................................................   86
         11.5     Expenses; Indemnification......................................................   86
         11.6      Amendments, Waivers and Consents..............................................   87
         11.7     Counterparts...................................................................   89
         11.8     Headings.......................................................................   89
         11.9     Survival.......................................................................   89
         11.10    Governing Law; Submission to Jurisdiction; Venue; Waiver of Jury Trial;
                  Waiver of Punitive and Exemplary Damages.......................................   89
         11.11    Severability...................................................................   90
         11.12    Entirety.......................................................................   90
         11.13    Binding Effect; Termination....................................................   90
         11.14    Confidentiality................................................................   90
         11.15    Source of Funds................................................................   91
         11.16    Conflict.......................................................................   92




                                      iii

                             SCHEDULES AND EXHIBITS

                        
Schedule 2.1               Commitments
Schedule 5.1               Identified Real Property Leasehold Interests
Schedule 6.8               Liens
Schedule 6.9               Intellectual Property
Schedule 6.13              Subsidiaries
Schedule 6.19(a)           Locations of Owned and Leased Real Property
Schedule 6.19(b)           Locations of Tangible Personal Property
Schedule 6.19(c)           Legal Name, State of Formation and Chief Executive Office Location
Schedule 7.6               Insurance
Schedule 8.1               Indebtedness
Schedule 8.6               Investments
Schedule 8.11              Limitations on Restricted Actions; Negative Pledges
Schedule 8.12              Non-Wholly Owned Subsidiaries
Schedule 11.1              Notice Addresses

Exhibit 1.1                Form of Genzyme Intercreditor and Subordination Agreement
Exhibit 2.2(a)(i)          Form of Notice of Revolving Loan Borrowing
Exhibit 2.2(a)(ii)         Form of Notice of Request of Letter of Credit
Exhibit 2.2(a)(iii)        Form of Notice of Swingline Loan Borrowing
Exhibit 2.5-1              Form of Revolving Note
Exhibit 2.5-2              Form of Tranche A Term Note
Exhibit 2.5-3              Form of Tranche B Term Note
Exhibit 3.2                Form of Notice of Continuation/Conversion
Exhibit 5.1                Form of Officer's Certificate
Exhibit 7.1(c)             Form of Officer's Compliance Certificate
Exhibit 7.11               Form of Joinder Agreement
Exhibit 11.3(b)            Form of Assignment and Acceptance




                                       iv

                      AMENDED AND RESTATED CREDIT AGREEMENT

      THIS AMENDED AND RESTATED CREDIT AGREEMENT (the "Credit Agreement") dated
as of June 13, 2002 is by and among ACCREDO HEALTH, INCORPORATED, a Delaware
corporation (the "Borrower"), the Guarantors (defined herein), the Lenders
(defined herein) and BANK OF AMERICA, N.A., as Administrative Agent for the
Lenders (in such capacity, the "Administrative Agent").

                               W I T N E S S E T H

      WHEREAS, $60 million in credit facilities have been established in favor
of the Borrower pursuant to that Loan and Security Agreement (as amended,
modified and supplemented, the "Existing Credit Agreement") dated as of June 5,
1997 among the Borrower, the guarantors identified therein, the banks identified
therein and Bank of America, N.A., as agent;

      WHEREAS, the Borrower has requested certain modifications to the credit
facilities, including, among other things, an increase in the size of the credit
facilities to $325 million;

      WHEREAS, the Lenders have agreed to make the requested credit facilities
available to the Borrower on the terms and conditions hereinafter set forth; and

      WHEREAS, this Credit Agreement is given in amendment to, restatement of
and substitution for the Existing Credit Agreement.

      NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:


                                    SECTION 1

                                   DEFINITIONS

1.1   Definitions.

      As used in this Credit Agreement, the following terms shall have the
meanings specified below unless the context otherwise requires:

      "Acquired Company" means substantially all of the assets and rights used
in or related to the operation and conduct of the business of Sellers (as
defined in the Asset Purchase Agreement) that is identified as the Specialty
Pharmaceutical Services business in Gentiva Health Services Inc.'s Form 10-K for
fiscal year 2000, as updated by its Form 10-Q for the quarterly period ended
September 30, 2001.

      "Acquisition" means any transaction, or series of related transactions, by
which a Person directly or indirectly (a) acquires all or any substantial
portion of the Property of another Person (other than a Credit Party) or (b)
acquires control of at least a majority of the Voting Stock of another Person
(other than a Credit Party).

      "Acute Disposition" means the sale of some or all of the assets used in
the Acute Business which is being acquired by Borrower in the Transaction (which
may include fixed assets, contracts , leases, accounts receivable and the stock
in those entities engaged in the Acute Business). The Acute Business

consists of a product portfolio and branch pharmacy network that is engaged in
providing home infusion therapies to patients with acute medical needs and
includes but is not limited to the following therapies: antibiotic therapy,
biological response modifier, total parenteral nutrition, pain management
therapy, Chemotherapy, catheter care, enteral nutrition, hydration therapy and
other therapies which do not fall within the Borrower's business model.

      "Adjusted Base Rate" means the Base Rate plus the Applicable Percentage.

      "Adjusted Eurodollar Rate" means the Eurodollar Rate plus the Applicable
Percentage.

      "Administrative Agent" shall have the meaning provided in the heading
hereof, together with any successors or assigns.

      "Administrative Agent's Fee Letter" means that certain letter agreement,
dated as of December 31, 2001, between the Administrative Agent and the
Borrower, as amended, modified, restated or supplemented from time to time.

      "Affiliate" means, with respect to any Person, (i) any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such Person and (ii) solely for purposes of Section 8.9, any
other Person directly or indirectly owning or holding five percent (5%) or more
of the Capital Stock in such Person. For purposes of this definition, "control"
when used with respect to any Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.

      "Agent-Related Persons" means the Administrative Agent (including any
successor administrative agent), together with its Affiliates (including, in the
case of Bank of America in its capacity as the Administrative Agent, the
Arranger), and the officers, directors, employees, agents and attorneys-in-fact
of such Persons and Affiliates.

      "Aggregate Revolving Committed Amount" shall have the meaning provided in
Section 2.1(a).

      "Applicable Lending Office" means, for each Lender, the office of such
Lender (or of an Affiliate of such Lender) as such Lender may from time to time
specify to the Administrative Agent and the Borrower by written notice as the
office by which its Eurodollar Loans are made and maintained.

      "Applicable Percentage" means, for any day, the rate per annum set forth
below opposite the applicable Consolidated Leverage Ratio then in effect, it
being understood that the Applicable Percentage for (i) Base Rate Loans shall be
the percentage set forth under the column titled "Base Rate Margin", (ii)
Eurodollar Loans shall be the percentage set forth under the column titled
"Eurodollar Margin", (iii) the Letter of Credit Fee shall be the percentage set
forth under the column titled "Letter of Credit Fee", and (iv) the Commitment
Fee shall be the percentage set forth under the column titled "Commitment Fee":



                                    Revolving Loans and
                                    Tranche A Term Loans         Tranche B Term Loans
- -----------------------------------------------------------------------------------------------------------------
 Pricing       Consolidated       Eurodollar     Base Rate     Eurodollar    Base Rate     Letter of   Commitment
  Level       Leverage Ratio        Margin        Margin         Margin        Margin     Credit Fee      Fee
- -----------------------------------------------------------------------------------------------------------------
                                                                                 
    I       < or = 1.50:1.00         1.75%          0.25%         2.50%         1.00%         1.75%       0.375%
- -----------------------------------------------------------------------------------------------------------------
    II      < or = 2.00:1.00 but     2.00%          0.50%         2.50%         1.00%         2.00%       0.500%
                > 1.50:1.00
- -----------------------------------------------------------------------------------------------------------------




- ------------------------------------------------------------------------------------------------------------------
                                                                                     
   III        < or = 2.50:1.00 but       2.25%         0.75%        2.75%        1.25%        2.25%         0.500%
                > 2.00:1.00
- ------------------------------------------------------------------------------------------------------------------
    IV          > 2.50:1.00              2.50%         1.00%        2.75%        1.25%        2.50%         0.500%
- ------------------------------------------------------------------------------------------------------------------


The Applicable Percentage shall be determined and adjusted on each of the
following dates (each a "Rate Determination Date") (a) five Business Days after
the date by which each annual and quarterly compliance certificates and related
financial statements and information are required in accordance with the
provisions of Sections 7.1(a), (b) and (c), as appropriate, and (b) five
Business Days after the date on which any Permitted Acquisition closes; provided
that:

            (i)   the initial Applicable Percentages shall be based on pricing
      level III and shall remain in effect at such pricing level (or any higher
      (more expensive) pricing level as would otherwise apply) until the first
      Rate Determination Date to occur in connection with the delivery of the
      quarterly financial statements and appropriate compliance certificate for
      the fiscal quarter ending June 30, 2002, and

            (ii)  notwithstanding the foregoing, in the event an annual or
      quarterly compliance certificate and related financial statements and
      information are not delivered timely to the Administrative Agent and the
      Lenders by the date required by Section 7.1(a), (b) or (c), as
      appropriate, the Applicable Percentages shall be based on pricing level IV
      until the date five Business Days after the appropriate compliance
      certificate and related financial statements and information are
      delivered, whereupon the applicable pricing level shall be adjusted based
      on the information contained in such compliance certificate and related
      financial statements and information.

      Subject to the qualifications set forth above, each Applicable Percentage
shall be effective from a Rate Determination Date until the next Rate
Determination Date. The Administrative Agent shall determine the appropriate
Applicable Percentages in the pricing matrix promptly upon receipt of the
quarterly or annual compliance certificate and related financial information and
shall promptly notify the Borrower and the Lenders of any change thereof. Such
determinations by the Administrative Agent shall be conclusive absent manifest
error. Adjustments in the Applicable Percentages shall be effective as to
existing Extensions of Credit as well as new Extensions of Credit made
thereafter.

      "Approved Fund" means any Fund that is administered or managed by (a) a
Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an
entity that administers or manages a Lender.

      "Arranger" means Banc of America Securities LLC, in its capacity as sole
lead arranger and sole book manager.

      "Asset Disposition" shall mean and include the sale, lease or other
disposition of any Property (including the Capital Stock of a Subsidiary) by any
member of the Consolidated Group (including, without limitation, any Sale and
Leaseback Transaction), but for purposes hereof shall not include, in any event,
(A) the sale of inventory (including, without limitation, the sale of inventory
at wholesale cost to Joint Ventures) in the ordinary course of business or the
return of inventory to the manufacturer thereof, (B) the sale, lease or other
disposition of machinery and equipment no longer used or useful in the conduct
of business, (C) a sale, lease, transfer or disposition of Property to a Credit
Party, (D) the sublease of any real property and (E) the lease or sublease of
equipment, software and personnel pursuant to the Services and Transition
Agreement.

      "Asset Purchase Agreement" means the Asset Purchase Agreement dated
January 2, 2002 by and between the Borrower, Gentiva Health Services, Inc. and
the other Sellers named therein.

      "Assignment and Acceptance" means an assignment and acceptance
substantially in the form of Exhibit 11.3(b) hereto executed and delivered in
accordance with the provisions of Section 11.3.

      "Bank of America" means Bank of America, N.A., and its successors.

      "Bankruptcy Code" means the Bankruptcy Code in Title 11 of the United
States Code, as amended, modified, succeeded or replaced from time to time.

      "Bankruptcy Event" means, with respect to any Person, the occurrence of
any of the following with respect to such Person: (i) a court or governmental
agency having jurisdiction in the premises shall enter a decree or order for
relief in respect of such Person in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of such Person or for any substantial part of its Property
or ordering the winding up or liquidation of its affairs; or (ii) there shall be
commenced against such Person an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or any
case, proceeding or other action for the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of such Person
or for any substantial part of its Property or for the winding up or liquidation
of its affairs, and such involuntary case or other case, proceeding or other
action shall remain undismissed, undischarged or unbonded for a period of sixty
(60) consecutive days; or (iii) such Person shall commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consent to the entry of an order for relief in an
involuntary case under any such law, or consent to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of such Person or for any substantial part of its Property
or make any general assignment for the benefit of creditors; or (iv) such Person
shall be unable to, or shall admit in writing its inability to, pay its debts
generally as they become due.

      "Base Rate" means for any day a fluctuating rate per annum equal to the
higher of (a) the Federal Funds Rate in effect on such day plus one half of one
percent (0.5%) and (b) the Prime Rate in effect on such day.

      "Base Rate Loan" means any Loan bearing interest at a rate determined by
reference to the Base Rate.

      "Borrower" shall have the meaning provided in the heading hereof, together
with any successors or assigns.

      "Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banks in Charlotte, North Carolina or New York, New York are
authorized or required by law to close, except that, when used in connection
with a Eurodollar Loan, such day shall also be a day on which dealings between
banks are carried on in Dollar deposits in London, England.

      "Capital Lease" means, as applied to any Person, any lease of Property by
such Person as lessee that, in accordance with GAAP, is required to be accounted
for as a capital lease on the balance sheet of such Person.

      "Capital Stock" means (i) in the case of a corporation, capital stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
capital stock, (iii) in the case of a partnership, partnership interests
(whether general or limited), (iv) in the case of a limited liability company,
membership interests and (v) any other

interest or participation that confers on a Person the right to receive a share
of the profits and losses of, or distributions of assets of, the issuing Person.

      "Cash Equivalents" means (a) securities issued or directly and fully
guaranteed or insured by the United States or any agency or instrumentality
thereof (provided that the full faith and credit of the United States is pledged
in support thereof) having maturities of not more than twelve months from the
date of acquisition, (b) Dollar denominated time deposits and certificates of
deposit of (i) any Revolving Lender, (ii) any domestic commercial bank of
recognized standing having capital and surplus in excess of $500 million or
(iii) any bank whose short-term commercial paper rating from S&P is at least A-1
or the equivalent thereof or from Moody's is at least P-1 or the equivalent
thereof (any such bank being an "Approved Bank"), in each case with maturities
of not more than 270 days from the date of acquisition, (c) commercial paper and
variable or fixed rate notes issued by any Approved Bank (or by the parent
company thereof) or any variable rate notes issued by, or guaranteed by, any
domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or
P-1 (or the equivalent thereof) or better by Moody's and maturing within six
months of the date of acquisition, (d) repurchase agreements entered into by any
Person with a bank or trust company (including any of the Revolving Lenders) or
recognized securities dealer having capital and surplus in excess of $500
million for direct obligations issued by or fully guaranteed by the United
States in which such Person shall have a perfected first priority security
interest (subject to no other Liens) and having, on the date of purchase
thereof, a fair market value of at least one hundred percent (100%) of the
amount of the repurchase obligations and (e) Investments, classified in
accordance with GAAP as current assets, in money market investment programs
registered under the Investment Company Act of 1940, as amended, that are
administered by reputable financial institutions having capital of at least $500
million and the portfolios of which are limited to Investments of the character
described in the foregoing subdivisions (a) through (d).

      "CHAMPUS" means the United States Department of Defense Civilian Health
and Medical Program of the Uniformed Services, and any successor thereof
including TRICARE.

      "Change of Control" means the occurrence of any of the following events:
(i) any Person or two or more Persons acting in concert shall have acquired
beneficial ownership, directly or indirectly, of, or shall have acquired by
contract or otherwise, or shall have entered into a contract or arrangement
that, upon consummation, will result in its or their acquisition of or control
over, Voting Stock of the Borrower (or other securities convertible into such
Voting Stock) representing thirty percent (30%) or more of the combined voting
power of all Voting Stock of the Borrower or (ii) during any period of up to
twenty-four consecutive months, commencing after the Closing Date, individuals
who at the beginning of such twenty-four month period were directors of the
Borrower (together with any new director whose election by the Borrower's board
of directors or whose nomination for election by the Borrower's shareholders was
approved by a vote of at least a majority of the directors then still in office
who either were directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the directors of the Borrower then in office. As used
herein, "beneficial ownership" shall have the meaning provided in Rule 13d-3 of
the Securities and Exchange Commission under the Securities Exchange Act.

      "Closing Date" means the date hereof.

      "Collateral" means a collective reference to the collateral that is
identified in, and at any time will be covered by, the Collateral Documents.

      "Collateral Agent" means Bank of America in its capacity as "Collateral
Agent" under the Collateral Documents, together with any successors or assigns.

      "Collateral Documents" means a collective reference to the Security
Agreement, the Pledge Agreement, the Mortgages and such other documents executed
and delivered in connection with the attachment and perfection of the
Administrative Agent's security interests and liens arising thereunder,
including, without limitation, UCC financing statements and patent and trademark
filings.

      "Commitment" means the Revolving Commitment, the LOC Commitment and the
Swingline Commitment.

      "Commitment Fee" shall have the meaning provided in Section 3.5(a).

      "Commitment Period" means the period from and including the Closing Date
to but not including the earlier of (i) the Termination Date or (ii) the date on
which the Commitments terminate in accordance with the provisions of this Credit
Agreement.

      "Consolidated Accounts" means, as of any date of determination and without
duplication, the aggregate book value of all accounts receivable, receivables,
and obligations for payment created or arising from the sale of inventory or the
rendering of services in the ordinary course of business (collectively, the
"Receivables"), owned by or owing to any member of the Consolidated Group, net
of allowances and reserves for doubtful or uncollectible accounts and sales
adjustments consistent with such Person's internal policies and in any event in
accordance with GAAP, but excluding in any event (a) any Receivable that is (i)
not subject to a perfected, first priority Lien in favor of the Collateral Agent
pursuant to the Security Agreement or (ii) subject to any Lien that is not a
Permitted Lien, (b) Receivables owing by an account debtor located outside of
the United States (unless payment for the goods shipped is secured by an
irrevocable letter of credit in a form and from an institution acceptable to the
Administrative Agent), (c) Receivables owing by an account debtor that is not
solvent or is subject to any bankruptcy or insolvency proceeding of any kind and
(d) Receivables for which any Subsidiary or Joint Venture is the account debtor.

      "Consolidated Asset Coverage Ratio" means, as of the last day of each
fiscal quarter, the ratio of (a) Consolidated Assets on such day to (b)
Consolidated Funded Debt on such day; provided that for purposes of calculating
clause (a), the amount of Consolidated Inventory included in such calculation
shall not exceed an amount equal to thirty percent (30%) of the amount of
Consolidated Assets; provided, further, that for purposes of calculating clause
(a), the amount of Genzyme Inventory included in such calculation shall not
exceed an amount equal to fifteen percent (15%) of the amount of Consolidated
Assets.

      "Consolidated Assets" means, as of any date of determination, the sum of
Consolidated Accounts on such day plus Consolidated Inventory on such day.

      "Consolidated Capital Expenditures" means, for any period for the
Consolidated Group, without duplication, all expenditures (whether paid in cash
or other consideration) during such period that, in accordance with GAAP, are
required to be included in additions to property, plant and equipment or similar
items reflected in the consolidated statement of cash flows for such period
(including, without limitation, Capital Leases and capitalized software costs);
provided, that Consolidated Capital Expenditures shall not include, for purposes
hereof, expenditures of proceeds of insurance settlements, condemnation awards
and other settlements in respect of lost, destroyed, damaged or condemned
assets, equipment or other property to the extent such expenditures are made to
replace or repair such lost, destroyed, damaged or condemned assets, equipment
or other property or otherwise to acquire assets or properties useful in the
business of the members of the Consolidated Group.

      "Consolidated EBITDA" means, for any period for the Consolidated Group,
the sum of (i) Consolidated Net Income, plus (ii) to the extent deducted in
determining Consolidated Net Income, (A) Consolidated Interest Expense, (B)
taxes, (C) depreciation and amortization, in each case on a consolidated basis
determined in accordance with GAAP, (D) one time non-recurring non-cash charges
relating to restructuring and other costs in connection with the Transaction not
to exceed $6,000,000 and (E) one time non-recurring cash charges relating to
restructuring and other costs in connection with the Transaction not to exceed
$6,000,000. Except as otherwise expressly provided, the applicable period shall
be the four consecutive fiscal quarters ending as of the date of determination.

      "Consolidated EBITDAR" means, for any period for the Consolidated Group,
the sum of (i) Consolidated EBITDA, plus (ii) rent and lease expense, minus
(iii) cash taxes paid, minus (iv) Consolidated Capital Expenditures, in each
case determined on a consolidated basis in accordance with GAAP.

      "Consolidated Fixed Charge Coverage Ratio" means, as of the last day of
each fiscal quarter, the ratio of Consolidated EBITDAR for the period of four
consecutive fiscal quarters ending as of such day to Consolidated Fixed Charges
for the period of four consecutive fiscal quarters ending as of such day.

      "Consolidated Fixed Charges" means, for any period for the Consolidated
Group, the sum of (a) the cash portion of Consolidated Interest Expense, plus
(b) rent and lease expense, plus (c) current maturities of Consolidated Funded
Debt (including current scheduled reductions in commitments (but only to the
extent the Funded Debt in respect of any such commitment exceeded the reduced
commitment on the date of such reduction), but excluding current maturities of
Revolving Loans and Swingline Loans), plus (d) cash payments made to repurchase
outstanding common stock of the Borrower, plus (e) Deferred Purchase Price
Payments made during the last fiscal quarter of the applicable period, plus (f)
for each Deferred Purchase Price Payment made during the first three fiscal
quarters of the applicable period, an amount equal to the sum of (i) such
Deferred Purchase Price Payment, multiplied by (ii) (A) if such Deferred
Purchase Price Payment was made during the first fiscal quarter of the
applicable period, one-fourth (1/4), (B) if such Deferred Purchase Price Payment
was made during the second fiscal quarter of the applicable period, one-half
(1/2) and (C) if such Deferred Purchase Price Payment was made during the third
fiscal quarter of the applicable period, three-fourths (3/4), in each case on a
consolidated basis determined in accordance with GAAP.

      "Consolidated Funded Debt" means Funded Debt of the Consolidated Group
determined on a consolidated basis in accordance with GAAP.

      "Consolidated Group" means the Borrower and its consolidated subsidiaries,
as determined in accordance with GAAP.

      "Consolidated Interest Expense" means, for any period for the Consolidated
Group, all interest expense, including the amortization of debt discount and
premium, the interest component under Capital Leases and the implied interest
component under Securitization Transactions, in each case on a consolidated
basis determined in accordance with GAAP.

      "Consolidated Inventory" means, as of any date of determination and
without duplication, the lower of the aggregate book value or fair market value
of all finished goods inventory held for sale owned by any member of the
Consolidated Group less appropriate reserves determined, as to any inventory
held for sale only, in accordance with GAAP but excluding in any event (a)
inventory that is (i) not subject to a perfected, first priority Lien in favor
for the Collateral Agent pursuant to the Security Agreement or (ii) subject to
any Lien that is not a Permitted Lien, (b) inventory located outside of the
United States, (c) inventory which is not in good condition or fails to meet
standards for sale or use imposed by

governmental agencies, departments or divisions having regulatory authority over
such goods, (d) inventory that is not either usable or salable, at prices
approximating at least cost of such inventory, in the ordinary course of
business of the members of the Consolidated Group, and inventory that is slow
moving or stale, (e) inventory that is (i) held or stored on premises not owned
by a member of the Consolidated Group (or in transit to such premises) if (A)
the owner of such premises has a Lien (whether by statute, contract or
otherwise) on such inventory that is prior to the Lien in favor of the
Collateral Agent under the Security Agreement, (B) a material amount of
inventory is held or stored on such premises, (C) the Administrative Agent has
reasonably requested (and not subsequently waived) that the owner of such
premises deliver a lien subordination agreement for such premises, and (D)
within forty-five (45) days following such request (or such longer period agreed
to by the Administrative Agent) the owner of such premises has not entered into
a lien subordination agreement in form and substance substantially similar to
those delivered on the Closing Date or otherwise reasonably satisfactory to the
Administrative Agent ("Other Premises Inventory") or (ii) consigned to a
customer of a member of the Consolidated Group and appropriate steps have been
taken under the Uniform Commercial Code as enacted in any applicable
jurisdiction to perfect such member's interest in such inventory ("Consigned
Inventory"), provided that (A) $1,000,000 of Other Premises Inventory and
Consigned Inventory in the aggregate shall not be excluded by this clause (e)
and (B) to the extent excluded by this clause (e), Other Premises Inventory
shall be excluded only to the extent of the outstanding obligations secured by
the Lien of the owner of such premises, and (f) inventory in possession of a
Person other than a member of the Consolidated Group (other than Other Premises
Inventory and Consigned Inventory), except for inventory in transit to a member
of the Consolidated Group.

      "Consolidated Leverage Ratio" means, as of the last day of each fiscal
quarter, the ratio of Consolidated Funded Debt on such day to Consolidated
EBITDA for the period of four consecutive fiscal quarters ending as of such day.

      "Consolidated Net Income" means, for any period for the Consolidated
Group, net income (or loss) determined on a consolidated basis in accordance
with GAAP, but excluding for the purpose of determining the Consolidated
Leverage Ratio and the Consolidated Fixed Charge Coverage Ratio any
extraordinary gains, nonrecurring gains and gains from the write-up of assets
and related tax effects thereon.

      "Consolidated Net Worth" means, as of any date, consolidated stockholders'
equity of the Consolidated Group as determined in accordance with GAAP.

      "Continue", "Continuation", and "Continued" shall refer to the
continuation pursuant to Section 3.2 hereof of a Eurodollar Loan from one
Interest Period to the next Interest Period.

      "Contract Provider" means any Person or any employee, agent or
subcontractor of such Person who provides professional healthcare services under
or pursuant to any contract with any member of the Consolidated Group.

      "Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any material agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.

      "Convert", "Conversion", and "Converted" shall refer to a conversion
pursuant to Section 3.2 or Sections 3.7 through 3.12, inclusive, of a Base Rate
Loan into a Eurodollar Loan.

      "Credit Documents" means, collectively, this Credit Agreement, the Notes,
the LOC Documents, the Collateral Documents, the Administrative Agent's Fee
Letter, and all other related agreements and documents issued or delivered
hereunder or thereunder or pursuant hereto or thereto.

      "Credit Party" means any or all of the Borrower and the Guarantors.

      "Debt Transaction" means, with respect to any member of the Consolidated
Group, any sale, issuance, placement, assumption or guaranty of Funded Debt,
whether or not evidenced by promissory note or other written evidence of
indebtedness, except for Funded Debt permitted to be incurred pursuant to
Section 8.1.

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

      "Defaulting Lender" means, at any time, any Lender that (a) has failed to
make a Loan or purchase a Participation Interest required pursuant to the terms
of this Credit Agreement within one Business Day of when due, (b) other than as
set forth in (a) above, has failed to pay to the Administrative Agent or any
Lender an amount owed by such Lender pursuant to the terms of this Credit
Agreement within one Business Day of when due, unless such amount is subject to
a good faith dispute or (c) has been deemed insolvent or has become subject to a
bankruptcy or insolvency proceeding or with respect to which (or with respect to
any of the assets of which) a receiver, trustee or similar official has been
appointed.

      "Deferred Purchase Price Payments" means all payments on deferred purchase
price obligations incurred in connection with Acquisitions (including, without
limitation, earn-out payments).

      "Dollars" and "$" means dollars in lawful currency of the United States.

      "Domestic Subsidiary" means any Subsidiary that is incorporated or
organized under the laws of any state of the United States or the District of
Columbia.

      "Eligible Assignee" means (a) a Lender; (b) an Affiliate of a Lender; (c)
an Approved Fund; and (d) any other Person (other than a natural Person)
approved by (i) the Administrative Agent, (ii) in the case of an assignment of a
Revolving Commitment, the Issuing Lender and (iii) unless an Event of Default
has occurred and is continuing, the Borrower (each such approval not to be
unreasonably withheld or delayed, it being agreed that the Borrower's
withholding of consent to an assignment that would result in the Borrower having
to pay amounts under Section 3.11 shall be deemed to be reasonable).

      "Eligible Real Property" means, with respect to any member of the
Consolidated Group, including any Person that becomes a member of the
Consolidated Group after the Closing Date as contemplated by Section 7.12, any
real property that (i) is located in the United States or (to the extent deemed
material by the Administrative Agent or the Required Lenders in its or their
sole reasonable discretion) located outside of the United States, (ii) is owned
or (to the extent deemed material by the Administrative Agent or the Required
Lenders in its or their reasonable discretion) leased by such member of the
Consolidated Group and (iii) is not Excluded Property.

      "Environmental Laws" means any and all lawful and applicable federal,
state, local and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders, decrees, permits, concessions, grants, franchises, licenses,
agreements and other governmental restrictions relating to the environment or to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern into the environment including, without limitation,
ambient air, surface water, ground water, or land, or otherwise

relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of Materials of Environmental Concern.

      "Equity Transaction" means, with respect to any member of the Consolidated
Group, any issuance or sale of shares of its Capital Stock, other than an
issuance (i) to a member of the Consolidated Group, (ii) in connection with a
conversion of debt securities to equity, (iii) in connection with exercise by a
present or former employee, officer or director under a stock incentive plan,
stock option plan or other equity-based compensation plan or arrangement and
(iv) of Capital Stock of the Borrower in connection with a Permitted
Acquisition.

      "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto, as interpreted by the rules and
regulations thereunder, all as the same may be in effect from time to time.
References to sections of ERISA shall be construed also to refer to any
successor sections.

      "ERISA Affiliate" means an entity that is under common control with any
member of the Consolidated Group within the meaning of Section 4001(a)(14) of
ERISA, or is a member of a group that includes any member of the Consolidated
Group and that is treated as a single employer under Sections 414(b) or (c) of
the Internal Revenue Code.

      "ERISA Event" means (i) with respect to any Plan, the occurrence of a
Reportable Event or the substantial cessation of operations (within the meaning
of Section 4062(e) of ERISA); (ii) the withdrawal by any member of the
Consolidated Group or any ERISA Affiliate from a Multiple Employer Plan during a
plan year in which it was a substantial employer (as such term is defined in
Section 4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan;
(iii) the distribution of a notice of intent to terminate or the actual
termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA; (iv) the
institution of proceedings to terminate or the actual termination of a Plan by
the PBGC under Section 4042 of ERISA; (v) any event or condition that might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan; (vi) the complete or partial
withdrawal of any member of the Consolidated Group or any ERISA Affiliate from a
Multiemployer Plan; (vii) the conditions for imposition of a lien under Section
302(f) of ERISA exist with respect to any Plan; or (viii) the adoption of an
amendment to any Plan requiring the provision of security to such Plan pursuant
to Section 307 of ERISA.

      "Eurodollar Loan" means any Loan bearing interest at a rate determined by
reference to the Eurodollar Rate.

      "Eurodollar Rate" means, for any Eurodollar Loan for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of one percent (0.01%) determined by the Administrative Agent to be equal
to the quotient obtained by dividing (a) the Interbank Offered Rate for such
Eurodollar Loan for such Interest Period by (b) one minus the Eurodollar Reserve
Requirement for such Eurodollar Loan for such Interest Period.

      "Eurodollar Reserve Requirement" means, at any time, the maximum rate at
which reserves (including, without limitation, any marginal, special,
supplemental, or emergency reserves) are required to be maintained under
regulations issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) by member banks of the Federal Reserve System
against "Eurocurrency liabilities" (as such term is used in Regulation D).
Without limiting the effect of the foregoing, the Eurodollar Reserve Requirement
shall reflect any other reserves required to be maintained by such member banks
with respect to (i) any category of liabilities that includes deposits by
reference to which the Eurodollar Rate is to be determined, or (ii) any category
of extensions of credit or other assets that include Eurodollar Loans. The

Eurodollar Rate shall be adjusted automatically on and as of the effective date
of any change in the Eurodollar Reserve Requirement.

      "Event of Default" shall have the meaning provided in Section 9.1.

      "Excess Cash Flow" means, for any period for the Consolidated Group, an
amount equal to (a) Consolidated EBITDA minus (b) Consolidated Capital
Expenditures paid in cash minus (c) the cash portion of Consolidated Interest
Expense minus (d) cash taxes paid minus (e) current maturities of Consolidated
Funded Debt minus (f) the amount of any voluntary prepayments made on the
Obligations during such fiscal year, minus (g) cash consideration paid in
connection with Permitted Acquisitions, plus (h) Net Changes in Working Capital,
in each case on a consolidated basis determined in accordance with GAAP.

      "Excluded Property" means, with respect to any member of the Consolidated
Group, including any Person that becomes a member of the Consolidated Group
after the Closing Date, any Property of such member of the Consolidated Group
that, subject to the terms of Section 8.11 and Section 8.13, is subject to a
Lien of the type described in clause (viii) of the definition of "Permitted
Liens" pursuant to documents that prohibit such member of the Consolidated Group
from granting any other Liens in such Property.

      "Excluded Subsidiary" means Children's Hemophilia Services, a California
partnership, unless and until such time as such Subsidiary (i) accounts for more
than five percent (5%) of consolidated revenues for the Consolidated Group for
any period of four consecutive fiscal quarters, (ii) constitutes more than five
percent (5%) of consolidated assets for the Consolidated Group as of the end of
any fiscal quarter or (iii) is a Wholly Owned Subsidiary.

      "Exclusion Event" means an event or related events resulting in the
exclusion of one or more members of the Consolidated Group from participation in
any Medical Reimbursement Program; provided, however, that "Exclusion Event"
shall not mean an event or related events resulting in any such exclusion of an
Immaterial Subsidiary.

      "Existing Credit Agreement" shall have the meaning provided in the
recitals hereof.

      "Extension of Credit" means, as to any Lender, the making of, or
participation in, a Loan by such Lender (including Continuations and Conversions
thereof) or the issuance or extension of, or participation in, a Letter of
Credit by such Lender.

      "Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of one percent (0.01%)) equal to
the weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers on such
day, as published by the Federal Reserve Bank on the Business Day next
succeeding such day; provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (b) if no such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average rate charged to Bank of
America on such day on such transactions as determined by the Administrative
Agent.

      "Fees" means all fees payable pursuant to Section 3.5.

      "Foreign Subsidiary" means a Subsidiary that is not a Domestic Subsidiary.

      "Fund" means any Person (other than a natural Person) that is (or will be)
engaged in making, purchasing, holding or otherwise investing in commercial
loans and similar extensions of credit in the ordinary course of its business.

      "Funded Debt" means, with respect to any Person, without duplication, all
(i) obligations for borrowed money, (ii) obligations evidenced by bonds
debentures, notes or similar instruments or upon which interest payments are
customarily made, (iii) purchase money indebtedness (including, for purposes
hereof, indebtedness and obligations in respect of conditional sales and title
retention agreements relating to property purchased (other than customary
reservation or title retention arrangements under agreements entered into in the
ordinary course of business with suppliers), (iv) the deferred purchase price
of property or services acquired that would constitute, and be accounted for as,
a liability under GAAP, (v) the attributed principal amount of obligations owing
under Capital Leases, (vi) the maximum amount available to be drawn under
standby letters of credit and bankers' acceptances issued or created for such
Person's account, (vii) the attributed principal amount of Securitization
Transactions, (viii) the attributed principal amount of obligations owing under
Synthetic Leases, (ix) all preferred stock or comparable equity interests
providing for mandatory redemption, sinking fund or other like payments, (x)
Support Obligations of such Person in respect of Funded Debt of another Person,
(xi) Funded Debt of another Person secured by a Lien on any of such first
Person's Property, whether or not such Funded Debt has been assumed, provided,
however, for purposes hereof, the amount of such Funded Debt shall be limited to
the lesser of the amount of Funded Debt as to which there is recourse or to the
fair market value of the Property that is the subject of such Lien, and (xii)
the Funded Debt of any partnership or joint venture or other similar entity in
which such Person is a general partner or joint venturer and, as such, has
personal liability for such Funded Debt, but only to the extent there is
recourse to such Person for payment thereof. Notwithstanding anything to the
contrary contained in this definition of elsewhere in this Credit Agreement or
any other Credit Document, in no event shall the term "Funded Debt" be deemed to
include any accounts payable or other trade debt incurred in the ordinary course
of business and due within six months of the incurrence thereof.

      "GAAP" means generally accepted accounting principles in the United States
applied on a consistent basis and subject to the terms of Section 1.3.

      "Genzyme Intercreditor Agreement" means an intercreditor agreement among
Genzyme Corporation, Nova Factor, Inc. and the Collateral Agent in substantially
the form of Exhibit 1.1 attached hereto.

      "Genzyme Inventory" means all inventory of the Borrower and its
Subsidiaries consisting of the prescription drug Ceredase and the prescription
drug Cerezyme.

      "Governmental Authority" means any federal, state, local or foreign court
or governmental agency, authority, instrumentality or regulatory body.

      "Governmental Reimbursement Program Cost" means with respect to and
payable by the Borrower and its Subsidiaries the sum of:

            (i)   all amounts (including punitive and other similar amounts)
      agreed to be paid or payable (A) in settlement of claims or (B) as a
      result of a final, non-appealable judgment, award or similar order, in
      each case, relating to participation in Medical Reimbursement Programs;

            (ii)  all final, non-appealable fines, penalties, forfeitures or
      other amounts rendered pursuant to criminal indictments or other criminal
      proceedings relating to participation in Medical Reimbursement Programs;
      and

            (iii) the amount of final, non-appealable recovery, damages, awards,
      penalties, forfeitures or similar amounts rendered in any litigation,
      suit, arbitration, investigation or other legal or administrative
      proceeding of any kind relating to participation in Medical Reimbursement
      Programs.

      "Guaranteed Obligations" means, without duplication, (i) all of the
obligations of the Borrower to the Lenders (including the Issuing Lender and the
Swingline Lender), the Administrative Agent and the Collateral Agent, whenever
arising, under this Credit Agreement, the Notes, the Collateral Documents or any
of the other Credit Documents (including, without limitation, any interest
accruing after the occurrence of a Bankruptcy Event with respect to any Credit
Party, regardless of whether such interest is an allowed claim under the
Bankruptcy Code) and (ii) all liabilities and obligations owing from any Credit
Party to any Lender, or any Affiliate of a Lender, whenever arising, under any
Hedging Agreement relating to the Obligations to the extent permitted hereunder.

      "Guarantor" means each Person identified as a "Guarantor" on the signature
pages hereto and each other Person that joins as a Guarantor pursuant to Section
7.11, together with their successors and permitted assigns.

      "HCFA" means the United States Health Care Financing Administration and
any successor thereof, including the Centers for Medicare and Medicaid Services.

      "Hedging Agreements" means any interest rate protection agreement or
foreign currency exchange agreement.

      "HHS" means the United States Department of Health and Human Services and
any successor thereof.

      "Immaterial Subsidiary" means any Domestic Subsidiary that owns Property
with an aggregate value of less than $100,000.

      "Indebtedness" means, with respect to any Person, without duplication, all
(i) Funded Debt of such Person, (ii) obligations under take-or-pay or similar
arrangements or under commodities agreements, (iii) obligations under Hedging
Agreements, (iv) Support Obligations of such Person in respect of Indebtedness
of another Person, (v) Indebtedness of another Person secured by a Lien on any
of such first Person's Property, whether or not such Indebtedness has been
assumed, provided, however, for purposes hereof, the amount of such Indebtedness
shall be limited to the lesser of the amount of Indebtedness as to which there
is recourse or to the fair market value of the Property that is the subject of
such Lien and (vi) Indebtedness of any partnership or joint venture or other
similar entity in which such Person is a general partner or joint venturer and,
as such, has personal liability for such Indebtedness, but only to the extent
there is recourse to such Person for payment thereof.

      "Indemnified Liabilities" shall have the meaning provided in Section 11.5.

      "Indemnitees" shall have the meaning provided in Section 11.5.

      "Interbank Offered Rate" means, for any Eurodollar Loan for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100th of one percent (0.01%)) in each case determined by the
Administrative Agent to be equal to:

            (a)   the offered rate that appears on the Dow Jones Telerate Screen
      Page 3750 (or any successor page) that displays an average British Bankers
      Association Interest Settlement Rate for

      deposits in Dollars (for delivery on the first day of the applicable
      Interest Period) for a term equivalent to the applicable Interest Period
      at approximately 11:00 A.M. (London, England time) two Business Days prior
      to the first day of the applicable Interest Period; or

            (b)   if for any reason the foregoing rate in clause (a) is
      unavailable or undeterminable, the offered rate on such other page or
      other service that displays an average British Bankers Association
      Interest Settlement Rate for deposits in Dollars (for delivery on the
      first day of the applicable Interest Period) for a term equivalent to the
      applicable Interest Period at approximately 11:00 A.M. (London, England
      time) two Business Days prior to the first day of the applicable Interest
      Period; or

            (c)   if for any reason the foregoing rates in clauses (a) and (b)
      are unavailable or undeterminable, the rate of interest at which deposits
      in Dollars for delivery on the first day of the applicable Interest Period
      in same day funds in the approximate amount of the applicable Eurodollar
      Loan for a term equivalent to the applicable Interest Period would be
      offered by the London branch of Bank of America to major banks in the
      offshore Dollar market at approximately 11:00 A.M. (London, England time)
      two Business Days prior to the first day of the applicable Interest
      Period.

      "Interest Payment Date" means (i) as to any Base Rate Loan and any
Swingline Loan, the last day of each March, June, September and December, and
the Termination Date, and (ii) as to any Eurodollar Loan, the last day of each
Interest Period for such Loan, the date of repayment of principal of such Loan
and the Termination Date, and in addition where the applicable Interest Period
is more than three months, then also on the date three months from the beginning
of the Interest Period, and each three months thereafter. If an Interest Payment
Date falls on a date that is not a Business Day, such Interest Payment Date
shall be deemed to be the next succeeding Business Day.

      "Interest Period" means a period of one, two, three or six months
duration, as the Borrower may elect, commencing on the date of the borrowing
(including Conversions, Continuations and renewals); provided, however, (i) if
any Interest Period would end on a day that is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day (except where the
next succeeding Business Day falls in the next succeeding calendar month, then
on the next preceding Business Day), (ii) no Interest Period shall extend beyond
the Termination Date, (iii) where an Interest Period begins on a day for which
there is no numerically corresponding day in the calendar month in which the
Interest Period is to end, such Interest Period shall end on the last day of
such calendar month, (iv) with respect to Eurodollar Loans that are Tranche A
Term Loans, no Interest Period shall extend beyond any principal installment
payment date for Tranche A Term Loans unless the aggregate amount of Tranche A
Term Loans comprised of Eurodollar Loans with Interest Periods expiring prior to
such principal installment payment together with the aggregate amount of Tranche
A Term Loans comprised of Base Rate loans is at least equal to the amount of the
principal installment payment due on such principal installment payment date and
(v) with respect to Eurodollar Loans that are Tranche B Term Loans, no Interest
Period shall extend beyond any principal installment payment date for Tranche B
Term Loans unless the aggregate amount of Tranche B Term Loans comprised of
Eurodollar Loans with Interest Periods expiring prior to such principal
installment payment together with the aggregate amount of Tranche B Term Loans
comprised of Base Rate loans is at least equal to the amount of the principal
installment payment due on such principal installment payment date.

      "Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, and any successor statute thereto, as interpreted by the rules and
regulations issued thereunder, in each case as in effect from time to time.
References to sections of the Internal Revenue Code shall be construed also to
refer to any successor sections.

      "Investment" in any Person means (i) the acquisition (whether for cash,
property, services, assumption of Indebtedness, securities or otherwise) of
Capital Stock, bonds, notes, debentures, partnership, joint ventures or other
ownership interests or other securities of such Person, (ii) any deposit with,
or advance, loan or other extension of credit to, such Person (other than
deposits made in connection with the purchase of equipment or other assets in
the ordinary course of business and deposits with financial institutions in the
ordinary course of business) or (iii) any other capital contribution to or
investment in such Person, including, without limitation, any Support
Obligations (including any support for a letter of credit issued on behalf of
such Person) incurred for the benefit of such Person, but excluding any
Restricted Payment to such Person.

      "Issuing Lender" means Bank of America and any successor in its such
capacity.

      "Issuing Lender Fee" shall have the meaning provided in Section
3.5(b)(ii).

      "Joinder Agreement" means a joinder agreement substantially in the form of
Exhibit 7.11 hereto executed and delivered by a Subsidiary in accordance with
the provisions of Section 7.11.

      "Joint Venture" means any joint venture between the Borrower or any of its
Subsidiaries and any other Person, whether a corporation, partnership, limited
liability company or other entity; provided, however that the term "Joint
Venture" shall not include any Subsidiary of the Borrower.

      "Lenders" means each of the Persons identified as a "Lender" on the
signature pages hereto, and their successors and assigns.

      "Letter of Credit" means any standby letter of credit issued by the
Issuing Lender for the account of the Borrower in accordance with the terms of
Section 2.1(b).

      "Letter of Credit Fee" shall have the meaning provided in Section
3.5(b)(i).

      "Licenses" means all licenses, permits and other grants of authority
obtained or required to be obtained from any Governmental Authorities in
connection with the management or operation of the business of the members of
the Consolidated Group or the ownership, lease, license or use of any Property
of the members of the Consolidated Group.

      "Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, security interest, encumbrance, lien (statutory or otherwise),
preference, priority or charge of any kind (including any agreement to give any
of the foregoing, any conditional sale or other title retention agreement and
any lease in the nature thereof).

      "Loan" means any the Revolving Loans, Swingline Loans and Term Loans, and
the Base Rate Loans, Eurodollar Loans and Quoted Rate Swingline Loans comprising
the Revolving Loans, Swingline Loans and Term Loans.

      "LOC Commitment" means, with respect to the Issuing Lender, the commitment
of the Issuing Lender to issue, and to honor payment obligations under, Letters
of Credit in an aggregate principal amount outstanding up to the LOC Committed
Amount and, with respect to each Revolving Lender, the commitment of such
Revolving Lender to purchase Participation Interests in the LOC Obligations in
an aggregate amount up to such Revolving Lender's Revolving Commitment
Percentage of the LOC Committed Amount.

      "LOC Committed Amount" shall have the meaning provided in Section 2.1(b).

      "LOC Documents" means, with respect to any Letter of Credit, such Letter
of Credit, any amendments thereto, any documents delivered in connection
therewith, any application therefor, and any agreements, instruments, guarantees
or other documents (whether general in application or applicable only to such
Letter of Credit) governing or providing for (i) the rights and obligations of
the parties concerned or at risk or (ii) any collateral security for such
obligations.

      "LOC Obligations" means, at any time, the sum of (i) the maximum amount
that is, or at any time thereafter may become, available to be drawn under
Letters of Credit then outstanding, assuming compliance with all requirements
for drawings referred to in such Letters of Credit plus (ii) the aggregate
amount of all drawings under Letters of Credit honored by the Issuing Lender but
not yet reimbursed.

      "Material Adverse Effect" means a material adverse effect on (i) the
financial condition, operations, business, assets, liabilities or prospects of
the Consolidated Group taken as a whole, (ii) the ability of any member of the
Consolidated Group to perform any material obligation under any Credit Document
to which it is a party or (iii) the material rights and remedies of the
Administrative Agent and the Lenders under the Credit Documents.

      "Materials of Environmental Concern" means any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Laws, including, without limitation, asbestos,
polychlorinated biphenyls and urea-formaldehyde insulation.

      "Medicaid" means that means-tested entitlement program under Title XIX,
P.L. 89-87, of the Social Security Act that provides federal grants to states
for medical assistance based on specific eligibility criteria, as set forth at
Section 1396, et seq. of Title 42 of the United Sates Code, as amended.

      "Medicaid Regulations" means, collectively, (i) all federal statutes
(whether set forth in Title XIX of the Social Security Act or elsewhere)
affecting the medical assistance program established by Title XIX of the Social
Security Act and any statutes succeeding thereto; (ii) all applicable provisions
of all federal rules, regulations, manuals and orders of all Governmental
Authorities promulgated pursuant to or in connection with the statutes described
in clause (i) above and all federal administrative, reimbursement and other
guidelines of all Governmental Authorities having the force of law promulgated
pursuant to or in connection with the statutes described in clause (i) above;
(iii) all state statutes and plans for medical assistance enacted in connection
with the statutes and provisions described in clauses (i) and (ii) above; and
(iv) all applicable provisions of all rules, regulations, manuals and orders of
all Governmental Authorities promulgated pursuant to or in connection with the
statutes described in clause (iii) above and all state administrative,
reimbursement and other guidelines of all Governmental Authorities having the
force of law promulgated pursuant to or in connection with the statutes
described in clause (ii) above, in each case as may be amended, supplemented or
otherwise modified from time to time.

      "Medical Reimbursement Programs" means a collective reference to the
Medicare, Medicaid and CHAMPUS programs and any other health care program
operated by or financed in whole or in part by any foreign or domestic federal,
state or local government.

      "Medicare" means that government-sponsored entitlement program under Title
XVIII, P.L. 89-87, of the Social Security Act that provides for a health
insurance system for eligible elderly and disabled individuals, as set forth at
Section 1395, et seq. of Title 42 of the United States Code, as amended.

      "Medicare Regulations" means, collectively, all federal statutes (whether
set forth in Title XVIII of the Social Security Act or elsewhere) affecting the
health insurance program for the aged and disabled

established by Title XVIII of the Social Security Act and any statutes
succeeding thereto; together with all applicable provisions of all rules,
regulations, manuals and orders and administrative, reimbursement and other
guidelines having the force of law of all Governmental Authorities (including,
without limitation, HCFA, HHS, OIG, or any person succeeding to the functions of
any of the foregoing) promulgated pursuant to or in connection with any of the
foregoing having the force of law, as each may be amended, supplemented or
otherwise modified from time to time.

      "Moody's" means Moody's Investors Service, Inc., or any successor or
assignee of the business of such company in the business of rating securities.

      "Mortgages" means any mortgages, deeds of trust, security deeds or like
instruments given to the Administrative Agent, for the ratable benefit of the
Lenders, to secure the obligations of the Credit Parties under the Credit
Documents, as such mortgages, deeds of trust, security deeds or like instruments
may be amended and modified from time to time.

      "Multiemployer Plan" means a Plan that is a "multiemployer plan" as
defined in Section 3(37) or 4001(a)(3) of ERISA.

      "Multiple Employer Plan" means a Plan (other than a Multiemployer Plan) to
which any member of the Consolidated Group or any ERISA Affiliate and at least
one employer other than the members of the Consolidated Group or any ERISA
Affiliate are contributing sponsors.

      "Net Cash Proceeds" means the aggregate proceeds paid in cash or Cash
Equivalents received by any member of the Consolidated Group in connection with
any Asset Disposition, Equity Transaction or Debt Transaction, net of (a) direct
costs (including, without limitation, legal, accounting and investment banking
fees, and sales commissions), (b) taxes paid or payable as a result thereof and
(c) in the case of an Asset Disposition, the aggregate amount of Indebtedness
secured by any of the Property that is the subject of such Asset Disposition and
that is required by the terms thereof to be prepaid in connection with such
Asset Disposition; it being understood that "Net Cash Proceeds" shall include,
without limitation, any cash or Cash Equivalents received upon the sale or other
disposition of any non-cash consideration received by any such member of the
Consolidated Group in any Asset Disposition, Equity Transaction or Debt
Transaction.

      "Net Changes in Working Capital" means, for any period for the
Consolidated Group, an amount (positive or negative) equal to the sum of (a) the
net amount of decreases (minus the amount of increases) in accounts receivable
and inventory and (b) the amount of increases (minus the amount of decreases) in
accounts payable, in each case on a consolidated basis determined in accordance
with GAAP and as set forth in the audited annual consolidated financial
statements of the Consolidated Group delivered to the Administrative Agent
pursuant to Section 7.1(a).

      "Note" means any of the Revolving Notes, the Tranche A Term Notes and the
Tranche B Term Notes.

      "Notice of Continuation/Conversion" means the written notice of
Continuation or Conversion in substantially the form of Exhibit 3.2, as required
by Section 3.2.

      "Notice of Request of Letter of Credit" means a written notice (or
telephonic notice promptly confirmed in writing) in substantially the form of
Exhibit 2.2(a)(iii) that specifies (A) that a Letter of Credit is requested, (B)
the date of the requested issuance or extension, (C) the type, amount, expiry
date and terms on which the Letter of Credit is to be issued or extended, and
(D) the beneficiary.

      "Notice of Revolving Loan Borrowing" means a written notice (or telephonic
notice promptly confirmed in writing) in substantially the form of Exhibit
2.2(a)(i) that specifies (A) that a Revolving Loan is requested, (B) the date of
the requested borrowing (which shall be a Business Day), (C) the aggregate
principal amount to be borrowed, and (D) whether the borrowing shall be
comprised of Base Rate Loans, Eurodollar Loans or a combination thereof, and if
Eurodollar Loans are requested, the Interest Period(s) therefor.

      "Notice of Swingline Loan Borrowing" means a written notice (or telephonic
notice promptly confirmed in writing) in substantially the form of Exhibit
2.2(a)(iii) that specifies (A) that a Swingline Loan is requested, (B) the date
of the requested borrowing (which shall be a Business Day), (C) the aggregate
principal amount to be borrowed, and (D) whether the borrowing shall be
comprised of Base Rate Loans, Quoted Rate Swingline Loans or a combination
thereof.

      "Obligations" means the Revolving Loans, LOC Obligations, Swingline Loans
and Term Loans.

      "OIG" means the Office of Inspector General of HHS and any successor
thereof.

      "Operating Lease" means, as applied to any Person, any lease (including,
without limitation, leases that may be terminated by the lessee at any time) of
any Property by such Person as lessee that is not a Capital Lease.

      "Other Taxes" shall have the meaning provided in Section 3.11.

      "Participation Interest" means the purchase by a Lender of a participation
in LOC Obligations as provided in Section 2.6(b), in Swingline Loans as provided
in Section 2.7 and in Loans as provided in Section 3.14.

      "PBGC" means the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA and any successor thereof.

      "Permitted Acquisition" means any Acquisition by a member of the
Consolidated Group, provided that (a) the consideration paid is not greater than
the fair market value of the Property acquired; (b) the Property acquired (or
the Property of the Person acquired) in such Acquisition shall be used or useful
in the same or similar line of business as the members of the Consolidated Group
on the Closing Date; (c) all Property to be acquired in connection with such
Acquisition shall be located in the United States of America; (d) in the case of
an Acquisition of the Capital Stock of another Person, the board of directors
(or other comparable governing body) of such other Person shall have duly
approved such Acquisition; (e) no Default or Event of Default shall exist
immediately after giving effect to such Acquisition; (f) the representations and
warranties made by the Credit Parties in any Credit Document shall be true and
correct in all material respects at and as if made as of the date of such
Acquisition (after giving effect thereto) except to the extent such
representations and warranties expressly relate to an earlier date; (g) the
Borrower shall have delivered to the Administrative Agent a compliance
certificate signed by a Responsible Officer demonstrating compliance with the
financial covenants in Section 7.10 for the most recent period of four
consecutive fiscal quarters after giving effect to such Acquisition during such
period on a Pro Forma Basis and reaffirming that the representations and
warranties made hereunder are true and correct in all material respects as of
such date; (h) the cash consideration (including, for purposes hereof,
Indebtedness assumed but excluding Deferred Purchase Price Payments) paid in
connection with any Acquisition (or series of related Acquisitions) shall not
exceed $50,000,000; and (i) the cash consideration (including, for purposes
hereof, Indebtedness assumed but excluding Deferred Purchase Price Payments)
paid in connection with all Acquisitions shall not exceed $100,000,000 in any
twelve-month period.

      "Permitted Investments" means Investments that are (i) cash and Cash
Equivalents; (ii) accounts receivable created, acquired or made in the ordinary
course of business and payable or dischargeable in accordance with customary
trade terms; (iii) Investments consisting of Capital Stock, obligations,
securities or other Property received in settlement of accounts receivable
(created in the ordinary course of business) from bankrupt obligors; (iv)
Investments existing on the Closing Date and set forth in Schedule 8.6; (v)
advances or loans to directors, officers and employees that do not exceed
$3,000,000 in the aggregate at any one time outstanding; (vi) Investments by
members of the Consolidated Group in and to Subsidiaries; (vii) initial capital
Investments in Joint Ventures made after the Closing Date, provided that the
aggregate initial capital Investment in any Joint Venture shall not exceed
$500,000 and the aggregate initial capital Investments in all Joint Ventures
shall not exceed $2,500,000 in any fiscal year; (viii) Investments in Capital
Stock received as consideration for an Asset Disposition; (ix) Investments that
constitute Permitted Acquisitions and (x) Investments of a nature not
contemplated in the foregoing subsections in an amount not to exceed $5,000,000
in the aggregate at any time outstanding.

      "Permitted Liens" means:

            (i)     Liens in favor of the Collateral Agent to secure the
      obligations of the Credit Parties under the Credit Documents;

            (ii)    Liens in favor of a Lender or an Affiliate of a Lender
      pursuant to a Hedging Agreement permitted hereunder, but only (A) to the
      extent such Liens secure obligations under such agreements permitted under
      Section 8.1, (B) to the extent such Liens are on the same collateral as to
      which the Lenders hereunder also have a Lien, and (C) so long as the
      obligations under such Hedging Agreement and the loans and obligations
      hereunder and under the other Credit Documents shall share pari passu in
      the collateral subject to such Liens;

            (iii)   Liens (other than Liens created or imposed under ERISA) for
      taxes, assessments or governmental charges or levies not yet due or Liens
      for taxes, assessments, charges, levies and claims not required to be paid
      or discharged under Section 7.5 hereof;

            (iv)    statutory Liens of landlords and Liens of carriers,
      warehousemen, mechanics, materialmen and suppliers and other Liens imposed
      by law or pursuant to customary reservations or retentions of title
      arising in the ordinary course of business, provided that such Liens
      secure only amounts not yet due and payable or, if due and payable, are
      unfiled and no other action has been taken to enforce the same or are
      being contested in good faith by appropriate proceedings for which
      adequate reserves determined in accordance with GAAP have been established
      (and as to which the Property subject to any such Lien is not yet subject
      to foreclosure, sale or loss on account thereof);

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

            (vi)    Liens in connection with attachments or judgments (including
      judgment or appeal bonds) provided that the judgments secured shall,
      within thirty (30) days after the entry thereof, have been discharged or
      execution thereof stayed pending appeal, or shall have been discharged
      within thirty (30) days after the expiration of any such stay;

            (vii)   easements, rights-of-way, covenants, restrictions (including
      zoning restrictions), minor defects or irregularities in title and other
      similar charges or encumbrances not, in any material respect, impairing
      the use of the encumbered Property for its intended purposes;

            (viii)  Liens on Property of any Person securing Indebtedness
      (including Capital Leases and Synthetic Leases) of such Person permitted
      under Section 8.1(c), provided that any such Lien attaches only to the
      Property financed or leased and such Lien attaches concurrently with or
      within ninety (90) days after the acquisition thereof;

            (ix)    leases or subleases granted to others not interfering in any
      material respect with the business of any member of the Consolidated
      Group;

            (x)     any interest or title of a lessor under, and Liens arising
      from UCC financing statements (or equivalent filings, registrations or
      agreements in foreign jurisdictions) relating to, leases permitted by this
      Credit Agreement;

            (xi)    Liens in favor of customs and revenue authorities arising as
      a matter of law to secure payment of customs duties in connection with the
      importation of goods;

            (xii)   Liens deemed to exist in connection with Investments in
      repurchase agreements that constitute Permitted Investments;

            (xiii)  normal and customary rights of setoff upon deposits of cash
      in favor of banks or other depository institutions;

            (xiv)   Liens of a collection bank arising under Section 4-210 of
      the Uniform Commercial Code on items in the course of collection;

            (xv)    (A) Liens in favor of Genzyme Corporation on all Genzyme
      Inventory which Liens are prior to the Liens in favor of the Collateral
      Agent, for the benefit of the Lenders, in the Genzyme Inventory pursuant
      to the terms of the Genzyme Intercreditor Agreement and (B) Liens in favor
      of Genzyme Corporation on all accounts receivable arising from the sale of
      Genzyme Inventory which Liens are subject to the terms of the Genzyme
      Intercreditor Agreement;

            (xvi)   Liens in favor of Biogen US Corporation on all inventory of
      the Borrower and its Subsidiaries consisting of the prescription drug
      AVONEX, provided that such Liens are subordinated to the Liens in favor of
      the Collateral Agent to secure the obligations of the Credit Parties under
      the Credit Documents on terms and conditions reasonably satisfactory to
      the Collateral Agent;

            (xvii)  Liens created or deemed to exist by the establishment of
      trusts for the purpose of satisfying Governmental Reimbursement Program
      Costs; provided that the Borrower, in each case, shall have established
      adequate reserves for such claims or actions; and

            (xviii) Liens existing as of the Closing Date and set forth on
      Schedule 6.8, provided that the scope of such Lien shall not be extended
      to or cover any Property other than the Property subject thereto on the
      Closing Date (and renewals, replacements and substitutions thereof and
      proceeds thereof).

      "Person" means any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other enterprise
(whether or not incorporated) or any Governmental Authority.

      "Plan" means any employee benefit plan (as defined in Section 3(3) of
ERISA) that is covered by ERISA and with respect to which any member of the
Consolidated Group or any ERISA Affiliate is (or, if such plan were terminated
at such time, would under Section 4069 of ERISA be deemed to be) an "employer"
within the meaning of Section 3(5) of ERISA.

      "Pledge Agreement" means the pledge agreement dated as of the Closing Date
given by the Credit Parties to the Collateral Agent to secure the obligations of
the Credit Parties under the Credit Documents, as such pledge agreement may be
amended and modified from time to time.

      "Prime Rate" means, for any day, the rate per annum in effect for such day
as publicly announced from time to time by Bank of America as its "prime rate."
Such rate is a rate set by Bank of America based upon various factors including
Bank of America's costs and desired return, general economic conditions and
other factors, and is used as a reference point for pricing some loans, which
may be priced at, above, or below such announced rate. Any change in such rate
announced by Bank of America shall take effect at the opening of business on the
day specified in the public announcement of such change.

      "Pro Forma Basis" means that, for purposes of calculating the financial
covenants set forth in Section 7.10 (including, without limitation, for purposes
of determining the applicable pricing level under the definition of "Applicable
Percentage"), any Acquisition, Asset Disposition or Restricted Payment
consummated during the applicable period shall be deemed to have occurred as of
the first day of such period. In furtherance of the foregoing, (a) in the case
of an Asset Disposition, (i) income statement items (whether positive or
negative) attributable to the property, entities or business units that are the
subject of such Asset Disposition shall be excluded to the extent relating to
any period prior to the date of such Asset Disposition and (ii) Indebtedness
paid or retired in connection with such Asset Disposition shall be deemed to
have been paid and retired as of the first day of the applicable period, and (b)
in the case of an Acquisition, income statement items (whether positive or
negative) attributable to the property, entities or business units that are the
subject of such Acquisition shall be included to the extent relating to any
period prior to the date of such Acquisition (provided that any Funded Debt
incurred to finance such Acquisition shall be deemed to have been incurred on
the date of such Acquisition).

      "Pro Forma Statements" shall have the meaning provided in Section
5.1(d)(i).

      "Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.

      "Quoted Rate" means, with respect to a Quoted Rate Swingline Loan, the
fixed or floating percentage rate per annum, if any, offered by the Swingline
Lender and accepted by the Borrower in accordance with the provisions hereof.

      "Quoted Rate Swingline Loan" means a Swingline Loan bearing interest at
the Quoted Rate.

      "Rate Determination Date" shall have the meaning provided in the
definition of "Applicable Percentage".

      "Recovery Event" means the receipt by any member of the Consolidated Group
of any cash insurance proceeds, condemnation award or indemnification payments
from third parties by reason of theft, loss, physical destruction or damage,
taking or similar event with respect to any Property.

      "Register" shall have the meaning provided in Section 11.3(c).

      "Regulation D, O, T, U, or X" means Regulation D, O, T, U or X,
respectively, of the Board of Governors of the Federal Reserve System as from
time to time in effect and any successor to all or a portion thereof.

      "Reportable Event" means any of the events set forth in Section 4043(c) of
ERISA, other than those events as to which the notice requirement has been
waived by regulation.

      "Required Lenders" means, at any time, Lenders whose aggregate Credit
Exposure (as hereinafter defined) constitutes more than fifty percent (50%) of
the Credit Exposure of all the Lenders at such time; provided, however, that the
Credit Exposure of a Defaulting Lender shall be excluded for purposes of making
a determination of Required Lenders. As used in the preceding sentence, "Credit
Exposure" means, for any Lender, (a) at any time prior to the termination of the
Commitments, the sum of (i) such Lender's Revolving Committed Amount plus (ii)
the outstanding principal amount of the Tranche A Term Loan made by such Lender
plus (iii) the outstanding principal amount of the Tranche B Term Loan made by
such Lender, and (b) at any time after the termination of the Commitments, the
aggregate principal amount of Obligations held by such Lender (taking into
account in each case Participation Interests or obligations to participate
therein).

      "Requirement of Law" means, as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule, regulation or ordinance (including, without
limitation, Environmental Laws) or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or binding upon such
Person or to which any of its material Property is subject.

      "Responsible Officer" of any Person means any of the chief executive
officer, chief operating officer, president, senior vice president or chief
financial officer of such Person.

      "Restricted Payment" means (i) any dividend or other payment or
distribution, direct or indirect, on account of any shares of any class of
Capital Stock of any member of the Consolidated Group, now or hereafter
outstanding (including, without limitation, any payment in connection with any
dissolution, merger, consolidation or disposition involving any member of the
Consolidated Group), or to the holders, in their capacity as such, of any shares
of any class of Capital Stock of any member of the Consolidated Group, now or
hereafter outstanding (other than dividends or distributions payable in the same
class of Capital Stock of the applicable Person or dividends or distributions
payable to any Credit Party (directly or indirectly through Subsidiaries)), (ii)
any redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of Capital
Stock of any member of the Consolidated Group, now or hereafter outstanding, and
(iii) any payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of Capital
Stock of any member of the Consolidated Group, now or hereafter outstanding. The
term "Restricted Payment" shall in no event include any distribution of Capital
Stock of the Borrower or rights in respect of Capital Stock of the Borrower made
pursuant to the terms of, or otherwise in connection with or relating to, a
customary "poison pill" or similar shareholder rights plan, as such plan may be
amended, restated, supplemented or otherwise modified from time to time.

      "Revolving Commitment" means, with respect to each Revolving Lender, the
commitment of such Revolving Lender to make Revolving Loans in an aggregate
principal amount up to such Revolving Lender's Revolving Commitment Percentage
of the Aggregate Revolving Committed Amount.

      "Revolving Commitment Percentage" means, for each Revolving Lender, a
fraction (expressed as a percentage) the numerator of which is the Revolving
Committed Amount of such Revolving Lender at

such time and the denominator of which is the Aggregate Revolving Committed
Amount at such time. The initial Revolving Commitment Percentage of each
Revolving Lender is set forth on Schedule 2.1.

      "Revolving Committed Amount" means, with respect to each Revolving Lender,
the amount of such Revolving Lender's Revolving Commitment. The initial
Revolving Committed Amount of each Revolving Lender is set forth on Schedule
2.1.

      "Revolving Lender" means each Lender identified as a "Revolving Lender" on
Schedule 2.1(a) and its successors and assigns.

      "Revolving Loans" shall have the meaning provided in Section 2.1(a).

      "Revolving Notes" means the promissory notes in favor of each of the
Revolving Lenders evidencing the Revolving Loans and Swingline Loans in
substantially the form attached as Exhibit 2.5-1, individually or collectively,
as appropriate, as such promissory notes may be amended, modified, supplemented,
extended, renewed or replaced from time to time.

      "Revolving Obligations" means the Revolving Loans, LOC Obligations and
Swingline Loans.

      "S&P" means Standard & Poor's Ratings Group, a division of The McGraw Hill
Companies, Inc., or any successor or assignee of the business of such division
in the business of rating securities.

      "Sale and Leaseback Transaction" means any arrangement pursuant to which
any member of the Consolidated Group, directly or indirectly, becomes liable as
lessee, guarantor or other surety with respect to any lease, whether an
Operating Lease or a Capital Lease, of any Property that such member of the
Consolidated Group (a) has sold or transferred (or is to sell or transfer) to,
or arranged the purchase by, a Person that is not a member of the Consolidated
Group or (b) intends to use for substantially the same purpose as any other
Property that has been sold or transferred (or is to be sold or transferred) by
such member of the Consolidated Group to another Person that is not a member of
the Consolidated Group in connection with such lease.

      "Securities Exchange Act" means the Securities Exchange Act of 1934.

      "Securitization Transaction" means any financing transaction or series of
financing transactions that have been or may be entered into by a member of the
Consolidated Group pursuant to which such member of the Consolidated Group may
sell, convey or otherwise transfer to (i) a Subsidiary (a "Securitization
Subsidiary"), or (ii) any other Person, or may grant a security interest in, any
accounts receivable, notes receivable, rights to future lease payments or
residuals or other similar rights to payment (the "Securitization Receivables")
(whether such Securitization Receivables are then existing or arising in the
future) of such member of the Consolidated Group, and any assets related
thereto, including, without limitation, all security interests in merchandise or
services financed thereby, the proceeds of such Securitization Receivables, and
other assets that are customarily sold or in respect of which security interests
are customarily granted in connection with securitization transactions involving
such assets. A Synthetic Lease shall not constitute a Securitization
Transaction.

      "Security Agreement" means the security agreement dated as of the Closing
Date given by the Credit Parties to the Collateral Agent to secure the
obligations of the Credit Parties under the Credit Documents, as such security
agreement may be amended and modified from time to time.

      "Services and Transition Agreement" means that certain Services and
Transition Management Agreement dated as of June 13, 2002 by and among the
Borrower, Gentiva Health Services, Inc. and the Subsidiaries of Gentiva Health
Services, Inc. party thereto.

      "Single Employer Plan" means any Plan that is covered by Title IV of
ERISA, but that is not a Multiemployer Plan or a Multiple Employer Plan.

      "Social Security Act" means the Social Security Act of 1965 as set forth
in Title 42 of the United States Code, as amended, and any successor statute
thereto, as interpreted by the rules and regulations issued thereunder, in each
case as in effect from time to time. References to sections of the Social
Security Act shall be construed to refer to any successor sections.

      "Stark I and II" means Section 1877 of the Social Security Act as set
forth at Section 1395nn of Title 42 of the United States Code, as amended, and
any successor statute thereto, as interpreted by the rules and regulations
issued thereunder, in each case as in effect from time to time.

      "Subsidiary" means, as to any Person at any time, (a) any corporation more
than fifty percent (50%) of whose Voting 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 such time, any class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at such time owned by such Person directly
or indirectly through Subsidiaries, and (b) any partnership, association, joint
venture or other entity of which such Person directly or indirectly through
Subsidiaries owns at such time more than fifty percent (50%) of the Voting
Stock. Unless otherwise provided, "Subsidiary" shall refer to a Subsidiary of
the Borrower.

      "Support Obligations" means, with respect to any Person, without
duplication, any obligations of such Person (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or collection)
guaranteeing or intended to guarantee any Indebtedness of any other Person in
any manner, whether direct or indirect, and including, without limitation, any
obligation, whether or not contingent, (i) to purchase any such Indebtedness or
any Property constituting security therefor, (ii) to advance or provide funds or
other support for the payment or purchase of any such Indebtedness or to
maintain working capital, solvency or other balance sheet condition of such
other Person (including, without limitation, keep-well agreements, maintenance
agreements, comfort letters or similar agreements or arrangements) for the
benefit of any holder of Indebtedness of such other Person, (iii) to lease or
purchase Property, securities or services primarily for the purpose of assuring
the holder of such Indebtedness, or (iv) to otherwise assure or hold harmless
the holder of such Indebtedness against loss in respect thereof. The amount of
any Support Obligation hereunder shall (subject to any limitations set forth
therein) be deemed to be an amount equal to the outstanding principal amount (or
maximum principal amount, if larger) of the Indebtedness in respect of which
such Support Obligation is made.

      "Swingline Commitment" means, with respect to the Swingline Lender, the
commitment of the Swingline Lender to make Swingline Loans in an aggregate
principal amount outstanding up to the Swingline Committed Amount and, with
respect to each Revolving Lender, the commitment of such Revolving Lender to
purchase Participation Interests in Swingline Loans up to such Revolving
Lender's Revolving Commitment Percentage of the Swingline Committed Amount.

      "Swingline Committed Amount" shall have the meaning provided in Section
2.1(c).

      "Swingline Lender" means Bank of America and any successor in its such
capacity.

      "Swingline Loan" shall have the meaning provided in Section 2.1(c).

      "Synthetic Lease" means any synthetic lease, tax retention operating
lease, off-balance sheet loan or similar off-balance sheet financing product
where such transaction is considered borrowed money indebtedness for tax
purposes but is classified as an Operating Lease under GAAP. A Securitization
Transaction shall not constitute a Synthetic Lease.

      "Taxes" shall have the meaning provided in Section 3.11.

      "Term Loans" means the Tranche A Term Loan and the Tranche B Term Loan.

      "Termination Date" means June 13, 2007.

      "Tranche A Term Lender" means each Lender identified on identified on
Schedule 2.1 as a "Tranche A Term Lender" and its successors and assigns.

      "Tranche A Term Loan" shall have the meaning assigned to such term in
Section 2.1(d).

      "Tranche A Term Loan Percentage" means, for each Tranche A Term Lender, a
fraction (expressed as a percentage) the numerator of which is the amount of
such Tranche A Term Lender's Tranche A Term Loan at such time and the
denominator of which is the aggregate amount of the Tranche A Term Loans of all
the Tranche A Term Lenders at such time. The initial Tranche A Term Loan
Percentage of each Tranche A Term Lender is set forth on Schedule 2.1.

      "Tranche A Term Notes" means the promissory notes in favor of each of the
Tranche A Term Lenders evidencing the Tranche A Term Loans in substantially the
form attached as Exhibit 2.5-2, individually or collectively, as appropriate, as
such promissory notes may be amended, modified, supplemented, extended, renewed
or replaced from time to time.

      "Tranche B Term Lender" means each Lender identified on identified on
Schedule 2.1 as a "Tranche B Term Lender" and its successors and assigns.

      "Tranche B Term Loan" shall have the meaning assigned to such term in
Section 2.1(e).

      "Tranche B Term Loan Percentage" means, for each Tranche B Term Lender, a
fraction (expressed as a percentage) the numerator of which is the amount of
such Tranche B Term Lender's Tranche B Term Loan at such time and the
denominator of which is the aggregate amount of the Tranche B Term Loans of all
the Tranche B Term Lenders at such time. The initial Tranche B Term Loan
Percentage of each Tranche B Term Lender is set forth on Schedule 2.1.

      "Tranche B Term Notes" means the promissory notes in favor of each of the
Tranche B Term Lenders evidencing the Tranche B Term Loans in substantially the
form attached as Exhibit 2.5-3, individually or collectively, as appropriate, as
such promissory notes may be amended, modified, supplemented, extended, renewed
or replaced from time to time.

      "Transaction" means the acquisition by the Borrower of the Acquired
Company.

      "Transaction Documents" means the Asset Purchase Agreement, the Services
and Transition Agreement and the other documents and agreements delivered in
connection therewith.

      "Voting Stock" means, with respect to any Person, Capital Stock issued by
such Person the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or

persons performing similar functions) of such Person, even though the right so
to vote has been suspended by the happening of such a contingency.

      "Wholly Owned Subsidiary" of any Person means any Subsidiary one hundred
percent (100%) of whose Voting Stock (other than, with respect to Foreign
Subsidiaries, Capital Stock held pursuant to director's qualifying share
requirements under applicable law) is at the time owned by such Person directly
or indirectly through other Wholly Owned Subsidiaries.

1.2   Computation of Time Periods.

      For purposes of computation of periods of time hereunder, the word "from"
means "from and including" and the words "to" and "until" each mean "to but
excluding".

1.3   Accounting Terms.

      Except as otherwise expressly provided herein, all accounting terms used
herein shall be interpreted, and all financial statements and certificates and
reports as to financial matters required to be delivered to the Lenders
hereunder shall be prepared, in accordance with GAAP applied on a consistent
basis. All calculations made for the purposes of determining compliance with
this Credit Agreement shall (except as otherwise expressly provided herein) be
made by application of GAAP applied on a basis consistent with the most recent
annual or quarterly financial statements delivered pursuant to Section 7.1 (or,
prior to the delivery of the first financial statements pursuant to Section 7.1,
consistent with the annual audited financial statements referenced in Section
6.1(a)); provided, however, if (a) the Borrower shall object to determining such
compliance on such basis at the time of delivery of such financial statements
due to any change in GAAP or the rules promulgated with respect thereto or (b)
the Administrative Agent or the Required Lenders shall so object in writing
within sixty days after delivery of such financial statements, then such
calculations shall be made on a basis consistent with the most recent financial
statements delivered by the Credit Parties to the Lenders as to which no such
objection shall have been made.


                                    SECTION 2

                                CREDIT FACILITIES

2.1   Commitments.

      (a)   Revolving Commitment. During the Commitment Period, subject to the
terms and conditions hereof, each Revolving Lender severally agrees to make
revolving credit loans (the "Revolving Loans") to the Borrower in Dollars from
time to time in the amount of such Revolving Lender's Revolving Commitment
Percentage of such Revolving Loans for the purposes hereinafter set forth;
provided that (i) with regard to the Revolving Lenders collectively, the
aggregate principal amount of Revolving Obligations outstanding at any time
shall not exceed ONE HUNDRED TWENTY-FIVE MILLION DOLLARS ($125,000,000) (as such
amount may be reduced from time to time in accordance with the provisions
hereof, the "Aggregate Revolving Committed Amount"), and (ii) with regard to
each Revolving Lender individually, such Revolving Lender's Revolving Commitment
Percentage of Revolving Obligations outstanding at any time shall not exceed
such Revolving Lender's Revolving Committed Amount. Revolving Loans may consist
of Base Rate Loans or Eurodollar Loans, or a combination thereof, as the
Borrower may request, and may be repaid and reborrowed in accordance with the
provisions hereof.

      (b)   Letter of Credit Commitment. During the Commitment Period, in
reliance upon the agreements of the Revolving Lenders set forth in Section 2.6
and subject to the terms and conditions hereof and of the LOC Documents, if any,
the Issuing Lender shall issue, and the Revolving Lenders shall participate in,
such standby Letters of Credit in Dollars as the Borrower may request for its
own account or for the account of another Credit Party as provided herein, in a
form acceptable to the Issuing Lender, for the purposes hereinafter set forth;
provided that (i) the aggregate principal amount of LOC Obligations shall not at
any time exceed FIFTEEN MILLION DOLLARS ($15,000,000) (as such amount may be
reduced from time to time in accordance with the provisions hereof, the "LOC
Committed Amount"), (ii) with regard to the Revolving Lenders collectively, the
aggregate principal amount of Revolving Obligations outstanding at any time
shall not exceed the Aggregate Revolving Committed Amount, and (iii) with regard
to each Revolving Lender individually, such Revolving Lender's Revolving
Commitment Percentage of Revolving Obligations outstanding at any time shall not
exceed such Revolving Lender's Revolving Committed Amount. Letters of Credit
shall not have an original expiry date more than one year from the date of
issuance or extension. No Letter of Credit shall have an expiry date, whether as
originally issued or by extension, extending beyond the date thirty (30) days
prior to the Termination Date. Each Letter of Credit shall comply with the
related LOC Documents. The issuance date of each Letter of Credit shall be a
Business Day. Without the consent of the Required Lenders, the Issuing Lender
shall not issue any Letter of Credit after the occurrence and during the
continuation of an Event of Default (subject to Section 10.5(b)).

      (c)   Swingline Commitment. During the Commitment Period, subject to the
terms and conditions hereof, the Swingline Lender agrees to make revolving
credit loans (the "Swingline Loans") to the Borrower in Dollars from time to
time for the purposes hereinafter set forth; provided that (i) the aggregate
principal amount of Swingline Loans shall not at any time exceed TEN MILLION
DOLLARS ($10,000,000) (as such amount may be reduced from time to time in
accordance with the provisions hereof, the "Swingline Committed Amount"), and
(ii) with regard to the Revolving Lenders collectively, the aggregate principal
amount of Revolving Obligations outstanding at any time shall not exceed the
Aggregate Revolving Committed Amount. Swingline Loans may consist of Base Rate
Loans or Quoted Rate Swingline Loans, or a combination thereof, as the Borrower
may request and the Swingline Lender may agree, and may be repaid and reborrowed
in accordance with the provisions hereof. Without the consent of the Required
Lenders, the Swingline Lender shall not make any Swingline Loan after the
occurrence and during the continuation of an Event of Default (subject to
Section 10.5(b)).

      (d)   Tranche A Term Loan. Subject to the terms and conditions hereof,
each Tranche A Term Lender severally agrees to make a term loan (the "Tranche A
Term Loans") to the Borrower in Dollars in a single advance on the Closing Date
in the amount of such Tranche A Term Lender's Tranche A Term Loan Percentage of
SEVENTY-FIVE MILLION DOLLARS ($75,000,000) for the purposes hereinafter set
forth. The Tranche A Term Loans may consist of Base Rate Loans or Eurodollar
Loans, or a combination thereof, as the Borrower may request. Amounts repaid on
the Tranche A Term Loans may not be reborrowed.

      (e)   Tranche B Term Loan. Subject to the terms and conditions hereof,
each Tranche B Term Lender severally agrees to make a term loan (the "Tranche B
Term Loans") to the Borrower in Dollars in a single advance on the Closing Date
in the amount of such Tranche B Term Lender's Tranche B Term Loan Percentage of
ONE HUNDRED TWENTY-FIVE MILLION DOLLARS ($125,000,000) for the purposes
hereinafter set forth. The Tranche B Term Loans may consist of Base Rate Loans
or Eurodollar Loans, or a combination thereof, as the Borrower may request.
Amounts repaid on the Tranche B Term Loans may not be reborrowed.

2.2   Method of Borrowing.

      (a)   Notice of Request for Extensions of Credit. The Borrower shall
request an Extension of Credit by written notice (or telephonic notice promptly
confirmed in writing) as follows:

            (i)   Revolving Loans. In the case of Revolving Loans, the Borrower
      shall submit a Notice of Revolving Loan Borrowing to the Administrative
      Agent not later than 12:00 noon (Charlotte, North Carolina time) on the
      Business Day of the requested borrowing in the case of Base Rate Loans,
      and on the third Business Day prior to the date of the requested borrowing
      in the case of Eurodollar Loans. The Administrative Agent shall give
      notice to each Revolving Lender promptly upon receipt of each Notice of
      Revolving Loan Borrowing pursuant to this Section 2.2(a)(i), the contents
      thereof and each Revolving Lender's share of any borrowing to be made
      pursuant thereto.

            (ii)  Letters of Credit. In the case of Letters of Credit, the
      Borrower shall submit a Notice of Request of Letter of Credit to the
      Issuing Lender with a copy to the Administrative Agent not later than
      12:00 noon (Charlotte, North Carolina time) on the third Business Day
      prior to the date of the requested issuance or extension (or such shorter
      period as may be agreed by the Issuing Lender).

            (iii) Swingline Loans. In the case of Swingline Loans, the Borrower
      shall submit a Notice of Swingline Loan Borrowing to the Swingline Lender
      with a copy to the Administrative Agent not later than 12:00 noon
      (Charlotte, North Carolina time) on the Business Day of the requested
      borrowing. Each Swingline Loan shall have a maturity date as the Borrower
      may request and the Swingline Lender may agree.

      (b)   Minimum Amounts. Each Revolving Loan advance shall be (i) in the
case of Eurodollar Loans, in a minimum principal amount of $2,500,000 and
integral multiples of $250,000 in excess thereof and (ii) in the case of Base
Rate Loans, $1,000,000 (or, if less, the remaining Aggregate Revolving Committed
Amount) and integral multiples of $250,000 in excess thereof. Each Swingline
Loan advance shall be in a minimum principal amount of $100,000 and integral
multiples of $100,000 in excess thereof (or the remaining amount of the
Swingline Committed Amount, if less).

      (c)   Information Not Provided. If in connection with any such request for
a Revolving Loan, the Borrower shall fail to specify (i) an applicable Interest
Period in the case of a Eurodollar Loan, the Borrower shall be deemed to have
requested an Interest Period of one month, or (ii) the type of loan requested,
the Borrower shall be deemed to have requested a Base Rate Loan.

      (d)   Maximum Number of Eurodollar Loans. Revolving Loans may be comprised
of no more than eight (8) Eurodollar Loans outstanding at any time. Tranche A
Term Loans may be comprised of no more than four (4) Eurodollar Loans
outstanding at any time. Tranche B Term Loans may be comprised of no more than
four (4) Eurodollar Loans outstanding at any time. For purposes hereof,
Eurodollar Loans with separate or different Interest Periods will be considered
as separate Eurodollar Loans even if their Interest Periods expire on the same
date.

2.3   Interest.

      Subject to Section 3.1, the Loans shall bear interest at a per annum rate,
payable in arrears on each applicable Interest Payment Date (or at such other
times as may be specified herein), as follows:

            (a)   Base Rate Loans. During such periods as the Loans shall be
      comprised of Base Rate Loans, the Adjusted Base Rate;

            (b)   Eurodollar Loans. During such periods as the Loans shall be
      comprised of Eurodollar Loans, the Adjusted Eurodollar Rate; and

            (c)   Quoted Rate Swingline Loans. During such periods as the
      Swingline Loans shall be comprised of Quoted Rate Swingline Loans, the
      Quoted Rate.

2.4   Repayment.

      (a)   Revolving Loans. The principal amount of all Revolving Loans shall
be due and payable in full on the Termination Date.

      (b)   Swingline Loans. The principal amount of all Swingline Loans shall
be due and payable in full on the earlier of (A) the maturity date agreed to by
the Swingline Lender and the Borrower with respect to such Swingline Loan or (B)
the Termination Date.

      (c)   Tranche A Term Loans. The principal amount of the Tranche A Term
Loans shall be repaid in consecutive quarterly installments as follows, unless
accelerated sooner pursuant to Section 9.2:



               Payment Date                       Payment Amount
                                             
               June 30, 2003                        $3,750,000
            September 30, 2003                      $3,750,000
             December 31, 2003                      $3,750,000
              March 31, 2004                        $3,750,000

               June 30, 2004                        $3,750,000
            September 30, 2004                      $3,750,000
             December 31, 2004                      $3,750,000
              March 31, 2005                        $3,750,000

               June 30, 2005                        $5,625,000
            September 30, 2005                      $5,625,000
             December 31, 2005                      $5,625,000
              March 31, 2006                        $5,625,000

               June 30, 2006                        $5,625,000
            September 30, 2006                      $5,625,000
             December 31, 2006                      $5,625,000
              March 31, 2007                     Unpaid balance of
                                                Tranche A Term Loans


      (d)   Tranche B Term Loans. The principal amount of the Tranche B Term
Loans shall be repaid in consecutive quarterly installments as follows, unless
accelerated sooner pursuant to Section 9.2:



               Payment Date                       Payment Amount
                                             
               June 30, 2002                         $312,500
            September 30, 2002                       $312,500
             December 31, 2002                       $312,500


                                             
              March 31, 2003                         $312,500

               June 30, 2003                         $312,500
            September 30, 2003                       $312,500
             December 31, 2003                       $312,500
              March 31, 2004                         $312,500

               June 30, 2004                         $312,500
            September 30, 2004                       $312,500
             December 31, 2004                       $312,500
              March 31, 2005                         $312,500

               June 30, 2005                         $312,500
            September 30, 2005                       $312,500
             December 31, 2005                       $312,500
              March 31, 2006                         $312,500

               June 30, 2006                         $312,500
            September 30, 2006                       $312,500
             December 31, 2006                       $312,500
              March 31, 2007                         $312,500

               June 30, 2007                        $14,843,750
            September 30, 2007                      $14,843,750
             December 31, 2007                      $14,843,750
              March 31, 2008                        $14,843,750

               June 30, 2008                        $14,843,750
            September 30, 2008                      $14,843,750
             December 31, 2008                      $14,843,750
              March 31, 2009                     Unpaid balance of
                                                Tranche B Term Loans



2.5   Notes.

      The Revolving Loans and the Swingline Loans shall be evidenced by the
Revolving Notes. The Tranche A Term Loans shall be evidenced by the Tranche A
Term Notes. The Tranche B Term Loans shall be evidenced by the Tranche B Term
Notes.

2.6   Additional Provisions relating to Letters of Credit.

      (a)   Reports. The Issuing Lender will provide to the Administrative Agent
for dissemination to the Revolving Lenders at least quarterly, and more
frequently upon request, a detailed summary report on its Letters of Credit and
the activity thereon. The Issuing Lender will provide copies of the Letters of
Credit to the Administrative Agent, the Revolving Lenders or the Borrower
promptly upon request of such Person or Persons.

      (b)   Participation. Upon issuance of a Letter of Credit, each Revolving
Lender shall be deemed to have purchased without recourse a risk participation
from the Issuing Lender in such Letter of Credit and

the obligations arising thereunder, in each case in an amount equal to its pro
rata share of the obligations under such Letter of Credit (based on the
respective Revolving Commitment Percentages of the Revolving Lenders) and shall
absolutely, unconditionally and irrevocably assume, as primary obligor and not
as surety, and be obligated to pay to the Issuing Lender therefor and discharge
when due, its pro rata share of the obligations arising under such Letter of
Credit. Without limiting the scope and nature of each Revolving Lender's
participation in any Letter of Credit, to the extent that the Issuing Lender has
not been reimbursed as required hereunder or under any such Letter of Credit,
each Revolving Lender shall pay to the Issuing Lender its pro rata share of such
unreimbursed drawing in same day funds on the day of notification by the Issuing
Lender of an unreimbursed drawing pursuant to the provisions of subsection (d)
hereof. The obligation of each Revolving Lender to so reimburse the Issuing
Lender shall be absolute and unconditional and shall not be affected by the
occurrence of a Default, an Event of Default or any other occurrence or event.
Any such reimbursement shall not relieve or otherwise impair the obligation of
the Borrower to reimburse the Issuing Lender under any Letter of Credit,
together with interest as hereinafter provided.

      (c)   Reimbursement. In the event of any drawing under any Letter of
Credit, the Issuing Lender will promptly notify the Borrower. Unless the
Borrower shall immediately notify the Issuing Lender that the Borrower intends
to otherwise reimburse the Issuing Lender for such drawing, the Borrower shall
be deemed to have requested that the Revolving Lenders make a Revolving Loan in
the amount of the drawing as provided in subsection (d) hereof on the related
Letter of Credit, the proceeds of which will be used to satisfy the related
reimbursement obligations. The Borrower promises to reimburse the Issuing Lender
on the day of drawing under any Letter of Credit (either with the proceeds of a
Revolving Loan obtained hereunder or otherwise) in same day funds. If the
Borrower shall fail to reimburse the Issuing Lender as provided hereinabove, the
unreimbursed amount of such drawing shall bear interest at a per annum rate
equal to the Adjusted Base Rate plus two percent (2%). The Borrower's
reimbursement obligations hereunder shall be absolute and unconditional under
all circumstances irrespective of any rights of setoff, counterclaim or defense
to payment the Borrower may claim or have against the Issuing Lender, the
Administrative Agent, the Lenders, the beneficiary of the Letter of Credit drawn
upon or any other Person, including, without limitation, any defense based on
any failure of the Borrower or any other Credit Party to receive consideration
or the legality, validity, regularity or unenforceability of the Letter of
Credit. The Issuing Lender will promptly notify the Administrative Agent (who
will promptly notify the other Revolving Lenders) of the amount of any
unreimbursed drawing and each Revolving Lender shall promptly pay to the
Administrative Agent for the account of the Issuing Lender in Dollars and in
immediately available funds, the amount of such Revolving Lender's Revolving
Commitment Percentage of such unreimbursed drawing. Such payment shall be made
on the day such notice is received by such Revolving Lender from the Issuing
Lender if such notice is received at or before 2:00 P.M. (Charlotte, North
Carolina time) otherwise such payment shall be made at or before 12:00 Noon
(Charlotte, North Carolina time) on the Business Day next succeeding the day
such notice is received. If such Revolving Lender does not pay such amount to
the Issuing Lender in full upon such request, such Revolving Lender shall, on
demand, pay to the Administrative Agent for the account of the Issuing Lender
interest on the unpaid amount during the period from the date of such drawing
until such Revolving Lender pays such amount to the Issuing Lender in full at a
rate per annum equal to, if paid within two Business Days of the date that such
Revolving Lender is required to make payments of such amount pursuant to the
preceding sentence, the Federal Funds Rate and thereafter at a rate equal to the
Base Rate. Each Revolving Lender's obligation to make such payment to the
Issuing Lender, and the right of the Issuing Lender to receive the same, shall
be absolute and unconditional, shall not be affected by any circumstance
whatsoever and without regard to the termination of this Credit Agreement or the
Commitments hereunder, the existence of a Default or Event of Default or the
acceleration of the obligations of the Borrower hereunder and shall be made
without any offset, abatement, withholding or reduction whatsoever.
Simultaneously with the making of each such payment by a Revolving Lender to the
Issuing Lender, such Revolving Lender shall, automatically and without any
further action on the part of the Issuing Lender or such Revolving Lender,
acquire a participation in an amount equal to such payment (excluding the
portion of such payment constituting interest owing to the Issuing Lender) in
the related

unreimbursed drawing portion of the LOC Obligation and in the interest thereon
and in the related LOC Documents, and shall have a claim against the Borrower
with respect thereto.

      (d)   Repayment with Revolving Loans. On any day on which the Borrower
shall have requested, or been deemed to have requested, a Revolving Loan advance
to reimburse a drawing under a Letter of Credit, the Administrative Agent shall
give notice to the Revolving Lenders that a Revolving Loan has been requested or
deemed requested by the Borrower to be made in connection with a drawing under a
Letter of Credit, in which case a Revolving Loan advance comprised of Base Rate
Loans (or Eurodollar Loans to the extent the Borrower has complied with the
procedures of Section 2.2(a)(i) with respect thereto) shall be promptly made to
the Borrower by all Revolving Lenders (notwithstanding any termination of the
Commitments pursuant to Section 9.2) pro rata based on the respective Revolving
Commitment Percentages of the Revolving Lenders (determined before giving effect
to any termination of the Commitments pursuant to Section 9.2) and the proceeds
thereof shall be paid directly to the Issuing Lender for application to the
respective LOC Obligations. Each such Revolving Lender hereby irrevocably agrees
to make its Revolving Commitment Percentage of each such Revolving Loan promptly
upon any such request or deemed request in the amount, in the manner and on the
date specified in the preceding sentence notwithstanding (i) the amount of such
borrowing may not comply with the minimum amount for advances of Revolving Loans
otherwise required hereunder, (ii) whether any conditions specified in Section
5.2 are then satisfied, (iii) whether a Default or an Event of Default then
exists, (iv) failure for any such request or deemed request for Revolving Loan
to be made by the time otherwise required hereunder, (v) whether the date of
such borrowing is a date on which Revolving Loans are otherwise permitted to be
made hereunder or (vi) any termination of the Commitments relating thereto
immediately prior to or contemporaneously with such borrowing. In the event that
any Revolving Loan cannot for any reason be made on the date otherwise required
above (including, without limitation, as a result of the commencement of a
proceeding under the Bankruptcy Code with respect to any Credit Party), then
each such Revolving Lender hereby agrees that it shall forthwith purchase (as of
the date such borrowing would otherwise have occurred, but adjusted for any
payments received from the Borrower on or after such date and prior to such
purchase) from the Issuing Lender such participation in the outstanding LOC
Obligations as shall be necessary to cause each such Revolving Lender to share
in such LOC Obligations ratably (based upon the respective Revolving Commitment
Percentages of the Revolving Lenders (determined before giving effect to any
termination of the Commitments pursuant to Section 9.2)), provided that in the
event such payment is not made on the day of drawing, such Revolving Lender
shall pay in addition to the Issuing Lender interest on the amount of its
unfunded Participation Interest at a rate equal to, if paid within two Business
Days of the date of drawing, the Federal Funds Rate, and thereafter at the Base
Rate.

      (e)   Designation of other Credit Parties as Account Parties.
Notwithstanding anything to the contrary set forth in this Credit Agreement,
including, without limitation, Sections 2.1(c) and 2.2(a)(ii) hereof, a Letter
of Credit issued hereunder may contain a statement to the effect that such
Letter of Credit is issued for the account of a Credit Party other than the
Borrower, provided that notwithstanding such statement, the Borrower shall be
the actual account party for all purposes of this Credit Agreement for such
Letter of Credit and such statement shall not affect the Borrower's
reimbursement obligations hereunder with respect to such Letter of Credit.

      (f)   Renewal, Extension. The renewal or extension of any Letter of Credit
shall, for purposes hereof, be treated in all respects the same as the issuance
of a new Letter of Credit hereunder.

      (g)   Applicability of ISP98. Unless otherwise expressly agreed by the
Issuing Lender and the Borrower when a Letter of Credit is issued, the rules of
the "International Standby Practices 1998" published by the Institute of
International Banking Law & Practice (or such later version thereof as may be in
effect at the time of issuance) shall apply to each standby Letter of Credit.

      (h)   Indemnification; Nature of Issuing Lender's Duties.

            (i)   In addition to its other obligations under this Section 2.6,
      the Borrower hereby agrees to protect, indemnify, pay, save and hold the
      Issuing Lender and the Revolving Lenders harmless from and against any and
      all claims, demands, liabilities, damages, losses, costs, charges and
      expenses (including reasonable attorneys' fees actually incurred and
      expenses but excluding the allocated cost of internal counsel) that the
      Issuing Lender or any Revolving Lender may incur or be subject to as a
      consequence, direct or indirect, of (A) the issuance of any Letter of
      Credit or (B) the failure of the Issuing Lender to honor a drawing under a
      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").

            (ii)  As between the Borrower and the Issuing Lender, the Borrower
      shall assume all risks of the acts, omissions or misuse of any Letter of
      Credit by the beneficiary thereof. The Issuing Lender shall not be
      responsible: (A) 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 any Letter of Credit,
      even if it should in fact prove to be in any or all respects invalid,
      insufficient, inaccurate, fraudulent or forged; (B) for the validity or
      sufficiency of any instrument transferring or assigning or purporting to
      transfer or assign any Letter of Credit or the rights or benefits
      thereunder or proceeds thereof, in whole or in part, that may prove to be
      invalid or ineffective for any reason; (C) for errors, 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; (D) for any loss or delay in the transmission or otherwise of any
      document required in order to make a drawing under a Letter of Credit or
      of the proceeds thereof; and (E) for any consequences arising from causes
      beyond the control of the Issuing Lender, including, without limitation,
      any Government Acts. None of the above shall affect, impair, or prevent
      the vesting of the Issuing Lender's rights or powers hereunder.

            (iii) In furtherance and extension and not in limitation of the
      specific provisions hereinabove set forth, any action taken or omitted by
      the Issuing Lender, under or in connection with any Letter of Credit or
      the related certificates, if taken or omitted in good faith, shall not put
      such Issuing Lender under any resulting liability to the Borrower or any
      other Credit Party. It is the intention of the parties that this Credit
      Agreement shall be construed and applied to protect and indemnify the
      Issuing Lender against any and all risks involved in the issuance of the
      Letters of Credit, all of which risks are hereby assumed by the Borrower
      (on behalf of itself and each of the other Credit Parties), including,
      without limitation, any and all Government Acts. The Issuing Lender shall
      not, in any way, be liable for any failure by the Issuing Lender or anyone
      else to pay any drawing under any Letter of Credit as a result of any
      Government Acts or any other cause beyond the control of the Issuing
      Lender.

            (iv)  Nothing in this subsection (h) is intended to limit the
      reimbursement obligations of the Borrower contained in subsection (d)
      above, provided that the Borrower may have a claim against the Issuing
      Lender, and the Issuing Lender may be liable to the Borrower, to the
      extent, but only to the extent, of any direct damages (but not any
      consequential or exemplary damages) suffered by the Borrower which the
      Borrower proves were caused by the Issuing Lender's willful misconduct or
      gross negligence or the Issuing Lender's willful failure to pay under any
      Letter of Credit after the presentation to it by the beneficiary of a
      sight draft and certificate(s) strictly complying with the terms and
      conditions of a Letter of Credit. The obligations of the Borrower under
      this subsection (h) shall survive the termination of this Credit
      Agreement. No act or omissions of any current or prior beneficiary of a
      Letter of Credit shall in any way affect or impair the rights of the
      Issuing Lender to enforce any right, power or benefit under this Credit
      Agreement.

            (v)   Notwithstanding anything to the contrary contained in this
      subsection (h), the Borrower shall have no obligation to indemnify the
      Issuing Lender or any Revolving Lender in respect of any liability
      incurred by the Issuing Lender or such Revolving Lender (A) to the extent
      arising out of the gross negligence or willful misconduct of the Issuing
      Lender or such Revolving Lender, as the case may be, as determined by a
      court of competent jurisdiction, or (B) caused by the Issuing Lender's
      failure to pay under any Letter of Credit after presentation to it of a
      request strictly complying with the terms and conditions of such Letter of
      Credit, as determined by a court of competent jurisdiction, unless such
      payment is prohibited by any law, regulation, court order or decree.

      (i)   Responsibility of Issuing Lender. It is expressly understood and
agreed that the obligations of the Issuing Lender hereunder to the Lenders are
only those expressly set forth in this Credit Agreement and that the Issuing
Lender shall be entitled to assume that the conditions precedent set forth in
Section 5.2 have been satisfied unless it shall have acquired actual knowledge
that any such condition precedent has not been satisfied; provided, however,
that nothing set forth in this Section 2.6 shall be deemed to prejudice the
right of any Revolving Lender to recover from the Issuing Lender any amounts
made available by such Revolving Lender to the Issuing Lender pursuant to this
Section 2.6 in the event that it is determined by a court of competent
jurisdiction that the payment with respect to a Letter of Credit constituted
gross negligence or willful misconduct on the part of the Issuing Lender.

      (j)   Limitation on Obligation of the Issuing Lender. Notwithstanding
anything contained herein to the contrary, the Issuing Lender shall not be under
any obligation to issue, renew or extend any Letter of Credit if (i) any order,
judgment or decree of any Governmental Authority or arbitrator shall by its
terms purport to enjoin or restrain the Issuing Lender from issuing a Letter of
Credit, or any applicable law, rule or regulation or any request or directive
(whether or not having the force of law) from any Governmental Authority with
jurisdiction over the Issuing Lender shall prohibit, or request that the Issuing
Lender refrain from, the issuance of letters of credit generally or any such
Letter of Credit in particular, or shall impose upon the Issuing Lender with
respect to any such Letter of Credit any restriction, reserve or capital
requirement (for which the Issuing Lender is not otherwise compensated
hereunder) not in effect on the Closing Date, or shall impose upon the Issuing
Lender any unreimbursed loss, costs or expense that was not applicable on the
Closing Date and that the Issuing Lender should deem material to it in good
faith, or (ii) the issuance, renewal or extension would violate or otherwise
contravene its internal policy generally applicable to the issuance of letters
of credit.

      (k)   Conflict with LOC Documents. In the event of any conflict between
this Credit Agreement and any LOC Document (including any letter of credit
application but excluding any Letter of Credit), this Credit Agreement shall
control.

2.7   Additional Provisions relating to Swingline Loans.

      The Swingline Lender may, at any time, in its sole discretion, by written
notice to the Borrower and the Revolving Lenders, demand repayment of its
Swingline Loans by way of a Revolving Loan advance, in which case the Borrower
shall be deemed to have requested a Revolving Loan advance comprised solely of
Base Rate Loans in the amount of such Swingline Loans; provided, however, that
any such demand shall be deemed to have been given one Business Day prior to the
Termination Date and on the date of the occurrence of any Event of Default
described in Section 9.1 and upon acceleration of the indebtedness hereunder and
the exercise of remedies in accordance with the provisions of Section 9.2. Each
Revolving Lender hereby irrevocably agrees to make its Revolving Commitment
Percentage of each such Revolving Loan in the amount, in the manner and on the
date specified in the preceding sentence notwithstanding (a) the amount of such
borrowing may not comply with the minimum amount for advances of Revolving Loans
otherwise

required hereunder, (b) whether any conditions specified in Section 5.2 are then
satisfied, (c) whether a Default or an Event of Default then exists, (d) failure
of any such request or deemed request for Revolving Loan to be made by the time
otherwise required hereunder, (e) whether the date of such borrowing is a date
on which Revolving Loans are otherwise permitted to be made hereunder or (f) any
termination of the Commitments relating thereto immediately prior to or
contemporaneously with such borrowing. In the event that any Revolving Loan
cannot for any reason be made on the date otherwise required above (including,
without limitation, as a result of the commencement of a proceeding under the
Bankruptcy Code with respect to the Borrower or any other Credit Party), then
each Revolving Lender hereby agrees that it shall forthwith purchase (as of the
date such borrowing would otherwise have occurred, but adjusted for any payments
received from the Borrower on or after such date and prior to such purchase)
from the Swingline Lender such Participation Interests in the outstanding
Swingline Loans as shall be necessary to cause each such Revolving Lender to
share in such Swingline Loans ratably based upon its Revolving Commitment
Percentage (determined before giving effect to any termination of the
Commitments pursuant to Section 3.4), provided that (i) all interest payable on
the Swingline Loans shall be for the account of the Swingline Lender until the
date as of which the respective Participation Interest is funded and (ii) at the
time any purchase of Participation Interests pursuant to this sentence is
actually made, the purchasing Revolving Lender shall be required to pay to the
Swingline Lender, to the extent not paid to the Swingline Lender by the Borrower
in accordance with the terms of Section 2.3, interest on the principal amount of
Participation Interests purchased for each day from and including the day upon
which such borrowing would otherwise have occurred to but excluding the date of
payment for such Participation Interests, at the rate equal to the Federal Funds
Rate.


                                    SECTION 3

                 OTHER PROVISIONS RELATING TO CREDIT FACILITIES

3.1   Default Rate.

      Upon the occurrence, and during the continuance, of an Event of Default,
(i) the principal of and, to the extent permitted by law, interest on the Loans
and any other amounts owing hereunder or under the other Credit Documents shall
bear interest, payable on demand, at a per annum rate three percent (3%) greater
than the rate that would otherwise be applicable (or if no rate is applicable,
whether in respect of interest, fees or other amounts, then the Adjusted Base
Rate plus three percent (3%)) and (ii) the Letter of Credit Fee shall accrue at
a per annum rate three percent (3%) greater than the rate that would otherwise
be applicable.

3.2   Continuation and Conversion.

      The Borrower shall have the option, on any Business Day, to extend
existing Loans into a subsequent permissible Interest Period or to convert Loans
into Loans of another interest rate type; provided, however, that (i) except as
provided in Section 3.8, Eurodollar Loans may be converted into Base Rate Loans
or extended as Eurodollar Loans for new Interest Periods only on the last day of
the Interest Period applicable thereto, (ii) Eurodollar Loans may be extended,
and Base Rate Loans may be converted into Eurodollar Loans, only if the
conditions precedent set forth in Section 5.2 are satisfied on the date of
Continuation or Conversion, (iii) Loans extended as, or converted into,
Eurodollar Loans shall be subject to the terms of the definition of "Interest
Period" and shall be in such minimum amounts as provided in Section 2.2(b), and
(iv) any request for Continuation or Conversion of a Eurodollar Loan that shall
fail to specify an Interest Period shall be deemed to be a request for an
Interest Period of one month. Each such Continuation or Conversion shall be
effected by the Borrower by giving a Notice of Continuation/Conversion (or
telephonic notice promptly confirmed in writing) to the office of the
Administrative Agent specified in Section 11.1, or at such other office as the
Administrative Agent may designate to the Borrower in writing, prior to 12:00
noon (Charlotte, North Carolina time), on the Business Day of, in the case of
the Conversion of a Eurodollar Loan

into a Base Rate Loan, and on the third Business Day prior to, in the case of
the Continuation of a Eurodollar Loan as, or Conversion of a Base Rate Loan
into, a Eurodollar Loan, the date of the proposed Continuation or Conversion,
specifying the date of the proposed Continuation or Conversion, the Loans to be
so extended or converted, the types of Loans into which such Loans are to be
converted and, if appropriate, the applicable Interest Periods with respect
thereto. Each request for Continuation or Conversion shall be irrevocable and
shall constitute a representation and warranty by the Borrower of the matters
specified in Section 5.2. In the event the Borrower fails to request
Continuation or Conversion of any Eurodollar Loan in accordance with this
Section, or any such Conversion or Continuation is not permitted or required by
this Section, then such Eurodollar Loan shall be automatically converted into a
Base Rate Loan at the end of the Interest Period applicable thereto. The
Administrative Agent shall give each affected Lender notice as promptly as
practicable of any such proposed Continuation or Conversion affecting any Loan.

3.3   Prepayments.

      (a)   Voluntary Prepayments. The Loans may be repaid in whole or in part
without premium or penalty; provided that (i) Eurodollar Loans may be prepaid
only upon three Business Days prior written notice to the Administrative Agent
and must be accompanied by payment of any amounts owing under Section 3.12, (ii)
partial prepayments on Revolving Loans shall be minimum principal amounts of
$2,500,000, in the case of Eurodollar Loans, and $1,000,000, in the case of Base
Rate Loans, and in integral multiples of $250,000 in excess thereof and (iii)
partial prepayments on Swingline Loans shall in minimum principal amounts of
$100,000 and integral multiples of $100,000 in excess thereof.

      (b)   Mandatory Prepayments.

            (i)   Committed Amounts. If at any time (A) the aggregate principal
      amount of Revolving Obligations shall exceed the Aggregate Revolving
      Committed Amount, (B) the aggregate amount of LOC Obligations shall exceed
      the LOC Committed Amount or (C) the aggregate principal amount of
      Swingline Loans shall exceed the Swingline Committed Amount, the Borrower
      shall immediately upon the Administrative Agent's demand make payment on
      the Revolving Loans, on the Swingline Loans and/or to a cash collateral
      account in respect of the LOC Obligations, in an amount sufficient to
      eliminate the difference.

            (ii)  Asset Dispositions and Recovery Events. The Borrower shall
      promptly prepay the Obligations as hereafter provided in an amount equal
      to one hundred percent (100%) of the Net Cash Proceeds received from any
      Asset Disposition or Recovery Event to the extent (A) such Net Cash
      Proceeds are not reinvested in Property to be used by any member of the
      Consolidated Group in the operation of its business within nine (9) months
      of the date of such Asset Disposition or Recovery Event, and (B) the
      aggregate amount of such Net Cash Proceeds not reinvested in accordance
      with the foregoing clause (A) shall exceed $10,000,000 in any fiscal year.

            (iii) Excess Cash Flow. Within 95 days after the end of the fiscal
      year ending June 30, 2003 and each fiscal year end thereafter, the
      Borrower shall prepay the Obligations in an amount equal to the percentage
      of Excess Cash Flow set forth opposite the Consolidated Leverage Ratio as
      of the end of such fiscal year in the following table:



      Level     Consolidated Leverage Ratio          Percentage of Excess Cash Flow
                                               
        1              < 1.0 to 1.0                             0.0%
        2      > or = 1.0 to 1.0 but < 2.0 to 1.0              50.0%
        3            > or = 2.0 to 1.0                         75.0%


      provided that if the application of any such prepayment would reduce the
      Consolidated Leverage Ratio to a lower "Level" (as such term is used in
      the table above), then the Borrower shall be required to make a prepayment
      equal to the percentage of Excess Cash Flow corresponding to the
      applicable Level (after giving effect to the application of the proceeds
      of such prepayment to the Obligations as provided in the immediately
      following clause (v)). [For example, if the application of a particular
      prepayment would reduce the Consolidated Leverage Ratio from 2.2:1.0 to
      1.8:1.0, then the Borrower would be required to pay 75% of Excess Cash
      Flow to the extent necessary to cause the Consolidated Leverage Ratio,
      after giving effect to such prepayment, to be reduced to 2.00:1.0, and
      then 50% of the remainder of the Excess Cash Flow.]

            (iv)  Debt Transactions and Equity Transactions. The Borrower shall
      immediately prepay the Obligations as hereafter provided in an amount
      equal to:

                  (A)   one hundred percent (100%) of the Net Cash Proceeds
            received from any Debt Transaction; and

                  (B)   one hundred percent (100%) of the Net Cash Proceeds
            received from any Equity Transaction, provided that the Borrower
            shall be required to make such prepayment only in an amount
            sufficient to cause the Consolidated Leverage Ratio as of the end of
            the immediately preceding fiscal quarter to be less than or equal to
            1.0:1.0 (after giving effect to the application of such prepayment
            to the Obligations as provided in the immediately following clause
            (v)).

            (v)   Effect of Application of Amounts on Consolidated Leverage
      Ratio. For purposes of determining the effect of prepayments required
      under the immediately preceding clauses (iii) and (iv) on the Consolidated
      Leverage Ratio, the amount of any such prepayments shall be deemed to have
      been applied to the Obligations as of the last day of the fiscal quarter
      most recently ended.

      (c)   Application.

            (i)   Voluntary Prepayments. Voluntary prepayments on the Term Loans
      shall be applied pro rata to the Tranche A Term Loans and Tranche B Term
      Loans (and in each case pro rata to the remaining principal installments
      thereof) and, within the foregoing parameters, first to Base Rate Loans
      and then to Eurodollar Loans in direct order of interest period
      maturities. Voluntary prepayments on the Revolving Obligations shall be
      applied as directed by the Borrower or, if not so directed, first to Base
      Rate Loans (other than Swingline Loans), then to Eurodollar Loans in
      direct order of Interest Period maturities, then to Swingline Loans in
      direct order of maturities and then to a cash collateral account to secure
      LOC Obligations.

            (ii)  Mandatory Prepayments.

                  (A)   Mandatory prepayments under Section 3.3(b)(i) shall be
            applied as directed by the Borrower.

                  (B)   Mandatory prepayments under Section 3.3(b)(ii) (other
            than mandatory prepayments on account of the Acute Disposition)
            shall be applied pro rata to the Tranche A Term Loans, Tranche B
            Term Loans and Revolving Obligations (and, in the case of
            prepayments on the Terms Loans, to the remaining principal
            installments thereof in inverse order of maturity). Within the
            parameters of the immediately preceding sentence, mandatory
            prepayments shall be applied first to Base Rate Loans (other than
            Swingline

            Loans), then to Eurodollar Loans in direct order of Interest Period
            maturities, then to Swingline Loans in direct order of maturities
            and then to a cash collateral account to secure LOC Obligations.

                  (C)   Mandatory prepayments under Section 3.3(b)(ii) on
            account of the Acute Disposition shall be applied to the Revolving
            Obligations until paid in full (and thereafter may be retained by
            the Borrower). Within the parameters of the immediately preceding
            sentence, mandatory prepayments shall be applied first to Base Rate
            Loans (other than Swingline Loans), then to Eurodollar Loans in
            direct order of Interest Period maturities, then to Swingline Loans
            in direct order of maturities and then to a cash collateral account
            to secure LOC Obligations.

                  (D)   Mandatory prepayments under Sections 3.3(b)(iii) and
            3.3(b)(iv) shall be applied pro rata to the Tranche A Term Loans and
            Tranche B Term Loans (and in each case to the remaining principal
            installments thereof in inverse order of maturity) until the Term
            Loans have been repaid in full and then to the Revolving
            Obligations. Within the parameters of the immediately preceding
            sentence, mandatory prepayments shall be applied first to Base Rate
            Loans, then to Eurodollar Loans in direct order of Interest Period
            maturities, then to Quoted Rate Swingline Loans in direct order of
            maturities and then to a cash collateral account to secure LOC
            Obligations.

            (iii) Prepayment Account. If the Borrower is required to make a
      mandatory prepayment of Eurodollar Loans under Section 3.3(b)(ii), (iii)
      or (iv), the Borrower shall have the right, in lieu of making such
      prepayment in full, to deposit an amount equal to such mandatory
      prepayment with the Administrative Agent in a cash collateral account
      maintained (pursuant to documentation reasonably satisfactory to the
      Administrative Agent) by and in the sole dominion and control of the
      Administrative Agent. Any amounts so deposited shall be held by the
      Administrative Agent as collateral for the prepayment of such Eurodollar
      Loans and shall be applied to the prepayment of the applicable Eurodollar
      Loans at the end of the current Interest Periods applicable thereto. At
      the request of the Borrower, amounts so deposited shall be invested by the
      Administrative Agent in Cash Equivalents maturing prior to the date or
      dates on which it is anticipated that such amounts will be applied to
      prepay such Eurodollar Loans; any interest earned on such Cash Equivalents
      will be for the account of the Borrower and the Borrower will deposit with
      the Administrative Agent the amount of any loss on any such Cash
      Equivalents to the extent necessary in order that the amount of the
      prepayment to be made with the deposited amounts may not be reduced.

3.4   Reduction and Termination of Commitments.

      (a)   Voluntary Reduction of Commitments. The Commitments may be
terminated or permanently reduced in whole or in part by the Borrower upon three
Business Days prior written notice to the Administrative Agent, provided that
(i) after giving effect to any voluntary reduction the aggregate amount of
Revolving Obligations shall not exceed the Aggregate Revolving Committed Amount,
as reduced, and (ii) partial reductions shall be in a minimum principal amount
of $2,500,000 and in integral multiples of $1,000,000 in excess thereof.

      (b)   Mandatory Reduction of Commitments. The Aggregate Revolving
Committed Amount automatically shall be permanently reduced from time to time in
an amount equal to the amount of any prepayment required by Sections 3.3(b)(ii)
(other than any prepayment on account of the Acute Disposition).

      (c)   Termination of Commitments. The Commitments shall terminate on the
Termination Date.

3.5   Fees.

      (a)   Commitment Fee. In consideration of the Revolving Commitments, the
Borrower agrees to pay to the Administrative Agent for the ratable benefit of
the Revolving Lenders a commitment fee (the "Commitment Fee") equal to the
Applicable Percentage per annum on the average daily unused amount of the
Aggregate Revolving Committed Amount for the applicable period. The Commitment
Fee shall be payable quarterly in arrears on the last day of each March, June,
September and December for the immediately preceding quarter (or a portion
thereof). For purposes of computation of the Commitment Fee, (i) Swingline Loans
shall not be counted toward or considered usage of the Aggregate Revolving
Committed Amount and (ii) LOC Obligations shall be counted toward and considered
usage of the Aggregate Revolving Committed Amount.

      (b)   Letter of Credit Fees.

            (i)   Letter of Credit Issuance Fee. In consideration of the
      issuance of Letters of Credit, the Borrower promises to pay to the
      Administrative Agent for the account of each Revolving Lender a fee (the
      "Letter of Credit Fee") on such Revolving Lender's Revolving Commitment
      Percentage of the average daily maximum amount available to be drawn under
      each such Letter of Credit computed at a per annum rate for each day from
      the date of issuance to the date of expiration equal to the Applicable
      Percentage. The Letter of Credit Fee shall be payable quarterly in arrears
      on the last day of each March, June, September and December for the
      immediately preceding quarter (or a portion thereof).

            (ii)  Issuing Lender Fees. In addition to the Letter of Credit Fee,
      the Borrower promises to pay to the Administrative Agent for the account
      of the Issuing Lender without sharing by the other Lenders (i) a letter of
      credit fronting fee (the "Issuing Lender Fee") of one-eighth of one
      percent (0.125%) on the average daily maximum amount available to be drawn
      under each Letter of Credit computed at a per annum rate for each day from
      the date of issuance to the date of expiration and (ii) the customary
      charges from time to time of the Issuing Lender with respect to the
      issuance, amendment, transfer, administration, cancellation and conversion
      of, and drawings under, such Letters of Credit. The Issuing Lender Fee
      hereunder shall be payable quarterly in arrears on the last day of each
      March, June, September and December for the immediately preceding quarter
      (or portion thereof) and on the Termination Date.

      (c)   Administrative Fees. The Borrower agrees to pay to the
Administrative Agent, for its own account, the fees referred to in the
Administrative Agent's Fee Letter.

3.6   Capital Adequacy.

      If any Lender has reasonably determined, after the date hereof, that the
adoption or the becoming effective of, or any change in, or any change by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof in the interpretation or administration
of, any applicable law, rule or regulation regarding capital adequacy, or
compliance by such Lender with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on such Lender's (including, for purposes hereof, the parent company of
such Lender) capital or assets as a consequence of its commitments or
obligations hereunder to a level below that which such Lender could have
achieved but for such adoption, effectiveness, change or compliance (taking into
consideration such Lender's policies with

respect to capital adequacy), then, upon notice from such Lender to the
Borrower, the Borrower shall be obligated to pay to such Lender such additional
amount or amounts as will compensate such Lender for such reduction. Each
determination by any such Lender of amounts owing under this Section shall,
absent manifest error, be conclusive and binding on the parties hereto. Each
Lender agrees to notify the Borrower of any event occurring after the date
hereof entitling such Lender to compensation under this Sections as promptly as
practicable; provided, however, the failure of any Lender to give such notice
shall not release the Borrower from any of its obligations hereunder; provided,
further, however, a Lender shall be entitled to compensation under this Section
only for events occurring during the 180-day period ending on the date the
Borrower receives the notice described in this sentence. Each Lender agrees to
furnish to the Borrower a certificate setting forth the basis and amount of each
request by such Lender for compensation under this Section.

3.7   Limitation on Eurodollar Loans.

      If on or prior to the first day of any Interest Period for any Eurodollar
Loan:

            (a)   the Administrative Agent reasonably determines (which
      determination shall be conclusive) that by reason of circumstances
      affecting the relevant market, adequate and reasonable means do not exist
      for ascertaining the Eurodollar Rate for such Interest Period; or

            (b)   the Required Lenders reasonably determine (which determination
      shall be conclusive) and notify the Administrative Agent that the
      Eurodollar Rate will not adequately and fairly reflect the cost to the
      Lenders of funding Eurodollar Loans for such Interest Period;

then the Administrative Agent shall give the Borrower prompt notice thereof, and
so long as such condition remains in effect, the Lenders shall be under no
obligation to make additional Eurodollar Loans, Continue Eurodollar Loans, or to
Convert Base Rate Loans into Eurodollar Loans with respect to the affected
currency.

3.8   Illegality.

      Notwithstanding any other provision of this Credit Agreement, in the event
that it becomes unlawful for any Lender (or its Applicable Lending Office) to
make, maintain, or fund Eurodollar Loans hereunder, then such Lender shall
promptly notify the Borrower thereof and such Lender's obligation to make or
Continue Eurodollar Loans and to Convert Base Rate Loans into Eurodollar Loans
shall be suspended until such time as such Lender may again make, maintain, and
fund Eurodollar Loans (in which case the provisions of Section 3.10 shall be
applicable).

3.9   Requirements of Law.

      If, after the date hereof, the adoption of any applicable law, rule, or
regulation, or any change in any applicable law, rule, or regulation, or any
change in the interpretation or administration thereof by any Governmental
Authority, central bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such Governmental Authority, central bank, or comparable agency:

            (a)   shall subject such Lender (or its Applicable Lending Office)
      to any tax, duty, or other charge with respect to any Eurodollar Loans,
      its Notes, or its obligation to make Eurodollar Loans, or change the basis
      of taxation of any amounts payable to such Lender (or its Applicable
      Lending Office) under this Credit Agreement or its Notes in respect of any
      Eurodollar Loans (other

      than taxes imposed on the overall net income of such Lender by the
      jurisdiction in which such Lender has its principal office or such
      Applicable Lending Office);

            (b)   shall impose, modify, or deem applicable any reserve, special
      deposit, assessment, or similar requirement (other than the Eurodollar
      Reserve Requirement utilized in the determination of the Eurodollar Rate)
      relating to any extensions of credit or other assets of, or any deposits
      with or other liabilities or commitments of, such Lender (or its
      Applicable Lending Office), including the Commitment of such Lender
      hereunder; or

            (c)   shall impose on such Lender (or its Applicable Lending Office)
      or the London interbank market any other condition affecting this Credit
      Agreement or its Notes or any of such extensions of credit or liabilities
      or commitments;

and the result of any of the foregoing is to increase the cost to such Lender
(or its Applicable Lending Office) of making, Converting into, Continuing, or
maintaining any Eurodollar Loans or to reduce any sum received or receivable by
such Lender (or its Applicable Lending Office) under this Credit Agreement or
its Notes with respect to any Eurodollar Loans, then the Borrower shall pay to
such Lender on demand such amount or amounts as will compensate such Lender for
such increased cost or reduction. If any Lender requests compensation by the
Borrower under this Section 3.9, the Borrower may, by notice to such Lender
(with a copy to the Administrative Agent), suspend the obligation of such Lender
to make or Continue Eurodollar Loans, or to Convert Base Rate Loans into
Eurodollar Loans, until the event or condition giving rise to such request
ceases to be in effect (in which case the provisions of Section 3.10 shall be
applicable); provided that such suspension shall not affect the right of such
Lender to receive the compensation so requested. Each Lender shall promptly
notify the Borrower and the Administrative Agent of any event of which it has
knowledge, occurring after the date hereof, that will entitle such Lender to
compensation pursuant to this Section 3.9 and will designate a different
Applicable Lending Office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the judgment of such Lender,
be otherwise disadvantageous to it. A Lender shall be entitled to compensation
under this Section only for events occurring during the 180-day period ending on
the date the Borrower receives the notice described in the immediately preceding
sentence. Any Lender claiming compensation under this Section 3.9 shall furnish
to the Borrower and the Administrative Agent a statement setting forth the
additional amount or amounts to be paid to it hereunder, which shall be prima
facie evidence of the matters stated therein. In determining such amount, such
Lender may use any reasonable averaging and attribution methods.

3.10  Treatment of Affected Loans.

      If the obligation of any Lender to make any Eurodollar Loan or to
Continue, or to Convert Base Rate Loans into, Eurodollar Loans shall be
suspended pursuant to Section 3.8 or 3.9 hereof, such Lender's Eurodollar Loans
shall be automatically Converted into Base Rate Loans on the last day(s) of
then-current Interest Period(s) for such Eurodollar Loans (or, in the case of a
Conversion required by Section 3.8 hereof, on such earlier date as such Lender
may specify to the Borrower with a copy to the Administrative Agent) and, unless
and until such Lender gives notice as provided below that the circumstances
specified in Section 3.8 or 3.9 hereof that gave rise to such Conversion no
longer exist:

            (a)   to the extent that such Lender's Eurodollar Loans have been so
      Converted, all payments and prepayments of principal that would otherwise
      be applied to such Lender's Eurodollar Loans shall be applied instead to
      its Base Rate Loans; and

            (b)   all Loans that would otherwise be made or Continued by such
      Lender as Eurodollar Loans shall be made or Continued instead as Base Rate
      Loans, and all Base Rate Loans of such Lender that would otherwise be
      Converted into Eurodollar Loans shall remain as Base Rate Loans.

If such Lender gives notice to the Borrower (with a copy to the Administrative
Agent) that the circumstances specified in Section 3.8 or 3.9 hereof that gave
rise to the Conversion of such Lender's Eurodollar Loans pursuant to this
Section 3.10 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Eurodollar Loans made by other
Lenders are outstanding, such Lender's Base Rate Loans shall be automatically
Converted, on the first day(s) of the next succeeding Interest Period(s) for
such outstanding Eurodollar Loans, to the extent necessary so that, after giving
effect thereto, all Loans held by the Lenders holding Eurodollar Loans and by
such Lender are held pro rata (as to principal amounts, interest rate basis, and
Interest Periods) in accordance with their respective Commitments.

3.11  Taxes.

      (a)   Any and all payments by any Credit Party to or for the account of
any Lender or the Administrative Agent hereunder or under any other Credit
Document shall be made free and clear of and without deduction for any and all
present or future taxes, duties, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in the case
of each Lender and the Administrative Agent, (i) taxes imposed on its income,
and franchise taxes imposed on it, by the jurisdiction under the laws of which
such Lender (or its Applicable Lending Office) or the Administrative Agent (as
the case may be) is organized or any political subdivision thereof and (ii)
taxes arising after the Closing Date as a result of or attributable to a Lender
changing its Applicable Lending Office after the date on which such Lender
becomes a party hereto (all such non-excluded taxes, duties, levies, imposts,
deductions, charges, withholdings, and liabilities being hereinafter referred to
as "Taxes"). If any Credit Party shall be required by law to deduct or withhold
any Taxes from or in respect of any sum payable under this Credit Agreement or
any other Credit Document to any Lender or the Administrative Agent, (i) the sum
payable shall be increased as necessary so that after making all required
deductions and withholdings (including deductions and withholdings applicable to
additional sums payable under this Section 3.11) such Lender or the
Administrative Agent receives an amount equal to the sum it would have received
had no such deductions been made, (ii) such Credit Party shall make such
deductions and withholdings, (iii) such Credit Party shall pay the full amount
deducted or withheld to the relevant taxation authority or other authority in
accordance with applicable law, and (iv) such Credit Party shall furnish to the
Administrative Agent, at its address referred to in Section 11.1, the original
or a certified copy of a receipt evidencing payment thereof.

      (b)   In addition, the Borrower agrees to pay any and all present or
future stamp or documentary taxes and any other excise or property taxes or
charges or similar levies that arise from any payment made under this Credit
Agreement or any other Credit Document or from the execution or delivery of, or
otherwise with respect to, this Credit Agreement or any other Credit Document
(hereinafter referred to as "Other Taxes").

      (c)   The Borrower agrees to indemnify each Lender and the Administrative
Agent for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on
amounts payable under this Section 3.11) paid by such Lender or such
Administrative Agent (as the case may be) and any liability (including
penalties, interest, and expenses) arising therefrom or with respect thereto.

      (d)   Each Lender that is not a United States person under Section
7701(a)(30) of the Internal Revenue Code, on or prior to the date of its
execution and delivery of this Credit Agreement in the case of each Lender
listed on the signature pages hereof and on or prior to the date on which it
becomes a Lender in the case of each other Lender, and from time to time
thereafter if requested in writing by the Borrower or the Administrative Agent
(but only so long as such Lender remains lawfully able to do so), shall provide
the Borrower and the Administrative Agent with (i) Internal Revenue Service Form
W-8 BEN or W-8 ECI, as appropriate, or any successor form prescribed by the
Internal Revenue Service, certifying

that such Lender is entitled to benefits under an income tax treaty to which the
United States is a party that reduces to zero the rate of withholding tax on
payments of interest or certifying that the income receivable pursuant to this
Credit Agreement is effectively connected with the conduct of a trade or
business in the United States, (ii) Internal Revenue Service Form W-8 or W-9, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
and/or (iii) any other form or certificate required by any taxing authority
(including any certificate required by Sections 871(h) and 881(c) of the
Internal Revenue Code), certifying that such Lender is entitled to an exemption
from tax on payments pursuant to this Credit Agreement or any of the other
Credit Documents.

      (e)   For any period with respect to which a Lender has failed to provide
the Borrower and the Administrative Agent with the appropriate form pursuant to
Section 3.11(d) (unless such failure is due to a change in treaty, law, or
regulation occurring subsequent to the date on which a form originally was
required to be provided), such Lender shall not be entitled to indemnification
under Section 3.11(a) or 3.11(b) with respect to Taxes imposed by the United
States; provided, however, that should a Lender that is otherwise exempt from or
subject to a reduced rate of withholding tax, become subject to Taxes because of
its failure to deliver a form required hereunder, the Borrower shall take such
steps as such Lender shall reasonably request to assist such Lender to recover
such Taxes.

      (f)   If any Credit Party is required to pay additional amounts to or for
the account of any Lender pursuant to this Section 3.11, then such Lender will
agree to use reasonable efforts to change the jurisdiction of its Applicable
Lending Office or take such other steps as the Borrower may reasonably request
so as to eliminate or reduce any such additional payment that may thereafter
accrue if such change or steps, in the reasonable judgment of such Lender, is
not otherwise materially disadvantageous to such Lender.

      (g)   Within thirty days after the date of any payment of Taxes, the
applicable Credit Party shall furnish to the Administrative Agent the original
or a certified copy of a receipt evidencing such payment.

      (h)   Without prejudice to the survival of any other agreement of the
Credit Parties hereunder, the agreements and obligations of the Credit Parties
contained in this Section 3.11 shall survive the repayment of the Loans, LOC
Obligations and other obligations under the Credit Documents and the termination
of the Commitments hereunder.

3.12  Funding Losses.

      Upon demand of any Lender (with a copy to the Administrative Agent) from
time to time, the Borrower shall promptly compensate such Lender for and hold
such Lender harmless from any loss, cost or expense incurred by it as a result
of:

            (a)   any continuation, conversion, payment or prepayment of any
      Eurodollar Loan on a day other than the last day of the Interest Period
      for such Loan (whether voluntary, mandatory, automatic, by reason of
      acceleration, or otherwise); or

            (b)   any failure by the Borrower (for a reason other than the
      failure of such Lender to make a Loan) to prepay, borrow, continue or
      convert any Eurodollar Loan on the date or in the amount notified by the
      Borrower;

including any loss or expense arising from the liquidation or reemployment of
funds obtained by it to maintain such Loan or from fees payable to terminate the
deposits from which such funds were obtained

but excluding any loss of anticipated profits. The Borrower shall also pay any
customary and reasonable administrative fees charged by such Lender in
connection with the foregoing.

3.13  Pro Rata Treatment.

      (a)   Loans. Except to the extent otherwise provided herein, each
Revolving Loan advance, each payment or prepayment of principal of any Revolving
Loan or reimbursement obligations arising from drawings under Letters of Credit,
each payment of interest on any Revolving Loan, or reimbursement obligations
arising from drawings under Letters of Credit, each payment of the Commitment
Fee, each payment of the Letter of Credit Fee, each reduction of Aggregate
Revolving Committed Amount, and each conversion or extension of Revolving Loan
shall be allocated pro rata among the Revolving Lenders according to their
respective Revolving Commitment Percentages. Except to the extent otherwise
provided herein, each payment or prepayment of principal of any Tranche A Term
Loan, each payment of interest on any Tranche A Term Loan and each conversion or
extension of any Tranche A Term Loan shall be allocated pro rata among the
Tranche A Term Lenders according to their respective Tranche A Term Loan
Percentages. Except to the extent otherwise provided herein, each payment or
prepayment of principal of any Tranche B Term Loan, each payment of interest on
any Tranche B Term Loan and each conversion or extension of any Tranche B Term
Loan shall be allocated pro rata among the Tranche B Term Lenders according to
their respective Tranche B Term Loan Percentages.

      (b)   Advances. Except to the extent otherwise provided herein:

            (i)   No Lender shall be responsible for the failure or delay by any
      other Lender in its obligation to make its ratable share of a borrowing
      hereunder; provided, however, that the failure of any Lender to fulfill
      its obligations hereunder shall not relieve any other Lender of its
      obligations hereunder.

            (ii)  Unless the Borrower or any Lender has notified the
      Administrative Agent prior to the date any payment is required to be made
      by it to the Administrative Agent hereunder, that the Borrower or such
      Lender, as the case may be, will not make such payment, the Administrative
      Agent may assume that the Borrower or such Lender, as the case may be, has
      timely made such payment and may (but shall not be so required to), in
      reliance thereon, make available a corresponding amount to the Person
      entitled thereto. If and to the extent that such payment was not in fact
      made to the Administrative Agent in immediately available funds, then:

                  (A)   if the Borrower failed to make such payment, each Lender
            shall forthwith on demand repay to the Administrative Agent the
            portion of such assumed payment that was made available to such
            Lender in immediately available funds, together with interest
            thereon in respect of each day from and including the date such
            amount was made available by the Administrative Agent to such Lender
            to the date such amount is repaid to the Administrative Agent in
            immediately available funds, at the Federal Funds Rate from time to
            time in effect; and

                  (B)   if any Lender failed to make such payment, such Lender
            shall forthwith on demand pay to the Administrative Agent the amount
            thereof in immediately available funds, together with interest
            thereon for the period from the date such amount was made available
            by the Administrative Agent to the Borrower to the date such amount
            is recovered by the Administrative Agent (the "Compensation Period")
            at a rate per annum equal to the Federal Funds Rate from time to
            time in effect. If such Lender does not pay such amount forthwith
            upon the Administrative Agent's demand therefor, the

            Administrative Agent may make a demand therefor upon the Borrower,
            and the Borrower shall pay such amount to the Administrative Agent,
            together with interest thereon for the Compensation Period at a rate
            per annum equal to the rate of interest applicable to the applicable
            Loan. Nothing herein shall be deemed to relieve any Lender from its
            obligation to fulfill its Commitment or to prejudice any rights that
            the Administrative Agent or the Borrower may have against any Lender
            as a result of any default by such Lender hereunder. A notice of the
            Administrative Agent to any Lender with respect to any amount owing
            under this subsection (b)(ii)(B) shall be conclusive, absent
            manifest error.

3.14  Sharing of Payments.

      (a)   Lenders. The Lenders agree that, in the event that any Lender shall
obtain payment in respect of any Loan, LOC Obligation or any other obligation
owing to such Lender under this Credit Agreement through the exercise of a right
of setoff, banker's lien or counterclaim, or pursuant to a secured claim under
Section 506 of the Bankruptcy Code or other security or interest arising from,
or in lieu of, such secured claim, received by such Lender under any applicable
bankruptcy, insolvency or other similar law or otherwise, or by any other means,
in excess of its pro rata share of such payment as provided in this Credit
Agreement, such Lender shall promptly purchase from the other Lenders a
Participation Interest in such Loan, LOC Obligation and other obligations in
such amounts, and make such other adjustments from time to time, as shall be
equitable to the end that all the Lenders share such payment ratably in
accordance with the provisions of this Credit Agreement. The Lenders further
agree that if payment to any such Lender obtained by such Lender through the
exercise of a right of setoff, banker's lien, counterclaim or other event as
aforesaid shall be rescinded or must otherwise be restored, each Lender that
shall have shared the benefit of such payment shall, by repurchase of a
Participation Interest theretofore sold, return its share of that benefit
(together with its share of any accrued interest payable with respect thereto)
to each such Lender whose payment shall have been rescinded or otherwise
restored. The Borrower agrees that any Lender so purchasing such a participation
may, to the fullest extent permitted by law, exercise all rights of payment,
including setoff, banker's lien or counterclaim, with respect to such
participation as fully as if such Lender were a holder of such Loan, LOC
Obligation or other obligation in the amount of such participation. If under any
applicable bankruptcy, insolvency or other similar law, any Lender receives a
secured claim in lieu of a setoff to which this Section 3.14 applies, such
Lender shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders under this
Section 3.14 to share in the benefits of any recovery on such secured claim.

      (b)   Lenders and Administrative Agent. Except as otherwise expressly
provided in this Credit Agreement, if any Lender or the Administrative Agent
shall fail to remit to the Administrative Agent or any other Lender an amount
payable by such Lender or the Administrative Agent to the Administrative Agent
or such other Lender pursuant to this Credit Agreement on the date when such
amount is due, such payments shall be made together with interest thereon for
each date from the date such amount is due until the date such amount is paid to
the Administrative Agent or such other Lender at a rate per annum equal to the
Federal Funds Rate.

3.15  Payments, Computations, etc.

      (a)   Time of Payments. All payments shall be made to the Administrative
Agent not later than 2:00 P.M. (Charlotte, North Carolina time).

      (b)   Generally. Except as otherwise specifically provided herein, all
payments shall be made to the Administrative Agent in Dollars in immediately
available funds, and shall be made without condition or deduction for any
counterclaim, defense, recoupment or setoff. Payments received after the time
set forth

in Section 3.15(a) shall be deemed to have been received on the next succeeding
Business Day. The Administrative Agent may (but shall not be obligated to) debit
the amount of any such payment that is not made by such time to any ordinary
deposit account of the Borrower maintained with such Administrative Agent (with
prompt notice to the Borrower). The Borrower shall, at the time it makes any
payment under this Credit Agreement, specify to the Administrative Agent the
Loans, LOC Obligations, Fees, interest or other amounts payable by the Borrower
hereunder to which such payment is to be applied (and in the event that it fails
so to specify, or if such application would be inconsistent with the terms
hereof, the Administrative Agent shall distribute such payment to the Lenders in
such manner as the Administrative Agent may determine to be appropriate in
respect of obligations owing by the Borrower hereunder, subject to the terms of
Section 3.14(a) and Section 3.15(b)). The Administrative Agent will distribute
such payments to the Lenders if any such payment is received prior to 12:00 Noon
(Charlotte, North Carolina time) on a Business Day in like funds as received
prior to the end of such Business Day and otherwise such Administrative Agent
will distribute such payment to the Lenders entitled thereto on the next
succeeding Business Day. Whenever any payment hereunder 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 (subject to accrual of interest and Fees for
the period of such extension). Except as expressly provided otherwise herein,
all computations of interest and fees shall be made on the basis of the actual
number of days elapsed over a year of 360 days, except with respect to
computation of interest on Base Rate Loans determined by reference to the Prime
Rate, which shall be calculated based on a year of 365 or 366 days, as
appropriate. Interest shall accrue from and include the date of borrowing, but
exclude the date of payment.

      (c)   Allocation of Payments After Event of Default. Notwithstanding any
other provisions of this Credit Agreement to the contrary, after the occurrence
and during the continuance of an Event of Default, all amounts collected or
received on or in respect of the Obligations (or other amounts owing under the
Credit Documents in connection therewith) shall be paid over or delivered as
follows:

                  FIRST, to the payment of all reasonable out-of-pocket costs
            and expenses (including, without limitation, reasonable attorneys'
            fees actually incurred and expenses but excluding the allocated cost
            of internal counsel) of the Collateral Agent incurred in connection
            with the execution of its duties as collateral agent in exercising
            or attempting to exercise rights and remedies in respect of the
            Collateral and all protective advances made with respect thereto;

                  SECOND, to the payment of all reasonable out-of-pocket costs
            and expenses (including, without limitation, reasonable attorneys'
            fees actually incurred and expenses but excluding the allocated cost
            of internal counsel) of the Administrative Agent in connection with
            enforcing the rights and remedies of the Lenders under the Credit
            Documents and any protective advances made with respect thereto;

                  THIRD, to payment of any fees owed to the Administrative
            Agent;

                  FOURTH, to the payment of all reasonable out-of-pocket costs
            and expenses (including, without limitation, reasonable attorneys'
            fees actually incurred and expenses but excluding the allocated cost
            of internal counsel) of each of the Lenders hereunder in connection
            with enforcing its rights under the Credit Documents or otherwise
            with respect to the Obligations owing to such Lender;

                  FIFTH, to the payment of all accrued interest and fees on or
            in respect of the Obligations;

                  SIXTH, to the payment of the outstanding principal amount of
            the Obligations (including the payment or cash collateralization of
            the outstanding LOC Obligations) and obligations owing from any
            Credit Party to a Lender or an Affiliate of a Lender under Hedging
            Agreements relating to the Obligations to the extent permitted
            hereunder;

                  SEVENTH, to all other Obligations and other obligations that
            shall have become due and payable under the Credit Documents
            otherwise and not repaid pursuant to clauses "FIRST" through "SIXTH"
            above; and

                  EIGHTH, to the payment of the surplus, if any, to whoever may
            be lawfully entitled to receive such surplus.

      In carrying out the foregoing, (i) amounts received shall be applied in
      the numerical order provided until exhausted prior to application to the
      next succeeding category; (ii) except as otherwise provided, the Lenders
      shall receive amounts ratably in accordance with their respective pro rata
      share (based on the proportion that then outstanding Obligations held by
      such Lenders bears to the aggregate amount of Obligations then
      outstanding) of amounts available to be applied pursuant to clauses
      "FOURTH", "FIFTH" and "SEVENTH" above; (iii) except as otherwise provided,
      the Lenders and, with respect to Hedging Agreements, their Affiliates,
      shall receive amounts ratably in accordance with their respective pro rata
      share (based on the proportion that then outstanding Obligations and
      obligations under such Hedging Agreements held by such Lender or such
      Affiliate bears to the aggregate amount of then outstanding Obligations
      and obligations under such Hedging Agreements held by all Lenders and
      Affiliates) of amounts available to be applied pursuant to clauses "SIXTH"
      above; and (iv) to the extent that any amounts available for distribution
      pursuant to clause "SIXTH" above are attributable to the issued but
      undrawn amount of outstanding Letters of Credit, such amounts shall be
      held by the Administrative Agent in a cash collateral account and applied
      (A) first, to reimburse the Issuing Lender for any drawings under such
      Letters of Credit and (B) then, following the expiration of all Letters of
      Credit, to all other obligations of the types described in clauses "FIFTH"
      and "SIXTH" above in the manner provided in this Section 3.15(b).

3.16  Evidence of Debt.

      (a)   Each Lender shall maintain an account or accounts evidencing each
Loan made by such Lender to the Borrower from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time under this Credit Agreement. Each Lender will make reasonable efforts to
maintain the accuracy of its account or accounts and to promptly update its
account or accounts from time to time, as necessary.

      (b)   The Administrative Agent shall maintain the Register pursuant to
Section 11.3(c), and a subaccount for each Lender, in which Register and
subaccounts (taken together) shall be recorded (i) the amount, type and Interest
Period of each Loan hereunder, (ii) the amount of any principal or interest due
and payable or to become due and payable to each Lender hereunder and (iii) the
amount of any sum received by the Administrative Agent hereunder from or for the
account of the Borrower and each Lender's share thereof. The Administrative
Agent will make reasonable efforts to maintain the accuracy of the subaccounts
referred to in the preceding sentence and to promptly update such subaccounts
from time to time, as necessary.

      (c)   The entries made in the accounts, Register and subaccounts
maintained pursuant to subsection (b) of this Section 3.16 (and, if consistent
with the entries of the Administrative Agent, subsection (a)) shall be prima
facie evidence of the existence and amounts of the obligations of the Credit
Parties therein recorded; provided, however, that the failure of any Lender or
the Administrative Agent to maintain any such

account, such Register or such subaccount, as applicable, or any error therein,
shall not in any manner affect the obligation of the Credit Parties to repay the
Obligations and other amounts owing hereunder to such Lender.

3.17  Treatment of Affected Lenders.

      If (a) a Lender requests compensation pursuant to Section 3.6, 3.9 or
3.11, (b) the obligation of a Lender to make Eurodollar Loans or to Continue, or
to Convert Base Rate Loans into, Eurodollar Loans shall be suspended pursuant to
Section 3.8 or 3.9, (c) any Lender fails to consent to any waiver, consent,
amendment or other modification to any Credit Document which (i) requires the
unanimous written consent of all the Lenders under Section 11.6 and (ii) has
been approved in writing by the Required Lenders, or (d) any Lender shall be a
Defaulting Lender (any of the events described in clauses (a) through (d) above
are "Replacement Events")), then, so long as there does not then exist any Event
of Default, the Borrower may demand that such Lender (the "Affected Lender"),
and upon such demand the Affected Lender shall promptly, assign all of its
Commitments, if any, and Loans to one or more Eligible Assignees arranged by the
Borrower in accordance with Section 11.3 for a purchase price equal to the
aggregate principal balance of Loans then owing to the Affected Lender plus any
accrued but unpaid interest thereon and any accrued but unpaid fees owing to the
Affected Lender, provided that (i) the Borrower shall notify the Affected Lender
of its intention to replace the Affected Lender within fifteen (15) days after
the applicable Replacement Event, (ii) the Borrower shall arrange for the
consummation of such assignment(s) within thirty (30) days after the applicable
Replacement Event, and (iii) in the case of an Affected Lender that has
requested compensation pursuant to Section 3.6, 3.9 or 3.11, the Borrower shall
have paid to the Affected Lender such compensation. If the Borrower does not
comply with clauses (i), (ii) and (iii) of the immediately preceding sentence,
the Borrower's rights under this Section 3.16 with respect to the applicable
Replacement Event shall terminate. Each of the Administrative Agent and the
Affected Lender shall reasonably cooperate in effectuating the replacement of an
Affected Lender under this Section, but at no time shall the Administrative
Agent or the Affected Lender be obligated in any way whatsoever to initiate any
such replacement. The exercise by the Borrower of its rights under this Section
shall be at the Borrower's sole cost and expense.


                                    SECTION 4

                                    GUARANTY

4.1   The Guaranty.

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

      (b)   Notwithstanding any provision to the contrary contained herein or in
any other of the Credit Documents or Hedging Agreements, to the extent the
obligations of a Guarantor shall be adjudicated to be

invalid or unenforceable for any reason (including, without limitation, because
of any applicable state, provincial or federal law relating to fraudulent
conveyances or transfers or the granting of financial assistance) then the
obligations of each Guarantor under this Credit Agreement and the other Credit
Documents shall be limited to the maximum amount that is permissible under
applicable law (whether federal, state or provincial and including, without
limitation, the Bankruptcy Code). In such case or otherwise at the request of
the Administrative Agent, each Credit Party shall take such action and shall
execute and deliver all such further documents required by the Administrative
Agent to cause the obligations of such Guarantor to be enforceable to the extent
required by this Credit Agreement.

4.2   Obligations Unconditional.

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

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

            (b)   any of the acts mentioned in any of the provisions of any of
      the Credit Documents, any Hedging Agreement between any member of the
      Consolidated Group and any Lender or any Affiliate of a Lender, or any
      other agreement or instrument referred to in the Credit Documents or such
      Hedging Agreements shall be done or omitted;

            (c)   the maturity of any of the Guaranteed Obligations shall be
      accelerated, or any of the Guaranteed Obligations shall be modified,
      supplemented or amended in any respect, or any right under any of the
      Credit Documents, any Hedging Agreement between any member of the
      Consolidated Group and any Lender or any Affiliate of a Lender, or any
      other agreement or instrument referred to in the Credit Documents or such
      Hedging Agreements shall be waived or any other guarantee of any of the
      Guaranteed Obligations or any security therefor shall be released,
      impaired or exchanged in whole or in part or otherwise dealt with;

            (d)   any Lien granted to, or in favor of, the Administrative Agent
      or any Lender or Lenders as security for any of the Guaranteed Obligations
      shall fail to attach or be perfected; or

            (e)   any of the Guaranteed Obligations shall be determined to be
      void or voidable (including, without limitation, for the benefit of any
      creditor of any Guarantor) or shall be

      subordinated to the claims of any Person (including, without limitation,
      any creditor of any Guarantor).

With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever, and any requirement that the Administrative Agent or any Lender
exhaust any right, power or remedy or proceed against any Person under any of
the Credit Documents, any Hedging Agreement between any member of the
Consolidated Group and any Lender, or any Affiliate of a Lender, or any other
agreement or instrument referred to in the Credit Documents or such Hedging
Agreements, or against any other Person under any other guarantee of, or
security for, any of the Guaranteed Obligations.

4.3   Reinstatement.

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

4.4   Certain Additional Waivers.

      Each Guarantor agrees that such Guarantor shall have no right of recourse
to security for the Guaranteed Obligations, except through the exercise of
rights of subrogation pursuant to Section 4.2 and through the exercise of rights
of contribution pursuant to Section 4.6.

4.5   Remedies.

      The Guarantors agree that, to the fullest extent permitted by law, as
between the Guarantors, on the one hand, and the Administrative Agent and the
Lenders, on the other hand, the Guaranteed Obligations may be declared to be
forthwith due and payable as provided in Section 9.2 (and shall be deemed to
have become automatically due and payable in the circumstances provided in said
Section 9.2) for purposes of Section 4.1 notwithstanding any stay, injunction or
other prohibition preventing such declaration (or preventing the Guaranteed
Obligations from becoming automatically due and payable) as against any other
Person and that, in the event of such declaration (or the Guaranteed Obligations
being deemed to have become automatically due and payable), the Guaranteed
Obligations (whether or not due and payable by any other Person) shall forthwith
become due and payable by the Guarantors for purposes of Section 4.1. The
Guarantors acknowledge and agree that their obligations hereunder are secured in
accordance with the terms of the Collateral Documents and that the Lenders may
exercise their remedies thereunder in accordance with the terms thereof.

4.6   Rights of Contribution.

      The Guarantors hereby agree, as among themselves, that if any Guarantor
shall become an Excess Funding Guarantor (as defined below), each other
Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the
succeeding provisions of this Section 4.6), pay to such Excess Funding Guarantor
an amount equal to such Guarantor's Pro Rata Share (as defined below and
determined, for this

purpose, without reference to the properties, assets, liabilities and debts of
such Excess Funding Guarantor) of such Excess Payment (as defined below). The
payment obligation of any Guarantor to any Excess Funding Guarantor under this
Section 4.6 shall be subordinate and subject in right of payment to the prior
payment in full of the obligations of such Guarantor under the other provisions
of this Section 4, and such Excess Funding Guarantor shall not exercise any
right or remedy with respect to such excess until payment and satisfaction in
full of all of such obligations. For purposes hereof, (a) "Excess Funding
Guarantor" shall mean, in respect of any obligations arising under the other
provisions of this Section 4 (hereafter, the "Guaranty Obligations"), a
Guarantor that has paid an amount in excess of its Pro Rata Share of the
Guaranty Obligations; (b) "Excess Payment" shall mean, in respect of any
Guaranty Obligations, the amount paid by an Excess Funding Guarantor in excess
of its Pro Rata Share of such Guaranty Obligations; and (c) "Pro Rata Share",
for the purposes of this Section 4.6, shall mean, for any Guarantor, the ratio
(expressed as a percentage) of (i) the amount by which the aggregate present
fair saleable value of all of its assets and properties exceeds the amount of
all debts and liabilities of such Guarantor (including contingent, subordinated,
unmatured, and unliquidated liabilities, but excluding the obligations of such
Guarantor hereunder) to (ii) the amount by which the aggregate present fair
saleable value of all assets and other properties of the Borrower and all of the
Guarantors exceeds the amount of all of the debts and liabilities (including
contingent, subordinated, unmatured, and unliquidated liabilities, but excluding
the obligations of the Borrower and the Guarantors hereunder) of the Borrower
and all of the Guarantors, all as of the Closing Date (if any Guarantor becomes
a party hereto subsequent to the Closing Date, then for the purposes of this
Section 4.6 such subsequent Guarantor shall be deemed to have been a Guarantor
as of the Closing Date and the information pertaining to, and only pertaining
to, such Guarantor as of the date such Guarantor became a Guarantor shall be
deemed true as of the Closing Date).

4.7   Guarantee of Payment; Continuing Guarantee.

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


                                    SECTION 5

                                   CONDITIONS

5.1   Closing Conditions.

      The obligation of the Lenders to enter into this Credit Agreement and to
make the initial Extensions of Credit shall be subject to satisfaction of the
following conditions (in form and substance acceptable to the Lenders):

            (a)   Executed Credit Documents. Receipt by the Administrative Agent
      of: (i) multiple counterparts of this Credit Agreement, (ii) a Revolving
      Note for each Revolving Lender, (iii) a Tranche A Term Note for each
      Tranche A Term Lender, (iv) a Tranche B Term Note for each Tranche B Term
      Lender and (v) multiple counterparts of the Collateral Documents, in each
      case executed by a duly authorized officer of each party thereto and in
      each case conforming to the requirements of this Credit Agreement.

            (b)   Transaction Documents. The Administrative Agent shall have
      received a certified copy of the definitive purchase agreement and all
      other related material documentation for the Transaction (including,
      without limitation, the Services and Transition Agreement) (in each case
      including schedules and exhibits), together with all amendments,
      modifications, supplements and waivers, all of which shall be in form and
      substance reasonably satisfactory to the Administrative

      Agent. The aggregate purchase price and the cash portion of the aggregate
      purchase price for the Transaction shall not be in excess of the aggregate
      purchase price contemplated by the Asset Purchase Agreement as in effect
      on January 2, 2002.

            (c)   Consummation of Transaction. The Administrative Agent shall
      have received reasonably satisfactory evidence that the Transaction shall
      have been consummated (or contemporaneous with the advances of the initial
      Loans hereunder will be consummated) substantially in accordance with the
      terms of the Transaction Documents and substantially in compliance with
      applicable law and regulatory approvals.

            (d)   Financial Information.

                  (i)   The Administrative Agent shall have received (A) the
            consolidated financial statements of the Borrower and its
            subsidiaries for the fiscal years ended June 30, 1999, 2000 and
            2001, including balance sheets, income and cash flow statements, in
            each case audited by independent public accountants of recognized
            national standing and prepared in conformity with GAAP, (B) interim
            quarterly financial statements of the Borrower and its subsidiaries
            for the fiscal quarter ending December 31, 2001 (and March 31, 2002
            if the Borrower has made such financial statements available
            publicly), (C) a pro forma balance sheet and income statement of the
            Borrower and its subsidiaries giving effect to the Transaction as
            contained in the Form S-4 filed with the Securities and Exchange
            Commission by the Borrower in connection with the Transaction (the
            pro forma statements described in this clause (C) are herein
            referred to as the "Pro Forma Statements") and (D) such other
            information relating to the Transaction as the Administrative Agent
            may reasonably request.

                  (ii)  The Administrative Agent shall have received and in each
            case approved (A) the consolidated financial statements of the
            Acquired Company for the fiscal years ended January 2, 2000,
            December 31, 2000 and December 30, 2001 and for the nine months
            ending September 30, 2001, including balance sheets and statements
            of income and stockholders' equity, in each case audited by
            independent public accountants of recognized national standing and
            prepared in conformity with GAAP and (B) interim monthly financial
            statements of the Acquired Company for January 2002 and February
            2002.

                  (iii) The Administrative Agent and the Lenders shall have
            received such other financial information regarding the members of
            the Consolidated Group as may be reasonably requested by the
            Administrative Agent and the Lenders.

            (e)   Legal Opinions. Receipt by the Administrative Agent of
      multiple counterparts of opinions of counsel for the Credit Parties
      relating to the Credit Documents and the transactions contemplated
      therein, in form and substance satisfactory to the Administrative Agent
      and the Lenders, and including, among other things, opinions regarding
      enforceability of the Credit Documents and the perfection of the security
      interests created thereby.

            (f)   Corporate Documents. Receipt by the Administrative Agent of
      the following (or the equivalent) for each of the Credit Parties:

                  (i)   Charter Documents. Copies of the articles or
            certificates of incorporation or other charter documents of such
            Credit Party certified to be true and complete as of a recent date
            by the appropriate Governmental Authority of the state or other
            jurisdiction of its

            incorporation and certified by a secretary or assistant secretary
            (or individual performing equivalent function) of such Credit Party
            to be true and correct as of the Closing Date.

                  (ii)  Bylaws. A copy of the bylaws, operating agreement or
            equivalent of such Credit Party certified by a secretary or
            assistant secretary (or individual performing equivalent function)
            of such Credit Party to be true and correct and in force and effect
            as of the Closing Date.

                  (iii) Resolutions. Copies of resolutions of the board of
            directors (or comparable group of individuals) of such Credit Party
            approving and adopting the Credit Documents to which it is a party,
            the transactions contemplated therein and authorizing execution and
            delivery thereof, certified by a secretary or assistant secretary
            (or individual performing equivalent function) of such Credit Party
            to be true and correct and in force and effect as of the Closing
            Date.

                  (iv)  Good Standing. A copy of a certificate of good standing,
            existence or its equivalent certified as of a recent date by the
            appropriate governmental authorities of the state of incorporation
            and of the state where such Credit Party maintains its principal
            place of business.

                  (v)   Officer's Certificate. An officer's certificate for each
            of the Credit Parties dated as of the Closing Date substantially in
            the form of Exhibit 5.1 with appropriate insertions and attachments.

            (g)   Officer's Certificates. The Administrative Agent shall have
      received a certificate or certificates executed by a Responsible Officer
      of the Borrower as of the Closing Date, in form and substance satisfactory
      to the Administrative Agent, (i) confirming the matters contained in
      clauses (i) and (j) of this Section 5.1 and (ii) stating that immediately
      after giving effect to the initial Loans made and Letters of Credit issued
      on the Closing Date, (A) no Default or Event of Default exists and (B) all
      representations and warranties contained herein and in the other Credit
      Documents are true and correct in all material respects.

            (h)   Personal Property Collateral. Receipt by the Administrative
      Agent of the following:

                  (i)   Uniform Commercial Code Searches. Searches of Uniform
            Commercial Code filings in the state of formation of each Credit
            Party, the jurisdiction of the chief executive office of each Credit
            Party and each jurisdiction where any Collateral is located and each
            other jurisdiction where a filing would need to be made in order to
            perfect the Lender's security interest in the Collateral, copies of
            the financing statements on file in such jurisdictions and evidence
            that no Liens exist other than Permitted Liens and Liens to be
            released in connection with the consummation of the Transaction.

                  (ii)  Intellectual Property Searches. Searches of ownership
            of, and Liens on, Intellectual Property of each Credit Party in the
            appropriate governmental offices and evidence that no Liens exist
            other than Permitted Liens and Liens to be released in connection
            with the consummation of the Transaction;

                  (iii) Intellectual Property Filings. Such patent, trademark
            and copyright notices and filings as necessary or appropriate, in
            the Administrative Agent's discretion, to perfect the security
            interests in Intellectual Property.

                  (iv)  Certificated Interests. Original certificates evidencing
            the Capital Stock pledged pursuant to the Collateral Documents,
            together with undated stock transfer powers executed in blank.

            (i)   Consents. All material governmental, shareholder and third
      party consents (including Hart-Scott Rodino clearance) and approvals
      necessary in connection with the Transaction and the other transactions
      contemplated hereby shall have been obtained (or appropriate waivers
      obtained); all such consents and approvals shall be in force and effect;
      and all applicable waiting periods shall have expired without any action
      being taken by any authority that could restrain, prevent or impose any
      material adverse conditions on the Transaction or such other transactions
      or that could seek or threaten any of the foregoing.

            (j)   Judgments; Litigation. There shall not exist (a) any order,
      decree, judgment, ruling or injunction which restrains the consummation of
      the Transaction in the manner contemplated by the Transaction Documents,
      and (b) any pending or threatened action, suit, investigation or
      proceeding, which could reasonably be expected to have a Material Adverse
      Effect.

            (k)   Availability. After giving effect to the Transaction and the
      initial Extensions of Credit made on the Closing Date, there shall be at
      least $35 million of availability existing under the Aggregate Revolving
      Committed Amount.

            (l)   Leasehold Interests. In the case of each of the real property
      leasehold interests of the Borrower and its Subsidiaries identified on
      Schedule 5.1, the Administrative Agent shall have received such estoppel
      letters, consents and waivers from the landlords on such real property as
      may be required by the Administrative Agent, which estoppel letters shall
      be in the form and substance reasonably satisfactory to the Agent.

            (m)   Evidence of Insurance. Receipt by the Administrative Agent of
      copies of insurance policies or certificates of insurance of the members
      of the Consolidated Group evidencing liability and casualty insurance
      meeting the requirements set forth in the Credit Documents, including,
      without limitation, naming the Collateral Agent as additional insured (in
      the case of liability insurance) or sole loss payee (in the case of
      casualty insurance) on behalf of the Lenders.

            (n)   Fees and Expenses. The Borrower shall have paid to the
      Administrative Agent and the Lenders all fees and expenses required to be
      paid on or before the Closing Date.

5.2   Conditions to all Extensions of Credit.

      The obligation of each Lender to make any Extension of Credit hereunder
(including the initial Extension of Credit to be made hereunder) is subject to
the satisfaction of the following conditions precedent:

            (a)   Representations and Warranties. The representations and
      warranties made by the Credit Parties herein and in the other Credit
      Documents and that are contained in any certificate furnished at any time
      under or in connection herewith shall be true and correct in all material
      respects on and as of the date of such Extension of Credit as if made on
      and as of such date (except for those that expressly relate to an earlier
      date).

            (b)   No Default or Event of Default. No Default or Event of Default
      shall have occurred and be continuing on the date of such Extension of
      Credit or after giving effect to such Extension of Credit unless such
      Default or Event of Default shall have been waived in accordance with this
      Credit Agreement.

            (c)   Other Conditions. The Borrower shall have satisfied the
      conditions set forth in Section 2 and, in the case of Continuations and
      Conversions, Section 3.2.

      Each request for an Extension of Credit (including Continuations and
Conversions) and each acceptance by the Borrower of an Extension of Credit
(including Continuations and Conversions) shall be deemed to constitute a
representation and warranty by the Borrower as of the date of such Extension of
Credit that the applicable conditions in this Section 5.2 have been satisfied.


                                   SECTION 6

                         REPRESENTATIONS AND WARRANTIES

      To induce the Lenders to enter into this Credit Agreement and to make the
Extensions of Credit hereunder, each of the Credit Parties hereby represents and
warrants to the Administrative Agent and to each Lender that:

6.1   Financial Condition.

      Each of the financial statements described below (copies of which have
heretofore been provided to the Administrative Agent for distribution to the
Lenders) have been prepared in accordance with GAAP consistently applied
throughout the periods covered thereby, are complete and correct in all material
respects and present fairly, in all material respects, the financial condition
and results from operations of the entities and for the periods specified,
subject in the case of interim company-prepared statements to normal year-end
adjustments and the absence of footnotes:

            (a)   the audited consolidated balance sheets of the Borrower and
      its consolidated Subsidiaries dated as of June 30, 1999, June 30, 2000 and
      June 30, 2001, together with the related audited statements of income,
      stockholders' equity and cash flows for the respective fiscal years then
      ended, certified by Ernst & Young LLP, certified public accountants;

            (b)   the unaudited, company-prepared balance sheets of the Borrower
      and its consolidated Subsidiaries dated as of December 31, 2001, together
      with the related unaudited, company-prepared statements of income,
      stockholders' equity and cash flows for the fiscal quarter then ended;

            (c)   the audited consolidated balance sheets of the Acquired
      Company dated as of January 2, 2000, December 31, 2000 and December 30,
      2001, together with the related audited statements of income and
      stockholders' equity for the respective fiscal years then ended, certified
      by Ernst & Young LLP, certified public accountants;

            (d)   the audited consolidated balance sheet of the Acquired Company
      dated as of September 30, 2001, together with the related audited
      statements of income and stockholders' equity for the nine month period
      then ended, certified by Ernst & Young LLP, certified public accountants;
      and

            (e)   after the Closing Date, the annual and quarterly financial
      statements provided in accordance with Sections 7.1(a) and (b).

      The Pro Forma Statements are based upon reasonable assumptions made known
to the Lenders and upon information not known to be incorrect or misleading in
any material respect. The representations regarding the financial statements
referred to in the immediately preceding subsections (c) and (d) are only made
to the knowledge of the Responsible Officers of the Borrower as of the date such
representation is made.

6.2   No Changes or Restricted Payments.

      Since June 30, 2001:

            (a)   for the period to the Closing Date, except as previously
      disclosed in writing to the Administrative Agent and the Lenders or except
      as disclosed in any public filings or reports filed by the Borrower with
      the Securities and Exchange Commission, (i) there have been no material
      sales, transfers or other dispositions of any material part of the
      business or property of the members of the Consolidated Group, nor have
      there been any material purchases or other acquisitions of any business or
      property (including the Capital Stock of any other person) by the members
      of the Consolidated Group, that are not reflected in the annual audited or
      company-prepared quarterly financial statements referenced in Section
      6.1(a) and (b) hereof, and (ii) no Restricted Payments have been declared
      or paid by members of the Consolidated Group; and

            (b)   there has been no circumstance, development or event relating
      to or affecting the members of the Consolidated Group that has had or
      could reasonably be expected to have a Material Adverse Effect.

6.3   Organization; Existence; Compliance with Law.

      Each of the members of the Consolidated Group (a) is duly organized or
formed, as the case may be, validly existing and in good standing under the laws
of the jurisdiction of its organization or formation, (b) has the corporate or
other necessary power and authority, and the legal right to own and operate its
Property, to lease the Property it leases as lessee and to conduct the business
in which it is currently engaged, (c) is duly qualified as a foreign entity and
in good standing under the laws of each jurisdiction where its ownership, lease
or operation of Property or the conduct of its business requires such
qualification, other than in such jurisdictions where the failure to be so
qualified and in good standing would not, in the aggregate, be reasonably
expected to have a Material Adverse Effect, and (d) is in compliance with all
Medicare Regulations, Medicaid Regulations and all other Requirements of Law
applicable to it, or to its Properties, except to the extent that the failure to
comply therewith could not, in the aggregate, be reasonably expected to have a
Material Adverse Effect. Without limiting the generality of the foregoing, with
respect to each member of the Consolidated Group (and in each case, except as
would not be reasonably expected to have a Material Adverse Effect):

            (i)   There is (A) no member of the Consolidated Group or, to the
      knowledge of the Responsible Officers of the Borrower, no individual
      employed by any member of the Consolidated Group that could reasonably be
      expected to have criminal culpability or to be excluded from participation
      in any Medical Reimbursement Program for corporate or individual actions
      or failures to act where such culpability or exclusion has resulted or
      could reasonably be expected to result in an Exclusion Event; and (B) to
      the knowledge of the Responsible Officers of the Borrower, no officer
      continuing to be employed by the Consolidated Group who may be expected to
      have individual culpability for matters under investigation by the OIG or
      other

      Governmental Authority unless such officer has been, within a reasonable
      period of time after discovery of such actual or potential culpability,
      either suspended or removed from positions of responsibility related to
      those activities under challenge by the OIG or other Governmental
      Authority or otherwise dealt with in a manner consistent with the
      corporate compliance program referred to in Section 7.15 hereof;

            (ii)  Current billing policies, arrangements, protocols and
      instructions comply with requirements of Medical Reimbursement Programs,
      except where any such failure to comply could not reasonably be expected
      to result in an Exclusion Event;

            (iii) Current medical director compensation arrangements comply with
      state and federal anti-kick back, fraud and abuse, and Stark I and II
      requirements, except where any such failure to comply could not reasonably
      be expected to result in an Exclusion Event.

6.4   Power; Authorization; Enforceable Obligations.

      Each of the Credit Parties has the corporate or other necessary power and
authority, and the legal right, to make, deliver and perform the Credit
Documents to which it is a party and has taken all necessary corporate or other
action to authorize the execution, delivery and performance by it of the Credit
Documents to which it is a party. No material consent or authorization of,
filing with, notice to or other act by or in respect of, any Governmental
Authority or any other Person is required in connection with acceptance of
Extensions of Credit or the making of the guaranties hereunder or with the
execution, delivery or performance of any Credit Documents by the Credit Parties
(other than those that have been obtained, such filings as are required by the
Securities and Exchange Commission and to fulfill other reporting requirements
with Governmental Authorities) or with the validity or enforceability of any
Credit Document against the Credit Parties (except such filings as are necessary
in connection with the perfection of the Liens created by such Credit
Documents). Each Credit Document constitutes a legal, valid and binding
obligation of each Credit Party party thereto enforceable against such Credit
Party in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).

6.5   No Legal Bar.

      The execution, delivery and performance of the Credit Documents, the
borrowings hereunder and the use of the Extensions of Credit will not violate
any Requirement of Law or any Contractual Obligation of any member of the
Consolidated Group (except those as to which waivers or consents have been
obtained), and will not result in, or require, the creation or imposition of any
Lien on any of the Properties or revenues of any member of the Consolidated
Group pursuant to any Requirement of Law or Contractual Obligation other than
the Liens arising under or contemplated in connection with the Credit Documents.

6.6   No Material Litigation and Disputes.

      (a)   No claim, litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the best knowledge of the
Responsible Officers of the Borrower, threatened by or against, any members of
the Consolidated Group or against any of their respective Properties or revenues
that (i) relate to the Credit Documents or any of the transactions contemplated
hereby or thereby or (ii) could reasonably be expected to have a Material
Adverse Effect.

      (b)   No default exists and, to the knowledge of the Responsible Officers
of the Borrower, no default has been asserted, under any Contractual Obligations
to which any members of the Consolidated Group are party that individually or in
the aggregate could reasonably be expected to have a Material Adverse Effect.

6.7   No Defaults.

      No Default or Event of Default has occurred and is continuing.

6.8   Ownership and Operation of Property.

      Each of the members of the Consolidated Group (i) has good and marketable
title to, or a valid leasehold interest in, all its material real property, and
good title to, or a valid leasehold interest in, all its other material
Property, and none of such Property is subject to any Lien, except for Permitted
Liens, and (ii) has obtained all licenses, permits, franchises or other
certifications, consents, approvals and authorizations, governmental or private,
required as a result of the ownership of its Property and to the conduct of its
business other than those the failure of which to obtain could not reasonably be
expected to have a Material Adverse Effect.

6.9   Intellectual Property.

      (a)   Each of the members of the Consolidated Group owns, or has the legal
right to use, all United States trademarks, tradenames, copyrights, patents,
technology, know-how and processes, if any, necessary for each of them to
conduct its business as currently conducted (the "Intellectual Property") except
for those the failure to own or have such legal right to use would not be
reasonably expected to have a Material Adverse Effect. No claim has been
asserted and is pending by any Person challenging or questioning the use of any
such Intellectual Property or the validity or effectiveness of any such
Intellectual Property, nor does any Credit Party know of any such claim, and the
use of such Intellectual Property by the members of the Consolidated Group does
not infringe on the rights of any Person, except for such claims and
infringements that, in the aggregate, would not be reasonably expected to have a
Material Adverse Effect.

      (b)   Set forth on Schedule 6.9 is a list of the Intellectual Property as
of the Closing Date.

6.10  Taxes.

      Each of the members of the Consolidated Group has filed or caused to be
filed all material income tax returns (federal, state, local and foreign) and
all other material tax returns that are required to be filed and has paid (i)
all amounts shown therein to be due (including interest and penalties) and (ii)
all other material taxes, fees, assessments and other governmental charges
(including mortgage recording taxes, documentary stamp taxes and intangibles
taxes) owing, except for such taxes that are not yet delinquent or as are being
contested in good faith by appropriate proceedings for which adequate reserves,
if any, determined in accordance with GAAP have been established unless the
failure to make any such payment could give rise to an immediate right to
foreclose on a Lien securing such amounts. No tax claim or assessment has been
asserted against members of the Consolidated Group that could reasonably be
expected to have a Material Adverse Effect.

6.11  ERISA.

      Except as could not reasonably be expected to have a Material Adverse
Effect:

            (a)   During the five-year period prior to the date on which this
      representation is made or deemed made: (i) no ERISA Event has occurred,
      and, to the knowledge of the Responsible Officers of the Borrower, no
      event or condition has occurred or exists as a result of which any ERISA
      Event could reasonably be expected to occur, with respect to any Plan;
      (ii) no "accumulated funding deficiency," as such term is defined in
      Section 302 of ERISA and Section 412 of the Internal Revenue Code, whether
      or not waived, has occurred with respect to any Plan; (iii) each Plan has
      been maintained, operated, and funded in compliance with its own terms and
      in material compliance with the provisions of ERISA, the Internal Revenue
      Code, and any other applicable federal or state laws; and (iv) no lien in
      favor of the PBGC or a Plan has arisen or is reasonably likely to arise on
      account of any Plan.

            (b)   The actuarial present value of all "benefit liabilities" (as
      defined in Section 4001(a)(16) of ERISA), whether or not vested, under
      each Single Employer Plan, as of the last annual valuation date prior to
      the date on which this representation is made or deemed made (determined,
      in each case, in accordance with Financial Accounting Standards Board
      Statement 87, utilizing the actuarial assumptions used in such Plan's most
      recent actuarial valuation report), did not exceed as of such valuation
      date the fair market value of the assets of such Plan.

            (c)   No member of the Consolidated Group nor any ERISA Affiliate
      has incurred, or, to the knowledge of the Responsible Officers of the
      Borrower, could be reasonably expected to incur, any withdrawal liability
      under ERISA to any Multiemployer Plan or Multiple Employer Plan. No member
      of the Consolidated Group nor any ERISA Affiliate would become subject to
      any withdrawal liability under ERISA if any member of the Consolidated
      Group or any ERISA Affiliate were to withdraw completely from all
      Multiemployer Plans and Multiple Employer Plans as of the valuation date
      most closely preceding the date on which this representation is made or
      deemed made. No member of the Consolidated Group nor any ERISA Affiliate
      has received any notification that any Multiemployer Plan is in
      reorganization (within the meaning of Section 4241 of ERISA), is insolvent
      (within the meaning of Section 4245 of ERISA), or has been terminated
      (within the meaning of Title IV of ERISA), and no Multiemployer Plan is,
      to the knowledge of the Responsible Officers of the Borrower, reasonably
      expected to be in reorganization, insolvent, or terminated.

            (d)   No prohibited transaction (within the meaning of Section 406
      of ERISA or Section 4975 of the Internal Revenue Code) or breach of
      fiduciary responsibility has occurred with respect to a Plan that has
      subjected or may subject any member of the Consolidated Group or any ERISA
      Affiliate to any liability under Sections 406, 409, 502(i), or 502(l) of
      ERISA or Section 4975 of the Internal Revenue Code, or under any agreement
      or other instrument pursuant to which any member of the Consolidated Group
      or any ERISA Affiliate has agreed or is required to indemnify any person
      against any such liability.

            (e)   No member of the Consolidated Group nor any ERISA Affiliates
      has any material liability with respect to "expected post-retirement
      benefit obligations" within the meaning of the Financial Accounting
      Standards Board Statement 106. Each Plan that is a welfare plan (as
      defined in Section 3(1) of ERISA) to which Sections 601-609 of ERISA and
      Section 4980B of the Internal Revenue Code apply has been administered in
      compliance in all material respects of such sections.

            (f)   Neither the execution and delivery of this Credit Agreement
      nor the consummation of the financing transactions contemplated thereunder
      will involve any transaction that is subject to the prohibitions of
      Sections 404, 406 or 407 of ERISA or in connection with which a tax could
      be imposed pursuant to Section 4975 of the Internal Revenue Code. The
      representation by the Credit Parties in the preceding sentence is made in
      reliance upon and subject to the accuracy of the Lenders' representation
      in Section 11.15 with respect to their source of funds and is subject, in
      the event that

      the source of the funds used by the Lenders in connection with this
      transaction is an insurance company's general asset account, to the
      application of Prohibited Transaction Class Exemption 95-60, 60 Fed. Reg.
      35,925 (1995), compliance with the regulations issued under Section
      401(c)(1)(A) of ERISA, or the issuance of any other prohibited transaction
      exemption or similar relief, to the effect that assets in an insurance
      company's general asset account do not constitute assets of an "employee
      benefit plan" within the meaning of Section 3(3) of ERISA of a "plan"
      within the meaning of Section 4975(e)(1) of the Internal Revenue Code.

6.12  Governmental Regulations, etc.

      (a)   "Margin stock" (within the meaning of Regulation U) does not
constitute more than twenty-five percent (25%) of the value of the consolidated
assets of the Borrower and its Subsidiaries. None of the transactions
contemplated by this Credit Agreement (including, without limitation, the direct
or indirect use of the proceeds of the Loans) will violate or result in a
violation of the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, or regulations issued pursuant thereto, or Regulation
T, U or X.

      (b)   None of the members of the Consolidated Group is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act or the Investment Company Act of 1940, each as amended. In addition,
none of the members of the Consolidated Group is (i) an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, and is not controlled by such a company, or (ii) a "holding
company", or a "subsidiary company" of a "holding company", or an "affiliate" of
a "holding company" or of a "subsidiary" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as amended.

      (c)   No director, executive officer or principal shareholder of any
member of the Consolidated Group is a director, executive officer or principal
shareholder of any Lender. For the purposes hereof the terms "director",
"executive officer" and "principal shareholder" (when used with reference to any
Lender) have the respective meanings assigned thereto in Regulation O.

6.13  Subsidiaries.

      Set forth on Schedule 6.13 are all of the Subsidiaries of the Borrower as
of the Closing Date, including the jurisdiction of organization, classes of
Capital Stock (including options, warrants, rights of subscription, conversion
and exchangeability and other similar rights), ownership and ownership
percentages thereof. The outstanding shares of Capital Stock of each Subsidiary
have been validly issued, fully paid and are non-assessable and owned free of
Liens other than Permitted Liens and are not the subject of buy-sell, voting
trust or other shareholder agreement.

6.14  Purpose of Extensions of Credit.

      The proceeds of the Loans shall be used by the Borrower solely to (i) pay
the cash portion of the purchase price for the Transaction, (ii) pay fees and
expenses incurred in connection with the Transaction; and (iii) provide for
working capital and other general corporate purposes of the Borrower and its
Subsidiaries (including, without limitation, Permitted Acquisitions).

6.15  Environmental Matters.

      Except as could not reasonably be expected to have a Material Adverse
Effect:

            (a)   Each of the facilities and properties owned, leased or
      operated by the members of the Consolidated Group (the "Subject
      Properties") and all operations at the Subject Properties are in
      compliance with all applicable Environmental Laws, and there is no
      violation of any Environmental Law with respect to the Subject Properties
      or the businesses operated by the members of the Consolidated Group (the
      "Businesses"), and there are no conditions relating to the Businesses or
      Subject Properties that could give rise to liability under any applicable
      Environmental Laws.

            (b)   None of the Subject Properties contains, or has previously
      contained, any Materials of Environmental Concern at, on or under the
      Subject Properties in amounts or concentrations that constitute or
      constituted a violation of, or could give rise to liability under,
      Environmental Laws.

            (c)   None of the members of the Consolidated Group has received any
      written or verbal notice of, or inquiry from any Governmental Authority
      regarding, any violation, alleged violation, non-compliance, liability or
      potential liability regarding environmental matters or compliance with
      Environmental Laws with regard to any of the Subject Properties or the
      Businesses, nor does any Responsible Officer of any member of the
      Consolidated Group have knowledge or reason to believe that any such
      notice will be received or is being threatened.

            (d)   Materials of Environmental Concern have not been transported
      or disposed of from the Subject Properties, or generated, treated, stored
      or disposed of at, on or under any of the Subject Properties or any other
      location, in each case by or on behalf any members of the Consolidated
      Group in violation of, or in a manner that would be reasonably likely to
      give rise to liability under, any applicable Environmental Law.

            (e)   No judicial proceeding or governmental or administrative
      action is pending or, to the knowledge of the Responsible Officers of any
      Credit Party, threatened, under any Environmental Law to which any member
      of the Consolidated Group is or will be named as a party, nor are there
      any consent decrees or other decrees, consent orders, administrative
      orders or other orders, or other administrative or judicial requirements
      outstanding under any Environmental Law with respect to any member of the
      Consolidated Group, the Subject Properties or the Businesses.

            (f)   There has been no release or, threat of release of Materials
      of Environmental Concern at or from the Subject Properties, or arising
      from or related to the operations (including, without limitation,
      disposal) of any member of the Consolidated Group in connection with the
      Subject Properties or otherwise in connection with the Businesses, in
      violation of or in amounts or in a manner that could give rise to
      liability under Environmental Laws.

6.16  No Material Misstatements.

      None of the information, reports, financial statements, exhibits or
schedules, taken as a whole, prepared by any member of the Consolidated Group
(or prepared by the Administrative Agent and approved by the Borrower) and
furnished by or on behalf of any member of the Consolidated Group to the
Administrative Agent or any Lender in connection with the negotiation of the
Credit Documents or included therein or delivered pursuant thereto contained,
contains or will contain any material misstatement of fact or omitted, omits or
will omit to state any material fact necessary to make the statements therein,
in light of the circumstances under which they were, are or will be made, not
materially misleading, provided that to the extent any such information, report,
financial statement, exhibit or schedule was based upon or constitutes a
forecast or projection, each of the Credit Parties represents only that such
forecast or projection was prepared in good faith and based upon assumptions
believed to be reasonable.

6.17  Labor Matters.

      Except as could not reasonably be expected to have a Material Adverse
Effect:

            (a)   There are no strikes or lockouts against any members of the
      Consolidated Group pending or, to the knowledge of the Responsible
      Officers of the Borrower, threatened;

            (b)   The hours worked by and payments made to employees of the
      Consolidated Group have not been in violation of the Fair Labor Standards
      Act or any other applicable federal, state, local or foreign law dealing
      with such matters in any case where a Material Adverse Effect could
      reasonably be expected to occur as a result of the violation thereof;

            (c)   All payments due from members of the Consolidated Group, or
      for which any claim may be made against a member of the Consolidated
      Group, on account of wages and employee health and welfare insurance and
      other benefits, have been paid or accrued as a liability on the books of
      the respective members of the Consolidated Group; and

            (d)   None of the members of the Consolidated Group is party to a
      collective bargaining agreement.

6.18  Collateral Documents.

      The Collateral Documents create valid security interests in, and Liens on,
the Collateral purported to be covered thereby, which security interests and
Liens are currently perfected security interests and Liens, prior to all other
Liens other than Permitted Liens.

6.19  Location of Real Property and Leased Premises.

      (a)   Set forth on Schedule 6.19(a) is a complete and correct list of all
real property located in the United States and owned or leased by any Credit
Party as of the Closing Date with street address and state where located.

      (b)   Set forth on Schedule 6.19(b) is a list of all locations (other than
those locations set forth on Schedule 6.19(a)) where any tangible personal
property of any Credit Party is located as of the Closing Date, including street
address and state where located.

      (c)   Set forth on Schedule 6.19(c) is the chief executive office, state
of formation and legal name of each Credit Party as of the Closing Date. If any
Credit Party changes its state of formation or legal name, the Borrower shall
notify the Administrative Agent thereof within thirty days after the date of
such change.

6.20  Fraud and Abuse.

      Except as would not reasonably be expected to constitute a Material
Adverse Effect, no member of the Consolidated Group or any of their respective
officers, directors or, to the knowledge of the Responsible Officers of the
Borrower, any Contract Providers have engaged in any activities that are
prohibited under Medicare Regulations or Medicaid Regulations, including,
without limitation, (i) knowingly and willfully making or causing to be made a
false statement or a misrepresentation of any material fact in any application
for any benefit or payment; (ii) knowingly and willfully making or causing to be
made any false statement or a misrepresentation of any material fact for use in
determining rights to any benefit or payment; (iii) failing 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 to secure such benefit or
payment fraudulently; (iv) knowingly and willfully soliciting or receiving any
remuneration (including any kickback, bribe or rebate), directly or indirectly,
overtly or covertly, in cash or in kind or offering to pay such remuneration (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, Medicaid or other federal health care
program, or (B) in return for purchasing, leasing or ordering or arranging for
or recommending the purchasing, leasing or ordering of any good, facility,
service, or item for which payment may be made in whole or in part by Medicare,
Medicaid or other federal health program.

6.21  Licensing and Accreditation.

      Except as would not reasonably be expected to constitute a Material
Adverse Effect, each member of the Consolidated Group and, to the knowledge of
the Responsible Officers of the Borrower, each Contract Provider, has, to the
extent applicable: (i) obtained (or been duly assigned) all required
certificates of need or determinations of need as required by the relevant state
Governmental Authority for the acquisition, construction, expansion of,
investment in, operation of or management of its businesses as currently
operated; (ii) obtained and maintains in good standing all required licenses,
permits, authorizations and qualifications required under applicable law in
connection with the ownership, operation or management of each of its
Subsidiaries; (iii) to the extent prudent and customary in the industry in which
it is engaged, obtained and maintains accreditation from all generally
recognized accrediting agencies; and (iv) entered into and maintains in good
standing its status as a Medicare Supplier and as a Medicaid Supplier. Except as
would not reasonably be expected to constitute a Material Adverse Effect, to the
knowledge of the Responsible Officers of the Borrower, each Contract Provider is
duly licensed by each state, state agency, commission or other Governmental
Authority having jurisdiction over the provisions of such services by such
Person in the locations where the members of the Consolidated Group conduct
business, to the extent such licensing is required to enable such Person to
provide the professional services provided by such Person and otherwise as is
necessary to enable the Consolidated Group to operate as currently operated and
as contemplated to be operated, and all such required licenses are in full force
and effect on the date hereof and have not been revoked or suspended or
otherwise limited.

6.22  Solvency.

      Immediately after giving effect to the initial Extensions of Credit made
on the Closing Date, (i) the fair value of the assets of the Credit Parties
taken as a whole will exceed their consolidated debts and liabilities,
subordinated, contingent or otherwise; (ii) the present fair saleable value of
the property of the Credit Parties taken as a whole will be greater than the
amount that will be required to pay the probable liability of their consolidated
debts and other liabilities, subordinated, contingent or otherwise, as such
debts and other liabilities become absolute and mature; and (iii) the Credit
Parties taken as a whole will not have unreasonably small capital with which to
conduct the business in which they are engaged as such business is now conducted
and is proposed to be conducted following the Closing Date.

6.23  No Other Broker's Fees.

      None of the members of the Consolidated Group owes to any Person other
than the Lenders and their affiliates, or otherwise has any obligation in
respect of any finder's fees, broker's fees, investment banker's fees or other
similar fees in connection with the transactions contemplated in the Credit
Agreement and the other Credit Documents, other than the fees payable to Thomas
Weisel Partners LLC.

6.24  Transaction.

         The Transaction has been consummated substantially in accordance with
the terms of Transaction Documents and substantially in compliance with
applicable material laws and regulatory approvals.


                                   SECTION 7

                             AFFIRMATIVE COVENANTS

      Each Credit Party hereby covenants and agrees that so long as this Credit
Agreement is in effect or any amounts payable hereunder or under any other
Credit Document shall remain outstanding or any Letter of Credit is outstanding,
and until all of the Commitments hereunder shall have terminated:

7.1   Information Covenants.

      The Credit Parties will furnish, or cause to be furnished, to the
Administrative Agent (with a copy for each of the Lenders):

            (a)   Annual Financial Statements. As soon as available, and in any
      event within ninety (90) days after the close of each fiscal year of the
      Borrower, a consolidated balance sheet of the Consolidated Group as of the
      end of such fiscal year, together with related consolidated statements of
      income, stockholders' equity and cash flows for such fiscal year, in each
      case setting forth in comparative form consolidated figures for the
      preceding fiscal year, all such financial information described above to
      be audited by Ernst & Young LLP or other independent certified public
      accountants of recognized national standing reasonably acceptable to the
      Administrative Agent and whose opinion shall be to the effect that such
      financial statements have been prepared in accordance with GAAP (except
      for changes with which such accountants concur) and shall not be limited
      as to the scope of the audit or qualified as to the status of the members
      of the Consolidated Group as a going concern or any other material
      qualifications or exceptions.

            (b)   Quarterly Financial Statements. As soon as available, and in
      any event within forty-five (45) days after the close of each fiscal
      quarter of the Borrower (other than the fourth fiscal quarter), an
      unaudited consolidated balance sheet of the Consolidated Group as of the
      end of such fiscal quarter, together with related unaudited consolidated
      statements of income, stockholders' equity, operations and retained
      earnings and of cash flows for such fiscal quarter, in each case setting
      forth in comparative form consolidated figures for the corresponding
      period of the preceding fiscal year, all such financial information
      described above to be accompanied by a certificate of a Responsible
      Officer of the Borrower to the effect that such quarterly financial
      statements fairly present in all material respects the financial condition
      of the Consolidated Group and have been prepared in accordance with GAAP,
      subject to changes resulting from audit and normal year-end audit
      adjustments.

            (c)   Officer's Certificate. At the time of delivery of the
      financial statements required by Sections 7.1(a) and 7.1(b) above, a
      certificate of a Responsible Officer of the Borrower substantially in the
      form of Exhibit 7.1(c), (i) demonstrating compliance with the financial
      covenants contained in Section 7.10 by calculation thereof as of the end
      of each such fiscal period and (ii) stating that no Default or Event of
      Default exists, or if any Default or Event of Default does exist,
      specifying the nature and extent thereof and what action the Credit
      Parties propose to take with respect thereto.

            (d)   Annual Budgets. Within sixty (60) days following the end of
      each fiscal year of the Borrower, beginning with the fiscal year ending
      June 30, 2002, an annual capital budget and operating budget for the
      Consolidated Group for the then current fiscal year.

            (e)   Accountant's Certificate. Within the period for delivery of
      the annual financial statements provided in Section 7.1(a), a certificate
      of the accountants conducting the annual audit stating that they have
      reviewed this Credit Agreement and stating further whether, in the course
      of their audit, they have become aware of any Default or Event of Default
      under the financial covenants set forth in Section 7.10 and, if any such
      Default or Event of Default exists, specifying the nature and extent
      thereof.

            (f)   Schedule Updates. At the time of delivery of the financial
      statements required by Sections 7.1(a) and 7.1(b) above, a certificate of
      a Responsible Officer of the Borrower (i) listing of (A) all applications,
      if any, for Copyrights, Patents or Trademarks made since the date of the
      prior certificate (or, in the case of the first such certificate, the
      Closing Date) and (B) all issuances of registrations or letters on
      existing applications for Copyrights, Patents and Trademarks, and (ii)
      attaching the insurance binder or other evidence of insurance for any
      insurance coverage of any member of the Consolidated Group that was
      renewed, replaced or modified during the period covered by such financial
      statements.

            (g)   Auditor's Reports. Promptly (and in any event within thirty
      (30) days) upon receipt thereof, a copy of any other report or "management
      letter" submitted by independent accountants to any member of the
      Consolidated Group in connection with any annual, interim or special audit
      of the books of such Person.

            (h)   Reports. Within ten (10) days of the filing thereof, copies of
      all registration statements (excluding the exhibits thereto and any
      registration statements on Form S-8 or its equivalent), reports on Forms
      10-K, 10-Q and 8-K (or their equivalents) and all other periodic reports
      which any member of the Consolidated Group shall file with the Securities
      and Exchange Commission, or any successor agency.

            (i)   Reports to Shareholders. Within ten (10) days of the mailing
      thereof to the shareholders of the Borrower generally, copies of all
      financial statements, reports and proxy statements so mailed.

            (j)   Environmental and OSHA Reports. Promptly (and in any event
      within ten (10) days) of the request of the Administrative Agent, all
      reports and written information to and from the United States
      Environmental Protection Agency, or any state or local agency responsible
      for environmental matters, the United States Occupational Safety and
      Health Administration, or any state or local agency responsible for health
      and safety matters, or any successor agencies or authorities concerning
      environmental, health or safety matters.

            (k)   Notices. Upon any Responsible Officer of a Credit Party
      obtaining knowledge thereof, the Credit Parties will give written notice
      to the Administrative Agent promptly (and in any event within five (5)
      Business Days) of (i) the occurrence of a Default or Event of Default,
      specifying the nature and existence thereof and what action the Credit
      Parties propose to take with respect thereto, and (ii) the occurrence of
      any of the following with respect to any member of the Consolidated Group:
      (A) the commencement of any litigation, arbitral or governmental
      proceeding against such member that could reasonably be expected to have a
      Material Adverse Effect; (B) the institution of any proceedings against
      such member with respect to an alleged violation of any federal, state or
      local law, rule or regulation, including, without limitation,
      Environmental Laws, the

      violation of which could reasonably be expected to have a Material Adverse
      Effect; (C) the institution of any proceeding against such member to
      suspend, revoke or terminate its participation in a Medical Reimbursement
      Program or notice of an Exclusion Event, that, in each case if not
      promptly responded to, complied with or cured could reasonably be expected
      to result in an Exclusion Event; (D) the receipt of a notice of intent to
      exclude such member issued by the OIG that if not promptly responded to,
      complied with or cured could reasonably be expected to result in an
      Exclusion Event; or (E) a notice of loss of participation Medical
      Reimbursement Program or loss of applicable health care license or
      certificate of authority, and all other material deficiency notices,
      compliance orders or adverse reports issued by any Governmental Authority
      that, if not promptly responded to, complied with or cured, could
      reasonably be expected to result in the suspension or forfeiture of any
      license or certification necessary for the Borrower or any of its
      Subsidiaries to carry on its business as then conducted or the termination
      of its participation in a Medical Reimbursement Program available to the
      Borrower or any of its Subsidiaries.

            (l)   ERISA. Upon any Responsible Officer of a Credit Party
      obtaining knowledge thereof, the Credit Parties will give written notice
      to the Administrative Agent promptly (and in any event within ten (10)
      Business Days) of: (i) any event or condition, including, without
      limitation, any Reportable Event, that constitutes, or might reasonably
      lead to, an ERISA Event; (ii) with respect to any Multiemployer Plan, the
      receipt of notice as prescribed in ERISA or otherwise of any withdrawal
      liability assessed against the Credit Parties or any ERISA Affiliates, or
      of a determination that any Multiemployer Plan is in reorganization or
      insolvent (both within the meaning of Title IV of ERISA); (iii) the
      failure to make full payment on or before the due date (including
      extensions) thereof of all amounts that any member of the Consolidated
      Group or any ERISA Affiliate is required to contribute to each Plan
      pursuant to its terms and as required to meet the minimum funding standard
      set forth in ERISA and the Internal Revenue Code with respect thereto, the
      failure of which could reasonably be expected to have a Material Adverse
      Effect; or (iv) any change in the funding status of any Plan that could
      reasonably be expected to have a Material Adverse Effect, together with a
      description of any such event or condition or a copy of any such notice
      and a statement by a Responsible Officer of the Borrower briefly setting
      forth the details regarding such event, condition, or notice, and the
      action, if any, that has been or is being taken or is proposed to be taken
      by the Credit Parties with respect thereto. Promptly upon request, the
      Credit Parties shall furnish the Administrative Agent and the Lenders with
      such additional information concerning any Plan as may be reasonably
      requested, including, without limitation, copies of each annual
      report/return (Form 5500 series), as well as all schedules and attachments
      thereto required to be filed with the Department of Labor and/or the
      Internal Revenue Service pursuant to ERISA and the Internal Revenue Code,
      respectively, for each "plan year" (within the meaning of Section 3(39) of
      ERISA).

            (m)   Environmental.

                  (i)   Upon the reasonable written request of the
            Administrative Agent following the occurrence of any event or the
            discovery of any condition that the Administrative Agent or the
            Required Lenders reasonably believe has caused (or could be
            reasonably expected to cause) the representations and warranties set
            forth in Section 6.15 to be untrue in any material respect, the
            Borrower will furnish or cause to be furnished to the Administrative
            Agent, at the Credit Parties' expense, a report of an environmental
            assessment of reasonable scope, form and depth, (including, where
            appropriate, invasive soil or groundwater sampling) by a consultant
            reasonably acceptable to the Administrative Agent as to the nature
            and extent of the presence of any Materials of Environmental Concern
            on any Subject Properties (as defined in Section 6.15) and as to the
            compliance by any member of the Consolidated Group with
            Environmental Laws at such Subject Properties. If the Credit

            Parties fail to deliver such an environmental report within
            seventy-five (75) days after receipt of such written request then
            the Administrative Agent may arrange for the same, and the members
            of the Consolidated Group hereby grant to the Administrative Agent
            and their representatives access to the Subject Properties to
            reasonably undertake such an assessment (including, where
            appropriate, invasive soil or groundwater sampling). The reasonable
            cost of any assessment arranged for by the Administrative Agent
            pursuant to this provision will be payable by the Credit Parties on
            demand and added to the obligations secured by the Collateral
            Documents.

                  (ii)  The members of the Consolidated Group will conduct and
            complete all investigations, studies, sampling, and testing and all
            remedial, removal, and other actions necessary to address all
            Materials of Environmental Concern on, from or affecting any of the
            Subject Properties to the extent necessary to be in compliance with
            all Environmental Laws and with the validly issued orders and
            directives of all Governmental Authorities with jurisdiction over
            such Subject Properties to the extent any failure could reasonably
            be expected to have a Material Adverse Effect.

            (n)   Other Information. With reasonable promptness upon any such
      request, such other information regarding the business, properties or
      financial condition of any member of the Consolidated Group as the
      Administrative Agent or the Required Lenders may reasonably request.

7.2   Preservation of Existence and Franchises.

      Except as a result of or in connection with a dissolution, merger or
disposition of a Subsidiary permitted under Section 8.4 or 8.5, each Credit
Party will, and will cause each of its Subsidiaries to, do all things necessary
to preserve and keep in full force and effect (a) its existence and (b) except
where the failure to do so could not reasonably be expected to have a Material
Adverse Effect, its Licenses, rights, franchises and authority.

7.3   Books and Records.

      Each Credit Party will, and will cause each of its Subsidiaries to, keep
complete and accurate books and records of its transactions in accordance with
good accounting practices on the basis of GAAP (including the establishment and
maintenance of appropriate reserves).

7.4   Compliance with Law.

      Each Credit Party will, and will cause each of its Subsidiaries to, comply
with all laws, rules, regulations and orders, and all applicable restrictions
imposed by all Governmental Authorities, applicable to it and its Property if
noncompliance with any such law, rule, regulation, order or restriction could
reasonably be expected to have a Material Adverse Effect. Specifically, but
without limiting the foregoing, and except where any such failure to comply
could not reasonably be expected to result in either an Exclusion Event or a
Material Adverse Effect: (i) billing policies, arrangements, protocols and
instructions will comply with reimbursement requirements under Medical
Reimbursement Programs; and (ii) medical director compensation arrangements will
comply with state and federal anti-kick back/fraud and abuse, and Stark I and
II, requirements.

7.5   Payment of Taxes and Other Lawful Claims.

      Each Credit Party will, and will cause each of its Subsidiaries to, pay
and discharge (a) all material taxes, assessments and governmental charges or
levies imposed upon it, or upon its income or profits, or upon

any of its properties, before they shall become delinquent, and (b) all material
lawful claims (including claims for labor, materials and supplies) that, if
unpaid, might give rise to a Lien upon any of its properties; provided, however,
that no member of the Consolidated Group shall be required to pay or discharge
any such tax, assessment, charge, levy or claim that is being contested in good
faith by appropriate proceedings for which adequate reserves, if any, determined
in accordance with GAAP have been established, unless the failure to make any
such payment (i) could give rise to an immediate right to foreclose on a Lien
securing such amounts or (ii) could reasonably be expected to have a Material
Adverse Effect.

7.6   Insurance.

      (a)   Each Credit Party will, and will cause each of its Subsidiaries to,
at all times maintain in full force and effect insurance (including workers'
compensation insurance, liability insurance, casualty insurance and business
interruption insurance) in such amounts, covering such risks and liabilities and
with such deductibles or self-insurance retentions as are in accordance with
normal industry practice (or as otherwise required by the Collateral Documents).
The Collateral Agent shall be named as loss payee or mortgagee, as its interest
may appear, and/or additional insured with respect to any such insurance
providing coverage in respect of any Collateral, and each provider of any such
insurance shall agree, by endorsement upon the policy or policies issued by it
or by independent instruments furnished to the Collateral Agent, that it will
give the Collateral Agent thirty days prior written notice before any such
policy or policies shall be altered or canceled, and that no act or default of
any member of the Consolidated Group or any other Person shall affect the rights
of the Collateral Agent or the Lenders under such policy or policies.

      (b)   The insurance coverage of the members of the Consolidated Group as
in effect on the Closing Date is outlined as to carrier, policy number,
expiration date, type and amount on Schedule 7.6.

7.7   Maintenance of Property.

      Except as a result of transactions permitted under Sections 8.4 and 8.5 of
this Credit Agreement, each Credit Party will, and will cause each of its
Subsidiaries to, maintain and preserve its properties and equipment material to
the conduct of its business in good repair, working order and condition, normal
wear and tear and casualty and condemnation excepted, and will make, or cause to
be made, in such properties and equipment from time to time all repairs,
renewals, replacements, extensions, additions, betterments and improvements
thereto as may be needed or proper, to the extent and in the manner customary
for companies in similar businesses.

7.8   Use of Proceeds; Margin Stock.

      The Borrower will use the proceeds of Extensions of Credit solely for the
purposes set forth in Section 6.14. No part of the proceeds of the Extensions of
Credit hereunder will be used, directly or indirectly, for the purpose of
purchasing or carrying any "margin stock" within the meaning of Regulation U. If
requested by any Lender or the Administrative Agent, the Borrower will furnish
to the Administrative Agent and each Lender a statement to the foregoing effect
in conformity with the requirements of FR Form U-1 referred to in said
Regulation U. No indebtedness being reduced or retired out of the proceeds of
the Extensions of Credit hereunder was or will be incurred for the purpose of
purchasing or carrying any "margin stock" within the meaning of Regulation U or
any "margin security" within the meaning of Regulation T.

7.9   Audits/Inspections.

      Upon reasonable notice and during normal business hours (or, following the
occurrence and during the continuation of an Event of Default, at any time
without notice), each Credit Party will, and will cause each of its Subsidiaries
to, permit representatives appointed by the Administrative Agent, including,
without limitation, independent accountants, agents, attorneys, and appraisers
to visit and inspect its property, including its books and records, its accounts
receivable and inventory, its facilities and its other business assets, and to
make photocopies or photographs thereof and to write down and record any
information such representative obtains and shall permit the Administrative
Agent or its representatives to investigate and verify the accuracy of
information provided to the Lenders and to discuss all such matters with the
officers, employees and representatives of such Person and the accountants and
auditors of such Person. The Credit Parties agree that the Administrative Agent,
and its representatives, may conduct one audit of the Collateral each calendar
year and such audit shall be at the expense of the Credit Parties.

7.10  Financial Covenants.

      (a)   Consolidated Leverage Ratio. As of the end of each fiscal quarter
set forth below, the Consolidated Leverage Ratio shall not be greater than the
ratio set forth opposite such fiscal quarter:



                                                         Maximum Consolidated
                     Fiscal Quarter End                     Leverage Ratio
                                                      
            June 30, 2002                                     2.75:1.00
            September 30, 2002                                2.75:1.00
            December 31, 2002                                 2.75:1.00
            March 31, 2003                                    2.75:1.00
            June 30, 2003 and each fiscal quarter             2.50:1.00
            ending thereafter


      (b)   Consolidated Fixed Charge Coverage Ratio. As of the end of each
fiscal quarter (commencing with the fiscal quarter ending June 30, 2002), the
Consolidated Fixed Charge Coverage Ratio shall not be less than 1.5:1.0.

      (c)   Consolidated Net Worth. As of the end of each fiscal quarter
(commencing with the fiscal quarter ending June 30, 2002), the Consolidated Net
Worth shall not be less than the sum of (i) $415,955,000 plus (ii) as of the end
of each fiscal quarter ending after March 31, 2002, an amount equal to
ninety-percent (90%) of Consolidated Net Income (but not less than zero) for
such fiscal quarter, such increases to be cumulative, plus (iii) an amount equal
to one hundred percent (100%) of net proceeds from Equity Transactions occurring
after the Closing Date (other than the equity issuance to the Sellers (as
defined in the Asset Purchase Agreement) as consideration for the Transaction).

      (d)   Consolidated Asset Coverage Ratio. As of the end of each fiscal
quarter (commencing with the fiscal quarter ending June 30, 2002), the
Consolidated Asset Coverage Ratio shall not be less than 1.50:1.0.

      (e)   Calculation of Financial Covenants on a Pro Forma Basis.
Notwithstanding anything herein to the contrary, the calculation of the
financial covenants in clauses (a), (b), (c) and (d) of this Section 7.10
(including, without limitation, for purposes of determining the applicable
pricing level under the definition of "Applicable Percentage") shall be made on
a Pro Forma Basis.

7.11  Additional Guarantors; Foreign Subsidiaries.

      (a)   At any time the Borrower has any Domestic Subsidiary that is not a
Guarantor (other than any Immaterial Subsidiary, the Excluded Subsidiary and any
Securitization Subsidiary), the Borrower shall, within thirty (30) days of the
formation or acquisition of such Domestic Subsidiary, deliver, or cause such
Domestic Subsidiary to deliver, to the Administrative Agent (i) a Joinder
Agreement duly executed by such Domestic Subsidiary, (ii) such supporting
resolutions, incumbency certificates, corporate formation and organizational
documentation and opinions of counsel as the Administrative Agent may reasonably
request, (iii) a certificate of a Responsible Officer setting forth the legal
name, the jurisdiction of organization, classes of Capital Stock (including
options, warrants, rights of subscription, conversion and exchangeability and
other similar rights), ownership and ownership percentages of such Subsidiary,
and any buy-sell, voting trust or other shareholder agreement relating to such
Subsidiary, and (iv) such other items, including stock certificates and related
stock powers and UCC financing statements, as may be required under Section
7.13.

      (b)   The Borrower will not form or acquire any Foreign Subsidiaries.

7.12  Pledged Assets.

      Each Credit Party will cause (i) all of its owned personal property
located in the United States other than Excluded Property and (ii) all of its
Eligible Real Property to be subject at all times to first priority, perfected
and, in the case of real property (whether leased or owned), title insured Liens
in favor of the Collateral Agent to secure the obligations of the Borrower under
the Credit Documents pursuant to the Collateral Documents or, with respect to
any such Property acquired subsequent to the Closing Date, such other additional
security documents as the Collateral Agent shall reasonably request, subject in
any case to Permitted Liens. If any Credit Party acquires any Eligible Real
Property subsequent to the Closing Date, such Credit Party shall (a) within
thirty days of the acquisition thereof, notify the Administrative Agent thereof
and (b) within sixty days after the acquisition thereof, deliver to the
Collateral Agent with respect to such Eligible Real Property such surveys, title
policies, appraisals, environmental reports, insurance certificates and other
all documents, instruments and agreements reasonably requested by, and in each
case in form, scope and details reasonably satisfactory to, the Collateral
Agent.

7.13  Interest Rate Protection.

      Within sixty (60) days following the Closing Date, the Borrower shall have
entered into interest rate protection agreements protecting against fluctuations
in interest rates as to which the material terms are reasonably satisfactory to
the Administrative Agent, which agreements shall provide coverage in an amount
equal to at least fifty percent (50%) of the outstanding principal amount of the
Loans and for a duration of at least one (1) year.

7.14  Landlord Lien Waivers.

      The Credit Parties shall use commercially reasonable efforts to obtain
landlord lien waivers, in form and substance substantially similar to those
delivered on the Closing Date or otherwise reasonably satisfactory to the
Administrative Agent, for (a) each of the real property leasehold interests
identified on Schedule 5.1 for which such landlord lien waivers were not
provided on or before the Closing Date and (b) each other real property
leasehold interests where Other Premises Inventory is stored or held, in each
case unless waived by the Administrative Agent.

                                   SECTION 8

                               NEGATIVE COVENANTS

      Each Credit Party hereby covenants and agrees that so long as this Credit
Agreement is in effect or any amounts payable hereunder or under any other
Credit Document shall remain outstanding or any Letter of Credit is outstanding,
and until all of the Commitments hereunder shall have terminated:

8.1   Indebtedness.

      The Credit Parties will not permit any member of the Consolidated Group to
contract, create, incur, assume or permit to exist any Indebtedness, except:

            (a)   Indebtedness existing or arising under this Credit Agreement
      or the other Credit Documents;

            (b)   Indebtedness of the Borrower and its Subsidiaries existing on
      the Closing Date and set forth on Schedule 8.1, and renewals, refinancings
      and extensions thereof provided that (i) the aggregate principal amount
      thereof outstanding on the date of such renewal, refinancing or extension
      shall not be increased and (ii) the terms of such renewal, refinancing or
      extension shall not be materially less favorable to the respective
      obligors than the terms of such existing Indebtedness;

            (c)   purchase money Indebtedness (including obligations in respect
      of Capital Leases or Synthetic Leases) hereafter incurred by the Borrower
      or any of its Subsidiaries to finance the purchase of fixed assets
      provided that (i) the total of all such Indebtedness for the Borrower and
      its Subsidiaries taken together shall not exceed an aggregate principal
      amount of $25,000,000 at any one time outstanding; (ii) such Indebtedness
      when incurred shall not exceed the purchase price of the asset(s)
      financed; and (iii) no such Indebtedness shall be refinanced for a
      principal amount in excess of the principal balance outstanding thereon at
      the time of such refinancing;

            (d)   obligations of the Borrower or any of its Subsidiaries owing
      under interest rate, commodities and foreign currency exchange protection
      agreements entered into in the ordinary course of business to manage
      existing or anticipated risks and not for speculative purposes;

            (e)   unsecured intercompany Indebtedness owing by a member of the
      Consolidated Group to another member of the Consolidated Group (subject,
      however, to the limitations of Section 8.6 in the case of the member of
      the Consolidated Group extending the loan, advance or credit);

            (f)   Support Obligations of any member of the Consolidated Group
      with respect to any Indebtedness of any other member of the Consolidated
      Group that is permitted under this Section 8.1;

            (g)   Indebtedness arising or existing with respect to Governmental
      Reimbursement Program Costs; and

            (h)   other unsecured Funded Debt of the Borrower and its
      Subsidiaries in an aggregate outstanding principal amount of up to
      $15,000,000 at any time.

8.2   Liens.

      The Credit Parties will not permit any member of the Consolidated Group to
contract, create, incur, assume or permit to exist any Lien with respect to any
of its Property, whether now owned or after acquired, except for Permitted
Liens.

8.3   Nature of Business.

      The Credit Parties will not permit any member of the Consolidated Group to
substantively alter the character or conduct of the business conducted by such
Person as of the Closing Date; provided, the foregoing shall not prohibit any
member of the Consolidated Group from engaging in any type of business engaged
in by any other member of the Consolidated Group.

8.4   Merger and Consolidation, Dissolution and Acquisitions.

      (a)   No member of the Consolidated Group will enter into any transaction
of merger or consolidation, except that:

            (i)   a Credit Party may be party to a transaction of merger or
      consolidation with another Credit Party, provided that if the Borrower is
      a party to such transaction, it shall be the surviving entity;

            (ii)  a Foreign Subsidiary may be party to a transaction of merger
      or consolidation with a Subsidiary of the Borrower, provided that (A) if a
      Domestic Subsidiary is a party thereto, a Domestic Subsidiary shall be the
      surviving entity, and (B) if a Foreign Subsidiary is a party thereto and a
      Domestic Subsidiary is not a party thereto, the surviving entity shall be
      a Foreign Subsidiary;

            (iii) a Domestic Subsidiary of the Borrower may be a party to a
      transaction of merger or consolidation with a Person other than a member
      of the Consolidated Group, provided that (A) the surviving entity shall be
      a Domestic Subsidiary of the Borrower and (B) the transaction shall
      constitute a Permitted Acquisition; and

            (iv)  a Subsidiary of the Borrower may enter into a transaction of
      merger or consolidation in connection with an Asset Disposition permitted
      under Section 8.5.

      (b)   No member of the Consolidated Group may dissolve, liquidate or wind
up its affairs; provided, however, (i) a Wholly Owned Subsidiary of the Borrower
may dissolve, liquidate or wind up its affairs so long as no Material Adverse
Effect could reasonably be expected to result on account thereof and (ii) any
other Subsidiary of the Borrower may dissolve, liquidate or wind up its affairs
so long as the Asset Disposition resulting from the disposition of Property
allocated or to be distributed to a Person other than the Borrower or any of its
Wholly Owned Subsidiaries in connection with such dissolution, liquidation or
winding up is otherwise permitted under Section 8.5 hereof.

      (c)   No member of the Consolidated Group shall make any Acquisition,
unless:

            (i)   in the case of an acquisition of Capital Stock of another
      Person, such Acquisition shall either (x) constitute a Permitted
      Acquisition or (y) the Required Lenders shall have consented to such
      Acquisition and the Borrower shall have delivered to the Required Lenders
      at least ten (10) Business Days prior to the date of such Acquisition the
      information described in the paragraph immediately following clause (ii)
      below with respect to such Acquisition;

            (ii)  in the case of an Acquisition of all or any substantial
      portion of the Property (other than Capital Stock) of another Person, such
      Acquisition shall either (x) constitute a Permitted Acquisition or (y) the
      Required Lenders shall have consented to such Acquisition and the Borrower
      shall have delivered to the Required Lenders at least ten (10) Business
      Days prior to the date of such Acquisition the information described in
      the paragraph below with respect to such Acquisition.

      Within ten (10) Business Days of the consummation of any Permitted
Acquisition, the Borrower shall deliver to the Administrative Agent the
following information: (i) a copy of the signed acquisition agreement (together
with schedules and exhibits) and all other documents and instruments executed or
delivered in connection therewith that the Administrative Agent may reasonably
request; (ii) a written description of the Person (or Property) acquired,
including location and type of operations, key management, and real estate
assets (including legal descriptions of any owned real estate), if any; (iii) to
the extent available to the Borrower, audited or reviewed historical financial
statements of the Person (or Property) acquired for the prior two years and the
most recent interim statement; (iv) consolidated financial statements and
projections for each of the first four full fiscal quarters ending after the
closing of such Acquisition for both the Borrower and its Subsidiaries as well
as the Person (or Property) being acquired giving effect to such Acquisition on
a pro forma basis and (v) a copy of the package of financial and other
information delivered to the board of directors of the Borrower in connection
with their consideration of such Acquisition.

8.5   Asset Dispositions.

      The Credit Parties will not permit any member of the Consolidated Group to
make any Asset Disposition other than the Acute Disposition, unless (a) at least
eighty-five percent (85%) of the consideration paid therefor shall consist of
cash and Cash Equivalents and any consideration other than cash and Cash
Equivalents shall be limited to the Capital Stock of the purchaser, (b) if the
subject transaction is a Sale and Leaseback Transaction, such transaction shall
be permitted by Section 8.13, (c) if the subject transaction involves Capital
Stock of a Subsidiary, the subject transaction is of a controlling interest in
such Subsidiary, (d) the aggregate net book value of all assets sold, leased or
otherwise disposed of in any fiscal year shall not exceed five percent (5%) of
the total assets of the Consolidated Group determined on a consolidated basis in
accordance with GAAP as of the end of the immediately preceding fiscal year, (e)
the assets sold, leased or otherwise disposed of in any fiscal year shall not
have generated or accounted for more than five percent (5%) of Consolidated
EBITDA as of the end of the immediately preceding fiscal year, (f) no Default or
Event of Default shall exist immediately after giving effect thereto, (g) the
Borrower shall have delivered to the Administrative Agent a compliance
certificate signed by a Responsible Officer demonstrating compliance with the
financial covenants in Section 7.10 for the most recent period of four
consecutive fiscal quarters after giving effect to such Asset Disposition during
such period on a Pro Forma Basis and reaffirming that the representations and
warranties made hereunder are true and correct in all material respects as of
such date, and (h) the Borrower shall have given written notice to the
Administrative Agent at least ten (10) days in advance of the prospective
disposition, and the terms thereof, in sufficient detail as to the book value
and consideration to be paid, terms of disposition, and net proceeds expected
therefrom and intended application thereof.

      The Administrative Agent will promptly deliver to the Borrower upon
request, at the Borrower's expense, such release documentation (including
delivery of applicable stock certificates) as may be reasonably requested to
give effect to the release of subject Property from the Credit Documents
securing the obligations hereunder in connection with Asset Dispositions
permitted hereunder.

8.6   Investments.

      The Credit Parties will not permit any member of the Consolidated Group to
make or permit to exist Investments in or to any Person, except for Permitted
Investments.

8.7   Restricted Payments.

      The Credit Parties will not make, or permit any member of the Consolidated
Group to make, any Restricted Payment, other than:

      (a)   any non-Wholly Owned Subsidiary may pay cash dividends to the
holders of its Capital Stock, provided that (i) such cash dividends shall be
allocated to such holders ratably based on their respective ownership
percentages of such Subsidiary, (ii) such cash dividends shall be paid solely
with the operating income of such Subsidiary and (iii) the aggregate revenues of
all non-Wholly Owned Subsidiaries as of the end of the immediately preceding
fiscal quarter shall not exceed $100 million; and

      (b)   the Borrower may make cash payments to repurchase outstanding shares
of its common stock, provided that (i) the Consolidated Leverage Ratio as of the
end of the immediately preceding fiscal quarter shall be equal to or less than
1.0:1.0, (ii) prior to making any such cash payment the Borrower shall deliver
to the Administrative Agent a compliance certificate signed by a Responsible
Officer demonstrating compliance with the financial covenants in Section 7.10
for the most recent period of four consecutive fiscal quarters after giving
effect to such cash payment during such period on a Pro Forma Basis and (iii)
the proceeds of the Loans shall not be used to make any such cash payments.

8.8   Modifications and Payments in respect of Funded Debt.

      None of the members of the Consolidated Group will:

      (a)   After the issuance thereof, amend or modify (or permit the amendment
or modification of) the terms of any Funded Debt to shorten the maturity or
average life to maturity thereof, require any principal payment sooner than
previously scheduled or to increase the interest rate or fees applicable
thereto; or

      (b)   Except in connection with a refinancing or refunding permitted
hereunder, make any prepayment, redemption, defeasance or acquisition for value
of (including, without limitation, by way of depositing money or securities with
the trustee with respect thereto before due for the purpose of paying when due),
or refund, refinance or exchange of any Funded Debt (other than the Indebtedness
under the Credit Documents and intercompany Indebtedness permitted hereunder)
other than regularly scheduled payments of principal and interest on such Funded
Debt.

8.9   Transactions with Affiliates.

      The Credit Parties will not permit any member of the Consolidated Group to
enter into or permit to exist any transaction or series of transactions with any
officer, director, shareholder, Subsidiary or Affiliate of such Person other
than (a) transactions between Credit Parties or with Wholly Owned Subsidiaries,
(b) transactions permitted by Section 8.1, Section 8.4, Section 8.5, Section
8.6, or Section 8.7, (c) normal compensation and reimbursement of expenses of
officers and directors and (d) except as otherwise specifically limited in this
Credit Agreement, other transactions that are entered into in the ordinary
course of such Person's business on terms and conditions substantially as
favorable to such Person as would be obtainable by it in a comparable
arms-length transaction with a Person other than an officer, director,
shareholder, Subsidiary or Affiliate.

8.10  Fiscal Year.

      The Credit Parties will not permit any member of the Consolidated Group to
change its fiscal year.

8.11  Limitation on Restricted Actions; No Further Negative Pledges.

      (a)   The Credit Parties will not permit any member of the Consolidated
Group to, directly or indirectly, create or otherwise cause or suffer to exist
or become effective any encumbrance or restriction on the ability of any such
Person to (i) pay dividends or make any other distributions on its Capital Stock
or with respect to any other interest or participation in, or measured by, its
profits, (ii) pay any Indebtedness or other obligation, (iii) make loans,
advances or capital contributions, (iv) sell, lease or otherwise transfer any of
its properties or assets, or (v) guaranty any Indebtedness, in each case except
for (x) such encumbrances or restrictions existing under or by reason of this
Credit Agreement and the other Credit Documents and (y) as set forth on Schedule
8.11.

      (b)   The Credit Parties will not permit any member of the Consolidated
Group to enter into, assume or become subject to any agreement prohibiting or
otherwise restricting the creation or assumption of any Lien upon its properties
or assets, whether now owned or hereafter acquired, or requiring the grant of
any security for any obligation if security is given for any other obligation,
except (i) pursuant to this Credit Agreement and the other Credit Documents,
(ii) pursuant to the terms of any purchase money Indebtedness permitted by
Section 8.1(c) to the extent such limitations relate only to the property that
is the subject of such financing and (iii) as set forth on Schedule 8.11.

8.12  Ownership of Subsidiaries.

      Notwithstanding any other provisions of this Credit Agreement to the
contrary, the Credit Parties will not permit any member of the Consolidated
Group to (a) permit any Person (other than the Borrower or any Wholly Owned
Subsidiary of the Borrower) to own any Capital Stock of any Subsidiary of the
Borrower, except (i) the non-Wholly Owned Subsidiaries existing on the Closing
Date and identified on Schedule 8.12 and (ii) the Borrower can acquire or form a
non-Wholly Owned Subsidiary after the Closing Date if the aggregate revenues of
all non-Wholly Owned Subsidiaries as of the end of the immediately preceding
fiscal quarter do not exceed $100 million, (b) permit any non-Wholly Owned
Subsidiary to issue any shares of preferred Capital Stock to any Person other
than to a member of the Consolidated Group or (c) permit, create, incur, assume
or suffer to exist any Lien on any Capital Stock of any Subsidiary of the
Borrower, except for Permitted Liens.

8.13  Sale Leasebacks.

      The Credit Parties will not permit any member of the Consolidated Group to
enter into any Sale and Leaseback Transaction unless such Sale and Leaseback
Transaction constitutes purchase money Indebtedness permitted by Section 8.1(c).

                                    SECTION 9

                                EVENTS OF DEFAULT

9.1   Events of Default.

      An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):

            (a)   Payment. There shall occur a:

                  (i)   default in the payment when due of any principal of any
            of the Loans or of any reimbursement obligations arising from
            drawings under Letters of Credit, or

                  (ii)  default, and such default shall continue for three (3)
            or more Business Days, in the payment when due of any interest on
            the Loans or on any reimbursement obligations arising from drawings
            under Letters of Credit, or of any Fees or other amounts owing
            hereunder, under any of the other Credit Documents or in connection
            herewith or therewith; or

            (b)   Representations. Any representation, warranty or statement
      made or deemed to be made by any Credit Party herein, in any of the other
      Credit Documents, or in any statement or certificate delivered or required
      to be delivered pursuant hereto or thereto shall prove untrue in any
      material respect on the date as of which it was deemed to have been made;
      or

            (c)   Covenants. There shall occur a:

                  (i)   default in the due performance or observance of any
            term, covenant or agreement contained in Sections 7.1(k)(i), 7.2,
            7.8, 7.9, 7.10, 7.11, 7.12, 8.1, 8.2 or 8.4 through 8.13, inclusive;

                  (ii)  default in the due performance or observance of any
            term, covenant or agreement contained in Sections 7.1(a), (b), (c)
            or (d) and such default shall continue unremedied for a period of at
            least five (5) Business Days after the earlier of a Responsible
            Officer of a Credit Party becoming aware of such default or notice
            thereof by the Administrative Agent; or

                  (iii) default in the due performance or observance by it of
            any term, covenant or agreement (other than those referred to in
            subsections (a), (b), (c)(i) or (c)(ii) of this Section 9.1)
            contained in this Credit Agreement or any other Credit Document and
            such default shall continue unremedied for a period of at least
            thirty (30) days after the earlier of a Responsible Officer of a
            Credit Party becoming aware of such default or notice thereof by the
            Administrative Agent; or

            (d)   Other Credit Documents. Except as a result of or in connection
      with a dissolution, merger or disposition of a Subsidiary permitted under
      Section 8.4 or Section 8.5, any Credit Document shall fail to be in full
      force and effect or to give the Administrative Agent and/or the Lenders
      the Liens or material rights, powers and privileges purported to be
      created thereby, or any Credit Party shall so state in writing; or

            (e)   Guaranties. Except as the result of or in connection with a
      dissolution, merger or disposition of a Subsidiary permitted under Section
      8.4 or Section 8.5, the guaranty given by any Guarantor or any provision
      thereof shall cease to be in full force and effect, or any Guarantor or
      any Person acting by or on behalf of such Guarantor shall deny or
      disaffirm such Guarantor's obligations under such guaranty; or

            (f)   Bankruptcy, etc. Any Bankruptcy Event shall occur with respect
      to any member of the Consolidated Group (other than an Immaterial
      Subsidiary); or

            (g)   Defaults under Other Agreements. With respect to any
      Indebtedness (other than Indebtedness outstanding under this Credit
      Agreement) in excess of $15,000,000 in the aggregate for the members of
      the Consolidated Group taken as a whole, (i) any member of the
      Consolidated Group shall (A) default in any payment (beyond the applicable
      grace period with respect thereto, if any) with respect to any such
      Indebtedness, or (B) the occurrence and continuance of a default in the
      observance or performance relating to such Indebtedness or contained in
      any instrument or agreement evidencing, securing or relating thereto, or
      any other event or condition 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 trustee or agent on behalf of
      such holders) to cause (determined without regard to whether any notice or
      lapse of time is required), any such Indebtedness to become due prior to
      its stated maturity; or (ii) any such Indebtedness shall be declared due
      and payable, or required to be prepaid other than by a regularly scheduled
      required prepayment, prior to the stated maturity thereof; or

            (h)   Judgments. One or more judgments, settlements or decrees shall
      be entered against or agreed to by one or more of the members of the
      Consolidated Group (other than an Immaterial Subsidiary) involving a
      liability of $5,000,000 or more in the aggregate (to the extent not paid
      or fully covered by insurance provided by a carrier who has acknowledged
      coverage and has the ability to perform) and any such judgments,
      settlements or decrees shall not have been vacated, discharged or stayed
      or bonded pending appeal within thirty (30) days from the entry thereof;
      or

            (i)   ERISA. Any of the following events or conditions, if such
      event or condition could reasonably be expected to have a Material Adverse
      Effect: (i) any "accumulated funding deficiency," as such term is defined
      in Section 302 of ERISA and Section 412 of the Internal Revenue Code,
      whether or not waived, shall exist with respect to any Plan, or any lien
      shall arise on the assets of any member of the Consolidated Group or any
      ERISA Affiliate in favor of the PBGC or a Plan; (ii) an ERISA Event shall
      occur with respect to a Single Employer Plan, that is, in the reasonable
      opinion of the Administrative Agent, likely to result in the termination
      of such Plan for purposes of Title IV of ERISA; (iii) an ERISA Event shall
      occur with respect to a Multiemployer Plan or Multiple Employer Plan, that
      is, in the reasonable opinion of the Administrative Agent, likely to
      result in (A) the termination of such Plan for purposes of Title IV of
      ERISA, or (B) any member of the Consolidated Group or any ERISA Affiliate
      incurring any liability in connection with a withdrawal from,
      reorganization of (within the meaning of Section 4241 of ERISA), or
      insolvency (within the meaning of Section 4245 of ERISA) of such Plan; or
      (iv) any prohibited transaction (within the meaning of Section 406 of
      ERISA or Section 4975 of the Internal Revenue Code) or breach of fiduciary
      responsibility shall occur that may subject any member of the Consolidated
      Group or any ERISA Affiliate to any liability under Sections 406, 409,
      502(i), or 502(l) of ERISA or Section 4975 of the Internal Revenue Code,
      or under any agreement or other instrument pursuant to which any member of
      the Consolidated Group or any ERISA Affiliate has agreed or is required to
      indemnify any person against any such liability; or

            (j)   Ownership. There shall occur a Change of Control.

9.2   Acceleration; Remedies.

      Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived by, or cured to the
satisfaction of, the requisite Lenders (pursuant to the voting requirements of
Section 11.6), the Administrative Agent may, and upon the request and direction
of the Required Lenders shall, by written notice to the Credit Parties take any
of the following actions:

            (a)   Termination of Commitments. Declare the Commitments
      terminated, whereupon the Commitments shall be immediately terminated.

            (b)   Acceleration. Declare the unpaid principal of and any accrued
      interest in respect of all Loans, any reimbursement obligations arising
      from drawings under Letters of Credit and any and all other indebtedness
      or obligations of any and every kind owing by the Credit Parties to the
      Administrative Agent and/or any of the Lenders hereunder to be due
      whereupon the same shall be immediately due and payable without
      presentment, demand, protest or other notice of any kind, all of which are
      hereby waived by the Credit Parties.

            (c)   Cash Collateral. Direct the Credit Parties to pay (and the
      Credit Parties agree that upon receipt of such notice, or upon the
      occurrence of an Event of Default under Section 9.1(f), they will
      immediately pay) to the Administrative Agent additional cash, to be held
      by the Administrative Agent, for the benefit of the Revolving Lenders, in
      a cash collateral account as additional security for the LOC Obligations
      in respect of subsequent drawings under all then-outstanding Letters of
      Credit in an amount equal to the maximum aggregate amount that may be
      drawn under all then-outstanding Letters of Credit.

            (d)   Enforcement of Rights. Enforce any and all rights and
      interests created and existing under the Credit Documents including,
      without limitation, all rights and remedies existing under the Collateral
      Documents, all rights and remedies against a Guarantor and all rights of
      set-off.

      Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(f) shall occur with respect to the Borrower, then the Commitments shall
automatically terminate and all Loans, all reimbursement obligations arising
from drawings under Letters of Credit, all accrued interest in respect thereof,
all accrued and unpaid Fees and other indebtedness or obligations owing to the
Administrative Agent and/or any of the Lenders hereunder automatically shall
immediately become due and payable without the giving of any notice or other
action by the Administrative Agent or the Lenders.


                                   SECTION 10

                       ADMINISTRATIVE AND COLLATERAL AGENT

10.1  Appointment and Authorization.

      (a)   Each Lender hereby irrevocably (subject to Section 10.9) appoints,
designates and authorizes each of the Administrative Agent and the Collateral
Agent to take such action on its behalf under the provisions of this Credit
Agreement and each other Credit Document and to exercise such powers and perform
such duties as are expressly delegated to it by the terms of this Credit
Agreement or any other Credit Document, together with such powers as are
reasonably incidental thereto. Each Lender authorizes and directs the
Administrative Agent and the Collateral Agent to enter into the Credit Documents
and the Genzyme Intercreditor Agreement. Each Lender further authorizes and
directs each

of the Administrative Agent and the Collateral Agent to execute and deliver
releases (or similar agreements) to give effect to the provisions of this Credit
Agreement and the other Credit Documents, including specifically, without
limitation, the provisions of Sections 8.1, 8.4 and 8.5. Notwithstanding any
provision to the contrary contained elsewhere herein or in any other Credit
Document, neither the Administrative Agent nor the Collateral Agent shall have
any duties or responsibilities, except those expressly set forth herein, and
neither shall have or be deemed to have any fiduciary relationship with any
Lender or participant, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this Credit Agreement or
any other Credit Document or otherwise exist against either the Administrative
Agent or the Collateral Agent. Without limiting the generality of the foregoing
sentence, the use of the term "agent" herein and in the other Credit Documents
with reference to the Administrative Agent or the Collateral Agent is not
intended to connote any fiduciary or other implied (or express) obligations
arising under agency doctrine of any applicable law. Instead, such term is used
merely as a matter of market custom, and is intended to create or reflect only
an administrative relationship between independent contracting parties.

      (b)   The Issuing Lender shall act on behalf of the Lenders with respect
to any Letters of Credit issued by it and the documents associated therewith
until such time (and except for so long) as the Administrative Agent may agree
at the request of the Required Lenders to act for the Issuing Lender with
respect thereto; provided, however, that the Issuing Lender shall have all of
the benefits and immunities (i) provided to the Administrative Agent in this
Section 10 with respect to any acts taken or omissions suffered by the Issuing
Lender in connection with Letters of Credit issued by it or proposed to be
issued by it and the application and agreements for letters of credit pertaining
to the Letters of Credit as fully as if the term "Administrative Agent" as used
in this Section 10 included the Issuing Lender with respect to such acts or
omissions, and (ii) as additionally provided herein with respect to the Issuing
Lender.

10.2  Delegation of Duties.

      Each of the Administrative Agent and the Collateral Agent may execute any
of its duties under this Credit Agreement or any other Credit Document by or
through agents, employees or attorneys-in-fact and shall be entitled to advice
of counsel and other consultants or experts concerning all matters pertaining to
such duties. Neither the Administrative Agent nor the Collateral Agent shall be
responsible for the negligence or misconduct of any agent or attorney-in-fact
that it selects in the absence of gross negligence or willful misconduct.

10.3  Liability.

      No Agent-Related Person shall (a) be liable for any action taken or
omitted to be taken by any Agent-Related Person under or in connection with this
Credit Agreement or any other Credit Document or the transactions contemplated
hereby (except for its own gross negligence or willful misconduct in connection
with its duties expressly set forth herein), or (b) be responsible in any manner
to any Lender or participant for any recital, statement, representation or
warranty made by any Credit Party or any officer thereof, contained herein or in
any other Credit Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Administrative Agent
or the Collateral Agent under or in connection with, this Credit Agreement or
any other Credit Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Credit Agreement or any other Credit
Document, or for any failure of any Credit Party or any other party to any
Credit Document to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Lender or participant
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Credit Agreement or any other
Credit Document, or to inspect the properties, books or records of any Credit
Party or any Affiliate thereof.

10.4  Reliance.

      (a)   Each of the Administrative Agent and the Collateral Agent shall be
entitled to rely, and shall be fully protected in relying, upon any writing,
communication, signature, resolution, representation, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to any Credit
Party), independent accountants and other experts selected by the Administrative
Agent or the Collateral Agent. Each of the Administrative Agent and the
Collateral Agent shall be fully justified in failing or refusing to take any
action under any Credit Document unless it shall first receive such advice or
concurrence of the Required Lenders as it deems appropriate and, if it so
requests, it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense that may be incurred by it by reason
of taking or continuing to take any such action. Each of the Administrative
Agent and the Collateral Agent shall in all cases be fully protected in acting,
or in refraining from acting, under this Credit Agreement or any other Credit
Document in accordance with a request or consent of the Required Lenders or all
the Lenders, if required hereunder, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders and
participants. Where this Credit Agreement expressly permits or prohibits an
action unless the Required Lenders otherwise determine, the Administrative Agent
or the Collateral Agent, as appropriate, shall, and in all other instances, the
Administrative Agent or the Collateral Agent, as appropriate, may, but shall not
be required to, initiate any solicitation for the consent or a vote of the
Lenders.

      (b)   For purposes of determining compliance with the conditions specified
in Section 5.1, each Lender that has signed this Credit Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Administrative Agent or the
Collateral Agent to such Lender for consent, approval, acceptance or
satisfaction, or required thereunder to be consented to or approved by or
acceptable or satisfactory to a Lender.

10.5  Notice of Default.

      (a)   Administrative Agent and Collateral Agent. Neither the
Administrative Agent nor the Collateral Agent shall be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default, except with
respect to defaults in the payment of principal, interest and fees required to
be paid to the Administrative Agent or the Collateral Agent, as appropriate, for
the account of the Lenders, unless such agent shall have received written notice
from a Lender or the Borrower referring to this Credit Agreement, describing
such Default or Event of Default and stating that such notice is a "notice of
default." Such agent will notify the Lenders of its receipt of any such notice.
Each of the Administrative Agent and the Collateral Agent shall take such action
with respect to such Default or Event of Default as may be directed by the
Required Lenders in accordance with Section 9; provided, however, that unless
and until the Administrative Agent and the Collateral Agent have received any
such direction, each of the Administrative Agent and the Collateral Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable or in the best interest of the Lenders.

      (b)   Issuing Lender and Swingline Lender. Neither the Issuing Lender nor
the Swingline Lender shall be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default (including, without limitation,
for purposes of Sections 2.1(b) and 2.1(c)), unless the Issuing Lender or
Swingline Lender, as applicable, shall have received written notice from the
Administrative Agent, the Collateral Agent, a Lender or the Borrower referring
to this Credit Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default." The Issuing Lender and the
Swingline Lender will notify the Administrative Agent of its receipt of any such
notice.

10.6  Credit Decision; Disclosure of Information.

      Each Lender acknowledges that no Agent-Related Person has made any
representation or warranty to it, and that no act by the Administrative Agent or
the Collateral Agent hereinafter taken, including any consent to and acceptance
of any assignment or review of the affairs of any Credit Party or any Affiliate
thereof, shall be deemed to constitute any representation or warranty by any
Agent-Related Person to any Lender as to any matter, including whether
Agent-Related Persons have disclosed material information in their possession.
Each Lender represents to the Administrative Agent and the Collateral Agent that
it has, independently and without reliance upon any Agent-Related Person and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of the Credit
Parties and their respective Subsidiaries, and all applicable bank or other
regulatory laws relating to the transactions contemplated hereby, and made its
own decision to enter into this Credit Agreement and to extend credit to the
Borrower and the other Credit Parties hereunder. Each Lender also represents
that it will, independently and without reliance upon any Agent-Related Person
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Credit Agreement and the other Credit
Documents, and to make such investigations as it deems necessary to inform
itself as to the business, prospects, operations, property, financial and other
condition and creditworthiness of the Borrower and the other Credit Parties.
Except for notices, reports and other documents expressly required to be
furnished to the Lenders by the Administrative Agent or the Collateral Agent
under the Credit Documents, neither the Administrative Agent nor the Collateral
Agent shall have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, prospects, operations,
property, financial and other condition or creditworthiness of any of the Credit
Parties or any of their respective Affiliates that may come into the possession
of any Agent-Related Person.

10.7  Indemnification.

      Whether or not the transactions contemplated hereby are consummated, the
Lenders shall indemnify upon demand each Agent-Related Person (to the extent not
reimbursed by or on behalf of any Credit Party and without limiting the
obligation of any Credit Party to do so), pro rata, and hold harmless each
Agent-Related Person from and against any and all Indemnified Liabilities
incurred by it; provided, however, that no Lender shall be liable for the
payment to any Agent-Related Person of any portion of such Indemnified
Liabilities resulting from such Person's gross negligence or willful misconduct;
provided, however, that no action taken in accordance with the directions of the
Required Lenders shall be deemed to constitute gross negligence or willful
misconduct for purposes of this Section. Without limitation of the foregoing,
each Lender shall reimburse each of the Administrative Agent and the Collateral
Agent upon demand for its ratable share of any costs or out-of-pocket expenses
(including reasonable attorneys' fees actually incurred and expenses but
excluding the allocated cost of internal counsel) incurred by it in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Credit Agreement, any other Credit Document, or any document contemplated
by or referred to herein, to the extent that the Administrative Agent or the
Collateral Agent, as appropriate, is not reimbursed for such expenses by or on
behalf of the Borrower. The undertaking in this Section shall survive
termination of the Commitments, the payment of all Obligations hereunder and the
resignation or replacement of either or both of the Administrative Agent and the
Collateral Agent.

10.8  Individual Capacity.

      Bank of America and its Affiliates may make loans to, issue letters of
credit for the account of, accept deposits from, acquire equity interests in and
generally engage in any kind of banking, trust, financial advisory, underwriting
or other business with each of the Credit Parties and their respective
Affiliates as though Bank of America were not the Administrative Agent, the
Collateral Agent or the Issuing Lender hereunder and without notice to or
consent of the Lenders. The Lenders acknowledge that, pursuant to such
activities, Bank of America or its Affiliates may receive information regarding
any Credit Party or its Affiliates (including information that may be subject to
confidentiality obligations in favor of such Credit Party or such Affiliate) and
acknowledge that each of the Administrative Agent, the Collateral Agent and the
Issuing Lender shall be under no obligation to provide such information to them.
With respect to its Loans, Bank of America shall have the same rights and powers
under this Credit Agreement as any other Lender and may exercise such rights and
powers as though it were not the Administrative Agent, the Collateral Agent or
the Issuing Lender, and the terms "Lender" and "Lenders" include Bank of America
in its individual capacity.

10.9  Successor.

      Either or both of the Administrative Agent and the Collateral Agent may
resign upon thirty days notice to the Lenders. If either the Administrative
Agent or the Collateral Agent resigns, the Required Lenders shall appoint from
among the Lenders a successor administrative agent or collateral agent, as
appropriate, for the Lenders, which successor administrative agent or collateral
agent shall be consented to by the Borrower at all times other than during the
existence of an Event of Default (which consent of the Borrower shall not be
unreasonably withheld or delayed). If no successor administrative agent or
collateral agent is appointed prior to the effective date of the resignation of
the Administrative Agent or the Collateral Agent, such resigning agent may
appoint, after consulting with the Lenders and the Borrower, a successor
administrative agent or collateral agent, as appropriate, from among the
Lenders. Upon the acceptance of its appointment as successor administrative
agent or collateral agent hereunder, such successor agent shall succeed to all
the rights, powers and duties of the resigning Administrative Agent or
Collateral Agent, as appropriate, and thereafter the term "Administrative Agent"
or "Collateral Agent", as appropriate, shall mean such successor administrative
agent or collateral agent, as appropriate, and the resigning agent's
appointment, powers and duties as Administrative Agent or Collateral Agent shall
be terminated. After any such resignation hereunder, the provisions of this
Section 10 and Sections 11.4 and 11.9 shall inure to the benefit of such
resigning agent as to any actions taken or omitted to be taken by it while it
was Administrative Agent or Collateral Agent hereunder. If no successor has
accepted appointment as administrative agent or collateral agent, as
appropriate, by the date thirty days following such resigning agent's notice of
resignation, the resigning agent's resignation shall nevertheless thereupon
become effective and the Lenders shall perform all of the duties of the
Administrative Agent or the Collateral Agent, as appropriate, under the Credit
Documents until such time, if any, as the Required Lenders appoint a successor
agent as provided above.

10.10 Other Agents; Lead Managers.

      None of the Lenders identified on the facing page or signature pages of
this Credit Agreement as a "syndication agent", "documentation agent",
"co-agent" or "lead manager" shall have any right, power, obligation, liability,
responsibility or duty under this Credit Agreement other than those applicable
to all Lenders as such. Without limiting the foregoing, none of the Lenders so
identified shall have or be deemed to have any fiduciary relationship with any
Lender. Each Lender acknowledges that it has not relied, and will not rely, on
any of the Lenders so identified in deciding to enter into this Credit Agreement
or in taking or not taking action hereunder.

                                   SECTION 11

                                  MISCELLANEOUS

11.1  Notices.

      Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (a) when
delivered, (b) when transmitted via telecopy (or other facsimile device), (c)
the Business Day following the day on which the same has been delivered prepaid
to a reputable national overnight air courier service, or (d) the third Business
Day following the day on which the same is sent by certified or registered mail,
postage prepaid, in each case to the respective parties at the address (or, in
the case of (b) above, facsimile number) set forth on Schedule 11.1, or at such
other address as such party may specify by written notice to the other parties
hereto.

11.2  Right of Set-Off; Adjustments.

      Upon the occurrence and during the continuance of any Event of Default,
each Lender (and each of its Affiliates) is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by such Lender (or any
of its Affiliates) to or for the credit or the account of any Credit Party
against any and all of the obligations of such Person now or hereafter existing
under this Credit Agreement, under the Notes, under any other Credit Document or
otherwise, irrespective of whether such Lender shall have made any demand under
hereunder or thereunder and although such obligations may be unmatured. Each
Lender agrees promptly to notify any affected Credit Party after any such
set-off and application made by such Lender; provided, however, that the failure
to give such notice shall not affect the validity of such set-off and
application. The rights of each Lender under this Section 11.2 are in addition
to other rights and remedies (including, without limitation, other rights of
set-off) that such Lender may have.

11.3  Successors and Assigns.

      (a)   The provisions of this Credit Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby, except that the Borrower may not assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of each Lender and no Lender may assign or otherwise transfer any of its
rights or obligations hereunder except (i) to an Eligible Assignee in accordance
with the provisions of paragraph (b) of this Section, (ii) by way of
participation in accordance with the provisions of paragraph (d) of this Section
or (iii) by way of pledge or assignment of a security interest subject to the
restrictions of paragraph (f) of this Section (and any other attempted
assignment or transfer by any party hereto shall be null and void). Nothing in
this Credit Agreement, expressed or implied, shall be construed to confer upon
any Person (other than the parties hereto, their respective successors and
assigns permitted hereby, Participants to the extent provided in paragraph (d)
of this Section and, to the extent expressly contemplated hereby, the
Indemnitees) any legal or equitable right, remedy or claim under or by reason of
this Credit Agreement.

      (b)   Any Lender may assign to one or more Eligible Assignees all or a
portion of its rights and obligations under this Credit Agreement (including all
or a portion of its Commitment and the Loans (including for purposes of this
subsection (b), participations in LOC Obligations and in Swingline Loans) at the
time owing to it); provided that (i) except in the case of an assignment of the
entire remaining amount of the assigning Lender's Commitment and the Loans at
the time owing to it or in the case of an assignment to a Lender or an Affiliate
of a Lender or an Approved Fund with respect to a Lender, the

aggregate amount of the Commitment (which for this purpose includes Loans
outstanding thereunder) or principal outstanding balance of the Term Loans of
the assigning Lender subject to each such assignment, determined as of the date
the Assignment and Acceptance with respect to such assignment is delivered to
the Administrative Agent, shall not be less than $5,000,000 in the case of any
assignment of a Revolving Commitment or Tranche A Term Loan or $1,000,000 in the
case of any assignment of a Tranche B Term Loan unless each of the
Administrative Agent and, so long as no Event of Default has occurred and is
continuing, the Borrower otherwise consents (each such consent not to be
unreasonably withheld or delayed), (ii) each partial assignment shall be made as
an assignment of a proportionate part of all the assigning Lender's rights and
obligations under this Credit Agreement with respect to the Loans or the
Commitment assigned, except that this clause (ii) shall not (x) apply to rights
in respect of outstanding Swingline Loans and (y) prohibit any Lender from
assigning all or a portion of its rights and obligations among separate tranches
on a non-pro rata basis, (iii) any assignment of a Revolving Commitment must be
approved by the Administrative Agent and the Issuing Lender unless the Person
that is the proposed assignee is itself a Lender with a Revolving Commitment
(whether or not the proposed assignee would otherwise qualify as an Eligible
Assignee); and (iv) the parties to each assignment shall execute and deliver to
the Administrative Agent an Assignment and Acceptance substantially in the form
of Exhibit 11.3(b) hereto, together with a processing and recordation fee of
$3,500 (provided that only one processing and recordation fee of $3,500 shall be
required in connection with (i) simultaneous assignments from a Lender to two or
more Funds administered or managed by a common Person (or by Affiliates of a
common Person) ("Affiliated Funds") and (ii) simultaneous assignments from two
or more Affiliated Funds to the same Person or to other Affiliated Funds).
Subject to acceptance and recording thereof by the Administrative Agent pursuant
to subsection (c) of this Section, from and after the effective date specified
in each Assignment and Acceptance, the Eligible Assignee thereunder shall be a
party hereto and, to the extent of the interest assigned by such Assignment and
Acceptance, have the rights and obligations of a Lender under this Credit
Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Acceptance, be released from its
obligations under this Credit Agreement (and, in the case of an Assignment and
Acceptance covering all of the assigning Lender's rights and obligations under
this Credit Agreement, such Lender shall cease to be a party hereto but shall
continue to be entitled to the benefits of Sections 11.5 and 11.9). Upon
request, the Borrower (at its expense) shall execute and deliver new or
replacement Notes to the assigning Lender and the assignee Lender. Any
assignment or transfer by a Lender of rights or obligations under this Credit
Agreement that does not comply with this subsection shall be treated for
purposes of this Credit Agreement as a sale by such Lender of a participation in
such rights and obligations in accordance with subsection (d) of this Section.

      (c)   The Administrative Agent, acting solely for this purpose as an agent
of the Borrower, shall maintain at its office in Charlotte, North Carolina a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitments of,
and principal amount of the Loans and LOC Obligations owing to, each Lender
pursuant to the terms hereof from time to time (the "Register"). The entries in
the Register shall be prima facie evidence of the information contained therein,
and the Borrower, the Administrative Agent and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Credit Agreement, notwithstanding notice to
the contrary. The Register shall be available for inspection by the Borrower and
any Lender, at any reasonable time and from time to time upon reasonable prior
notice.

      (d)   Any Lender may, without the consent of, or notice to, the Borrower
or the Administrative Agent, sell participations to one or more banks or other
entities (a "Participant") in all or a portion of such Lender's rights and/or
obligations under this Credit Agreement (including all or a portion of its
Commitment and/or the Loans (including such Lender's participations in LOC
Obligations and/or Swingline Loans) owing to it); provided that (i) such
Lender's obligations under this Credit Agreement

shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations and (iii) the
Borrower, the Administrative Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Credit Agreement. Any agreement or instrument pursuant to
which a Lender sells such a participation shall provide that such Lender shall
retain the sole right to enforce this Credit Agreement and to approve any
amendment, modification or waiver of any provision of this Credit Agreement;
provided that such agreement or instrument may provide that such Lender will
not, without the consent of the Participant, agree to any amendment, waiver or
other modification that would (i) postpone any date upon which any payment of
money is scheduled to be paid to such Participant, (ii) reduce the principal,
interest, fees or other amounts payable to such Participant or (iii) release all
or substantially all of the Guarantors from their obligations under the Credit
Documents. Subject to subsection (e) of this Section, the Borrower agrees that
each Participant shall be entitled to the benefits of Sections 3.6, 3.9, 3.11
and 3.12 to the same extent as if it were a Lender and had acquired its interest
by assignment pursuant to subsection (b) of this Section. To the extent
permitted by law, each Participant also shall be entitled to the benefits of
Section 11.2 as though it were a Lender, provided such Participant agrees to be
subject to Section 3.14 as though it were a Lender.

      (e)   A Participant shall not be entitled to receive any greater payment
under Section 3.6, 3.9 or 3.11 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the
Borrower's prior written consent. A Participant that would be a foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 3.11 unless
the Borrower is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrower, to comply with Section
3.11(d) as though it were a Lender.

      (f)   Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Credit Agreement (including under
its Notes, if any) to secure obligations of such Lender, including any pledge or
assignment to secure obligations to a Federal Reserve Bank; provided that no
such pledge or assignment shall release a Lender from any of its obligations
hereunder or substitute any such pledgee or assignee for such Lender as a party
hereto.

      (g)   If the consent of the Borrower to an assignment or to an Eligible
Assignee is required hereunder (including a consent to an assignment that does
not meet the minimum assignment threshold specified in clause (i) of the proviso
to the first sentence of Section 11.3(b)), the Borrower shall be deemed to have
given its consent five Business Days after the date notice thereof has been
received by the Borrower unless such consent is expressly refused by the
Borrower prior to such fifth Business Day.

      (h)   Notwithstanding anything to the contrary contained herein, if at any
time Bank of America assigns all of its Commitment and Loans pursuant to
subsection (b) above, Bank of America may, (i) upon thirty days notice to the
Borrower and the Lenders, resign as Issuing Lender and/or (ii) upon five
Business Days notice to the Borrower, resign as Swingline Lender. In the event
of any such resignation as Issuing Lender or as Swingline Lender, the Borrower
shall be entitled to appoint from among the Lenders a successor Issuing Lender
or Swingline Lender hereunder; provided, however, that no failure by the
Borrower to appoint any such successor shall affect the resignation of Bank of
America as Issuing Lender or as Swingline Lender, as the case may be. Bank of
America shall retain all the rights and obligations of the Issuing Lender
hereunder with respect to all Letters of Credit outstanding as of the effective
date of its resignation as Issuing Lender and all LOC Obligations with respect
thereto (including the right to require the Lenders to make Base Rate Loans or
fund participations in Letters of Credit pursuant to Section 2.6(b)). If Bank of
America resigns as Swingline Lender, it shall retain all the rights of the
Swingline Lender provided hereunder with respect to Swingline Loans made by it
and outstanding

as of the effective date of such resignation, including the right to require the
Lenders to make Base Rate Loans or fund participations in outstanding Swingline
Loans pursuant to Section 2.7.

11.4  No Waiver; Remedies Cumulative.

      No failure or delay on the part of the Administrative Agent or any Lender
in exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between the Administrative Agent or any Lender
and any of the Credit Parties 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 and remedies provided herein are cumulative and not exclusive of any
rights or remedies that the Administrative Agent or any Lender would otherwise
have. No notice to or demand on any Credit Party in any case shall entitle the
Credit Parties to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Administrative Agent
or the Lenders to any other or further action in any circumstances without
notice or demand.

11.5  Expenses; Indemnification.

      (a)   The Borrower agrees to pay on demand all reasonable costs and
expenses of the Administrative Agent in connection with the syndication,
preparation, execution, delivery, modification, and amendment of this Credit
Agreement, the other Credit Documents and the other documents to be delivered
hereunder and in connection with advising the Administrative Agent as to its
rights and responsibilities under the Credit Documents (in each case including,
without limitation, reasonable attorneys' fees actually incurred and expenses
but excluding the allocated cost of internal counsel). The Borrower agrees to
pay on demand all reasonable costs and expenses of the Administrative Agent and
the Lenders, if any (including, without limitation, reasonable attorneys' fees
actually incurred and expenses but excluding the allocated cost of internal
counsel), in connection with the enforcement (whether through negotiations,
legal proceedings, or otherwise) of the Credit Documents and the other documents
to be delivered thereunder. The Borrower further agrees to permit the
Administrative Agent to perform inventory and accounts receivable field audits
at the Borrower's expense, provided that unless a Default shall then be in
existence the Borrower's obligation to reimburse the Administrative Agent for
such field audits shall be limited to one such field audit each fiscal year.

      (b)   Whether or not the transactions contemplated hereby are consummated,
the Borrower agrees to indemnify, save and hold harmless each Agent-Related
Person, each Lender and their respective Affiliates, directors, officers,
employees, counsel, agents and attorneys-in-fact (collectively the
"Indemnitees") from and against: (i) any and all claims, demands, actions or
causes of action that are asserted against any Indemnitee by any Person (other
than the Administrative Agent or any Lender) relating directly or indirectly to
a claim, demand, action or cause of action that such Person asserts or may
assert against any Credit Party, any Affiliate of any Credit Party or any of
their respective officers or directors; (ii) any and all claims, demands,
actions or causes of action that may at any time (including at any time
following repayment of the Obligations and the resignation or removal of the
Administrative Agent or the replacement of any Lender) be asserted or imposed
against any Indemnitee, arising out of or relating to, the Credit Documents, any
predecessor Credit Documents, the Commitments, the use or contemplated use of
the proceeds of any Extension of Credit, or the relationship of any Credit
Party, the Administrative Agent and the Lenders under this Credit Agreement or
any other Credit Document; (iii) any administrative or investigative proceeding
by any Governmental Authority arising out of or related to a claim, demand,
action or cause of action described in subsection (i) or (ii) above; and (iv)
any and all liabilities (including liabilities under indemnities), losses, costs
or expenses (including reasonable fees and costs of counsel) that any Indemnitee
suffers or incurs as a result of the assertion of any foregoing claim, demand,
action, cause of action or proceeding, or as a result of the preparation of any
defense in

connection with any foregoing claim, demand, action, cause of action or
proceeding, in all cases, whether or not arising out of the negligence of an
Indemnitee, and whether or not an Indemnitee is a party to such claim, demand,
action, cause of action or proceeding (all the foregoing, collectively, the
"Indemnified Liabilities"); provided that no Indemnitee shall be entitled to
indemnification for any claim caused by its own gross negligence or willful
misconduct or for any loss asserted against it by another Indemnitee. The
agreements in this Section shall survive the termination of the Commitments and
repayment of all the other Obligations.

      (c)   Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 11.5 shall survive the repayment of the Loans, LOC Obligations and
other obligations under the Credit Documents and the termination of the
Commitments hereunder.

11.6  Amendments, Waivers and Consents.

      Neither this Credit Agreement nor any other Credit Document nor any of the
terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing entered into by, or approved in writing by, the Required Lenders and the
Borrower, provided, however, that:

            (a)   without the consent of each Lender affected thereby, neither
      this Credit Agreement nor any other Credit Document may be amended to

                  (i)    extend the Termination Date or the final maturity of
            any Loan or of any reimbursement obligation, or any portion thereof,
            arising from drawings under Letters of Credit, or extend or waive
            any principal amortization payment of the Tranche A Term Loans or
            the Tranche B Term Loans, or any portion thereof,

                  (ii)   reduce the rate or extend the time of payment of
            interest on any Loan or on any reimbursement obligation arising from
            drawings under Letters of Credit (other than as a result of waiving
            the applicability of any post-default increase in interest rates) or
            Fees,

                  (iii)  reduce or waive the principal amount of any Loan or of
            any reimbursement obligation, or any portion thereof, arising from
            drawings under Letters of Credit,

                  (iv)   increase the Commitment of a Lender over the amount
            thereof in effect (it being understood and agreed that a waiver of
            any Default or Event of Default or mandatory reduction in the
            Commitments shall not constitute a change in the terms of any
            Commitment of any Lender),

                  (v)    release the Borrower or, except as the result of or in
            connection with a dissolution, merger or disposition of a member of
            the Consolidated Group permitted under Section 8.4 or 8.5, all or
            substantially all of the Guarantors, from its or their obligations
            under the Credit Documents,

                  (vi)   except as the result of or in connection with an Asset
            Disposition permitted under Section 8.5, release all or
            substantially all of the Collateral,

                  (vii)  amend, modify or waive any provision of this Section
            11.6(a), 3.13, 3.14, 3.15(b), 3.15(c), 9.1(a), 11.2, 11.3, 11.5 or
            11.9,

                  (viii) amend, modify or waive any provision of Section 3.6,
            3.7, 3.8, 3.9, 3.10, 3.11 or 3.12 in a manner materially adverse to
            such Lender,

                  (ix)   reduce any percentage specified in, or otherwise
            modify, the definition of Required Lenders, or

                  (x)    consent to the assignment or transfer by the Borrower
            or all or substantially all of the other Credit Parties of any of
            its or their rights and obligations under (or in respect of) the
            Credit Documents except as permitted thereby;

                  (b)    (i) without the consent of the Revolving Lenders
            holding in the aggregate more than 50% of the Revolving Commitments,
            or if the Revolving Commitments have been terminated, Revolving
            Lenders holding in the aggregate more than 50% of the aggregate
            principal amount of the Revolving Obligations outstanding (taking
            into account in each case Participation Interests or obligation to
            participate therein), (A) this Section 11.6(b)(i) may not be amended
            or waived and (B) Section 3.3(c) may not be amended or waived with
            regard to the application of any mandatory prepayment on the
            Revolving Obligations;

                         (ii)  without the consent of the Tranche A Term Lenders
            holding in the aggregate more than 50% of the aggregate principal
            amount of the Tranche A Term Loans outstanding, (A) this Section
            11.6(b)(ii) may not be amended or waived and (B) Section 3.3(c) may
            not be amended or waived with regard to the application of any
            mandatory prepayment on the Tranche A Term Loans;

                         (iii) without the consent of the Tranche B Term Lenders
            holding in the aggregate more than 50% of the aggregate principal
            amount of the Tranche B Term Loans outstanding, (A) this Section
            11.6(b)(iii) may not be amended or waived and (B) Section 3.3(c) may
            not be amended or waived with regard to the application of any
            mandatory prepayment on the Tranche B Term Loans; and

            (c)   without the consent of the Revolving Lenders holding in the
      aggregate more than 50% of the Revolving Commitments, or if the Revolving
      Commitments have been terminated, Revolving Lenders holding in the
      aggregate more than 50% of the aggregate principal amount of the Revolving
      Obligations outstanding (taking into account in each case Participation
      Interests or obligation to participate therein), no Default or Event of
      Default may be waived for purposes of Section 5.2(b);

            (d)   without the consent of the Administrative Agent and the
      Collateral Agent, no provision of Section 10 may be amended;

            (e)   without the consent of the Issuing Lender, no provision of
      Section 2.1(b), 2.2(a)(ii), 2.6 or 3.5(b)(ii) may be amended; and

            (f)   without the consent of the Swingline Lender, no provision of
      Section 2.1(c), 2.2(a)(iii) and 2.7 may be amended.

      Notwithstanding the fact that the consent of all the Lenders is required
      in certain circumstances as set forth above, (x) each Lender is entitled
      to vote as such Lender sees fit on any bankruptcy reorganization plan that
      affects the Loans, and each Lender acknowledges that the provisions of
      Section 1126(c) of the Bankruptcy Code supersedes the unanimous consent
      provisions set forth

      herein and (y) the Required Lenders may consent to allow a Credit Party to
      use cash collateral in the context of a bankruptcy or insolvency
      proceeding.

11.7  Counterparts.

      This Credit Agreement may be executed in any number of counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart for each of the parties hereto. Delivery by facsimile by any of
the parties hereto of an executed counterpart of this Credit Agreement shall be
as effective as an original executed counterpart hereof and shall be deemed a
representation that an original executed counterpart hereof will be delivered.

11.8  Headings.

      The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.

11.9  Survival.

      All indemnities set forth herein, including, without limitation, in
Section 2.6(h), 3.11, 3.12, 10.5 or 11.5 shall survive the execution and
delivery of this Credit Agreement, the making of the Loans, the issuance of the
Letters of Credit, the repayment of the Loans, LOC Obligations and other
obligations under the Credit Documents and the termination of the Commitments
hereunder, and all representations and warranties made by the Credit Parties
herein shall survive delivery of the Notes and the making of the Loans
hereunder.

11.10 Governing Law; Submission to Jurisdiction; Venue; Waiver of Jury Trial;
Waiver of Punitive and Exemplary Damages.

      (a)   THIS CREDIT AGREEMENT AND, UNLESS OTHERWISE EXPRESSLY PROVIDED
THEREIN, THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Any legal
action or proceeding with respect to this Credit Agreement or any other Credit
Document may be brought in the state or federal courts located in Nashville,
Tennessee or Charlotte, North Carolina, and, by execution and delivery of this
Credit Agreement, each of the Credit Parties hereby irrevocably accepts for
itself and in respect of its property, generally and unconditionally, the
nonexclusive jurisdiction of such courts. Nothing herein shall affect the right
of the Administrative Agent or any Lender to commence legal proceedings or to
otherwise proceed against any Credit Party in any other jurisdiction.

      (b)   Each of the Credit Parties hereby irrevocably waives any objection
that it may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Credit
Agreement or any other Credit Document brought in the courts referred to in
subsection (a) above and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding brought in
any such court has been brought in an inconvenient forum.

      (c)   EACH PARTY TO THIS CREDIT AGREEMENT HEREBY EXPRESSLY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING
UNDER ANY CREDIT DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY CREDIT
DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING
OR HEREAFTER ARISING, AND

WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS CREDIT
AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER
OF THEIR RIGHT TO TRIAL BY JURY.

      (d)   Each party to this Credit Agreement hereby agrees that it shall not
have a remedy of punitive or exemplary damages against any other party hereto in
any Dispute and hereby waives any right or claim to punitive or exemplary
damages they have now or which may arise in the future in connection with any
Dispute whether the Dispute is resolved by arbitration or judicially. As used is
this clause (d), "Dispute" means any claim, demand, action or cause of action
arising under any Credit Document or in any way connected with or related or
incidental to the dealings of the parties hereto with respect to any Credit
Document or the transactions related thereto, in each case whether now existing
or hereafter arising, and whether founded in contract or tort or otherwise.

11.11 Severability.

      If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.

11.12 Entirety.

      This Credit Agreement together with the other Credit Documents represent
the entire agreement of the parties hereto and thereto, and supersede all prior
agreements and understandings, oral or written, if any, including any commitment
letters or correspondence relating to the Credit Documents or the transactions
contemplated herein and therein.

11.13 Binding Effect; Termination.

      (a)   This Credit Agreement shall become effective at such time on or
after the Closing Date when it shall have been executed by each Credit Party and
the Administrative Agent, and the Administrative Agent shall have received
copies hereof (telecopied or otherwise) which, when taken together, bear the
signatures of each Lender, and thereafter this Credit Agreement shall be binding
upon and inure to the benefit of each Credit Party, the Administrative Agent and
each Lender and their respective successors and assigns.

      (b)   The term of this Credit Agreement shall be until no Loans, LOC
Obligations or any other amounts payable hereunder or under any of the other
Credit Documents shall remain outstanding, no Letters of Credit shall be
outstanding and all of the Commitments hereunder shall have expired or been
terminated.

11.14 Confidentiality.

      Each of the Administrative Agent and the Lenders agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its and its Affiliates' directors, officers, employees
and agents, including accountants, legal counsel and other advisors (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential); (b) to the extent requested by any regulatory
authority; (c) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process; (d) to any other party to this Credit
Agreement; (e) in connection with the exercise of any remedies hereunder or any
suit, action or proceeding relating to this Credit Agreement or

the enforcement of rights hereunder; (f) subject to an agreement containing
provisions substantially the same as those of this Section, to (i) any Eligible
Assignee of or Participant in, or any prospective Eligible Assignee of or
Participant in, any of its rights or obligations under this Credit Agreement or
(ii) any direct or indirect contractual counterparty or prospective counterparty
(or such contractual counterparty's or prospective counterparty's professional
advisor) to any credit derivative transaction relating to obligations of the
Borrower; (g) with the consent of the Borrower; (h) to the extent such
Information (i) becomes publicly available other than as a result of a breach of
this Section or (ii) becomes available to the Administrative Agent or any Lender
on a nonconfidential basis from a source other than the Borrower; or (i) to the
National Association of Insurance Commissioners or any other similar
organization or any nationally recognized rating agency that requires access to
information about a Lender's or its Affiliates' investment portfolio in
connection with ratings issued with respect to such Lender or its Affiliates. If
any Person required to keep Information confidential by the terms of this
Section (or any agreement contemplated by this Section) is requested or required
(by applicable laws or regulations or by any subpoena or similar legal process)
to disclose such Information, such Person shall give the Borrower prompt notice
of such request or requirement so that the Borrower may seek an appropriate
protective order or waive compliance with the provisions of this Section. For
the purposes of this Section, "Information" means all information received from
the Borrower relating to the Borrower or its business, other than any such
information that is available to the Administrative Agent or any Lender on a
nonconfidential basis prior to disclosure by the Borrower. Any Person required
to maintain the confidentiality of Information as provided in this Section shall
be considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as is customary industry practice.

11.15 Source of Funds.

      Each of the Lenders hereby represents and warrants to the Borrower that at
least one of the following statements is an accurate representation as to the
source of funds to be used by such Lender in connection with the financing
hereunder:

            (a)   no part of such funds constitutes assets allocated to any
      separate account maintained by such Lender in which any employee benefit
      plan (or its related trust) has any interest;

            (b)   to the extent that any part of such funds constitutes assets
      allocated to any separate account maintained by such Lender, such Lender
      has disclosed to the Borrower the name of each employee benefit plan whose
      assets in such account exceed ten percent (10%) of the total assets of
      such account as of the date of such purchase (and, for purposes of this
      subsection (b), all employee benefit plans maintained by the same employer
      or employee organization are deemed to be a single plan);

            (c)   to the extent that any part of such funds constitutes assets
      of an insurance company's general account, such insurance company has
      complied with all of the requirements of the regulations issued under
      Section 401(c)(1)(A) of ERISA; or

            (d)   such funds constitute assets of one or more specific benefit
      plans that such Lender has identified in writing to the Borrower.

As used in this Section 11.15, the terms "employee benefit plan" and "separate
account" shall have the respective meanings provided in Section 3 of ERISA.

11.16 Conflict.

      To the extent that there is a conflict or inconsistency between any
provision hereof, on the one hand, and any provision of any Credit Document, on
the other hand, this Credit Agreement shall control.

                           [signature pages to follow]

      IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Credit Agreement to be duly executed and delivered as of the date first
above written.

BORROWER:                           ACCREDO HEALTH, INCORPORATED,
                                    a Delaware corporation

                                    By:________________________________
                                    Name:
                                    Title:

GUARANTORS:                         SOUTHERN HEALTH SYSTEMS, INC.,
                                    a Tennessee corporation
                                    NOVA FACTOR, INC.,
                                    a Tennessee corporation
                                    HEMOPHILIA HEALTH SERVICES, INC.,
                                    a Tennessee corporation
                                    PHARMACARE RESOURCES INC.,
                                    a New York corporation
                                    SUNRISE HEALTH MANAGEMENT, INC.,
                                    a Georgia corporation
                                    BIO PARTNERS IN CARE, INC.,
                                    a Missouri corporation
                                    GENTIVA HEALTH SERVICES (QUANTUM) CORP.,
                                    a Delaware corporation
                                    GENTIVA HEALTH SERVICES (INFUSION), INC.,
                                    a Delaware corporation
                                    GENTIVA HEALTH RESOURCES, INC. (NEW YORK),
                                    a New York corporation

                                    By:________________________________
                                    Name:
                                    Title:
                                            of each of the Guarantors

                           [Signature Pages Continue]

ADMINISTRATIVE AGENT:               BANK OF AMERICA, N.A.,
                                    it its capacity as Administrative Agent

                                    By:________________________________
                                    Name:
                                    Title:

LENDERS:                            BANK OF AMERICA, N.A.,
                                    in its capacity as a Lender

                                    By:________________________________
                                    Name:
                                    Title:

                                    JPMORGAN CHASE BANK

                                    By:________________________________
                                    Name:
                                    Title:

                                    WACHOVIA BANK, NATIONAL ASSOCIATION

                                    By:________________________________
                                    Name:
                                    Title:

                                    FIRST TENNESSEE BANK NATIONAL ASSOCIATION

                                    By:________________________________
                                    Name:
                                    Title:

                                    BROWN BROTHERS HARRIMAN & CO.

                                    By:________________________________
                                    Name:
                                    Title:

                                    UNION PLANTERS BANK, NATIONAL ASSOCIATION

                                    By:________________________________
                                    Name:
                                    Title:

                                    CREDIT LYONNIAS NEW YORK BRANCH

                                    By:________________________________
                                    Name:
                                    Title:

                           [Signature Pages Continue]

                                    FLEET NATIONAL BANK

                                    By:________________________________
                                    Name:
                                    Title:

                                    SUNTRUST BANK

                                    By:________________________________
                                    Name:
                                    Title:

                                    DEUTSCHE BANK TRUST COMPANY AMERICAS

                                    By:________________________________
                                    Name:
                                    Title:

                                    COMERICA BANK

                                    By:________________________________
                                    Name:
                                    Title:

                                    TRUST ONE BANK

                                    By:________________________________
                                    Name:
                                    Title:

                                    U.S. BANK NATIONAL ASSOCIATION

                                    By:________________________________
                                    Name:
                                    Title:

                                  Schedule 2.1

                                  COMMITMENTS



- --------------------------------------------------------------------------------------------------------------------------------
                                              Revolving      Revolving     Tranche A     Tranche A    Tranche B      Tranche B
                                             Commitment      Committed     Term Loan     Term Loan    Term Loan      Term Loan
                   Lenders                   Percentage       Amount      Percentage      Amount      Percentage       Amount
- --------------------------------------------------------------------------------------------------------------------------------
                                                                                                  
Bank of America, N.A.                       14.000000000%   $17,500,000  10.666666666%  $8,000,000  100.000000000%  $125,000,000
- --------------------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Bank                         10.800000000%   $13,500,000  12.000000000%  $9,000,000       ---            ---
- --------------------------------------------------------------------------------------------------------------------------------
Wachovia Bank, National Association         10.800000000%   $13,500,000  12.000000000%  $9,000,000       ---            ---
- --------------------------------------------------------------------------------------------------------------------------------
First Tennessee Bank National Association   10.800000000%   $13,500,000  12.000000000%  $9,000,000       ---            ---
- --------------------------------------------------------------------------------------------------------------------------------
Brown Brothers Harriman & Co.               10.000000000%   $12,500,000  10.000000000%  $7,500,000       ---            ---
- --------------------------------------------------------------------------------------------------------------------------------
Union Planters Bank, National Association    6.600000000%   $ 8,250,000   6.666666667%  $5,000,000       ---            ---
- --------------------------------------------------------------------------------------------------------------------------------
Fleet National Bank                          6.600000000%   $ 8,250,000   6.666666667%  $5,000,000       ---            ---
- --------------------------------------------------------------------------------------------------------------------------------
SunTrust Bank                                6.600000000%   $ 8,250,000   6.666666667%  $5,000,000       ---            ---
- --------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank Trust Company Americas         6.600000000%   $ 8,250,000   6.666666667%  $5,000,000       ---            ---
- --------------------------------------------------------------------------------------------------------------------------------
U.S. Bank National Association               6.400000000%   $ 8,000,000   2.666666666%  $2,000,000
- --------------------------------------------------------------------------------------------------------------------------------
Comerica Bank                                5.200000000%   $ 6,500,000   4.666666667%  $3,500,000       ---            ---
- --------------------------------------------------------------------------------------------------------------------------------
Credit Lyonnais New York Branch              4.000000000%   $ 5,000,000   6.666666667%  $5,000,000       ---            ---
- --------------------------------------------------------------------------------------------------------------------------------
Trust One Bank                               1.600000000%   $ 2,000,000   2.666666666%  $2,000,000       ---            ---
- --------------------------------------------------------------------------------------------------------------------------------

- --------------------------------------------------------------------------------------------------------------------------------
                    Total                      100.00%     $125,000,000     100.00%     $75,000,000    100.00%      $125,000,000
- --------------------------------------------------------------------------------------------------------------------------------


                                  Schedule 5.1

                  Identified Real Property Leasehold Interests


1.    1620 Century Center Parkway, Suites 109, 109-B, 109-C, Memphis, TN
2.    9625 D- Southern Pines Blvd., Charlotte, NC
3.    6820 Charlotte Pike, Suite 101, Nashville, TN
4.    5980 Unity Drive, Suite G, Norcross, GA
5.    8 Westchester Plaza, Elmsford, New York
6.    11411-11413 Strang Line Road, Lenexa, KS
7.    178 Thorn Hill Road, Warrendale, PA
8.    12900 Foster Street, Overland Park, KS
9.    7345 Airport Freeway, Fort Worth, TX
10.   150 Lake Drive, Wexford, PA
11.   170 N. Maple/1831 Commerce Street, Corona, CA
12.   8550 Ciderbed Road, Newington, VA
13.   11 B Commerce Way, Totowa, NJ
14.   9414 North 25th Avenue, Phoenix, AZ
15.   4180 Piedmont Parkway, Greensboro, NC
16.   4901 West Reno Avenue, Oklahoma City, OK
17.   22408 66th Avenue South, Kent, WA

                                  Schedule 6.8

                                      Liens


None.

                                  Schedule 6.9

                              Intellectual Property

                 Trademarks/Service Marks/Copyrights/Patents

Accredo Health, Incorporated and Design: Reg. # 2,287,968, SM, Filed 10/5/98

Nova Factor, Inc. and Design: Reg. # 1,688,287, TM/SM, Filed 5/17/90

H Hemophilia Health Services        (&)
Hemophilia Health Services, Inc. and Design     Reg. # 2,337,097, SM, Filed
10/8/97

      For the Human Factor - Reg. # 1,784,575. SM, Filed 5/11/92

      Bloodstone Buddies - Reg # 1,985,493, SM, Filed 7/9/96, abandoning on
        7/9/02

      Max Track - Reg. # 1,792,021, SM, Filed 7/9/92

      The Human Factor - Reg. # 2,045,535, SM, Filed 9/18/95

      Positive Prescriptions - Reg. # 2,104,662, TM, Filed 1/2/96

      Emergency Room Kits - Reg. # TX 4,633,454, Copyright, Filed 6/17/99

      The Hemophilia Connection - Reg. # 2,378,733, TM/SM, Filed 12/17/98

      Bloodstone Gazette - Reg. # 2,316,353,TM, Filed 12/18/98 Welligan Hugsley
        and Design - Reg. # 2,448,808, TM, Filed 10/6/99

      Welligan Hugsley - Reg. # 2,48,809, TM, Filed 10/6/99

      Welligan Hugsley - Serial # 75,516,814, TM, Filed 10/6/99

      Welligan Hugsley and Design Serial # 75,816,700, TM Filed 10/6/99,
        Abandoned


      Bloodstone Magazine - Serial # 76/137,647, TM, Filed 9/29/00

      FactorXCare and Design - Serial # 76/379,399 (pending) SM. Filed 3/6/02

      Factor Care - Serial # 76/378,938 (pending) SM, Filed 3/6/02

Bio Partners in Care, Inc. - Serial # 75/933,216 (pending) TM, Filed 3/2/00

      Method of Providing Pharmaceuticals and Pharmaceutical Services - Serial #
        09/728,032 (pending) Patent, Filed 12/1/00

      Method and Apparatus for

      Managing a Fertility Kit - Serial # 09/618,368 (pending), Patent Filed
      6/18/00

      Method and Systems for Providing Patients and Health-Care Providers
        Access to Care Data -  Serial # 09/548,229 (pending) Patent, Filed
        4/12/00

      BIO-FEEDBACK -  Serial # 75/901,695 (pending) SM, Filed 1/24/00

ChroniCare - Reg # 1,967,646, TM, Filed 4/16/96 A.C.C.E.S.S. - Reg # 2,029,809,
TM, Filed 1/14/97 Specialty Solutions - Tradename, not registered

1.    Accredo routinely claims a copyright in all manuals, forms, advertisements
      and other publications prepared internally and used in its business.

2.    Various web pages , web sites, and web designs.

3.    Various software modifications developed internally and various
      licenses of third party software including Keane software, RxHome
      software, HR software, 4 domain names.

4.    Various applications and databases developed internally including a
      managed care database and online reorder applications.

5.    Computer System configurations and architectures.

6.    Standard Operating procedures.

                                  Schedule 6.13

                                  Subsidiaries

1.    Southern Health Systems, Inc.
      1640 Century Center Parkway, Suite 101
      Memphis, Tennessee  38134
      Wholly owned by Accredo Health, Incorporated
      Jurisdiction: Tennessee
      Stock Classes: A Common, B Common, Preferred
      20,000,000 Authorized  A- Common Shares
      10,000,000 Shares A -Common Stock Outstanding
      10,000,000 Authorized B-Common Shares
      0 Shares B-Common Outstanding
      1,000,000 Authorized Prefered Stock
      0 Shares Preferred Outstanding

2.    Nova Factor, Inc.
      1620 Century Center Parkway, Suite 109
      Memphis, Tennessee  38134
      Wholly owned by Southern Health Systems, Inc.
      Jurisdiction: Tennessee
      Stock Class: Common
      1,000 Authorized Shares
      100 Shares Common Stock Outstanding

3.    Hemophilia Health Services, Inc.
      6820 Charlotte Pike, Suite 100
      Nashville, Tennessee  37209
      Wholly owned by Accredo Health, Incorporated
      Jurisdiction:  Tennessee
      Stock Class : Common
      1,000 Authorized Shares
      100 Shares Common Stock Outstanding

4.    Pharmacare Resources Inc.
      8 Westchester Plaza
      Elmsford, New York  10523
      Wholly owned by Accredo Health, Incorporated
      Jurisdiction: New York
      Stock Class:  Common
      200 Authorized Shares
      20 Shares Common Stock Outstanding

5.    Sunrise Health Management, Inc.
      5980-E, F, G & H Unity Drive
      Norcross, Georgia  30071
      Wholly owned by Hemophilia Health Services, Inc.
      Jurisdiction: Georgia
      Stock Class: Common
      1,250,000 Authorized Shares
      954,777 Shares Common Stock Outstanding

6.    Bio Partners In Care, Inc.
      3411 Office Park Dr., Suite 100
      Dayton, Ohio  45439
      Wholly owned by Accredo Health, Incorporated
      Jurisdiction: Missouri
      Stock Class:  Common
      3,000,000 Authorized Shares
      999,997 Shares Common Stock Outstanding

7.    Children's Hemophilia Services
      6820 Charlotte Pike, Suite 101
      Nashville, Tennessee  37201
      80% owned by Hemophilia Health Services, Inc.
      Jurisdiction: California

8.    Gentiva Health Services (Quantum) Corp.
      1640 Century Center Parkway, Suite 101
      Memphis, Tennessee  38134
      100% owned by Accredo Health, Incorporated
      Jurisdiction: Delaware
      Stock Class: Common
      1,000 Authorized Shares
      1,000 Common Shares Outstanding

9.    Gentiva Health Services (Infusion), Inc.
      1640 Century Center Parkway, Suite 101
      Memphis, Tennessee  38134
      100% owned by Accredo Health, Incorporated
      Jurisdiction: Delaware
      Stock Class:  Common
      1000 Authorized Shares
      1,000 Common Shares Outstanding

10.   Gentiva Health Resources, Inc. (New York)
      1640 Century Center Parkway, Suite 101
      Memphis, Tennessee  38134
      100% owned by Gentiva Health Services (Quantum) Corporation
      Jurisdiction: New York
      Stock Class:  Common
      100   Authorized Shares
      100 Common Shares Issued

                                Schedule 6.19(a)

                 Locations of Owned and Leased Real Property

Owned Real Property:    None
Leased Real Property:

                                                   
      Accredo Health, Incorporated                    Bio Partners In Care, Inc.
      1640 Century Center Parkway                     3411 Office Park Drive
      Suites 101 - 105                                Suite 100
      Memphis, Tennessee  38134                       Dayton, Ohio  45439

      Nova Factor, Inc.                               Bio Partners In Care, Inc.
      1620 Century Center Parkway, #103-110           11411 Strang Line Road
      Memphis, Tennessee  38134                       Lenexa, Kansas  66215

      Hemophilia Health Services, Inc.                Bio Partners In Care, Inc.
      6820 Charlotte Pike                             1 McBride & Son Center Dr
      Suite 100                                       Suite 280
      Nashville, Tennessee  37209                     Chesterfield, Missouri

      Pharmacare Resources Inc.                       Bio Partners In Care, Inc.
      8 Westchester Plaza                             935 W. Chestnut
      Elmsford, New York  10523                       Suite 405
      500 Executive Blvd.                             Chicago, Illinois
      Elmsford, NY

      Texas Health Pharmaceutical Resources           Nova Factor, Inc.
      2100 Hwy. 360, Suite 604                        1680 Century Center Parkway,  Ste 2
      Grand Prairie, Texas  75050                     Memphis, Tennessee 38314

      Sunrise Health Management, Inc.                 Nova Factor, Inc.
      5980-E, F, G & H Unity Drive                    194 West Street, RT 140
      Norcross, Georgia  30071                        Unit 14-A
                                                      Milford, MA  01757
      Nova Factor, Inc.
      3576 Lorna Ridge Drive
      Hoover, Alabama  35216

      Nova Factor, Inc.
      5393 Roosevelt Blvd.
      Jacksonville, Florida  32210

      Nova Factor, Inc.
      11562 Knott Avenue, Unit 6
      Garden Grove, California  92841

      Nova Factor, Inc.
      9625 D Southern Pine Blvd.
      Charlotte, North Carolina  28273



                                                   
      GENTIVA LOCATIONS

      Gentiva Health Services (Quantum) Corp.   Gentiva Health Services (Infusion), Inc.
      4710 Eisenhower Blvd.                     4403 NW Loop 410
      Tampa Florida       33634                 San Antonio, Texas 78229

      Gentiva Health Services (Quantum) Corp.   Gentiva Health Services (Quantum) Corp.
      230 Highway 35                            1142 West 2320 South
      Red Bank, New Jersey 07701                West Valley City, Utah  84119

      Gentiva Health Services (Quantum) Corp.   Gentiva Health Services (Infusion), Inc.
      178 Thorn Hill Road                       240 Clearfield Avenue
      Warrendale, Pennsylvania  15086           Virginia Beach, Virginia 23462

      Gentiva Health Services (Quantum) Corp.   Gentiva Health Services (Quantum) Corp.
      10431 Perry Highway                       22408 66th Avenue South
      Wexford, Pennsylvania  15090              Kent, Washington  998032

      Gentiva Health Services (Quantum) Corp.   Gentiva Health Services (Quantum) Corp.
      140 Lake Drive                            9414 North 25th Avenue
      Wexford, Pennsylvania  15090              Phoenix, Arizona  85021

      Gentiva Health Services (Infusion), Inc.  Gentiva Health Services (Quantum) Corp.
      1421 South Beltline Road                  10500 West Markham
      Coppell, Texas  75019                     Little Rock, Arkansas  72205

      Gentiva Health Services (Quantum) Corp.   Gentiva Health Services (Quantum) Corp.
      631 Beacon Pkwy West                      170 N. Maple/1831 Commerce St
      Birmingham, Alabama  35209                Corona, California  92880

      Gentiva Health Services (Quantum) Corp.   Gentiva Health Services (Quantum) Corp.
      11211 John Galt Blvd.                     16673 Roscoe Blvd
      Omaha, Nebraska                           North Hills, California  91343

      Gentiva Health Services (Quantum) Corp.   Gentiva Health Services (Quantum) Corp.
      9980 Lakeview Avenue                      2970 Hilltop Mall Road
      Lenexa, Kansas  66219                     Richmond, California  94806

      Gentiva Health Services (Quantum) Corp.   Gentiva Health Services (Quantum) Corp.
      12900 Foster Street                       361 Inverness Drive
      Overland Park, Kansas  66213              Englewood, Colorado  80112

      Gentiva Health Services (Quantum) Corp.   Gentiva Health Services (Quantum) Corp.
      3500 N. Causeway Bldg.                    125 Commerce Court
      Metaire, Louisiana  70002                 Cheshire, Connecticut  06410

      Gentiva Health Services (Quantum) Corp.   Gentiva Health Services (Infusion), Inc.
      505 E. Capivilla                          5249 NW 33rd Avenue
      Las Vegas, Nevada  89119                  Fort Lauderdale, Florida 33309



                                                   
      Gentiva Health Services (Quantum) Corp.   Gentiva Health Services (Quantum) Corp.
      5571 Midway Park Place NE                 931 South Semoran
      Albuquerque, New Mexico  87109            Winter Park, Florida  32792

      Gentiva Health Services (Quantum) Corp.   Gentiva Health Services (Quantum) Corp.
      941 Chatham Lane                          805 Franklin Court
      Columbus, Ohio  43221                     Marietta, Georgia  30067

      Gentiva Health Services (Quantum) Corp.   Gentiva Health Services (Quantum) Corp.
      5211 Linbar Drive                         501 Kendall Street
      Nashville, Tennessee  37211               Boise, Idaho  83706

      Gentiva Health Services (Quantum) Corp.   Gentiva Health Services (Quantum) Corp.
      4343 West Royal Lane                      650 West Grand Avenue
      Irving, Texas  75063                      Elmhurst, Illinois  60126

      Gentiva Health Services (Quantum) Corp.   Gentiva Health Services (Quantum) Corp.
      6666 East 75th Street                     9307 Kirby Drive
      Indianapolis, Indiana  46250              Houston, Texas  77054

      Gentiva Health Services (Quantum) Corp.   Gentiva Health Services (Quantum) Corp.
      2415 Heinz Road                           8550 Cinderbed Road
      Iowa City, Iowa  52240                    Newington, Virginia

      Gentiva Health Services (Quantum) Corp.   Gentiva Health Services (Infusion), Inc.
      10801 Electron Drive                      12308 North Corporate Parkway
      Louisville, Kentucky  40299               Mequon, Wisconsin  53092

      Gentiva Health Services (Quantum) Corp.
      165 Forest Street
      Marlboro, Massachusetts  01752

      Gentiva Health Services (Quantum) Corp.
      4000 Grand River Avenue
      Novi, Michigan  48375

      Gentiva Health Services (Quantum) Corp.
      2915 Waters Road
      Eagan Minnesota  55121

      Gentiva Health Services (Quantum) Corp.
      749 Goddard Avenue
      Chesterfield, Missouri  63005

      Gentiva Health Services (Quantum) Corp.
      11 B Commerce Way
      Totowa, New Jersey  07512



                                                   
      Gentiva Health Services (Infusion), Inc.
      80 Express Street
      Plainview, New York  11803

      Gentiva Health Services (Quantum) Corp.
      4180 Piedmont Pkwy
      Greensboro, North Carolina

      Gentiva Health Services (Quantum) Corp.
      4901 West Reno Ave
      Oklahoma City, Oklahoma  73127

      Gentiva Health Services (Quantum) Corp.
      150 Lake Drive
      Wexford, Pennsylvania  15090

      Gentiva Health Services (Infusion), Inc.
      660 Clark Avenue
      King of Prussia, Pennsylvania  19406

      Gentiva Health Services (Quantum) Corp.
      7345 Airport Freeway
      Fort Worth, Texas  76118

      Gentiva Health Services (Quantum) Corp.
      7461 Airport Freeway
      Fort Worth, Texas  76118



                                Schedule 6.19(b)

                   Locations of Tangible Personal Property

All of the locations set forth on Schedule 6.20(a) and the following locations:

Dallas Children's Hospital
1935 Motor St.
Dallas, TX  75235

A.I. Dupont Hospital for Children
1600 Rockland Rd.
Wilmington, DE  19899

Children's Home Care
1530 Hillhurst Ave, First Floor
Los Angeles, CA  90027

University Pharmacy of Oklahoma
835 Station L Young Blvd.
Oklahoma City, OK  73104

St. Vincent Mercy Medical Center
2213 Cherry Street
Toledo, OH  43608

Children's National Medical Center
111 Michigan Ave NW
Washington, DC  20010

Johnson City Medical Center
400 North State of Franklin Rd.
Johnson City, TN  37604

LeBonheur Childrens Hospital
50 North Dunlap
Memphis, TN  38103

OUMC/Childrens Hospital
940 NE 13th Street, Room 2G2100
Oklahoma City, OK 73104

OUMC/Everett Tower
1200 Everett Dr,  Room 5E202
Oklahoma City, OK  73104

OUMC/Presbyterian Tower
700 N.E. 13th Street
Oklahoma City, OK  73104

Biodoron
5821 Hollywood Blvd
Hollywood, FL  33021

Children's Hospital
8200 Dodge Street
Omaha, NE  68114

PGPA Pharmacy
3520 Okemos Road
Okemos, MI  48864

Dr. Sheehy
1401 Avocao Street,  Ste 903
Newport Beach, 92660

Belli Hospital
744 S. Webster Avenue
Green Bay, WI  54305

Children's Mercy Hospital
2401 Gilham Road
Kansas City, MO  64108

                                Schedule 6.19(c)

      Legal Name, State of Formation and Chief Executive Office Location

Accredo Health, Incorporated, a Delaware corporation
1640 Century Center Parkway, Suite 101
Memphis, Tennessee  38134

Southern Health Systems, Inc., Tennessee corporation
1640 Century Center Parkway, Suite 101
Memphis, Tennessee  38134

Nova Factor, Inc., Tennessee corporation
1620 Century Center Parkway, Suite 109
Memphis, Tennessee  38134

Hemophilia Health Services, Inc., Tennessee corporation
6820 Charlotte Pike, Suite 100
Nashville, Tennessee  37209

Pharmacare Resources Inc., a New York corporation
8 Westchester Plaza
Elmsford, New York  10523

Sunrise Health Management, Inc., a Georgia corporation
5980-E, F, G & H Unity Drive
Norcross, Georgia  30071

Bio Partners In Care, Inc., a Missouri corporation
3411 Office Park Dr., Suite 100
Dayton, Ohio  45439

Gentiva Health Services (Quantum) Corp., Delaware corporation
1640 Century Center Parkway, Suite 101
Memphis, Tennessee  38134

Gentiva Health Services (Infusion), Inc., Delaware corporation
1640 Century Center Parkway, Suite 101
Memphis, Tennessee  38134

Gentiva Health Resources, Inc. (New York), New York corporation
1640 Century Center Parkway, Suite 101
Memphis, Tennessee  38134

                                  Schedule 7.6

                                    Insurance

See attached.

                                  Schedule 8.1

                                  Indebtedness

None.

                                  Schedule 8.6

                                   Investments

None.

                                  Schedule 8.11

             Limitations on Restricted Actions; Negative Pledges

1.    The distribution agreement with Biogen, Inc. contains restrictions on
the ability of Nova Factor, Inc. to grant Liens in the inventory of Nova
Factor, Inc. consisting of the prescription drug AVONEX.

2. The distribution agreement with Genzyme Corporation and the security
agreement entered into in connection therewith contain restrictions on the
ability of Nova Factor, Inc. consisting of the prescription drug Ceredase and
the prescription drug Cerezyme and all accounts receivable arising from the sale
of such inventory.

                                  Schedule 8.12

                          Non-Wholly Owned Subsidiaries

Children's Hemophilia Services
6820 Charlotte Pike, Suite 101
Nashville, Tennessee 37201
80% owned by Hemophilia Health Services, Inc.

                                  Schedule 11.1

                                Notice Addresses

1.    Credit Parties:

      Accredo Health, Incorporated
      1640 Century Center Parkway, Suite 101
      Memphis, TN 38134
      Attention:  Joel R. Kimbrough
                  Chief Financial Officer
      Telephone:  (901) 385-3621
      Facsimile:  (901) 385-3689

      With a copy to:

      Accredo Health, Incorporated
      1640 Century Center Parkway, Suite 101
      Memphis, TN 38134
      Attention:  Tom Bell
                  General Counsel
      Telephone:  (901) 385-3680
      Facsimile:  (901) 385-3689

2.    Administrative Agent:

      For Notices of Borrowing, Notices of Extension/Conversion and Payments:

      Bank of America, N.A., as Administrative Agent
      101 N. Tryon Street, 15th Floor
      NC1-001-15-04
      Charlotte, NC  28255
      Attention:  Catherine Gauthier
      Telephone:  (704) 388-3919
      Facsimile:  (704) 409-0284

      For Compliance Certificates, Financial Statements and all other Notices

      Bank of America, N.A., as Administrative Agent
      231 South LaSalle Street
      Mail Code:  IL1-231-08-30
      Chicago, IL  60697
      Attention:  Kristine Thennes
      Telephone:  (312) 828-1657
      Facsimile:  (877) 206-8412

3.    Issuing Lender:

      Bank of America, N.A.
      333 S. Beaudry Ave.
      Mail Code:  CA9-703-19-23

      Los Angeles, CA 90017-1466
      Attention:  Teela Yung
      Telephone:  (213) 345-0145
      Facsimile:  (213) 345-6710

4.    Collateral Agent:

      Bank of America, N.A., as Collateral Agent
      231 South LaSalle Street
      Mail Code:  IL1-231-08-30
      Chicago, IL  60697
      Attention:  Kristine Thennes
      Telephone:  (312) 828-1657
      Facsimile:  (877) 206-8412

5.    Lenders:



      Lender                                 Operations Contact                           Credit Contact

                                                                                
Bank of America, N.A.                      Bank of America, N.A.                      Bank of America, N.A.
                                           101 N. Tryon Street, 15th Floor            414 Union Street, 4th Floor
                                           NC1-001-15-04                              Mail Code:  TN1-100-04-17
                                           Charlotte, NC  28255                       Nashville, TN 37219
                                           Attention:   Catherine Gauthier            Attention:  Elizabeth Knox
                                           Telephone: (704) 388-3919                  Telephone: (615) 749-3918
                                           Facsimile:  (704) 409-0284                 Facsimile:  (615) 749-4951

JPMorgan Chase Bank                        JPMorgan Chase Bank                        JPMorgan Chase Bank
                                           1 Chase Manhattan Plaza, 8th Floor         270 Park Avenue, 15th Floor
                                           New York, NY 10081                         New York, NY 10017
                                           Attention:   Monica Mikolajczyk            Attention:   Dawn Lee Lum
                                           Telephone:  (212) 552-4567                 Telephone:  (212) 270-2472
                                           Facsimile:   (212) 552-7500                Facsimile:   (212) 270-3279

Wachovia Bank, National Association        Wachovia Bank, National Association        Wachovia Bank , National Association
                                           201 S. College Street, NC 1183             1339 Chestnut Street, PA 4830
                                           Charlotte, NC 28288                        Philadelphia, PA 19107
                                           Attention:   Sue Patterson                 Attention:   Ruth Leone
                                           Telephone:  (704) 374-7121                 Telephone:  (267) 321-6620
                                           Facsimile:   (704) 383-7201                Facsimile:   (267) 321-6701

First Tennessee Bank National Association  First Tennessee Bank National Association  First Tennessee Bank National Association
                                           165 Madison Avenue, 10th Floor             165 Madison Avenue, 10th Floor
                                           Memphis, TN 38103                          Memphis, TN 38103
                                           Attention:   Michelle Butler               Attention:   Bob Nieman
                                           Telephone:  (901) 523-4249                 Telephone:  (901) 523-4259
                                           Facsimile:  (901) 523-4235                 Facsimile:  (901) 523-4235

Brown Brothers Harriman & Co.              Brown Brothers Harriman & Co.              Brown Brothers Harriman & Co.
                                           40 Water Street                            40 Water Street
                                           Boston, MA 02109                           Boston, MA 02109
                                           Attention:   Margaret O'Brien              Attention:   Susan Falzarano
                                           Telephone:  (617) 772-6903                 Telephone:  (617) 772-6902
                                           Facsimile:   (617) 772-2230                Facsimile:   (617) 772-2230


                                                                                
Union Planters Bank, National Association  Union Planters Bank, National Association  Union Planters Bank, National Association
                                           6200 Poplar Avenue, 3rd Floor              6200 Poplar Avenue, 3rd Floor
                                           Memphis, TN 38119                          Memphis, TN 38119
                                           Attention:   Venita Brooks                 Attention:   Craig Gardella, SVP
                                           Telephone:  (901) 580-5480                 Telephone:  (901) 580-5507
                                           Facsimile:   (901) 580-5451                Facsimile:   (901) 580-5451

Credit Lyonnais New York Branch            Credit Lyonnais New York Branch            Credit Lyonnais New York Branch
                                           1301 Avenue of the Americas                1301 Avenue of the Americas
                                           New York, NY 10019                         New York, NY 10019
                                           Attention:   Gener David                   Attention:   Tom Randolph
                                           Telephone:  (212) 261-7741                 Telephone:  (212) 261-7431
                                           Facsimile:   (212) 459-3181                Facsimile:   (212) 261-3440

Fleet National Bank                        Fleet National Bank                        Fleet National Bank
                                           100 Federal Street                         100 Federal Street
                                           MADE 100 10B                               MADE 100 10B
                                           Boston, MA 02110                           Boston, MA 02110
                                           Attention:   Vani Rattan                   Attention:   Bart Coughlin
                                           Telephone:  (617) 434-5277                 Telephone:  (617) 434-6188
                                           Facsimile:   (617) 434-0800                Facsimile:   (617) 434-2472

SunTrust Bank                              SunTrust Bank                              SunTrust Bank
                                           201 4th Avenue North                       201 4th Avenue North
                                           Nashville, TN 37219                        Nashville, TN 37219
                                           Attention:   Leigh Anne Gregory            Attention:   Brooks Hubbard
                                           Telephone:  (615) 748-5461                 Telephone:  (615) 748-4464
                                           Facsimile:   (615) 748-4611                Facsimile:   (615) 748-5117

Deutsche Bank Trust Company Americas       Deutsche Bank Trust Company Americas       Deutsche Bank Trust Company Americas
                                           90 Hudson Street                           31 W. 52nd Street
                                           MS: JCY05-0511                             MS: JCY05-0511
                                           Jersey City, NJ 07302                      Jersey City, NJ 07302
                                           Attention:  Christopher Dibiase            Attention:  Scottye Lindsey
                                           Telephone:  (201) 593-2175                 Telephone:  (646) 324-2197
                                           Facsimile:   (201) 593-2808                Facsimile:   (646) 324-7456

Comerica Bank                              Comerica Bank                              Comerica Bank
                                           500 Woodward Avenue                        500 Woodward Avenue
                                           MC 3269                                    MC 3269
                                           Detroit, MI 48275                          Detroit, MI 48275
                                           Attention:   Beverly Jones                 Attention:   Kathleen M. Kasperek
                                           Telephone:  (313) 222-3805                 Telephone:  (313) 222-3808
                                           Facsimile:   (313) 222-9516                Facsimile:   (313) 222-9516

Trust One Bank                             Trust One Bank                             Trust One Bank
                                           1715 Aaron Brenner Dr., Ste 100            1715 Aaron Brenner Dr., Ste 100
                                           Memphis, TN 38120                          Memphis, TN 38120
                                           Attention:   Erin Ward, SVP                Attention:   Julie Cutler
                                           Telephone:  (901) 759-3503                 Telephone:  (901) 759-3535
                                           Facsimile:   (901) 759-3570                Facsimile:   (901) 759-3570



                                                                                
U.S. Bank National Association             U.S. Bank National Association             U.S. Bank National Association
                                           150 4th Avenue North                       1850 Osborn Avenue
                                           Nashville, TN 37219                        Oshkosh, WI 54902
                                           Attention:  S. W. Choppin                  Telephone:  920-237-7604
                                           Telephone:  (615) 251-9225                 Facsimile:   920-237-7993
                                           Facsimile: (615) 251-0729



                                   Exhibit 1.1

            FORM OF GENZYME INTERCREDITOR AND SUBORDINATION AGREEMENT

                        INTERCREDITOR, SUBORDINATION AND
                           COLLECTION AGENCY AGREEMENT

            THIS INTERCREDITOR, SUBORDINATION AND COLLECTION AGENCY AGREEMENT
("Agreement") is made and entered into as of June 13, 2002, by and among NOVA
FACTOR, INC., a Tennessee corporation ("NF"), BANK OF AMERICA, N.A., as Bank
Collateral Agent, BANK OF AMERICA, N.A., as Bank Administrative Agent, and
GENZYME CORPORATION, a Massachusetts corporation ("Genzyme").

                                   WITNESSETH:

           WHEREAS, a revolving credit and term loan credit facility has been
established pursuant that Credit Agreement dated as of June 13, 2002 (as
amended, modified, increased, extended and renewed, the "Credit Agreement")
among Accredo Health, Incorporated, a Delaware corporation (the "Parent"), as
borrower, NF and certain other subsidiaries of the Parent identified therein, as
guarantors (the "Guarantors" and together with NF, the "Credit Parties"), the
financial institutions identified therein (the "Lenders"), and Bank of America,
N.A., as Administrative Agent (the "Bank Administrative Agent");

           WHEREAS, the Credit Parties have entered into a Security Agreement
dated as of June 13, 2002 (as amended, modified, extended or renewed, the "Bank
Security Agreement") with Bank of America, N.A., as collateral agent (in such
capacity, the "Bank Collateral Agent") for the Lenders and the holders of
certain other obligations more particularly described therein (the "Secured
Parties") whereby the Credit Parties have granted a security interest in, among
other things, all of their inventory and accounts, including those arising out
of the purchase and sale of the prescription drug Ceredase(R) or the
prescription drug Cerezyme(R), together with all proceeds thereof; and

           WHEREAS, NF and Genzyme have entered into an Amended and Restated
Distribution Agreement dated as of January 1, 1998 (as amended and modified from
time to time, the "Genzyme Distribution Agreement") pursuant to which NF will
purchase Cerezyme(R) and Ceredase(R) from Genzyme for resale, and a copy
of the Genzyme Distribution Agreement has been provided to the Bank
Administrative Agent;

           WHEREAS, NF and Genzyme have entered into an Amended and Restated
Security Agreement dated as of January 1, 1998 ("Genzyme Security Agreement") as
security for NF's obligations under the Genzyme Distribution Agreement, and a
copy of the Genzyme Security Agreement has been provided to the Bank
Administrative Agent;

           NOW, THEREFORE, for good and valuable consideration, the parties
hereto agree as follows:

           1. The Bank Collateral Agent, for and on behalf of itself and the
Secured Parties, hereby agrees that the security interest of the Bank Collateral
Agent under the Bank Security Agreement in that portion of NF's inventory
consisting of the prescription drug Ceredase(R) and the prescription drug

Cerezyme(R) (the "Inventory") is subordinate to the liens of Genzyme in the
Inventory under the Genzyme Security Agreement.

           2. Genzyme hereby agrees that its security interest and all of its
rights and remedies, whether now existing or hereafter arising, in or related to
the accounts, accounts receivable, chattel paper, instruments, general
intangibles and other obligations of any kind, whether or not evidenced by an
instrument or chattel paper, representing or arising out of the sale by NF of
Ceredase(R) or Cerezyme(R) (collectively, the "Accounts") and any and all
security agreements or other contracts securing or otherwise relating to any
such Accounts be and hereby are subordinate to the security interests and rights
of the Bank Collateral Agent and the Secured Parties in the Accounts under the
Bank Security Agreement. Notwithstanding the foregoing, so long as there is no
default by the Credit Parties under the Credit Agreement, Genzyme shall be
permitted to receive all payments due and owing under the Genzyme Distribution
Agreement.

           3. The Bank Collateral Agent, for and on behalf of itself and the
Secured Parties, hereby consents to the continued encumbrance upon the Accounts
created by the Genzyme Distribution Agreement and the Genzyme Security
Agreement. The Bank Administrative Agent and the Bank Collateral Agent agree
that Genzyme and NF can restate, modify or supersede the Genzyme Distribution
Agreement without their consent or the consent of the Secured Parties.

           4. Genzyme hereby consents to the encumbrance upon the Inventory and
Accounts created by the Bank Security Agreement and the execution and delivery
by NF of the Credit Agreement and the Bank Security Agreement, and agrees that
the foregoing encumbrances shall not constitute a default under the Genzyme
Security Agreement.

           5. Genzyme agrees not to terminate the Genzyme Distribution Agreement
pursuant to the second sentence of Section 3.2(d) thereof upon a breach of the
Genzyme Distribution Agreement unless Genzyme has given the Bank Collateral
Agent written notice of such breach and such breach is not cured within 30 days
of such breach. The Bank Collateral Agent, for the benefit of the Secured
Parties, shall have the right to cure such default to the extent such default is
curable. Genzyme agrees not to exercise any of its rights as a secured party
pursuant to the Genzyme Security Agreement without giving Bank Collateral Agent
written notice at least equal to the cure period set out in the Genzyme Security
Agreement, which period may be simultaneous with such cure period.

           6. The Bank Collateral Agent and NF each agree to give Genzyme
written notice of on the date (a) of any acceleration of the obligations of the
Credit Parties under the Credit Agreement, (b) three (3) business days after any
default by the Parent in the payment of principal or interest under the Credit
Agreement when due and such default shall not have been cured or waived by the
Lenders and (c) thirty (30) days after any default by the Parent under any of
the financial covenants in the Credit Agreement and such default shall not have
been cured or waived by the Lenders (each such event is herein a "Default" and
each such notice is herein a "Default Notice"). NF further agrees that from and
after its delivery of such a Default Notice (the "Default Notice Delivery
Date"), and unless and until such Default is cured, NF shall (i) not sell that
portion of the Inventory then or after held by NF that is equal in amount to the
payable owed by NF to Genzyme on or after the Default Notice Delivery Date (the
"Genzyme Financed Inventory") without the prior written consent of Genzyme, and
(ii) if Genzyme shall not allow the continued sale of the Inventory by NF within
ten(10) business days after Genzyme's receipt of the Default Notice, Genzyme or
its designee shall accept the return of all Genzyme Financed Inventory then held
by NF in consideration of a credit in the amount of the unpaid payable owed by
NF to Genzyme for each such unit of Genzyme Financed Inventory returned to
Genzyme by NF, except any units of Genzyme Financed Inventory that were
destroyed or damaged for which NF bears the risk of loss under the Genzyme
Distribution Agreement. In such latter instance, the Bank Collateral Agent, for
and on behalf of


                                       2

itself and the Secured Parties, hereby consents to the transfer of the Genzyme
Financed Inventory free and clear of the lien of the Bank Collateral Agent and
the Secured Parties. If Genzyme consents to the sale of Genzyme Financed
Inventory by NF to a third party in the ordinary course of business after the
Default Notice Delivery Date, for so long and to the extent that NF maintains an
outstanding payable to Genzyme, (i) NF, the Bank Administrative Agent and the
Bank Collateral Agent, for and on behalf of itself and the Secured Parties,
agree that the proceeds received by NF from the sale of the Genzyme Financed
Inventory (the "Genzyme Financed Proceeds") shall be collected and held in trust
by NF for the benefit of Genzyme and shall be remitted immediately by NF to
Genzyme in satisfaction of any outstanding payable owed by NF to Genzyme, and
(ii) notwithstanding the provisions of Paragraph 2 of this Agreement, the Bank
Collateral Agent and the Secured Parties agree that the lien granted by NF to
the Bank Collateral Agent and the Secured Parties on that portion of the
Accounts that constitutes the Genzyme Financed Proceeds shall be subordinate to
the lien granted to Genzyme on that portion of the Accounts that constitutes the
Genzyme Financed Proceeds. Notwithstanding anything herein or elsewhere to the
contrary, the failure of the Bank Collateral Agent or any of the Secured Parties
to give Genzyme any notice required hereunder (including any Default Notice)
shall not result in any claim for damages (whether in contract, tort or
otherwise) by Genzyme against either the Bank Collateral Agent and/or the
Secured Parties.

           7. Each of NF and the Bank Collateral Agent agrees to provide written
notice to Genzyme on the date three business days (a) after the date of any
default by the Parent under any of the financial covenants in the Credit
Agreement and (b) after the date any such default is cured or waived by the
Lenders.

           8. The Bank Collateral Agent, for and on behalf of itself and the
Secured Parties, agrees not to foreclose on the Inventory unless the Bank
Collateral Agent has first given Genzyme 45 days prior written notice of such
foreclosure sale date.

           9. Nothing herein shall be deemed to constitute an agreement,
implicitly or explicitly, by Genzyme to subordinate its lien priority with
respect to the Inventory or the Accounts to any other person or party other than
the Bank Collateral Agent for the benefit of the Secured Parties and their
successors in interest and assigns.

           10. (a) After the acceleration of the loans and other obligations
under the Credit Agreement, the parties agree that Genzyme shall have the first
option to be the collection agent for all Accounts. Genzyme agrees to give
notice of its decision whether it shall exercise this option within three (3)
business days after receipt of notification by the Bank Collateral Agent of the
acceleration of the loans and other obligations under the Credit Agreement.
Therefore, the Bank Collateral Agent, for and on behalf of itself and the
Secured Parties, hereby constitutes and appoints Genzyme as the agent and
attorney in fact for the Bank Collateral Agent and the Secured Parties with full
power of substitution or revocation, and hereby grants to Genzyme the rights and
powers enumerated herein, for the purpose of taking any action or executing any
instrument which Genzyme may deem necessary or advisable to accomplish the
purposes set forth in this Paragraph 9.

               (b) After the Bank Collateral Agent has notified Genzyme of the
acceleration of the loans and other obligations under the Credit Agreement, and
if Genzyme has agreed to act as collection agent for the Secured Parties,
Genzyme shall act as agent for the Secured Parties for the collection of all
Accounts, shall succeed to the rights of NF under its Sale and Billing Agent
Agreements, relating to the sale of Ceredase(R) and Cerezyme(R) , between NF and
the physicians to whom NF sells Ceredase(R) or Cerezyme(R), except the Accounts
shall remain the property of NF, to be applied pursuant to the Credit Agreement
and the Bank Security Agreement and the Genzyme Security Agreement. All amounts
received by Genzyme as collection agent hereunder as proceeds of the Accounts
shall be received and held in trust for the benefit of the Secured Parties,
subject to the provisions of Paragraph 6 above, shall be


                                       3

segregated from other funds of Genzyme, and shall be forthwith paid over to the
Bank Collateral Agent for the benefit of the Secured Parties in the exact form
received, and Genzyme shall provide the Bank Collateral Agent on a monthly
basis, a full accounting of all collections on the Accounts (which shall include
copies of all explanation of benefit forms relating to such accounts), and on
request of the Bank Collateral Agent, at any time, a copy of all explanation of
benefit forms received by it.

               (c) When acting as collection agent pursuant to this Paragraph 9,
Genzyme shall monitor and coordinate the collection of all monies due under the
Accounts; however, Genzyme shall not be responsible for any failure to collect
any account receivable from a patient or third party payor. Genzyme shall use
all reasonable efforts to collect all outstanding amounts on any account, but
Genzyme shall have the sole discretion to undertake, or refrain from
undertaking, litigation. Subject to the foregoing, nothing herein shall restrict
the Bank Collateral Agent's and/or the Secured Parties' ability to collect or
process the proceeds of any such accounts receivable. Genzyme shall not
compromise or settle any claims for the collection of Accounts, without the
prior written consent of the Bank Collateral Agent, which consent shall not be
unreasonably withheld or delayed.

               (d) NF hereby consents to the naming of Genzyme as collection
agent after acceleration of the loans and other obligations under the Credit
Agreement, and hereby agrees and consents to Genzyme succeeding to all their
rights and obligations pursuant to the Sale and Billing Agent Agreements, except
the Accounts shall remain the property of NF, to be applied pursuant to the
Genzyme Security Agreement. Genzyme is authorized to take only such action as
Bank Collateral Agent and/or the Secured Parties have the ability to take
pursuant to the Bank Security Agreement and shall be subject to the same
obligations and restrictions that the Bank Collateral Agent and the Secured
Parties are subject to pursuant to such agreement.

           Notwithstanding anything herein to the contrary, Genzyme shall be
entitled to retain all proceeds of Accounts in excess of the indebtedness owed
the Secured Parties, to the extent said amounts are due and owing to Genzyme.

           11. Genzyme hereby covenants that it shall not, at any time, use any
third party payor provider number or such other identification of NF as a
distributor of Ceredase(R) or Cerezyme(R).

           12. Genzyme and the Bank Collateral Agent hereby covenant that the
exercise of any and all remedies either may have in the Inventory and Accounts
pursuant to any loan document now or hereafter entered into with the Credit
Parties shall be governed by this Agreement.

           13. Genzyme hereby represents and warrants that the security
interests set forth in the Genzyme Distribution Agreement and the Genzyme
Security Agreement are the only security interests it has in any property of NF.

           14. This Agreement shall be binding upon the parties hereto and inure
to the benefit of the parties hereto and their successors and assigns.

           15. The Bank Collateral Agent and the Bank Administrative Agent
represent and warrant that they have the full right, title, power and authority
to enter into this Agreement. Genzyme represents and warrants that it is the
owner and holder of the indebtedness evidenced by the Genzyme Distribution
Agreement and that it has the full right, title, power and authority to enter
into this Agreement. NF represents and warrants that it has the full right,
title, power and authority to enter into this Agreement.


                                       4

           16. The parties agree to take all action and execute all documents
necessary to effectuate the purposes of this Agreement, including but not
limited to the execution and filing of UCC-3 amendments to financing statements.

           17. The Bank Administrative Agent agrees to notify Genzyme in writing
prior to increasing the aggregate amount of the credit facility above
$325,000,000, provided that (a) Genzyme shall have no right to object to such
increase, this paragraph being solely for notification purposes, and (b) the
failure of the Bank Administrative Agent to give such notice shall not affect
any such increase. The address of Genzyme for purposes of forwarding this notice
and any other notices under this Agreement shall be as follows:

                               Genzyme Corporation
                               One Kendall Square
                               Cambridge, MA  02139
                               Attention:  Chief Financial Officer

                               with a copy to:

                               Genzyme Corporation
                               Legal Department
                               One Kendall Square
                               Cambridge, Massachusetts  02139
                               Attention:  Chief Legal Officer

The address for the Bank Administrative Agent and Bank Collateral Agent for such
purposes shall be as follows:

                               Bank of America, N.A., as Collateral Agent
                               231 South LaSalle Street
                               Mail Code:  IL1-231-08-30
                               Chicago, IL  60697
                               Attention:  Kristine Thennes

           18. This Agreement shall be deemed a contract made under the laws of
the State of Tennessee and shall be governed by and construed in accordance with
the internal laws of said state.

           19. This Agreement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original and all of which when taken
together shall constitute one and the same instrument.

           20. This Agreement may be amended only in writing, signed by all the
parties hereto.

           21. This Agreement constitutes the full and entire understanding and
agreement between the parties with respect to the subjects set forth herein.

           22. In the event that any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality of unenforceability
shall not affect any other provisions of this Agreement, but this Agreement
shall be construed as if such invalid, illegal or unenforceable position had not
been contained herein.

                            [Signature Pages Follow]


                                       5

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

                                      NOVA FACTOR, INC.,
                                      a Tennessee corporation

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

                                      GENZYME CORPORATION,
                                      a Massachusetts corporation

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

                                      BANK OF AMERICA, N.A.,
                                      as Bank Collateral Agent

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

                                      BANK OF AMERICA, N.A.,
                                      as Bank Administrative Agent

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

                                Exhibit 2.2(a)(i)

                   FORM OF NOTICE OF REVOLVING LOAN BORROWING

Bank of America, N.A., as Administrative Agent
101 N. Tryon Street, 15th Floor
NC1-001-15-04
Charlotte, North Carolina  28255
Attn:      Agency Services

Re:        Amended and Restated Credit Agreement (as amended, modified,
           supplemented, increased and extended from time to time, the "Credit
           Agreement") dated as of June 13, 2002 among Accredo Health,
           Incorporated, a Delaware corporation (the "Borrower"), the Guarantors
           identified therein, the Lenders identified therein and Bank of
           America, N.A., as Administrative Agent. Terms used but not otherwise
           defined herein shall have the meanings provided in the Credit
           Agreement.

Ladies and Gentlemen:

           The Borrower hereby gives notice pursuant to Section 2.2 of the
Credit Agreement that it requests a Revolving Loan advance under the Credit
Agreement and in connection therewith sets forth below the terms on which such
advance is requested to be made:

(A)        Date of Borrowing (which is a Business Day)   _______________________

(B)        Principal Amount of Borrowing                 _______________________

(C)        Interest rate basis                           _______________________

(D)        Interest Period and the last day thereof      _______________________

           The Borrower hereby represents and warrants to the Administrative
Agent and each Lender that:

                     (i) Representations and Warranties. The representations and
           warranties made by the Credit Parties in the Credit Documents and in
           any certificate furnished at any time under or in connection with the
           Credit Documents are true and correct in all material respects on and
           as of the date of borrowing set forth above (except for those that
           expressly relate to an earlier date).

                     (ii) No Default or Event of Default. No Default or Event of
           Default has occurred and is continuing on the date of borrowing set
           forth above or would exist after giving effect to the requested
           Extension of Credit.

                                        ACCREDO HEALTH, INCORPORATED,
                                        a Delaware corporation

                                        By:_____________________________________
                                        Name:
                                        Title:

                               Exhibit 2.2(a)(ii)

                  FORM OF NOTICE OF REQUEST OF LETTER OF CREDIT

Bank of America, N.A., as Issuing Lender
101 N. Tryon Street, 15th Floor
NC1-001-15-04
Charlotte, North Carolina  28255
Attn:  Agency Services

Re:    Amended and Restated Credit Agreement (as amended, modified,
       supplemented, increased and extended from time to time, the "Credit
       Agreement") dated as of June 13, 2002 among Accredo Health,
       Incorporated, a Delaware corporation (the "Borrower"), the Guarantors
       identified therein, the Lenders identified therein and Bank of
       America, N.A., as Administrative Agent. Terms used but not otherwise
       defined herein shall have the meanings provided in the Credit
       Agreement.

Ladies and Gentlemen:

           The Borrower hereby gives notice pursuant to Section 2.2 of the
Credit Agreement that it requests a the issuance of a Letter of Credit under the
Credit Agreement as follows:

(1)   Account Party:

(2)   For use by:

(3)   Beneficiary:

(4)   Face Amount of Letter of Credit:

(5)   Date of Issuance:

Delivery of Letter of Credit should be made as follows:

           The Borrower hereby represents and warrants to the Administrative
Agent and each Lender that:

                     (i) Representations and Warranties. The representations and
           warranties made by the Credit Parties in the Credit Documents and in
           any certificate furnished at any time under or in connection with the
           Credit Documents are true and correct in all material respects on and
           as of the date of borrowing set forth above (except for those that
           expressly relate to an earlier date).

                     (ii) No Default or Event of Default. No Default or Event of
           Default has occurred and is continuing on the date of borrowing set
           forth above or would exist after giving effect to the requested
           Extension of Credit.

                                    ACCREDO HEALTH, INCORPORATED,
                                    a Delaware corporation

                                    By: ________________________________________
                                    Name:
                                    Title:

                               Exhibit 2.2(a)(iii)

                   FORM OF NOTICE OF SWINGLINE LOAN BORROWING

Bank of America, N.A., as Administrative Agent
101 N. Tryon Street, 15th Floor
NC1-001-15-04
Charlotte, North Carolina  28255
Attn: Agency Services

Re:   Amended and Restated Credit Agreement (as amended, modified,
      supplemented, increased and extended from time to time, the "Credit
      Agreement") dated as of June 13, 2002 among Accredo Health,
      Incorporated, a Delaware corporation (the "Borrower"), the Guarantors
      identified therein, the Lenders identified therein and Bank of
      America, N.A., as Administrative Agent. Terms used but not otherwise
      defined herein shall have the meanings provided in the Credit
      Agreement.

Ladies and Gentlemen:

           The Borrower hereby gives notice pursuant to Section 2.2 of the
Credit Agreement that it requests a Swingline Loan advance under the Credit
Agreement and in connection therewith sets forth below the terms on which such
advance is requested to be made:

(A)   Date of Borrowing (which is a Business Day)        _______________________

(B)   Principal Amount of Borrowing                      _______________________

(C)   Interest rate basis                                _______________________

(D)   Interest Period and the last day thereof           _______________________

      The Borrower hereby represents and warrants to the Administrative
Agent and each Lender that:

                     (i) Representations and Warranties. The representations and
           warranties made by the Credit Parties in the Credit Documents and in
           any certificate furnished at any time under or in connection with the
           Credit Documents are true and correct in all material respects on and
           as of the date of borrowing set forth above (except for those that
           expressly relate to an earlier date).

                     (ii) No Default or Event of Default. No Default or Event of
           Default has occurred and is continuing on the date of borrowing set
           forth above or would exist after giving effect to the requested
           Extension of Credit.

                                      ACCREDO HEALTH, INCORPORATED,
                                      a Delaware corporation

                                      By: ______________________________________
                                      Name:
                                      Title:

                                  Exhibit 2.5-1

                                     FORM OF
                                 REVOLVING NOTE

                                                                   June 13, 2002

           FOR VALUE RECEIVED, ACCREDO HEALTH, INCORPORATED, a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of
______________________, its successors and assigns (the "Lender"), on or before
the Termination Date to the office of the Administrative Agent in immediately
available funds as provided in the Credit Agreement,

                  (i) in the case of Revolving Loans, the Lender's Revolving
           Committed Amount or, if less, the aggregate unpaid principal amount
           of all Revolving Loans owing to the Lender; and

                  (ii) in the case of Swingline Loans, if the Lender is the
           Swingline Lender, the Swingline Committed Amount or, if less, the
           aggregate unpaid principal amount of all Swingline Loans owing to the
           Swingline Lender;

together with interest thereon at the rates and as provided in the Credit
Agreement.

           This Revolving Note is one of the Revolving Notes referred to in the
Amended and Restated Credit Agreement (as amended, modified, supplemented,
increased and extended from time to time, the "Credit Agreement") dated as of
June 13, 2002 among the Borrower, the Guarantors identified therein, the Lenders
identified therein and Bank of America, N.A., as Administrative Agent.
Capitalized terms used but not otherwise defined herein shall have the meanings
provided in the Credit Agreement.

           The holder may endorse and attach a schedule to reflect borrowings
evidenced by this Revolving Note and all payments and prepayments thereon;
provided that any failure to endorse such information shall not affect the
obligation of the Borrower to pay amounts evidenced hereby.

           Upon the occurrence of an Event of Default, all amounts evidenced by
this Revolving Note may, or shall, become immediately due and payable as
provided in the Credit Agreement without presentment, demand, protest or notice
of any kind, all of which are waived by the Borrower. In the event payment of
amounts evidenced by this Revolving Note is not made at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to principal and
interest, all costs of collection, including reasonable attorneys' fees actually
incurred and expenses but excluding the allocated cost of internal counsel.

           This Revolving Note and the Loans and amounts evidenced hereby may be
transferred only as provided in the Credit Agreement.

           This Revolving Note shall be governed by, and construed and
interpreted in accordance with, the law of the State of New York.

           IN WITNESS WHEREOF, the Borrower has caused this Revolving Note to be
duly executed by its duly authorized officer as of the day and year first above
written.

                                    ACCREDO HEALTH, INCORPORATED,
                                    a Delaware corporation

                                    By:________________________________________
                                    Name:
                                    Title:


                                       2

                                  Exhibit 2.5-2

                                     FORM OF
                               TRANCHE A TERM NOTE

$__________                                                        June 13, 2002

           FOR VALUE RECEIVED, ACCREDO HEALTH, INCORPORATED, a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of
______________________, its successors and assigns (the "Lender"), to the office
of the Administrative Agent in immediately available funds as provided in the
Credit Agreement, the aggregate principal amount of $__________ on the dates and
in the amounts set forth in the Credit Agreement, together with interest thereon
at the rates and as provided in the Credit Agreement.

           This Tranche A Term Note is one of the Tranche A Term Notes referred
to in the Amended and Restated Credit Agreement (as amended, modified,
supplemented, increased and extended from time to time, the "Credit Agreement")
dated as of June 13, 2002 among the Borrower, the Guarantors identified therein,
the Lenders identified therein and Bank of America, N.A., as Administrative
Agent. Capitalized terms used but not otherwise defined herein shall have the
meanings provided in the Credit Agreement.

           The holder may endorse and attach a schedule to reflect borrowings
evidenced by this Tranche A Term Note and all payments and prepayments thereon;
provided that any failure to endorse such information shall not affect the
obligation of the Borrower to pay amounts evidenced hereby.

           Upon the occurrence of an Event of Default, all amounts evidenced by
this Tranche A Term Note may, or shall, become immediately due and payable as
provided in the Credit Agreement without presentment, demand, protest or notice
of any kind, all of which are waived by the Borrower. In the event payment of
amounts evidenced by this Tranche A Term Note is not made at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to principal and
interest, all costs of collection, including reasonable attorneys' fees actually
incurred and expenses but excluding the allocated cost of internal counsel.

           This Tranche A Term Note and the Loans and amounts evidenced hereby
may be transferred only as provided in the Credit Agreement.

           This Tranche A Term Note shall be governed by, and construed and
interpreted in accordance with, the law of the State of New York.

           IN WITNESS WHEREOF, the Borrower has caused this Tranche A Term Note
to be duly executed by its duly authorized officer as of the day and year first
above written.

                                    ACCREDO HEALTH, INCORPORATED,
                                    a Delaware corporation

                                    By:________________________________________
                                    Name:
                                    Title:


                                       2

                                  Exhibit 2.5-3

                                     FORM OF
                               TRANCHE B TERM NOTE

$__________                                                        June 13, 2002

           FOR VALUE RECEIVED, ACCREDO HEALTH, INCORPORATED, a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of
______________________, its successors and assigns (the "Lender"), to the office
of the Administrative Agent in immediately available funds as provided in the
Credit Agreement, the aggregate principal amount of $__________ on the dates and
in the amounts set forth in the Credit Agreement, together with interest thereon
at the rates and as provided in the Credit Agreement.

           This Tranche B Term Note is one of the Tranche B Term Notes referred
to in the Amended and Restated Credit Agreement (as amended, modified,
supplemented, increased and extended from time to time, the "Credit Agreement")
dated as of June 13, 2002 among the Borrower, the Guarantors identified therein,
the Lenders identified therein and Bank of America, N.A., as Administrative
Agent. Capitalized terms used but not otherwise defined herein shall have the
meanings provided in the Credit Agreement.

           The holder may endorse and attach a schedule to reflect borrowings
evidenced by this Tranche B Term Note and all payments and prepayments thereon;
provided that any failure to endorse such information shall not affect the
obligation of the Borrower to pay amounts evidenced hereby.

           Upon the occurrence of an Event of Default, all amounts evidenced by
this Tranche B Term Note may, or shall, become immediately due and payable as
provided in the Credit Agreement without presentment, demand, protest or notice
of any kind, all of which are waived by the Borrower. In the event payment of
amounts evidenced by this Tranche B Term Note is not made at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to principal and
interest, all costs of collection, including reasonable attorneys' fees actually
incurred and expenses but excluding the allocated cost of internal counsel.

           This Tranche B Term Note and the Loans and amounts evidenced hereby
may be transferred only as provided in the Credit Agreement.

           This Tranche B Term Note shall be governed by, and construed and
interpreted in accordance with, the law of the State of New York.

           IN WITNESS WHEREOF, the Borrower has caused this Tranche B Term Note
to be duly executed by its duly authorized officer as of the day and year first
above written.

                                    ACCREDO HEALTH, INCORPORATED,
                                    a Delaware corporation

                                    By:________________________________________
                                    Name:
                                    Title:


                                       2

                                   Exhibit 3.2

                  FORM OF NOTICE OF CONTINUATION/CONVERSION

Bank of America, N.A., as Administrative Agent
101 N. Tryon Street, 15th Floor
NC1-001-15-04
Charlotte, North Carolina  28255
Attn: Agency Services

Re:   Amended and Restated Credit Agreement (as amended, modified, supplemented,
      increased and extended from time to time, the "Credit Agreement") dated as
      of June 13, 2002 among Accredo Health, Incorporated, a Delaware
      corporation (the "Borrower"), the Guarantors identified therein, the
      Lenders identified therein and Bank of America, N.A., as Administrative
      Agent. Terms used but not otherwise defined herein shall have the meanings
      provided in the Credit Agreement.

Ladies and Gentlemen:

      Pursuant to Section 3.2 of the Credit Agreement, the Borrower hereby
requests an Continuation or Conversion of a Loan outstanding under the Credit
Agreement, and in connection therewith sets forth below the terms on which such
Continuation or Conversion is requested to be made:

(A)   Loan Type                                       _______________________

(B)   Date of Continuation or Conversion
      (which is the last day of the applicable
      Interest Period)                                _______________________

(C)   Principal Amount of Continuation or Conversion  _______________________

(D)   Interest rate basis                             _______________________

(E)   Interest Period and the last day thereof        _______________________

      The Borrower hereby represents and warrants to the Administrative Agent
and each Lender that:

            (i) Representations and Warranties. The representations and
      warranties made by the Credit Parties in the Credit Documents and in any
      certificate furnished at any time under or in connection with the Credit
      Documents are true and correct in all material respects on and as of the
      date of borrowing set forth above (except for those that expressly relate
      to an earlier date).

            (ii) No Default or Event of Default. No Default or Event of Default
      has occurred and is continuing on the date of borrowing set forth above or
      would exist after giving effect to the requested Extension of Credit.

                                          ACCREDO HEALTH, INCORPORATED,
                                          a Delaware corporation

                                          By:
                                             ___________________________________
                                          Name:
                                          Title:

                                   Exhibit 5.1

                          Form of Officer's Certificate

      Pursuant to Section 5.1 of the Amended and Restated Credit Agreement (the
"Credit Agreement"), dated as of June 13, 2002 by and among ACCREDO HEALTH,
INCORPORATED, a Delaware corporation (the "Borrower"), the Guarantors identified
therein, the Lenders identified therein and BANK OF AMERICA, N.A., as
Administrative Agent, the undersigned, ___________, Secretary of _______________
(the "Corporation"), in such capacity and not in his or her individual capacity,
hereby certifies to the Administrative Agent and the Lenders as follows:

      1. Attached hereto as Annex I is a true and complete copy of resolutions
duly adopted by the board of directors of the Corporation on __________, 200_.
The attached resolutions have not been rescinded or modified and remain in full
force and effect. The attached resolutions are the only corporate proceedings of
the Corporation now in force relating to or affecting the matters referenced
therein.

      2.    Attached hereto as Annex II is a true and complete copy of the
Bylaws of the Corporation as in effect on the date hereof.

      3. Attached hereto as Annex III is a true and complete copy of the
Certificate of Incorporation of the Corporation and all amendments thereto as in
effect on the date hereof.

      4. Each of the following persons is now a duly elected and qualified
officer of the Corporation, holding the office(s) indicated, and the signature
appearing opposite his/her name below is his/her true and genuine signature, and
such officer is duly authorized to execute and deliver on behalf of the
Corporation, the Credit Agreement, the Notes and the other Credit Documents.



           Name                       Title                    Signature
           ----                       -----                    ---------
                                               

                                                     ___________________________

                                                     ___________________________


      IN WITNESS WHEREOF, the undersigned has hereunto set his/her name.

                                          ______________________________________
                                          Secretary
                                          Date: [INSERT THE CLOSING DATE]

      I, _____________________, [Title] of the Corporation, hereby certify that
_______________, whose genuine signature appears above, is a duly elected,
qualified and acting Secretary of the Corporation.


                                          ______________________________________
                                          [Title]
                                          Date:       [INSERT THE CLOSING DATE]

                                 Exhibit 7.1(c)

                   FORM OF OFFICER'S COMPLIANCE CERTIFICATE

For the fiscal quarter ended _________________, ___.

      Reference is hereby made to that Amended and Restated Credit Agreement (as
amended, modified, supplemented, increased and extended from time to time, the
"Credit Agreement") dated as of June 13, 2002 among the Accredo Health,
Incorporated, a Delaware corporation (the "Borrower"), the Guarantors identified
therein, the Lenders identified therein and Bank of America, N.A., as
Administrative Agent.

      I, [INSERT NAME], [INSERT TITLE] of the Borrower, in such capacity and not
in my individual capacity, hereby certify to the Administrative Agent and the
Lenders that:

      (a)   The company-prepared financial statements that accompany this
            certificate are true and correct in all material respects and have
            been prepared in accordance with GAAP applied on a consistent basis,
            subject to changes resulting from normal year-end audit adjustments.

      (b)   Since ___________ (the date of the last similar certification, or,
            if none, the Closing Date) no Default or Event of Default has
            occurred under the Credit Agreement.

      (c)   Attached hereto as Annex A is a listing of (i) all applications, if
            any, for Copyrights, Patents or Trademarks made since ___________
            (the date of the last similar certification, or, if none, the
            Closing Date) and (ii) all issuances of registrations or letters on
            existing applications for Copyrights, Patents and Trademarks since
            ___________ (the date of the last similar certification, or, if
            none, the Closing Date)

      (d)   Attached hereto as Annex B is the insurance binder or other evidence
            of insurance with respect to any insurance coverage that has been
            renewed, replaced or modified since ___________ (the date of the
            last similar certification, or, if none, the Closing Date).

      (e)   Attached hereto as Annex C are detailed calculations demonstrating
            compliance by the Credit Parties with the financial covenants
            contained in Section 7.10 of the Credit Agreement as of the end of
            the fiscal period referred to above.

      Capitalized terms used herein but not otherwise defined herein shall have
the meanings assigned to such terms in the Credit Agreement.

      This __ day of __________, 200_.

                                          ACCREDO HEALTH, INCORPORATED,
                                          a Delaware corporation

                                          By:_____________________________
                                          Name:
                                          Title:

                                  Exhibit 7.11

                            FORM OF JOINDER AGREEMENT

      THIS JOINDER AGREEMENT (the "Agreement"), dated as of _____________,
200__, is by and between _____________________, a ___________________ (the
"Subsidiary"), and Bank of America, N.A., in its capacity as Administrative
Agent under that certain Amended and Restated Credit Agreement (as amended,
modified, supplemented, increased and extended from time to time, the "Credit
Agreement"), dated as of June 13, 2002 by and among Accredo Health,
Incorporated, a Delaware corporation (the "Borrower"), the Guarantors identified
therein, the Lenders identified therein and Bank of America, N.A., as
Administrative Agent. All of the defined terms in the Credit Agreement are
incorporated herein by reference.

      The Credit Parties are required by Section 7.11 of the Credit Agreement to
cause the Subsidiary to become a "Guarantor". Accordingly, the Subsidiary hereby
agrees as follows with the Administrative Agent, for the benefit of the Lenders:

      1. The Subsidiary hereby acknowledges, agrees and confirms that, by its
execution of this Agreement, the Subsidiary will be deemed to be a party to the
Credit Agreement and a "Guarantor" for all purposes of the Credit Agreement, and
shall have all of the obligations of a Guarantor thereunder as if it had
executed the Credit Agreement. The Subsidiary hereby ratifies, as of the date
hereof, and agrees to be bound by, all of the terms, provisions and conditions
applicable to the Guarantors contained in the Credit Agreement. Without limiting
the generality of the foregoing terms of this paragraph 1, the Subsidiary hereby
jointly and severally together with the other Guarantors, guarantees to each
Lender and the Administrative Agent, as provided in Section 4 of the Credit
Agreement, the prompt payment and performance of the Guaranteed Obligations in
full when due (whether at stated maturity, as a mandatory prepayment, by
acceleration or otherwise) strictly in accordance with the terms thereof.

      2. The Subsidiary hereby acknowledges, agrees and confirms that, by its
execution of this Agreement, the Subsidiary will be deemed to be a party to the
Security Agreement, and shall have all the obligations of an "Grantor" (as such
term is defined in the Security Agreement) thereunder as if it had executed the
Security Agreement. The Subsidiary hereby ratifies, as of the date hereof, and
agrees to be bound by, all of the terms, provisions and conditions contained in
the Security Agreement. Without limiting generality of the foregoing terms of
this paragraph 2, the Subsidiary hereby grants to the Administrative Agent, for
the benefit of the Lenders, a continuing security interest in, and a right of
set off against any and all right, title and interest of the Subsidiary in and
to the Collateral (as such term is defined in Section 2 of the Security
Agreement) of the Subsidiary. The Subsidiary hereby represents and warrants to
the Administrative Agent that:

            (i) The Subsidiary's chief executive office is (and for the prior
      four months have been) located at the locations set forth on Schedule 1
      attached hereto and the Subsidiary keeps its books and records at such
      locations.

            (ii) The Collateral owned by the Subsidiary is located at the
      locations set forth on Schedule 2 attached hereto.

            (iii) The Subsidiary's legal name is as shown in this Agreement and
      the Subsidiary has not in the past four months changed its name, been
      party to a merger, consolidation or other change in structure or used any
      tradename except as set forth in Schedule 3 attached hereto.

            (iv) All of the Patents, Patent Licenses, Trademarks, Trademark
      Licenses, Copyrights and Copyright Licenses (each such term as defined in
      the Security Agreement) of such Subsidiary are set forth on Schedule 4
      attached hereto.

      3. The Subsidiary hereby acknowledges, agrees and confirms that, by its
execution of this Agreement, the Subsidiary will be deemed to be a party to the
Pledge Agreement, and shall have all the obligations of a "Pledgor" thereunder
as if it had executed the Pledge Agreement. The Subsidiary hereby ratifies, as
of the date hereof, and agrees to be bound by, all the terms, provisions and
conditions contained in the Pledge Agreement. Without limiting the generality of
the foregoing terms of this paragraph 3, the Subsidiary hereby pledges and
assigns to the Administrative Agent, for the benefit of the Lenders, and grants
to the Administrative Agent, for the benefit of the Lenders, a continuing
security interest in any and all right, title and interest of the Subsidiary in
and to Pledged Shares (as such term is defined in Section 2 of the Pledge
Agreement) listed on Schedule 5 attached hereto and the other Pledged Collateral
(as such term is defined in Section 2 of the Pledge Agreement).

      4.    The address of the Subsidiary for purposes of all notices and
other communications is the address set forth in the Credit Agreement for the
Borrower.

      5. The Subsidiary hereby waives acceptance by the Administrative Agent and
the Lenders of the guaranty by the Subsidiary under Section 4 of the Credit
Agreement upon the execution of this Agreement by the Subsidiary.

      6. This Agreement may be executed in two or more counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute one contract.

      7.    This Agreement shall be governed by and construed and interpreted
in accordance with the laws of the State of New York.

                 [remainder of page intentionally left blank]


                                       2

      IN WITNESS WHEREOF, the Subsidiary has caused this Joinder Agreement to be
duly executed by its authorized officers, and the Administrative Agent, for the
benefit of the Lenders, has caused the same to be accepted by its authorized
officer, as of the day and year first above written.

                                          [SUBSIDIARY]


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

                                          Acknowledged and accepted:

                                          BANK OF AMERICA, N.A.,
                                          as Administrative Agent

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


                                       3

                                 Exhibit 11.3(b)

                        FORM OF ASSIGNMENT AND ASSUMPTION

      This Assignment and Assumption (the "Assignment and Assumption") is dated
as of the Effective Date set forth below and is entered into by and between
[Insert name of Assignor] (the "Assignor") and [Insert name of Assignee] (the
"Assignee"). Capitalized terms used but not defined herein shall have the
meanings given to them in the Credit Agreement identified below (as amended, the
"Credit Agreement"), receipt of a copy of which is hereby acknowledged by the
Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto
(the "Standard Terms and Conditions") are hereby agreed to and incorporated
herein by reference and made a part of this Assignment and Assumption as if set
forth herein in full.

      For an agreed consideration, the Assignor hereby irrevocably sells and
assigns to the Assignee, and the Assignee hereby irrevocably purchases and
assumes from the Assignor, subject to and in accordance with the Standard Terms
and Conditions and the Credit Agreement, as of the Effective Date inserted by
the Administrative Agent as contemplated below (i) all of the Assignor's rights
and obligations in its capacity as a Lender under the Credit Agreement and any
other documents or instruments delivered pursuant thereto to the extent related
to the amount and percentage interest identified below of all of such
outstanding rights and obligations of the Assignor under the respective
facilities identified below (including without limitation any letters of credit,
guarantees, and swingline loans included in such facilities) and (ii) to the
extent permitted to be assigned under applicable law, all claims, suits, causes
of action and any other right of the Assignor (in its capacity as a Lender)
against any Person, whether known or unknown, arising under or in connection
with the Credit Agreement, any other documents or instruments delivered pursuant
thereto or the loan transactions governed thereby or in any way based on or
related to any of the foregoing, including, but not limited to, contract claims,
tort claims, malpractice claims, statutory claims and all other claims at law or
in equity related to the rights and obligations sold and assigned pursuant to
clause (i) above (the rights and obligations sold and assigned pursuant to
clauses (i) and (ii) above being referred to herein collectively as, the
"Assigned Interest"). Such sale and assignment is without recourse to the
Assignor and, except as expressly provided in this Assignment and Assumption,
without representation or warranty by the Assignor.

1.    Assignor:         ______________________________

2.    Assignee:         ______________________________
                        [and is an Affiliate/Approved Fund of [identify
                              Lender]]

3.    Borrower:         Accredo Health, Incorporated

4.    Administrative Agent:   Bank of America, N.A., as the administrative
                              agent under the Credit Agreement

5.    Credit Agreement: Amended and Restated Credit Agreement dated as of
                        June 13, 2002 among Accredo Health, Incorporated, a
                        Delaware corporation, the Guarantors identified
                        therein, the Lenders identified therein and Bank of
                        America, N.A., as Administrative Agent.

6.     Assigned Interest:



                    Aggregate Amount of       Amount of          Percentage
                      Commitment/Loans    Commitment/ Loans      Assigned of
 Facility Assigned    for all Lenders         Assigned       Commitment/Loans(1)
 -----------------    ---------------         --------       -------------------
                                                    




[7.   Trade Date:       ______________](2)

Effective Date:   _____________ ___, 2002 [TO BE INSERTED BY ADMINISTRATIVE
AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE
REGISTER THEREFOR.]

                           [SIGNATURE PAGES FOLLOW]

- --------
(1)  Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans
     of all Lenders thereunder.

(2)  To be completed if the Assignor and the Assignee intend that the minimum
     assignment amount is to be determined as of the Trade Date.


                                       2

The terms set forth in this Assignment and Assumption are hereby agreed to:

                                    ASSIGNOR

                                    [NAME OF ASSIGNOR]

                                    By:_______________________________________
                                      Name:
                                     Title:

                                    ASSIGNEE

                                    [NAME OF ASSIGNEE]

                                    By:_______________________________________
                                      Name:
                                     Title:

[Consented to and](3) Accepted:

BANK OF AMERICA, N.A., as
  Administrative Agent

By:____________________________
Name:
Title:

[Consented to:](4)

[ACCREDO HEALTH, INCORPORATED,
a Delaware corporation]
[BANK OF AMERICA, N.A., AS ISSUING LENDER]

By:____________________________
Name:
Title:



(3)  To be added only if the consent of the Administrative Agent is required by
     the terms of the Credit Agreement.

(4)  To be added only if the consent of the Borrower and/or the Issuing Lender
     is required by the terms of the Credit Agreement.

                                     ANNEX 1

                        STANDARD TERMS AND CONDITIONS FOR
                            ASSIGNMENT AND ASSUMPTION

1.    Representations and Warranties.

      1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the
legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest
is free and clear of any lien, encumbrance or other adverse claim and (iii) it
has full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby; and (b) assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the
Credit Agreement or any other Credit Document, (ii) the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Documents or any collateral thereunder, (iii) the financial condition of the
Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in
respect of any Credit Document or (iv) the performance or observance by the
Borrower, any of its Subsidiaries or Affiliates or any other Person of any of
their respective obligations under any Credit Document.

      1.2. Assignee. The Assignee (a) represents and warrants that (i) it has
full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby and to become a Lender under the Credit Agreement, (ii) it
meets all requirements of an Eligible Assignee under the Credit Agreement
(subject to receipt of such consents as may be required under the Credit
Agreement), (iii) from and after the Effective Date, it shall be bound by the
provisions of the Credit Agreement as a Lender thereunder and, to the extent of
the Assigned Interest, shall have the obligations of a Lender thereunder, (iv)
it has received a copy of the Credit Agreement, together with copies of the most
recent financial statements delivered pursuant to Section 7.1 thereof, as
applicable, and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Assumption and to purchase the Assigned Interest on the basis of
which it has made such analysis and decision independently and without reliance
on the Administrative Agent or any other Lender, and (v) if it is not a United
States person under Section 7701(a)(30) of the Internal Revenue Code, attached
to the Assignment and Assumption is any documentation required to be delivered
by it pursuant to the terms of the Credit Agreement, duly completed and executed
by the Assignee; and (b) agrees that (i) it will, independently and without
reliance on the Administrative Agent, the Assignor or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Documents, and (ii) it will perform in accordance with their
terms all of the obligations which by the terms of the Credit Documents are
required to be performed by it as a Lender.

2. Payments. From and after the Effective Date, the Administrative Agent shall
make all payments in respect of the Assigned Interest (including payments of
principal, interest, fees and other amounts) to the Assignor for amounts which
have accrued to but excluding the Effective Date and to the Assignee for amounts
which have accrued from and after the Effective Date.

3. General Provisions. This Assignment and Assumption shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
assigns. This Assignment and Assumption may be executed in any number of
counterparts, which together shall constitute one instrument. Delivery of an
executed counterpart of a signature page of this Assignment and Assumption by
telecopy shall be effective as delivery of a manually executed counterpart of
this Assignment and

Assumption. This Assignment and Assumption shall be governed by, and construed
in accordance with, the law of the State of New York.


                                       2

EX-10.14

                      AMENDED AND RESTATED PLEDGE AGREEMENT

      THIS AMENDED AND RESTATED PLEDGE AGREEMENT (this "Pledge Agreement"),
dated as of June 13, 2002, is by and among the parties identified as "Pledgors"
on the signature pages hereto and such other parties as may become Pledgors
hereunder after the date hereof (individually a "Pledgor", and collectively the
"Pledgors") and BANK OF AMERICA, N.A., as collateral agent (in such capacity,
the "Collateral Agent") for the holders of the Secured Obligations referenced
below.

                               W I T N E S S E T H

      WHEREAS, pursuant to the Existing Credit Agreement the banks party thereto
provided $60 million in credit facilities to the Borrower;

      WHEREAS, pursuant to the Stock Pledge Agreement (the "Existing Pledge
Agreement") dated as of June 5, 1997 by the Borrower in favor of Bank of
America, N.A., as agent, the Borrower pledged the Capital Stock of certain of
its Subsidiaries to secure the credit facilities provided under the Existing
Credit Agreement;

      WHEREAS, pursuant to that Credit Agreement (as amended, modified and
supplemented, the "Credit Agreement") dated as of the date hereof among the
Borrower, the Guarantors identified therein, the Lenders identified therein and
Bank of America, N.A., as Administrative Agent, the Lenders have agreed to amend
and restate the credit facilities provided under Existing Credit Agreement on
the terms set forth in the Credit Agreement to provide, among other things, an
increase in the size of the credit facilities to $325 million; and

      WHEREAS, this Pledge Agreement is given in amendment to, restatement of
and substitution for the Existing Pledge Agreement.

      NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

      1.    Definitions. Capitalized terms used and not otherwise defined herein
shall have the meanings provided in the Credit Agreement. In addition, the
following terms, which are defined in the UCC as in effect in the State of North
Carolina on the date hereof, are used herein as so defined: Accession, Financial
Asset, Proceeds and Security. As used herein:

            "Event of Default" has the meaning provided in Section 8 hereof.

            "Pledged Collateral" has the meaning provided in Section 2 hereof.

            "Pledged Shares" has the meaning provided in Section 2 hereof.

            "Secured Obligations" means, without duplication, (i) all of the
      obligations of the Credit Parties to the Lenders (including the Swingline
      Lender and the Issuing Lender), the Administrative Agent and the
      Collateral Agent, whenever arising, under the Credit Agreement or any of
      the other Credit Documents (including, but not limited to, any interest
      accruing after the occurrence of a Bankruptcy Event with respect to any
      Credit Party, regardless of whether such interest is an allowed claim
      under the Bankruptcy Code), whether now existing or hereafter arising, due
      or to become due, direct or indirect, absolute or contingent, howsoever
      evidenced, created, held or acquired, whether primary, secondary, direct,
      contingent, or joint and several, as such obligations may be amended,
      modified, increased, extended, renewed or replaced from time to time, (ii)
      all of the

      obligations owing by the Credit Parties to the Lenders or any affiliate of
      a Lender, whenever arising, under any Hedging Agreement to the extent
      permitted under the Credit Agreement, and (iii) all costs and expenses
      incurred in connection with enforcement and collection of the Secured
      Obligations, including reasonable attorneys' fees actually incurred but
      excluding the allocated cost of internal counsel.

            "UCC" means the Uniform Commercial Code.

      2.    Pledge and Grant of Security Interest. To secure the prompt payment
and performance in full when due, whether by lapse of time, acceleration,
mandatory prepayment or otherwise, of the Secured Obligations, each Pledgor
hereby grants, pledges and assigns to the Collateral Agent, for the benefit of
the holders of the Secured Obligations, a continuing security interest in, and a
right to set-off against, any and all right, title and interest of such Pledgor
in and to the following, whether now owned or existing or owned, acquired, or
arising hereafter (collectively, the "Pledged Collateral"):

            (a)   Pledged Shares. (i) One hundred percent (100%) (or, if less,
      the full amount owned by such Pledgor) of the issued and outstanding
      Capital Stock owned by such Pledgor of each Domestic Subsidiary set forth
      on Schedule 2(a) attached hereto and (ii) sixty-five percent (65%) (or, if
      less, the full amount owned by such Pledgor) of the issued and outstanding
      shares of Capital Stock entitled to vote (within the meaning of Treas.
      Reg. Section 1.956-2(c)(2)) ("Voting Equity") and one hundred percent
      (100%) (or, if less, the full amount owned by such Pledgor) of the issued
      and outstanding Capital Stock not entitled to vote (within the meaning of
      Treas. Reg. Section 1.956-2(c)(2)) ("Non-Voting Equity") owned by such
      Pledgor of each Foreign Subsidiary set forth on Schedule 2(a) attached
      hereto, in each case together with the certificates (or other agreements
      or instruments), if any, representing such Capital Stock, and all options
      and other rights, contractual or otherwise, with respect thereto
      (collectively, together with the Capital Stock described in Section 2(b)
      and 2(c) below, the "Pledged Shares"), including, but not limited to, the
      following:

                  (A)   all shares, securities, membership interests or other
            equity interests representing a dividend on any of the Pledged
            Shares, or representing a distribution or return of capital upon or
            in respect of the Pledged Shares, or resulting from a stock split,
            revision, reclassification or other exchange therefor, and any
            subscriptions, warrants, rights or options issued to the holder of,
            or otherwise in respect of, the Pledged Shares; and

                  (B)   without affecting the obligations of the Pledgors under
            any provision prohibiting such action hereunder or under the Credit
            Agreement, in the event of any consolidation or merger involving the
            issuer of any Pledged Shares and in which such issuer is not the
            surviving entity, all Capital Stock of the successor entity formed
            by or resulting from such consolidation or merger.

            (b)   Additional Shares. (i) One hundred percent (100%) (or, if
      less, the full amount owned by such Pledgor) of the issued and outstanding
      Capital Stock owned by such Pledgor of any Person that hereafter becomes a
      Domestic Subsidiary and (ii) sixty-five percent (65%) (or, if less, the
      full amount owned by such Pledgor) of the Voting Equity and one hundred
      percent (100%) (or, if less, the full amount owned by such Pledgor) of the
      Non-Voting Equity owned by such Pledgor of any Person that hereafter
      becomes a Foreign Subsidiary, including, without limitation, the
      certificates (or other agreements or instruments) representing such
      Capital Stock.

            (c)   Accessions and Proceeds. All Accessions and all Proceeds of
      any and all of the foregoing.


                                       2

      Without limiting the generality of the foregoing, it is hereby
specifically understood and agreed that a Pledgor may from time to time
hereafter deliver additional Capital Stock to the Collateral Agent as collateral
security for the Secured Obligations. Upon delivery to the Collateral Agent,
such additional Capital Stock shall be deemed to be part of the Pledged
Collateral of such Pledgor and shall be subject to the terms of this Pledge
Agreement whether or not Schedule 2(a) is amended to refer to such additional
Capital Stock.

      3.    Security for Secured Obligations. The security interest created
hereby in the Pledged Collateral of each Pledgor constitutes continuing
collateral security for all of the Secured Obligations.

      4.    Delivery of the Pledged Collateral. Each Pledgor hereby agrees that:

            (a)   Each Pledgor shall deliver to the Collateral Agent (i)
      simultaneously with or prior to the execution and delivery of this Pledge
      Agreement, all certificates representing the Pledged Shares of such
      Pledgor and (ii) promptly upon the receipt thereof by or on behalf of a
      Pledgor, all other certificates and instruments constituting Pledged
      Collateral of a Pledgor. Prior to delivery to the Collateral Agent, all
      such certificates and instruments constituting Pledged Collateral of a
      Pledgor shall be held in trust by such Pledgor for the benefit of the
      Collateral Agent pursuant hereto. All such certificates shall be delivered
      in suitable form for transfer by delivery or shall be accompanied by duly
      executed instruments of transfer or assignment in blank, substantially in
      the form provided in Schedule 4(a) attached hereto.

            (b)   Additional Securities. If such Pledgor shall receive by virtue
      of its being or having been the owner of any Pledged Collateral, any (i)
      certificate, including without limitation, any certificate representing a
      dividend or distribution in connection with any increase or reduction of
      capital, reclassification, merger, consolidation, sale of assets,
      combination of shares or other equity interests, stock splits, spin-off or
      split-off, promissory notes or other instruments; (ii) option or right,
      whether as an addition to, substitution for, or an exchange for, any
      Pledged Collateral or otherwise; (iii) dividends payable in securities; or
      (iv) distributions of securities in connection with a partial or total
      liquidation, dissolution or reduction of capital, capital surplus or
      paid-in surplus, then such Pledgor shall receive such certificate,
      instrument, option, right or distribution in trust for the benefit of the
      Collateral Agent, shall segregate it from such Pledgor's other property
      and shall deliver it forthwith to the Collateral Agent in the exact form
      received together with any necessary endorsement and/or appropriate stock
      power duly executed in blank, substantially in the form provided in
      Schedule 4(a), to be held by the Collateral Agent as Pledged Collateral
      and as further collateral security for the Secured Obligations.

            (c)   Financing Statements. Each Pledgor shall execute and deliver
      to the Collateral Agent such UCC or other applicable financing statements
      as may be reasonably requested by the Collateral Agent in order to perfect
      and protect the security interest created hereby in the Pledged Collateral
      of such Pledgor.

      5.    Representations and Warranties. Each Pledgor hereby represents and
warrants to the Collateral Agent, for the benefit of the holders of the Secured
Obligations, that so long as any of the Secured Obligations remains outstanding
and until all of the commitments relating thereto have been terminated:

            (a)   Authorization of Pledged Shares. The Pledged Shares are duly
      authorized and validly issued, are fully paid and nonassessable and are
      not subject to the preemptive rights of any Person.


                                       3

            (b)   Title. Each Pledgor has good and indefeasible title to the
      Pledged Collateral of such Pledgor and will at all times be the legal and
      beneficial owner of such Pledged Collateral free and clear of any Lien,
      other than Permitted Liens. There exists no "adverse claim" within the
      meaning of Section 8-102 of the UCC with respect to the Pledged Shares of
      such Pledgor.

            (c)   Exercising of Rights. The exercise by the Collateral Agent of
      its rights and remedies hereunder will not violate any law or governmental
      regulation or any material contractual restriction binding on or affecting
      a Pledgor or any of its property.

            (d)   Pledgor's Authority. No authorization, approval or action by,
      and no notice or filing with any Governmental Authority or with the issuer
      of any Pledged Stock is required either (i) for the pledge made by a
      Pledgor or for the granting of the security interest by a Pledgor pursuant
      to this Pledge Agreement (except as have been already obtained) or (ii)
      for the exercise by the Collateral Agent or the holders of the Secured
      Obligations of their rights and remedies hereunder (except as may be
      required by laws affecting the offering and sale of securities).

            (e)   Security Interest/Priority. This Pledge Agreement creates a
      valid security interest in favor of the Collateral Agent for the benefit
      of the holders of the Secured Obligations, in the Pledged Collateral. The
      taking of possession by the Collateral Agent of the certificates
      representing the Pledged Shares and all other certificates and instruments
      constituting Pledged Collateral will perfect and establish the first
      priority of the Collateral Agent's security interest in the Pledged Shares
      and, when properly perfected by filing or registration, in all other
      Pledged Collateral represented by such Pledged Shares and instruments
      securing the Secured Obligations. Except as set forth in this Section
      5(e), no action is necessary to perfect or otherwise protect such security
      interest.

            (f)   Partnership and Membership Interests. Except as previously
      disclosed to the Collateral Agent, none of the Pledged Shares consisting
      of partnership or limited liability company interests (i) is dealt in or
      traded on a securities exchange or in a securities market, (ii) by its
      terms expressly provides that it is a security governed by Article 8 of
      the UCC, (iii) is an investment company security, (iv) is held in a
      securities account or (v) constitutes a Security or a Financial Asset.

            (g)   No Other Interests. No Pledgor owns any Capital Stock in any
      Subsidiary other than as set forth on Schedule 2(a) attached hereto.

      6.    Covenants. Each Pledgor hereby covenants, that so long as any of the
Secured Obligations remains outstanding and until all of the commitments
relating thereto have been terminated, such Pledgor shall:

            (a)   Books and Records. Mark its books and records (and shall cause
      the issuer of the Pledged Shares of such Pledgor to mark its books and
      records) to reflect the security interest granted to the Collateral Agent,
      for the benefit of the holders of the Secured Obligations, pursuant to
      this Pledge Agreement.

            (b)   Defense of Title. Warrant and defend title to and ownership of
      the Pledged Collateral of such Pledgor at its own expense against the
      claims and demands of all other parties claiming an interest therein, keep
      the Pledged Collateral free from all Liens, except for Permitted Liens,
      and not sell, exchange, transfer, assign, lease or otherwise dispose of
      Pledged Collateral of such Pledgor or any interest therein, except as
      permitted under the Credit Agreement and the other Credit Documents.


                                       4

            (c)   Further Assurances. Promptly execute and deliver at its
      expense all further instruments and documents and take all further action
      that may be necessary and desirable or that the Collateral Agent may
      reasonably request in order to (i) perfect and protect the security
      interest created hereby in the Pledged Collateral of such Pledgor
      (including, without limitation, any and all action necessary to satisfy
      the Collateral Agent that the Collateral Agent has obtained a first
      priority perfected security interest in all Pledged Collateral); (ii)
      enable the Collateral Agent to exercise and enforce its rights and
      remedies hereunder in respect of the Pledged Collateral of such Pledgor;
      and (iii) otherwise effect the purposes of this Pledge Agreement,
      including, without limitation and if requested by the Collateral Agent,
      delivering to the Collateral Agent irrevocable proxies in respect of the
      Pledged Collateral of such Pledgor.

            (d)   Amendments. Not make or consent to any amendment or other
      modification or waiver with respect to any of the Pledged Collateral of
      such Pledgor or enter into any agreement or allow to exist any restriction
      with respect to any of the Pledged Collateral of such Pledgor other than
      pursuant hereto or as may be permitted under the Credit Agreement.

            (e)   Compliance with Securities Laws. File all reports and other
      information now or hereafter required to be filed by such Pledgor with the
      United States Securities and Exchange Commission and any other state,
      federal or foreign agency in connection with the ownership of the Pledged
      Collateral of such Pledgor.

            (f)   Issuance or Acquisition of Capital Stock. Not, without
      executing and delivering, or causing to be executed and delivered, to the
      Collateral Agent such agreements, documents and instruments as the
      Collateral Agent may require, issue or acquire any Capital Stock
      consisting of an interest in a partnership or a limited liability company
      that (i) is dealt in or traded on a securities exchange or in a securities
      market, (ii) by its terms expressly provides that it is a security
      governed by Article 8 of the UCC, (iii) is an investment company security,
      (iv) is held in a securities account or (v) constitutes a Security or a
      Financial Asset.

      7.    Advances by Holders of the Secured Obligations. On failure of any
Pledgor to perform any of the covenants and agreements contained herein, the
Collateral Agent may, at its sole option and in its sole discretion, perform the
same and in so doing may expend such sums as the Collateral Agent may reasonably
deem advisable in the performance thereof, including, without limitation, the
payment of any insurance premiums, the payment of any taxes, a payment to obtain
a release of a Lien or potential Lien, expenditures made in defending against
any adverse claim and all other expenditures that the Collateral Agent or the
holders of the Secured Obligations may make for the protection of the security
hereof or may be compelled to make by operation of law. All such sums and
amounts so expended shall be repayable by the Pledgors on a joint and several
basis promptly upon timely notice thereof and demand therefor, shall constitute
additional Secured Obligations and shall bear interest from the date said
amounts are expended at the default rate specified in Section 3.1 of the Credit
Agreement for Revolving Loans that are Base Rate Loans. No such performance of
any covenant or agreement by the Collateral Agent or the holders of the Secured
Obligations on behalf of any Pledgor, and no such advance or expenditure
therefor, shall relieve the Pledgors of any default under the terms of this
Pledge Agreement, the other Credit Documents or any other documents relating to
the Secured Obligations. The holders of the Secured Obligations may make any
payment hereby authorized in accordance with any bill, statement or estimate
procured from the appropriate public office or holder of the claim to be
discharged without inquiry into the accuracy of such bill, statement or estimate
or into the validity of any tax assessment, sale, forfeiture, tax lien, title or
claim except to the extent such payment is being contested in good faith by a
Pledgor in appropriate proceedings and against which adequate reserves are being
maintained in accordance with GAAP.

      8.    Events of Default. The occurrence of an event that would constitute
an Event of Default under the Credit Agreement shall be an Event of Default
hereunder (an "Event of Default").


                                       5

      9.    Remedies.

      (a)   General Remedies. Upon the occurrence of an Event of Default and
during the continuation thereof, the Collateral Agent and the holders of the
Secured Obligations shall have, in addition to the rights and remedies provided
herein, in the Credit Documents, in any other documents relating to the Secured
Obligations, or by law (including, without limitation, levy of attachment and
garnishment), the rights and remedies of a secured party under the UCC of the
jurisdiction applicable to the affected Pledged Collateral.

      (b)   Sale of Pledged Collateral. Upon the occurrence of an Event of
Default and during the continuation thereof, without limiting the generality of
this Section 9 and without notice, the Collateral Agent may, in its sole
discretion, sell or otherwise dispose of or realize upon the Pledged Collateral,
or any part thereof, in one or more parcels, at public or private sale, at any
exchange or broker's board or elsewhere, at such price or prices and on such
other terms as the Collateral Agent may deem commercially reasonable, for cash,
credit or for future delivery or otherwise in accordance with applicable law. To
the extent permitted by law, any holder of the Secured Obligations may in such
event, bid for the purchase of such securities. Each Pledgor agrees that, to the
extent notice of sale shall be required by law and has not been waived by such
Pledgor, any requirement of reasonable notice shall be met if notice, specifying
the place of any public sale or the time after which any private sale is to be
made, is personally served on or mailed, postage prepaid, to such Pledgor, in
accordance with the notice provisions of Section 11.1 of the Credit Agreement at
least ten days before the time of such sale. The Collateral Agent shall not be
obligated to make any sale of Pledged Collateral of such Pledgor regardless of
notice of sale having been given. The Collateral Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned.

      (c)   Private Sale. Upon the occurrence of an Event of Default and during
the continuation thereof, the Pledgors recognize that the Collateral Agent may
deem it impracticable to effect a public sale of all or any part of the Pledged
Shares or any of the securities constituting Pledged Collateral and that the
Collateral Agent may, therefore, determine to make one or more private sales of
any such Pledged Collateral to a restricted group of purchasers who will be
obligated to agree, among other things, to acquire such Pledged Collateral for
their own account, for investment and not with a view to the distribution or
resale thereof. Each Pledgor acknowledges that any such private sale may be at
prices and on terms less favorable to the seller than the prices and other terms
that might have been obtained at a public sale and, notwithstanding the
foregoing, agrees that such private sale shall be deemed to have been made in a
commercially reasonable manner and that the Collateral Agent shall have no
obligation to delay sale of any such Pledged Collateral for the period of time
necessary to permit the issuer of such Pledged Collateral to register such
Pledged Collateral for public sale under the Securities Act. Each Pledgor
further acknowledges and agrees that any offer to sell such Pledged Collateral
that has been (i) publicly advertised on a bona fide basis in a newspaper or
other publication of general circulation in the financial community of New York,
New York (to the extent that such offer may be advertised without prior
registration under the Securities Act), or (ii) made privately in the manner
described above shall be deemed to involve a "public sale" under the UCC,
notwithstanding that such sale may not constitute a "public offering" under the
Securities Act, and the Collateral Agent may, in such event, bid for the
purchase of such Pledged Collateral.

      (d)   Retention of Pledged Collateral. To the extent permitted under
applicable law, in addition to the rights and remedies hereunder, upon the
occurrence of an Event of Default, the Collateral Agent may, after providing the
notices required by Sections 9-620 and 9-621 of the UCC or otherwise complying
with the requirements of applicable law of the relevant jurisdiction, accept or
retain all or any portion of the Pledged Collateral in satisfaction of the
Secured Obligations. Unless and until the


                                       6

Collateral Agent shall have provided such notices, however, the Collateral Agent
shall not be deemed to have accepted or retained any Pledged Collateral in
satisfaction of any Secured Obligations for any reason.

      (e)   Deficiency. In the event that the proceeds of any sale, collection
or realization are insufficient to pay all amounts to which the Collateral Agent
or the holders of the Secured Obligations are legally entitled, the Pledgors
shall be jointly and severally liable for the deficiency, together with interest
thereon at the default rate specified in Section 3.1 of the Credit Agreement for
Revolving Loans that are Base Rate Loans, together with the costs of collection
and reasonable attorneys' fees actually incurred (excluding the allocated cost
of internal counsel). Any surplus remaining after the full payment and
satisfaction of the Secured Obligations shall be returned to the Pledgors or to
whomsoever a court of competent jurisdiction shall determine to be entitled
thereto.

      10.   Rights of the Collateral Agent.

      (a)   Power of Attorney. In addition to other powers of attorney contained
herein, each Pledgor hereby designates and appoints the Collateral Agent, on
behalf of the holders of the Secured Obligations, and each of its designees or
agents, as attorney-in-fact of such Pledgor, irrevocably and with power of
substitution, with authority to take any or all of the following actions upon
the occurrence and during the continuation of an Event of Default:

            (i)    to demand, collect, settle, compromise and adjust, and give
      discharges and releases concerning the Pledged Collateral, all as the
      Collateral Agent may reasonably deem appropriate;

            (ii)   to commence and prosecute any actions at any court for the
      purposes of collecting any of the Pledged Collateral and enforcing any
      other right in respect thereof;

            (iii)  to defend, settle or compromise any action brought and, in
      connection therewith, give such discharge or release as the Collateral
      Agent may reasonably deem appropriate;

            (iv)   to pay or discharge taxes, liens, security interests or other
      encumbrances levied or placed on or threatened against the Pledged
      Collateral;

            (v)    to direct any parties liable for any payment in connection
      with any of the Pledged Collateral to make payment of any and all monies
      due and to become due thereunder directly to the Collateral Agent or as
      the Collateral Agent shall direct;

            (vi)   to receive payment of and receipt for any and all monies,
      claims, and other amounts due and to become due at any time in respect of
      or arising out of any Pledged Collateral;

            (vii)  to sign and endorse any drafts, assignments, proxies, stock
      powers, verifications, notices and other documents relating to the Pledged
      Collateral;

            (viii) to execute and deliver all assignments, conveyances,
      statements, financing statements, renewal financing statements, security
      and pledge agreements, affidavits, notices and other agreements,
      instruments and documents that the Collateral Agent may reasonably deem
      appropriate in order to perfect and maintain the security interests and
      liens granted in this Pledge Agreement and in order to fully consummate
      all of the transactions contemplated therein;

            (ix)   to exchange any of the Pledged Collateral or other property
      upon any merger, consolidation, reorganization, recapitalization or other
      readjustment of the issuer thereof and, in


                                       7

      connection therewith, deposit any of the Pledged Collateral with any
      committee, depository, transfer agent, registrar or other designated
      agency upon such terms as the Collateral Agent may reasonably deem
      appropriate;

            (x)    to vote for a shareholder resolution, or to sign an
      instrument in writing, sanctioning the transfer of any or all of the
      Pledged Collateral into the name of the Collateral Agent or one or more of
      the holders of the Secured Obligations or into the name of any transferee
      to whom the Pledged Collateral or any part thereof may be sold pursuant to
      Section 9 hereof; and

            (xi)   to do and perform all such other acts and things as the
      Collateral Agent may reasonably deem appropriate or convenient in
      connection with the Pledged Collateral.

      This power of attorney is a power coupled with an interest and shall be
irrevocable for so long as any of the Secured Obligations shall remain
outstanding and until all of the commitments relating thereto shall have been
terminated. The Collateral Agent shall be under no duty to exercise or withhold
the exercise of any of the rights, powers, privileges and options expressly or
implicitly granted to the Collateral Agent in this Pledge Agreement, and shall
not be liable for any failure to do so or any delay in doing so. The Collateral
Agent shall not be liable for any act or omission or for any error of judgment
or any mistake of fact or law in its individual capacity or its capacity as
attorney-in-fact except acts or omissions resulting from its gross negligence or
willful misconduct. This power of attorney is conferred on the Collateral Agent
solely to protect, preserve and realize upon its security interest in the
Pledged Collateral.

      (b)   Performance by the Collateral Agent of Obligations. If any Pledgor
fails to perform any agreement or obligation contained herein, the Collateral
Agent itself may perform, or cause performance of, such agreement or obligation,
and the expenses of the Collateral Agent incurred in connection therewith shall
be payable by the Pledgors on a joint and several basis pursuant to Section 26
hereof.

      (c)   The Collateral Agent's Duty of Care. Other than the exercise of
reasonable care to assure the safe custody of the Pledged Collateral while being
held by the Collateral Agent hereunder, the Collateral Agent shall have no duty
or liability to preserve rights pertaining thereto, it being understood and
agreed that the Pledgors shall be responsible for preservation of all rights in
the Pledged Collateral, and the Collateral Agent shall be relieved of all
responsibility for the Pledged Collateral upon surrendering it or tendering the
surrender of it to the Pledgors. The Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if such Pledged Collateral is accorded treatment
substantially equal to that which the Collateral Agent accords its own property,
which shall be no less than the treatment employed by a reasonable and prudent
agent in the industry, it being understood that the Collateral Agent shall not
have responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Pledged Collateral, whether or not the Collateral Agent has or is deemed to have
knowledge of such matters, or (ii) taking any necessary steps to preserve rights
against any parties with respect to any of the Pledged Collateral.

      (d)   Voting Rights in Respect of the Pledged Collateral.

            (i)   So long as no Event of Default shall have occurred and be
      continuing, to the extent permitted by law, each Pledgor may exercise any
      and all voting and other consensual rights pertaining to the Pledged
      Collateral of such Pledgor or any part thereof for any purpose not
      inconsistent with the terms of this Pledge Agreement or the Credit
      Agreement; and

            (ii)  Upon the occurrence and during the continuance of an Event of
      Default, all rights of a Pledgor to exercise the voting and other
      consensual rights that it would otherwise be


                                       8

      entitled to exercise pursuant to paragraph (i) of this subsection shall
      cease and all such rights shall thereupon become vested in the Collateral
      Agent, which shall then have the sole right to exercise such voting and
      other consensual rights.

      (e)   Dividend Rights in Respect of the Pledged Collateral.

            (i)   So long as no Event of Default shall have occurred and be
      continuing and subject to Section 4(b) hereof, each Pledgor may receive
      and retain any and all dividends (other than stock dividends and other
      dividends constituting Pledged Collateral addressed hereinabove) or
      interest paid in respect of the Pledged Collateral to the extent they are
      allowed under the Credit Agreement.

            (ii)  Upon the occurrence and during the continuance of an Event of
      Default:

                  (A)   all rights of a Pledgor to receive the dividends and
            interest payments that it would otherwise be authorized to receive
            and retain pursuant to paragraph (i) of this subsection shall cease
            and all such rights shall thereupon be vested in the Collateral
            Agent, which shall then have the sole right to receive and hold as
            Pledged Collateral such dividends and interest payments; and

                  (B)   all dividends and interest payments that are received by
            a Pledgor contrary to the provisions of paragraph (A) of this
            subsection shall be received in trust for the benefit of the
            Collateral Agent, shall be segregated from other property or funds
            of such Pledgor, and shall be forthwith paid over to the Collateral
            Agent as Pledged Collateral in the exact form received, to be held
            by the Collateral Agent as Pledged Collateral and as further
            collateral security for the Secured Obligations.

      (f)   Release of Pledged Collateral. The Collateral Agent may release any
of the Pledged Collateral from this Pledge Agreement or may substitute any of
the Pledged Collateral for other Pledged Collateral without altering, varying or
diminishing in any way the force, effect, lien, pledge or security interest of
this Pledge Agreement as to any Pledged Collateral not expressly released or
substituted, and this Pledge Agreement shall continue as a first priority lien
on all Pledged Collateral not expressly released or substituted.

      11.   Rights of Required Lenders. All rights of the Collateral Agent
hereunder, if not exercised by the Collateral Agent, may be exercised by the
Required Lenders.

      12.   Application of Proceeds. Upon the occurrence and during the
continuation of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Pledged Collateral, when received by the
Collateral Agent or any of the holders of the Secured Obligations in cash or its
equivalent, will be applied in reduction of the Secured Obligations in the order
set forth in the Credit Agreement or other document relating to the Secured
Obligations, and each Pledgor irrevocably waives the right to direct the
application of such payments and proceeds and acknowledges and agrees that the
Collateral Agent shall have the continuing and exclusive right to apply and
reapply any and all such payments and proceeds in the manner set forth in this
Section 12, notwithstanding any entry to the contrary upon any of its books and
records.

      13.   Costs of Counsel. At all times hereafter, whether or not upon the
occurrence of an Event of Default, the Pledgors agree to promptly pay upon
demand any and all reasonable costs and expenses (including, without limitation,
attorneys' fees actually incurred but excluding the allocated costs of internal
counsel) of the Collateral Agent and the holders of the Secured Obligations (a)
as required under Section 11.5 of the Credit Agreement and (b) as necessary to
protect the Pledged Collateral or to exercise


                                       9

any rights or remedies under this Pledge Agreement or with respect to any of the
Pledged Collateral. All of the foregoing costs and expenses shall constitute
Secured Obligations hereunder.

      14.   Continuing Agreement.

      (a)   This Pledge Agreement shall be a continuing agreement in every
respect and shall remain in full force and effect so long as any of the Secured
Obligations remains outstanding and until all of the commitments relating
thereto have been terminated (other than any obligations with respect to the
indemnities and the representations and warranties set forth in the Credit
Documents). Upon such payment and termination, this Pledge Agreement shall be
automatically terminated and the Collateral Agent and the holders of the Secured
Obligations shall forthwith release all of its liens and security interests
hereunder and shall, upon the request and at the expense of the Pledgors,
execute and deliver all UCC termination statements and/or other documents
reasonably requested by the Pledgors evidencing such termination.
Notwithstanding the foregoing, all releases and indemnities provided hereunder
shall survive termination of this Pledge Agreement.

      (b)   This Pledge Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment, in whole
or in part, of any of the Secured Obligations is rescinded or must otherwise be
restored or returned by the Collateral Agent or any holder of the Secured
Obligations as a preference, fraudulent conveyance or otherwise under any
bankruptcy, insolvency or similar law, all as though such payment had not been
made; provided that in the event payment of all or any part of the Secured
Obligations is rescinded or must be restored or returned, all reasonable costs
and expenses (including, without limitation, attorneys' fees actually incurred
(excluding the allocated cost of internal counsel) and disbursements) incurred
by the Collateral Agent or any holder of the Secured Obligations in defending
and enforcing such reinstatement shall be deemed to be included as a part of the
Secured Obligations.

      15.   Amendments and Waivers. This Pledge Agreement and the provisions
hereof may not be amended, waived, modified, changed, discharged or terminated
except as set forth in Section 11.6 of the Credit Agreement.

      16.   Successors in Interest. This Pledge Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Pledgor, its successors and assigns, and shall inure, together with the rights
and remedies of the Collateral Agent and the holders of the Secured Obligations
hereunder, to the benefit of the Collateral Agent and the holders of the Secured
Obligations and their successors and permitted assigns; provided, however, that
none of the Pledgors may assign its rights or delegate its duties hereunder
without the prior written consent of the requisite Lenders under the Credit
Agreement. To the fullest extent permitted by law, each Pledgor hereby releases
the Collateral Agent and each holder of the Secured Obligations, and their
respective successors and assigns, from any liability for any act or omission
relating to this Pledge Agreement or the Collateral, except for any liability
arising from the gross negligence or willful misconduct of the Collateral Agent
or such holder, or their respective officers, employees or agents.

      17.   Notices. All notices required or permitted to be given under this
Pledge Agreement shall be given as provided in Section 11.1 of the Credit
Agreement.

      18.   Counterparts. This Pledge Agreement may be executed in any number of
counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Pledge Agreement to produce or
account for more than one such counterpart.


                                       10

      19.   Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Pledge Agreement.

      20.   Governing Law; Submission to Jurisdiction; Venue.

      (a)   THIS PLEDGE AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK. Any legal action or proceeding with respect
to this Pledge Agreement may be brought in the state or federal courts located
in Nashville, Tennessee or Charlotte, North Carolina, and, by execution and
delivery of this Pledge Agreement, each Pledgor hereby irrevocably accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of such courts. Nothing herein shall affect the right of the
Collateral Agent to commence legal proceedings or to otherwise proceed against
any Pledgor in any other jurisdiction.

      (b)   Each Pledgor hereby irrevocably waives any objection that it may now
or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Pledge Agreement brought
in the courts referred to in subsection (a) hereof and hereby further
irrevocably waives and agrees not to plead or claim in any such court that any
such action or proceeding brought in any such court has been brought in an
inconvenient forum.

      21.   Waiver of Jury Trial. EACH PARTY TO THIS PLEDGE AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION ARISING UNDER ANY CREDIT DOCUMENT OR IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO ANY CREDIT DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN
CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS PLEDGE AGREEMENT MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT
TO TRIAL BY JURY.

      22.   Severability. If any provision of this Pledge Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.

      23.   Entirety. This Pledge Agreement, the other Credit Documents and the
other documents relating to the Secured Obligations represent the entire
agreement of the parties hereto and thereto, and supersede all prior agreements
and understandings, oral or written, if any, including any commitment letters or
correspondence relating to the Credit Documents, any other documents relating to
the Secured Obligations, or the transactions contemplated herein and therein.

      24.   Survival. All representations and warranties of the Pledgors
hereunder shall survive the execution and delivery of this Pledge Agreement, the
other Credit Documents and the other documents relating to the Secured
Obligations, the delivery of the Notes and the extension of credit thereunder or
in connection therewith.


                                       11

      25.   Other Security. To the extent that any of the Secured Obligations
are now or hereafter secured by property other than the Pledged Collateral
(including, without limitation, real and other personal property owned by a
Pledgor), or by a guarantee, endorsement or property of any other Person, then
the Collateral Agent shall have the right to proceed against such other
property, guarantee or endorsement upon the occurrence of any Event of Default,
and the Collateral Agent shall have the right, in its sole discretion, to
determine which rights, security, liens, security interests or remedies the
Collateral Agent shall at any time pursue, relinquish, subordinate, modify or
take with respect thereto, without in any way modifying or affecting any of them
or the Secured Obligations or any of the rights of the Collateral Agent or the
holders of the Secured Obligations under this Pledge Agreement, under any of the
other Credit Documents or under any other document relating to the Secured
Obligations.

      26.   Joint and Several Obligations of Pledgors.

      (a)   Each of the Pledgors is accepting joint and several liability
hereunder in consideration of the financial accommodation to be provided by the
holders of the Secured Obligations, for the mutual benefit, directly and
indirectly, of each of the Pledgors and in consideration of the undertakings of
each of the Pledgors to accept joint and several liability for the obligations
of each of them.

      (b)   Each of the Pledgors jointly and severally hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint
and several liability with the other Pledgors with respect to the payment and
performance of all of the Secured Obligations arising under this Pledge
Agreement, the other Credit Documents and any other documents relating to the
Secured Obligations, it being the intention of the parties hereto that all the
Secured Obligations shall be the joint and several obligations of each of the
Pledgors without preferences or distinction among them.

      (c)   Notwithstanding any provision to the contrary contained herein, in
any other of the Credit Documents or in any other documents relating to the
Secured Obligations, the obligations of each Guarantor under the Credit
Agreement and the other Credit Documents shall be limited to an aggregate amount
equal to the largest amount that would not render such obligations subject to
avoidance under Section 548 of the Bankruptcy Code or any comparable provisions
of any applicable state law.

                  [remainder of page intentionally left blank]


                                       12

      Each of the parties hereto has caused a counterpart of this Pledge
Agreement to be duly executed and delivered as of the date first above written.

PLEDGORS:                           ACCREDO HEALTH, INCORPORATED,
                                    a Delaware corporation

                                    By:_____________________________________
                                    Name:  Thomas W. Bell, Jr.
                                    Title: Secretary

                                    SOUTHERN HEALTH SYSTEMS, INC.,
                                    a Tennessee corporation
                                    NOVA FACTOR, INC.,
                                    a Tennessee corporation
                                    HEMOPHILIA HEALTH SERVICES, INC.,
                                    a Tennessee corporation
                                    PHARMACARE RESOURCES INC.,
                                    a New York corporation
                                    SUNRISE HEALTH MANAGEMENT, INC.,
                                    a Georgia corporation
                                    BIO PARTNERS IN CARE, INC.,
                                    a Missouri corporation
                                    GENTIVA HEALTH SERVICES (QUANTUM) CORP.,
                                    a Delaware corporation
                                    GENTIVA HEALTH SERVICES (INFUSION), INC.,
                                    a Delaware corporation
                                    GENTIVA HEALTH RESOURCES, INC. (NEW YORK),
                                    a New York corporation

                                    By:_____________________________________
                                    Name:  Thomas W. Bell, Jr.
                                    Title: Secretary
                                           of each of the foregoing Pledgors

                           [Signature pages continue]

Accepted and agreed to as of the date first above written.

BANK OF AMERICA, N.A.,
as Collateral Agent

By:________________________
Name:
Title:

                                    SCHEDULES


Schedule 2(a)           Pledged Stock
Schedule 4(a)           Form of Stock Power

                                  Schedule 2(a)

                                  Pledged Stock



                                                                               Class of      Number of   Certificate  Percentage of
              Pledgor                              Issuer                    Capital Stock    Shares       Number     Capital Stock
                                                                                                       
Accredo Health, Incorporated      Southern Health Systems, Inc.                 Common       10,000,000       3            100%
Southern Health Systems, Inc.     Nova Factor, Inc.                             Common           100          1            100%
Accredo Health, Incoporated       Hemophilia Health Services, Inc.              Common           100          4            100%
Accredo Health, Incoporated       Pharmacare Resources Inc.                     Common           20           4            100%
Hemophilia Health Services, Inc.  Sunrise Health Management, Inc.               Common         954,777       28            100%
Accredo Health, Incoporated       Bio Partners In Care, Inc.                    Common         999,997        8            100%
Accredo Health, Incoporated       Gentiva Health Services (Quantum) Corp.       Common          1,000         5            100%
Accredo Health, Incoporated       Gentiva Health Services (Infusion), Inc.      Common          1,000         5            100%
Gentiva Health Services
(Quantum) Corp.                   Gentiva Health Resources, Inc. (New York)     Common           100          2            100%


                                  Schedule 4(a)

                             Irrevocable Stock Power


   FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to

the following shares of capital stock of ____________________[ISSUER], a
____________ corporation:



       No. of Shares                                       Certificate No.
       -------------                                       ---------------
                                                        



and irrevocably appoints __________________________________ its agent and
attorney-in-fact to transfer all or any part of such capital stock and to take
all necessary and appropriate action to effect any such transfer. The agent and
attorney-in-fact may substitute and appoint one or more persons to act for him.
The effectiveness of a transfer pursuant to this stock power shall be subject to
any and all transfer restrictions referenced on the face of the certificates
evidencing such interest or in the certificate of incorporation or bylaws of the
subject corporation, to the extent they may from time to time exist.

                                                   [HOLDER]

                                                   By:__________________________
                                                   Name:
                                                   Title:

EX-10.15

                     AMENDED AND RESTATED SECURITY AGREEMENT

      THIS AMENDED AND RESTATED SECURITY AGREEMENT (this "Security Agreement"),
dated as of June 13, 2002, is by and among the parties identified as "Grantors"
on the signature pages hereto and such other parties as may become Grantors
hereunder after the date hereof (individually a "Grantor", and collectively the
"Grantors") and BANK OF AMERICA, N.A., as collateral agent (in such capacity,
the "Collateral Agent") for the holders of the Secured Obligations referenced
below.

                               W I T N E S S E T H

      WHEREAS, pursuant to the Existing Credit Agreement the banks party thereto
provided $60 million in credit facilities to the Borrower and the Borrower and
the guarantors party thereto granted a security interest in the collateral
identified therein to secure the credit facilities;

      WHEREAS, pursuant to that Credit Agreement (as amended, modified and
supplemented, the "Credit Agreement") dated as of the date hereof among the
Borrower, the Guarantors identified therein, the Lenders identified therein and
Bank of America, N.A., as Administrative Agent, the Lenders have agreed to amend
and restate the credit facilities provided under Existing Credit Agreement on
the terms set forth in the Credit Agreement to provide, among other things, an
increase in the size of the credit facilities to $325 million; and

      WHEREAS, this Security Agreement is given in amendment to, restatement of
and substitution for the security agreement provided in the Existing Credit
Agreement.

      NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

      1.    Definitions.

      (a)   Capitalized terms used and not otherwise defined herein shall have
the meanings provided in the Credit Agreement. In addition, the following terms,
which are defined in the UCC as in effect in the State of North Carolina on the
date hereof, are used herein as so defined: Accession, Account, As-Extracted
Collateral, Chattel Paper, Commercial Tort Claim, Commingled Goods, Consumer
Goods, Deposit Account, Document, Equipment, Farm Products, Fixtures, General
Intangible, Goods, Instrument, Inventory, Investment Property, Letter-of-Credit
Right, Manufactured Home, Proceeds, Software, Standing Timber, Supporting
Obligation and Tangible Chattel Paper.

      (b)   As used herein:

            "Collateral" has the meaning provided in Section 2 hereof.

            "Copyright License" means any written agreement, naming any Grantor
      as licensor, granting any right under any Copyright including, without
      limitation, any thereof referred to in Schedule 6.9 of the Credit
      Agreement.

            "Copyrights" means (a) all registered United States copyrights in
      all Works, now existing or hereafter created or acquired, all
      registrations and recordings thereof, and all applications in connection
      therewith, including, without limitation, registrations, recordings and
      applications in the United States Copyright Office including, without
      limitation, any thereof referred to in Schedule 6.9 of the Credit
      Agreement, and (b) all renewals thereof including, without limitation, any
      thereof referred to in Schedule 6.9 of the Credit Agreement.

            "Patent License" means any written agreement providing for the grant
      by or to a Grantor of any right to manufacture, use or sell any invention
      covered by a Patent, including, without limitation, any thereof referred
      to in Schedule 6.9 of the Credit Agreement.

            "Patents" means (a) all letters patent of the United States or any
      other country and all reissues and extensions thereof, including, without
      limitation, any letters patent referred to in Schedule 6.9 of the Credit
      Agreement, and (b) all applications for letters patent of the United
      States or any other country and all divisions, continuations and
      continuations-in-part thereof, including, without limitation, any thereof
      referred to in Schedule 6.9 of the Credit Agreement.

            "Secured Obligations" means, without duplication, (i) all of the
      obligations of the Credit Parties to the Lenders (including the Swingline
      Lender and the Issuing Lender), the Administrative Agent and the
      Collateral Agent, whenever arising, under the Credit Agreement or any of
      the other Credit Documents (including, but not limited to, any interest
      accruing after the occurrence of a Bankruptcy Event with respect to any
      Credit Party, regardless of whether such interest is an allowed claim
      under the Bankruptcy Code), whether now existing or hereafter arising, due
      or to become due, direct or indirect, absolute or contingent, howsoever
      evidenced, created, held or acquired, whether primary, secondary, direct,
      contingent, or joint and several, as such obligations may be amended,
      modified, increased, extended, renewed or replaced from time to time, (ii)
      all of the obligations owing by the Credit Parties to the Lenders or any
      affiliate of a Lender, whenever arising, under any Hedging Agreement to
      the extent permitted under the Credit Agreement, and (iii) all costs and
      expenses incurred in connection with enforcement and collection of the
      obligations described in the foregoing clauses (i) and (ii), including
      reasonable attorneys' fees actually incurred but excluding the allocated
      cost of internal counsel.

            "Trademark License" means any written agreement providing for the
      grant by or to a Grantor of any right to use any Trademark, including,
      without limitation, any thereof referred to in Schedule 6.9 of the Credit
      Agreement.

            "Trademarks" means (a) all trademarks, trade names, corporate names,
      company names, business names, fictitious business names, trade styles,
      service marks, logos and other source or business identifiers, and the
      goodwill associated therewith, now existing or hereafter adopted or
      acquired, all registrations and recordings thereof, and all applications
      in connection therewith, whether in the United States Patent and Trademark
      Office or in any similar office or agency of the United States, any state
      thereof or any other country or any political subdivision thereof, or
      otherwise, including, without limitation, any thereof referred to in
      Schedule 6.9 of the Credit Agreement, and (b) all renewals thereof.

            "UCC" means the Uniform Commercial Code.

            "Work" means any work that is subject to copyright protection
      pursuant to Title 17 of the United States Code.

      2.    Grant of Security Interest in the Collateral. To secure the prompt
payment and performance in full when due, whether by lapse of time,
acceleration, mandatory prepayment or otherwise, of the Secured Obligations,
each Grantor hereby grants to the Collateral Agent, for the benefit of the
holders of the Secured Obligations, a continuing security interest in, and a
right to set off against, any and all right, title and interest of such Grantor
in and to the following (collectively, the "Collateral"), whether now owned or
existing or owned, acquired, or arising hereafter:

            (a)   all Accounts;


                                       2

            (b)   all cash and currency;

            (c)   all Chattel Paper;

            (d)   those Commercial Tort Claims identified on Schedule 2(d)
      attached hereto;

            (e)   all Copyrights;

            (f)   all Copyright Licenses;

            (g)   all Deposit Accounts;

            (h)   all Documents;

            (i)   all Equipment;

            (j)   all Fixtures;

            (k)   all General Intangibles (other than any Capital Stock in the
      Excluded Subsidiary);

            (l)   all Instruments;

            (m)   all Inventory;

            (n)   all Investment Property;

            (o)   all Letter-of-Credit Rights;

            (p)   all Patents;

            (q)   all Patent Licenses;

            (r)   all Software;

            (s)   all Supporting Obligations;

            (t)   all Trademarks;

            (u)   all Trademark Licenses;

            (v)   all other personal property of such Grantor of whatever type
      or description (other than any Capital Stock in the Excluded Subsidiary);
      and

            (w)   to the extent not otherwise included, all Accessions and all
      Proceeds of any and all of the foregoing.

            Notwithstanding anything to the contrary contained herein, the
      security interests granted under this Security Agreement shall not extend
      to (i) any property that is subject to a Lien securing purchase money
      Indebtedness permitted under the Credit Agreement pursuant to documents
      that prohibit such Grantor from granting any other Liens in such property
      or (ii) any lease, license or other contract if the grant of a security
      interest in such lease, license or contract in the manner contemplated by
      this Security Agreement, under the terms thereof and under applicable law,
      is


                                       3

      prohibited and would result in the termination thereof; provided in each
      case that any such limitation on the security interests granted hereunder
      shall only apply to the extent that (A) after commercially reasonable
      efforts not involving the expenditure of money, consent from the relevant
      party or parties has not been obtained and (B) any such prohibition could
      not be rendered ineffective pursuant to the UCC or any other applicable
      law (including the Bankruptcy Code) or principles of equity.

      The Grantors and the Collateral Agent, on behalf of the holders of the
Secured Obligations, hereby acknowledge and agree that the security interest
created hereby in the Collateral (i) constitutes continuing collateral security
for all of the Secured Obligations, whether now existing or hereafter arising
and (ii) is not to be construed as an assignment of any Copyrights, Copyright
Licenses, Patents, Patent Licenses, Trademarks or Trademark Licenses.

      3.    Provisions Relating to Accounts.

      (a)   Anything herein to the contrary notwithstanding, each of the
Grantors shall remain liable under each of the Accounts to observe and perform
all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise to
each such Account. Neither the Collateral Agent nor any holder of the Secured
Obligations shall have any obligation or liability under any Account (or any
agreement giving rise thereto) by reason of or arising out of this Security
Agreement or the receipt by the Collateral Agent or any holder of the Secured
Obligations of any payment relating to such Account pursuant hereto, nor shall
the Collateral Agent or any holder of the Secured Obligations be obligated in
any manner to perform any of the obligations of a Grantor under or pursuant to
any Account (or any agreement giving rise thereto), to make any payment, to make
any inquiry as to the nature or the sufficiency of any payment received by it or
as to the sufficiency of any performance by any party under any Account (or any
agreement giving rise thereto), to present or file any claim, to take any action
to enforce any performance or to collect the payment of any amounts that may
have been assigned to it or to which it may be entitled at any time or times.

      (b)   Once during each calendar year or at any time after the occurrence
and during the continuation of an Event of Default, the Collateral Agent shall
have the right, but not the obligation, to make test verifications of the
Accounts in any manner and through any medium that it reasonably considers
advisable, and the Grantors shall furnish all such assistance and information as
the Collateral Agent may require in connection with such test verifications. At
any time and from time to time, upon the Collateral Agent's request and at the
expense of the Grantors, the Grantors shall cause independent public accountants
or others satisfactory to the Collateral Agent to furnish to the Collateral
Agent reports showing reconciliations, aging and test verifications of, and
trial balances for, the Accounts. The Collateral Agent in its own name or in the
name of others may communicate with account debtors on the Accounts to verify
with them to the Collateral Agent's satisfaction the existence, amount and terms
of any Accounts.

      4.    Representations and Warranties. Each Grantor hereby represents and
warrants to the Collateral Agent, for the benefit of the holders of the Secured
Obligations, that so long as any of the Secured Obligations remains outstanding
and until all of the commitments relating thereto have been terminated:

            (a)   Legal Name; State of Incorporation; Chief Executive Office. As
      of the date hereof:

                  (i)   Each Grantor's exact legal name, state of incorporation
            or formation and chief executive office as of the Closing Date is
            (and for the four months prior to the Closing Date was) as set forth
            on Schedule 6.19(c) of the Credit Agreement.

                  (ii)  Other than as set forth on Schedule 4(a)(ii) attached
            hereto, no Grantor has been party to a merger, consolidation or
            other change in structure or used any tradename in the four months
            prior to the Closing Date.


                                       4

                  (iii) All of the Collateral of the Grantor is (and for the
            four months prior to the Closing Date was) at the locations set
            forth on Schedule 6.20(b) of the Credit Agreement.

            (b)   Ownership. Each Grantor is the legal and beneficial owner of
      its Collateral and has the right to pledge, sell, assign or transfer the
      same.

            (c)   Security Interest/Priority. This Security Agreement creates a
      valid security interest in favor of the Collateral Agent, for the benefit
      of the holders of the Secured Obligations, in the Collateral of such
      Grantor and, when properly perfected by filing, shall constitute a valid
      perfected security interest in such Collateral, to the extent such
      security interest can be perfected by filing under the UCC, free and clear
      of all Liens except for Permitted Liens.

            (d)   Types of Collateral. None of the Collateral consists of, or is
      the Accessions or the Proceeds of, As-Extracted Collateral, Consumer
      Goods, Farm Products, Manufactured Homes, or Standing Timber.

            (e)   Accounts. (i) Each Account of the Grantors and the papers and
      documents relating thereto are genuine and in all material respects what
      they purport to be, (ii) each Account arises out of (A) a bona fide sale
      of goods sold and delivered by such Grantor (or is in the process of being
      delivered) or (B) services theretofore actually rendered by such Grantor
      to, the account debtor named therein, (iii) no Account of a Grantor is
      evidenced by any Instrument or Chattel Paper unless such Instrument or
      Chattel Paper has been theretofore endorsed over and delivered to, or
      submitted to the control of, the Collateral Agent and (iv) no surety bond
      was required or given in connection with any Account of a Grantor or the
      contracts or purchase orders out of which they arose.

            (f)   Copyrights, Patents and Trademarks. All Copyrights, Copyright
      Licenses, Patents, Patent Licenses, registered Trademarks, Trademark
      applications and Trademark Licenses owned by any Grantor in its own name
      are set forth on Schedule 6.9 of the Credit Agreement.

      5.    Covenants. Each Grantor covenants that, so long as any of the
Secured Obligations remains outstanding and until all of the commitments
relating thereto have been terminated, such Grantor shall:

            (a)   Other Liens. Defend the Collateral against the claims and
      demands of all other parties claiming an interest therein, keep the
      Collateral free from all Liens, except for Permitted Liens, and not sell,
      exchange, transfer, assign, lease or otherwise dispose of the Collateral
      or any interest therein, except (i) as permitted under the Credit
      Agreement and (ii) no Grantor shall be required to defend or maintain any
      Trademark, Trademark License, Copyright, Copyright License, Patent or
      Patent Licens, if, in the reasonable business judgment of such Grantor
      such action would not be advisable.

            (b)   Preservation of Collateral. Keep the Collateral in good order,
      condition and repair and not use the Collateral in violation of the
      provisions of this Security Agreement or any other agreement relating to
      the Collateral or any policy insuring the Collateral or any applicable
      statute, law, bylaw, rule, regulation or ordinance.

            (c)   Instruments/Tangible Chattel Paper/Documents. If any amount
      payable under or in connection with any of the Collateral shall be or
      become evidenced by any Instrument or Tangible Chattel Paper, or if any
      property constituting Collateral shall be stored or shipped subject to a
      Document, such Grantor shall ensure that such Instrument, Tangible Chattel
      Paper or Document is either in the possession of such Grantor at all times
      or, if requested by the Collateral Agent, is immediately delivered to the
      Collateral Agent, duly endorsed in a manner satisfactory to the


                                       5

      Collateral Agent. Such Grantor shall ensure that any Collateral consisting
      of Tangible Chattel Paper is marked with a legend acceptable to the
      Collateral Agent indicating the Collateral Agent's security interest in
      such Tangible Chattel Paper.

            (d)   Change in Structure, Location or Type. Change its name or
      state of formation or be party to a merger, consolidation or other change
      in structure or use any tradename without providing written notice to the
      Collateral Agent within thirty (30) days thereof.

            (e)   Inspection. Upon reasonable notice, and during reasonable
      hours, at all times allow the Collateral Agent or its representatives to
      visit and inspect the Collateral as set forth in Section 7.10 of the
      Credit Agreement.

            (f)   Authorization. Authorize the Collateral Agent to prepare and
      file such financing statements (including renewal statements), amendments
      and supplements or such other instruments as the Collateral Agent may from
      time to time reasonably deem necessary or appropriate in order to perfect
      and maintain the security interests granted hereunder in accordance with
      the UCC.

            (g)   Perfection of Security Interest. Execute and deliver to the
      Collateral Agent such agreements, assignments or instruments (including
      affidavits, notices, reaffirmations and amendments and restatements of
      existing documents, as the Collateral Agent may reasonably request) and do
      all such other things as the Collateral Agent may reasonably deem
      necessary or appropriate (i) to assure to the Collateral Agent the
      effectiveness and priority of its security interests hereunder, including
      (A) such financing statements (including renewal statements), amendments
      and supplements or such other instruments as the Collateral Agent may from
      time to time reasonably request in order to perfect and maintain the
      security interests granted hereunder in accordance with the UCC, (B) with
      regard to Copyrights, a Notice of Grant of Security Interest in Copyrights
      for filing with the United States Copyright Office in the form of Schedule
      5(f)(i) attached hereto, (C) with regard to Patents, a Notice of Grant of
      Security Interest in Patents for filing with the United States Patent and
      Trademark Office in the form of Schedule 5(f)(ii) attached hereto and (D)
      with regard to Trademarks, a Notice of Grant of Security Interest in
      Trademarks for filing with the United States Patent and Trademark Office
      in the form of Schedule 5(f)(iii) attached hereto, (ii) to consummate the
      transactions contemplated hereby and (iii) to otherwise protect and assure
      the Collateral Agent of its rights and interests hereunder. To that end,
      each Grantor agrees that the Collateral Agent may file one or more
      financing statements (with collateral descriptions broader and/or less
      specific than the description of the Collateral contained herein)
      disclosing the Collateral Agent's security interest in any or all of the
      Collateral of such Grantor without such Grantor's signature thereon, and
      further each Grantor also hereby irrevocably makes, constitutes and
      appoints the Collateral Agent, its nominee or any other Person whom the
      Collateral Agent may designate, as such Grantor's attorney-in-fact with
      full power and for the limited purpose to sign in the name of such Grantor
      any such financing statements (including renewal statements), amendments
      and supplements, notices or any similar documents that in the Collateral
      Agent's reasonable discretion would be necessary or appropriate in order
      to perfect and maintain perfection of the security interests granted
      hereunder, such power, being coupled with an interest, being and remaining
      irrevocable so long as the Secured Obligations remain unpaid and until the
      commitments relating thereto shall have been terminated. Each Grantor
      hereby agrees that a carbon, photographic or other reproduction of this
      Security Agreement or any such financing statement is sufficient for
      filing as a financing statement by the Collateral Agent without notice
      thereof to such Grantor wherever the Collateral Agent may in its sole
      discretion desire to file the same (the Collateral Agent shall give prompt
      notice to the Borrower after any such filing but the failure to give such
      notice shall not affect the validity of such filing). In the event for any
      reason the law of any jurisdiction other than North Carolina becomes or is
      applicable to the Collateral of any Grantor or any part thereof, or to any
      of the Secured Obligations, such Grantor agrees to execute and deliver all
      such instruments and to do all such other


                                       6

      things as the Collateral Agent in its sole discretion reasonably deems
      necessary or appropriate to preserve, protect and enforce the security
      interests of the Collateral Agent under the law of such other jurisdiction
      (and, if a Grantor shall fail to do so promptly upon the request of the
      Collateral Agent, then the Collateral Agent may execute any and all such
      requested documents on behalf of such Grantor pursuant to the power of
      attorney granted hereinabove). If any Collateral is in the possession or
      control of a Grantor's agents and the Collateral Agent so requests, such
      Grantor agrees to notify such agents in writing of the Collateral Agent's
      security interest therein and, upon the Collateral Agent's request,
      instruct them to hold all such Collateral for the account of the holders
      of the Secured Obligations and subject to the Collateral Agent's
      instructions. Each Grantor agrees to mark its books and records to reflect
      the security interest of the Collateral Agent in the Collateral.

            (h)   Control. Execute and deliver all agreements, assignments,
      instruments or other documents as the Collateral Agent shall reasonably
      request for the purpose of obtaining and maintaining control within the
      meaning of the UCC with respect to any Collateral consisting of Deposit
      Accounts, Investment Property, Letter-of-Credit Rights and Electronic
      Chattel Paper.

            (i)   Treatment of Accounts. Not grant or extend the time for
      payment of any Account, or compromise or settle any Account for less than
      the full amount thereof, or release any Person or property, in whole or in
      part, from payment thereof, or allow any credit or discount thereon, other
      than as normal and customary in the ordinary course of a Grantor's
      business or as required by law.

            (j)   Insurance. Insure, repair and replace the Collateral of such
      Grantor as set forth in the Credit Agreement. All insurance proceeds shall
      be subject to the security interest of the Collateral Agent hereunder.

            (k)   Commercial Tort Claims.

                  (i)   Promptly notify the Collateral Agent in writing of the
            initiation of any Commercial Tort Claim before any Governmental
            Authority by or in favor of such Grantor or any of its Subsidiaries.

                  (ii)  Execute and deliver such statements, documents and
            notices and do and cause to be done all such things as the
            Collateral Agent may reasonably deem necessary or appropriate, or as
            are required by law, to create, perfect and maintain the Collateral
            Agent's security interest in any Commercial Tort Claim.

      6.    Advances by Holders of the Secured Obligations. On failure of any
Grantor to perform any of the covenants and agreements contained herein, the
Collateral Agent may, at its sole option and in its sole discretion, perform the
same and in so doing may expend such sums as the Collateral Agent may reasonably
deem advisable in the performance thereof, including, without limitation, the
payment of any insurance premiums, the payment of any taxes, a payment to obtain
a release of a Lien or potential Lien, expenditures made in defending against
any adverse claim and all other expenditures that the Collateral Agent or the
holders of the Secured Obligations may make for the protection of the security
hereof or that may be compelled to made by operation of law. All such sums and
amounts so expended shall be repayable by the Grantors on a joint and several
basis (subject to Section 25 hereof) promptly upon timely notice thereof and
demand therefor, shall constitute additional Secured Obligations and shall bear
interest from the date said amounts are expended at the default rate specified
in Section 3.1 of the Credit Agreement for Revolving Loans that are Base Rate
Loans. No such performance of any covenant or agreement by the Collateral Agent
or the holders of the Secured Obligations on behalf of any Grantor, and no such
advance or expenditure therefor, shall relieve the Grantors of any default under
the terms of this Security Agreement, the other Credit Documents or any other
documents relating to the Secured Obligations. The holders of the Secured
Obligations may make any payment hereby authorized in accordance with any bill,
statement or estimate


                                       7

procured from the appropriate public office or holder of the claim to be
discharged without inquiry into the accuracy of such bill, statement or estimate
or into the validity of any tax assessment, sale, forfeiture, tax lien, title or
claim except to the extent such payment is being contested in good faith by a
Grantor in appropriate proceedings and against which adequate reserves are being
maintained in accordance with GAAP.

      7.    Remedies.

      (a)   General Remedies. Upon the occurrence of an Event of Default and
during the continuation thereof, the Collateral Agent and the holders of the
Secured Obligations shall have, in addition to the rights and remedies provided
herein, in the Credit Documents, in any other documents relating to the Secured
Obligations, or by law (including, without limitation, levy of attachment and
garnishment), the rights and remedies of a secured party under the UCC of the
jurisdiction applicable to the affected Collateral and, further, the Collateral
Agent may, with or without judicial process or the aid and assistance of others,
(i) enter on any premises on which any of the Collateral may be located and,
without resistance or interference by the Grantors, take possession of the
Collateral, (ii) dispose of any Collateral on any such premises, (iii) require
the Grantors to assemble and make available to the Collateral Agent at the
expense of the Grantors any Collateral at any place and time designated by the
Collateral Agent that is reasonably convenient to both parties, (iv) remove any
Collateral from any such premises for the purpose of effecting sale or other
disposition thereof, and/or (v) without demand and without advertisement,
notice, hearing or process of law, all of which each of the Grantors hereby
waives to the fullest extent permitted by law, at any place and time or times,
sell and deliver any or all Collateral held by or for it at public or private
sale, by one or more contracts, in one or more parcels, for cash, upon credit or
otherwise, at such prices and upon such terms as the Collateral Agent deems
advisable, in its sole discretion (provided such prices and terms shall be
commercially reasonable and otherwise subject to any and all mandatory legal
requirements). Each of the Grantors acknowledges that any private sale
referenced above may be at prices and on terms less favorable to the seller than
the prices and terms that might have been obtained at a public sale and agrees
that such private sale shall be deemed to have been made in a commercially
reasonable manner. Neither the Collateral Agent's compliance with applicable law
nor its disclaimer of warranties relating to the Collateral shall be considered
to adversely affect the commercial reasonableness of any sale. In addition to
all other sums due the Collateral Agent and the holders of the Secured
Obligations with respect to the Secured Obligations, the Grantors shall pay the
Collateral Agent and each of the holders of the Secured Obligations all
reasonable documented costs and expenses incurred by the Collateral Agent or any
such holder of the Secured Obligations, including, but not limited to,
reasonable attorneys' fees actually incurred (excluding the allocated cost of
internal counsel) and court costs, in obtaining or liquidating the Collateral,
in enforcing payment of the Secured Obligations, or in the prosecution or
defense of any action or proceeding by or against the Collateral Agent or the
holders of the Secured Obligations or the Grantors concerning any matter arising
out of or connected with this Security Agreement, any Collateral or the Secured
Obligations, including, without limitation, any of the foregoing arising in,
arising under or related to a case under the Bankruptcy Code. To the extent the
rights of notice cannot be legally waived hereunder, each Grantor agrees that
any requirement of reasonable notice shall be met if such notice is personally
served on or mailed, postage prepaid, to the Borrower in accordance with the
notice provisions of Section 11.1 of the Credit Agreement at least ten Business
Days before the time of sale or other event giving rise to the requirement of
such notice. The Collateral Agent and the holders of the Secured Obligations
shall not be obligated to make any sale or other disposition of the Collateral
regardless of notice having been given. To the extent permitted by law, any
holder of the Secured Obligations may be a purchaser at any such sale. To the
extent permitted by applicable law, each of the Grantors hereby waives all of
its rights of redemption with respect to any such sale. Subject to the
provisions of applicable law, the Collateral Agent and the holders of the
Secured Obligations may postpone or cause the postponement of the sale of all or
any portion of the Collateral by announcement at the time and place of such
sale, and such sale may, without further notice, to the extent permitted by law,
be made at the time and place to which the sale was postponed, or the Collateral
Agent and the holders of the Secured Obligations may further postpone such sale
by announcement made at such time and place.


                                       8

      (b)   Remedies relating to Accounts. Upon the occurrence of an Event of
Default and during the continuation thereof, whether or not the Collateral Agent
has exercised any or all of its rights and remedies hereunder, each Grantor will
promptly upon request of the Collateral Agent instruct all account debtors to
remit all payments in respect of Accounts to a mailing location selected by the
Collateral Agent. In addition, the Collateral Agent shall have the right to
enforce any Grantor's rights against its customers and account debtors, and the
Collateral Agent or its designee may notify any Grantor's customers and account
debtors that the Accounts of such Grantor have been assigned to the Collateral
Agent or of the Collateral Agent's security interest therein, and may (either in
its own name or in the name of a Grantor or both) demand, collect (including
without limitation by way of a lockbox arrangement), receive, take receipt for,
sell, sue for, compound, settle, compromise and give acquittance for any and all
amounts due or to become due on any Account, and, in the Collateral Agent's
discretion, file any claim or take any other action or proceeding to protect and
realize upon the security interest of the holders of the Secured Obligations in
the Accounts. Each Grantor acknowledges and agrees that the Proceeds of its
Accounts remitted to or on behalf of the Collateral Agent in accordance with the
provisions hereof shall be solely for the Collateral Agent's own convenience and
that such Grantor shall not have any right, title or interest in such Accounts
or in any such other amounts except as expressly provided herein. The Collateral
Agent and the holders of the Secured Obligations shall have no liability or
responsibility to any Grantor for acceptance of a check, draft or other order
for payment of money bearing the legend "payment in full" or words of similar
import or any other restrictive legend or endorsement or be responsible for
determining the correctness of any remittance. Each Grantor hereby agrees to
indemnify the Collateral Agent and the holders of the Secured Obligations from
and against all liabilities, damages, losses, actions, claims, judgments, costs,
expenses, charges and reasonable attorneys' fees actually incurred (excluding
the allocated cost of internal counsel) suffered or incurred by the Collateral
Agent or the holders of the Secured Obligations (each, an "Indemnified Party")
because of the maintenance of the foregoing arrangements except as relating to
or arising out of the gross negligence or willful misconduct of an Indemnified
Party or its officers, employees or agents. In the case of any investigation,
litigation or other proceeding, the foregoing indemnity shall be effective
whether or not such investigation, litigation or proceeding is brought by a
Grantor, its directors, shareholders or creditors or an Indemnified Party or any
other Person or any other Indemnified Party is otherwise a party thereto.

      (c)   Access. In addition to the rights and remedies hereunder, upon the
occurrence of an Event of Default and during the continuation thereof, the
Collateral Agent shall have the right to enter and remain upon the various
premises of the Grantors without cost or charge to the Collateral Agent, and use
the same, together with materials, supplies, books and records of the Grantors
for the purpose of collecting and liquidating the Collateral, or for preparing
for sale and conducting the sale of the Collateral, whether by foreclosure,
auction or otherwise. In addition, the Collateral Agent may remove Collateral,
or any part thereof, from such premises and/or any records with respect thereto,
in order to effectively collect or liquidate such Collateral.

      (d)   Nonexclusive Nature of Remedies. Failure by the Collateral Agent or
the holders of the Secured Obligations to exercise any right, remedy or option
under this Security Agreement, any other Credit Document, any other documents
relating to the Secured Obligations, or as provided by law, or any delay by the
Collateral Agent or the holders of the Secured Obligations in exercising the
same, shall not operate as a waiver of any such right, remedy or option. No
waiver hereunder shall be effective unless it is in writing, signed by the party
against whom such waiver is sought to be enforced and then only to the extent
specifically stated, which in the case of the Collateral Agent or the holders of
the Secured Obligations shall only be granted as provided herein. To the extent
permitted by law, neither the Collateral Agent, the holders of the Secured
Obligations shall be liable hereunder for any acts or omissions or for any error
of judgment or mistake of fact or law other than their gross negligence or
willful misconduct hereunder. The rights and remedies of the Collateral Agents
and the holders of the Secured Obligations under this Security Agreement shall
be cumulative and not exclusive of any other right or remedy that the Collateral
Agent or the holders of the Secured Obligations may have.


                                       9

      (e)   Retention of Collateral. To the extent permitted under applicable
law, in addition to the rights and remedies hereunder, upon the occurrence of an
Event of Default, the Collateral Agent may, after providing the notices required
by Sections 9-620 and 9-621 of the UCC or otherwise complying with the
requirements of applicable law of the relevant jurisdiction, accept or retain
all or any portion of the Collateral in satisfaction of the Secured Obligations.
Unless and until the Collateral Agent shall have provided such notices, however,
the Collateral Agent shall not be deemed to have accepted or retained any
Collateral in satisfaction of any Secured Obligations for any reason.

      (f)   Deficiency. In the event that the proceeds of any sale, collection
or realization are insufficient to pay all amounts to which the Collateral Agent
or the holders of the Secured Obligations are legally entitled, the Grantors
shall be jointly and severally liable for the deficiency (subject to Section 25
hereof), together with interest thereon at the default rate specified in Section
3.1 of the Credit Agreement for Revolving Loans that are Base Rate Loans,
together with the costs of collection and reasonable attorneys' fees actually
incurred (excluding the allocated cost of internal counsel). Any surplus
remaining after the full payment and satisfaction of the Secured Obligations
shall be returned to the Grantors or to whomsoever a court of competent
jurisdiction shall determine to be entitled thereto.

      8.    Release of Collateral. Upon request, the Collateral Agent shall
promptly deliver to the Borrower (at the Borrower's expense) appropriate release
documentation to the extent the release of Collateral is permitted under, and on
the terms and conditions set forth in, the Credit Agreement; provided that any
such release, or the substitution of any of the Collateral for other Collateral,
will not alter, vary or diminish in any way the force, effect, lien, pledge or
security interest of this Security Agreement as to any and all Collateral not
expressly released or substituted, and this Security Agreement shall continue as
a first priority lien (subject to Permitted Liens) on any and all Collateral not
expressly released or substituted.

      9.    Rights of the Collateral Agent.

      (a)   Power of Attorney. In addition to other powers of attorney contained
herein, each Grantor hereby designates and appoints the Collateral Agent, on
behalf of the holders of the Secured Obligations, and each of its designees or
agents, as attorney-in-fact of such Grantor, irrevocably and with power of
substitution, with authority to take any or all of the following actions upon
the occurrence and during the continuation of an Event of Default:

            (i)    to demand, collect, settle, compromise and adjust, and give
      discharges and releases concerning the Collateral, all as the Collateral
      Agent may reasonably deem appropriate;

            (ii)   to commence and prosecute any actions at any court for the
      purposes of collecting any of the Collateral and enforcing any other right
      in respect thereof;

            (iii)  to defend, settle or compromise any action brought and, in
      connection therewith, give such discharge or release as the Collateral
      Agent may reasonably deem appropriate;

            (iv)   to receive, open and dispose of mail addressed to a Grantor
      and endorse checks, notes, drafts, acceptances, money orders, bills of
      lading, warehouse receipts or other instruments or documents evidencing
      payment, shipment or storage of the goods giving rise to the Collateral on
      behalf of and in the name of such Grantor, or securing, or relating to
      such Collateral;


                                       10

            (v)    to pay or discharge taxes, liens, security interests or other
      encumbrances levied or placed on or threatened against the Collateral;

            (vi)   to direct any parties liable for any payment in connection
      with any of the Collateral to make payment of any and all monies due and
      to become due thereunder directly to the Collateral Agent or as the
      Collateral Agent shall direct;

            (vii)  to receive payment of and receipt for any and all monies,
      claims, and other amounts due and to become due at any time in respect of
      or arising out of any Collateral;

            (viii) to sell, assign, transfer, make any agreement in respect of,
      or otherwise deal with or exercise rights in respect of, any Collateral or
      the goods or services that have given rise thereto, as fully and
      completely as though the Collateral Agent were the absolute owner thereof
      for all purposes;

            (ix)   to adjust and settle claims under any insurance policy
      relating thereto;

            (x)    to execute and deliver all assignments, conveyances,
      statements, financing statements, renewal financing statements, security
      and pledge agreements, affidavits, notices and other agreements,
      instruments and documents that the Collateral Agent may reasonably deem
      appropriate in order to perfect and maintain the security interests and
      liens granted in this Security Agreement and in order to fully consummate
      all of the transactions contemplated therein;

            (xi)   to institute any foreclosure proceedings that the Collateral
      Agent may reasonably deem appropriate; and

            (xii)  to do and perform all such other acts and things as the
      Collateral Agent may reasonably deem appropriate in connection with the
      Collateral.

      This power of attorney is a power coupled with an interest and shall be
irrevocable for so long as any of the Secured Obligations shall remain
outstanding and until all of the commitments relating thereto shall have been
terminated. The Collateral Agent shall be under no duty to exercise or withhold
the exercise of any of the rights, powers, privileges and options expressly or
implicitly granted to the Collateral Agent in this Security Agreement, and shall
not be liable for any failure to do so or any delay in doing so. The Collateral
Agent shall not be liable for any act or omission or for any error of judgment
or any mistake of fact or law in its individual capacity or its capacity as
attorney-in-fact except acts or omissions resulting from its gross negligence or
willful misconduct. This power of attorney is conferred on the Collateral Agent
solely to protect, preserve and realize upon its security interest in the
Collateral.

      (b)   Performance by the Collateral Agent of Obligations. If any Grantor
fails to perform any agreement or obligation contained herein, the Collateral
Agent itself may perform, or cause performance of, such agreement or obligation,
and the expenses of the Collateral Agent incurred in connection therewith shall
be payable by the Grantors on a joint and several basis (subject to Section 25
hereof).

      (c)   The Collateral Agent's Duty of Care. Other than the exercise of
reasonable care to assure the safe custody of the Collateral while being held by
the Collateral Agent hereunder, the Collateral Agent shall have no duty or
liability to preserve rights pertaining thereto, it being understood and agreed
that the Grantors shall be responsible for preservation of all rights in the
Collateral, and the Collateral Agent shall be relieved of all responsibility for
the Collateral upon surrendering it or tendering the surrender of it to the
Grantors. The Collateral Agent shall be deemed to have exercised reasonable care
in the custody and preservation of the Collateral in its possession if such
Collateral is accorded treatment substantially equal to


                                       11

that which the Collateral Agent accords its own property, which shall be no less
than the treatment employed by a reasonable and prudent agent in the industry,
it being understood that the Collateral Agent shall not have responsibility for
taking any necessary steps to preserve rights against any parties with respect
to any of the Collateral. In the event of a public or private sale of Collateral
pursuant to Section 7 hereof, the Collateral Agent shall have no obligation to
clean, repair or otherwise prepare the Collateral for sale.

      10.   Rights of Required Lenders. All rights of the Collateral Agent
hereunder, if not exercised by the Collateral Agent, may be exercised by the
Required Lenders.

      11.   Application of Proceeds. Upon the occurrence and during the
continuation of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Collateral, when received by the Collateral
Agent or any of the holders of the Secured Obligations in cash or its
equivalent, will be applied in reduction of the Secured Obligations in the order
set forth in the Credit Agreement or other document relating to the Secured
Obligations, and each Grantor irrevocably waives the right to direct the
application of such payments and proceeds and acknowledges and agrees that the
Collateral Agent shall have the continuing and exclusive right to apply and
reapply any and all such payments and proceeds in the Collateral Agent's sole
discretion, notwithstanding any entry to the contrary upon any of its books and
records.

      12.   Continuing Agreement.

      (a)   This Security Agreement shall be a continuing agreement in every
respect and shall remain in full force and effect so long as any of the Secured
Obligations remains outstanding and until all of the commitments relating
thereto have been terminated (other than any obligations with respect to the
indemnities and the representations and warranties set forth in the Credit
Documents). Upon such payment and termination, this Security Agreement shall be
automatically terminated and the Collateral Agent and the holders of the Secured
Obligations shall forthwith release all of its liens and security interests
hereunder and shall, upon the request and at the expense of the Grantors,
execute and deliver all UCC termination statements and/or other documents
reasonably requested by the Grantors evidencing such termination.
Notwithstanding the foregoing, all releases and indemnities provided hereunder
shall survive termination of this Security Agreement.

      (b)   This Security Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment, in whole
or in part, of any of the Secured Obligations is rescinded or must otherwise be
restored or returned by the Collateral Agent or any holder of the Secured
Obligations as a preference, fraudulent conveyance or otherwise under any
bankruptcy, insolvency or similar law, all as though such payment had not been
made; provided that in the event payment of all or any part of the Secured
Obligations is rescinded or must be restored or returned, all reasonable costs
and expenses (including, without limitation, attorneys' fees actually incurred
(excluding the allocated cost of internal counsel) and disbursements) incurred
by the Collateral Agent or any holder of the Secured Obligations in defending
and enforcing such reinstatement shall be deemed to be included as a part of the
Secured Obligations.

      13.   Amendments and Waivers. This Security Agreement and the provisions
hereof may not be amended, waived, modified, changed, discharged or terminated
except as set forth in Section 11.6 of the Credit Agreement.

      14.   Successors in Interest. This Security Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Grantor, its successors and assigns, and shall inure, together with the rights
and remedies of the Collateral Agent and the holders of the Secured Obligations
hereunder, to the benefit of the Collateral Agent and the holders of the Secured
Obligations and their successors and permitted assigns; provided, however, that
none of the Grantors may assign its rights or delegate its duties hereunder
without the prior written consent of the requisite Lenders under the Credit
Agreement. To the


                                       12

fullest extent permitted by law, each Grantor hereby releases the Collateral
Agent and each holder of the Secured Obligations, their respective successors
and assigns and their respective officers, attorneys, employees and agents, from
any liability for any act or omission or any error of judgment or mistake of
fact or of law relating to this Security Agreement or the Collateral, except for
any liability arising from the gross negligence or willful misconduct of the
Collateral Agent or such holder, or their respective officers, attorneys,
employees or agents.

      15.   Notices. All notices required or permitted to be given under this
Security Agreement shall be given as provided in Section 11.1 of the Credit
Agreement.

      16.   Counterparts. This Security Agreement may be executed in any number
of counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Security Agreement to produce or
account for more than one such counterpart.

      17.   Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Security Agreement.

      18.   Governing Law; Submission to Jurisdiction; Venue.

      (a)   THIS SECURITY AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Any legal action or
proceeding with respect to this Security Agreement may be brought in the state
or federal courts located in Nashville, Tennessee or Charlotte, North Carolina,
and, by execution and delivery of this Security Agreement, each Grantor hereby
irrevocably accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of such courts. Nothing herein shall affect
the right of the Collateral Agent to commence legal proceedings or to otherwise
proceed against any Grantor in any other jurisdiction.

      (b)   Each Grantor hereby irrevocably waives any objection that it may now
or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Security Agreement brought
in the courts referred to in subsection (a) hereof and hereby further
irrevocably waives and agrees not to plead or claim in any such court that any
such action or proceeding brought in any such court has been brought in an
inconvenient forum.

      19.   Waiver of Jury Trial. EACH PARTY TO THIS SECURITY AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION ARISING UNDER ANY CREDIT DOCUMENT OR IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO ANY CREDIT DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN
CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS SECURITY AGREEMENT MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT
TO TRIAL BY JURY.

      20.   Severability. If any provision of this Security Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full


                                       13

force and effect and shall be construed without giving effect to the illegal,
invalid or unenforceable provisions.

      21.   Entirety. This Security Agreement, the other Credit Documents and
the other documents relating to the Secured Obligations represent the entire
agreement of the parties hereto and thereto, and supersede all prior agreements
and understandings, oral or written, if any, including any commitment letters or
correspondence relating to the Credit Documents, any other documents relating to
the Secured Obligations, or the transactions contemplated herein and therein.

      22.   Survival. All representations and warranties of the Grantors
hereunder shall survive the execution and delivery of this Security Agreement,
the other Credit Documents and the other documents relating to the Secured
Obligations, the delivery of the Notes and the extension of credit thereunder or
in connection therewith.

      23.   Other Security. To the extent that any of the Secured Obligations
are now or hereafter secured by property other than the Collateral (including,
without limitation, real property and securities owned by a Grantor), or by a
guarantee, endorsement or property of any other Person, then the Collateral
Agent shall have the right to proceed against such other property, guarantee or
endorsement upon the occurrence of any Event of Default, and the Collateral
Agent shall have the right, in its sole discretion, to determine which rights,
security, liens, security interests or remedies the Collateral Agent shall at
any time pursue, relinquish, subordinate, modify or take with respect thereto,
without in any way modifying or affecting any of them or the Secured Obligations
or any of the rights of the Collateral Agent or the holders of the Secured
Obligations under this Security Agreement, under any of the other Credit
Documents or under any other document relating to the Secured Obligations.

      24.   Joint and Several Obligations of Grantors.

      (a)   Subject to subsection (c) of this Section 25, each of the Grantors
is accepting joint and several liability hereunder in consideration of the
financial accommodation to be provided by the holders of the Secured
Obligations, for the mutual benefit, directly and indirectly, of each of the
Grantors and in consideration of the undertakings of each of the Grantors to
accept joint and several liability for the obligations of each of them.

      (b)   Subject to subsection (c) of this Section 25, each of the Grantors
jointly and severally hereby irrevocably and unconditionally accepts, not merely
as a surety but also as a co-debtor, joint and several liability with the other
Grantors with respect to the payment and performance of all of the Secured
Obligations arising under this Security Agreement, the other Credit Documents
and any other documents relating to the Secured Obligations, it being the
intention of the parties hereto that all the Secured Obligations shall be the
joint and several obligations of each of the Grantors without preferences or
distinction among them.

      (c)   Notwithstanding any provision to the contrary contained herein, in
any other of the Credit Documents or in any other documents relating to the
Secured Obligations, the obligations of each Guarantor under the Credit
Agreement and the other Credit Documents shall be limited to an aggregate amount
equal to the largest amount that would not render such obligations subject to
avoidance under Section 548 of the Bankruptcy Code or any comparable provisions
of any applicable state law.

                  [remainder of page intentionally left blank]


                                       14

      Each of the parties hereto has caused a counterpart of this Security
Agreement to be duly executed and delivered as of the date first above written.

GRANTORS:                            ACCREDO HEALTH, INCORPORATED,
                                     a Delaware corporation

                                     By:_____________________________________
                                     Name:
                                     Title:

                                     SOUTHERN HEALTH SYSTEMS, INC.,
                                     a Tennessee corporation
                                     NOVA FACTOR, INC.,
                                     a Tennessee corporation
                                     HEMOPHILIA HEALTH SERVICES, INC.,
                                     a Tennessee corporation
                                     PHARMACARE RESOURCES INC.,
                                     a New York corporation
                                     SUNRISE HEALTH MANAGEMENT, INC.,
                                     a Georgia corporation
                                     BIO PARTNERS IN CARE, INC.,
                                     a Missouri corporation
                                     GENTIVA HEALTH SERVICES (QUANTUM) CORP.,
                                     a Delaware corporation
                                     GENTIVA HEALTH SERVICES (INFUSION), INC.,
                                     a Delaware corporation
                                     GENTIVA HEALTH RESOURCES, INC. (NEW YORK),
                                     a New York corporation

                                     By:_____________________________________
                                     Name:
                                     Title:
                                            of each of the foregoing Grantors

                                     [Signature pages continue]

Accepted and agreed to as of the date first above written.

Bank of America, N.A.,
as Collateral Agent

By:__________________________________
Name:
Title:

                                    SCHEDULES


                  
Schedule 2(d)        Commercial Tort Claims
Schedule 4(a)(ii)    Mergers, Consolidations, Changes in Structure, Use of Tradenames
Schedule 5(f)(i)     Notice of Grant of Security Interest in Copyrights
Schedule 5(f)(ii)    Notice of Grant of Security Interest in Patents
Schedule 5(f)(iii)   Notice of Grant of Security Interest in Trademarks



                                  Schedule 2(d)

                             Commercial Tort Claims

Hemophilia Health Services Inc v. William Peter Johnson, Patricia Ann Johnson,
Curative Health Services Inc., eBioCare.com Inc/b/a Millenium Health, Patti
Johnson , Maria Johnson and John Does 1 through 10. Suit against former
employees and their daughters and new employer alleging breach of written non
compete agreements; violation of T.C.A. 47-50-109, Procurement of breach of
contract; misappropriation of confidential and proprietary information in
violation of the Uniform Trade Secrets Act; breach of fiduciary duty;
interference with business relationships and prospective business relationships
and engagement in a plan or conspiracy to induce customers , employees and
patients to breach contracts and to misappropriate HHS confidential information.
Case is pending in the Superior Court of New Jersey, Chancery Division, Atlantic
County. Court has granted an injunction and trial is set for August.

                                Schedule 4(a)(ii)

        Mergers, Consolidations, Changes in Structure, Use of Tradenames


None.

                                Schedule 5(f)(i)

                                     NOTICE

                                       OF

                           GRANT OF SECURITY INTEREST

                                       IN

                                   COPYRIGHTS


United States Copyright Office

Ladies and Gentlemen:

      Please be advised that pursuant to the Amended and Restated Security
Agreement dated as of June 13, 2002 (as the same may be amended, modified,
extended or restated from time to time, the "Security Agreement") by and among
the Grantors party thereto (each an "Grantor" and collectively, the "Grantors")
and Bank of America, N.A., as Collateral Agent (the "Collateral Agent") for the
holders of the Secured Obligations referenced therein, the undersigned Grantor
has granted a continuing security interest in and continuing lien upon, the
copyrights and copyright applications shown on Schedule 1 attached hereto to the
Collateral Agent for the ratable benefit of the holders of the Secured
Obligations.

      The undersigned Grantor and the Collateral Agent, on behalf of the holders
of the Secured Obligations, hereby acknowledge and agree that the security
interest in the copyrights and copyright applications set forth on Schedule 1
attached hereto (i) may only be terminated in accordance with the terms of the
Security Agreement and (ii) is not to be construed as an assignment of any
copyright or copyright application.

                                                 Very truly yours,

                                                 [NAME]

                                                 By:____________________________
                                                 Name:
                                                 Title:

                                                 Grantor's Address:



Acknowledged and Accepted:

BANK OF AMERICA, N.A., as Collateral Agent

By:_________________________________
Name:
Title:

                               Schedule 5(f)(ii)

                                     NOTICE

                                       OF

                           GRANT OF SECURITY INTEREST

                                       IN

                                    PATENTS


United States Patent and Trademark Office

Ladies and Gentlemen:

      Please be advised that pursuant to the Amended and Restated Security
Agreement dated as of June 13, 2002 (the "Security Agreement") by and among the
Grantors party thereto (each an "Grantor" and collectively, the "Grantors") and
Bank of America, N.A., as Collateral Agent (the "Collateral Agent") for the
holders of the Secured Obligations referenced therein, the undersigned Grantor
has granted a continuing security interest in and continuing lien upon, the
patents and patent applications set forth on Schedule 1 attached hereto to the
Collateral Agent for the ratable benefit of the holders of the Secured
Obligations.

      The undersigned Grantor and the Collateral Agent, on behalf of the holders
of the Secured Obligations, hereby acknowledge and agree that the security
interest in the patents and patent applications set forth on Schedule 1 attached
hereto (i) may only be terminated in accordance with the terms of the Security
Agreement and (ii) is not to be construed as an assignment of any patent or
patent application.

                                                 Very truly yours,

                                                 [NAME]

                                                 By:____________________________
                                                 Name:
                                                 Title:

                                                 Grantor's Address:



Acknowledged and Accepted:

BANK OF AMERICA, N.A., as Collateral Agent

By:_________________________________
Name:
Title:

                               Schedule 5(f)(iii)

                                     NOTICE

                                       OF

                           GRANT OF SECURITY INTEREST

                                       IN

                                   TRADEMARKS


United States Patent and Trademark Office

Ladies and Gentlemen:

      Please be advised that pursuant to the Amended and Restated Security
Agreement dated as of June 13, 2002 (the "Security Agreement") by and among the
Grantors party thereto (each an "Grantor" and collectively, the "Grantors") and
Bank of America, N.A., as Collateral Agent (the "Collateral Agent") for the
holders of the Secured Obligations referenced therein, the undersigned Grantor
has granted a continuing security interest in and continuing lien upon, the
trademarks and trademark applications set forth on Schedule 1 attached hereto to
the Collateral Agent for the ratable benefit of the holders of the Secured
Obligations.

      The undersigned Grantor and the Collateral Agent, on behalf of the holders
of the Secured Obligations, hereby acknowledge and agree that the security
interest in the trademarks and trademark applications set forth on Schedule 1
attached hereto (i) may only be terminated in accordance with the terms of the
Security Agreement and (ii) is not to be construed as an assignment of any
trademark or trademark application.

                                                 Very truly yours,

                                                 [NAME]

                                                 By:____________________________
                                                 Name:
                                                 Title:

                                                 Grantor's Address:



Acknowledged and Accepted:

BANK OF AMERICA, N.A., as Collateral Agent

By:_________________________________
Name:
Title:

EX-21.1

                                                                    Exhibit 21.1

                         SUBSIDIARIES OF THE REGISTRANT



NAME OF SUBSIDIARY                                   JURISDICTION OF INCORPORATION
- ------------------                                   -----------------------------
                                                  
Southern Health Systems, Inc.                        Tennessee
Nova Factor, Inc.                                    Tennessee
Hemophilia Health Services, Inc.                     Tennessee
Pharmacare Resources, Inc.                           New York
Sunrise Health Management, Inc.                      Georgia
BioPartners In Care, Inc.                            Missouri
Accredo Therapeutics, Inc.                           Delaware
Gentiva Health Services (Infusion), Inc.             Delaware

EX-23.1

                                                                    Exhibit 23.1



                         Consent of Independent Auditors


We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-76399) pertaining to: the Accredo Health, Inc. and its Subsidiaries
Stock Option and Restricted Stock Purchase Plan, as amended and restated; the
Accredo Health, Incorporated 1999 Employee Stock Purchase Plan; the Accredo
Health, Incorporated 1999 Long-Term Incentive Plan and the Accredo Health,
Incorporated 2002 Long-Term Incentive Plan, of our report dated August 16, 2002,
with respect to the consolidated financial statements and schedule included in
this Annual Report (Form 10-K) of Accredo Health, Incorporated.

                                                /s/Ernst & Young LLP

Memphis, Tennessee
September 27, 2002

EX-99.1

                                                                    Exhibit 99.1


    CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


      In connection with the Annual Report of Accredo Health, Inc. (the Company)
on Form 10-K for the fiscal year ended June 30, 2002, as filed with the
Securities and Exchange Commission on the date hereof (the Report), I, David D.
Stevens, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:

            (1)   The Report fully complies with the requirements of section
                  13(a) or 15(d) of the Securities Exchange Act of 1934; and

            (2)   The information contained in the Report fairly presents, in
                  all material respects, the financial condition and results of
                  operations of the Company.

                                                      /s/ David S. Stevens
                                                      -----------------------
                                                      David D. Stevens
                                                      Chief Executive Officer
                                                      September 30, 2002

EX-99.2

                                                                    Exhibit 99.2


    CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


      In connection with the Annual Report of Accredo Health, Inc. (the Company)
on Form 10-K for the fiscal year ended June 30, 2002, as filed with the
Securities and Exchange Commission on the date hereof (the Report), I, Joel R.
Kimbrough, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:

            (1)   The Report fully complies with the requirements of section
                  13(a) or 15(d) of the Securities Exchange Act of 1934; and

            (2)   The information contained in the Report fairly presents, in
                  all material respects, the financial condition and results of
                  operations of the Company.

                                                     /s/ Joel R. Kimbrough
                                                     -----------------------
                                                     Joel R. Kimbrough
                                                     Chief Financial Officer
                                                     September 30, 2002