10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the Quarterly Period Ended November 30, 2002

Commission File Number 000-19364

AMERICAN HEALTHWAYS, INC

(Exact Name of Registrant as Specified in its Charter)

Delaware	62-1117144
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

3841 Green Hills Village Drive, Nashville, TN 37215
(Address of Principal Executive Offices) (Zip Code)

615-665-1122
(Registrant’s Telephone Number, Including Area Code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]           No [  ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes [X]           No [  ]

As of January 7, 2003 there were outstanding 15,425,314 shares of the Registrant’s Common Stock, par value $.001 per share.

TABLE OF CONTENTS

	Part I.
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Part II
SIGNATURES
CERTIFICATIONS
Amended and Restated Revolving Credit Agreement
Form of Revolving Credit Note
Form of Subsidiary Guaranty Agreement
Earnings Per Share Reconciliation
Section 906 Certification of the CEO
Section 906 Certification of the CFO

Part I.

Item 1.      Financial Statements

AMERICAN HEALTHWAYS, INC.

CONSOLIDATED BALANCE SHEETS

ASSETS

			(Unaudited)
			November 30,			August 31,
			2002			2002
Current assets:
	Cash and cash equivalents		$	16,248,948		$	23,924,050
	Restricted cash and cash equivalents			3,000,000			—
	Accounts receivable, net			23,715,000			20,688,640
	Other current assets			4,075,422			3,495,123
	Deferred tax asset			1,313,000			1,313,000
		Total current assets		48,352,370			49,420,813
Property and equipment:
	Leasehold improvements			4,268,547			3,458,932
	Computer equipment, related software and other equipment			39,200,941			35,148,123
				43,469,488			38,607,055
	Less accumulated depreciation			(19,176,634	)		(16,801,871	)
				24,292,854			21,805,184
Long-term deferred tax asset				942,000			942,000
Other assets, net				1,003,674			1,410,793
Goodwill, net				44,438,196			44,438,196
			$	119,029,094		$	118,016,986

See accompanying notes to the consolidated financial statements.

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AMERICAN HEALTHWAYS, INC.

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS’ EQUITY

			(Unaudited)
			November 30,		August 31,
			2002		2002
Current liabilities:
	Accounts payable		$	2,016,759	$	4,268,088
	Accrued salaries and benefits			4,197,981		11,725,520
	Accrued liabilities			3,400,647		2,371,747
	Contract billings in excess of earnings			8,797,914		5,726,312
	Income taxes payable			2,439,301		235,273
	Current portion of other long-term liabilities			849,357		799,208
		Total current liabilities		21,701,959		25,126,148
Long-term debt				415,031		514,187
Other long-term liabilities				3,837,812		3,567,725
Stockholders’ equity:
	Preferred stock
		$.001 par value, 5,000,000 shares authorized, none outstanding		—		—
	Common stock
		$.001 par value, 40,000,000 shares authorized, 15,423,540 and 15,366,232 shares outstanding		15,424		15,366
	Additional paid-in capital			69,505,281		68,938,626
	Retained earnings			23,553,587		19,854,934
		Total stockholders’ equity		93,074,292		88,808,926
			$	119,029,094	$	118,016,986

See accompanying notes to the consolidated financial statements.

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AMERICAN HEALTHWAYS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

		Three Months Ended
		November 30,
		2002		2001
Revenues		$	37,538,173	$	24,542,326
Cost of services			24,626,198		18,185,611
Gross margin			12,911,975		6,356,715
Selling, general and administrative expenses			3,918,122		2,266,222
Depreciation and amortization			2,538,878		1,503,950
Interest expense			185,322		53,351
Income before income taxes			6,269,653		2,533,192
Income tax expense			2,571,000		1,039,000
Net income		$	3,698,653	$	1,494,192
Basic income per share		$	0.24	$	0.10
Diluted income per share		$	0.23	$	0.10
Weighted average common shares and equivalents
	Basic		15,396,399		14,372,604
	Diluted		16,345,116		15,598,450

Certain items in prior periods have been reclassified to conform to current classifications.

See accompanying notes to the consolidated financial statements.

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AMERICAN HEALTHWAYS, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Three Months Ended November 30, 2002

(Unaudited)

						Additional
		Preferred		Common		Paid-in		Retained
		Stock		Stock		Capital		Earnings		Total
Balance, August 31, 2002		$	—	$	15,366	$	68,938,626	$	19,854,934		$	88,808,926
	Exercise of stock options		—		58		214,768		—			214,826
	Tax benefit of option exercises		—		—		351,887		—			351,887
	Net income		—		—		—		3,698,653			3,698,653
Balance, November 30, 2002		$	—	$	15,424	$	69,505,281	$	23,553,587		$	93,074,292

See accompanying notes to consolidated financial statements.

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AMERICAN HEALTHWAYS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

					Three Months Ended
					November 30,
					2002			2001
Cash flows from operating activities:
	Net income				$	3,698,653		$	1,494,192
		Income tax expense				2,571,000			1,039,000
	Income before income taxes					6,269,653			2,533,192
	Noncash expenses, revenues, losses and gains included in income:
			Depreciation and amortization			2,538,878			1,503,950
			Other noncash transactions			550,729			205,440
						9,359,260			4,242,582
	Increase in working capital items					(9,285,025	)		(570,742	)
	Income taxes (net paid)					(15,085	)		(227,306	)
	Decrease (increase) in other assets					16,076			(1,293	)
	Payments on other long-term liabilities					—			(82,916	)
				Net cash flows provided by operating activities		75,226			3,360,325
Cash flows from investing activities:
	Acquisition of property and equipment					(4,862,436	)		(2,360,130	)
	Business acquisitions					—			(320,209	)
				Net cash flows used in investing activities		(4,862,436	)		(2,680,339	)
Cash flows from financing activities:
	Increase in restricted cash and cash equivalents					(3,000,000	)		—
	Exercise of stock options					205,969			651,843
	Payments of long-term debt					(93,861	)		—
				Net cash flows provided by (used in) financing activities		(2,887,892	)		651,843
Net increase (decrease) in cash and cash equivalents						(7,675,102	)		1,331,829
Cash and cash equivalents, beginning of period						23,924,050			12,375,772
Cash and cash equivalents, end of period					$	16,248,948		$	13,707,601

See accompanying notes to the consolidated financial statements.

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AMERICAN HEALTHWAYS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1)       Interim Financial Reporting

     The accompanying consolidated financial statements of American Healthways, Inc. and its subsidiaries (the “Company”) for the three months ended November 30, 2002 and 2001 are unaudited. However, in the opinion of the Company, all adjustments consisting of normal, recurring accruals necessary for a fair presentation have been reflected therein. Certain items in prior periods have been reclassified to conform to current classifications.

     Certain financial information, which is normally included in financial statements prepared in accordance with generally accepted accounting principles, but which is not required for interim reporting purposes, has been omitted. The accompanying consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2002.

(2)       Business Segments

     The Company provides care enhancement and disease management services to health plans and hospitals. The Company’s reportable segments are the types of customers, hospital or health plan, who contract for the Company’s services. The segments are managed separately and the Company evaluates performance based on operating profits of the respective segments. The Company supports both segments with common human resources, clinical, marketing and information technology resources.

     The accounting policies of the segments are the same as those discussed in the summary of significant accounting policies. There are no intersegment sales. Income (loss) before income taxes by operating segment excludes general corporate expenses.

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     Summarized financial information by business segment is as follows:

			Three Months Ended
			November 30,
			2002			2001
Revenues:
	Health plan contracts		$	33,507,363		$	19,760,466
	Hospital contracts			3,946,767			4,680,486
	Other revenue			84,043			101,374
			$	37,538,173		$	24,542,326
Income (loss) before income taxes:
	Health plan contracts		$	11,932,522		$	4,836,823
	Hospital contracts			752,741			1,042,544
	Shared support services			(5,246,263	)		(2,719,986	)
		Total segments		7,439,000			3,159,381
	General corporate expenses			(1,169,347	)		(626,189	)
			$	6,269,653		$	2,533,192

(3)       Recently Issued Accounting Standards

     Impairment and Disposal of Long-Lived Assets

     In August 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, effective for fiscal years beginning after December 15, 2001. SFAS No. 144 supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,” and provides a single accounting model for the disposal of long-lived assets from continuing and discontinued operations. The adoption of SFAS No. 144 did not have a material effect on the Company’s financial position or results of operations.

     Leases

     In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections”. SFAS No. 145, among other things, amends SFAS No. 13, “Accounting for Leases”, to eliminate an inconsistency between the accounting for sale-leaseback transactions and the accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS No. 145 also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The provisions of SFAS No. 145 related to SFAS No. 13 are effective for transactions occurring after May 15, 2002, with early application encouraged. All other provisions of SFAS No. 145 are effective for financial statements issued on or after May 15, 2002, with early application encouraged. The adoption of SFAS No. 145 did not have a material impact on the Company’s financial position or results of operations.

     Accounting for Costs Associated with Exit or Disposal Activities

     In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”. SFAS No. 146 rescinds Emerging Issues Task Force Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including

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Certain Costs Incurred in a Restructuring)”. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at its fair value in the period that the liability is incurred. The provisions of SFAS No. 146 are effective for exit or disposal activities initiated after December 31, 2002, with early application encouraged. The adoption of SFAS No. 146 is not expected to have a material impact on the Company’s financial position or results of operations.

(4)       Restricted Cash and Cash Equivalents

     Restricted cash and cash equivalents represent funds in escrow in connection with contractual requirements (see Note 7).

(5)      Unbilled Receivables

     As of November 30, 2002 and August 31, 2002, unbilled revenues included in accounts receivable were $5.3 million and $5.5 million, respectively. Unbilled receivables primarily represent incentive bonuses which are billed to customers upon settlement of the contract year during which they are earned (typically six to eight months after the end of a contract year).

(6)      Long-Term Debt

     On November 22, 2002, the Company entered into a new credit agreement with three financial institutions. The new agreement provides the Company with up to $35.0 million in borrowing capacity, including the ability to issue up to $35.0 million of letters of credit, under a credit facility that expires in May 2005. Borrowings under the agreement bear interest, at the Company’s option, at a fluctuating LIBOR-based rate or at the higher of the federal funds rate plus 0.5% or the banks’ prime lending rate. Substantially all of the Company and its subsidiaries’ assets are pledged as collateral for any borrowings under the credit facility. The agreement also contains various financial covenants, limits the amount of repurchases of the Company’s common stock, and requires the Company to maintain minimum liquidity (cash, marketable securities, and unused availability under the credit agreement) of $8.0 million. As of November 30, 2002, there were no borrowings outstanding under the credit agreement; however, there were letters of credit outstanding under the agreement totaling approximately $18.9 million to support the Company’s requirement to repay fees under three health plan contracts in the event the Company does not perform at established target levels and does not repay the fees due in accordance with the terms of the contracts. The Company has never had a draw under an outstanding letter of credit.

     Long-term debt at November 30, 2002 consists of computer equipment leased by the Company under capital lease obligations.

(7)      Commitments and Contingencies

     Two of the Company’s health plan contracts require the Company to reimburse the health plans up to a specified limit, approximately $14.6 million in the aggregate annually, if the customer’s medical costs increase compared to their baseline year, which is adjusted for the customer’s medical inflation cost trend. One of these contracts, which limits the Company’s exposure to healthcare cost increases to $12.0 million annually, requires the Company to establish an escrow account of $6.0 million to partially guarantee the Company’s ability to pay for healthcare cost increases under this contract. As of November 30, 2002, the Company had funded $3.0 million of the escrow account and is required to fund an additional $3.0 million by April 30, 2003. The Company has limited its exposure under this contract by purchasing insurance from an unaffiliated insurer covering the Company’s obligations for the customer’s medical cost increases in excess of the escrow. The Company typically includes the cost of instruments such as letters of credit or insurance in its fees to the health plan.

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     Typically, the Company’s fees or incentives are higher in contracts with increased financial risk such as those contracts with performance-based fees or guarantees against cost increases. Although the Company has never had a draw on instruments such as letters of credit or insurance due to a failure to achieve targeted cost reductions, such a failure could, in certain cases, render a contract unprofitable and could have a material negative impact on the Company’s results of operations.

(8)      Stockholders’ Equity

     At a Special Meeting of Stockholders on October 25, 2001, the stockholders approved an amendment to the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of the Company’s common stock from 15,000,000 to 40,000,000. On October 29, 2001, the Company’s Board of Directors approved a three-for-two stock split effected in the form of a 50% stock dividend distributed on November 23, 2001 to stockholders of record at the close of business on November 9, 2001. The consolidated balance sheets and consolidated statements of changes in stockholders’ equity have been restated as if the split and increase in authorized shares had occurred on August 31, 2001. Earnings per share, weighted average shares and equivalents and stock option information have been retroactively restated as if the split had occurred at the beginning of the periods presented.

     In December 2001, the Company entered into a strategic alliance agreement with Johns Hopkins University and Health System for the establishment of an outcomes verification program to independently evaluate and verify the effectiveness of clinical interventions and their clinical and financial results. This five year strategic alliance agreement was effective December 1, 2001. Pursuant to the terms of the agreement, the Company pays Johns Hopkins compensation of $1.0 million annually and issued 75,000 unregistered shares of common stock to Johns Hopkins. One half of the 75,000 shares vested immediately, and the remaining 37,500 shares vest on December 1, 2003.

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Item 2.      Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

     American Healthways, Inc. (the “Company”), a corporation formed in 1981, provides specialized, comprehensive care enhancement and disease management services to health plans and hospitals. The Company’s integrated care enhancement programs serve entire health plan populations through member and physician care support interventions, advanced neural network predictive modeling, and a confidential, secure Internet-based application that provides patients and physicians with individualized health information and data. American Healthways’ integrated care enhancement programs enable health plans to develop relationships with all of their members, not just the chronically ill, and to identify those at highest risk for a health problem, allowing for early interventions.

     The Company’s integrated care enhancement product line includes programs for members with key chronic diseases, programs for members with conditions of significant health and financial impact and programs for members identified as being at high risk for significant and costly episodes of illness. The product line is supported by a variety of integrated tools and technologies that are designed to deliver the best clinical and financial outcomes to American Healthways’ customers.

     Healthways Cardiac^SM, Healthways Respiratory^SM for chronic obstructive pulmonary disease (“COPD”) and Healthways Diabetes^SM are designed to meet the total healthcare needs of the entire population diagnosed with these conditions, whether or not those needs are related to their chronic disease, through a system of interventions intended to improve patients’ health in the short term and prevent, delay or reduce the severity of long-term complications. Healthways Respiratory^SM for asthma provides asthma-specific interventions only and includes a focus on pediatric populations.

     Healthways Impact Conditions^SM addresses the total healthcare needs of populations diagnosed with health conditions for which research has identified significant gaps in care against published evidence-based medical guidelines, including low back pain, fibromyalgia, acid-related disorders and others. This group of impact conditions affects a significant percentage of the population and provides an opportunity for improvement in healthcare quality and cost.

     My Healthways^SM Personal Health Management program is designed to create a healthcare relationship between the health plan and its members, particularly those who have few meaningful ties to the plan, are not significant users of the plan’s healthcare services and, therefore, comprise the majority of member turnover. My Healthway^SM also identifies those at the highest risk for costly healthcare episodes and provides services to help all members, and their physicians, coordinate, integrate and manage their individual healthcare needs.

     As of November 30, 2002, the Company had contracts to provide its services to 21 health plans and also had 54 contracts to provide its services at 72 hospitals.

     Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements, which are based upon current expectations and involve a number of risks and uncertainties. In order for the Company to utilize the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, investors are hereby cautioned that these statements may be affected by the important factors, among others, set forth below, and consequently, actual operations and results may differ materially from those expressed in these forward-looking statements. The important factors include:

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• the Company’s ability to sign and execute new contracts for health plan disease management services and care enhancement services and to sign and execute new contracts for hospital-based diabetes services;

• the risks associated with a significant concentration of the Company’s revenues with a limited number of health plan customers;

• the Company’s ability to effect cost savings and clinical outcomes improvements under health plan disease management and care enhancement contracts and reach mutual agreement with customers with respect to cost savings, or to effect such savings and improvements within the time frames contemplated by the Company;

• the ability of the Company to accurately forecast performance under the terms of its health plan contracts ahead of data collection and reconciliation;

• the Company’s ability to collect contractually earned performance incentive bonuses;

• the ability of the Company’s health plan customers to provide timely and accurate data that is essential to the operation and measurement of the Company’s performance under the terms of its health plan contracts;

• the Company’s ability to resolve favorably contract billing and interpretation issues with its health plan customers;

• the ability of the Company to effectively integrate new technologies such as those encompassed in its care enhancement initiatives into the Company’s care enhancement information technology platform;

• the Company’s ability to renew and/or maintain contracts with its customers under existing terms or restructure these contracts on terms that would not have a material negative impact on the Company’s results of operations;

• the Company’s ability to implement its care enhancement strategy within expected cost estimates;

• the ability of the Company to obtain adequate financing to provide the capital that may be needed to support the growth of the Company’s health plan operations and to support or guarantee the Company’s performance under new health plan contracts;

• unusual and unforeseen patterns of healthcare utilization by individuals with diabetes, cardiac, respiratory and/or other diseases or conditions for which the Company provides services, in the health plans with which the Company has executed a disease management contract;

• the ability of the health plans to maintain the number of covered lives enrolled in the plans during the terms of the agreements between the health plans and the Company;

• the Company’s ability to attract and/or retain and effectively manage the employees required to implement its agreements with hospitals and health plans;

• the impact of litigation involving the Company;

• the impact of future state and federal healthcare legislation and regulations on the ability of the Company to deliver its services and on the financial health of the Company’s customers and their willingness to purchase the Company’s services; and

• general economic conditions.

The Company undertakes no obligation to update or revise any such forward-looking statements.

     The following table sets forth the sources of the Company’s revenues by customer type as a percentage of total revenues for the three months ended November 30, 2002 and 2001:

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	Three Months Ended
	November 30,
	2002			2001
Health plan contracts		89	%		80	%
Hospital contracts		11	%		19	%
Other		0	%		1	%
		100	%		100	%

     The Company believes that its future revenue growth will result primarily from health plan customer contracts.

Critical Accounting Policies

     The Company’s accounting policies are described in Note 1 of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2002. The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require management to make estimates and judgments that affect the reported amounts of assets and liabilities and related disclosures at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

     The Company believes the following accounting policies to be the most critical in understanding the judgments that are involved in preparing its financial statements and the uncertainties that could impact its results of operations, financial condition and cash flows.

Revenue Recognition

     Fees under the Company’s hospital contracts are generally fixed-fee and are recorded as services are provided.

     Fees under the Company’s health plan contracts are generally determined by multiplying a contractually negotiated rate per health plan member per month (“PMPM”) by the number of health plan members covered by the Company’s services during the month. In some contracts, the PMPM rate may differ between the health plan product groups (e.g. PPO, HMO, Medicare). These contracts are generally for terms of three to five years with provisions for subsequent renewal and typically provide that between 15% and 100% of the Company’s fees may be refundable (“performance-based”) if a targeted percentage reduction in the customer’s healthcare costs and clinical and other criteria that focus on improving the health of the members, compared to a baseline year, are not achieved. Approximately 22% of the Company’s revenues recorded during the three months ended November 30, 2002 were performance-based. A limited number of contracts also provide opportunities for incentive bonuses in excess of the contractual PMPM rate if the Company is able to achieve an even greater reduction in the customer’s healthcare costs than the targeted reduction.

     The Company bills its customers each month for the entire amount of the fees contractually due for the prior month’s enrollment, which always includes the amount, if any, that may be subject to refund. The monthly billing does not include any potential incentive bonuses which, if earned, are not due until after contract settlement. The Company recognizes revenue during the period the services are performed

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as follows: the fixed portion of the monthly fees are recognized as revenue during the period the services are performed; the performance-based portion of the monthly fees are recognized based on performance-to-date in the contract year; additional incentive bonuses are recognized based on performance-to-date in the contract year to the extent such amounts are considered collectible based on credit risk and/or business relationships. The Company assesses its level of performance based on medical claims and other data contractually required to be supplied monthly by the health plan customer. Estimates that may be included in the Company’s assessment of performance include medical claims incurred but not reported and a health plan’s medical cost trend compared to a baseline year. In addition, the Company may also provide reserves, when appropriate, for billing adjustments at contract reconciliation and for the collectibility of incentive bonuses (“contractual reserves”). In the event interim performance measures indicate that performance targets are not being met, or data from the health plan is insufficient to measure performance, fees subject to refund are not recognized as revenues but rather are recorded as a current liability in contract billings in excess of earnings. The Company would reverse revenues previously recognized only in those situations in which performance-to-date in the contract year, previously above targeted levels, dropped below targeted levels due to subsequent adverse performance and/or adjustments in contractual reserves.

     The contractual settlement process under a contract, which generally is not completed until six to eight months after the end of a contract year, involves reconciliation of healthcare claims and clinical data. Data reconciliation differences between the Company and the customer can arise due to health plan data deficiencies, omissions and/or data discrepancies, for which the Company provides contractual allowances until agreement is reached with respect to identified issues.

Impairment of Intangible Assets and Goodwill

     The Company elected early adoption of SFAS No. 142, “Goodwill and Other Intangible Assets” on September 1, 2001, the beginning of the 2002 fiscal year, at which time it ceased amortization of goodwill. In accordance with SFAS No. 142, goodwill acquired is reviewed for impairment by reporting unit on an annual basis or more frequently whenever events or circumstances indicate that the carrying value of a reporting unit may not be recoverable.

     In the event the Company determines that the carrying value of goodwill is impaired based upon an impairment review, the measurement of any impairment is calculated using a fair-value-based goodwill impairment test as required under the provisions of SFAS No. 142. Fair value is the amount at which the asset could be bought or sold in a current transaction between two willing parties and may be estimated using a number of techniques, including quoted market prices or valuations by third parties, present value techniques based on estimates of cash flows, or multiples of earnings or revenues performance measures.

     The Company’s other identifiable intangible assets, such as covenants not to compete and acquired technologies, are amortized on the straight-line method over their estimated useful lives. The Company also assesses the impairment of its other identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

     In the event the Company determines that the carrying value of other identifiable intangible assets may not be recoverable, the measurement of any impairment is calculated using an estimate of the asset’s fair value based on the projected net cash flows expected to result from that asset, including eventual disposition.

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     Future events could cause the Company to conclude that impairment indicators exist and that goodwill and/or other intangible assets associated with its acquired businesses are impaired. Any resulting impairment loss could have a material adverse impact on the Company’s financial condition and results of operations.

Health Plan Contracts

     The Company’s health plan disease management and care enhancement services range from telephone and mail contacts directed primarily to health plan members with targeted diseases from one of the Company’s six care enhancement centers to services that include providing local market resources to address acute episode interventions and coordination of care with local healthcare providers. Fees under the Company’s health plan contracts are generally determined by multiplying a contractually negotiated rate per health plan member per month by the number of health plan members covered by the Company’s services during the month. In some contracts, the PMPM rate may differ between the health plan product groups (e.g. PPO, HMO, Medicare). Contracts are generally for terms of three to five years with provisions for subsequent renewal and typically provide that between 15% and 100% of the Company’s fees may be refundable (“performance-based”). The Company earns performance-based fees upon achieving a targeted percentage reduction in the customer’s healthcare costs, in addition to clinical and other criteria that focus on improving the health of the members, compared to a baseline year. Approximately 22% of the Company’s revenues recorded during the three months ended November 30, 2002 were performance-based. A limited number of contracts also provide opportunities for incentive bonuses in excess of the contractual PMPM rate if the Company is able to achieve an even greater reduction in the customer’s healthcare costs compared to the targeted reduction.

     The Company anticipates that additional disease management and care enhancement contracts that the Company may sign with health plans may take one of several forms, including PMPM payments to the Company to cover its services to enrollees, some form of shared savings of overall enrollee healthcare costs, or some combination of these arrangements. The Company anticipates that under most contracts, some portion of the Company’s fees will be at risk subject to its performance against financial cost savings, clinical, and other performance criteria.

     The annual membership enrollment and disenrollment processes of employers from health plans can result in a seasonal reduction in lives under management during the Company’s second fiscal quarter. Employers typically make decisions on which health insurance carriers they will offer to their employees and also may allow employees to switch between health plans on an annual basis. Historically, the Company has found that a majority of these decisions are made effective December 31 of each year. An employer’s change in health plans or employees’ change in health plan elections will result in the Company’s loss of covered lives under management as of January 1. Although these decisions may also result in a gain in enrollees as new employers sign on with the Company’s customers, the process of identifying new members eligible to participate in the Company’s programs is dependent on the submission of healthcare claims, which lags enrollment by an indeterminate period. As a result, historically the Company has experienced a loss of covered lives of between 5% and 7% on January 1 that is not restored through new member identification until later in the fiscal year, thereby negatively affecting the Company’s revenues in its second fiscal quarter.

     Disease management and care enhancement health plan contracts require sophisticated management information systems to enable the Company to manage the care of large populations of patients with certain chronic diseases such as diabetes, cardiac disease and respiratory disease as well as certain other medical conditions and to assist in reporting clinical and financial outcomes before and after the Company’s involvement with a health plan’s enrollees. The Company has developed and is

15

continually expanding and improving its clinical management systems which it believes meet its information management needs for its disease management and care enhancement services. The Company has installed and is utilizing the systems for the enrollees of each of its health plan contract customers. The anticipated expansion and improvement in its information management systems will continue to require significant investments by the Company in information technology software, hardware and its information technology staff.

     At November 30, 2002, the Company had contracts with 21 health plans to provide disease management services compared with contracts with 17 health plans at November 30, 2001. The Company reports the number of covered lives serviced under its health plan contracts in terms of “equivalent lives.” Because the Company’s original disease management services were focused on health plan members with diabetes, the equivalent life calculation is based on the fees and average service intensity of a diabetic life. Although the average service intensity and fee for a health plan member with cardiac or respiratory disease differs from diabetes, the Company believes that the percent contribution margin is approximately the same.

     Equivalent lives reported as “under management” are health plan members to whom the Company is providing services. Equivalent lives reported in backlog are the estimated number of health plan members for whom services have been contracted but are not yet being provided. The number of equivalent lives under management as well as the backlog of equivalent lives under contract are shown below at November 30, 2002 and 2001.

At November 30,		2002		2001
Equivalent lives under management			682,159		358,549
Equivalent lives in backlog			90,000		—
	Total equivalent lives		772,159		358,549

     The Company is experiencing increasing demand for its health plan customers’ administrative services only (“ASO”) business, which expanded to 90,000 equivalent lives under contract at November 30, 2002 from 49,000 equivalent lives at August 31, 2002. These lives are included in the equivalent lives reported in the table above. ASO business represents lives for which the Company’s health plan customers do not assume risk but provide only administrative claim and health network access services, principally to self-insured employers. Some of the Company’s health plan customers that provide ASO services have recently begun offering the Company’s care enhancement services to their employer customers. The Company’s policy is to not add health plan ASO lives to its backlog until contracts are finalized between the health plan and their employer customers.

     Approximately 71% of the Company’s revenues for the three months ended November 30, 2002 were derived from contracts with three health plans that each comprised more than 10% of the Company’s revenues for that period. The loss of any of these contracts or any other large health plan contract or a reduction in the profitability of any of these contracts would have a material negative impact on the Company’s results of operations and financial condition.

     During the three months ended November 30, 2002, the Company entered into an agreement with Principal Financial Group to offer the Company’s care enhancement programs to its ASO customers.

     The Company’s health plan contract revenues are dependent upon the contractual relationships it establishes and maintains with health plans to provide disease management and care enhancement services to their members. The terms of these health plan contracts generally range from three to five

16

years with some contracts providing for early termination by the health plan under certain conditions. Because the disease management industry is relatively new and the Company’s contracts were some of the first large-scale contracts to be executed with health plans for disease management services, the renewal experience for these contracts is limited. No assurances can be given that the results from restructurings and possible terminations at or prior to renewal would not have a material negative impact on the Company’s results of operations and financial condition.

     Of the five health plan contracts scheduled to expire in fiscal 2003, one has been extended, one has been expanded and extended and one has been acquired by an existing health plan customer. The remaining two health plan contracts that are scheduled to expire in fiscal 2003 represent less than 1% of the Company’s revenues for the three months ended November 30, 2002. Four health plan contracts, representing approximately 46% of the Company’s revenues in the three months ended November 30, 2002, have contractual terms that allow for early termination. No assurance can be given that unscheduled contract terminations or renegotiations would not have a material negative impact on the Company’s results of operations and financial condition.

     In December 2001, the Company entered into a strategic alliance agreement with Johns Hopkins University and Health System for the establishment of an outcomes verification program to independently evaluate and verify the effectiveness of clinical interventions and their clinical and financial results. This five-year strategic alliance agreement was effective December 1, 2001 Pursuant to the terms of the agreement, the Company pays Johns Hopkins compensation of $1.0 million annually and issued 75,000 unregistered shares of common stock to Johns Hopkins. One half of the 75,000 shares vested immediately, and the remaining 37,500 shares vest on December 1, 2003.

Hospital Contracts

     The Company’s hospital-based diabetes treatment centers are located in and operated under contracts with general acute-care hospitals. The primary goal of each center is to create a center of excellence for the treatment of diabetes in the community in which it is located and thereby increase the hospital’s market share of diabetes patients and lower the hospital’s cost of providing services while enhancing the quality of care to this population. Fee structures under the hospital contracts consist primarily of fixed management fees, but some contracts may also include variable fees based on the Company’s performance. Fixed management fees are recorded as services are provided. Variable fees based upon performance generally provide for payments to the Company based on changes in the client hospital’s market share of diabetes inpatients, the costs of providing care to these patients, and/or quality of care measurements. The Company has renewed or entered into new contracts in recent years that included primarily fixed management fee arrangements. The terms of hospital contracts generally range from two to five years and are subject to periodic renegotiation and renewal that may include reduction in fee structures that have a negative impact on the Company’s revenues and profitability. The form of these contracts includes various structures ranging from arrangements where all costs of the Company’s program for center professional personnel and community relations are the responsibility of the Company to structures where all Company program costs are the responsibility of the client hospital. The Company is paid directly by the hospital. Patients receiving services from the diabetes treatment centers are charged by the hospital for typical hospital services.

     Under the terms of its contracts with hospitals, the Company provides the resources that enable the hospital to develop and operate an integrated system of care for patients with diabetes that includes: (1) programs to work with physicians to identify objectives for the patient and monitor accomplishment of the objectives during the patient’s stay; (2) clinical interventions for patients with diabetes; (3) an information network service that connects the hospital to the Company’s dedicated nationwide resources;

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(4) programs for specific activities related to quality improvement, cost reduction and market share increases for patients with diabetes; and (5) programs to monitor the hospital’s performance against quality indicators and processes related to diabetes patients. Also available for hospital customers are numerous other services such as (1) outpatient diabetes patient education and follow-up; (2) programs for diabetes during pregnancy and programs for insulin pump therapy; and (3) policies and procedures to help ensure formal recognition of the diabetes program at the hospital by the American Diabetes Association.

     As of November 30, 2002, the Company had 54 hospital contracts to provide services at 72 hospital sites compared with 55 contracts at 78 hospital sites as of November 30, 2001. Components of changes in the total number of hospital contracts and hospital sites under these contracts for the three months ended November 30, 2002 and 2001 are presented below.

	Three Months Ended
	November 30,
	2002			2001
Contracts in effect at beginning of period		55			55
Contracts signed		1			1
Contracts discontinued		(2	)		(1	)
Contracts in effect at end of period		54			55
Hospital sites where services are delivered		72			78

     During the three months ended November 30, 2002, the Company entered into an agreement with VHA, Inc. (“VHA”) to provide care enhancement programs to its member healthcare organizations. VHA is a cooperative representing more than 2,200 leading community-owned health care organizations and their affiliated physicians. The Company was selected from several organizations to be VHA’s supplier of diabetes and senior services to its member hospitals. Member hospitals will contract individually for these services directly with the Company.

     During the three months ended November 30, 2002, three hospital contracts were renewed. Two of these renewals included contract rate reductions, which the Company has undertaken to maintain long-term contractual relationships. Also during the three months ended November 30, 2002, two hospital contracts were discontinued. The Company had no material continuing obligations or costs associated with the termination of any client hospital contracts. The Company anticipates that continued hospital industry pressures to reduce costs because of constrained revenues will result in a continuation of contract rate reductions and the potential for additional contract terminations. During the remainder of fiscal 2003, 14 hospital contracts representing 2% of the Company’s revenues for the three months ended November 30, 2002 are subject to expiration if not renewed and an additional 14 hospital contracts representing 2% of the Company’s revenues for the three months ended November 30, 2002 have early cancellation provisions.

     The hospital industry continues to experience pressures on its profitability as a result of constrained revenues from governmental and private revenue sources as well as from increasing underlying medical care costs. As a result, average revenue per hospital contract for the three months ended November 30, 2002 declined by 13% compared with the same period in the prior year. The Company believes that these pressures will continue. While the Company believes that its products are geared specifically to assist hospitals in controlling the high costs associated with the treatment of diabetes, the pressures to reduce costs immediately may have a negative effect, in certain circumstances, on the ability of or the length of time required by the Company to sign new hospital contracts as well as

18

on the Company’s ability to retain hospital contracts. This focus on cost reduction may also result in a continuation of downward pressure on the fee structures of existing contracts. There can be no assurance that these financial pressures will not continue to have a negative impact on the Company’s hospital contract operations.

Business Strategy

     The Company’s primary strategy is to develop new and expand existing relationships with health plans to provide disease management and care enhancement services. The Company anticipates that it will utilize its state-of-the-art care enhancement centers and medical information technologies to gain a competitive advantage in delivering its health plan disease management services. In addition, the Company has added services to its product mix for health plans that extend the Company’s programs beyond a chronic disease focus and provide care enhancement services to individuals identified with one or more additional conditions or who are at risk for developing these diseases or conditions. The Company believes that significant cost savings and improvements in care can result from addressing care enhancement and treatment requirements for these additional selected diseases and conditions, which will enable the Company to address a much larger percentage of a health plan’s total healthcare costs. The Company anticipates that significant costs will be incurred during the remainder of fiscal 2003 for the enhancement and expansion of clinical programs, the enhancement of information technology support, and the opening of additional care enhancement centers. The Company expects that these costs will be incurred prior to the initiation of revenues from new contracts. It is also anticipated that some of these new capabilities and technologies may be added through strategic alliances with other entities and that the Company may choose to make minority interest investments in or acquire for stock or cash one or more of these entities.

     The Company’s disease management and care enhancement contracts with health plans are expected to be consistent with its current contract strategy and new contracts will likely take one of several forms, including PMPM payments to the Company, some form of shared savings of overall enrollee healthcare costs, or some combination of these arrangements. Under most contracts, some portion of the Company’s fees will be at risk subject to its performance against financial cost savings, clinical, and other performance criteria.

Results of Operations

Three Months Ended November 30, 2002 Compared to Three Months Ended November 30, 2001

     Revenues for the three months ended November 30, 2002 increased $13.0 million or 53.0% over the three months ended November 30, 2001 primarily due to an increase in the average number of equivalent lives enrolled in the Company’s health plan contracts to approximately 638,000 for the three months ended November 30, 2002 from approximately 346,000 lives for the three months ended November 30, 2001 in addition to contract performance incentive bonus revenues of approximately $1.0 million recognized during the three months ended November 30, 2002. The increase in the average number of equivalent lives under management was primarily the result of new health plan contracts signed during fiscal 2002. The average revenue per member per month for equivalent lives enrolled under the Company’s health plan contracts for the three months ended November 30, 2002 decreased 8.0% from the three months ended November 30, 2001. This decrease in average per member per month revenue occurred primarily because the Company had insufficient data from certain early stage health plan contracts needed in order to ascertain current performance under performance-based fee structures. The increase in health plan contract revenues was offset partially by decreased revenues from hospital-based diabetes treatment center contracts. Revenues from the Company’s hospital contract operations for

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the three months ended November 30, 2002 decreased 15.7% from the three months ended November 30, 2001 principally due to rate reductions on contract renewals and a slightly lower average number of contracts in operation. Average revenue per hospital contract for the three months ended November 30, 2002 decreased 13.0% from the three months ended November 30, 2001 principally due to contract fee reductions and lower average fees on new contracts in fiscal 2003. The Company anticipates that total revenues for the remainder of fiscal 2003 will increase over fiscal 2002 revenues primarily as a result of additional lives enrolled under its existing and anticipated new health plan contracts which may be offset somewhat by lower revenues from hospital contract operations resulting from contract fee reductions and contract terminations.

     Cost of services for the three months ended November 30, 2002 increased $6.4 million or 35.4% over the three months ended November 30, 2001 primarily due to higher staffing levels associated with increases in the number of equivalent lives covered in the Company’s health plan contracts and the opening of care enhancement centers in March 2002 and November 2002. Cost of services as a percentage of revenues decreased to 65.6% for the three months ended November 30, 2002, compared to 74.1% for the three months ended November 30, 2001 primarily as a result of increased capacity utilization, economies of scale, and contract performance incentive bonus revenues of approximately $1.0 million. The Company anticipates that cost of services for the remainder of fiscal 2003 will increase over fiscal 2002 cost of services primarily as a result of increased operating staff required for expected increases in the number of equivalent lives enrolled under the Company’s health plan contracts, increased indirect staff costs associated with the development and implementation of its total population care enhancement services and increases in information technology staff.

     Selling, general and administrative expenses for the three months ended November 30, 2002 increased $1.7 million or 72.9% over the three months ended November 30, 2001 primarily due to an increase in expenses associated with the Company’s investment in sales and marketing expertise and strategic relationships, and an increase in general corporate expenses attributable to growth in the Company’s health plan operations. Selling, general and administrative expenses as a percentage of revenues for the three months ended November 30, 2002 increased to 10.4%, compared to 9.2% for the three months ended November 30, 2001 primarily as a result of the increase in expenses associated with the Company’s investment in sales and marketing expertise and strategic relationships. The Company anticipates that selling, general and administrative expenses for the remainder of fiscal 2003 will increase over fiscal 2002 primarily as a result of increased sales and marketing expenses, increased support costs required for the Company’s rapidly growing health plan segment, and increased costs associated with a full year under the Company’s strategic alliance with Johns Hopkins University and Health System.

     Depreciation and amortization expense for the three months ended November 30, 2002 increased $1.0 million or 68.8% over the three months ended November 30, 2001 primarily due to increased depreciation and amortization expense associated with equipment, software development, and computer-related capital expenditures related to enhancements in the Company’s health plan information technology capabilities and the addition of two care enhancement centers and expansion of two existing centers since November 30, 2001. The Company anticipates that depreciation and amortization expense for the remainder of fiscal 2003 will increase over fiscal 2002 primarily as a result of additional capital expenditures associated with expected increases in the number of equivalent lives enrolled under the Company’s health plan contracts, additional care enhancement centers, growth and improvement in the Company’s information technology capabilities and the growth and further adoption of its new total population care enhancement programs.

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     The Company’s interest expense was $185,322 for the three months ended November 30, 2002 compared to $53,351 for the three months ended November 30, 2001. This increase was primarily due to the write off of certain deferred loan costs associated with the Company’s previous credit facility and an increase in fees related to outstanding letters of credit to support the Company’s contractual requirement to repay fees in the event the Company does not perform at established target levels and does not repay the fees due in accordance with the terms of the contracts.

     The Company’s income tax expense for the three months ended November 30, 2002 was $2.6 million compared to $1.0 million for the three months ended November 30, 2001. The increase in the income tax expense between these periods resulted primarily from an increase in profitability. The differences between the statutory federal income tax rate of 34% and the Company’s effective tax rate of 41% for the three months ended November 30, 2002 are due primarily to the impact of state income taxes and certain non-deductible expenses for income tax purposes.

Liquidity and Capital Resources

     Operating activities for the three months ended November 30, 2002 generated $0.1 million in cash flow from operations compared to $3.4 million for the three months ended November 30, 2001. The decrease in operating cash flow resulted primarily from a $9.3 million increase in working capital items, primarily due to the payment of accrued salaries and benefits for performance bonuses paid annually in the first quarter of each fiscal year to substantially all Company employees. The increase in working capital items was partially offset by additional income before income taxes, depreciation and amortization of $4.8 million. Investing activities during the three months ended November 30, 2002 used $4.9 million in cash which consisted of the acquisition of property and equipment primarily associated with the new St. Louis care enhancement center and enhancements in the Company’s health plan information technology capabilities. Financing activities for the three months ended November 30, 2002 used $2.9 million in cash primarily to establish an escrow account as required by a health plan contract.

     On November 22, 2002, the Company entered into a new credit agreement with three financial institutions. The new agreement provides the Company with up to $35.0 million in borrowing capacity, including the ability to issue up to $35.0 million of letters of credit, under a credit facility that expires in May 2005. Borrowings under the agreement bear interest, at the Company’s option, at a fluctuating LIBOR-based rate or at the higher of the federal funds rate plus 0.5% or the banks’ prime lending rate. Substantially all of the Company’s and its subsidiaries’ assets are pledged as collateral for any borrowings under the credit facility. The agreement also contains various financial covenants, limits the amount of repurchases of the Company’s common stock, and requires the Company to maintain minimum liquidity (cash, marketable securities, and unused availability under the credit agreement) of $8.0 million. As of November 30, 2002, there were no borrowings outstanding under the credit agreement; however, there were letters of credit outstanding under the agreement totaling approximately $18.9 million to support the Company’s requirement to repay fees under three health plan contracts in the event the Company does not perform at established target levels and does not repay the fees due in accordance with the terms of the contracts. The Company has never had a draw under an outstanding letter of credit.

     The Company believes that cash flow from operating activities, its available cash and available credit under its credit agreement will continue to enable the Company to meet its contractual obligations and to fund the current level of growth in its health plan operations. However, to the extent that the expansion of the Company’s health plan operations requires significant additional financing resources, such as capital expenditures for technology improvements, additional care enhancement centers and/or the issuance of letters of credit or other forms of financial assurance to guarantee the Company’s performance under the terms of new health plan contracts, the Company may need to raise additional

21

capital through the expansion of the Company’s existing credit facility and/or issuance of debt or equity. The Company’s ability to arrange such financing may be limited and, accordingly, the Company’s ability to expand its health plan operations could be restricted. In addition, should health plan contract development accelerate or should acquisition opportunities arise that would enhance the Company’s planned expansion of its health plan operations, the Company may need to issue additional debt or equity to provide the funding for these increased growth opportunities or may issue equity in connection with future acquisitions or strategic alliances. No assurance can be given that the Company would be able to issue additional debt or equity on terms that would be acceptable to the Company.

     At a Special Meeting of Stockholders on October 25, 2001, the stockholders approved an amendment to the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of the Company’s common stock from 15,000,000 to 40,000,000. On October 29, 2001, the Company’s Board of Directors approved a three-for-two stock split effected in the form of a 50% stock dividend to be distributed on November 23, 2001 to stockholders of record at the close of business on November 9, 2001. The accompanying balance sheets and statements of stockholders’ equity have been restated as if the split and the increase in authorized shares had occurred on August 31, 2001. Earnings per share, weighted average common shares and equivalents and stock option information have been retroactively restated as if the split had occurred at the beginning of the periods presented.

Contractual Cash Obligations

     The following schedule summarizes the Company’s contractual cash obligations at November 30, 2002:

		Twelve Months Ended November 30,
								2008 and
		2003		2004 - 2005		2006 - 2007		After		Total
Long-term debt (1)		$	388,590	$	415,031	$	—	$	—	$	803,621
Deferred compensation plan payments			384,172		805,256		681,292		1,790,560		3,661,280
Operating leases			3,005,756		6,212,913		5,209,782		1,801,126		16,229,577
Other contractual cash obligations (2)			4,000,000		2,000,000		1,000,000		—		7,000,000
	Total cyntractual cash obligations	$	7,778,518	$	9,433,200	$	6,891,074	$	3,591,686	$	27,694,478

(1)

Long-term debt consists of capital lease obligations.

(2)

During the three months ended November 30, 2002, the Company established an escrow account in the amount of $3 million in connection with a health plan contract requirement. Other commitments represent the health plan contract requirement to fund an additional $3 million in this escrow account by April 30, 2003 and cash payments in connection with the Company’s strategic alliance agreement with Johns Hopkins University and Health System.

Item 3.      Quantitative and Qualitative Disclosures About Market Risk

     Not Applicable

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Item 4.      Controls and Procedures

Evaluation of Disclosure Controls and Procedures

     The Company’s chief executive officer and chief financial officer have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of a date within 90 days before the filing date of this quarterly report. Based on that evaluation, the chief executive officer and chief financial officer have concluded that the Company’s disclosure controls and procedures effectively and timely provide them with material information relating to the Company and its consolidated subsidiaries required to be disclosed in the reports the Company files or submits under the Exchange Act.

Changes in Internal Controls

     There have not been any significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. There were no significant deficiencies or material weaknesses, and therefore no corrective actions were taken.

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Part II

Item 1.      Legal Proceedings.

     In June 1994, a “whistle blower” action was filed on behalf of the United States government by a former employee dismissed by the Company in February 1994. The employee sued the Company and a wholly-owned subsidiary of the Company, American Healthways Services, Inc. (“AHSI”), as well as certain named and unnamed medical directors and client hospitals. The Company has since been dismissed as a defendant. The complaint alleges that AHSI, the client hospitals and the medical directors violated the federal False Claims Act by entering into certain arrangements that allegedly violated the federal anti-kickback statute and provisions of the Social Security Act prohibiting physician self-referrals. Although no specific monetary damage has been claimed, the plaintiff, on behalf of the federal government, seeks treble damages plus civil penalties and attorneys’ fees. The plaintiff also has requested an award of 30% of any judgment plus expenses. The Office of the Inspector General of the Department of Health and Human Services determined not to intervene in the litigation, and the complaint was unsealed in February 1995. The case is still in the discovery stage and has not yet been set for trial.

     The Company believes that its operations have been conducted in full compliance with applicable statutory requirements. Although there can be no assurance that the existence of, or the results of, the matter would not have a material adverse impact on the Company, the Company believes that the resolution of issues, if any, which may be raised by the government and the resolution of the civil litigation would not have a material adverse effect on the Company’s financial position or results of operations except to the extent that the Company incurs material legal expenses associated with its defense of this matter and the civil suit.

Item 2.	Changes in Securities and Use of Proceeds
	Not Applicable.
Item 3.	Defaults Upon Senior Securities
	Not Applicable.
Item 4.	Submission of Matters to a Vote of Security Holders
	Not Applicable
Item 5.	Other Information
	Not Applicable.
Item 6.	Exhibits and Reports on Form 8-K
	(a)      Exhibits

10.1 Amended and Restated Revolving Credit Agreement between the Company and SunTrust Bank as Administrative Agent dated November 22, 2002 (the schedules and exhibits to this agreement are omitted pursuant to SEC regulations but will be provided supplementally to the Commission upon request)

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10.2	Form of Revolving Credit Note
10.3	Form of Subsidiary Guaranty Agreement between the Company and SunTrust Bank as Administrative Agent
11.	Earnings Per Share Reconciliation
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

(b)	Reports on Form 8-K
	A Current Report on Form 8-K dated September 25, 2002 was filed during the quarter ended November 30, 2002 reporting a live broadcast of the fourth quarter conference call to analysts on the Internet.

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SIGNATURES

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

			American Healthways, Inc.
			(Registrant)
Date	January 13, 2003	By	/s/ Mary A. Chaput
			Mary A. Chaput Executive Vice President Chief Financial Officer (Principal Financial Officer)
Date	January 13, 2003	By	/s/ Alfred Lumsdaine
			Alfred Lumsdaine Vice President and Controller (Principal Accounting Officer)

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CERTIFICATIONS

I, Thomas G. Cigarran certify that:

1.     I have reviewed this quarterly report on Form 10-Q of American Healthways, Inc.;

2.     Based on my knowledge, this quarterly 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 quarterly report;

3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

     b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

     c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

     a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.     The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: January 13, 2003
	/s/ Thomas G. Cigarran
	Thomas G. Cigarran Chairman of the Board and Chief Executive Officer

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I, Mary A. Chaput, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of American Healthways, Inc.;

2.     Based on my knowledge, this quarterly 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 quarterly report;

3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

     b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

     c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

     a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.     The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: January 13, 2003
	/s/ Mary A. Chaput
	Mary A. Chaput
	Executive Vice President and Chief Financial Officer

28

Exhibit Index

10.1	Amended and Restated Revolving Credit Agreement between the Company and SunTrust Bank as Administrative Agent dated November 22, 2002 (the schedules and exhibits to this agreement are omitted pursuant to SEC regulations but will be provided supplementally to the Commission upon request)
10.2	Form of Revolving Credit Note
10.3	Form of Subsidiary Guaranty Agreement between the Company and SunTrust Bank as Administrative Agent
11.	Earnings Per Share Reconciliation
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

29 EX-10.1 3 g80160exv10w1.txt AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT EXHIBIT 10.1 AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT DATED AS OF NOVEMBER 22, 2002 AMONG AMERICAN HEALTHWAYS, INC. AS BORROWER THE LENDERS FROM TIME TO TIME PARTY HERETO AND SUNTRUST BANK AS ADMINISTRATIVE AGENT ================================================================================ ARTICLE I DEFINITIONS; CONSTRUCTION.............................................................1 Section 1.1 Definitions..................................................................1 Section 1.2 Classifications of Loans and Borrowings.....................................16 Section 1.3 Accounting Terms and Determination..........................................16 Section 1.4 Terms Generally.............................................................16 ARTICLE II AMOUNT AND TERMS OF THE COMMITMENTS..................................................17 Section 2.1 General Description of Facilities...........................................17 Section 2.2 Revolving Loans.............................................................17 Section 2.3 Procedure for Borrowings....................................................17 Section 2.4 Funding of Borrowings.......................................................18 Section 2.5 Interest Elections..........................................................18 Section 2.6 Optional Reduction and Termination of Commitments...........................19 Section 2.7 Repayment of Loans..........................................................20 Section 2.8 Evidence of Indebtedness....................................................20 Section 2.9 Optional Prepayments........................................................20 Section 2.10 Interest on Loans...........................................................21 Section 2.11 Fees........................................................................21 Section 2.12 Computation of Interest and Fees............................................22 Section 2.13 Inability to Determine Interest Rates.......................................22 Section 2.14 Illegality..................................................................23 Section 2.15 Increased Costs.............................................................23 Section 2.16 Funding Indemnity...........................................................24 Section 2.17 Taxes.......................................................................25 Section 2.18 Payments Generally; Pro Rata Treatment; Sharing of Set-Offs.................26 Section 2.19 Mitigation of Obligations...................................................28 Section 2.20 Letters of Credit...........................................................28 ARTICLE III CONDITIONS PRECEDENT TO LOANS AND LETTERS OF CREDIT..................................32 Section 3.1 Conditions To Effectiveness.................................................32 Section 3.2 Each Credit Event...........................................................33 Section 3.3 Delivery of Documents.......................................................34 i ARTICLE IV REPRESENTATIONS AND WARRANTIES.......................................................34 Section 4.1 Existence; Power............................................................34 Section 4.2 Organizational Power; Authorization.........................................34 Section 4.3 Governmental Approvals; No Conflicts........................................34 Section 4.4 Financial Statements........................................................35 Section 4.5 Litigation and Environmental Matters........................................35 Section 4.6 Compliance with Laws and Agreements.........................................35 Section 4.7 Investment Company Act, Etc.................................................36 Section 4.8 Taxes.......................................................................36 Section 4.9 Margin Regulations..........................................................36 Section 4.10 ERISA.......................................................................36 Section 4.11 Ownership of Property.......................................................36 Section 4.12 Disclosure..................................................................37 Section 4.13 Labor Relations.............................................................37 Section 4.14 Subsidiaries................................................................37 ARTICLE V AFFIRMATIVE COVENANTS................................................................37 Section 5.1 Financial Statements and Other Information..................................37 Section 5.2 Notices of Material Events..................................................39 Section 5.3 Existence; Conduct of Business..............................................40 Section 5.4 Compliance with Laws, Etc...................................................40 Section 5.5 Payment of Obligations......................................................40 Section 5.6 Books and Records...........................................................40 Section 5.7 Visitation, Inspection, Etc.................................................40 Section 5.8 Maintenance of Properties; Insurance........................................40 Section 5.9 Use of Proceeds and Letters of Credit.......................................41 Section 5.10 Bank Accounts...............................................................41 Section 5.11 Additional Subsidiaries.....................................................41 Section 5.12 Additional Assets...........................................................41 ARTICLE VI FINANCIAL COVENANTS..................................................................41 Section 6.1 Leverage Ratio..............................................................42 Section 6.2 Consolidated Fixed Charge Coverage Ratio....................................42 Section 6.3 Consolidated Net Worth......................................................42 ii ARTICLE VII NEGATIVE COVENANTS...................................................................42 Section 7.1 Indebtedness................................................................42 Section 7.2 Negative Pledge.............................................................43 Section 7.3 Fundamental Changes.........................................................43 Section 7.4 Investments, Loans, Etc.....................................................44 Section 7.5 Restricted Payments.........................................................45 Section 7.6 Sale of Assets..............................................................45 Section 7.7 Transactions with Affiliates................................................45 Section 7.8 Restrictive Agreements......................................................46 Section 7.9 Sale and Leaseback Transactions.............................................46 Section 7.10 Hedging Agreements..........................................................46 Section 7.11 Status of Incorporation.....................................................46 Section 7.12 Accounting Changes..........................................................46 ARTICLE VIII EVENTS OF DEFAULT....................................................................46 Section 8.1 Events of Default...........................................................46 ARTICLE IX THE ADMINISTRATIVE AGENT.............................................................49 Section 9.1 Appointment of Administrative Agent.........................................49 Section 9.2 Nature of Duties of Administrative Agent....................................50 Section 9.3 Lack of Reliance on the Administrative Agent................................50 Section 9.4 Certain Rights of the Administrative Agent..................................50 Section 9.5 Reliance by Administrative Agent............................................51 Section 9.6 The Administrative Agent in its Individual Capacity.........................51 Section 9.7 Successor Administrative Agent..............................................51 ARTICLE X MISCELLANEOUS........................................................................52 Section 10.1 Notices.....................................................................52 Section 10.2 Waiver; Amendments..........................................................53 Section 10.3 Expenses; Indemnification...................................................54 Section 10.4 Successors and Assigns......................................................55 Section 10.5 Governing Law; Jurisdiction; Consent to Service of Process..................58 Section 10.6 WAIVER OF JURY TRIAL........................................................58 Section 10.7 Right of Setoff.............................................................59 Section 10.8 Counterparts; Integration...................................................59 Section 10.9 Survival....................................................................59 iii Section 10.10 Severability................................................................60 Section 10.11 Confidentiality.............................................................60 Section 10.12 Interest and Loan Charges Not to Exceed Maximum Amounts Allowed by Law......60 Schedules Schedule 4.5(a) - Litigation Schedule 4.14 - Subsidiaries Schedule 7.1 - Outstanding Indebtedness Schedule 7.2 - Existing Liens Schedule 7.4 - Existing Investments Exhibits Exhibit A - Revolving Credit Note Exhibit B - Form of Assignment and Acceptance Exhibit C - Form of Subsidiary Guarantee Agreement Exhibit D - Form of Indemnity, Subrogation and Contribution Agreement Exhibit E - Borrowing Base Certificate Exhibit 2.3 - Notice of Borrowing Exhibit 2.5 - Form of Notice of Continuation/Conversion Exhibit 3.1(b)(iv) - Form of Secretary's Certificate Exhibit 3.1(b)(vii) - Form of Officer's Certificate iv REVOLVING CREDIT AGREEMENT THIS REVOLVING CREDIT AGREEMENT (this "Agreement") is made and entered into as of November 22, 2002, by and among AMERICAN HEALTHWAYS, INC., a Delaware corporation (the "Borrower"), SUNTRUST BANK, and the several banks and other financial institutions from time to time party hereto (the "Lenders"), and SUNTRUST BANK, in its capacity as Administrative Agent for the Lenders (the "Administrative Agent"). W I T N E S S E T H: WHEREAS, the Borrower has requested that the Lenders establish a $35,000,000 revolving credit facility, with a Letter of Credit sublimit for stand-by Letters of Credit. WHEREAS, subject to the terms and conditions of this Agreement, the Lenders severally, to the extent of their respective Commitments, are willing to establish the requested revolving credit facility with a Letter of Credit sublimit for stand-by letters of credit. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Borrower, the Lenders and the Administrative Agent agree as follows: ARTICLE I DEFINITIONS; CONSTRUCTION SECTION 1.1 Definitions. In addition to the other terms defined herein, the following terms used herein shall have the meanings herein specified (to be equally applicable to both the singular and plural forms of the terms defined): "ADJUSTED LIBO RATE" shall mean, with respect to each Interest Period for a Eurodollar Borrowing, the rate per annum obtained by dividing (i) LIBOR for such Interest Period by (ii) a percentage equal to 1.00 minus the Eurodollar Reserve Percentage, to the extent Eurodollar reserves are actually maintained. "ADMINISTRATIVE AGENT" shall have the meaning assigned to such term in the opening paragraph hereof. "ADMINISTRATIVE QUESTIONNAIRE" shall mean, with respect to each Lender, an administrative questionnaire in the form prepared by the Administrative Agent and submitted to the Administrative Agent duly completed by such Lender. "AFFILIATE" shall mean, as to any Person, any other Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person. "AGGREGATE REVOLVING COMMITMENTS" shall mean the sum of the Revolving Commitments of all Lenders at any time outstanding. On the Closing Date, the Aggregate Revolving Commitments equal $35,000,000.00. "APPLICABLE LENDING OFFICE" shall mean, for each Lender and for each Type of Loan, the "Lending Office" of such Lender (or an Affiliate of such Lender) designated for such Type of Loan in the Administrative Questionnaire submitted by such Lender or such other office of such Lender (or an Affiliate of such Lender) as such Lender may from time to time specify to the Administrative Agent and the Borrower as the office by which its Loans of such Type are to be made and maintained. "APPLICABLE MARGIN" shall mean with respect to Eurodollar Loans and Letters of Credit an amount equal to two hundred (200) basis points per annum. "APPLICABLE PERCENTAGE" shall mean, with respect to the Facility Fee an amount equal to one quarter of one percent (.25%) per annum. "ASSIGNMENT AND ACCEPTANCE" shall mean an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.4(b)) and accepted by the Administrative Agent, in the form of Exhibit B attached hereto or any other form approved by the Administrative Agent. "AVAILABILITY PERIOD" shall mean the period from the Closing Date to the Commitment Termination Date. "BASE RATE" shall mean the higher of (i) the per annum rate which the Administrative Agent publicly announces from time to time to be its prime lending rate, as in effect from time to time, and (ii) the Federal Funds Rate, as in effect from time to time, plus one-half of one percent (0.50%). The Administrative Agent's prime lending rate is a reference rate and does not necessarily represent the lowest or best rate charged to customers. The Administrative Agent may make commercial loans or other loans at rates of interest at, above or below the Administrative Agent's prime lending rate. Each change in the Administrative Agent's prime lending rate shall be effective from and including the date such change is publicly announced as being effective. "BORROWER" shall have the meaning in the introductory paragraph hereof. "BORROWING" shall mean a borrowing consisting of Loans of the same Type, made, converted or continued on the same date and in case of Eurodollar Loans, as to which a single Interest Period is in effect. "BORROWING BASE" means the sum of: (i) Borrower's Unrestricted Cash and Cash Equivalents, plus (ii) an amount equal to eighty percent (80%) of Eligible Accounts Receivable, plus (iii) an amount equal to twenty-five percent (25%) of Borrower's net property and equipment values, all as set forth on Borrower's consolidated financial statements. "BORROWING BASE CERTIFICATE" means the Certificate in the form of Exhibit E provided by Borrower to Lender pursuant to Section 5.1(g). "BUSINESS DAY" shall mean (i) any day other than a Saturday, Sunday or other day on which commercial banks in Nashville, Tennessee are authorized or required by law to close and (ii) if such day relates to a Borrowing of, a payment or prepayment of principal or interest on, a conversion of or into, or an Interest Period for, a Eurodollar Loan or a notice with respect to any of the foregoing, any day on which dealings in Dollars are carried on in the London interbank market. "CAPITAL EXPENDITURES" shall mean for any period, without duplication, (a) the additions to property, plant and equipment and other capital expenditures of the Borrower and its Subsidiaries that are (or would be) set forth on a consolidated statement of cash flows of the Borrower for such period prepared in accordance with GAAP, and (b) Capital Lease Obligations incurred by the Borrower and its Subsidiaries during such period. "CAPITAL LEASE OBLIGATIONS" of any Person shall mean all obligations of such Person to pay rent or other amounts under any lease (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "CHANGE IN CONTROL" shall mean the occurrence of one or more of the following events: (a) any sale, lease, exchange or other transfer (in a single transaction or a series of related transactions) of all or substantially all of the assets of the Borrower to any Person or "group" (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder in effect on the date hereof), (b) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or "group" (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) of 50% or more of the outstanding shares of the voting stock of the Borrower; or (c) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (i) nominated by the current board of directors, or (ii) appointed by directors so nominated. "CHANGE IN LAW" shall mean (i) the adoption of any applicable law, rule or regulation after the date of this Agreement, (ii) any change in any applicable law, rule or regulation, or any change in the interpretation or application thereof, by any Governmental Authority after the date of this Agreement, or (iii) compliance by any Lender (or its Applicable Lending Office) or the Issuing Bank (or for purposes of Section 2.15(b), by such Lender's or the Issuing Bank's holding company, if applicable) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. "CLOSING DATE" shall mean the date on which the conditions precedent set forth in Section 3.1 and Section 3.2 have been satisfied or waived in accordance with Section 10.2. "CODE" shall mean the Internal Revenue Code of 1986, as amended and in effect from time to time. "COMMITMENT" shall mean the Revolving Commitment. "COMMITMENT TERMINATION DATE" shall mean the earliest of (i) May 31, 2005, (ii) the date on which the Revolving Commitments are terminated pursuant to Section 2.6, and (iii) the date on which all amounts outstanding under this Agreement have been declared or have automatically become due and payable (whether by acceleration or otherwise). "CONSOLIDATED CASH FLOW" shall mean the sum of Consolidated EBITDAR, less Maintenance Capital Expenditures. "CONSOLIDATED EBITDA" shall mean, for the Borrower and its Subsidiaries for any period, an amount equal to the sum of (a) Consolidated Net Income for such period plus (b) to the extent deducted in determining Consolidated Net Income for such period, (i) Consolidated Interest Expense, (ii) provisions for taxes based on income, (iii) depreciation expense, and (iv) amortization expense, all determined on a consolidated basis in accordance with GAAP in each case for such period. "CONSOLIDATED EBITDAR" shall mean, for the Borrower and its Subsidiaries for any period, an amount equal to the sum of (a) Consolidated EBITDA, and (b) Consolidated Lease Expense. "CONSOLIDATED FIXED CHARGE COVERAGE RATIO" shall mean the ratio of: (a) Consolidated Cash Flow to (b) Consolidated Fixed Charges. "CONSOLIDATED FIXED CHARGES" shall mean, for the Borrower and its Subsidiaries for any period, the sum (without duplication) of: (a) Consolidated Interest Expense for such period, (b) scheduled principal payments made in respect of Consolidated Total Debt and Capital Lease Obligations during such period, (c) Restricted Payments paid during such period, and (d) Consolidated Lease Expense for such period. "CONSOLIDATED INTEREST EXPENSE" shall mean, for the Borrower and its Subsidiaries for any period determined on a consolidated basis in accordance with GAAP, the sum of: (i) total interest expense and Letter of Credit fees and expenses as set forth in Section 2.11(d) herein, including without limitation the interest component of any payments in respect of Capital Lease Obligations capitalized or expensed during such period (whether or not actually paid during such period) plus (ii) the net amount payable (or minus the net amount receivable) under Hedging Agreements during such period (whether or not actually paid or received during such period). "CONSOLIDATED LEASE EXPENSE" shall mean, for any period, the aggregate amount of fixed and contingent rentals payable by the Borrower and its Subsidiaries with respect to leases of real and personal property (excluding Capital Lease Obligations) determined on a consolidated basis in accordance with GAAP for such period. "CONSOLIDATED NET INCOME" shall mean, for any period, the net income (or loss) of the Borrower and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, but excluding therefrom (to the extent otherwise included therein) (i) any extraordinary gains or losses, (ii) any gains attributable to write-ups of assets, and (iii) any equity interest of the Borrower or any Subsidiary of the Borrower in the unremitted earnings of any Person that is not a Subsidiary, and (iv) any income (or loss) of any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Borrower or any Subsidiary or the date that such Person's assets are acquired by the Borrower or any Subsidiary. "CONSOLIDATED NET WORTH" shall mean, as of any date, (i) the total assets of the Borrower and its Subsidiaries that would be reflected on the Borrower's consolidated balance sheet as of such date prepared in accordance with GAAP, after eliminating all amounts properly attributable to minority interests, if any, in the stock and surplus of Subsidiaries, minus the sum of (i) the total liabilities of the Borrower and its Subsidiaries that would be reflected on the Borrower's consolidated balance sheet as of such date prepared in accordance with GAAP and (ii) the amount of any write-up in the book value of any assets resulting from a revaluation thereof or any write-up in excess of the cost of such assets acquired reflected on the consolidated balance sheet of the Borrower as of such date prepared in accordance with GAAP. "CONSOLIDATED TOTAL DEBT" shall mean, as of any date of determination, all Indebtedness of the Borrower and its Subsidiaries that would be reflected on a consolidated balance sheet of the Borrower prepared in accordance with GAAP as of such date. "CONTROL" shall mean the power, directly or indirectly, either to (i) vote 50% or more of securities having ordinary voting power for the election of directors (or persons performing similar functions) of a Person, or (ii) direct or cause the direction of the management and policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. The terms "CONTROLLING", "CONTROLLED BY", and "UNDER COMMON CONTROL WITH" have meanings correlative thereto. "DEFAULT" shall mean any condition or event that, with the giving of notice or the lapse of time or both, would constitute an Event of Default. "DEFAULT INTEREST" shall have the meaning set forth in Section 2.10(a). "DOLLAR(S)" and the sign "$" shall mean lawful money of the United States of America. "ELIGIBLE ACCOUNTS RECEIVABLE" shall mean accounts receivable owed to Borrower by non-Affiliated Persons for services rendered by Borrower and which shall exclude: (a) accounts receivable which are due and owing for more than 90 days from the date of invoice; (b) accounts receivable owed by any federal, state, or local governmental agency or authority; (c) accounts receivable owed by a Person who is insolvent or the subject of a bankruptcy or insolvency proceeding in state or federal court; (d) accounts receivable owed by any Person who has other accounts receivable owing to Borrower if: (i) those other accounts receivable are more than 90 days past due, (ii) such past due accounts receivable constitute more than 20% of the aggregate accounts receivable owed by such Person, and (iii) such past due accounts are not being disputed reasonably and in good faith; or (e) accounts receivable subject to any dispute, counterclaim, or objection. "ENVIRONMENTAL LAWS" shall mean all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by or with any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, Release or threatened Release of any Hazardous Material or to health and safety matters. "ENVIRONMENTAL LIABILITY" shall mean any liability, contingent or otherwise (including any liability for damages, costs of environmental investigation and remediation, costs of administrative oversight, fines, natural resource damages, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) any actual or alleged violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) any actual or alleged exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials, or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute. "ERISA AFFILIATE" shall mean any trade or business (whether or not incorporated), which, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for the purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA EVENT" shall mean (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator appointed by the PBGC of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. "EURODOLLAR" when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, bears interest at a rate determined by reference to the Adjusted LIBO Rate. "EURODOLLAR RESERVE PERCENTAGE" shall mean the aggregate of the maximum reserve percentages (including, without limitation, any emergency, supplemental, special or other marginal reserves) expressed as a decimal (rounded upwards to the next 1/100th of 1%) in effect on any day to which the Administrative Agent is subject with respect to the Adjusted LIBO Rate pursuant to regulations issued by the Board of Governors of the Federal Reserve System (or any Governmental Authority succeeding to any of its principal functions) with respect to eurocurrency funding (currently referred to as "eurocurrency liabilities" under Regulation D). Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under Regulation D. The Eurodollar Reserve Percentage shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "EVENT OF DEFAULT" shall have the meaning provided in Article VIII. "EXCLUDED TAXES" shall mean with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income, excise or franchise taxes imposed on (or measured by) its net income or assets, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a Foreign Lender, any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender's failure to comply with Section 2.17(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 2.17(a). "FACILITY FEE" shall mean a fee payable quarterly in arrears and determined by calculating the Applicable Percentage on the total Revolving Commitments. "FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum (rounded upwards, if necessary, to the next 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with member banks of the Federal Reserve System arranged by Federal funds brokers, as published by the Federal Reserve Bank of New York on the next succeeding Business Day or if such rate is not so published for any Business Day, the Federal Funds Rate for such day shall be the average rounded upwards, if necessary, to the next 1/100th of 1% of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by the Administrative Agent. "FOREIGN LENDER" shall mean any Lender that is organized under the laws of a jurisdiction other than that of the Borrower. For purposes of this definition, the United States of America or any State thereof or the District of Columbia shall constitute one jurisdiction. "GAAP" shall mean generally accepted accounting principles in the United States applied on a consistent basis and subject to the terms of Section 1.3. "GOVERNMENTAL AUTHORITY" shall mean the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "GUARANTEE" of or by any Person (the "GUARANTOR") shall mean any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly and including any obligation, direct or indirect, of the guarantor (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (d) as an account party in respect of any letter of credit or letter of guaranty issued in support of such Indebtedness or obligation; provided that the term "Guarantee" shall not include endorsements for collection or deposits in the ordinary course of business. The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which Guarantee is made or, if not so stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. The term "Guarantee" used as a verb has a corresponding meaning. "HAZARDOUS MATERIALS" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "HEDGING AGREEMENTS" shall mean interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts, commodity agreements and other similar agreements or arrangements designed to protect against fluctuations in interest rates, currency values or commodity values. "INDEBTEDNESS" of any Person shall mean, without duplication (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person in respect of the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of business; provided that for purposes of Section 8.1(f), trade payables overdue by more than one hundred twenty (120) days shall be included in this definition except to the extent that any of such trade payables are being disputed in good faith and by appropriate measures), (iv) all obligations of such Person under any conditional sale or other title retention agreement(s) relating to property acquired by such Person, (v) all Capital Lease Obligations of such Person, (vi) all obligations, contingent or otherwise, of such Person in respect of letters of credit, acceptances or similar extensions of credit, (vii) all Guarantees of such Person of the type of Indebtedness described in clauses (i) through (vi) above, (viii) all Indebtedness of a third party secured by any Lien on property owned by such Person, whether or not such Indebtedness has been assumed by such Person, (ix) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any common stock of such Person, and (x) Off-Balance Sheet Liabilities. The Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer, except to the extent that applicable law or the terms of such Indebtedness provide that such Person is not liable therefor. "INDEMNIFIED TAXES" shall mean Taxes other than Excluded Taxes. "INDEMNITY AND CONTRIBUTION AGREEMENT" shall mean the Indemnity, Subrogation and Contribution Agreement, substantially in the form of Exhibit G, among the Borrower, the Subsidiary Loan Parties and the Administrative Agent. "INTEREST PERIOD" shall mean with respect to any Eurodollar Borrowing, a period of one, two, three, or six months, provided that: (i) the initial Interest Period for such Borrowing shall commence on the date of such Borrowing (including the date of any conversion from a Borrowing of another Type) and each Interest Period occurring thereafter in respect of such Borrowing shall commence on the day on which the next preceding Interest Period expires; (ii) if any Interest Period would otherwise end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day, unless, in the case of a Eurodollar Borrowing, such Business Day falls in another calendar month, in which case such Interest Period would end on the next preceding Business Day; (iii) any Interest Period in respect of a Eurodollar Borrowing which begins on the last Business Day of a calendar month or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period shall end on the last Business Day of such calendar month; (iv) no Interest Period may extend beyond the Commitment Termination Date. "ISSUING BANK" shall mean SunTrust Bank in its capacity as an issuer of Letters of Credit pursuant to Section 2.20. "LC COMMITMENT" shall mean that portion of the Aggregate Revolving Commitments that may be used by the Borrower for the issuance of Letters of Credit in an aggregate face amount not to exceed $35,000,000.00. "LC COMMITMENT DATE" shall mean May 31, 2004. "LC DISBURSEMENT" shall mean a payment made by the Issuing Bank pursuant to and in compliance with a Letter of Credit. "LC DOCUMENTS" shall mean the Letters of Credit and all applications, agreements and instruments relating to the Letters of Credit. "LC EXPOSURE" shall mean, at any time, the sum of (i) the aggregate undrawn amount of all outstanding Letters of Credit at such time, plus (ii) the aggregate amount of all LC Disbursements that have not been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Lender shall be its Pro Rata Share of the total LC Exposure at such time. "LENDERS" shall have the meaning assigned to such term in the opening paragraph of this Agreement. "LETTER OF CREDIT" shall mean any letter of credit issued pursuant to Section 2.20 by the Issuing Bank for the account of the Borrower pursuant to the LC Commitment. "LEVERAGE RATIO" shall mean, as of any date of determination with respect to the Borrower, the ratio of (i) Consolidated Total Debt as of such date to (ii) Consolidated EBITDA as of such date. "LIBOR" shall mean, for any applicable Interest Period with respect to any Eurodollar Loan, the rate per annum for deposits in Dollars for a period equal to such Interest Period appearing on the display designated as Page 3750 on the Dow Jones Markets Service (or such other page on that service or such other service designated by the British Banker's Association for the display of such Association's Interest Settlement Rates for Dollar deposits) as of 11:00 a.m. (London, England time) on the day that is two Business Days prior to the first day of the Interest Period or if such Page 3750 is unavailable for any reason at such time, the rate which appears on the Reuters Screen ISDA Page as of such date and such time; provided that if the Administrative Agent determines that the relevant foregoing sources are unavailable for the relevant Interest Period, LIBOR shall mean the rate of interest determined by the Administrative Agent to be the average (rounded upward, if necessary, to the nearest 1/100th of 1%) of the rates per annum at which deposits in Dollars are offered to the Administrative Agent two (2) Business Days preceding the first day of such Interest Period by leading banks in the London interbank market as of 10:00 a. m. for delivery on the first day of such Interest Period, for the number of days comprised therein and in an amount comparable to the amount of the Eurodollar Loan of the Administrative Agent. "LIEN" shall mean any mortgage, pledge, security interest, lien (statutory or otherwise), charge, encumbrance, hypothecation, assignment, deposit arrangement, or other arrangement having the practical effect of the foregoing or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any capital lease having the same economic effect as any of the foregoing). "LOAN DOCUMENTS" shall mean, collectively, this Agreement, the Notes, the LC Documents, all Notices of Borrowing, the Subsidiary Guarantee Agreements, the Indemnity and Contribution Agreement, the Security Documents, and any and all other instruments, agreements, documents and writings executed in connection with any of the foregoing. "LOAN PARTIES" shall mean the Borrower and the Subsidiary Loan Parties. "LOANS" shall mean all Revolving Loans in the aggregate or any of them, as the context shall require. "MAINTENANCE CAPITAL EXPENDITURES" shall mean Capital Expenditures incurred by the Borrower or its Subsidiaries for ordinary and necessary maintenance of its property, computers, telecommunications equipment, intellectual property, plant and equipment. "MATERIAL ADVERSE EFFECT" shall mean, with respect to any event, act, condition or occurrence of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences whether or not related, a material adverse change in, or a material adverse effect on, (i) the business, results of operations, financial condition, assets, liabilities or prospects of the Borrower and of the Borrower and its Subsidiaries taken as a whole, (ii) the ability of the Loan Parties to perform any of their respective obligations under the Loan Documents, (iii) the rights and remedies of the Administrative Agent, the Issuing Bank and the Lenders under any of the Loan Documents or (iv) the legality, validity or enforceability of any of the Loan Documents. "MATERIAL INDEBTEDNESS" shall mean Indebtedness (other than the Loans and Letters of Credit) or obligations in respect of one or more Hedging Agreements, of any one or more of the Borrower and the Subsidiaries in an aggregate principal amount exceeding $500,000.00. For purposes of determining Material Indebtedness, the "principal amount" of the obligations of the Borrower or any Subsidiary in respect to any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or such Subsidiary would be required to pay if such Hedging Agreement were terminated at such time. "MOODY'S" shall mean Moody's Investors Service, Inc. "MULTIEMPLOYER PLAN" shall have the meaning set forth in Section 4001(a)(3) of ERISA. "NOTES" shall mean, collectively, the Revolving Credit Notes. "NOTICE OF BORROWING" shall have the meaning as set forth in Section 2.3. "NOTICE OF CONVERSION/CONTINUATION" shall mean the notice given by the Borrower to the Administrative Agent in respect of the conversion or continuation of an outstanding Borrowing as provided in Section 2.5(b) hereof. "OBLIGATIONS" shall mean all amounts owing by the Borrower to the Administrative Agent, the Issuing Bank or any Lender pursuant to or in connection with this Agreement or any other Loan Document, including without limitation, principal, interest (including any interest accruing after the filing of any petition in bankruptcy or the commencement of any insolvency, reorganization or like proceeding relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), reimbursement obligations, fees, expenses, indemnification and reimbursement payments, costs and expenses (including all fees and expenses of counsel to the Administrative Agent and any Lender incurred pursuant to this Agreement or any other Loan Document), whether direct or indirect, absolute or contingent, liquidated or unliquidated, now existing or hereafter arising hereunder or thereunder, together with all renewals, extensions, modifications or refinancings thereof. "OFF-BALANCE SHEET LIABILITIES" of any Person shall mean (i) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, (ii) any liability of such Person under any sale and leaseback transactions which do not create a liability on the balance sheet of such Person, (iii) any liability of such Person under any so-called "synthetic" lease transaction or (iv) any obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheet of such Person. "PARTICIPANT" shall have the meaning set forth in Section 10.4(c). "PAYMENT OFFICE" shall mean the office of the Administrative Agent located at 201 Fourth Avenue North, Nashville, Tennessee 37219, or such other location as to which the Administrative Agent shall have given written notice to the Borrower and the other Lenders. "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA, and any successor entity performing similar functions. "PERMITTED ENCUMBRANCES" shall mean (i) Liens imposed by law for taxes not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP; (ii) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law created in the ordinary course of business for amounts not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP; (iii) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations; (iv) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (v) judgment and attachment liens not giving rise to an Event of Default or Liens created by or existing from any litigation or legal proceeding that are currently being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP; (vi) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or materially interfere with the ordinary conduct of business of the Borrower and its Subsidiaries taken as a whole; (vii) Capital Lease Obligations to the extent permitted hereunder; (viii) Liens securing purchase money indebtedness to the extent permitted pursuant to Section 7.1 hereunder; (x) Liens created by the Security Documents or otherwise provided for in this Agreement for the benefit of the Lenders; (xi) any Lien in favor of the United States of America or any department or agency thereof, in favor of any state government or political subdivision thereof, or in favor of a prime contractor under a government contract of the United States, or of any political subdivision thereof, and in each case, resulting from acceptance of partial progress, advance or other payments in the ordinary course of business under government contracts of the United States, or of any state government or political subdivision thereof, or subcontracts thereunder; and (xii) statutory Liens arising under ERISA created in the ordinary course of business for amounts not yet due and as to which adequate reserves have been established in accordance with GAAP. "PERMITTED INVESTMENTS" shall mean: (i) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States), in each case maturing within one year from the date of acquisition thereof; (ii) commercial paper having the highest rating, at the time of acquisition thereof, of S&P or Moody's and in either case maturing within six months from the date of acquisition thereof; (iii) certificates of deposit, bankers' acceptances and time deposits maturing within 180 days of the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States or any state thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000; (iv) fully collateralized repurchase agreements with a term of not more than 90 days for securities described in clause (i) above and entered into with a financial institution satisfying the criteria described in clause (iii) above; (v) mutual funds investing solely in any one or more of the Permitted Investments described in clauses (i) through (iv) above; (vi) investments in obligations the return with respect to which is excludable from gross income under Section 103 of the Code, having a maturity of not more than six (6) months or providing the holder the right to put such obligations for purchase at par upon not more than twenty-eight (28) days' notice, and which are rated at least A-1 by S&P or P-1 by Moody's; (vii) investments in tax free money market funds all of whose assets consist of securities of the types described in the foregoing clause (vi) above; and (viii) investments, redeemable upon not more than seven (7) days' notice, in money market preferred municipal bond funds that are rated at least AAA by S&P or Aaa by Moody's. "PERSON" shall mean any individual, partnership, firm, corporation, association, joint venture, limited liability company, trust or other entity, or any Governmental Authority. "PLAN" means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "PRO RATA SHARE" shall mean, with respect to any Lender at any time, a percentage, the numerator of which shall be the sum of such Lender's Revolving Commitment and the denominator of which shall be the sum of all Lenders' Revolving Commitments. "REGULATION D" shall mean Regulation D of the Board of Governors of the Federal Reserve System, as the same may be in effect from time to time, and any successor regulations. "RELATED PARTIES" shall mean, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, and agents of such Person and such Person's Affiliates. "RELEASE" means any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into the environment (including ambient air, surface water, groundwater, land surface or subsurface strata) or within any building, structure, facility or fixture. "REQUIRED LENDERS" shall mean, at any time, Lenders holding 66 2/3% of the aggregate outstanding Revolving Credit Exposures at such time or if the Lenders have no Revolving Credit Exposure outstanding, then Lenders holding 66 2/3% of the Aggregate Revolving Commitments. "RESPONSIBLE OFFICER" shall mean any of the president, the chief executive officer, the chief operating officer, the chief financial officer, the controller or a vice president of the Borrower or such other representative of the Borrower as may be designated in writing by any one of the foregoing with the consent of the Administrative Agent; and, with respect to the financial covenants only, the president, the chief executive officer, the chief financial officer or the controller of the Borrower. "RESTRICTED PAYMENT" shall have the meaning set forth in Section 7.5. "REVOLVING COMMITMENT" shall mean, with respect to each Lender, the obligation of such Lender to make Revolving Loans to the Borrower and to participate in Letters of Credit in an aggregate principal amount not exceeding the amount set forth with respect to such Lender on the signature pages to this Agreement, or in the case of a Person becoming a Lender after the Closing Date, the amount of the assigned "Revolving Commitment" as provided in the Assignment and Acceptance Agreement executed by such Person as an assignee, as the same may be changed pursuant to terms hereof. "REVOLVING CREDIT EXPOSURE" shall mean, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender's Revolving Loans, plus such Lender's LC Exposure. "REVOLVING CREDIT NOTE" shall mean a revolving credit note of the Borrower payable to the order of a Lender in the principal amount of such Lender's Revolving Commitment, in substantially the form of Exhibit A. "REVOLVING LOAN" shall mean a loan made by a Lender to the Borrower under its Revolving Commitment, which may either be a Base Rate Loan or a Eurodollar Loan. "S&P" shall mean Standard & Poor's. "SECURITY DOCUMENTS" shall mean the Assignment and Security Agreements executed by the Borrower and all other Loan Parties and the Administrative Agent dated May 31, 2002, as amended by first amendments dated November 22, 2002, as such may be further amended, from time to time, and all financing statements filed in connection with such Security Agreements. "SUBSIDIARY" shall mean, with respect to any Person (the "PARENT"), any corporation, partnership, joint venture, limited liability company, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of the date of preparation, as well as any other corporation, partnership, joint venture, limited liability company, association or other entity (i) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power, or in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, Controlled or held, or (ii) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. Unless otherwise indicated, all references to "Subsidiary" hereunder shall mean a Subsidiary of the Borrower. "SUBSIDIARY GUARANTEE AGREEMENT" shall mean the Subsidiary Guarantee Agreement, substantially in the form of Exhibit F, made by the Subsidiary Loan Parties in favor of the Administrative Agent for the benefit of the Lenders. "SUBSIDIARY LOAN PARTY" shall mean any presently existing or hereafter created Subsidiary. "TAXES" shall mean any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority in respect of the execution, delivery, or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document or any payment to the Administrative Agent, the Lenders, or the Issuing Bank hereunder or thereunder. "TYPE", when used in reference to a Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Base Rate. "UNRESTRICTED CASH AND CASH EQUIVALENTS" means cash and cash equivalents that are not subject to any lien, encumbrance, pledge, or escrow arrangement, except for liens and encumbrances in favor of Administrative Agent for the benefit of Lenders. "WITHDRAWAL LIABILITY" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.2 Classifications of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Type (e.g. a "Eurodollar Loan" or "Base Rate Loan"). SECTION 1.3 Accounting Terms and Determination. Unless otherwise defined or specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with GAAP as in effect from time to time, applied on a basis consistent (except for such changes approved by the Borrower's independent public accountants) with the most recent audited consolidated financial statement of the Borrower delivered pursuant to Section 5.1(a); provided that if the Borrower notifies the Administrative Agent that the Borrower wishes to amend any covenant in Article VI to eliminate the effect of any change in GAAP on the operation of such covenant (or if the Administrative Agent notifies the Borrower that the Required Lenders wish to amend Article VI for such purpose), then the Borrower's compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Lenders. SECTION 1.4 Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the word "to" means "to but excluding". Unless the context requires otherwise (i) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as it was originally executed or as it may from time to time be amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (ii) any reference herein to any Person shall be construed to include such Person's successors and permitted assigns, (iii) the words "hereof", "herein" and "hereunder" and words of similar import shall be construed to refer to this Agreement as a whole and not to any particular provision hereof, (iv) all references to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles, Sections, Exhibits and Schedules to this Agreement and (v) all references to a specific time shall be construed to refer to the time in the city and state of the Administrative Agent's principal office, unless otherwise indicated. ARTICLE II AMOUNT AND TERMS OF THE COMMITMENTS SECTION 2.1 General Description of Facilities. Subject to and upon the terms and conditions herein set forth, (i) the Lenders hereby establish in favor of the Borrower a revolving credit facility pursuant to which the Lenders severally agree (to the extent of each Lender's Pro Rata Share up to such Lender's Revolving Commitment) to make Revolving Loans to the Borrower in accordance with Section 2.2, (ii) the Issuing Bank agrees to issue Letters of Credit in accordance with Section 2.20, and (iii) each Lender agrees to purchase a participation interest in the Letters of Credit pursuant to the terms and conditions hereof; provided that in no event shall the aggregate principal amount of all outstanding Revolving Loans, plus the outstanding LC Obligations exceed at any time the lesser of: (a) the Borrowing Base, and (b) the Aggregate Revolving Commitments from time to time in effect. SECTION 2.2 Revolving Loans. Subject to the terms and conditions set forth herein, each Lender severally agrees to make Revolving Loans to the Borrower, from time to time during the Availability Period, in an aggregate principal amount outstanding at any time that will not result in (a) such Lender's Revolving Credit Exposure exceeding such Lender's Revolving Commitment or (b) the sum of the Loans and the LC Exposure exceeding the lesser of: (i) the Aggregate Revolving Commitments, or (ii) the Borrowing Base. During the Availability Period, the Borrower shall be entitled to borrow, prepay and reborrow Revolving Loans in accordance with the terms and conditions of this Agreement; provided that the Borrower may not borrow or reborrow should there exist a Default or Event of Default. SECTION 2.3 Procedure for Borrowings. The Borrower shall give the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of each Borrowing substantially in the form of Exhibit 2.3 attached hereto (a "NOTICE OF BORROWING") (x) prior to 11:00 a.m. one (1) Business Day prior to the requested date of each Base Rate Borrowing and (y) prior to 11:00 a.m. three (3) Business Days prior to the requested date of each Eurodollar Borrowing. Each Notice of Borrowing shall be irrevocable and shall specify: (i) the aggregate principal amount of such Borrowing, (ii) the date of such Borrowing (which shall be a Business Day), (iii) the Type of such Revolving Loan comprising such Borrowing and (iv) in the case of a Eurodollar Borrowing, the duration of the initial Interest Period applicable thereto (subject to the provisions of the definition of Interest Period). Each Borrowing shall consist entirely of Base Rate Loans or Eurodollar Loans, as the Borrower may request. The aggregate principal amount of each Eurodollar Borrowing shall be not less than $1,000,000 or a larger multiple of $500,000, and the aggregate principal amount of each Base Rate Borrowing shall not be less than $500,000 or a larger multiple of $100,000; provided that Base Rate Loans made pursuant to Section 2.20(d) may be made in lesser amounts as provided therein. At no time shall the total number of Eurodollar Borrowings outstanding at any time exceed five (5). Promptly following the receipt of a Notice of Borrowing in accordance herewith, the Administrative Agent shall advise each Lender of the details thereof and the amount of such Lender's Revolving Loan to be made as part of the requested Borrowing. SECTION 2.4 Funding of Borrowings (a) Each Lender will make available each Loan to be made by it hereunder on the proposed date thereof by wire transfer in immediately available funds by 11:00 a.m. to the Administrative Agent at the Payment Office. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts that it receives, in like funds by the close of business on such proposed date, to an account maintained by the Borrower with the Administrative Agent. (b) Unless the Administrative Agent shall have been notified by any Lender prior to 5 p.m. one (1) Business Day prior to the date of a Borrowing in which such Lender is participating that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such date, and the Administrative Agent, in reliance on such assumption, may make available to the Borrower on such date a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Lender on the date of such Borrowing, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest at the Federal Funds Rate for up to two (2) days and thereafter at the rate specified for such Borrowing. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent shall promptly notify the Borrower, and the Borrower shall immediately pay such corresponding amount to the Administrative Agent together with interest at the rate specified for such Borrowing. Nothing in this subsection shall be deemed to relieve any Lender from its obligation to fund its Pro Rata Share of any Borrowing hereunder or to prejudice any rights which the Borrower may have against any Lender as a result of any default by such Lender hereunder. (c) All Borrowings shall be made by the Lenders on the basis of their respective Pro Rata Shares. No Lender shall be responsible for any default by any other Lender in its obligations hereunder, and each Lender shall be obligated to make its Loans provided to be made by it hereunder, regardless of the failure of any other Lender to make its Loans hereunder. SECTION 2.5 Interest Elections. (a) Each Borrowing initially shall be of the Type specified in the applicable Notice of Borrowing, and in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Notice of Borrowing. Thereafter, the Borrower may elect to convert such Borrowing into a different Type or to continue such Borrowing, and in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. (b) To make an election pursuant to this Section, the Borrower shall give the Administrative Agent prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing (a "NOTICE OF CONVERSION/CONTINUATION") that is to be converted or continued, as the case may be, (x) prior to 11:00 a.m. one (1) Business Day prior to the requested date of a conversion into a Base Rate Borrowing and (y) prior to 11:00 a.m. three (3) Business Days prior to a continuation of or conversion into a Eurodollar Borrowing. Each such Notice of Conversion/Continuation shall be irrevocable and shall specify (i) the Borrowing to which such Notice of Continuation/Conversion applies and if different options are being elected with respect to different portions thereof, the portions thereof that are to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Notice of Continuation/Conversion, which shall be a Business Day, (iii) whether the resulting Borrowing is to be a Base Rate Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is to be a Eurodollar Borrowing, the Interest Period applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of "Interest Period". If any such Notice of Continuation/Conversion requests a Eurodollar Borrowing but does not specify an Interest Period, the Borrower shall be deemed to have selected an Interest Period of one month. The principal amount of any resulting Borrowing shall satisfy the minimum borrowing amount for Eurodollar Borrowings and Base Rate Borrowings set forth in Section 2.3. (c) If, on the expiration of any Interest Period in respect of any Eurodollar Borrowing, the Borrower shall have failed to deliver a Notice of Conversion/Continuation, then, unless such Borrowing is repaid as provided herein, the Borrower shall be deemed to have elected to convert such Borrowing to a Base Rate Borrowing. No Borrowing may be converted into, or continued as, a Eurodollar Borrowing if a Default or an Event of Default exists, unless the Administrative Agent and each of the Lenders shall have otherwise consented in writing. No conversion of any Eurodollar Loans shall be permitted except on the last day of the Interest Period in respect thereof. (d) Upon receipt of any Notice of Conversion/Continuation, the Administrative Agent shall promptly notify each Lender of the details thereof and of such Lender's portion of each resulting Borrowing. SECTION 2.6 Optional Reduction and Termination of Commitments. (a) Unless previously terminated, all Revolving Commitments shall terminate on the Commitment Termination Date. (b) Upon at least three (3) Business Days' prior written notice (or telephonic notice promptly confirmed in writing) to the Administrative Agent (which notice shall be irrevocable), the Borrower may reduce the Aggregate Revolving Commitments in part or terminate the Aggregate Revolving Commitments in whole; provided that (i) any partial reduction shall apply to reduce proportionately and permanently the Revolving Commitment of each Lender, (ii) any partial reduction pursuant to this Section 2.6 shall be in an amount of at least $1,000,000 and any larger multiple of $1,000,000, and (iii) no such reduction shall be permitted which would reduce the Aggregate Revolving Commitments to an amount less than the outstanding Revolving Credit Exposures of all Lenders. Any such reduction in the Aggregate Revolving Commitments shall result in a proportionate reduction (rounded to the next lowest integral multiple of $100,000) LC Commitment. SECTION 2.7 Repayment of Loans. The outstanding principal amount of all Revolving Loans shall be due and payable (together with accrued and unpaid interest thereon) on the Commitment Termination Date. SECTION 2.8 Evidence of Indebtedness. (a) Each Lender shall maintain in accordance with its usual practice appropriate records evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable thereon and paid to such Lender from time to time under this Agreement. The Administrative Agent shall maintain appropriate records in which shall be recorded (i) the Revolving Commitment of each Lender, (ii) the amount of each Loan made hereunder by each Lender, the Type thereof and the Interest Period applicable thereto, (iii) the date of each continuation thereof pursuant to Section 2.5, (iv) the date of each conversion of all or a portion thereof to another Type pursuant to Section 2.5, (v) the date and amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder in respect of such Loans and (vi) both the date and amount of any sum received by the Administrative Agent hereunder from the Borrower in respect of the Loans and each Lender's Pro Rata Share thereof. The entries made in such records shall be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided that the failure or delay of any Lender or the Administrative Agent in maintaining or making entries into any such record or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans (both principal and unpaid accrued interest) of such Lender in accordance with the terms of this Agreement. (b) The Borrower agrees that it will execute and deliver to each Lender a Revolving Credit Note, payable to the order of such Lender, in the amount of such Lender's Revolving Commitment. SECTION 2.9 Optional Prepayments. The Borrower shall have the right at any time and from time to time to prepay any Borrowing, in whole or in part, without premium or penalty, by giving irrevocable written notice (or telephonic notice promptly confirmed in writing) to the Administrative Agent no later than (i) in the case of prepayment of any Eurodollar Borrowing, 11:00 a.m. not less than three (3) Business Days prior to any such prepayment, and (ii) in the case of any prepayment of any Base Rate Borrowing, not less than one (1) Business Day prior to the date of such prepayment. Each such notice shall be irrevocable and shall specify the proposed date of such prepayment and the principal amount of each Borrowing or portion thereof to be prepaid. Upon receipt of any such notice, the Administrative Agent shall promptly notify each affected Lender of the contents thereof and of such Lender's Pro Rata Share of any such prepayment. If such notice is given, the aggregate amount specified in such notice shall be due and payable on the date designated in such notice, together with accrued interest to such date on the amount so prepaid in accordance with Section 2.10(b); provided that if a Eurodollar Borrowing is prepaid on a date other than the last day of an Interest Period applicable thereto, the Borrower shall also pay all amounts required pursuant to Section 2.16. Each partial prepayment of any Loan shall be in an amount not less than the minimum amount that would be permitted in the case of an advance of a Borrowing of the same Type pursuant to Section 2.2. Each prepayment of a Borrowing shall be applied ratably to the Loans comprising such Borrowing. SECTION 2.10 Interest on Loans. (a) While an Event of Default exists or after acceleration, at the option of the Required Lenders, the Borrower shall pay interest ("DEFAULT INTEREST") with respect to all Eurodollar Loans at the rate otherwise applicable for the then-current Interest Period plus an additional two percent (2%) per annum until the last day of such Interest Period, and thereafter, and with respect to all Base Rate Loans and all other Obligations hereunder (other than Loans), at the rate in effect from time to time for Base Rate Loans, plus an additional two percent (2%) per annum. (b) Interest on the principal amount of all Loans shall accrue from the date such Loans are made to the date of any repayment thereof. Interest on all outstanding Base Rate Loans shall be payable in arrears on the last day of each calendar month and on the Commitment Termination Date. Interest on all outstanding Eurodollar Loans shall be payable on the last day of each Interest Period applicable thereto, and, in the case of any Eurodollar Loans having an Interest Period in excess of three months or ninety (90) days, respectively, on each day which occurs every three months or ninety (90) days, as the case may be, after the initial date of such Interest Period, and on the Commitment Termination Date. All Default Interest shall be payable on demand. (c) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder and shall promptly notify the Borrower and the Lenders of such rate in writing (or by telephone, promptly confirmed in writing). Any such determination shall be conclusive and binding for all purposes, absent manifest error. SECTION 2.11 Fees. (a) Administrative Agent Fees. The Borrower shall pay to the Administrative Agent for its own account fees in the amounts and at the times previously agreed upon the Borrower and the Administrative Agent. (b) Facility Fee. The Borrower agrees to pay to the Administrative Agent a facility fee equal to one quarter of one percent (.25%) per annum on the Aggregate Revolving Commitments. The Facility Fee shall be payable in arrears on the last day of each March, June, September, and December of each year and on the Commitment Termination Date. (c) Payments. Accrued fees shall be payable quarterly in arrears on the last day of each March, June, September, and December (commencing June 30, 2002) of each year and on the Commitment Termination Date. (d) Letter of Credit Fees. The Borrower agrees to pay (i) to the Administrative Agent, for the account of each Lender, a letter of credit fee with respect to its participation in each Letter of Credit, which shall accrue at the Applicable Margin on the average daily amount of such Lender's LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) attributable to such Letter of Credit during the period from the date of issuance of such Letter of Credit to the date on which such Letter of Credit expires or is drawn in full (including without limitation any LC Exposure that remains outstanding after the Commitment Termination Date) and (ii) to the Issuing Bank for its own account a fronting fee, which shall accrue at the rate of .125% per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to Unreimbursed LC Disbursements) during the Availability Period (or until the date that such Letter of Credit is irrevocably canceled, whichever is later), as well as the Issuing Bank's standard administrative fees with respect to issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. SECTION 2.12 Computation of Interest and Fees. All computations of interest and fees hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable (to the extent computed on the basis of days elapsed). Each determination by the Administrative Agent of an interest amount or fee hereunder shall be made in good faith and, except for manifest error, shall be presumed correct for all purposes. SECTION 2.13 Inability to Determine Interest Rates. If prior to the commencement of any Interest Period for any Eurodollar Borrowing, (a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant interbank market, adequate means do not exist for ascertaining LIBOR for such Interest Period, or (b) the Administrative Agent shall have received notice from the Required Lenders that the Adjusted LIBO Rate does not adequately and fairly reflect the cost to such Lenders (or Lender, as the case may be) of making, funding or maintaining their (or its, as the case may be) Eurodollar Loans for such Interest Period, the Administrative Agent shall give written notice (or telephonic notice, promptly confirmed in writing) to the Borrower and to the Lenders as soon as practicable thereafter. In the case of Eurodollar Loans, until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) the obligations of the Lenders to make Eurodollar Revolving Loans or to continue or convert outstanding Loans as or into Eurodollar Loans shall be suspended and (ii) all such affected Loans shall be converted into Base Rate Loans on the last day of the then current Interest Period applicable thereto unless the Borrower prepays such Loans in accordance with this Agreement. Unless the Borrower notifies the Administrative Agent at least one Business Day before the date of any Eurodollar Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, then such Borrowing shall be made as a Base Rate Borrowing. SECTION 2.14 Illegality. If any Change in Law shall make it unlawful or impossible for any Lender to make, maintain or fund any Eurodollar Loan and such Lender shall so notify the Administrative Agent, the Administrative Agent shall promptly give notice thereof to the Borrower and the other Lenders, whereupon until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such suspension no longer exist, the obligation of such Lender to make Eurodollar Revolving Loans, or to continue or convert outstanding Loans as or into Eurodollar Revolving Loans, shall be suspended. In the case of the making of a Eurodollar Borrowing, such Lender's Loan shall be made as a Base Rate Loan as part of the same Borrowing for the same Interest Period and if the affected Eurodollar Loan is then outstanding, such Loan shall be converted to a Base Rate Loan either (i) on the last day of the then current Interest Period applicable to such Eurodollar Loan if such Lender may lawfully continue to maintain such Loan to such date or (ii) immediately if such Lender shall determine that it may not lawfully continue to maintain such Eurodollar Loan to such date. Notwithstanding the foregoing, the affected Lender shall, prior to giving such notice to the Administrative Agent, designate a different Applicable Lending Office if such designation would avoid the need for giving such notice and if such designation would not otherwise be disadvantageous to such Lender in the good faith exercise of its discretion. SECTION 2.15 Increased Costs. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement that is not otherwise included in the determination of the Adjusted LIBO Rate hereunder against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or the Issuing Bank; or (ii) impose on any Lender or on the Issuing Bank or the eurodollar interbank market any other condition affecting this Agreement or any Eurodollar Loans made by such Lender or any Letter of Credit or any participation therein; and the result of the foregoing is to increase the actual cost to such Lender of making, converting into, continuing or maintaining a Eurodollar Loan or to increase the cost to such Lender or the Issuing Bank of participating in or issuing any Letter of Credit or to reduce the amount received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or any other amount), then the Borrower shall promptly pay, upon written notice from and demand by such Lender on the Borrower (with a copy of such notice and demand to the Administrative Agent), to the Administrative Agent for the account of such Lender, within five (5) Business Days after the date of such notice and demand, additional amount or amounts sufficient to compensate such Lender or the Issuing Bank, as the case may be, for such additional costs actually incurred or reduction actually suffered. (b) If any Lender or the Issuing Bank shall have determined that on or after the date of this Agreement any Change in Law regarding capital requirements has or would have the effect of actually reducing the rate of return on such Lender's or the Issuing Bank's capital (or on the capital of such Lender's or the Issuing Bank's parent corporation) as a consequence of its obligations hereunder or under or in respect of any Letter of Credit to a level below that which such Lender or the Issuing Bank or such Lender's or the Issuing Bank's parent corporation could have achieved but for such Change in Law (taking into consideration such Lender's or the Issuing Bank's policies or the policies of such Lender's or the Issuing Bank's parent corporation with respect to capital adequacy) then, from time to time, within five (5) Business Days after receipt by the Borrower of written demand by such Lender (with a copy thereof to the Administrative Agent), the Borrower shall pay to such Lender such additional amounts as will compensate such Lender or the Issuing Bank or such Lender's or the Issuing Bank's parent corporation for any such reduction actually suffered. (c) A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or such Lender's or the Issuing Bank's parent corporation, as the case may be, specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower (with a copy to the Administrative Agent) and shall be presumed correct, absent manifest error. The Borrower shall pay any such Lender or the Issuing Bank, as the case may be, such amount or amounts within ten (10) days after receipt thereof. (d) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's or the Issuing Bank's right to demand such compensation. SECTION 2.16 Funding Indemnity. In the event of: (a) the payment of any principal of a Eurodollar Loan other than on the last day of the Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion or continuation of a Eurodollar Loan other than on the last day of the Interest Period applicable thereto, or (c) the failure by the Borrower to borrow, prepay, convert or continue any Eurodollar Loan on the date specified in any applicable Notice of Borrowing (regardless of whether such notice is withdrawn or revoked), then, in any such event, the Borrower shall compensate each Lender, within five (5) Business Days after written demand from such Lender, for any loss, cost or expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense shall be deemed to include an amount determined by such Lender to be the excess, if any, of (A) the amount of interest that would have accrued on the principal amount of such Eurodollar Loan if such event had not occurred at the Adjusted LIBO Rate applicable to such Eurodollar Loan for the period from the date of such event to the last day of the then current Interest Period therefor (or in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Eurodollar Loan) over (B) the amount of interest that would accrue on the principal amount of such Eurodollar Loan for the same period if the Adjusted LIBO Rate were set on the date such Eurodollar Loan was prepaid or converted or the date on which the Borrower failed to borrow, convert or continue such Eurodollar Loan. A certificate as to any additional amount payable under this Section 2.16 submitted to the Borrower by any Lender shall be presumed correct, absent manifest error. SECTION 2.17 Taxes. (a) Any and all payments by or on account of any obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes; provided that if the Borrower shall be required to deduct any Indemnified Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, any Lender or the Issuing Bank (as the case may be) shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, the Borrower shall be responsible for the payment of any Indemnified Taxes to the relevant Governmental Authority in accordance with applicable law. (c) The Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within five (5) Business Days after written demand therefor, for the full amount of any Indemnified Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto as a result of the Borrower's failure to comply with this Section 2.17(c) in a timely manner. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or the Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Bank, shall be presumed correct absent manifest error. (d) As soon as practicable after any payment of Indemnified Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate. Without limiting the generality of the foregoing, each Foreign Lender agrees that it will deliver to the Administrative Agent and the Borrower (or in the case of a Participant, to the Lender from which the related participation shall have been purchased) two (2) duly completed copies of Internal Revenue Service Form 1001 or 4224, or any successor form thereto, as the case may be, certifying in each case that such Foreign Lender is entitled to receive payments made by the Borrower hereunder and under the Notes payable to it, without deduction or withholding of any United States federal income taxes and (ii) a duly completed Internal Revenue Service Form W-8 or W-9, or any successor form thereto, as the case may be, to establish an exemption from United State backup withholding tax. Each such Foreign Lender shall deliver to the Borrower and the Administrative Agent such forms on or before the date that it becomes a party to this Agreement (or in the case of a Participant, on or before the date such Participant purchases the related participation). In addition, each such Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Lender. Each such Lender shall promptly notify the Borrower and the Administrative Agent at any time that it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the U.S. taxing authorities for such purpose). SECTION 2.18 Payments Generally; Pro Rata Treatment; Sharing of Set-Offs. (a) The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.15, 2.16 or 2.17, or otherwise) prior to 12:00 noon, on the Business Day when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at the Payment Office, except payments to be made directly to the Issuing Bank as expressly provided herein and except that payments pursuant to Sections 2.15, 2.16 and 2.17 and 10.3 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be made payable for the period of such extension. All payments hereunder shall be made in Dollars. (b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties. (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans or participations in LC Disbursements that would result in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans and participations in LC Disbursements and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans and participations in LC Disbursements of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans and participations in LC Disbursements; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation. (d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Bank hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Bank, as the case may be, the amount or amounts due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.20(d) or (e), 2.18(d) or 10.3(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. SECTION 2.19 Mitigation of Obligations. If any Lender requests compensation under Section 2.15, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the sole judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable under Section 2.17 or Section 2.15, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all costs and expenses incurred by any Lender in connection with such designation or assignment. SECTION 2.20 Letters of Credit. (a) During the Availability Period, the Issuing Bank, in reliance upon the agreements of the other Lenders pursuant to Section 2.20(d), agrees to issue, at the request of the Borrower, Letters of Credit for the account of the Borrower on the terms and conditions hereinafter set forth; provided that (i) each Letter of Credit shall expire no later than five (5) days prior to the Commitment Termination Date; (ii) each Letter of Credit shall be in a stated amount of at least $250,000.00; and (iii) the Borrower may not request any Letter of Credit, if, after giving effect to such issuance (A) the aggregate LC Exposure would exceed the LC Commitment or (B) the aggregate LC Exposure, plus the aggregate outstanding Revolving Loans of all Lenders, would exceed the Aggregate Revolving Commitments. Upon the issuance of each Letter of Credit each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Issuing Bank without recourse a participation in such Letter of Credit equal to such Lender's Pro Rata Share of the aggregate amount available to be drawn under such Letter of Credit. Each issuance of a Letter of Credit shall be deemed to utilize the Revolving Commitment of each Lender by an amount equal to the amount of such participation. (b) To request the issuance of a Letter of Credit (or any amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall give the Issuing Bank and the Administrative Agent irrevocable written notice at least three (3) Business Days prior to the requested date of such issuance specifying the date (which shall be a Business Day) such Letter of Credit is to be issued (or amended, extended or renewed, as the case may be), the expiration date of such Letter of Credit, the amount of such Letter of Credit , the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. In addition to the satisfaction of the conditions in Article III, the issuance of such Letter of Credit (or any amendment which increases the amount of such Letter of Credit) will be subject to the further conditions that such Letter of Credit shall be in such form and contain such terms as the Issuing Bank shall approve (such approval not to be withheld unreasonably) and that the Borrower shall have executed and delivered any additional applications, agreements and instruments relating to such Letter of Credit as the Issuing Bank shall reasonably require; provided that in the event of any conflict between such applications, agreements or instruments and this Agreement, the terms of this Agreement shall control. (c) At least two (2) Business Days prior to the issuance of any Letter of Credit, the Issuing Bank will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received such notice and if not, the Issuing Bank will provide the Administrative Agent with a copy thereof. Unless the Issuing Bank has received notice from the Administrative Agent on or before the Business Day immediately preceding the date the Issuing Bank is to issue the requested Letter of Credit directing the Issuing Bank not to issue the Letter of Credit because such issuance is not then permitted hereunder because of the limitations set forth in Section 2.20(a) or that one or more conditions specified in Article III are not then satisfied, then, subject to the terms and conditions hereof, the Issuing Bank shall, on the requested date, issue such Letter of Credit in accordance with the Issuing Bank's usual and customary business practices. (d) The Issuing Bank shall examine all documents purporting to represent a demand for payment under a Letter of Credit promptly following its receipt thereof. The Issuing Bank shall notify the Borrower and the Administrative Agent of such demand for payment and whether the Issuing Bank has made or will make a LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the Lenders with respect to such LC Disbursement. The Borrower shall be irrevocably and unconditionally obligated to reimburse the Issuing Bank for any LC Disbursements paid by the Issuing Bank in respect of such drawing, without presentment, demand or other formalities of any kind. Unless the Borrower shall have notified the Issuing Bank and the Administrative Agent prior to 11:00 a.m. on the Business Day immediately prior to the date on which such drawing is honored that the Borrower intends to reimburse the Issuing Bank for the amount of such drawing in funds other than from the proceeds of Revolving Loans, the Borrower shall be deemed to have timely given a Notice of Borrowing to the Administrative Agent requesting the Lenders to make a Base Rate Borrowing on the date on which such drawing is honored in an exact amount due to the Issuing Bank; provided that for purposes solely of such Borrowing, the conditions precedent set forth in Section 3.2 hereof shall not be applicable. The Administrative Agent shall notify the Lenders of such Borrowing in accordance with Section 2.3, and each Lender shall make the proceeds of its Base Rate Loan included in such Borrowing available to the Administrative Agent for the account of the Issuing Bank in accordance with Section 2.4. The proceeds of such Borrowing shall be applied directly by the Administrative Agent to reimburse the Issuing Bank for such LC Disbursement. (e) If for any reason a Base Rate Borrowing may not be (as determined in the sole discretion of the Administrative Agent), or is not, made in accordance with the foregoing provisions, then each Lender (other than the Issuing Bank) shall be obligated to fund the participation that such Lender purchased pursuant to subsection (a) in an amount equal to its Pro Rata Share of such LC Disbursement on and as of the date which such Base Rate Borrowing should have occurred. Each Lender's obligation to fund its participation shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any setoff, counterclaim, recoupment, defense or other right that such Lender or any other Person may have against the Issuing Bank or any other Person for any reason whatsoever, (ii) the existence of a Default or an Event of Default or the termination of the Aggregate Revolving Commitments, (iii) any adverse change in the condition (financial or otherwise) of the Borrower or any of its Subsidiaries, (iv) any breach of this Agreement by the Borrower or any other Lender, (v) any amendment, renewal or extension of any Letter of Credit, or (vi) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. On the date that such participation is required to be funded, each Lender shall promptly transfer, in immediately available funds, the amount of its participation to the Administrative Agent for the account of the Issuing Bank. Whenever, at any time after the Issuing Bank has received from any such Lender the funds for its participation in a LC Disbursement, the Issuing Bank (or the Administrative Agent on its behalf) receives any payment on account thereof, the Administrative Agent or the Issuing Bank, as the case may be, will distribute to such Lender its Pro Rata Share of such payment; provided that if such payment is required to be returned for any reason to the Borrower or to a trustee, receiver, liquidator, custodian or similar official in any bankruptcy proceeding, such Lender will return to the Administrative Agent or the Issuing Bank any portion thereof previously distributed by the Administrative Agent or the Issuing Bank to it. (f) To the extent that any Lender shall fail to pay any amount required to be paid pursuant to paragraph (d) of this Section 2.20 on the due date therefor, such Lender shall pay interest to the Issuing Bank (through the Administrative Agent) on such amount from such due date to the date such payment is made at a rate per annum equal to the Federal Funds Rate; provided that if such Lender shall fail to make such payment to the Issuing Bank within three (3) Business Days of such due date, then, retroactively to the due date, such Lender shall be obligated to pay interest on such amount at the Default Rate. (g) If any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice from the Administrative Agent or the Required Lenders demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash equal to 105% of the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, with demand or notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in clause (g) or (h) of Section 8.1. Such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the Borrower under this Agreement. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower's risk and expense, such deposits shall not bear interest. Interest and profits, if any, on such investments shall accumulate in such account. Moneys in such account shall applied by the Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which it had not been reimbursed and to the extent so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated, with the consent of the Required Lenders, be applied to satisfy other obligations of the Borrower under this Agreement. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not so applied as aforesaid) shall be returned to the Borrower within three (3) Business Days after all Events of Default have been cured or waived. (h) Omitted by Agreement. (i) The Borrower's obligation to reimburse LC Disbursements hereunder shall be absolute, unconditional and irrevocable and shall be performed strictly in accordance with the terms of this Agreement under all circumstances whatsoever and irrespective of any of the following circumstances: (i) Any lack of validity or enforceability of any Letter of Credit or this Agreement; (ii) The existence of any claim, set-off, defense or other right which the Borrower or any Subsidiary or Affiliate of the Borrower may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Persons or entities for whom any such beneficiary or transferee may be acting), any Lender (including the Issuing Bank) or any other Person, whether in connection with this Agreement or the Letter of Credit or any document related hereto or thereto or any unrelated transaction; (iii) Any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, if such documents on their faces appear to be in order; (iv) Payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document to the Issuing Bank that does not comply with the terms of such Letter of Credit; (v) Any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower's obligations hereunder; or (vi) The existence of a Default or an Event of Default. Neither the Administrative Agent, the Issuing Bank, the Lenders nor any Related Party of any of the foregoing shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to above), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided that the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Bank's failure to exercise care when determining whether drafts or other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree, that in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented that appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit. (j) Each Letter of Credit shall be subject to the Uniform Customs and Practices for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No.500, as the same may be amended from time to time, and, to the extent not inconsistent therewith, the governing law of this Agreement set forth in Section 10.5. ARTICLE III CONDITIONS PRECEDENT TO LOANS AND LETTERS OF CREDIT SECTION 3.1 Conditions To Effectiveness. The obligations of the Lenders to make Loans and the obligation of the Issuing Bank to issue any Letter of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 10.2). (a) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Closing Date, including reimbursement or payment of all out-of-pocket expenses (including reasonable fees, charges and disbursements of counsel to the Administrative Agent) required to be reimbursed or paid by the Borrower hereunder, under any other Loan Document and under any agreement with the Administrative Agent. (b) The Administrative Agent (or its counsel) shall have received the following: (i) a counterpart of this Agreement signed by or on behalf of each party thereto or written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement; (ii) duly executed Notes payable to such Lender; (iii) a duly executed Subsidiary Guarantee Agreement and Indemnity and Contribution Agreement; (iv) duly executed Security Documents; (v) a certificate of the Secretary or Assistant Secretary of each Loan Party, attaching and certifying copies of its bylaws and of the resolutions of its boards of directors, authorizing the execution, delivery and performance of the Loan Documents to which it is a party and certifying the name, title and true signature of each officer of such Loan Party executing the Loan Documents to which it is a party; (vi) certified copies of the articles of incorporation or other charter documents of each Loan Party, together with certificates of good standing or existence, as may be available from the Secretary of State of the jurisdiction of incorporation of such Loan Party and each other jurisdiction where such Loan Party is required to be qualified to do business as a foreign corporation; (vii) a favorable written opinion of Bass, Berry & Sims PLC, counsel to the Loan Parties, addressed to the Administrative Agent and each of the Lenders, and covering such matters relating to the Loan Parties, the Loan Documents and the transactions contemplated therein as the Administrative Agent or the Required Lenders shall reasonably request; (viii) a certificate, dated the Closing Date and signed by a Responsible Officer, confirming compliance with the conditions set forth in paragraphs (a), (b) and (c) of Section 3.2; and (ix) duly executed Notices of Borrowing, if applicable. SECTION 3.2 Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing and of the Issuing Bank to issue, amend, renew or extend any Letter of Credit is subject to the satisfaction of the following conditions: (a) at the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default or Event of Default shall exist; and (b) all representations and warranties of each Loan Party set forth in the Loan Documents shall be true and correct in all material respects on and as of the date of such Borrowing or the date of issuance, amendment, extension or renewal of such Letter of Credit, in each case before and after giving effect thereto, except for (i) representations and warranties effective as of a specified date, which shall remain true and correct as of such specified date, and (ii) changes in facts and circumstances that are not prohibited by the terms of this Agreement; (c) since the date of the most recent financial statements of the Borrower described in Section 5.1(a), there shall have been no change which has had or could reasonably be expected to have a Material Adverse Effect; and (d) the Administrative Agent shall have received such other documents, certificates, information or legal opinions as the Administrative Agent or the Required Lenders may reasonably request, all in form and substance reasonably satisfactory to the Administrative Agent or the Required Lenders. Each Borrowing and each issuance, amendment, extension or renewal of any Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a), (b) and (c) of this Section 3.2. SECTION 3.3 Delivery of Documents. All of the Loan Documents, certificates, legal opinions and other documents and papers referred to in this Article III, unless otherwise specified, shall be delivered to the Administrative Agent for the account of each of the Lenders and, except for the Notes, in sufficient counterparts or copies for each of the Lenders and shall be in form and substance satisfactory in all respects to the Administrative Agent. ARTICLE IV REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Administrative Agent and each Lender as follows: SECTION 4.1 Existence; Power. The Borrower and each of its Subsidiaries: (i) is duly organized, validly existing and in good standing as a corporation under the laws of the jurisdiction of its organization, (ii) has all requisite power and authority to carry on its business as now conducted, and (iii) is duly qualified to do business, and is in good standing, in each jurisdiction where such qualification is required, except where a failure to be so qualified could not reasonably be expected to result in a Material Adverse Effect. SECTION 4.2 Organizational Power; Authorization. The execution, delivery and performance by each Loan Party of the Loan Documents to which it is a party are within such Loan Party's organizational powers and have been duly authorized by all necessary organizational action. This Agreement has been duly executed and delivered by the Borrower, and constitutes, and each other Loan Document to which any Loan Party is a party, when executed and delivered by such Loan Party, will constitute, valid and binding obligations of the Borrower or such Loan Party (as the case may be), enforceable against it in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity. SECTION 4.3 Governmental Approvals; No Conflicts. The execution, delivery and performance by the Borrower of this Agreement, and by each Loan Party of the other Loan Documents to which it is a party (a) do not require any consent or approval of, registration or filing with, or any action by, any Governmental Authority, except those as have been obtained or made and are in full force and effect or where the failure to do so, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Borrower or any of its Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, material agreement or other material instrument binding on the Borrower or any of its Subsidiaries or any of its material assets or give rise to a right thereunder to require any payment to be made by the Borrower or any of its Subsidiaries and (d) will not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries, except Liens (if any) created under the Loan Documents. SECTION 4.4 Financial Statements. The Borrower has furnished to each Lender: (i) the audited consolidated balance sheet of the Borrower and its Subsidiaries as of August 31, 2001 and the related consolidated statements of income, shareholders' equity and cash flows for the fiscal year then ended audited by Deloitte & Touche LLP and (ii) the unaudited consolidated balance sheet of the Borrower and its Subsidiaries as at the end of February 28, 2002, and the related unaudited consolidated statements of income and cash flows for the fiscal quarter and year-to-date period then ending, certified by a Responsible Officer. Such financial statements fairly present the consolidated financial condition of the Borrower and its Subsidiaries as of such dates and the consolidated results of operations for such periods in conformity with GAAP consistently applied, subject to year end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii). Since August 31, 2001, there have been no changes with respect to the Borrower and its Subsidiaries which have had or could reasonably be expected to have, singly or in the aggregate, a Material Adverse Effect. SECTION 4.5 Litigation and Environmental Matters. (a) Except as set forth on Schedule 4.5(a), no litigation, investigation or proceeding of or before any arbitrators or Governmental Authorities is pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries: (i) as to which there is a reasonable possibility of an adverse determination that could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect, or (ii) which in any manner draws into question the validity or enforceability of this Agreement or any other Loan Document. (b) Except as to any matter which would not have a Material Adverse Effect, neither the Borrower nor any of its Subsidiaries: (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability, or (iv) knows of any basis for any Environmental Liability. SECTION 4.6 Compliance with Laws and Agreements. The Borrower and each Subsidiary is in compliance with (a) all applicable laws, rules, regulations and orders of any Governmental Authority, and (b) all indentures, agreements or other instruments binding upon it or its properties, except where non-compliance, either singly or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 4.7 Investment Company Act, Etc. Neither the Borrower nor any of its Subsidiaries is (a) an "investment company", as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended, (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935, as amended, or (c) otherwise subject to any other regulatory scheme limiting its ability to incur debt. SECTION 4.8 Taxes. The Borrower and its Subsidiaries have timely filed or caused to be filed (or have obtained permitted extensions for) all Federal income tax returns and, to the knowledge of the Borrower, have filed or caused to be filed (or have obtained permitted extensions for) all other material tax returns that are required to be filed by them, and have paid all taxes shown to be due and payable on such returns or on any assessments made against it or its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority, except (i) to the extent the failure to do so would not have a Material Adverse Effect, or (ii) where the same are currently being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as the case may be, has set aside on its books adequate reserves. SECTION 4.9 Margin Regulations. None of the proceeds of any of the Loans or Letters of Credit will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of such terms under Regulation U as now and from time to time hereafter in effect or for any purpose that violates the provisions of the applicable Margin Regulations. SECTION 4.10 ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $300,000.00 the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $300,000.00 the fair market value of the assets of all such underfunded Plans. SECTION 4.11 Ownership of Property. (a) Each of the Borrower and its Subsidiaries has good title to, or valid leasehold interests in, all of its real and personal property material to the operation of its business. (b) Each of the Borrower and its Subsidiaries owns, or is licensed, or otherwise has the right, to use, all material patents, trademarks, service marks, tradenames, copyrights and other intellectual property material to its business, and the use thereof by the Borrower and its Subsidiaries does not infringe on the rights of any other Person, except for any such infringements that, individually or in the aggregate, would not have a Material Adverse Effect. SECTION 4.12 Disclosure. (a) The Borrower has disclosed to the Lenders all agreements, instruments, and corporate or other restrictions to which the Borrower or any of its Subsidiaries is subject, and all other matters known to any of them, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports (including without limitation all reports that the Borrower is required to file with the Securities and Exchange Commission), financial statements, certificates or other information furnished by or on behalf of the Borrower to the Administrative Agent or any Lender in connection with the negotiation or syndication of this Agreement or any other Loan Document or delivered hereunder or thereunder (as modified or supplemented by any other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, taken as a whole, in light of the circumstances under which they were made, not misleading. (b) The financial projections and other pro forma financial information contained in the information referred to in subsection (a) above were based on good faith estimates and assumptions believed by the Borrower to be reasonable at the time made and at the time furnished to the Administrative Agent and the Lenders, it being recognized by the Administrative Agent and the Lenders that such projections and other pro forma financial information as to future events may differ from the actual results for such period or periods. SECTION 4.13 Labor Relations. There are no strikes, lockouts or other labor disputes or grievances against the Borrower or any of its Subsidiaries, or, to the Borrower's knowledge, threatened against or affecting the Borrower or any of its Subsidiaries, and no unfair labor practice, charges or grievances are pending against the Borrower or any of its Subsidiaries, or to the Borrower's knowledge, threatened against any of them before any Governmental Authority, which individually or in the aggregate, would result in a Material Adverse Effect. All payments due from the Borrower or any of its Subsidiaries pursuant to the provisions of any collective bargaining agreement have been paid or accrued as a liability on the books of the Borrower or any such Subsidiary, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. SECTION 4.14 Subsidiaries. Schedule 4.14 sets forth the name of, the ownership interest of the Borrower in, the jurisdiction of incorporation of, and the type of, each Subsidiary and identifies each Subsidiary that is a Subsidiary Loan Party, in each case as of the Closing Date. ARTICLE V AFFIRMATIVE COVENANTS The Borrower covenants and agrees that so long as any Lender has a Commitment hereunder or the principal of and interest on any Loan or any fee or any LC Disbursement remains unpaid or any Letter of Credit remains outstanding: SECTION 5.1 Financial Statements and Other Information. The Borrower will deliver to the Administrative Agent and each Lender: (a) as soon as available and in any event within ninety (90) days after the end of each fiscal year of Borrower, a copy of the annual audited report for such fiscal year for the Borrower and its Subsidiaries, containing a consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal year and the related consolidated statements of income, stockholders' equity and cash flows (together with all footnotes thereto) of the Borrower and its Subsidiaries for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and reported on by Deloitte & Touche LLP or other independent public accountants of nationally recognized standing (without a "going concern" or like qualification, exception or explanation and without any qualification or exception as to scope of such audit) to the effect that such financial statements present fairly in all material respects the financial condition and the results of operations of the Borrower and its Subsidiaries for such fiscal year on a consolidated basis in accordance with GAAP and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards; (b) as soon as available and in any event within forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, an unaudited consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal quarter and the related unaudited consolidated statements of income and cash flows of the Borrower and its Subsidiaries for such fiscal quarter and the then elapsed portion of such fiscal year, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of Borrower's previous fiscal year, all certified by a Responsible Officer as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP, subject to normal year-end audit adjustments and the absence of footnotes; (c) concurrently with the delivery of the financial statements referred to in clauses (a) and (b) above, a certificate of a Responsible Officer, (i) certifying as to whether there exists a Default or Event of Default on the date of such certificate, and if a Default or an Event of Default then exists, specifying the details thereof and the action which the Borrower has taken or proposes to take with respect thereto, (ii) setting forth in reasonable detail calculations demonstrating compliance with Article VI, and (iii) stating whether any change in GAAP or the application thereof has occurred since the date of the Borrower's audited financial statements referred to in Section 4.4 and, if any change has occurred, specifying the effect of such change on the financial statements accompanying such certificate; (d) concurrently with the delivery of the financial statements referred to in clause (a) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained any knowledge during the course of their examination of such financial statements of any Default or Event of Default (which certificate may be limited to the extent required by accounting rules or guidelines); (e) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all functions of said Commission, or with any national securities exchange, or distributed by the Borrower to its shareholders generally, as the case may be; (f) concurrently with the delivery of the financial statements referred to in clause (a) above, a copy of the Borrower's proposed annual budget and financial projections; (g) concurrently with a request for a Borrowing or a request for the issuance of a Letter of Credit and on the fifteenth (15th) day of each January, April, July, and October, the Borrower shall deliver to the Administrative Agent a Borrowing Base Certificate; (h) on the fifteenth (15th) day of each January, April, July, and October, the Borrower shall deliver to the Administrative Agent, in a form reasonably acceptable to the Administrative Agent, a listing and aging of Borrower's accounts receivable; and (i) promptly following any request therefor, such other information regarding the results of operations, business affairs and financial condition of the Borrower or any Subsidiary as the Administrative Agent or any Lender may reasonably request. SECTION 5.2 Notices of Material Events. The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the following: (a) the occurrence of any Default or Event of Default; (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or, to the knowledge of the Borrower, affecting the Borrower or any Subsidiary which, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; (c) the occurrence of any event or any other development by which the Borrower or any of its Subsidiaries (i) fails to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) becomes subject to any Environmental Liability, (iii) receives notice of any claim with respect to any Environmental Liability, or (iv) becomes aware of any basis for any Environmental Liability, and in each of the preceding clauses, which individually or in the aggregate could reasonably be expected to result in a Material Adverse Effect; (d) the occurrence of any ERISA Event that alone, or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $300,000.00; and (e) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Section shall be accompanied by a written statement of a Responsible Officer setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. SECTION 5.3 Existence; Conduct of Business. The Borrower will, and will cause each of its Subsidiaries to, do or cause to be done all things necessary to preserve, renew and maintain in full force and effect its legal existence and its respective rights, licenses, permits, privileges, franchises, patents, copyrights, trademarks and trade names material to the conduct of its business, where the failure to do so would have a Material Adverse Effect, and will continue to engage in substantially the same business as presently conducted or such other businesses that are reasonably related thereto; provided that nothing in this Section shall prohibit any merger, consolidation, liquidation or dissolution permitted under Section 7.3. SECTION 5.4 Compliance with Laws, Etc. The Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and requirements of any Governmental Authority applicable to its properties, except where the failure to do so, either individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.5 Payment of Obligations. The Borrower will, and will cause each of its Subsidiaries to, pay and discharge at or before maturity, all of its obligations and liabilities (including without limitation all tax liabilities and claims that could result in a statutory Lien) before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP, and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.6 Books and Records. The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries shall be made of all material dealings and transactions in relation to its business and activities to the extent necessary to prepare the consolidated financial statements of Borrower in conformity with GAAP. SECTION 5.7 Visitation, Inspection, Etc. The Borrower will, and will cause each of its Subsidiaries to, permit any representative of the Administrative Agent or any Lender, to visit and inspect its properties, to examine its books and records and to make copies and take extracts therefrom, and to discuss its affairs, finances and accounts with any of its officers and with its independent certified public accountants, all at such reasonable times and as often as the Administrative Agent or any Lender may reasonably request after reasonable prior notice to the Borrower. SECTION 5.8 Maintenance of Properties; Insurance. The Borrower will, and will cause each of its Subsidiaries to, (a) keep and maintain all property material to the conduct of its business in good working order and condition, except for ordinary wear and tear and except where the failure to do so, either individually or it the aggregate, could not reasonably be expected to result in a Material Adverse Effect, and (b) maintain with financially sound and reputable insurance companies, insurance with respect to its properties and business, and the properties and business of its Subsidiaries, against loss or damage of the kinds customarily insured against by companies in the same or similar businesses operating in the same or similar locations. SECTION 5.9 Use of Proceeds and Letters of Credit. The Borrower will use the proceeds of all Loans to finance working capital needs and for other general corporate purposes of the Borrower and its Subsidiaries, including, but not limited to, the use of Letters of Credit to guarantee performance of fee refund provisions under contracts entered into by Borrower with health plans. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that would violate any rule or regulation of the Board of Governors of the Federal Reserve System, including Regulations T, U or X. All Letters of Credit will be used for general corporate purposes. SECTION 5.10 Bank Accounts. In consideration for the interest rate offered herein and as additional collateral for the Loans, the Borrower shall, and shall cause its Subsidiaries, to maintain its bank accounts and investment accounts with the Administrative Agent; provided that it is understood and agreed that the Borrower shall deposit as escrow monies up to $6,000,000 with Chase Manhattan Bank, N.A. pursuant to the terms of the Administrative Services Agreement dated as of February 15, 2002, as amended, by and among American Healthways Services, Inc., Oxford Health Plans, Inc. and related entities. Upon the occurrence of an Event of Default, the Administrative Agent is authorized to set-off (without prior notice to the Borrower or its Subsidiaries) against all such bank accounts and to apply the proceeds thereof to the Obligations. SECTION 5.11 Additional Subsidiaries. If any additional Subsidiary is acquired or formed after the Closing Date, the Borrower will, within ten (10) business days after such Subsidiary is acquired or formed, notify the Administrative Agent and the Lenders thereof and will cause such Subsidiary to become a Subsidiary Loan Party by executing agreements in the form of Annex I to Exhibit F and Annex I to Exhibit G in form and substance satisfactory to the Administrative Agent and the Required Lenders and will cause such Subsidiary to deliver simultaneously therewith similar documents applicable to such Subsidiary required under Section 3.1 as reasonably requested by the Administrative Agent. SECTION 5.12 Additional Assets. Within ten (10) days after receipt of written notice from the Administrative Agent, the Borrower and any Subsidiary Loan Party shall execute such security agreements, collateral assignments, deeds of trust, mortgages, pledge agreements, or similar agreements, and take all such necessary steps (including filings and recordings with appropriate governmental offices), all at the Borrower's expense, as reasonably requested by the Administrative Agent to obtain on behalf of the Lenders a Lien against any presently existing or hereafter acquired material asset of the Borrower and each Subsidiary Loan Party. ARTICLE VI FINANCIAL COVENANTS The Borrower covenants and agrees that so long as any Lender has a Commitment hereunder or the principal of or interest on or any Loan remains unpaid or any fee or any LC Disbursement remains unpaid or any Letter of Credit remains outstanding: SECTION 6.1 Leverage Ratio. The Borrower will have, as of the end of each fiscal quarter (calculated for such quarter and the three prior fiscal quarters) of the Borrower, a Leverage Ratio of not greater than 2.0 to 1.0: SECTION 6.2 Consolidated Fixed Charge Coverage Ratio. The Borrower will have, as of the end of each fiscal quarter (calculated for such quarter and the three prior fiscal quarters) of the Borrower, a Consolidated Fixed Charge Coverage Ratio of not less than 2.0 to 1.0: SECTION 6.3 Consolidated Net Worth The Borrower will not permit its Consolidated Net Worth at any time to be less than the sum of: (i) $50,000,000.00, plus (ii) one hundred percent (100%) of the amount by which the Borrower's "total stockholders' equity" is increased as a result of any public or private offering of common stock of the Borrower after the Closing Date, plus (iii) seventy-five percent (75%) of Consolidated Net Income on a cumulative basis for all preceding fiscal quarters of the Borrower, commencing with the fiscal quarter ended February 28, 2002; provided that if Consolidated Net Income is negative in any fiscal quarter the amount attributed to Consolidated Net Income for such fiscal quarter shall be zero and such negative Consolidated Net Income shall not reduce the amount of Consolidated Net Income added from any previous fiscal quarter. Promptly upon the consummation of any public or private offering of common stock, the Borrower shall notify the Administrative Agent in writing of the amount of such increase in "total stockholders' equity". SECTION 6.4 MINIMUM LIQUIDITY. The Borrower will maintain at all times at least $8,000,000.00 in cash, marketable securities, and unused availability under the Revolving Commitments. ARTICLE VII NEGATIVE COVENANTS The Borrower covenants and agrees that so long as any Lender has a Commitment hereunder or the principal of or interest on any Loan remains unpaid or any fee or any LC Disbursement remains unpaid or any Letter of Credit remains outstanding: SECTION 7.1 Indebtedness. The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness created pursuant to the Loan Documents; (b) Indebtedness existing on the date hereof and set forth on Schedule 7.1 and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof (immediately prior to giving effect to such extension, renewal or replacement) or shorten the maturity or the weighted average life thereof; (c) Indebtedness of the Borrower owing to any Subsidiary and of any Subsidiary owing to the Borrower or any other Subsidiary; provided that any such Indebtedness that is owed to a Subsidiary or by a Subsidiary shall be a domestic Subsidiary created and existing under the laws of a State of the United States, and provided, further, that any such Indebtedness that is owed to a Subsidiary that is not a Subsidiary Loan Party shall be subject to Section 7.4; (d) Indebtedness in respect of obligations under Hedging Agreements permitted by Section 7.10; (e) other unsecured Indebtedness in an aggregate principal amount not to exceed $1,000,000.00 at any time outstanding; and (f) Capital Lease Obligations and secured purchase money indebtedness not in excess of $2,000,000 in the aggregate. SECTION 7.2 Negative Pledge. Except for Liens granted to Administrative Agent to secure the Indebtedness, the Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien on any of its assets or property now owned or hereafter acquired or, except: (a) Permitted Encumbrances; (b) any Liens on any property or asset of the Borrower or any Subsidiary existing on the Closing Date set forth on Schedule 7.2; provided that such Lien shall not apply to any other property or asset of the Borrower or any Subsidiary; (c) any Lien (i) existing on any asset of any Person at the time such Person becomes a Subsidiary of the Borrower, (ii) existing on any asset of any Person at the time such Person is merged with or into the Borrower or any Subsidiary of the Borrower or (iii) existing on any asset prior to the acquisition thereof by the Borrower or any Subsidiary of the Borrower; provided that any such Lien was not created in the contemplation of any of the foregoing and any such Lien secures only those obligations which it secures on the date that such Person becomes a Subsidiary or the date of such merger or the date of such acquisition; and (d) extensions, renewals, or replacements of any Lien referred to in paragraphs (a) through (c) of this Section; provided that the principal amount of the Indebtedness secured thereby is not increased and that any such extension, renewal or replacement is limited to the assets originally encumbered thereby. SECTION 7.3 Fundamental Changes. (a) The Borrower will not, and will not permit any Subsidiary to, merge into or consolidate into any other Person, or permit any other Person to merge into or consolidate with it, or sell, lease, transfer or otherwise dispose of (in a single transaction or a series of transactions) all or substantially all of its assets (in each case, whether now owned or hereafter acquired) or all or substantially all of the stock of any of its Subsidiaries (in each case, whether now owned or hereafter acquired) or liquidate or dissolve; provided that if at the time thereof and immediately after giving effect thereto, no Default or Event of Default shall have occurred and be continuing (i) the Borrower or any Subsidiary may merge with a Person if the Borrower (or such Subsidiary if the Borrower is not a party to such merger) is the surviving Person, (ii) any Subsidiary may merge into another Subsidiary; provided that if any party to such merger is a Subsidiary Loan Party, a Subsidiary Loan Party shall be the surviving Person, (iii) any Subsidiary may sell, transfer, lease or otherwise dispose of all or substantially all of its assets to the Borrower or to a Subsidiary Loan Party and (iv) any Subsidiary (other than a Subsidiary Loan Party) may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and is not materially disadvantageous to the Lenders; provided that any such merger involving a Person that is not a wholly-owned Subsidiary immediately prior to such merger shall not be permitted unless the corresponding Investment (as such term is defined in Section 7.4 below), if any, is also permitted by Section 7.4. (b) The Borrower will not, and will not permit any of its Subsidiaries to, engage to any material extent in any business other than businesses of the type conducted by the Borrower and its Subsidiaries on the date hereof and businesses reasonably related thereto. SECTION 7.4 Investments, Loans, Etc. The Borrower will not, and will not permit any of its Subsidiaries to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly-owned Subsidiary prior to such merger), any common stock, evidence of indebtedness or other securities (including any option, warrant, or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person (all of the foregoing being collectively called "INVESTMENTS"), or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person that constitute a business unit, except: (a) Investments (other than Permitted Investments) existing on the date hereof and set forth on Schedule 7.4 (including Investments in Subsidiaries); (b) Permitted Investments; (c) Guarantees with respect to or constituting Indebtedness permitted by Section 7.1; (d) loans or advances to employees, officers or directors of the Borrower or any Subsidiary in the ordinary course of business for travel, relocation and related expenses; (e) Hedging Agreements permitted by Section 7.10; and (f) Investments in any Person in which the consideration paid or exchanged in such Investment is not in excess of whichever of the following applies: (i) $2,000,000, if the sole consideration paid or exchanged is cash; (ii) an amount equal to fifteen percent (15%) of Consolidated Net Worth, as calculated at the end of the most recent fiscal quarter, if the sole consideration paid or exchanged is stock; and (iii) $2,000,000 in cash and fifteen percent (15%) of Consolidated Net Worth, as calculated at the end of the most recent fiscal quarter, if the consideration paid or exchanged consists of a combination of cash and stock. SECTION 7.5 Restricted Payments. The Borrower will not, and will not permit its Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any dividend on any class of its stock, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, retirement, defeasance or other acquisition of, any shares of common stock or Indebtedness subordinated to the Obligations of the Borrower or any options, warrants, or other rights to purchase such common stock or such Indebtedness, whether now or hereafter outstanding (each, a "RESTRICTED PAYMENT"), except for (i) dividends payable by the Borrower solely in shares of any class of its common stock, (ii) Restricted Payments made by any Subsidiary to the Borrower, and (iii) cash redemptions of the common stock of the Borrower; provided that (a) no Default or Event of Default has occurred and is continuing at the time such redemption is made, and (b) no more than $3,000,000.00 in the aggregate is paid for stock redemptions during the term of the Revolving Loans. SECTION 7.6 Sale of Assets. The Borrower will not, and will not permit any of its Subsidiaries to, convey, sell, lease, assign, transfer or otherwise dispose of, any of its assets, business or property, whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's common stock to any Person other than the Borrower or any Subsidiary of the Borrower, except: (a) the sale or other disposition for fair market value of obsolete or worn out property or other property not necessary for operations disposed of in the ordinary course of business; (b) the sale of inventory and Permitted Investments in the ordinary course of business; and (c) transactions permitted by Section 7.3(a) herein. SECTION 7.7 Transactions with Affiliates. The Borrower will not, and will not permit any of its Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower or such Subsidiary than could be obtained on an arm's-length basis from unrelated third parties, (b) transactions between or among the Borrower and its Subsidiaries not involving any other Affiliates, or (c) any Restricted Payment permitted by Section 7.5. SECTION 7.8 Restrictive Agreements. The Borrower will not, and will not permit any Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement that prohibits, restricts or imposes any condition upon (a) the ability of the Borrower or any Subsidiary to create, incur or permit any Lien upon any of its assets or properties, whether now owned or hereafter acquired, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to its common stock, to make or repay loans or advances to the Borrower or any other Subsidiary, to Guarantee Indebtedness of the Borrower or any other Subsidiary or to transfer any of its property or assets to the Borrower or any Subsidiary of the Borrower; provided that (i) the foregoing shall not apply to restrictions or conditions imposed by law or by this Agreement or any other Loan Document, (ii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is sold and such sale is permitted hereunder, (iii) clause (a) shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions and conditions apply only to the property or assets securing such Indebtedness and (iv) clause (a) shall not apply to customary provisions in real property or equipment leases restricting the assignment thereof. SECTION 7.9 Sale and Leaseback Transactions. The Borrower will not, and will not permit any of the Subsidiaries to, enter into any arrangement, directly or indirectly, whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereinafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property sold or transferred. SECTION 7.10 Hedging Agreements. Unless such is approved by the Administrative Agent in the exercise of its reasonable discretion, the Borrower will not, and will not permit any of the Subsidiaries to, enter into any Hedging Agreement. SECTION 7.11 Status of Incorporation. The Borrower will not nor will it permit any Subsidiary to change its state of incorporation. SECTION 7.12 Accounting Changes. Subject to Section 1.3, the Borrower will not, and will not permit any Subsidiary to, make any significant change in accounting treatment or reporting practices, except as required by GAAP, or change the fiscal year of the Borrower or of any Subsidiary, except to change the fiscal year of a Subsidiary to conform its fiscal year to that of the Borrower. ARTICLE VIII EVENTS OF DEFAULT SECTION 8.1 Events of Default. If any of the following events (each an "Event of Default") shall occur: (a) the Borrower shall fail to pay any principal of any Loan or of any reimbursement obligation in respect of any LC Disbursement within ten (10) days following the date such payment became due and payable, whether at the due date thereof or at a date fixed for prepayment or otherwise; or (b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount payable under clause (a) of this Article) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of ten (10) Business Days; or (c) any representation or warranty made or deemed made by or on behalf of the Borrower or any Subsidiary in or in connection with this Agreement or any other Loan Document (including the Schedules attached thereto) and any amendments or modifications hereof or waivers hereunder, or in any certificate, report, financial statement or other document submitted to the Administrative Agent or the Lenders by any Loan Party or any representative of any Loan Party pursuant to or in connection with this Agreement or any other Loan Document shall prove to be incorrect when made or deemed made or submitted; or (d) the Borrower shall fail to observe or perform any covenant or agreement contained in Sections 5.2, 5.3 (with respect to the Borrower's existence) or Articles VI or VII; or (e) any Loan Party shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those referred to in clauses (a), (b) and (d) above) or any other Loan Document, and such failure shall remain unremedied for 30 days after the earlier of (i) any Responsible Officer obtains actual knowledge or reasonably should have obtained actual knowledge of such failure, or (ii) written notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender; or (f) the Borrower or any Subsidiary (whether as primary obligor or as guarantor or other surety) shall fail to pay any principal of or premium or interest on any Material Indebtedness that is outstanding, when and as the same shall become due and payable (whether at scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument evidencing such Indebtedness; or any other event shall occur or condition shall exist under any agreement or instrument relating to such Indebtedness and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or permit the acceleration of, the maturity of such Indebtedness; or any such Indebtedness shall be declared to be due and payable; or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or any offer to prepay, redeem, purchase or defease such Indebtedness shall be required to be made, in each case prior to the stated maturity thereof; or (g) the Borrower or any Subsidiary shall (i) commence a voluntary case or other proceeding or file any petition seeking liquidation, reorganization or other relief under any federal, state or foreign bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a custodian, trustee, receiver, liquidator or other similar official of it or any substantial part of its property, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (i) of this Section, (iii) apply for or consent to the appointment of a custodian, trustee, receiver, liquidator or other similar official for the Borrower or any such Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, or (vi) take any action for the purpose of effecting any of the foregoing; or (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any Subsidiary or its debts, or any substantial part of its assets, under any federal, state or foreign bankruptcy, insolvency or other similar law now or hereafter in effect or (ii) the appointment of a custodian, trustee, receiver, liquidator or other similar official for the Borrower or any Subsidiary or for a substantial part of its assets, and in any such case, such proceeding or petition shall remain undismissed for a period of 60 days or an order or decree approving or ordering any of the foregoing shall be entered; or (i) the Borrower or any Subsidiary shall admit in writing its inability to pay its debts as they become due; or (j) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with other ERISA Events that have occurred, could reasonably be expected to result in liability to the Borrower and the Subsidiaries in an aggregate amount exceeding $300,000.00; or (k) any judgment or order for the payment of money in excess of $300,000.00 in the aggregate shall be rendered against the Borrower or any Subsidiary, and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be a period of thirty (30) consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (l) any non-monetary judgment or order shall be rendered against the Borrower or any Subsidiary that could reasonably be expected to have a Material Adverse Effect, and there shall be a period of thirty (30) consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (m) a Change in Control shall occur or exist; or (n) any provision of any Subsidiary Guarantee Agreement shall for any reason cease to be valid and binding on, or enforceable against, any Subsidiary Loan Party, or any Subsidiary Loan Party shall so state in writing, or any Subsidiary Loan Party shall seek to terminate its Subsidiary Guarantee Agreement without the written consent of the Lenders; or (o) an Event of Default shall occur under any other agreements evidencing Indebtedness owed to any of the Lenders or under any Hedging Agreement executed with any of the Lenders (taking into account any applicable notice and cure or grace period provisions thereof); then, and in every such event (other than an event with respect to the Borrower described in clause (g) or (h) of this Section) and at any time thereafter during the continuance of such event, the Administrative Agent may, and upon the written request of the Required Lenders shall, by notice to the Borrower, take any or all of the following actions, at the same or different times: (i) terminate the Commitments, whereupon the Commitment of each Lender shall terminate immediately; (ii) declare the principal of and any accrued interest on the Loans, and all other Obligations owing hereunder, to be, whereupon the same shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower and (iii) exercise all remedies contained in any other Loan Document; and that, if an Event of Default specified in either clause (g) or (h) shall occur, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon, and all fees, and all other Obligations shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. ARTICLE IX THE ADMINISTRATIVE AGENT SECTION 9.1 Appointment of Administrative Agent. (a) Each Lender irrevocably appoints SunTrust Bank as the Administrative Agent and authorizes it to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent under this Agreement and the other Loan Documents, together with all such actions and powers that are reasonably incidental thereto. The Administrative Agent may perform any of its duties hereunder by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions set forth in this Article shall apply to any such sub-agent and the Related Parties of the Administrative Agent and any such sub-agent and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. (b) The Issuing Bank 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 Bank with respect thereto; provided that the Issuing Bank shall have all the benefits and immunities (i) provided to the Administrative Agent in this Article IX with respect to any acts taken or omissions suffered by the Issuing Bank 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 the term "Administrative Agent" as used in this Article IX included the Issuing Bank with respect to such acts or omissions and (ii) as additionally provided in this Agreement with respect to the Issuing Bank. SECTION 9.2 Nature of Duties of Administrative Agent. The Administrative Agent shall not have any duties or obligations except those expressly set forth in this Agreement and the other Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or an Event of Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except those discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.2), and (c) except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.2) or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall not be deemed to have knowledge of any Default or Event of Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or any Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements, or other terms and conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article III or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. SECTION 9.3 Lack of Reliance on the Administrative Agent. Each of the Lenders and the Issuing Bank acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each of the Lenders, and the Issuing Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, continue to make its own decisions in taking or not taking of any action under or based on this Agreement, any related agreement or any document furnished hereunder or thereunder. SECTION 9.4 Certain Rights of the Administrative Agent. If the Administrative Agent shall request instructions from the Required Lenders with respect to any action or actions (including the failure to act) in connection with this Agreement, the Administrative Agent shall be entitled to refrain from such act or taking such act, unless and until it shall have received instructions from such Lenders; and the Administrative Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Lender shall have any right of action whatsoever against the Administrative Agent as a result of the Administrative Agent acting or refraining from acting hereunder in accordance with the instructions of the Required Lenders where required by the terms of this Agreement. SECTION 9.5 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed, sent or made by the proper Person. The Administrative Agent may also rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (including counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or not taken by it in accordance with the advice of such counsel, accountants or experts. SECTION 9.6 The Administrative Agent in its Individual Capacity. The bank serving as the Administrative Agent shall have the same rights and powers under this Agreement and any other Loan Document in its capacity as a Lender as any other Lender and may exercise or refrain from exercising the same as though it were not the Administrative Agent; and the terms "Lenders", "Required Lenders", "holders of Notes", or any similar terms shall, unless the context clearly otherwise indicates, include the Administrative Agent in its individual capacity. The bank acting as the Administrative Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or Affiliate of the Borrower as if it were not the Administrative Agent hereunder. SECTION 9.7 Successor Administrative Agent. (a) The Administrative Agent may resign at any time by giving notice thereof to the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Administrative Agent, subject to the approval by the Borrower provided that no Default or Event of Default shall exist at such time. If no successor Administrative Agent shall have been so appointed, and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent, which shall be a commercial bank organized under the laws of the United States of America or any state thereof or a bank which maintains an office in the United States, having a combined capital and surplus of at least $500,000,000. (b) Upon the acceptance of its appointment as the Administrative Agent hereunder by a successor, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. If within 45 days after written notice is given of the retiring Administrative Agent's resignation under this Section 9.7 no successor Administrative Agent shall have been appointed and shall have accepted such appointment, then on such 45th day (i) the retiring Administrative Agent's resignation shall become effective, (ii) the retiring Administrative Agent shall thereupon be discharged from its duties and obligations under the Loan Documents, and (iii) the Required Lenders shall thereafter perform all duties of the retiring Administrative Agent under the Loan Documents until such time as the Required Lenders appoint a successor Administrative Agent as provided above. After any retiring Administrative Agent's resignation hereunder, the provisions of this Article IX shall continue in effect for the benefit of such retiring Administrative Agent and its representatives and agents in respect of any actions taken or not taken by any of them while it was serving as the Administrative Agent. ARTICLE X MISCELLANEOUS SECTION 10.1 Notices. (a) Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications to any party herein to be effective shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: To the Borrower: To the Administrative Agent SunTrust Bank For All Purposes other than 201 Fourth Avenue North Advances: P.O. Box 305110 Mail Code: TN Nashville 1907 Nashville, Tennessee 37230-5110 Attention: Bill Priester Telecopy Number: (615) 748-5117 To the Administrative Agent SunTrust Bank For Advances Only: 201 Fourth Avenue North P.O. Box 305110 Mail Code: TN Nashville 4800 Nashville, Tennessee 37230-5110 Attention: Leigh Ann Gregory Telecopy Number: (615) 748-4611 To the Issuing Bank: SunTrust Bank 201 Fourth Avenue North P.O. Box 305110 Mail Code: TN Nashville 1907 Nashville, Tennessee 37230-5110 Attention: Bill Priester Telecopy Number: (615) 748-5117 To any other Lender: the address set forth in the Administrative Questionnaire Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All such notices and other communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the mails or if delivered, upon delivery; provided that notices delivered to the Administrative Agent, or the Issuing Bank shall not be effective until actually received by such Person at its address specified in this Section 10.1. (b) Any agreement of the Administrative Agent and the Lenders herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of the Borrower. The Administrative Agent and the Lenders shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Borrower to give such notice and the Administrative Agent and Lenders shall not have any liability to the Borrower or other Person on account of any action taken or not taken by the Administrative Agent or the Lenders in reliance upon such telephonic or facsimile notice. The obligation of the Borrower to repay the Loans and all other Obligations hereunder shall not be affected in any way or to any extent by any failure of the Administrative Agent and the Lenders to receive written confirmation of any telephonic or facsimile notice or the receipt by the Administrative Agent and the Lenders of a confirmation which is at variance with the terms understood by the Administrative Agent and the Lenders to be contained in any such telephonic or facsimile notice. SECTION 10.2 Waiver; Amendments. (a) No failure or delay by the Administrative Agent, the Issuing Bank or any Lender in exercising any right or power hereunder or any other Loan Document, and no course of dealing between the Borrower and the Administrative Agent or any Lender, shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power or any abandonment or discontinuance of steps to enforce such right or power, preclude any other or further exercise thereof or the exercise of any other right or power hereunder or thereunder. The rights and remedies of the Administrative Agent, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies provided by law. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or the issuance of a Letter of Credit shall not be construed as a waiver of any Default or Event of Default, regardless of whether the Administrative Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default or Event of Default at the time. (b) No amendment or waiver of any provision of this Agreement or the other Loan Documents, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Borrower and the Required Lenders or the Borrower and the Administrative Agent with the consent of the Required Lenders and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that no amendment or waiver shall: (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the date fixed for any payment of any principal of, or interest on, any Loan or LC Disbursement or interest thereon or any fees hereunder or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date for the termination or reduction of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.18(c) in a manner that would alter the pro rata sharing of payments required thereby , without the written consent of each Lender, (v) change any of the provisions of this Section or the definition of "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders which are required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the consent of each Lender; (vi) release any guarantor or limit the liability of any such guarantor under any guaranty agreement; (vii) release all or substantially all collateral (if any) securing any of the Obligations; provided further, that no such agreement shall amend, modify or otherwise affect the rights, duties or obligations of the Administrative Agent, or the Issuing Bank without the prior written consent of such Person. SECTION 10.3 Expenses; Indemnification. (a) The Borrower shall pay (i) all reasonable, out-of-pocket costs and expenses of the Administrative Agent, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of the Loan Documents and any amendments, modifications or waivers thereof (whether or not the transactions contemplated in this Agreement or any other Loan Document shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out-of-pocket costs and expenses (including, without limitation, the reasonable fees, charges and disbursements of outside counsel and the allocated cost of inside counsel) incurred by the Administrative Agent or the Issuing Bank in connection with the enforcement or protection of its rights in connection with this Agreement, including its rights under this Section, or in connection with the Loans made or any Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit. (b) The Borrower shall indemnify the Administrative Agent, the Issuing Bank and each Lender, and each Related Party of any of the foregoing (each, an "INDEMNITEE") against, and hold each of them harmless from, any and all costs, losses, liabilities, claims, damages and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, which may be reasonably incurred by or asserted against any Indemnitee arising out of, in connection with or as a result of (i) the execution or delivery of this Agreement or any other agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of any of the transactions contemplated hereby, (ii) any Loan or Letter of Credit or any actual or proposed use of the proceeds therefrom (including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned by the Borrower or any Subsidiary or any Environmental Liability related in any way to the Borrower or any Subsidiary or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that the Borrower shall not be obligated to indemnify any Indemnitee for any of the foregoing arising out of such Indemnitee's gross negligence or willful misconduct as determined by a court of competent jurisdiction in a final and nonappealable judgment. (c) The Borrower shall pay, and hold the Administrative Agent and each of the Lenders harmless from and against, any and all present and future stamp, documentary, indebtedness taxes, and other similar taxes incurred with respect to perfecting its and their Liens in and against the Collateral. (d) To the extent that the Borrower fails to pay any amount required to be paid to the Administrative Agent, or the Issuing Bank under clauses (a), (b) or (c) hereof, each Lender severally agrees to pay to the Administrative Agent, or the Issuing Bank, as the case may be, such Lender's Pro Rata Share (determined as of the time that the unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified payment, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent, the Issuing Bank in its capacity as such. (e) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to actual or direct damages) arising out of, in connection with or as a result of, this Agreement or any agreement or instrument contemplated hereby, the transactions contemplated therein, any Loan or any Letter of Credit or the use of proceeds thereof. (f) All amounts due under this Section shall be payable promptly after written demand therefor. SECTION 10.4 Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void). (b) Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including all or a portion of its Commitment and the Loans and LC Exposure at the time owing to it); provided that (i) except in the case of an assignment to a Lender or an Affiliate of a Lender, each of the Borrower and the Administrative Agent (and, in the case of an assignment of all or a portion of a Commitment or any Lender's obligations in respect of its LC Exposure, the Issuing Bank) must give their prior written consent (which consent shall not be unreasonably withheld or delayed), (ii) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire amount of the assigning Lender's Commitment hereunder or an assignment while an Event of Default has occurred and is continuing, the amount of the Commitment 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 $5,000,000.00 (unless the Borrower and the Administrative Agent shall otherwise consent), (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement and the other Loan Documents, (iv) the assigning Lender and the assignee shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee payable by the assigning Lender or the assignee (as determined between such Persons) in an amount equal to $3,500 and (v) such assignee, if it is not a Lender, shall deliver a duly completed Administrative Questionnaire to the Administrative Agent; provided that any consent of the Borrower otherwise required hereunder shall not be required if an Event of Default has occurred and is continuing. Upon the execution and delivery of the Assignment and Acceptance and payment by such assignee to the assigning Lender of an amount equal to the purchase price agreed between such Persons, such assignee shall become a party to this Agreement and any other Loan Documents to which such assigning Lender is a party and, to the extent of such interest assigned by such Assignment and Acceptance, shall have the rights and obligations of a Lender under this Agreement, and the assigning Lender shall be released from its obligations hereunder to a corresponding extent (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.14, 2.15 and 2.16 and 10.3. Upon the consummation of any such assignment hereunder, the assigning Lender, the Administrative Agent and the Borrower shall make appropriate arrangements to have new Notes issued if so requested by either or both the assigning Lender or the assignee. Any assignment or other transfer by a Lender that does not fully comply with the terms of this clause (b) shall be treated for purposes of this Agreement as a sale of a participation pursuant to clause (c) below. (c) Any Lender may at any time, without the consent of the Borrower, the Administrative Agent, or the Issuing Bank, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitment, the Loans owing to it and its LC Exposure); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of its obligations hereunder, and (iii) the Borrower, the Administrative Agent, the Issuing Bank 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 Agreement and the other Loan Documents. Any agreement between such Lender and the Participant with respect to such participation shall provide that such Lender shall retain the sole right and responsibility to enforce this Agreement and the other Loan Documents and the sole right to approve any amendment, modification, consent, or waiver regarding this Agreement and the other Loan Documents; provided that such participation agreement may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver of this Agreement described in the first proviso of Section 10.2(b) that affects the Participant. (d) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement and its Notes (if any) to secure its obligations to a Federal Reserve Bank without complying with this Section; 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. (e) Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Lender") may grant to a special purpose funding vehicle (an "SPV"), identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPV to make any Loan and (ii) if an SPV elects not to exercise such option or otherwise fails to provide all or any part of any Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPV hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if such Loan were made by such Granting Lender. Each party hereto hereby agrees that no SPV shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPV, it will not institute against, or join any other person in instituting against, such SPV any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State. Notwithstanding anything to the contrary contained in this Section 10.4, any SPV may (i) with notice to, but without the prior written consent of, the Borrower and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to the Granting Lender or to any financial institutions (consented to by the Borrower and the Administrative Agent) providing liquidity and/or credit support to or for the account of such SPV to support the funding or maintenance of Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPV. As this Section 10.4(e) applies to any particular SPV, this Section may not be amended without the written consent of such SPV. SECTION 10.5 Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement and the other Loan Documents shall be construed in accordance with and be governed by the law (without giving effect to the conflict of law principles thereof) of the State of Tennessee. (b) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the non-exclusive jurisdiction of the United States District Court of the Middle District of Tennessee, and of any state court of the State of Tennessee located in Davidson County and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document or the transactions contemplated hereby or thereby, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Tennessee state court or, to the extent permitted by applicable law, such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or its properties in the courts of any jurisdiction. (c) The Borrower irrevocably and unconditionally waives any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding described in paragraph (b) of this Section and brought in any court referred to in paragraph (b) of this Section. Each of the parties hereto irrevocably waives, to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Each party to this Agreement irrevocably consents to the service of process in the manner provided for notices in Section 10.1. Nothing in this Agreement or in any other Loan Document will affect the right of any party hereto to serve process in any other manner permitted by law. SECTION 10.6 WAIVER OF JURY TRIAL. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 10.7 Right of Setoff. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, each Lender and the Issuing Bank shall have the right, at any time or from time to time upon the occurrence and during the continuance of an Event of Default, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, to set off and apply against all deposits (general or special, time or demand, provisional or final) of the Borrower at any time held or other obligations at any time owing by such Lender and the Issuing Bank to or for the credit or the account of the Borrower against any and all Obligations held by such Lender or the Issuing Bank, as the case may be, irrespective of whether such Lender or the Issuing Bank shall have made demand hereunder and although such Obligations may be unmatured. Each Lender and the Issuing Bank agree promptly to notify the Administrative Agent and the Borrower after any such set-off and any application made by such Lender and the Issuing Bank, as the case may be; provided that the failure to give such notice shall not affect the validity of such set-off and application. SECTION 10.8 Counterparts; Integration. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. This Agreement, the other Loan Documents, and any separate letter agreement(s) relating to any fees payable to the Administrative Agent constitute the entire agreement among the parties hereto and thereto regarding the subject matters hereof and thereof and supersede all prior agreements and understandings, oral or written, regarding such subject matters. SECTION 10.9 Survival. All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.15, 2.16, 2.17, and 10.3 and Article IX shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof. SECTION 10.10 Severability. Any provision of this Agreement or any other Loan Document held to be illegal, invalid or unenforceable in any jurisdiction, shall, as to such jurisdiction, be ineffective to the extent of such illegality, invalidity or unenforceability without affecting the legality, validity or enforceability of the remaining provisions hereof or thereof; and the illegality, invalidity or unenforceability of a particular provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 10.11 Confidentiality. Each of the Administrative Agent, the Issuing Bank and each Lender agrees to take normal and reasonable precautions to maintain the confidentiality of any information designated in writing as confidential and provided to it by the Borrower or any Subsidiary, except that such information may be disclosed (i) to any Related Party of the Administrative Agent, the Issuing Bank or any such Lender, including without limitation accountants, legal counsel and other advisors, (ii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (iii) to the extent requested by any regulatory agency or authority having jurisdiction, (iv) to the extent that such information becomes publicly available other than as a result of a breach of this Section, or which becomes available to the Administrative Agent, the Issuing Bank, any Lender or any Related Party of any of the foregoing on a nonconfidential basis from a source other than the Borrower, (v) in connection with the exercise of any remedy hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, and (ix) subject to provisions substantially similar to this Section 10.11, to any actual or prospective assignee or Participant, or (vi) with the consent of the Borrower. Any Person required to maintain the confidentiality of any information as provided for 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 such Person would accord its own confidential information. SECTION 10.12 Interest and Loan Charges Not to Exceed Maximum Amounts Allowed by Law. Anything in this Agreement, the Notes, the Security Documents or any of the other Loan Documents to the contrary notwithstanding, in no event whatsoever, whether by reason of advancement of proceeds of the Loans, acceleration of the maturity of the unpaid balance of the Loans or otherwise, shall the interest and loan charges agreed to be paid to any Lender for the use of the money advanced or to be advanced hereunder exceed the maximum amounts collectible under applicable laws in effect from time to time. It is understood and agreed by the parties that, if for any reason whatsoever the interest or loan charges paid or contracted to be paid by Borrower in respect of the Loans shall exceed the maximum amounts collectible under applicable laws in effect from time to time, then ipso facto, the obligation to pay such interest and/or loan charges shall be reduced to the maximum amounts collectible under applicable laws in effect from time to time, and any amounts collected by any Lender that exceed such maximum amounts shall be applied to the reduction of the principal balance of the Loans and/or refunded to Borrower so that at no time shall the interest or loan charges paid or payable in respect of the Loans exceed the maximum amounts permitted from time to time by applicable law. (remainder of page left intentionally blank) IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. AMERICAN HEALTHWAYS, INC. By: ---------------------------------------------- Name: ---------------------------------- Title: --------------------------------- SUNTRUST BANK as Administrative Agent, as Issuing Bank, as a Lender By: ---------------------------------------------- Name: ---------------------------------- Title: --------------------------------- Revolving Commitment: $15,000,000.00 LC Commitment: $15,000,000.00 BANK OF AMERICA, N.A. By: ------------------------------------------------- Name: -------------------------------------- Title: -------------------------------------- Revolving Commitment: $10,000,000.00 LC Commitment: $10,000,000.00 U.S. BANK NATIONAL ASSOCIATION By: ------------------------------------------------- Name: -------------------------------------- Title: -------------------------------------- Revolving Commitment: $10,000,000.00 LC Commitment: $10,000,000.00 EX-10.2 4 g80160exv10w2.txt FORM OF REVOLVING CREDIT NOTE EXHIBIT 10.2 FORM OF REVOLVING CREDIT NOTE $_____________________ Nashville, Tennessee November 22, 2002 FOR VALUE RECEIVED, the undersigned, AMERICAN HEALTHWAYS, INC., a Delaware corporation (the "BORROWER"), hereby promises to pay to______________ ____________________________________ (the "LENDER") or its registered assigns, at the office of ("______________________") at ____________________, on the Commitment Termination Date (as defined in the Amended and Restated Revolving Credit Agreement dated as of November 22, 2002, (as the same may be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), among the Borrower, the lenders from time to time party thereto and SunTrust Bank, as administrative agent for the lenders, the lesser of (i) the principal sum of __________ and 00/100 ($___________) or (ii) the aggregate unpaid principal amount of all Revolving Loans made by the Lender to the Borrower pursuant to the Credit Agreement, in lawful money of the United States of America in immediately available funds, and to pay interest from the date hereof on the principal amount thereof from time to time outstanding, in like funds, at said office, at the rate or rates per annum and payable on such dates as provided in the Credit Agreement. In addition, should legal action or an attorney-at-law be utilized to collect any amount due hereunder, the Borrower further promises to pay all costs of collection, including the reasonable attorneys' fees of the Lender. The Borrower promises to pay interest, on demand, on any overdue principal and, to the extent permitted by law, overdue interest from their due dates at a rate or rates provided in the Credit Agreement. In no event (i) shall Advances be made hereunder in excess of the Borrowing Base, nor (ii) shall amounts outstanding hereunder be permitted to exceed the Borrowing Base. All borrowings evidenced by this Revolving Credit Note and all payments and prepayments of the principal hereof and the date thereof shall be endorsed by the holder hereof on the schedule attached hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof, or otherwise recorded by such holder in its internal records; provided that the failure of the holder hereof to make such a notation or any error in such notation shall not affect the obligations of the Borrower to make the payments of principal and interest in accordance with the terms of this Revolving Credit Note and the Credit Agreement. Anything in this Note or in any of the other Loan Documents to the contrary notwithstanding, in no event whatsoever, whether by reason of advancement of proceeds hereunder, acceleration of the maturity of the unpaid balance hereunder or otherwise, shall the interest and loan charges agreed to be paid to any Lender for the use of the money advanced or to be advanced hereunder exceed the maximum amounts collectible under applicable laws in effect from time to time. It is understood and agreed by the parties that, if for any reason whatsoever the interest or loan charges paid or contracted to be paid by Borrower in respect of this Note shall exceed the maximum amounts collectible under applicable laws in effect from time to time, then ipso facto, the obligation to pay such interest and/or loan charges shall be reduced to the maximum amounts collectible under applicable laws in effect from time to time, and any amounts collected by the Lender that exceed such maximum amounts shall be applied to the reduction of the principal balance hereunder and/or refunded to Borrower so that at no time shall the interest or loan charges paid or payable in respect of the indebtedness evidenced herein exceed the maximum amounts permitted from time to time by applicable law. This Revolving Credit Note is issued in connection with, and is entitled to the benefits of, the Credit Agreement which, among other things, contains provisions for the acceleration of the maturity hereof upon the happening of certain events, for prepayment of the principal hereof prior to the maturity hereof and for the amendment or waiver of certain provisions of the Credit Agreement, all upon the terms and conditions therein specified. THIS REVOLVING CREDIT NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TENNESSEE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. AMERICAN HEALTHWAYS, INC. By: ---------------------------------- Name: Title: [SEAL] LOANS AND PAYMENTS

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EX-10.3 5 g80160exv10w3.txt FORM OF SUBSIDIARY GUARANTY AGREEMENT EXHIBIT 10.3 [FORM OF] SUBSIDIARY GUARANTEE AGREEMENT SUBSIDIARY GUARANTEE AGREEMENT dated as of November 22, 2002 , among each of the Subsidiaries listed on Schedule I hereto (each such subsidiary individually, a "Guarantor" and collectively, the "Guarantors") of AMERICAN HEALTHWAYS, INC., a Delaware corporation (the "Borrower"), and SUNTRUST BANK, a Georgia banking corporation, as administrative agent (the "Administrative Agent") for the Lenders (as defined in the Credit Agreement referred to below). Reference is made to the Amended and Restated Revolving Credit Agreement dated as of November 22, 2002 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the lenders from time to time party thereto (the "Lenders") and SunTrust Bank, as administrative agent for the Lenders (in such capacity, the "Administrative Agent"), and issuing bank (in such capacity, the "Issuing Bank"). Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Lenders have agreed to make Loans to the Borrower, and the Issuing Bank has agreed to issue Letters of Credit for the account of the Borrower, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. Each of the Guarantors is a direct or indirect wholly-owned Subsidiary of the Borrower and acknowledges that it will derive substantial benefit from the making of the Loans by the Lenders, and the issuance of the Letters of Credit by the Issuing Bank. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit are conditioned on, among other things, the execution and delivery by the Guarantors of a Subsidiary Guarantee Agreement in the form hereof. As consideration therefor and in order to induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit, the Guarantors are willing to execute this Subsidiary Guarantee Agreement. Accordingly, the parties hereto agree as follows: SECTION 1. Guarantee. Each Guarantor unconditionally guarantees, jointly with the other Guarantors and severally, as a primary obligor and not merely as a surety, (a) the due and punctual payment of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement or disbursements, interest thereon and obligations to provide cash collateral, and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Loan Parties to the Administrative Agent and the Lenders under the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Loan Parties under or pursuant to the Credit Agreement and the other Loan Documents; and (c) the due and punctual payment and performance of all obligations of the Borrower, monetary or otherwise, under each Hedging Agreement entered into with a counterparty that was a Lender or an Affiliate of a Lender at the time such Hedging Agreement was entered into (all the monetary and other obligations referred to in the preceding clauses (a) through (c) being collectively called the "Obligations"). Each Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Obligation. SECTION 2. Obligations Not Waived. To the fullest extent permitted by applicable law, each Guarantor waives presentment to, demand of payment from and protest to the Borrower of any of the Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment. To the fullest extent permitted by applicable law, the obligations of each Guarantor hereunder shall not be affected by (a) the failure of the Administrative Agent or any Lender to assert any claim or demand or to enforce or exercise any right or remedy against the Borrower or any other Guarantor under the provisions of the Credit Agreement, any other Loan Document or otherwise, (b) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, this Agreement, any other Loan Document, any Guarantee or any other agreement, including with respect to any other Guarantor under this Agreement, or (c) the failure to perfect any security interest in, or the release of, any of the security held by or on behalf of the Administrative Agent or any Lender. SECTION 3. Security. Each of the Guarantors authorizes the Administrative Agent and each of the Lenders to (a) take and hold security for payment of this Guarantee and the Obligations and exchange, enforce, waive and release any such security, (b) apply such security and direct the order or manner of sale thereof as they in their sole discretion may determine and (c) release or substitute any one or more endorsees, other guarantors of other obligors. SECTION 4. Guarantee of Payment. Each Guarantor further agrees that its guarantee constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Administrative Agent or any Lender to any of the security held for payment of the Obligations or to any balance of any deposit account or credit on the books of the Administrative Agent or any Lender in favor of the Borrower or any other person. SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Obligations), including any claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by the failure of the Administrative Agent or any Lender to assert any claim or demand or to enforce any remedy under the Credit Agreement, any other Loan Document or any other agreement, by any waiver or modification of any provision of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or omission that may or might in any manner or to the extent vary the risk of any Guarantor or that would otherwise operate as a discharge of each Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations). SECTION 6. Defenses of Borrower Waived. To the fullest extent permitted by applicable law, each Guarantor waives any defense based on or arising out of any defense of the Borrower or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower, other than the final and indefeasible payment in full in cash of the Obligations. The Administrative Agent and the Lenders may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with the Borrower or any other guarantor, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Obligations have been fully, finally and indefeasibly paid in cash. Pursuant to applicable law, each Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower or any other Guarantor or guarantor, as the case may be, or any security. SECTION 7. Agreement to Pay; Subordination. In furtherance of the foregoing and not in limitation of any other right that the Administrative Agent or any Lender has at law or in equity against any Guarantor by virtue hereof, upon the failure of the Borrower or any other Loan Party to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Administrative Agent for the benefit of the Lenders in cash the amount of such unpaid Obligations. Upon payment by any Guarantor of any sums to the Administrative Agent, all rights of such Guarantor against the Borrower arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible payment in full in cash of all the Obligations. In addition, any indebtedness of the Borrower now or hereafter held by any Guarantor is hereby subordinated in right of payment to the prior payment in full in cash of the Obligations. If any amount shall erroneously be paid to any Guarantor on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of the Borrower, such amount shall be held in trust for the benefit of the Administrative Agent and the Lenders and shall forthwith be paid to the Administrative Agent to be credited against the payment of the Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents. SECTION 8. Information. Each Guarantor assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that none of the Administrative Agent or the Lenders will have any duty to advise any of the Guarantors of information known to it or any of them regarding such circumstances or risks. SECTION 9. Representations and Warranties. Each Guarantor represents and warrants as to itself that all representations and warranties relating to it (as a Subsidiary of the Borrower) contained in the Credit Agreement are true and correct as of the date made. SECTION 10. Termination. The guarantees made hereunder (a) shall terminate when all the Obligations have been paid in full in cash and the Lenders have no further commitment to lend under the Credit Agreement, the LC Exposure has been reduced to zero and the Issuing Bank has no further obligation to issue Letters of Credit under the Credit Agreement and (b) shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Lender or any Guarantor upon the bankruptcy or reorganization of the Borrower, any Guarantor or otherwise. In connection with the foregoing, the Administrative Agent shall execute and deliver to such Guarantor or Guarantor's designee, at such Guarantor's expense, any documents or instruments which such Guarantor shall reasonably request from time to time to evidence such termination and release. SECTION 11. Binding Effect; Several Agreement; Assignments. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Guarantors that are contained in this Agreement shall bind and inure to the benefit of each party hereto and their respective successors and assigns. This Agreement shall become effective as to any Guarantor when a counterpart hereof executed on behalf of such Guarantor shall have been delivered to the Administrative Agent, and a counterpart hereof shall have been executed on behalf of the Administrative Agent, and thereafter shall be binding upon such Guarantor and the Administrative Agent and their respective successors and assigns, and shall inure to the benefit of such Guarantor, the Administrative Agent and the Lenders, and their respective successors and assigns, except that no Guarantor shall have the right to assign its rights or obligations hereunder or any interest herein (and any such attempted assignment shall be void). If all of the capital stock of a Guarantor is sold, transferred or otherwise disposed of pursuant to a transaction permitted by the Credit Agreement, such Guarantor shall be released from its obligations under this Agreement without further action. This Agreement shall be construed as a separate agreement with respect to each Guarantor and may be amended, modified, supplemented, waived or released with respect to any Guarantor without the approval of any other Guarantor and without affecting the obligations of any other Guarantor hereunder. SECTION 12. Waivers; Amendment. (a) No failure or delay of the Administrative Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and of the Administrative Agent hereunder and of the Lenders under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Guarantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver and consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Guarantor in any case shall entitle such Guarantor to any other or further notice in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Guarantors with respect to which such waiver, amendment or modification relates and the Administrative Agent, with the prior written consent of the Required Lenders (except as otherwise provided in the Credit Agreement). SECTION 13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TENNESSEE. SECTION 14. Notices. All communications and notices hereunder shall be in writing and given as provided in Section 10.01 of the Credit Agreement. All communications and notices hereunder to each Guarantor shall be given to it at its address set forth on Schedule I attached hereto. SECTION 15. Survival of Agreement; Severability. (a) All covenants, agreements representations and warranties made by the Guarantors herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or the other Loan Document shall be considered to have been relied upon by the Administrative Agent and the Lenders and shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit by the Issuing Bank regardless of any investigation made by any of them or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any other fee or amount payable under this Agreement or any other Loan Document is outstanding and unpaid or the LC Exposure does not equal zero and as long as the Commitments have not been terminated. (b) In the event one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 16. Counterparts. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract (subject to Section 11), and shall become effective as provided in Section 11. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Agreement. SECTION 17. Rules of Interpretation. The rules of interpretation specified in Section 1.03 of the Credit Agreement shall be applicable to this Agreement. SECTION 18. Jurisdiction; Consent to Service of Process. (a) Each Guarantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any Tennessee State court or Federal court of the United States of America sitting in Nashville, Tennessee, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Tennessee State court or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Guarantor or its properties in the courts of any jurisdiction. (b) Each Guarantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any Tennessee State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 14. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 19. Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 19. SECTION 20. Additional Guarantors. Pursuant to Section 5.12 of the Credit Agreement, each Subsidiary Loan Party that was not in existence on the date of the Credit Agreement is required to enter into this Agreement as a Guarantor upon becoming Subsidiary Loan Party. Upon execution and delivery after the date hereof by the Administrative Agent and such Subsidiary of an instrument in the form of Annex 1, such Subsidiary shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor herein. The execution and delivery of any instrument adding an additional Guarantor as a party to this Agreement shall not require the consent of any other Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Agreement. SECTION 21. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and the Issuing Bank are 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 the Issuing Bank to or for the credit or the account of any Guarantor against any or all the obligations of such Guarantor now or hereafter existing under this Agreement and the other Loan Documents held by such Lender or the Issuing Bank, irrespective of whether or not such Person shall have made any demand under this Agreement or any other Loan Document and although such obligations may be unmatured. The rights of each Lender and the Issuing Bank under this Section 21 are in addition to other rights and remedies (including other rights of setoff) which such Lender or the Issuing Bank, as the case may be, may have. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. GUARANTORS: AMERICAN HEALTHWAY SERVICES, INC. By: -------------------------------------------- Name: Title: CARESTEPS.COM, INC. By: -------------------------------------------- Name: Title: AXONAL INFORMATION SOLUTIONS, INC. By: -------------------------------------------- Name: Title: ACCEPTED BY: SUNTRUST BANK, as Administrative Agent By: ---------------------- Name: Title: SCHEDULE I TO THE SUBSIDIARY GUARANTEE AGREEMENT

GUARANTOR(S) ADDRESS ------------ ------- American Healthways Services, Inc. 3841 Green Hills Village Drive Suite 300 Nashville, Tennessee 37230-5110 CareSteps.com., Inc. 3841 Green Hills Village Drive Suite 300 Nashville, Tennessee 37230-5110 Axonal Information Solutions, Inc. 3841 Green Hills Village Drive Suite 300 Nashville, Tennessee 37230-5110

ANNEX 1 TO THE SUBSIDIARY GUARANTEE AGREEMENT SUPPLEMENT NO. [ ] dated as of [ ], to the Subsidiary Guarantee Agreement (the "Guarantee Agreement") dated as of [ ] among each of the subsidiaries listed on Schedule I thereto (each such Subsidiary individually, a "Guarantor" and collectively, the "Guarantors") of AMERICAN HEALTHWAYS, INC., a Delaware corporation (the "Borrower"), and SUNTRUST BANK, a Georgia banking corporation, as Administrative Agent (the "Administrative Agent") for the Lenders (as defined in the Credit Agreement referred to below). A. Reference is made to the Amended and Restated Revolving Credit Agreement dated as of November 22, 2002 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the lenders from time to time party thereto (the "Lenders") and SunTrust Bank, as Administrative Agent, and issuing bank (in such capacity, the "Issuing Bank"). Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Guarantee Agreement and the Credit Agreement. C. The Guarantors have entered into the Guarantee Agreement in order to induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit. Pursuant to Section 5.12 of the Credit Agreement, each Subsidiary Loan Party that was not in existence or not a Subsidiary Loan Party on the date of the Credit Agreement is required to enter into the Guarantee Agreement as a Guarantor upon becoming a Subsidiary Loan Party. Section 20 of the Guarantee Agreement provides that additional Subsidiaries of the Borrower may become Guarantors under the Guarantee Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary of the Borrower (the "New Guarantor") is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Guarantor under the Guarantee Agreement in order to induce the Lenders to make additional Loans and the Issuing Bank to issue additional Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued. Accordingly, the Administrative Agent and the New Guarantor agree as follows: SECTION 1. In accordance with Section 20 of the Guarantee Agreement, the New Guarantor by its signature below becomes a Guarantor under the Guarantee Agreement with the same force and effect as if originally named therein as a Guarantor and the New Guarantor hereby (a) agrees to all the terms and provisions of the Guarantee Agreement applicable to it as Guarantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Guarantor thereunder are true and correct on and as of the date hereof. Each reference to a Guarantor in the Guarantee Agreement shall be deemed to include the New Guarantor. The Guarantee Agreement is hereby incorporated herein by reference. SECTION 2. The New Guarantor represents and warrants to the Administrative Agent and the Lenders that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. SECTION 3. This Supplement may be executed in counterparts each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Administrative Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Guarantor and the Administrative Agent. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Supplement. SECTION 4. Except as expressly supplemented hereby, the Guarantee Agreement shall remain in full force and effect. SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TENNESSEE. SECTION 6. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Guarantee Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision hereof in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7. All communications and notices hereunder shall be in writing and given as provided in Section 14 of the Guarantee Agreement. All communications and notices hereunder to the New Guarantor shall be given to it at the address set forth under its signature below, with a copy to the Borrower. SECTION 8. The New Guarantor agrees to reimburse the Administrative Agent for its out-of-pocket expenses in connection with this Supplement, including the fees, disbursements and other charges of counsel for the Administrative Agent. IN WITNESS WHEREOF, the New Guarantor and the Administrative Agent have duly executed this Supplement to the Guarantee Agreement as of the day and year first above written. [Name of New Guarantor] By: --------------------------------------- Name: Title: Address: SUNTRUST BANK, as Administrative Agent By: --------------------------------------- Name: Title: EX-11 6 g80160exv11.txt EARNINGS PER SHARE RECONCILIATION EXHIBIT 11 AMERICAN HEALTHWAYS, INC. EARNINGS PER SHARE RECONCILIATION NOVEMBER 30, 2002 (UNAUDITED) The following is a reconciliation of the numerator and denominator of basic and diluted income per share (adjusted for the stock split effective November 2001 for the prior year period)

Three Months Ended November 30, ---------------------------------- 2002 2001 ----------- ----------- Numerator: Net income $ 3,698,653 $ 1,494,192 Effect of dilutive securities -- -- ----------- ----------- Numerator for diluted income per share $ 3,698,653 $ 1,494,192 =========== =========== Denominator: Shares used for basic income per share 15,396,399 14,372,604 Effect of dilutive stock options outstanding 948,717 1,225,846 ----------- ----------- Shares used for diluted income per share 16,345,116 15,598,450 =========== =========== Basic income per share: $ 0.24 $ 0.10 =========== =========== Diluted income per share $ 0.23 $ 0.10 =========== ===========

EX-99.1 7 g80160exv99w1.txt SECTION 906 CERTIFICATION OF THE CEO 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 Quarterly Report of American Healthways, Inc. (the "Company") on Form 10-Q for the period ending November 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Thomas G. Cigarran, Chairman of the Board and 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/ Thomas G. Cigarran - ------------------------------------------------------- Thomas G. Cigarran Chairman of the Board and Chief Executive Officer January 13, 2003 EX-99.2 8 g80160exv99w2.txt SECTION 906 CERTIFICATION OF THE CFO 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 Quarterly Report of American Healthways, Inc. (the "Company") on Form 10-Q for the period ending November 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Mary A. Chaput, Executive Vice President and Chief Financial 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/ Mary A. Chaput - ------------------------------------------------------- Mary A. Chaput Executive Vice President and Chief Financial Officer January 13, 2003 -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.1

                                                                    EXHIBIT 10.1




                              AMENDED AND RESTATED
                           REVOLVING CREDIT AGREEMENT



                          DATED AS OF NOVEMBER 22, 2002



                                      AMONG



                            AMERICAN HEALTHWAYS, INC.
                                   AS BORROWER



                   THE LENDERS FROM TIME TO TIME PARTY HERETO


                                       AND



                                  SUNTRUST BANK
                             AS ADMINISTRATIVE AGENT










================================================================================











                        
ARTICLE I                  DEFINITIONS; CONSTRUCTION.............................................................1

         Section 1.1                Definitions..................................................................1

         Section 1.2                Classifications of Loans and Borrowings.....................................16

         Section 1.3                Accounting Terms and Determination..........................................16

         Section 1.4                Terms Generally.............................................................16

ARTICLE II                 AMOUNT AND TERMS OF THE COMMITMENTS..................................................17

         Section 2.1                General Description of Facilities...........................................17

         Section 2.2                Revolving Loans.............................................................17

         Section 2.3                Procedure for Borrowings....................................................17

         Section 2.4                Funding of Borrowings.......................................................18

         Section 2.5                Interest Elections..........................................................18

         Section 2.6                Optional Reduction and Termination of Commitments...........................19

         Section 2.7                Repayment of Loans..........................................................20

         Section 2.8                Evidence of Indebtedness....................................................20

         Section 2.9                Optional Prepayments........................................................20

         Section 2.10               Interest on Loans...........................................................21

         Section 2.11               Fees........................................................................21

         Section 2.12               Computation of Interest and Fees............................................22

         Section 2.13               Inability to Determine Interest Rates.......................................22

         Section 2.14               Illegality..................................................................23

         Section 2.15               Increased Costs.............................................................23

         Section 2.16               Funding Indemnity...........................................................24

         Section 2.17               Taxes.......................................................................25

         Section 2.18               Payments Generally; Pro Rata Treatment; Sharing of Set-Offs.................26

         Section 2.19               Mitigation of Obligations...................................................28

         Section 2.20               Letters of Credit...........................................................28

ARTICLE III                CONDITIONS PRECEDENT TO LOANS AND LETTERS OF CREDIT..................................32

         Section 3.1                Conditions To Effectiveness.................................................32

         Section 3.2                Each Credit Event...........................................................33

         Section 3.3                Delivery of Documents.......................................................34




                                       i


                                                                                                          
ARTICLE IV                 REPRESENTATIONS AND WARRANTIES.......................................................34

         Section 4.1                Existence; Power............................................................34

         Section 4.2                Organizational Power; Authorization.........................................34

         Section 4.3                Governmental Approvals; No Conflicts........................................34

         Section 4.4                Financial Statements........................................................35

         Section 4.5                Litigation and Environmental Matters........................................35

         Section 4.6                Compliance with Laws and Agreements.........................................35

         Section 4.7                Investment Company Act, Etc.................................................36

         Section 4.8                Taxes.......................................................................36

         Section 4.9                Margin Regulations..........................................................36

         Section 4.10               ERISA.......................................................................36

         Section 4.11               Ownership of Property.......................................................36

         Section 4.12               Disclosure..................................................................37

         Section 4.13               Labor Relations.............................................................37

         Section 4.14               Subsidiaries................................................................37

ARTICLE V                  AFFIRMATIVE COVENANTS................................................................37

         Section 5.1                Financial Statements and Other Information..................................37

         Section 5.2                Notices of Material Events..................................................39

         Section 5.3                Existence; Conduct of Business..............................................40

         Section 5.4                Compliance with Laws, Etc...................................................40

         Section 5.5                Payment of Obligations......................................................40

         Section 5.6                Books and Records...........................................................40

         Section 5.7                Visitation, Inspection, Etc.................................................40

         Section 5.8                Maintenance of Properties; Insurance........................................40

         Section 5.9                Use of Proceeds and Letters of Credit.......................................41

         Section 5.10               Bank Accounts...............................................................41

         Section 5.11               Additional Subsidiaries.....................................................41

         Section 5.12               Additional Assets...........................................................41

ARTICLE VI                 FINANCIAL COVENANTS..................................................................41

         Section 6.1                Leverage Ratio..............................................................42

         Section 6.2                Consolidated Fixed Charge Coverage Ratio....................................42

         Section 6.3                Consolidated Net Worth......................................................42




                                       ii


                        
ARTICLE VII                NEGATIVE COVENANTS...................................................................42

         Section 7.1                Indebtedness................................................................42

         Section 7.2                Negative Pledge.............................................................43

         Section 7.3                Fundamental Changes.........................................................43

         Section 7.4                Investments, Loans, Etc.....................................................44

         Section 7.5                Restricted Payments.........................................................45

         Section 7.6                Sale of Assets..............................................................45

         Section 7.7                Transactions with Affiliates................................................45

         Section 7.8                Restrictive Agreements......................................................46

         Section 7.9                Sale and Leaseback Transactions.............................................46

         Section 7.10               Hedging Agreements..........................................................46

         Section 7.11               Status of Incorporation.....................................................46

         Section 7.12               Accounting Changes..........................................................46

ARTICLE VIII               EVENTS OF DEFAULT....................................................................46

         Section 8.1                Events of Default...........................................................46

ARTICLE IX                 THE ADMINISTRATIVE AGENT.............................................................49

         Section 9.1                Appointment of Administrative Agent.........................................49

         Section 9.2                Nature of Duties of Administrative Agent....................................50

         Section 9.3                Lack of Reliance on the Administrative Agent................................50

         Section 9.4                Certain Rights of the Administrative Agent..................................50

         Section 9.5                Reliance by Administrative Agent............................................51

         Section 9.6                The Administrative Agent in its Individual Capacity.........................51

         Section 9.7                Successor Administrative Agent..............................................51

ARTICLE X                  MISCELLANEOUS........................................................................52

         Section 10.1               Notices.....................................................................52

         Section 10.2               Waiver; Amendments..........................................................53

         Section 10.3               Expenses; Indemnification...................................................54

         Section 10.4               Successors and Assigns......................................................55

         Section 10.5               Governing Law; Jurisdiction; Consent to Service of Process..................58

         Section 10.6               WAIVER OF JURY TRIAL........................................................58

         Section 10.7               Right of Setoff.............................................................59

         Section 10.8               Counterparts; Integration...................................................59

         Section 10.9               Survival....................................................................59




                                      iii

                           
         Section 10.10              Severability................................................................60

         Section 10.11              Confidentiality.............................................................60

         Section 10.12              Interest and Loan Charges Not to Exceed Maximum Amounts Allowed by Law......60

Schedules

         Schedule 4.5(a)       -    Litigation
         Schedule 4.14         -    Subsidiaries
         Schedule 7.1          -    Outstanding Indebtedness
         Schedule 7.2          -    Existing Liens
         Schedule 7.4          -    Existing Investments


Exhibits

         Exhibit A             -    Revolving Credit Note
         Exhibit B             -    Form of Assignment and Acceptance
         Exhibit C             -    Form of Subsidiary Guarantee Agreement
         Exhibit D             -    Form of Indemnity, Subrogation and Contribution Agreement
         Exhibit E             -    Borrowing Base Certificate

         Exhibit 2.3           -    Notice of Borrowing
         Exhibit 2.5           -    Form of Notice of Continuation/Conversion
         Exhibit 3.1(b)(iv)    -    Form of Secretary's Certificate
         Exhibit 3.1(b)(vii)   -    Form of Officer's Certificate





                                       iv

                         REVOLVING CREDIT AGREEMENT


         THIS REVOLVING CREDIT AGREEMENT (this "Agreement") is made and entered
into as of November 22, 2002, by and among AMERICAN HEALTHWAYS, INC., a Delaware
corporation (the "Borrower"), SUNTRUST BANK, and the several banks and other
financial institutions from time to time party hereto (the "Lenders"), and
SUNTRUST BANK, in its capacity as Administrative Agent for the Lenders (the
"Administrative Agent").

                              W I T N E S S E T H:

         WHEREAS, the Borrower has requested that the Lenders establish a
$35,000,000 revolving credit facility, with a Letter of Credit sublimit for
stand-by Letters of Credit.

         WHEREAS, subject to the terms and conditions of this Agreement, the
Lenders severally, to the extent of their respective Commitments, are willing to
establish the requested revolving credit facility with a Letter of Credit
sublimit for stand-by letters of credit.

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Borrower, the Lenders and the Administrative
Agent agree as follows:

                                   ARTICLE I

                            DEFINITIONS; CONSTRUCTION

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

         "ADJUSTED LIBO RATE" shall mean, with respect to each Interest Period
for a Eurodollar Borrowing, the rate per annum obtained by dividing (i) LIBOR
for such Interest Period by (ii) a percentage equal to 1.00 minus the Eurodollar
Reserve Percentage, to the extent Eurodollar reserves are actually maintained.

         "ADMINISTRATIVE AGENT" shall have the meaning assigned to such term in
the opening paragraph hereof.

         "ADMINISTRATIVE QUESTIONNAIRE" shall mean, with respect to each Lender,
an administrative questionnaire in the form prepared by the Administrative Agent
and submitted to the Administrative Agent duly completed by such Lender.

         "AFFILIATE" shall mean, as to any Person, any other Person that
directly, or indirectly through one or more intermediaries, Controls, is
Controlled by, or is under common Control with, such Person.

         "AGGREGATE REVOLVING COMMITMENTS" shall mean the sum of the Revolving
Commitments of all Lenders at any time outstanding. On the Closing Date, the
Aggregate Revolving Commitments equal $35,000,000.00.


         "APPLICABLE LENDING OFFICE" shall mean, for each Lender and for each
Type of Loan, the "Lending Office" of such Lender (or an Affiliate of such
Lender) designated for such Type of Loan in the Administrative Questionnaire
submitted by such Lender or such other office of such Lender (or an Affiliate of
such Lender) as such Lender may from time to time specify to the Administrative
Agent and the Borrower as the office by which its Loans of such Type are to be
made and maintained.

         "APPLICABLE MARGIN" shall mean with respect to Eurodollar Loans and
Letters of Credit an amount equal to two hundred (200) basis points per annum.

         "APPLICABLE PERCENTAGE" shall mean, with respect to the Facility Fee an
amount equal to one quarter of one percent (.25%) per annum.

         "ASSIGNMENT AND ACCEPTANCE" shall mean an assignment and acceptance
entered into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 10.4(b)) and accepted by the Administrative
Agent, in the form of Exhibit B attached hereto or any other form approved by
the Administrative Agent.

         "AVAILABILITY PERIOD" shall mean the period from the Closing Date to
the Commitment Termination Date.

         "BASE RATE" shall mean the higher of (i) the per annum rate which the
Administrative Agent publicly announces from time to time to be its prime
lending rate, as in effect from time to time, and (ii) the Federal Funds Rate,
as in effect from time to time, plus one-half of one percent (0.50%). The
Administrative Agent's prime lending rate is a reference rate and does not
necessarily represent the lowest or best rate charged to customers. The
Administrative Agent may make commercial loans or other loans at rates of
interest at, above or below the Administrative Agent's prime lending rate. Each
change in the Administrative Agent's prime lending rate shall be effective from
and including the date such change is publicly announced as being effective.

         "BORROWER" shall have the meaning in the introductory paragraph hereof.

         "BORROWING" shall mean a borrowing consisting of Loans of the same
Type, made, converted or continued on the same date and in case of Eurodollar
Loans, as to which a single Interest Period is in effect.

         "BORROWING BASE" means the sum of: (i) Borrower's Unrestricted Cash and
Cash Equivalents, plus (ii) an amount equal to eighty percent (80%) of Eligible
Accounts Receivable, plus (iii) an amount equal to twenty-five percent (25%) of
Borrower's net property and equipment values, all as set forth on Borrower's
consolidated financial statements.

         "BORROWING BASE CERTIFICATE" means the Certificate in the form of
Exhibit E provided by Borrower to Lender pursuant to Section 5.1(g).

         "BUSINESS DAY" shall mean (i) any day other than a Saturday, Sunday or
other day on which commercial banks in Nashville, Tennessee are authorized or
required by law to close and (ii) if such day relates to a Borrowing of, a
payment or prepayment of principal or interest on, a



conversion of or into, or an Interest Period for, a Eurodollar Loan or a notice
with respect to any of the foregoing, any day on which dealings in Dollars are
carried on in the London interbank market.

         "CAPITAL EXPENDITURES" shall mean for any period, without duplication,
(a) the additions to property, plant and equipment and other capital
expenditures of the Borrower and its Subsidiaries that are (or would be) set
forth on a consolidated statement of cash flows of the Borrower for such period
prepared in accordance with GAAP, and (b) Capital Lease Obligations incurred by
the Borrower and its Subsidiaries during such period.

         "CAPITAL LEASE OBLIGATIONS" of any Person shall mean all obligations of
such Person to pay rent or other amounts under any lease (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.

         "CHANGE IN CONTROL" shall mean the occurrence of one or more of the
following events: (a) any sale, lease, exchange or other transfer (in a single
transaction or a series of related transactions) of all or substantially all of
the assets of the Borrower to any Person or "group" (within the meaning of the
Securities Exchange Act of 1934 and the rules of the Securities and Exchange
Commission thereunder in effect on the date hereof), (b) the acquisition of
ownership, directly or indirectly, beneficially or of record, by any Person or
"group" (within the meaning of the Securities Exchange Act of 1934 and the rules
of the Securities and Exchange Commission thereunder as in effect on the date
hereof) of 50% or more of the outstanding shares of the voting stock of the
Borrower; or (c) occupation of a majority of the seats (other than vacant seats)
on the board of directors of the Borrower by Persons who were neither (i)
nominated by the current board of directors, or (ii) appointed by directors so
nominated.

         "CHANGE IN LAW" shall mean (i) the adoption of any applicable law, rule
or regulation after the date of this Agreement, (ii) any change in any
applicable law, rule or regulation, or any change in the interpretation or
application thereof, by any Governmental Authority after the date of this
Agreement, or (iii) compliance by any Lender (or its Applicable Lending Office)
or the Issuing Bank (or for purposes of Section 2.15(b), by such Lender's or the
Issuing Bank's holding company, if applicable) with any request, guideline or
directive (whether or not having the force of law) of any Governmental Authority
made or issued after the date of this Agreement.

         "CLOSING DATE" shall mean the date on which the conditions precedent
set forth in Section 3.1 and Section 3.2 have been satisfied or waived in
accordance with Section 10.2.

         "CODE" shall mean the Internal Revenue Code of 1986, as amended and in
effect from time to time.

         "COMMITMENT" shall mean the Revolving Commitment.

         "COMMITMENT TERMINATION DATE" shall mean the earliest of (i) May 31,
2005, (ii) the date on which the Revolving Commitments are terminated pursuant
to Section 2.6, and (iii) the




date on which all amounts outstanding under this Agreement have been declared or
have automatically become due and payable (whether by acceleration or
otherwise).

         "CONSOLIDATED CASH FLOW" shall mean the sum of Consolidated EBITDAR,
less Maintenance Capital Expenditures.

         "CONSOLIDATED EBITDA" shall mean, for the Borrower and its Subsidiaries
for any period, an amount equal to the sum of (a) Consolidated Net Income for
such period plus (b) to the extent deducted in determining Consolidated Net
Income for such period, (i) Consolidated Interest Expense, (ii) provisions for
taxes based on income, (iii) depreciation expense, and (iv) amortization
expense, all determined on a consolidated basis in accordance with GAAP in each
case for such period.

         "CONSOLIDATED EBITDAR" shall mean, for the Borrower and its
Subsidiaries for any period, an amount equal to the sum of (a) Consolidated
EBITDA, and (b) Consolidated Lease Expense.

         "CONSOLIDATED FIXED CHARGE COVERAGE RATIO" shall mean the ratio of: (a)
Consolidated Cash Flow to (b) Consolidated Fixed Charges.

         "CONSOLIDATED FIXED CHARGES" shall mean, for the Borrower and its
Subsidiaries for any period, the sum (without duplication) of: (a) Consolidated
Interest Expense for such period, (b) scheduled principal payments made in
respect of Consolidated Total Debt and Capital Lease Obligations during such
period, (c) Restricted Payments paid during such period, and (d) Consolidated
Lease Expense for such period.

         "CONSOLIDATED INTEREST EXPENSE" shall mean, for the Borrower and its
Subsidiaries for any period determined on a consolidated basis in accordance
with GAAP, the sum of: (i) total interest expense and Letter of Credit fees and
expenses as set forth in Section 2.11(d) herein, including without limitation
the interest component of any payments in respect of Capital Lease Obligations
capitalized or expensed during such period (whether or not actually paid during
such period) plus (ii) the net amount payable (or minus the net amount
receivable) under Hedging Agreements during such period (whether or not actually
paid or received during such period).

         "CONSOLIDATED LEASE EXPENSE" shall mean, for any period, the aggregate
amount of fixed and contingent rentals payable by the Borrower and its
Subsidiaries with respect to leases of real and personal property (excluding
Capital Lease Obligations) determined on a consolidated basis in accordance with
GAAP for such period.

         "CONSOLIDATED NET INCOME" shall mean, for any period, the net income
(or loss) of the Borrower and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, but excluding therefrom (to the
extent otherwise included therein) (i) any extraordinary gains or losses, (ii)
any gains attributable to write-ups of assets, and (iii) any equity interest of
the Borrower or any Subsidiary of the Borrower in the unremitted earnings of any
Person that is not a Subsidiary, and (iv) any income (or loss) of any Person
accrued prior to the date it becomes a Subsidiary or is merged into or
consolidated with the Borrower or any Subsidiary or the date that such Person's
assets are acquired by the Borrower or any Subsidiary.


         "CONSOLIDATED NET WORTH" shall mean, as of any date, (i) the total
assets of the Borrower and its Subsidiaries that would be reflected on the
Borrower's consolidated balance sheet as of such date prepared in accordance
with GAAP, after eliminating all amounts properly attributable to minority
interests, if any, in the stock and surplus of Subsidiaries, minus the sum of
(i) the total liabilities of the Borrower and its Subsidiaries that would be
reflected on the Borrower's consolidated balance sheet as of such date prepared
in accordance with GAAP and (ii) the amount of any write-up in the book value of
any assets resulting from a revaluation thereof or any write-up in excess of the
cost of such assets acquired reflected on the consolidated balance sheet of the
Borrower as of such date prepared in accordance with GAAP.

         "CONSOLIDATED TOTAL DEBT" shall mean, as of any date of determination,
all Indebtedness of the Borrower and its Subsidiaries that would be reflected on
a consolidated balance sheet of the Borrower prepared in accordance with GAAP as
of such date.

         "CONTROL" shall mean the power, directly or indirectly, either to (i)
vote 50% or more of securities having ordinary voting power for the election of
directors (or persons performing similar functions) of a Person, or (ii) direct
or cause the direction of the management and policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise. The
terms "CONTROLLING", "CONTROLLED BY", and "UNDER COMMON CONTROL WITH" have
meanings correlative thereto.

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

         "DEFAULT INTEREST" shall have the meaning set forth in Section 2.10(a).

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

         "ELIGIBLE ACCOUNTS RECEIVABLE" shall mean accounts receivable owed to
Borrower by non-Affiliated Persons for services rendered by Borrower and which
shall exclude:

                  (a)      accounts receivable which are due and owing for more
                           than 90 days from the date of invoice;

                  (b)      accounts receivable owed by any federal, state, or
                           local governmental agency or authority;

                  (c)      accounts receivable owed by a Person who is insolvent
         or the subject of a bankruptcy or insolvency proceeding in state or
         federal court;

                  (d)      accounts receivable owed by any Person who has other
         accounts receivable owing to Borrower if: (i) those other accounts
         receivable are more than 90 days past due, (ii) such past due accounts
         receivable constitute more than 20% of the aggregate accounts
         receivable owed by such Person, and (iii) such past due accounts are
         not being disputed reasonably and in good faith; or

                  (e)      accounts receivable subject to any dispute,
         counterclaim, or objection.




         "ENVIRONMENTAL LAWS" shall mean all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by or with any Governmental
Authority, relating in any way to the environment, preservation or reclamation
of natural resources, the management, Release or threatened Release of any
Hazardous Material or to health and safety matters.

         "ENVIRONMENTAL LIABILITY" shall mean any liability, contingent or
otherwise (including any liability for damages, costs of environmental
investigation and remediation, costs of administrative oversight, fines, natural
resource damages, penalties or indemnities), of the Borrower or any Subsidiary
directly or indirectly resulting from or based upon (a) any actual or alleged
violation of any Environmental Law, (b) the generation, use, handling,
transportation, storage, treatment or disposal of any Hazardous Materials, (c)
any actual or alleged exposure to any Hazardous Materials, (d) the Release or
threatened Release of any Hazardous Materials, or (e) any contract, agreement or
other consensual arrangement pursuant to which liability is assumed or imposed
with respect to any of the foregoing.

         "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any successor statute.

         "ERISA AFFILIATE" shall mean any trade or business (whether or not
incorporated), which, together with the Borrower, is treated as a single
employer under Section 414(b) or (c) of the Code or, solely for the purposes of
Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.

         "ERISA EVENT" shall mean (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate
from the PBGC or a plan administrator appointed by the PBGC of any notice
relating to an intention to terminate any Plan or Plans or to appoint a trustee
to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA
Affiliates of any liability with respect to the withdrawal or partial withdrawal
from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any
ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the
Borrower or any ERISA Affiliate of any notice, concerning the imposition of
Withdrawal Liability or a determination that a Multiemployer Plan is, or is
expected to be, insolvent or in reorganization, within the meaning of Title IV
of ERISA.

         "EURODOLLAR" when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, bears interest at a
rate determined by reference to the Adjusted LIBO Rate.

         "EURODOLLAR RESERVE PERCENTAGE" shall mean the aggregate of the maximum
reserve percentages (including, without limitation, any emergency, supplemental,
special or other



marginal reserves) expressed as a decimal (rounded upwards to the next 1/100th
of 1%) in effect on any day to which the Administrative Agent is subject with
respect to the Adjusted LIBO Rate pursuant to regulations issued by the Board of
Governors of the Federal Reserve System (or any Governmental Authority
succeeding to any of its principal functions) with respect to eurocurrency
funding (currently referred to as "eurocurrency liabilities" under Regulation
D). Eurodollar Loans shall be deemed to constitute eurocurrency funding and to
be subject to such reserve requirements without benefit of or credit for
proration, exemptions or offsets that may be available from time to time to any
Lender under Regulation D. The Eurodollar Reserve Percentage shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.

         "EVENT OF DEFAULT" shall have the meaning provided in Article VIII.

         "EXCLUDED TAXES" shall mean with respect to the Administrative Agent,
any Lender, the Issuing Bank or any other recipient of any payment to be made by
or on account of any obligation of the Borrower hereunder, (a) income, excise or
franchise taxes imposed on (or measured by) its net income or assets, (b) any
branch profits taxes imposed by the United States of America or any similar tax
imposed by any other jurisdiction in which the Borrower is located and (c) in
the case of a Foreign Lender, any withholding tax that is imposed on amounts
payable to such Foreign Lender at the time such Foreign Lender becomes a party
to this Agreement (or designates a new lending office) or is attributable to
such Foreign Lender's failure to comply with Section 2.17(e), except to the
extent that such Foreign Lender (or its assignor, if any) was entitled, at the
time of designation of a new lending office (or assignment), to receive
additional amounts from the Borrower with respect to such withholding tax
pursuant to Section 2.17(a).

         "FACILITY FEE" shall mean a fee payable quarterly in arrears and
determined by calculating the Applicable Percentage on the total Revolving
Commitments.

         "FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the next 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with member banks
of the Federal Reserve System arranged by Federal funds brokers, as published by
the Federal Reserve Bank of New York on the next succeeding Business Day or if
such rate is not so published for any Business Day, the Federal Funds Rate for
such day shall be the average rounded upwards, if necessary, to the next 1/100th
of 1% of the quotations for such day on such transactions received by the
Administrative Agent from three Federal funds brokers of recognized standing
selected by the Administrative Agent.

         "FOREIGN LENDER" shall mean any Lender that is organized under the laws
of a jurisdiction other than that of the Borrower. For purposes of this
definition, the United States of America or any State thereof or the District of
Columbia shall constitute one jurisdiction.

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

         "GOVERNMENTAL AUTHORITY" shall mean the government of the United States
of America, any other nation or any political subdivision thereof, whether state
or local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising



executive, legislative, judicial, taxing, regulatory or administrative powers or
functions of or pertaining to government.

         "GUARANTEE" of or by any Person (the "GUARANTOR") shall mean any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "PRIMARY OBLIGOR") in any manner, whether directly or
indirectly and including any obligation, direct or indirect, of the guarantor
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation, or (d) as an account party
in respect of any letter of credit or letter of guaranty issued in support of
such Indebtedness or obligation; provided that the term "Guarantee" shall not
include endorsements for collection or deposits in the ordinary course of
business. The amount of any Guarantee shall be deemed to be an amount equal to
the stated or determinable amount of the primary obligation in respect of which
Guarantee is made or, if not so stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person is required to
perform thereunder) as determined by such Person in good faith. The term
"Guarantee" used as a verb has a corresponding meaning.

         "HAZARDOUS MATERIALS" means all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.

         "HEDGING AGREEMENTS" shall mean interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap agreements,
currency future or option contracts, commodity agreements and other similar
agreements or arrangements designed to protect against fluctuations in interest
rates, currency values or commodity values.

         "INDEBTEDNESS" of any Person shall mean, without duplication (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person in respect of the deferred purchase price of
property or services (other than trade payables incurred in the ordinary course
of business; provided that for purposes of Section 8.1(f), trade payables
overdue by more than one hundred twenty (120) days shall be included in this
definition except to the extent that any of such trade payables are being
disputed in good faith and by appropriate measures), (iv) all obligations of
such Person under any conditional sale or other title retention agreement(s)
relating to property acquired by such Person, (v) all Capital Lease Obligations
of such Person, (vi) all obligations, contingent or otherwise, of such Person in
respect of letters of credit, acceptances or similar extensions of credit, (vii)
all Guarantees of such Person of the type of Indebtedness described in clauses
(i) through (vi) above, (viii) all Indebtedness of a third party secured by any
Lien on property owned by such Person, whether or not such Indebtedness has been
assumed by such Person, (ix) all obligations of such Person, contingent or
otherwise, to



purchase, redeem, retire or otherwise acquire for value any common stock of such
Person, and (x) Off-Balance Sheet Liabilities. The Indebtedness of any Person
shall include the Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer, except to the extent that
applicable law or the terms of such Indebtedness provide that such Person is not
liable therefor.

         "INDEMNIFIED TAXES" shall mean Taxes other than Excluded Taxes.

         "INDEMNITY AND CONTRIBUTION AGREEMENT" shall mean the Indemnity,
Subrogation and Contribution Agreement, substantially in the form of Exhibit G,
among the Borrower, the Subsidiary Loan Parties and the Administrative Agent.

         "INTEREST PERIOD" shall mean with respect to any Eurodollar Borrowing,
a period of one, two, three, or six months, provided that:

                  (i)      the initial Interest Period for such Borrowing shall
         commence on the date of such Borrowing (including the date of any
         conversion from a Borrowing of another Type) and each Interest Period
         occurring thereafter in respect of such Borrowing shall commence on the
         day on which the next preceding Interest Period expires;

                  (ii)     if any Interest Period would otherwise end on a day
         other than a Business Day, such Interest Period shall be extended to
         the next succeeding Business Day, unless, in the case of a Eurodollar
         Borrowing, such Business Day falls in another calendar month, in which
         case such Interest Period would end on the next preceding Business Day;

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

                  (iv)     no Interest Period may extend beyond the Commitment
         Termination Date.

         "ISSUING BANK" shall mean SunTrust Bank in its capacity as an issuer of
Letters of Credit pursuant to Section 2.20.

         "LC COMMITMENT" shall mean that portion of the Aggregate Revolving
Commitments that may be used by the Borrower for the issuance of Letters of
Credit in an aggregate face amount not to exceed $35,000,000.00.

         "LC COMMITMENT DATE" shall mean May 31, 2004.

         "LC DISBURSEMENT" shall mean a payment made by the Issuing Bank
pursuant to and in compliance with a Letter of Credit.

         "LC DOCUMENTS" shall mean the Letters of Credit and all applications,
agreements and instruments relating to the Letters of Credit.



         "LC EXPOSURE" shall mean, at any time, the sum of (i) the aggregate
undrawn amount of all outstanding Letters of Credit at such time, plus (ii) the
aggregate amount of all LC Disbursements that have not been reimbursed by or on
behalf of the Borrower at such time. The LC Exposure of any Lender shall be its
Pro Rata Share of the total LC Exposure at such time.

         "LENDERS" shall have the meaning assigned to such term in the opening
paragraph of this Agreement.

         "LETTER OF CREDIT" shall mean any letter of credit issued pursuant to
Section 2.20 by the Issuing Bank for the account of the Borrower pursuant to the
LC Commitment.

         "LEVERAGE RATIO" shall mean, as of any date of determination with
respect to the Borrower, the ratio of (i) Consolidated Total Debt as of such
date to (ii) Consolidated EBITDA as of such date.

         "LIBOR" shall mean, for any applicable Interest Period with respect to
any Eurodollar Loan, the rate per annum for deposits in Dollars for a period
equal to such Interest Period appearing on the display designated as Page 3750
on the Dow Jones Markets Service (or such other page on that service or such
other service designated by the British Banker's Association for the display of
such Association's Interest Settlement Rates for Dollar deposits) as of 11:00
a.m. (London, England time) on the day that is two Business Days prior to the
first day of the Interest Period or if such Page 3750 is unavailable for any
reason at such time, the rate which appears on the Reuters Screen ISDA Page as
of such date and such time; provided that if the Administrative Agent determines
that the relevant foregoing sources are unavailable for the relevant Interest
Period, LIBOR shall mean the rate of interest determined by the Administrative
Agent to be the average (rounded upward, if necessary, to the nearest 1/100th of
1%) of the rates per annum at which deposits in Dollars are offered to the
Administrative Agent two (2) Business Days preceding the first day of such
Interest Period by leading banks in the London interbank market as of 10:00 a.
m. for delivery on the first day of such Interest Period, for the number of days
comprised therein and in an amount comparable to the amount of the Eurodollar
Loan of the Administrative Agent.

         "LIEN" shall mean any mortgage, pledge, security interest, lien
(statutory or otherwise), charge, encumbrance, hypothecation, assignment,
deposit arrangement, or other arrangement having the practical effect of the
foregoing or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any
conditional sale or other title retention agreement and any capital lease having
the same economic effect as any of the foregoing).

         "LOAN DOCUMENTS" shall mean, collectively, this Agreement, the Notes,
the LC Documents, all Notices of Borrowing, the Subsidiary Guarantee Agreements,
the Indemnity and Contribution Agreement, the Security Documents, and any and
all other instruments, agreements, documents and writings executed in connection
with any of the foregoing.

         "LOAN PARTIES" shall mean the Borrower and the Subsidiary Loan Parties.

         "LOANS" shall mean all Revolving Loans in the aggregate or any of them,
as the context shall require.




         "MAINTENANCE CAPITAL EXPENDITURES" shall mean Capital Expenditures
incurred by the Borrower or its Subsidiaries for ordinary and necessary
maintenance of its property, computers, telecommunications equipment,
intellectual property, plant and equipment.

         "MATERIAL ADVERSE EFFECT" shall mean, with respect to any event, act,
condition or occurrence of whatever nature (including any adverse determination
in any litigation, arbitration, or governmental investigation or proceeding),
whether singly or in conjunction with any other event or events, act or acts,
condition or conditions, occurrence or occurrences whether or not related, a
material adverse change in, or a material adverse effect on, (i) the business,
results of operations, financial condition, assets, liabilities or prospects of
the Borrower and of the Borrower and its Subsidiaries taken as a whole, (ii) the
ability of the Loan Parties to perform any of their respective obligations under
the Loan Documents, (iii) the rights and remedies of the Administrative Agent,
the Issuing Bank and the Lenders under any of the Loan Documents or (iv) the
legality, validity or enforceability of any of the Loan Documents.

         "MATERIAL INDEBTEDNESS" shall mean Indebtedness (other than the Loans
and Letters of Credit) or obligations in respect of one or more Hedging
Agreements, of any one or more of the Borrower and the Subsidiaries in an
aggregate principal amount exceeding $500,000.00. For purposes of determining
Material Indebtedness, the "principal amount" of the obligations of the Borrower
or any Subsidiary in respect to any Hedging Agreement at any time shall be the
maximum aggregate amount (giving effect to any netting agreements) that the
Borrower or such Subsidiary would be required to pay if such Hedging Agreement
were terminated at such time.

         "MOODY'S" shall mean Moody's Investors Service, Inc.

         "MULTIEMPLOYER PLAN" shall have the meaning set forth in Section
         4001(a)(3) of ERISA.

         "NOTES" shall mean, collectively, the Revolving Credit Notes.

         "NOTICE OF BORROWING" shall have the meaning as set forth in Section
         2.3.

         "NOTICE OF CONVERSION/CONTINUATION" shall mean the notice given by the
Borrower to the Administrative Agent in respect of the conversion or
continuation of an outstanding Borrowing as provided in Section 2.5(b) hereof.

         "OBLIGATIONS" shall mean all amounts owing by the Borrower to the
Administrative Agent, the Issuing Bank or any Lender pursuant to or in
connection with this Agreement or any other Loan Document, including without
limitation, principal, interest (including any interest accruing after the
filing of any petition in bankruptcy or the commencement of any insolvency,
reorganization or like proceeding relating to the Borrower, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding),
reimbursement obligations, fees, expenses, indemnification and reimbursement
payments, costs and expenses (including all fees and expenses of counsel to the
Administrative Agent and any Lender incurred pursuant to this Agreement or any
other Loan Document), whether direct or indirect, absolute or contingent,
liquidated or unliquidated, now existing or hereafter arising hereunder or
thereunder, together with all renewals, extensions, modifications or
refinancings thereof.



         "OFF-BALANCE SHEET LIABILITIES" of any Person shall mean (i) any
repurchase obligation or liability of such Person with respect to accounts or
notes receivable sold by such Person, (ii) any liability of such Person under
any sale and leaseback transactions which do not create a liability on the
balance sheet of such Person, (iii) any liability of such Person under any
so-called "synthetic" lease transaction or (iv) any obligation arising with
respect to any other transaction which is the functional equivalent of or takes
the place of borrowing but which does not constitute a liability on the balance
sheet of such Person.

         "PARTICIPANT" shall have the meaning set forth in Section 10.4(c).

         "PAYMENT OFFICE" shall mean the office of the Administrative Agent
located at 201 Fourth Avenue North, Nashville, Tennessee 37219, or such other
location as to which the Administrative Agent shall have given written notice to
the Borrower and the other Lenders.

         "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to
and defined in ERISA, and any successor entity performing similar functions.

         "PERMITTED ENCUMBRANCES" shall mean

                  (i)      Liens imposed by law for taxes not yet due or which
         are being contested in good faith by appropriate proceedings and with
         respect to which adequate reserves are being maintained in accordance
         with GAAP;

                  (ii)     statutory Liens of landlords and Liens of carriers,
         warehousemen, mechanics, materialmen and other Liens imposed by law
         created in the ordinary course of business for amounts not yet due or
         which are being contested in good faith by appropriate proceedings and
         with respect to which adequate reserves are being maintained in
         accordance with GAAP;

                  (iii)    pledges and deposits made in the ordinary course of
         business in compliance with workers' compensation, unemployment
         insurance and other social security laws or regulations;

                  (iv)     deposits to secure the performance of bids, trade
         contracts, leases, statutory obligations, surety and appeal bonds,
         performance bonds and other obligations of a like nature, in each case
         in the ordinary course of business;

                  (v)      judgment and attachment liens not giving rise to an
         Event of Default or Liens created by or existing from any litigation or
         legal proceeding that are currently being contested in good faith by
         appropriate proceedings and with respect to which adequate reserves are
         being maintained in accordance with GAAP;

                  (vi)     easements, zoning restrictions, rights-of-way and
         similar encumbrances on real property imposed by law or arising in the
         ordinary course of business that do not secure any monetary obligations
         and do not materially detract from the value of the affected property
         or materially interfere with the ordinary conduct of business of the
         Borrower and its Subsidiaries taken as a whole;




                  (vii)    Capital Lease Obligations to the extent permitted
         hereunder;

                  (viii)   Liens securing purchase money indebtedness to the
         extent permitted pursuant to Section 7.1 hereunder;

                  (x)      Liens created by the Security Documents or otherwise
         provided for in this Agreement for the benefit of the Lenders;

                  (xi)     any Lien in favor of the United States of America or
         any department or agency thereof, in favor of any state government or
         political subdivision thereof, or in favor of a prime contractor under
         a government contract of the United States, or of any political
         subdivision thereof, and in each case, resulting from acceptance of
         partial progress, advance or other payments in the ordinary course of
         business under government contracts of the United States, or of any
         state government or political subdivision thereof, or subcontracts
         thereunder; and

                  (xii)    statutory Liens arising under ERISA created in the
         ordinary course of business for amounts not yet due and as to which
         adequate reserves have been established in accordance with GAAP.

         "PERMITTED INVESTMENTS" shall mean:

                  (i)      direct obligations of, or obligations the principal
         of and interest on which are unconditionally guaranteed by, the United
         States (or by any agency thereof to the extent such obligations are
         backed by the full faith and credit of the United States), in each case
         maturing within one year from the date of acquisition thereof;

                  (ii)     commercial paper having the highest rating, at the
         time of acquisition thereof, of S&P or Moody's and in either case
         maturing within six months from the date of acquisition thereof;

                  (iii)    certificates of deposit, bankers' acceptances and
         time deposits maturing within 180 days of the date of acquisition
         thereof issued or guaranteed by or placed with, and money market
         deposit accounts issued or offered by, any domestic office of any
         commercial bank organized under the laws of the United States or any
         state thereof which has a combined capital and surplus and undivided
         profits of not less than $500,000,000;

                  (iv)     fully collateralized repurchase agreements with a
         term of not more than 90 days for securities described in clause (i)
         above and entered into with a financial institution satisfying the
         criteria described in clause (iii) above;

                  (v)      mutual funds investing solely in any one or more of
         the Permitted Investments described in clauses (i) through (iv) above;

                  (vi)     investments in obligations the return with respect to
         which is excludable from gross income under Section 103 of the Code,
         having a maturity of not more than six (6) months or providing the
         holder the right to put such obligations for purchase at par




         upon not more than twenty-eight (28) days' notice, and which are rated
         at least A-1 by S&P or P-1 by Moody's;

                  (vii)    investments in tax free money market funds all of
         whose assets consist of securities of the types described in the
         foregoing clause (vi) above; and

                  (viii)   investments, redeemable upon not more than seven (7)
         days' notice, in money market preferred municipal bond funds that are
         rated at least AAA by S&P or Aaa by Moody's.

         "PERSON" shall mean any individual, partnership, firm, corporation,
association, joint venture, limited liability company, trust or other entity, or
any Governmental Authority.

         "PLAN" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.

         "PRO RATA SHARE" shall mean, with respect to any Lender at any time, a
percentage, the numerator of which shall be the sum of such Lender's Revolving
Commitment and the denominator of which shall be the sum of all Lenders'
Revolving Commitments.

         "REGULATION D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System, as the same may be in effect from time to time, and any
successor regulations.

         "RELATED PARTIES" shall mean, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers, employees, and
agents of such Person and such Person's Affiliates.

         "RELEASE" means any release, spill, emission, leaking, dumping,
injection, pouring, deposit, disposal, discharge, dispersal, leaching or
migration into the environment (including ambient air, surface water,
groundwater, land surface or subsurface strata) or within any building,
structure, facility or fixture.

         "REQUIRED LENDERS" shall mean, at any time, Lenders holding 66 2/3% of
the aggregate outstanding Revolving Credit Exposures at such time or if the
Lenders have no Revolving Credit Exposure outstanding, then Lenders holding 66
2/3% of the Aggregate Revolving Commitments.

         "RESPONSIBLE OFFICER" shall mean any of the president, the chief
executive officer, the chief operating officer, the chief financial officer, the
controller or a vice president of the Borrower or such other representative of
the Borrower as may be designated in writing by any one of the foregoing with
the consent of the Administrative Agent; and, with respect to the financial
covenants only, the president, the chief executive officer, the chief financial
officer or the controller of the Borrower.

         "RESTRICTED PAYMENT" shall have the meaning set forth in Section 7.5.




         "REVOLVING COMMITMENT" shall mean, with respect to each Lender, the
obligation of such Lender to make Revolving Loans to the Borrower and to
participate in Letters of Credit in an aggregate principal amount not exceeding
the amount set forth with respect to such Lender on the signature pages to this
Agreement, or in the case of a Person becoming a Lender after the Closing Date,
the amount of the assigned "Revolving Commitment" as provided in the Assignment
and Acceptance Agreement executed by such Person as an assignee, as the same may
be changed pursuant to terms hereof.

         "REVOLVING CREDIT EXPOSURE" shall mean, with respect to any Lender at
any time, the sum of the outstanding principal amount of such Lender's Revolving
Loans, plus such Lender's LC Exposure.

         "REVOLVING CREDIT NOTE" shall mean a revolving credit note of the
Borrower payable to the order of a Lender in the principal amount of such
Lender's Revolving Commitment, in substantially the form of Exhibit A.

         "REVOLVING LOAN" shall mean a loan made by a Lender to the Borrower
under its Revolving Commitment, which may either be a Base Rate Loan or a
Eurodollar Loan.

         "S&P" shall mean Standard & Poor's.

         "SECURITY DOCUMENTS" shall mean the Assignment and Security Agreements
executed by the Borrower and all other Loan Parties and the Administrative Agent
dated May 31, 2002, as amended by first amendments dated November 22, 2002, as
such may be further amended, from time to time, and all financing statements
filed in connection with such Security Agreements.

         "SUBSIDIARY" shall mean, with respect to any Person (the "PARENT"), any
corporation, partnership, joint venture, limited liability company, association
or other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of the date of preparation,
as well as any other corporation, partnership, joint venture, limited liability
company, association or other entity (i) of which securities or other ownership
interests representing more than 50% of the equity or more than 50% of the
ordinary voting power, or in the case of a partnership, more than 50% of the
general partnership interests are, as of such date, owned, Controlled or held,
or (ii) that is, as of such date, otherwise Controlled, by the parent or one or
more subsidiaries of the parent or by the parent and one or more subsidiaries of
the parent. Unless otherwise indicated, all references to "Subsidiary" hereunder
shall mean a Subsidiary of the Borrower.

         "SUBSIDIARY GUARANTEE AGREEMENT" shall mean the Subsidiary Guarantee
Agreement, substantially in the form of Exhibit F, made by the Subsidiary Loan
Parties in favor of the Administrative Agent for the benefit of the Lenders.

         "SUBSIDIARY LOAN PARTY" shall mean any presently existing or hereafter
created Subsidiary.

         "TAXES" shall mean any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any Governmental
Authority in respect of the



execution, delivery, or enforcement of, or otherwise with respect to, this
Agreement or any other Loan Document or any payment to the Administrative Agent,
the Lenders, or the Issuing Bank hereunder or thereunder.

         "TYPE", when used in reference to a Loan or Borrowing, refers to
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate or the Base
Rate.

         "UNRESTRICTED CASH AND CASH EQUIVALENTS" means cash and cash
equivalents that are not subject to any lien, encumbrance, pledge, or escrow
arrangement, except for liens and encumbrances in favor of Administrative Agent
for the benefit of Lenders.

         "WITHDRAWAL LIABILITY" shall mean liability to a Multiemployer Plan as
a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.

         SECTION  1.2 Classifications of Loans and Borrowings. For purposes of
this Agreement, Loans may be classified and referred to by Type (e.g. a
"Eurodollar Loan" or "Base Rate Loan").

         SECTION 1.3 Accounting Terms and Determination. Unless otherwise
defined or specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared, in
accordance with GAAP as in effect from time to time, applied on a basis
consistent (except for such changes approved by the Borrower's independent
public accountants) with the most recent audited consolidated financial
statement of the Borrower delivered pursuant to Section 5.1(a); provided that if
the Borrower notifies the Administrative Agent that the Borrower wishes to amend
any covenant in Article VI to eliminate the effect of any change in GAAP on the
operation of such covenant (or if the Administrative Agent notifies the Borrower
that the Required Lenders wish to amend Article VI for such purpose), then the
Borrower's compliance with such covenant shall be determined on the basis of
GAAP in effect immediately before the relevant change in GAAP became effective,
until either such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Borrower and the Required Lenders.

         SECTION 1.4 Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall". In
the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the word "to" means "to but
excluding". Unless the context requires otherwise (i) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as it was
originally executed or as it may from time to time be amended, supplemented or
otherwise modified (subject to any restrictions on such amendments, supplements
or modifications set forth herein), (ii) any reference herein to any Person
shall be construed to include such Person's successors and permitted assigns,
(iii) the words "hereof", "herein" and



"hereunder" and words of similar import shall be construed to refer to this
Agreement as a whole and not to any particular provision hereof, (iv) all
references to Articles, Sections, Exhibits and Schedules shall be construed to
refer to Articles, Sections, Exhibits and Schedules to this Agreement and (v)
all references to a specific time shall be construed to refer to the time in the
city and state of the Administrative Agent's principal office, unless otherwise
indicated.

                                  ARTICLE II

                       AMOUNT AND TERMS OF THE COMMITMENTS

         SECTION 2.1 General Description of Facilities. Subject to and upon the
terms and conditions herein set forth, (i) the Lenders hereby establish in favor
of the Borrower a revolving credit facility pursuant to which the Lenders
severally agree (to the extent of each Lender's Pro Rata Share up to such
Lender's Revolving Commitment) to make Revolving Loans to the Borrower in
accordance with Section 2.2, (ii) the Issuing Bank agrees to issue Letters of
Credit in accordance with Section 2.20, and (iii) each Lender agrees to purchase
a participation interest in the Letters of Credit pursuant to the terms and
conditions hereof; provided that in no event shall the aggregate principal
amount of all outstanding Revolving Loans, plus the outstanding LC Obligations
exceed at any time the lesser of: (a) the Borrowing Base, and (b) the Aggregate
Revolving Commitments from time to time in effect.

         SECTION 2.2 Revolving Loans. Subject to the terms and conditions set
forth herein, each Lender severally agrees to make Revolving Loans to the
Borrower, from time to time during the Availability Period, in an aggregate
principal amount outstanding at any time that will not result in (a) such
Lender's Revolving Credit Exposure exceeding such Lender's Revolving Commitment
or (b) the sum of the Loans and the LC Exposure exceeding the lesser of: (i) the
Aggregate Revolving Commitments, or (ii) the Borrowing Base. During the
Availability Period, the Borrower shall be entitled to borrow, prepay and
reborrow Revolving Loans in accordance with the terms and conditions of this
Agreement; provided that the Borrower may not borrow or reborrow should there
exist a Default or Event of Default.

         SECTION 2.3 Procedure for Borrowings. The Borrower shall give the
Administrative Agent written notice (or telephonic notice promptly confirmed in
writing) of each Borrowing substantially in the form of Exhibit 2.3 attached
hereto (a "NOTICE OF BORROWING") (x) prior to 11:00 a.m. one (1) Business Day
prior to the requested date of each Base Rate Borrowing and (y) prior to 11:00
a.m. three (3) Business Days prior to the requested date of each Eurodollar
Borrowing. Each Notice of Borrowing shall be irrevocable and shall specify: (i)
the aggregate principal amount of such Borrowing, (ii) the date of such
Borrowing (which shall be a Business Day), (iii) the Type of such Revolving Loan
comprising such Borrowing and (iv) in the case of a Eurodollar Borrowing, the
duration of the initial Interest Period applicable thereto (subject to the
provisions of the definition of Interest Period). Each Borrowing shall consist
entirely of Base Rate Loans or Eurodollar Loans, as the Borrower may request.
The aggregate principal amount of each Eurodollar Borrowing shall be not less
than $1,000,000 or a larger multiple of $500,000, and the aggregate principal
amount of each Base Rate Borrowing shall not be less than $500,000 or a larger
multiple of $100,000; provided that Base Rate Loans made pursuant to Section
2.20(d) may be made in lesser amounts as provided therein. At no time shall the
total number of Eurodollar Borrowings outstanding at any time exceed five (5).
Promptly following the receipt of




a Notice of Borrowing in accordance herewith, the Administrative Agent shall
advise each Lender of the details thereof and the amount of such Lender's
Revolving Loan to be made as part of the requested Borrowing.

         SECTION 2.4 Funding of Borrowings

                  (a)      Each Lender will make available each Loan to be made
         by it hereunder on the proposed date thereof by wire transfer in
         immediately available funds by 11:00 a.m. to the Administrative Agent
         at the Payment Office. The Administrative Agent will make such Loans
         available to the Borrower by promptly crediting the amounts that it
         receives, in like funds by the close of business on such proposed date,
         to an account maintained by the Borrower with the Administrative Agent.

                  (b)      Unless the Administrative Agent shall have been
         notified by any Lender prior to 5 p.m. one (1) Business Day prior to
         the date of a Borrowing in which such Lender is participating that such
         Lender will not make available to the Administrative Agent such
         Lender's share of such Borrowing, the Administrative Agent may assume
         that such Lender has made such amount available to the Administrative
         Agent on such date, and the Administrative Agent, in reliance on such
         assumption, may make available to the Borrower on such date a
         corresponding amount. If such corresponding amount is not in fact made
         available to the Administrative Agent by such Lender on the date of
         such Borrowing, the Administrative Agent shall be entitled to recover
         such corresponding amount on demand from such Lender together with
         interest at the Federal Funds Rate for up to two (2) days and
         thereafter at the rate specified for such Borrowing. If such Lender
         does not pay such corresponding amount forthwith upon the
         Administrative Agent's demand therefor, the Administrative Agent shall
         promptly notify the Borrower, and the Borrower shall immediately pay
         such corresponding amount to the Administrative Agent together with
         interest at the rate specified for such Borrowing. Nothing in this
         subsection shall be deemed to relieve any Lender from its obligation to
         fund its Pro Rata Share of any Borrowing hereunder or to prejudice any
         rights which the Borrower may have against any Lender as a result of
         any default by such Lender hereunder.

                  (c)      All Borrowings shall be made by the Lenders on the
         basis of their respective Pro Rata Shares. No Lender shall be
         responsible for any default by any other Lender in its obligations
         hereunder, and each Lender shall be obligated to make its Loans
         provided to be made by it hereunder, regardless of the failure of any
         other Lender to make its Loans hereunder.

         SECTION 2.5 Interest Elections.

                  (a)      Each Borrowing initially shall be of the Type
         specified in the applicable Notice of Borrowing, and in the case of a
         Eurodollar Borrowing, shall have an initial Interest Period as
         specified in such Notice of Borrowing. Thereafter, the Borrower may
         elect to convert such Borrowing into a different Type or to continue
         such Borrowing, and in the case of a Eurodollar Borrowing, may elect
         Interest Periods therefor, all as provided in this Section. The
         Borrower may elect different options with respect to different portions
         of the affected Borrowing, in which case each such portion shall be
         allocated




         ratably among the Lenders holding Loans comprising such Borrowing, and
         the Loans comprising each such portion shall be considered a separate
         Borrowing.

                  (b)      To make an election pursuant to this Section, the
         Borrower shall give the Administrative Agent prior written notice (or
         telephonic notice promptly confirmed in writing) of each Borrowing (a
         "NOTICE OF CONVERSION/CONTINUATION") that is to be converted or
         continued, as the case may be, (x) prior to 11:00 a.m. one (1) Business
         Day prior to the requested date of a conversion into a Base Rate
         Borrowing and (y) prior to 11:00 a.m. three (3) Business Days prior to
         a continuation of or conversion into a Eurodollar Borrowing. Each such
         Notice of Conversion/Continuation shall be irrevocable and shall
         specify (i) the Borrowing to which such Notice of
         Continuation/Conversion applies and if different options are being
         elected with respect to different portions thereof, the portions
         thereof that are to be allocated to each resulting Borrowing (in which
         case the information to be specified pursuant to clauses (iii) and (iv)
         shall be specified for each resulting Borrowing); (ii) the effective
         date of the election made pursuant to such Notice of
         Continuation/Conversion, which shall be a Business Day, (iii) whether
         the resulting Borrowing is to be a Base Rate Borrowing or a Eurodollar
         Borrowing; and (iv) if the resulting Borrowing is to be a Eurodollar
         Borrowing, the Interest Period applicable thereto after giving effect
         to such election, which shall be a period contemplated by the
         definition of "Interest Period". If any such Notice of
         Continuation/Conversion requests a Eurodollar Borrowing but does not
         specify an Interest Period, the Borrower shall be deemed to have
         selected an Interest Period of one month. The principal amount of any
         resulting Borrowing shall satisfy the minimum borrowing amount for
         Eurodollar Borrowings and Base Rate Borrowings set forth in Section
         2.3.

                  (c)      If, on the expiration of any Interest Period in
         respect of any Eurodollar Borrowing, the Borrower shall have failed to
         deliver a Notice of Conversion/Continuation, then, unless such
         Borrowing is repaid as provided herein, the Borrower shall be deemed to
         have elected to convert such Borrowing to a Base Rate Borrowing. No
         Borrowing may be converted into, or continued as, a Eurodollar
         Borrowing if a Default or an Event of Default exists, unless the
         Administrative Agent and each of the Lenders shall have otherwise
         consented in writing. No conversion of any Eurodollar Loans shall be
         permitted except on the last day of the Interest Period in respect
         thereof.

                  (d)      Upon receipt of any Notice of
         Conversion/Continuation, the Administrative Agent shall promptly notify
         each Lender of the details thereof and of such Lender's portion of each
         resulting Borrowing.

         SECTION 2.6 Optional Reduction and Termination of Commitments.

                  (a)      Unless previously terminated, all Revolving
         Commitments shall terminate on the Commitment Termination Date.

                  (b)      Upon at least three (3) Business Days' prior written
         notice (or telephonic notice promptly confirmed in writing) to the
         Administrative Agent (which notice shall be irrevocable), the Borrower
         may reduce the Aggregate Revolving Commitments in part or terminate the
         Aggregate Revolving Commitments in whole; provided that (i) any partial





         reduction shall apply to reduce proportionately and permanently the
         Revolving Commitment of each Lender, (ii) any partial reduction
         pursuant to this Section 2.6 shall be in an amount of at least
         $1,000,000 and any larger multiple of $1,000,000, and (iii) no such
         reduction shall be permitted which would reduce the Aggregate Revolving
         Commitments to an amount less than the outstanding Revolving Credit
         Exposures of all Lenders. Any such reduction in the Aggregate Revolving
         Commitments shall result in a proportionate reduction (rounded to the
         next lowest integral multiple of $100,000) LC Commitment.

         SECTION 2.7 Repayment of Loans. The outstanding principal amount of all
Revolving Loans shall be due and payable (together with accrued and unpaid
interest thereon) on the Commitment Termination Date.

         SECTION 2.8 Evidence of Indebtedness.

                  (a)      Each Lender shall maintain in accordance with its
         usual practice appropriate records evidencing the indebtedness of the
         Borrower to such Lender resulting from each Loan made by such Lender
         from time to time, including the amounts of principal and interest
         payable thereon and paid to such Lender from time to time under this
         Agreement. The Administrative Agent shall maintain appropriate records
         in which shall be recorded (i) the Revolving Commitment of each Lender,
         (ii) the amount of each Loan made hereunder by each Lender, the Type
         thereof and the Interest Period applicable thereto, (iii) the date of
         each continuation thereof pursuant to Section 2.5, (iv) the date of
         each conversion of all or a portion thereof to another Type pursuant to
         Section 2.5, (v) the date and amount of any principal or interest due
         and payable or to become due and payable from the Borrower to each
         Lender hereunder in respect of such Loans and (vi) both the date and
         amount of any sum received by the Administrative Agent hereunder from
         the Borrower in respect of the Loans and each Lender's Pro Rata Share
         thereof. The entries made in such records shall be prima facie evidence
         of the existence and amounts of the obligations of the Borrower therein
         recorded; provided that the failure or delay of any Lender or the
         Administrative Agent in maintaining or making entries into any such
         record or any error therein shall not in any manner affect the
         obligation of the Borrower to repay the Loans (both principal and
         unpaid accrued interest) of such Lender in accordance with the terms of
         this Agreement.

                  (b)      The Borrower agrees that it will execute and deliver
         to each Lender a Revolving Credit Note, payable to the order of such
         Lender, in the amount of such Lender's Revolving Commitment.

         SECTION 2.9 Optional Prepayments. The Borrower shall have the right at
any time and from time to time to prepay any Borrowing, in whole or in part,
without premium or penalty, by giving irrevocable written notice (or telephonic
notice promptly confirmed in writing) to the Administrative Agent no later than
(i) in the case of prepayment of any Eurodollar Borrowing, 11:00 a.m. not less
than three (3) Business Days prior to any such prepayment, and (ii) in the case
of any prepayment of any Base Rate Borrowing, not less than one (1) Business Day
prior to the date of such prepayment. Each such notice shall be irrevocable and
shall specify the proposed date of such prepayment and the principal amount of
each Borrowing or portion thereof to be



prepaid. Upon receipt of any such notice, the Administrative Agent shall
promptly notify each affected Lender of the contents thereof and of such
Lender's Pro Rata Share of any such prepayment. If such notice is given, the
aggregate amount specified in such notice shall be due and payable on the date
designated in such notice, together with accrued interest to such date on the
amount so prepaid in accordance with Section 2.10(b); provided that if a
Eurodollar Borrowing is prepaid on a date other than the last day of an Interest
Period applicable thereto, the Borrower shall also pay all amounts required
pursuant to Section 2.16. Each partial prepayment of any Loan shall be in an
amount not less than the minimum amount that would be permitted in the case of
an advance of a Borrowing of the same Type pursuant to Section 2.2. Each
prepayment of a Borrowing shall be applied ratably to the Loans comprising such
Borrowing.

         SECTION 2.10 Interest on Loans.

                  (a)      While an Event of Default exists or after
         acceleration, at the option of the Required Lenders, the Borrower shall
         pay interest ("DEFAULT INTEREST") with respect to all Eurodollar Loans
         at the rate otherwise applicable for the then-current Interest Period
         plus an additional two percent (2%) per annum until the last day of
         such Interest Period, and thereafter, and with respect to all Base Rate
         Loans and all other Obligations hereunder (other than Loans), at the
         rate in effect from time to time for Base Rate Loans, plus an
         additional two percent (2%) per annum.

                  (b)      Interest on the principal amount of all Loans shall
         accrue from the date such Loans are made to the date of any repayment
         thereof. Interest on all outstanding Base Rate Loans shall be payable
         in arrears on the last day of each calendar month and on the Commitment
         Termination Date. Interest on all outstanding Eurodollar Loans shall be
         payable on the last day of each Interest Period applicable thereto,
         and, in the case of any Eurodollar Loans having an Interest Period in
         excess of three months or ninety (90) days, respectively, on each day
         which occurs every three months or ninety (90) days, as the case may
         be, after the initial date of such Interest Period, and on the
         Commitment Termination Date. All Default Interest shall be payable on
         demand.

                  (c)      The Administrative Agent shall determine each
         interest rate applicable to the Loans hereunder and shall promptly
         notify the Borrower and the Lenders of such rate in writing (or by
         telephone, promptly confirmed in writing). Any such determination shall
         be conclusive and binding for all purposes, absent manifest error.

         SECTION 2.11 Fees.

                  (a)      Administrative Agent Fees. The Borrower shall pay to
         the Administrative Agent for its own account fees in the amounts and at
         the times previously agreed upon the Borrower and the Administrative
         Agent.

                  (b)      Facility Fee. The Borrower agrees to pay to the
         Administrative Agent a facility fee equal to one quarter of one percent
         (.25%) per annum on the Aggregate Revolving Commitments. The Facility
         Fee shall be payable in arrears on the last day of each March, June,
         September, and December of each year and on the Commitment Termination
         Date.


                  (c)      Payments. Accrued fees shall be payable quarterly in
         arrears on the last day of each March, June, September, and December
         (commencing June 30, 2002) of each year and on the Commitment
         Termination Date.

                  (d)      Letter of Credit Fees. The Borrower agrees to pay (i)
         to the Administrative Agent, for the account of each Lender, a letter
         of credit fee with respect to its participation in each Letter of
         Credit, which shall accrue at the Applicable Margin on the average
         daily amount of such Lender's LC Exposure (excluding any portion
         thereof attributable to unreimbursed LC Disbursements) attributable to
         such Letter of Credit during the period from the date of issuance of
         such Letter of Credit to the date on which such Letter of Credit
         expires or is drawn in full (including without limitation any LC
         Exposure that remains outstanding after the Commitment Termination
         Date) and (ii) to the Issuing Bank for its own account a fronting fee,
         which shall accrue at the rate of .125% per annum on the average daily
         amount of the LC Exposure (excluding any portion thereof attributable
         to Unreimbursed LC Disbursements) during the Availability Period (or
         until the date that such Letter of Credit is irrevocably canceled,
         whichever is later), as well as the Issuing Bank's standard
         administrative fees with respect to issuance, amendment, renewal or
         extension of any Letter of Credit or processing of drawings thereunder.

         SECTION 2.12 Computation of Interest and Fees. All computations of
interest and fees hereunder shall be made on the basis of a year of 360 days for
the actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest or fees are payable (to the
extent computed on the basis of days elapsed). Each determination by the
Administrative Agent of an interest amount or fee hereunder shall be made in
good faith and, except for manifest error, shall be presumed correct for all
purposes.

         SECTION 2.13 Inability to Determine Interest Rates. If prior to the
commencement of any Interest Period for any Eurodollar Borrowing,

                  (a)      the Administrative Agent shall have determined (which
         determination shall be conclusive and binding upon the Borrower) that,
         by reason of circumstances affecting the relevant interbank market,
         adequate means do not exist for ascertaining LIBOR for such Interest
         Period, or

                  (b)      the Administrative Agent shall have received notice
         from the Required Lenders that the Adjusted LIBO Rate does not
         adequately and fairly reflect the cost to such Lenders (or Lender, as
         the case may be) of making, funding or maintaining their (or its, as
         the case may be) Eurodollar Loans for such Interest Period,

the Administrative Agent shall give written notice (or telephonic notice,
promptly confirmed in writing) to the Borrower and to the Lenders as soon as
practicable thereafter. In the case of Eurodollar Loans, until the
Administrative Agent shall notify the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) the obligations of
the Lenders to make Eurodollar Revolving Loans or to continue or convert
outstanding Loans as or into Eurodollar Loans shall be suspended and (ii) all
such affected Loans shall be converted into Base Rate Loans on the last day of
the then current Interest Period applicable thereto unless the


Borrower prepays such Loans in accordance with this Agreement. Unless the
Borrower notifies the Administrative Agent at least one Business Day before the
date of any Eurodollar Borrowing for which a Notice of Borrowing has previously
been given that it elects not to borrow on such date, then such Borrowing shall
be made as a Base Rate Borrowing.

         SECTION 2.14 Illegality. If any Change in Law shall make it unlawful or
impossible for any Lender to make, maintain or fund any Eurodollar Loan and such
Lender shall so notify the Administrative Agent, the Administrative Agent shall
promptly give notice thereof to the Borrower and the other Lenders, whereupon
until such Lender notifies the Administrative Agent and the Borrower that the
circumstances giving rise to such suspension no longer exist, the obligation of
such Lender to make Eurodollar Revolving Loans, or to continue or convert
outstanding Loans as or into Eurodollar Revolving Loans, shall be suspended. In
the case of the making of a Eurodollar Borrowing, such Lender's Loan shall be
made as a Base Rate Loan as part of the same Borrowing for the same Interest
Period and if the affected Eurodollar Loan is then outstanding, such Loan shall
be converted to a Base Rate Loan either (i) on the last day of the then current
Interest Period applicable to such Eurodollar Loan if such Lender may lawfully
continue to maintain such Loan to such date or (ii) immediately if such Lender
shall determine that it may not lawfully continue to maintain such Eurodollar
Loan to such date. Notwithstanding the foregoing, the affected Lender shall,
prior to giving such notice to the Administrative Agent, designate a different
Applicable Lending Office if such designation would avoid the need for giving
such notice and if such designation would not otherwise be disadvantageous to
such Lender in the good faith exercise of its discretion.

         SECTION 2.15 Increased Costs.

                  (a)      If any Change in Law shall:

                           (i)      impose, modify or deem applicable any
                  reserve, special deposit or similar requirement that is not
                  otherwise included in the determination of the Adjusted LIBO
                  Rate hereunder against assets of, deposits with or for the
                  account of, or credit extended by, any Lender (except any such
                  reserve requirement reflected in the Adjusted LIBO Rate) or
                  the Issuing Bank; or

                           (ii)     impose on any Lender or on the Issuing Bank
                  or the eurodollar interbank market any other condition
                  affecting this Agreement or any Eurodollar Loans made by such
                  Lender or any Letter of Credit or any participation therein;

         and the result of the foregoing is to increase the actual cost to such
         Lender of making, converting into, continuing or maintaining a
         Eurodollar Loan or to increase the cost to such Lender or the Issuing
         Bank of participating in or issuing any Letter of Credit or to reduce
         the amount received or receivable by such Lender or the Issuing Bank
         hereunder (whether of principal, interest or any other amount), then
         the Borrower shall promptly pay, upon written notice from and demand by
         such Lender on the Borrower (with a copy of such notice and demand to
         the Administrative Agent), to the Administrative Agent for the account
         of such Lender, within five (5) Business Days after the date of such
         notice and demand, additional amount or amounts sufficient to
         compensate such Lender or the



         Issuing Bank, as the case may be, for such additional costs actually
         incurred or reduction actually suffered.

                  (b)      If any Lender or the Issuing Bank shall have
         determined that on or after the date of this Agreement any Change in
         Law regarding capital requirements has or would have the effect of
         actually reducing the rate of return on such Lender's or the Issuing
         Bank's capital (or on the capital of such Lender's or the Issuing
         Bank's parent corporation) as a consequence of its obligations
         hereunder or under or in respect of any Letter of Credit to a level
         below that which such Lender or the Issuing Bank or such Lender's or
         the Issuing Bank's parent corporation could have achieved but for such
         Change in Law (taking into consideration such Lender's or the Issuing
         Bank's policies or the policies of such Lender's or the Issuing Bank's
         parent corporation with respect to capital adequacy) then, from time to
         time, within five (5) Business Days after receipt by the Borrower of
         written demand by such Lender (with a copy thereof to the
         Administrative Agent), the Borrower shall pay to such Lender such
         additional amounts as will compensate such Lender or the Issuing Bank
         or such Lender's or the Issuing Bank's parent corporation for any such
         reduction actually suffered.

                  (c)      A certificate of a Lender or the Issuing Bank setting
         forth the amount or amounts necessary to compensate such Lender or the
         Issuing Bank or such Lender's or the Issuing Bank's parent corporation,
         as the case may be, specified in paragraph (a) or (b) of this Section
         shall be delivered to the Borrower (with a copy to the Administrative
         Agent) and shall be presumed correct, absent manifest error. The
         Borrower shall pay any such Lender or the Issuing Bank, as the case may
         be, such amount or amounts within ten (10) days after receipt thereof.

                  (d)      Failure or delay on the part of any Lender or the
         Issuing Bank to demand compensation pursuant to this Section shall not
         constitute a waiver of such Lender's or the Issuing Bank's right to
         demand such compensation.

         SECTION 2.16 Funding Indemnity. In the event of: (a) the payment of any
principal of a Eurodollar Loan other than on the last day of the Interest Period
applicable thereto (including as a result of an Event of Default), (b) the
conversion or continuation of a Eurodollar Loan other than on the last day of
the Interest Period applicable thereto, or (c) the failure by the Borrower to
borrow, prepay, convert or continue any Eurodollar Loan on the date specified in
any applicable Notice of Borrowing (regardless of whether such notice is
withdrawn or revoked), then, in any such event, the Borrower shall compensate
each Lender, within five (5) Business Days after written demand from such
Lender, for any loss, cost or expense attributable to such event. In the case of
a Eurodollar Loan, such loss, cost or expense shall be deemed to include an
amount determined by such Lender to be the excess, if any, of (A) the amount of
interest that would have accrued on the principal amount of such Eurodollar Loan
if such event had not occurred at the Adjusted LIBO Rate applicable to such
Eurodollar Loan for the period from the date of such event to the last day of
the then current Interest Period therefor (or in the case of a failure to
borrow, convert or continue, for the period that would have been the Interest
Period for such Eurodollar Loan) over (B) the amount of interest that would
accrue on the principal amount of such Eurodollar Loan for the same period if
the Adjusted LIBO Rate were set on the date such Eurodollar Loan was prepaid or
converted or the date on which the Borrower failed to



borrow, convert or continue such Eurodollar Loan. A certificate as to any
additional amount payable under this Section 2.16 submitted to the Borrower by
any Lender shall be presumed correct, absent manifest error.

         SECTION 2.17 Taxes.

                  (a)      Any and all payments by or on account of any
         obligation of the Borrower hereunder shall be made free and clear of
         and without deduction for any Indemnified Taxes; provided that if the
         Borrower shall be required to deduct any Indemnified Taxes from such
         payments, then (i) the sum payable shall be increased as necessary so
         that after making all required deductions (including deductions
         applicable to additional sums payable under this Section) the
         Administrative Agent, any Lender or the Issuing Bank (as the case may
         be) shall receive an amount equal to the sum it would have received had
         no such deductions been made, (ii) the Borrower shall make such
         deductions and (iii) the Borrower shall pay the full amount deducted to
         the relevant Governmental Authority in accordance with applicable law.

                  (b)      In addition, the Borrower shall be responsible for
         the payment of any Indemnified Taxes to the relevant Governmental
         Authority in accordance with applicable law.

                  (c)      The Borrower shall indemnify the Administrative
         Agent, each Lender and the Issuing Bank, within five (5) Business Days
         after written demand therefor, for the full amount of any Indemnified
         Taxes paid by the Administrative Agent, such Lender or the Issuing
         Bank, as the case may be, on or with respect to any payment by or on
         account of any obligation of the Borrower hereunder (including
         Indemnified Taxes imposed or asserted on or attributable to amounts
         payable under this Section) and any penalties, interest and reasonable
         expenses arising therefrom or with respect thereto as a result of the
         Borrower's failure to comply with this Section 2.17(c) in a timely
         manner. A certificate as to the amount of such payment or liability
         delivered to the Borrower by a Lender or the Issuing Bank, or by the
         Administrative Agent on its own behalf or on behalf of a Lender or the
         Issuing Bank, shall be presumed correct absent manifest error.

                  (d)      As soon as practicable after any payment of
         Indemnified Taxes by the Borrower to a Governmental Authority, the
         Borrower shall deliver to the Administrative Agent the original or a
         certified copy of a receipt issued by such Governmental Authority
         evidencing such payment, a copy of the return reporting such payment or
         other evidence of such payment reasonably satisfactory to the
         Administrative Agent.

                  (e)      Any Foreign Lender that is entitled to an exemption
         from or reduction of withholding tax under the law of the jurisdiction
         in which the Borrower is located, or any treaty to which such
         jurisdiction is a party, with respect to payments under this Agreement
         shall deliver to the Borrower (with a copy to the Administrative
         Agent), at the time or times prescribed by applicable law, such
         properly completed and executed documentation prescribed by applicable
         law or reasonably requested by the Borrower as will permit such
         payments to be made without withholding or at a reduced rate. Without
         limiting the generality of the foregoing, each Foreign Lender agrees
         that it will deliver to



         the Administrative Agent and the Borrower (or in the case of a
         Participant, to the Lender from which the related participation shall
         have been purchased) two (2) duly completed copies of Internal Revenue
         Service Form 1001 or 4224, or any successor form thereto, as the case
         may be, certifying in each case that such Foreign Lender is entitled to
         receive payments made by the Borrower hereunder and under the Notes
         payable to it, without deduction or withholding of any United States
         federal income taxes and (ii) a duly completed Internal Revenue Service
         Form W-8 or W-9, or any successor form thereto, as the case may be, to
         establish an exemption from United State backup withholding tax. Each
         such Foreign Lender shall deliver to the Borrower and the
         Administrative Agent such forms on or before the date that it becomes a
         party to this Agreement (or in the case of a Participant, on or before
         the date such Participant purchases the related participation). In
         addition, each such Lender shall deliver such forms promptly upon the
         obsolescence or invalidity of any form previously delivered by such
         Lender. Each such Lender shall promptly notify the Borrower and the
         Administrative Agent at any time that it determines that it is no
         longer in a position to provide any previously delivered certificate to
         the Borrower (or any other form of certification adopted by the U.S.
         taxing authorities for such purpose).

         SECTION 2.18 Payments Generally; Pro Rata Treatment; Sharing of
         Set-Offs.

                  (a)      The Borrower shall make each payment required to be
         made by it hereunder (whether of principal, interest, fees or
         reimbursement of LC Disbursements, or of amounts payable under Section
         2.15, 2.16 or 2.17, or otherwise) prior to 12:00 noon, on the Business
         Day when due, in immediately available funds, without set-off or
         counterclaim. Any amounts received after such time on any date may, in
         the discretion of the Administrative Agent, be deemed to have been
         received on the next succeeding Business Day for purposes of
         calculating interest thereon. All such payments shall be made to the
         Administrative Agent at the Payment Office, except payments to be made
         directly to the Issuing Bank as expressly provided herein and except
         that payments pursuant to Sections 2.15, 2.16 and 2.17 and 10.3 shall
         be made directly to the Persons entitled thereto. The Administrative
         Agent shall distribute any such payments received by it for the account
         of any other Person to the appropriate recipient promptly following
         receipt thereof. If any payment hereunder shall be due on a day that is
         not a Business Day, the date for payment shall be extended to the next
         succeeding Business Day, and, in the case of any payment accruing
         interest, interest thereon shall be made payable for the period of such
         extension. All payments hereunder shall be made in Dollars.

                  (b)      If at any time insufficient funds are received by and
         available to the Administrative Agent to pay fully all amounts of
         principal, unreimbursed LC Disbursements, interest and fees then due
         hereunder, such funds shall be applied (i) first, towards payment of
         interest and fees then due hereunder, ratably among the parties
         entitled thereto in accordance with the amounts of interest and fees
         then due to such parties, and (ii) second, towards payment of principal
         and unreimbursed LC Disbursements then due hereunder, ratably among the
         parties entitled thereto in accordance with the amounts of principal
         and unreimbursed LC Disbursements then due to such parties.




                  (c)      If any Lender shall, by exercising any right of
         set-off or counterclaim or otherwise, obtain payment in respect of any
         principal of or interest on any of its Revolving Loans or
         participations in LC Disbursements that would result in such Lender
         receiving payment of a greater proportion of the aggregate amount of
         its Revolving Loans and participations in LC Disbursements and accrued
         interest thereon than the proportion received by any other Lender, then
         the Lender receiving such greater proportion shall purchase (for cash
         at face value) participations in the Revolving Loans and participations
         in LC Disbursements of other Lenders to the extent necessary so that
         the benefit of all such payments shall be shared by the Lenders ratably
         in accordance with the aggregate amount of principal of and accrued
         interest on their respective Revolving Loans and participations in LC
         Disbursements; provided that (i) if any such participations are
         purchased and all or any portion of the payment giving rise thereto is
         recovered, such participations shall be rescinded and the purchase
         price restored to the extent of such recovery, without interest, and
         (ii) the provisions of this paragraph shall not be construed to apply
         to any payment made by the Borrower pursuant to and in accordance with
         the express terms of this Agreement or any payment obtained by a Lender
         as consideration for the assignment of or sale of a participation in
         any of its Loans or participations in LC Disbursements to any assignee
         or participant, other than to the Borrower or any Subsidiary or
         Affiliate thereof (as to which the provisions of this paragraph shall
         apply). The Borrower consents to the foregoing and agrees, to the
         extent it may effectively do so under applicable law, that any Lender
         acquiring a participation pursuant to the foregoing arrangements may
         exercise against the Borrower rights of set-off and counterclaim with
         respect to such participation as fully as if such Lender were a direct
         creditor of the Borrower in the amount of such participation.

                  (d)      Unless the Administrative Agent shall have received
         notice from the Borrower prior to the date on which any payment is due
         to the Administrative Agent for the account of the Lenders or the
         Issuing Bank hereunder that the Borrower will not make such payment,
         the Administrative Agent may assume that the Borrower has made such
         payment on such date in accordance herewith and may, in reliance upon
         such assumption, distribute to the Lenders or the Issuing Bank, as the
         case may be, the amount or amounts due. In such event, if the Borrower
         has not in fact made such payment, then each of the Lenders or the
         Issuing Bank, as the case may be, severally agrees to repay to the
         Administrative Agent forthwith on demand the amount so distributed to
         such Lender or Issuing Bank with interest thereon, for each day from
         and including the date such amount is distributed to it to but
         excluding the date of payment to the Administrative Agent, at the
         greater of the Federal Funds Effective Rate and a rate determined by
         the Administrative Agent in accordance with banking industry rules on
         interbank compensation.

                  (e)      If any Lender shall fail to make any payment required
         to be made by it pursuant to Section 2.20(d) or (e), 2.18(d) or
         10.3(d), then the Administrative Agent may, in its discretion
         (notwithstanding any contrary provision hereof), apply any amounts
         thereafter received by the Administrative Agent for the account of such
         Lender to satisfy such Lender's obligations under such Sections until
         all such unsatisfied obligations are fully paid.


         SECTION 2.19 Mitigation of Obligations. If any Lender requests
compensation under Section 2.15, or if the Borrower is required to pay any
additional amount to any Lender or any Governmental Authority for the account of
any Lender pursuant to Section 2.17, then such Lender shall use reasonable
efforts to designate a different lending office for funding or booking its Loans
hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the sole judgment of such Lender, such
designation or assignment (i) would eliminate or reduce amounts payable under
Section 2.17 or Section 2.15, as the case may be, in the future and (ii) would
not subject such Lender to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay
all costs and expenses incurred by any Lender in connection with such
designation or assignment.

         SECTION 2.20 Letters of Credit.

                  (a)      During the Availability Period, the Issuing Bank, in
         reliance upon the agreements of the other Lenders pursuant to Section
         2.20(d), agrees to issue, at the request of the Borrower, Letters of
         Credit for the account of the Borrower on the terms and conditions
         hereinafter set forth; provided that (i) each Letter of Credit shall
         expire no later than five (5) days prior to the Commitment Termination
         Date; (ii) each Letter of Credit shall be in a stated amount of at
         least $250,000.00; and (iii) the Borrower may not request any Letter of
         Credit, if, after giving effect to such issuance (A) the aggregate LC
         Exposure would exceed the LC Commitment or (B) the aggregate LC
         Exposure, plus the aggregate outstanding Revolving Loans of all
         Lenders, would exceed the Aggregate Revolving Commitments. Upon the
         issuance of each Letter of Credit each Lender shall be deemed to, and
         hereby irrevocably and unconditionally agrees to, purchase from the
         Issuing Bank without recourse a participation in such Letter of Credit
         equal to such Lender's Pro Rata Share of the aggregate amount available
         to be drawn under such Letter of Credit. Each issuance of a Letter of
         Credit shall be deemed to utilize the Revolving Commitment of each
         Lender by an amount equal to the amount of such participation.

                  (b)      To request the issuance of a Letter of Credit (or any
         amendment, renewal or extension of an outstanding Letter of Credit),
         the Borrower shall give the Issuing Bank and the Administrative Agent
         irrevocable written notice at least three (3) Business Days prior to
         the requested date of such issuance specifying the date (which shall be
         a Business Day) such Letter of Credit is to be issued (or amended,
         extended or renewed, as the case may be), the expiration date of such
         Letter of Credit, the amount of such Letter of Credit , the name and
         address of the beneficiary thereof and such other information as shall
         be necessary to prepare, amend, renew or extend such Letter of Credit.
         In addition to the satisfaction of the conditions in Article III, the
         issuance of such Letter of Credit (or any amendment which increases the
         amount of such Letter of Credit) will be subject to the further
         conditions that such Letter of Credit shall be in such form and contain
         such terms as the Issuing Bank shall approve (such approval not to be
         withheld unreasonably) and that the Borrower shall have executed and
         delivered any additional applications, agreements and instruments
         relating to such Letter of Credit as the Issuing Bank shall reasonably
         require; provided that in the event of any conflict between such
         applications, agreements or instruments and this Agreement, the terms
         of this Agreement shall control.



                  (c)      At least two (2) Business Days prior to the issuance
         of any Letter of Credit, the Issuing Bank will confirm with the
         Administrative Agent (by telephone or in writing) that the
         Administrative Agent has received such notice and if not, the Issuing
         Bank will provide the Administrative Agent with a copy thereof. Unless
         the Issuing Bank has received notice from the Administrative Agent on
         or before the Business Day immediately preceding the date the Issuing
         Bank is to issue the requested Letter of Credit directing the Issuing
         Bank not to issue the Letter of Credit because such issuance is not
         then permitted hereunder because of the limitations set forth in
         Section 2.20(a) or that one or more conditions specified in Article III
         are not then satisfied, then, subject to the terms and conditions
         hereof, the Issuing Bank shall, on the requested date, issue such
         Letter of Credit in accordance with the Issuing Bank's usual and
         customary business practices.

                  (d)      The Issuing Bank shall examine all documents
         purporting to represent a demand for payment under a Letter of Credit
         promptly following its receipt thereof. The Issuing Bank shall notify
         the Borrower and the Administrative Agent of such demand for payment
         and whether the Issuing Bank has made or will make a LC Disbursement
         thereunder; provided that any failure to give or delay in giving such
         notice shall not relieve the Borrower of its obligation to reimburse
         the Issuing Bank and the Lenders with respect to such LC Disbursement.
         The Borrower shall be irrevocably and unconditionally obligated to
         reimburse the Issuing Bank for any LC Disbursements paid by the Issuing
         Bank in respect of such drawing, without presentment, demand or other
         formalities of any kind. Unless the Borrower shall have notified the
         Issuing Bank and the Administrative Agent prior to 11:00 a.m. on the
         Business Day immediately prior to the date on which such drawing is
         honored that the Borrower intends to reimburse the Issuing Bank for the
         amount of such drawing in funds other than from the proceeds of
         Revolving Loans, the Borrower shall be deemed to have timely given a
         Notice of Borrowing to the Administrative Agent requesting the Lenders
         to make a Base Rate Borrowing on the date on which such drawing is
         honored in an exact amount due to the Issuing Bank; provided that for
         purposes solely of such Borrowing, the conditions precedent set forth
         in Section 3.2 hereof shall not be applicable. The Administrative Agent
         shall notify the Lenders of such Borrowing in accordance with Section
         2.3, and each Lender shall make the proceeds of its Base Rate Loan
         included in such Borrowing available to the Administrative Agent for
         the account of the Issuing Bank in accordance with Section 2.4. The
         proceeds of such Borrowing shall be applied directly by the
         Administrative Agent to reimburse the Issuing Bank for such LC
         Disbursement.

                  (e)      If for any reason a Base Rate Borrowing may not be
         (as determined in the sole discretion of the Administrative Agent), or
         is not, made in accordance with the foregoing provisions, then each
         Lender (other than the Issuing Bank) shall be obligated to fund the
         participation that such Lender purchased pursuant to subsection (a) in
         an amount equal to its Pro Rata Share of such LC Disbursement on and as
         of the date which such Base Rate Borrowing should have occurred. Each
         Lender's obligation to fund its participation shall be absolute and
         unconditional and shall not be affected by any circumstance, including,
         without limitation, (i) any setoff, counterclaim, recoupment, defense
         or other right that such Lender or any other Person may have against
         the Issuing Bank or any other Person for any reason whatsoever, (ii)
         the existence of a Default or an



         Event of Default or the termination of the Aggregate Revolving
         Commitments, (iii) any adverse change in the condition (financial or
         otherwise) of the Borrower or any of its Subsidiaries, (iv) any breach
         of this Agreement by the Borrower or any other Lender, (v) any
         amendment, renewal or extension of any Letter of Credit, or (vi) any
         other circumstance, happening or event whatsoever, whether or not
         similar to any of the foregoing. On the date that such participation is
         required to be funded, each Lender shall promptly transfer, in
         immediately available funds, the amount of its participation to the
         Administrative Agent for the account of the Issuing Bank. Whenever, at
         any time after the Issuing Bank has received from any such Lender the
         funds for its participation in a LC Disbursement, the Issuing Bank (or
         the Administrative Agent on its behalf) receives any payment on account
         thereof, the Administrative Agent or the Issuing Bank, as the case may
         be, will distribute to such Lender its Pro Rata Share of such payment;
         provided that if such payment is required to be returned for any reason
         to the Borrower or to a trustee, receiver, liquidator, custodian or
         similar official in any bankruptcy proceeding, such Lender will return
         to the Administrative Agent or the Issuing Bank any portion thereof
         previously distributed by the Administrative Agent or the Issuing Bank
         to it.

                  (f)      To the extent that any Lender shall fail to pay any
         amount required to be paid pursuant to paragraph (d) of this Section
         2.20 on the due date therefor, such Lender shall pay interest to the
         Issuing Bank (through the Administrative Agent) on such amount from
         such due date to the date such payment is made at a rate per annum
         equal to the Federal Funds Rate; provided that if such Lender shall
         fail to make such payment to the Issuing Bank within three (3) Business
         Days of such due date, then, retroactively to the due date, such Lender
         shall be obligated to pay interest on such amount at the Default Rate.

                  (g)      If any Event of Default shall occur and be
         continuing, on the Business Day that the Borrower receives notice from
         the Administrative Agent or the Required Lenders demanding the deposit
         of cash collateral pursuant to this paragraph, the Borrower shall
         deposit in an account with the Administrative Agent, in the name of the
         Administrative Agent and for the benefit of the Lenders, an amount in
         cash equal to 105% of the LC Exposure as of such date plus any accrued
         and unpaid interest thereon; provided that the obligation to deposit
         such cash collateral shall become effective immediately, and such
         deposit shall become immediately due and payable, with demand or notice
         of any kind, upon the occurrence of any Event of Default with respect
         to the Borrower described in clause (g) or (h) of Section 8.1. Such
         deposit shall be held by the Administrative Agent as collateral for the
         payment and performance of the obligations of the Borrower under this
         Agreement. The Administrative Agent shall have exclusive dominion and
         control, including the exclusive right of withdrawal, over such
         account. Other than any interest earned on the investment of such
         deposits, which investments shall be made at the option and sole
         discretion of the Administrative Agent and at the Borrower's risk and
         expense, such deposits shall not bear interest. Interest and profits,
         if any, on such investments shall accumulate in such account. Moneys in
         such account shall applied by the Administrative Agent to reimburse the
         Issuing Bank for LC Disbursements for which it had not been reimbursed
         and to the extent so applied, shall be held for the satisfaction of the
         reimbursement obligations of the Borrower for the LC Exposure at such
         time or, if the maturity of the Loans has been accelerated, with the
         consent of the Required Lenders, be



         applied to satisfy other obligations of the Borrower under this
         Agreement. If the Borrower is required to provide an amount of cash
         collateral hereunder as a result of the occurrence of an Event of
         Default, such amount (to the extent not so applied as aforesaid) shall
         be returned to the Borrower within three (3) Business Days after all
         Events of Default have been cured or waived.

                  (h)      Omitted by Agreement.

                  (i)      The Borrower's obligation to reimburse LC
         Disbursements hereunder shall be absolute, unconditional and
         irrevocable and shall be performed strictly in accordance with the
         terms of this Agreement under all circumstances whatsoever and
         irrespective of any of the following circumstances:

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

                           (ii)     The existence of any claim, set-off, defense
         or other right which the Borrower or any Subsidiary or Affiliate of the
         Borrower may have at any time against a beneficiary or any transferee
         of any Letter of Credit (or any Persons or entities for whom any such
         beneficiary or transferee may be acting), any Lender (including the
         Issuing Bank) or any other Person, whether in connection with this
         Agreement or the Letter of Credit or any document related hereto or
         thereto or any unrelated transaction;

                           (iii)    Any draft or other document presented under
         a Letter of Credit proving to be forged, fraudulent or invalid in any
         respect or any statement therein being untrue or inaccurate in any
         respect, if such documents on their faces appear to be in order;

                           (iv)     Payment by the Issuing Bank under a Letter
         of Credit against presentation of a draft or other document to the
         Issuing Bank that does not comply with the terms of such Letter of
         Credit;

                           (v)      Any other event or circumstance whatsoever,
         whether or not similar to any of the foregoing, that might, but for the
         provisions of this Section, constitute a legal or equitable discharge
         of, or provide a right of setoff against, the Borrower's obligations
         hereunder; or

                           (vi)     The existence of a Default or an Event of
         Default.

         Neither the Administrative Agent, the Issuing Bank, the Lenders nor any
         Related Party of any of the foregoing shall have any liability or
         responsibility by reason of or in connection with the issuance or
         transfer of any Letter of Credit or any payment or failure to make any
         payment thereunder (irrespective of any of the circumstances referred
         to above), or any error, omission, interruption, loss or delay in
         transmission or delivery of any draft, notice or other communication
         under or relating to any Letter of Credit (including any document
         required to make a drawing thereunder), any error in interpretation of
         technical terms or any consequence arising from causes beyond the





         control of the Issuing Bank; provided that the foregoing shall not be
         construed to excuse the Issuing Bank from liability to the Borrower to
         the extent of any direct damages (as opposed to consequential damages,
         claims in respect of which are hereby waived by the Borrower to the
         extent permitted by applicable law) suffered by the Borrower that are
         caused by the Issuing Bank's failure to exercise care when determining
         whether drafts or other documents presented under a Letter of Credit
         comply with the terms thereof. The parties hereto expressly agree, that
         in the absence of gross negligence or willful misconduct on the part of
         the Issuing Bank (as finally determined by a court of competent
         jurisdiction), the Issuing Bank shall be deemed to have exercised care
         in each such determination. In furtherance of the foregoing and without
         limiting the generality thereof, the parties agree that, with respect
         to documents presented that appear on their face to be in substantial
         compliance with the terms of a Letter of Credit, the Issuing Bank may,
         in its sole discretion, either accept and make payment upon such
         documents without responsibility for further investigation, regardless
         of any notice or information to the contrary, or refuse to accept and
         make payment upon such documents if such documents are not in strict
         compliance with the terms of such Letter of Credit.

                  (j)      Each Letter of Credit shall be subject to the Uniform
         Customs and Practices for Documentary Credits (1993 Revision),
         International Chamber of Commerce Publication No.500, as the same may
         be amended from time to time, and, to the extent not inconsistent
         therewith, the governing law of this Agreement set forth in Section
         10.5.

                                  ARTICLE III

               CONDITIONS PRECEDENT TO LOANS AND LETTERS OF CREDIT

         SECTION 3.1 Conditions To Effectiveness. The obligations of the Lenders
to make Loans and the obligation of the Issuing Bank to issue any Letter of
Credit hereunder shall not become effective until the date on which each of the
following conditions is satisfied (or waived in accordance with Section 10.2).

                  (a)      The Administrative Agent shall have received all fees
         and other amounts due and payable on or prior to the Closing Date,
         including reimbursement or payment of all out-of-pocket expenses
         (including reasonable fees, charges and disbursements of counsel to the
         Administrative Agent) required to be reimbursed or paid by the Borrower
         hereunder, under any other Loan Document and under any agreement with
         the Administrative Agent.

                  (b)      The Administrative Agent (or its counsel) shall have
         received the following:

                           (i)      a counterpart of this Agreement signed by or
                  on behalf of each party thereto or written evidence
                  satisfactory to the Administrative Agent (which may include
                  telecopy transmission of a signed signature page of this
                  Agreement) that such party has signed a counterpart of this
                  Agreement;

                           (ii)     duly executed Notes payable to such Lender;


                           (iii)    a duly executed Subsidiary Guarantee
                  Agreement and Indemnity and Contribution Agreement;

                           (iv)     duly executed Security Documents;

                           (v)      a certificate of the Secretary or Assistant
                  Secretary of each Loan Party, attaching and certifying copies
                  of its bylaws and of the resolutions of its boards of
                  directors, authorizing the execution, delivery and performance
                  of the Loan Documents to which it is a party and certifying
                  the name, title and true signature of each officer of such
                  Loan Party executing the Loan Documents to which it is a
                  party;

                           (vi)     certified copies of the articles of
                  incorporation or other charter documents of each Loan Party,
                  together with certificates of good standing or existence, as
                  may be available from the Secretary of State of the
                  jurisdiction of incorporation of such Loan Party and each
                  other jurisdiction where such Loan Party is required to be
                  qualified to do business as a foreign corporation;

                           (vii)    a favorable written opinion of Bass, Berry &
                  Sims PLC, counsel to the Loan Parties, addressed to the
                  Administrative Agent and each of the Lenders, and covering
                  such matters relating to the Loan Parties, the Loan Documents
                  and the transactions contemplated therein as the
                  Administrative Agent or the Required Lenders shall reasonably
                  request;

                           (viii)   a certificate, dated the Closing Date and
                  signed by a Responsible Officer, confirming compliance with
                  the conditions set forth in paragraphs (a), (b) and (c) of
                  Section 3.2; and

                           (ix)     duly executed Notices of Borrowing, if
                  applicable.

         SECTION 3.2 Each Credit Event. The obligation of each Lender to make a
Loan on the occasion of any Borrowing and of the Issuing Bank to issue, amend,
renew or extend any Letter of Credit is subject to the satisfaction of the
following conditions:

                  (a)      at the time of and immediately after giving effect to
         such Borrowing or the issuance, amendment, renewal or extension of such
         Letter of Credit, as applicable, no Default or Event of Default shall
         exist; and

                  (b)      all representations and warranties of each Loan Party
         set forth in the Loan Documents shall be true and correct in all
         material respects on and as of the date of such Borrowing or the date
         of issuance, amendment, extension or renewal of such Letter of Credit,
         in each case before and after giving effect thereto, except for (i)
         representations and warranties effective as of a specified date, which
         shall remain true and correct as of such specified date, and (ii)
         changes in facts and circumstances that are not prohibited by the terms
         of this Agreement;




                  (c)      since the date of the most recent financial
         statements of the Borrower described in Section 5.1(a), there shall
         have been no change which has had or could reasonably be expected to
         have a Material Adverse Effect; and

                  (d)      the Administrative Agent shall have received such
         other documents, certificates, information or legal opinions as the
         Administrative Agent or the Required Lenders may reasonably request,
         all in form and substance reasonably satisfactory to the Administrative
         Agent or the Required Lenders.

         Each Borrowing and each issuance, amendment, extension or renewal of
any Letter of Credit shall be deemed to constitute a representation and warranty
by the Borrower on the date thereof as to the matters specified in paragraphs
(a), (b) and (c) of this Section 3.2.

         SECTION 3.3 Delivery of Documents. All of the Loan Documents,
certificates, legal opinions and other documents and papers referred to in this
Article III, unless otherwise specified, shall be delivered to the
Administrative Agent for the account of each of the Lenders and, except for the
Notes, in sufficient counterparts or copies for each of the Lenders and shall be
in form and substance satisfactory in all respects to the Administrative Agent.

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

         The Borrower represents and warrants to the Administrative Agent and
each Lender as follows:

         SECTION 4.1 Existence; Power. The Borrower and each of its
Subsidiaries: (i) is duly organized, validly existing and in good standing as a
corporation under the laws of the jurisdiction of its organization, (ii) has all
requisite power and authority to carry on its business as now conducted, and
(iii) is duly qualified to do business, and is in good standing, in each
jurisdiction where such qualification is required, except where a failure to be
so qualified could not reasonably be expected to result in a Material Adverse
Effect.

         SECTION 4.2 Organizational Power; Authorization. The execution,
delivery and performance by each Loan Party of the Loan Documents to which it is
a party are within such Loan Party's organizational powers and have been duly
authorized by all necessary organizational action. This Agreement has been duly
executed and delivered by the Borrower, and constitutes, and each other Loan
Document to which any Loan Party is a party, when executed and delivered by such
Loan Party, will constitute, valid and binding obligations of the Borrower or
such Loan Party (as the case may be), enforceable against it in accordance with
their respective terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity.

         SECTION 4.3 Governmental Approvals; No Conflicts. The execution,
delivery and performance by the Borrower of this Agreement, and by each Loan
Party of the other Loan Documents to which it is a party (a) do not require any
consent or approval of, registration or filing with, or any action by, any
Governmental Authority, except those as have been obtained or




made and are in full force and effect or where the failure to do so,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect, (b) will not violate any applicable law or regulation
or the charter, by-laws or other organizational documents of the Borrower or any
of its Subsidiaries or any order of any Governmental Authority, (c) will not
violate or result in a default under any indenture, material agreement or other
material instrument binding on the Borrower or any of its Subsidiaries or any of
its material assets or give rise to a right thereunder to require any payment to
be made by the Borrower or any of its Subsidiaries and (d) will not result in
the creation or imposition of any Lien on any asset of the Borrower or any of
its Subsidiaries, except Liens (if any) created under the Loan Documents.

         SECTION 4.4 Financial Statements. The Borrower has furnished to each
Lender: (i) the audited consolidated balance sheet of the Borrower and its
Subsidiaries as of August 31, 2001 and the related consolidated statements of
income, shareholders' equity and cash flows for the fiscal year then ended
audited by Deloitte & Touche LLP and (ii) the unaudited consolidated balance
sheet of the Borrower and its Subsidiaries as at the end of February 28, 2002,
and the related unaudited consolidated statements of income and cash flows for
the fiscal quarter and year-to-date period then ending, certified by a
Responsible Officer. Such financial statements fairly present the consolidated
financial condition of the Borrower and its Subsidiaries as of such dates and
the consolidated results of operations for such periods in conformity with GAAP
consistently applied, subject to year end audit adjustments and the absence of
footnotes in the case of the statements referred to in clause (ii). Since August
31, 2001, there have been no changes with respect to the Borrower and its
Subsidiaries which have had or could reasonably be expected to have, singly or
in the aggregate, a Material Adverse Effect.

         SECTION 4.5 Litigation and Environmental Matters.

                  (a)      Except as set forth on Schedule 4.5(a), no
         litigation, investigation or proceeding of or before any arbitrators or
         Governmental Authorities is pending against or, to the knowledge of the
         Borrower, threatened against or affecting the Borrower or any of its
         Subsidiaries: (i) as to which there is a reasonable possibility of an
         adverse determination that could reasonably be expected to have, either
         individually or in the aggregate, a Material Adverse Effect, or (ii)
         which in any manner draws into question the validity or enforceability
         of this Agreement or any other Loan Document.

(b)      Except as to any matter which would not have a Material Adverse Effect,
         neither the Borrower nor any of its Subsidiaries: (i) has failed to
         comply with any Environmental Law or to obtain, maintain or comply with
         any permit, license or other approval required under any Environmental
         Law, (ii) has become subject to any Environmental Liability, (iii) has
         received notice of any claim with respect to any Environmental
         Liability, or (iv) knows of any basis for any Environmental Liability.

         SECTION 4.6 Compliance with Laws and Agreements. The Borrower and each
Subsidiary is in compliance with (a) all applicable laws, rules, regulations and
orders of any Governmental Authority, and (b) all indentures, agreements or
other instruments binding upon it or its properties, except where
non-compliance, either singly or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.



         SECTION 4.7 Investment Company Act, Etc. Neither the Borrower nor any
of its Subsidiaries is (a) an "investment company", as defined in, or subject to
regulation under, the Investment Company Act of 1940, as amended, (b) a "holding
company" as defined in, or subject to regulation under, the Public Utility
Holding Company Act of 1935, as amended, or (c) otherwise subject to any other
regulatory scheme limiting its ability to incur debt.

         SECTION 4.8 Taxes. The Borrower and its Subsidiaries have timely filed
or caused to be filed (or have obtained permitted extensions for) all Federal
income tax returns and, to the knowledge of the Borrower, have filed or caused
to be filed (or have obtained permitted extensions for) all other material tax
returns that are required to be filed by them, and have paid all taxes shown to
be due and payable on such returns or on any assessments made against it or its
property and all other taxes, fees or other charges imposed on it or any of its
property by any Governmental Authority, except (i) to the extent the failure to
do so would not have a Material Adverse Effect, or (ii) where the same are
currently being contested in good faith by appropriate proceedings and for which
the Borrower or such Subsidiary, as the case may be, has set aside on its books
adequate reserves.

         SECTION 4.9 Margin Regulations. None of the proceeds of any of the
Loans or Letters of Credit will be used for "purchasing" or "carrying" any
"margin stock" within the respective meanings of each of such terms under
Regulation U as now and from time to time hereafter in effect or for any purpose
that violates the provisions of the applicable Margin Regulations.

         SECTION 4.10 ERISA. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Standards No. 87) did not, as of the date of the most
recent financial statements reflecting such amounts, exceed by more than
$300,000.00 the fair market value of the assets of such Plan, and the present
value of all accumulated benefit obligations of all underfunded Plans (based on
the assumptions used for purposes of Statement of Financial Standards No. 87)
did not, as of the date of the most recent financial statements reflecting such
amounts, exceed by more than $300,000.00 the fair market value of the assets of
all such underfunded Plans.

         SECTION 4.11 Ownership of Property.

                  (a)      Each of the Borrower and its Subsidiaries has good
         title to, or valid leasehold interests in, all of its real and personal
         property material to the operation of its business.

                  (b)      Each of the Borrower and its Subsidiaries owns, or is
         licensed, or otherwise has the right, to use, all material patents,
         trademarks, service marks, tradenames, copyrights and other
         intellectual property material to its business, and the use thereof by
         the Borrower and its Subsidiaries does not infringe on the rights of
         any other Person, except for any such infringements that, individually
         or in the aggregate, would not have a Material Adverse Effect.



         SECTION 4.12 Disclosure.

                  (a)      The Borrower has disclosed to the Lenders all
         agreements, instruments, and corporate or other restrictions to which
         the Borrower or any of its Subsidiaries is subject, and all other
         matters known to any of them, that, individually or in the aggregate,
         could reasonably be expected to result in a Material Adverse Effect.
         None of the reports (including without limitation all reports that the
         Borrower is required to file with the Securities and Exchange
         Commission), financial statements, certificates or other information
         furnished by or on behalf of the Borrower to the Administrative Agent
         or any Lender in connection with the negotiation or syndication of this
         Agreement or any other Loan Document or delivered hereunder or
         thereunder (as modified or supplemented by any other information so
         furnished) contains any material misstatement of fact or omits to state
         any material fact necessary to make the statements therein, taken as a
         whole, in light of the circumstances under which they were made, not
         misleading.

                  (b)      The financial projections and other pro forma
         financial information contained in the information referred to in
         subsection (a) above were based on good faith estimates and assumptions
         believed by the Borrower to be reasonable at the time made and at the
         time furnished to the Administrative Agent and the Lenders, it being
         recognized by the Administrative Agent and the Lenders that such
         projections and other pro forma financial information as to future
         events may differ from the actual results for such period or periods.

         SECTION 4.13 Labor Relations. There are no strikes, lockouts or other
labor disputes or grievances against the Borrower or any of its Subsidiaries,
or, to the Borrower's knowledge, threatened against or affecting the Borrower or
any of its Subsidiaries, and no unfair labor practice, charges or grievances are
pending against the Borrower or any of its Subsidiaries, or to the Borrower's
knowledge, threatened against any of them before any Governmental Authority,
which individually or in the aggregate, would result in a Material Adverse
Effect. All payments due from the Borrower or any of its Subsidiaries pursuant
to the provisions of any collective bargaining agreement have been paid or
accrued as a liability on the books of the Borrower or any such Subsidiary,
except where the failure to do so could not reasonably be expected to have a
Material Adverse Effect.

         SECTION 4.14 Subsidiaries. Schedule 4.14 sets forth the name of, the
ownership interest of the Borrower in, the jurisdiction of incorporation of, and
the type of, each Subsidiary and identifies each Subsidiary that is a Subsidiary
Loan Party, in each case as of the Closing Date.

                                   ARTICLE V
                              AFFIRMATIVE COVENANTS

         The Borrower covenants and agrees that so long as any Lender has a
Commitment hereunder or the principal of and interest on any Loan or any fee or
any LC Disbursement remains unpaid or any Letter of Credit remains outstanding:

         SECTION 5.1 Financial Statements and Other Information. The Borrower
will deliver to the Administrative Agent and each Lender:



                  (a)      as soon as available and in any event within ninety
         (90) days after the end of each fiscal year of Borrower, a copy of the
         annual audited report for such fiscal year for the Borrower and its
         Subsidiaries, containing a consolidated balance sheet of the Borrower
         and its Subsidiaries as of the end of such fiscal year and the related
         consolidated statements of income, stockholders' equity and cash flows
         (together with all footnotes thereto) of the Borrower and its
         Subsidiaries for such fiscal year, setting forth in each case in
         comparative form the figures for the previous fiscal year, all in
         reasonable detail and reported on by Deloitte & Touche LLP or other
         independent public accountants of nationally recognized standing
         (without a "going concern" or like qualification, exception or
         explanation and without any qualification or exception as to scope of
         such audit) to the effect that such financial statements present fairly
         in all material respects the financial condition and the results of
         operations of the Borrower and its Subsidiaries for such fiscal year on
         a consolidated basis in accordance with GAAP and that the examination
         by such accountants in connection with such consolidated financial
         statements has been made in accordance with generally accepted auditing
         standards;

                  (b)      as soon as available and in any event within
         forty-five (45) days after the end of each of the first three fiscal
         quarters of each fiscal year of the Borrower, an unaudited consolidated
         balance sheet of the Borrower and its Subsidiaries as of the end of
         such fiscal quarter and the related unaudited consolidated statements
         of income and cash flows of the Borrower and its Subsidiaries for such
         fiscal quarter and the then elapsed portion of such fiscal year,
         setting forth in each case in comparative form the figures for the
         corresponding quarter and the corresponding portion of Borrower's
         previous fiscal year, all certified by a Responsible Officer as
         presenting fairly in all material respects the financial condition and
         results of operations of the Borrower and its Subsidiaries on a
         consolidated basis in accordance with GAAP, subject to normal year-end
         audit adjustments and the absence of footnotes;

                  (c)      concurrently with the delivery of the financial
         statements referred to in clauses (a) and (b) above, a certificate of a
         Responsible Officer, (i) certifying as to whether there exists a
         Default or Event of Default on the date of such certificate, and if a
         Default or an Event of Default then exists, specifying the details
         thereof and the action which the Borrower has taken or proposes to take
         with respect thereto, (ii) setting forth in reasonable detail
         calculations demonstrating compliance with Article VI, and (iii)
         stating whether any change in GAAP or the application thereof has
         occurred since the date of the Borrower's audited financial statements
         referred to in Section 4.4 and, if any change has occurred, specifying
         the effect of such change on the financial statements accompanying such
         certificate;

                  (d)      concurrently with the delivery of the financial
         statements referred to in clause (a) above, a certificate of the
         accounting firm that reported on such financial statements stating
         whether they obtained any knowledge during the course of their
         examination of such financial statements of any Default or Event of
         Default (which certificate may be limited to the extent required by
         accounting rules or guidelines);

                  (e)      promptly after the same become publicly available,
         copies of all periodic and other reports, proxy statements and other
         materials filed with the Securities and



         Exchange Commission, or any Governmental Authority succeeding to any or
         all functions of said Commission, or with any national securities
         exchange, or distributed by the Borrower to its shareholders generally,
         as the case may be;

                  (f)      concurrently with the delivery of the financial
         statements referred to in clause (a) above, a copy of the Borrower's
         proposed annual budget and financial projections;

                  (g)      concurrently with a request for a Borrowing or a
         request for the issuance of a Letter of Credit and on the fifteenth
         (15th) day of each January, April, July, and October, the Borrower
         shall deliver to the Administrative Agent a Borrowing Base Certificate;

                  (h)      on the fifteenth (15th) day of each January, April,
         July, and October, the Borrower shall deliver to the Administrative
         Agent, in a form reasonably acceptable to the Administrative Agent, a
         listing and aging of Borrower's accounts receivable; and

                  (i)      promptly following any request therefor, such other
         information regarding the results of operations, business affairs and
         financial condition of the Borrower or any Subsidiary as the
         Administrative Agent or any Lender may reasonably request.

         SECTION 5.2 Notices of Material Events. The Borrower will furnish to
the Administrative Agent and each Lender prompt written notice of the following:

                  (a)      the occurrence of any Default or Event of Default;

                  (b)      the filing or commencement of any action, suit or
         proceeding by or before any arbitrator or Governmental Authority
         against or, to the knowledge of the Borrower, affecting the Borrower or
         any Subsidiary which, if adversely determined, could reasonably be
         expected to result in a Material Adverse Effect;

                  (c)      the occurrence of any event or any other development
         by which the Borrower or any of its Subsidiaries (i) fails to comply
         with any Environmental Law or to obtain, maintain or comply with any
         permit, license or other approval required under any Environmental Law,
         (ii) becomes subject to any Environmental Liability, (iii) receives
         notice of any claim with respect to any Environmental Liability, or
         (iv) becomes aware of any basis for any Environmental Liability, and in
         each of the preceding clauses, which individually or in the aggregate
         could reasonably be expected to result in a Material Adverse Effect;

                  (d)      the occurrence of any ERISA Event that alone, or
         together with any other ERISA Events that have occurred, could
         reasonably be expected to result in liability of the Borrower and its
         Subsidiaries in an aggregate amount exceeding $300,000.00; and

                  (e)      any other development that results in, or could
         reasonably be expected to result in, a Material Adverse Effect.


         Each notice delivered under this Section shall be accompanied by a
written statement of a Responsible Officer setting forth the details of the
event or development requiring such notice and any action taken or proposed to
be taken with respect thereto.

         SECTION 5.3 Existence; Conduct of Business. The Borrower will, and will
cause each of its Subsidiaries to, do or cause to be done all things necessary
to preserve, renew and maintain in full force and effect its legal existence and
its respective rights, licenses, permits, privileges, franchises, patents,
copyrights, trademarks and trade names material to the conduct of its business,
where the failure to do so would have a Material Adverse Effect, and will
continue to engage in substantially the same business as presently conducted or
such other businesses that are reasonably related thereto; provided that nothing
in this Section shall prohibit any merger, consolidation, liquidation or
dissolution permitted under Section 7.3.

         SECTION 5.4 Compliance with Laws, Etc. The Borrower will, and will
cause each of its Subsidiaries to, comply with all laws, rules, regulations and
requirements of any Governmental Authority applicable to its properties, except
where the failure to do so, either individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.

         SECTION 5.5 Payment of Obligations. The Borrower will, and will cause
each of its Subsidiaries to, pay and discharge at or before maturity, all of its
obligations and liabilities (including without limitation all tax liabilities
and claims that could result in a statutory Lien) before the same shall become
delinquent or in default, except where (a) the validity or amount thereof is
being contested in good faith by appropriate proceedings, (b) the Borrower or
such Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP, and (c) the failure to make payment pending
such contest could not reasonably be expected to result in a Material Adverse
Effect.

         SECTION 5.6 Books and Records. The Borrower will, and will cause each
of its Subsidiaries to, keep proper books of record and account in which full,
true and correct entries shall be made of all material dealings and transactions
in relation to its business and activities to the extent necessary to prepare
the consolidated financial statements of Borrower in conformity with GAAP.

         SECTION 5.7 Visitation, Inspection, Etc. The Borrower will, and will
cause each of its Subsidiaries to, permit any representative of the
Administrative Agent or any Lender, to visit and inspect its properties, to
examine its books and records and to make copies and take extracts therefrom,
and to discuss its affairs, finances and accounts with any of its officers and
with its independent certified public accountants, all at such reasonable times
and as often as the Administrative Agent or any Lender may reasonably request
after reasonable prior notice to the Borrower.

         SECTION 5.8 Maintenance of Properties; Insurance. The Borrower will,
and will cause each of its Subsidiaries to, (a) keep and maintain all property
material to the conduct of its business in good working order and condition,
except for ordinary wear and tear and except where the failure to do so, either
individually or it the aggregate, could not reasonably be expected to result in
a Material Adverse Effect, and (b) maintain with financially sound and reputable
insurance companies, insurance with respect to its properties and business, and
the




properties and business of its Subsidiaries, against loss or damage of the kinds
customarily insured against by companies in the same or similar businesses
operating in the same or similar locations.

         SECTION 5.9 Use of Proceeds and Letters of Credit. The Borrower will
use the proceeds of all Loans to finance working capital needs and for other
general corporate purposes of the Borrower and its Subsidiaries, including, but
not limited to, the use of Letters of Credit to guarantee performance of fee
refund provisions under contracts entered into by Borrower with health plans. No
part of the proceeds of any Loan will be used, whether directly or indirectly,
for any purpose that would violate any rule or regulation of the Board of
Governors of the Federal Reserve System, including Regulations T, U or X. All
Letters of Credit will be used for general corporate purposes.

         SECTION 5.10 Bank Accounts. In consideration for the interest rate
offered herein and as additional collateral for the Loans, the Borrower shall,
and shall cause its Subsidiaries, to maintain its bank accounts and investment
accounts with the Administrative Agent; provided that it is understood and
agreed that the Borrower shall deposit as escrow monies up to $6,000,000 with
Chase Manhattan Bank, N.A. pursuant to the terms of the Administrative Services
Agreement dated as of February 15, 2002, as amended, by and among American
Healthways Services, Inc., Oxford Health Plans, Inc. and related entities. Upon
the occurrence of an Event of Default, the Administrative Agent is authorized to
set-off (without prior notice to the Borrower or its Subsidiaries) against all
such bank accounts and to apply the proceeds thereof to the Obligations.

         SECTION 5.11 Additional Subsidiaries. If any additional Subsidiary is
acquired or formed after the Closing Date, the Borrower will, within ten (10)
business days after such Subsidiary is acquired or formed, notify the
Administrative Agent and the Lenders thereof and will cause such Subsidiary to
become a Subsidiary Loan Party by executing agreements in the form of Annex I to
Exhibit F and Annex I to Exhibit G in form and substance satisfactory to the
Administrative Agent and the Required Lenders and will cause such Subsidiary to
deliver simultaneously therewith similar documents applicable to such Subsidiary
required under Section 3.1 as reasonably requested by the Administrative Agent.

         SECTION 5.12 Additional Assets. Within ten (10) days after receipt of
written notice from the Administrative Agent, the Borrower and any Subsidiary
Loan Party shall execute such security agreements, collateral assignments, deeds
of trust, mortgages, pledge agreements, or similar agreements, and take all such
necessary steps (including filings and recordings with appropriate governmental
offices), all at the Borrower's expense, as reasonably requested by the
Administrative Agent to obtain on behalf of the Lenders a Lien against any
presently existing or hereafter acquired material asset of the Borrower and each
Subsidiary Loan Party.




                                   ARTICLE VI

                               FINANCIAL COVENANTS

         The Borrower covenants and agrees that so long as any Lender has a
Commitment hereunder or the principal of or interest on or any Loan remains
unpaid or any fee or any LC Disbursement remains unpaid or any Letter of Credit
remains outstanding:

         SECTION 6.1 Leverage Ratio. The Borrower will have, as of the end of
each fiscal quarter (calculated for such quarter and the three prior fiscal
quarters) of the Borrower, a Leverage Ratio of not greater than 2.0 to 1.0:

         SECTION 6.2 Consolidated Fixed Charge Coverage Ratio. The Borrower will
have, as of the end of each fiscal quarter (calculated for such quarter and the
three prior fiscal quarters) of the Borrower, a Consolidated Fixed Charge
Coverage Ratio of not less than 2.0 to 1.0:

         SECTION 6.3 Consolidated Net Worth The Borrower will not permit its
Consolidated Net Worth at any time to be less than the sum of: (i)
$50,000,000.00, plus (ii) one hundred percent (100%) of the amount by which the
Borrower's "total stockholders' equity" is increased as a result of any public
or private offering of common stock of the Borrower after the Closing Date, plus
(iii) seventy-five percent (75%) of Consolidated Net Income on a cumulative
basis for all preceding fiscal quarters of the Borrower, commencing with the
fiscal quarter ended February 28, 2002; provided that if Consolidated Net Income
is negative in any fiscal quarter the amount attributed to Consolidated Net
Income for such fiscal quarter shall be zero and such negative Consolidated Net
Income shall not reduce the amount of Consolidated Net Income added from any
previous fiscal quarter. Promptly upon the consummation of any public or private
offering of common stock, the Borrower shall notify the Administrative Agent in
writing of the amount of such increase in "total stockholders' equity".

         SECTION 6.4 MINIMUM LIQUIDITY. The Borrower will maintain at all times
at least $8,000,000.00 in cash, marketable securities, and unused availability
under the Revolving Commitments.

                                  ARTICLE VII

                               NEGATIVE COVENANTS

         The Borrower covenants and agrees that so long as any Lender has a
Commitment hereunder or the principal of or interest on any Loan remains unpaid
or any fee or any LC Disbursement remains unpaid or any Letter of Credit remains
outstanding:

         SECTION 7.1 Indebtedness. The Borrower will not, and will not permit
any of its Subsidiaries to, create, incur, assume or suffer to exist any
Indebtedness, except:

                  (a)      Indebtedness created pursuant to the Loan Documents;

                  (b)      Indebtedness existing on the date hereof and set
         forth on Schedule 7.1 and extensions, renewals and replacements of any
         such Indebtedness that do not increase the outstanding principal amount
         thereof (immediately prior to giving effect to such extension, renewal
         or replacement) or shorten the maturity or the weighted average life
         thereof;


                  (c)      Indebtedness of the Borrower owing to any Subsidiary
         and of any Subsidiary owing to the Borrower or any other Subsidiary;
         provided that any such Indebtedness that is owed to a Subsidiary or by
         a Subsidiary shall be a domestic Subsidiary created and existing under
         the laws of a State of the United States, and provided, further, that
         any such Indebtedness that is owed to a Subsidiary that is not a
         Subsidiary Loan Party shall be subject to Section 7.4;

                  (d)      Indebtedness in respect of obligations under Hedging
         Agreements permitted by Section 7.10;

                  (e)      other unsecured Indebtedness in an aggregate
         principal amount not to exceed $1,000,000.00 at any time outstanding;
         and

                  (f)      Capital Lease Obligations and secured purchase money
         indebtedness not in excess of $2,000,000 in the aggregate.

         SECTION 7.2 Negative Pledge. Except for Liens granted to Administrative
Agent to secure the Indebtedness, the Borrower will not, and will not permit any
of its Subsidiaries to, create, incur, assume or suffer to exist any Lien on any
of its assets or property now owned or hereafter acquired or, except:

                  (a)      Permitted Encumbrances;

                  (b)      any Liens on any property or asset of the Borrower or
         any Subsidiary existing on the Closing Date set forth on Schedule 7.2;
         provided that such Lien shall not apply to any other property or asset
         of the Borrower or any Subsidiary;

                  (c)      any Lien (i) existing on any asset of any Person at
         the time such Person becomes a Subsidiary of the Borrower, (ii)
         existing on any asset of any Person at the time such Person is merged
         with or into the Borrower or any Subsidiary of the Borrower or (iii)
         existing on any asset prior to the acquisition thereof by the Borrower
         or any Subsidiary of the Borrower; provided that any such Lien was not
         created in the contemplation of any of the foregoing and any such Lien
         secures only those obligations which it secures on the date that such
         Person becomes a Subsidiary or the date of such merger or the date of
         such acquisition; and

                  (d)      extensions, renewals, or replacements of any Lien
         referred to in paragraphs (a) through (c) of this Section; provided
         that the principal amount of the Indebtedness secured thereby is not
         increased and that any such extension, renewal or replacement is
         limited to the assets originally encumbered thereby.

         SECTION 7.3 Fundamental Changes.

                  (a)      The Borrower will not, and will not permit any
         Subsidiary to, merge into or consolidate into any other Person, or
         permit any other Person to merge into or consolidate with it, or sell,
         lease, transfer or otherwise dispose of (in a single transaction or a
         series of transactions) all or substantially all of its assets (in each
         case, whether now owned or hereafter acquired) or all or substantially
         all of the stock of any of its



         Subsidiaries (in each case, whether now owned or hereafter acquired) or
         liquidate or dissolve; provided that if at the time thereof and
         immediately after giving effect thereto, no Default or Event of Default
         shall have occurred and be continuing (i) the Borrower or any
         Subsidiary may merge with a Person if the Borrower (or such Subsidiary
         if the Borrower is not a party to such merger) is the surviving Person,
         (ii) any Subsidiary may merge into another Subsidiary; provided that if
         any party to such merger is a Subsidiary Loan Party, a Subsidiary Loan
         Party shall be the surviving Person, (iii) any Subsidiary may sell,
         transfer, lease or otherwise dispose of all or substantially all of its
         assets to the Borrower or to a Subsidiary Loan Party and (iv) any
         Subsidiary (other than a Subsidiary Loan Party) may liquidate or
         dissolve if the Borrower determines in good faith that such liquidation
         or dissolution is in the best interests of the Borrower and is not
         materially disadvantageous to the Lenders; provided that any such
         merger involving a Person that is not a wholly-owned Subsidiary
         immediately prior to such merger shall not be permitted unless the
         corresponding Investment (as such term is defined in Section 7.4
         below), if any, is also permitted by Section 7.4.

                  (b)      The Borrower will not, and will not permit any of its
         Subsidiaries to, engage to any material extent in any business other
         than businesses of the type conducted by the Borrower and its
         Subsidiaries on the date hereof and businesses reasonably related
         thereto.

         SECTION 7.4 Investments, Loans, Etc. The Borrower will not, and will
not permit any of its Subsidiaries to, purchase, hold or acquire (including
pursuant to any merger with any Person that was not a wholly-owned Subsidiary
prior to such merger), any common stock, evidence of indebtedness or other
securities (including any option, warrant, or other right to acquire any of the
foregoing) of, make or permit to exist any loans or advances to, Guarantee any
obligations of, or make or permit to exist any investment or any other interest
in, any other Person (all of the foregoing being collectively called
"INVESTMENTS"), or purchase or otherwise acquire (in one transaction or a series
of transactions) any assets of any other Person that constitute a business unit,
except:

                  (a)      Investments (other than Permitted Investments)
         existing on the date hereof and set forth on Schedule 7.4 (including
         Investments in Subsidiaries);

                  (b)      Permitted Investments;

                  (c)      Guarantees with respect to or constituting
         Indebtedness permitted by Section 7.1;

                  (d)      loans or advances to employees, officers or directors
         of the Borrower or any Subsidiary in the ordinary course of business
         for travel, relocation and related expenses;

                  (e)      Hedging Agreements permitted by Section 7.10; and

                  (f)      Investments in any Person in which the consideration
         paid or exchanged in such Investment is not in excess of whichever of
         the following applies: (i) $2,000,000, if the sole consideration paid
         or exchanged is cash; (ii) an amount equal to fifteen percent




         (15%) of Consolidated Net Worth, as calculated at the end of the most
         recent fiscal quarter, if the sole consideration paid or exchanged is
         stock; and (iii) $2,000,000 in cash and fifteen percent (15%) of
         Consolidated Net Worth, as calculated at the end of the most recent
         fiscal quarter, if the consideration paid or exchanged consists of a
         combination of cash and stock.

         SECTION 7.5 Restricted Payments. The Borrower will not, and will not
permit its Subsidiaries to, declare or make, or agree to pay or make, directly
or indirectly, any dividend on any class of its stock, or make any payment on
account of, or set apart assets for a sinking or other analogous fund for, the
purchase, redemption, retirement, defeasance or other acquisition of, any shares
of common stock or Indebtedness subordinated to the Obligations of the Borrower
or any options, warrants, or other rights to purchase such common stock or such
Indebtedness, whether now or hereafter outstanding (each, a "RESTRICTED
PAYMENT"), except for (i) dividends payable by the Borrower solely in shares of
any class of its common stock, (ii) Restricted Payments made by any Subsidiary
to the Borrower, and (iii) cash redemptions of the common stock of the Borrower;
provided that (a) no Default or Event of Default has occurred and is continuing
at the time such redemption is made, and (b) no more than $3,000,000.00 in the
aggregate is paid for stock redemptions during the term of the Revolving Loans.

         SECTION 7.6 Sale of Assets. The Borrower will not, and will not permit
any of its Subsidiaries to, convey, sell, lease, assign, transfer or otherwise
dispose of, any of its assets, business or property, whether now owned or
hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares
of such Subsidiary's common stock to any Person other than the Borrower or any
Subsidiary of the Borrower, except:

                  (a)      the sale or other disposition for fair market value
         of obsolete or worn out property or other property not necessary for
         operations disposed of in the ordinary course of business;

                  (b)      the sale of inventory and Permitted Investments in
         the ordinary course of business; and

                  (c)      transactions permitted by Section 7.3(a) herein.

         SECTION 7.7 Transactions with Affiliates. The Borrower will not, and
will not permit any of its Subsidiaries to, sell, lease or otherwise transfer
any property or assets to, or purchase, lease or otherwise acquire any property
or assets from, or otherwise engage in any other transactions with, any of its
Affiliates, except (a) in the ordinary course of business at prices and on terms
and conditions not less favorable to the Borrower or such Subsidiary than could
be obtained on an arm's-length basis from unrelated third parties, (b)
transactions between or among the Borrower and its Subsidiaries not involving
any other Affiliates, or (c) any Restricted Payment permitted by Section 7.5.

         SECTION 7.8 Restrictive Agreements. The Borrower will not, and will not
permit any Subsidiary to, directly or indirectly, enter into, incur or permit to
exist any agreement that prohibits, restricts or imposes any condition upon (a)
the ability of the Borrower or any Subsidiary to create, incur or permit any
Lien upon any of its assets or properties, whether now



owned or hereafter acquired, or (b) the ability of any Subsidiary to pay
dividends or other distributions with respect to its common stock, to make or
repay loans or advances to the Borrower or any other Subsidiary, to Guarantee
Indebtedness of the Borrower or any other Subsidiary or to transfer any of its
property or assets to the Borrower or any Subsidiary of the Borrower; provided
that (i) the foregoing shall not apply to restrictions or conditions imposed by
law or by this Agreement or any other Loan Document, (ii) the foregoing shall
not apply to customary restrictions and conditions contained in agreements
relating to the sale of a Subsidiary pending such sale, provided such
restrictions and conditions apply only to the Subsidiary that is sold and such
sale is permitted hereunder, (iii) clause (a) shall not apply to restrictions or
conditions imposed by any agreement relating to secured Indebtedness permitted
by this Agreement if such restrictions and conditions apply only to the property
or assets securing such Indebtedness and (iv) clause (a) shall not apply to
customary provisions in real property or equipment leases restricting the
assignment thereof.

         SECTION 7.9 Sale and Leaseback Transactions. The Borrower will not, and
will not permit any of the Subsidiaries to, enter into any arrangement, directly
or indirectly, whereby it shall sell or transfer any property, real or personal,
used or useful in its business, whether now owned or hereinafter acquired, and
thereafter rent or lease such property or other property that it intends to use
for substantially the same purpose or purposes as the property sold or
transferred.

         SECTION 7.10 Hedging Agreements. Unless such is approved by the
Administrative Agent in the exercise of its reasonable discretion, the Borrower
will not, and will not permit any of the Subsidiaries to, enter into any Hedging
Agreement.

         SECTION 7.11 Status of Incorporation. The Borrower will not nor will it
permit any Subsidiary to change its state of incorporation.

         SECTION 7.12 Accounting Changes. Subject to Section 1.3, the Borrower
will not, and will not permit any Subsidiary to, make any significant change in
accounting treatment or reporting practices, except as required by GAAP, or
change the fiscal year of the Borrower or of any Subsidiary, except to change
the fiscal year of a Subsidiary to conform its fiscal year to that of the
Borrower.

                                  ARTICLE VIII

                                EVENTS OF DEFAULT

         SECTION 8.1 Events of Default. If any of the following events (each an
"Event of Default") shall occur:

                  (a)      the Borrower shall fail to pay any principal of any
         Loan or of any reimbursement obligation in respect of any LC
         Disbursement within ten (10) days following the date such payment
         became due and payable, whether at the due date thereof or at a date
         fixed for prepayment or otherwise; or

                  (b)      the Borrower shall fail to pay any interest on any
         Loan or any fee or any other amount (other than an amount payable under
         clause (a) of this Article) payable under this Agreement or any other
         Loan Document, when and as the same shall become



         due and payable, and such failure shall continue unremedied for a
         period of ten (10) Business Days; or

                  (c)      any representation or warranty made or deemed made by
         or on behalf of the Borrower or any Subsidiary in or in connection with
         this Agreement or any other Loan Document (including the Schedules
         attached thereto) and any amendments or modifications hereof or waivers
         hereunder, or in any certificate, report, financial statement or other
         document submitted to the Administrative Agent or the Lenders by any
         Loan Party or any representative of any Loan Party pursuant to or in
         connection with this Agreement or any other Loan Document shall prove
         to be incorrect when made or deemed made or submitted; or

                  (d)      the Borrower shall fail to observe or perform any
         covenant or agreement contained in Sections 5.2, 5.3 (with respect to
         the Borrower's existence) or Articles VI or VII; or

                  (e)      any Loan Party shall fail to observe or perform any
         covenant or agreement contained in this Agreement (other than those
         referred to in clauses (a), (b) and (d) above) or any other Loan
         Document, and such failure shall remain unremedied for 30 days after
         the earlier of (i) any Responsible Officer obtains actual knowledge or
         reasonably should have obtained actual knowledge of such failure, or
         (ii) written notice thereof shall have been given to the Borrower by
         the Administrative Agent or any Lender; or

                  (f)      the Borrower or any Subsidiary (whether as primary
         obligor or as guarantor or other surety) shall fail to pay any
         principal of or premium or interest on any Material Indebtedness that
         is outstanding, when and as the same shall become due and payable
         (whether at scheduled maturity, required prepayment, acceleration,
         demand or otherwise), and such failure shall continue after the
         applicable grace period, if any, specified in the agreement or
         instrument evidencing such Indebtedness; or any other event shall occur
         or condition shall exist under any agreement or instrument relating to
         such Indebtedness and shall continue after the applicable grace period,
         if any, specified in such agreement or instrument, if the effect of
         such event or condition is to accelerate, or permit the acceleration
         of, the maturity of such Indebtedness; or any such Indebtedness shall
         be declared to be due and payable; or required to be prepaid or
         redeemed (other than by a regularly scheduled required prepayment or
         redemption), purchased or defeased, or any offer to prepay, redeem,
         purchase or defease such Indebtedness shall be required to be made, in
         each case prior to the stated maturity thereof; or

                  (g)      the Borrower or any Subsidiary shall (i) commence a
         voluntary case or other proceeding or file any petition seeking
         liquidation, reorganization or other relief under any federal, state or
         foreign bankruptcy, insolvency or other similar law now or hereafter in
         effect or seeking the appointment of a custodian, trustee, receiver,
         liquidator or other similar official of it or any substantial part of
         its property, (ii) consent to the institution of, or fail to contest in
         a timely and appropriate manner, any proceeding or petition described
         in clause (i) of this Section, (iii) apply for or consent to the
         appointment of a custodian, trustee, receiver, liquidator or other
         similar official for the Borrower or any such Subsidiary or for a
         substantial part of its assets, (iv) file an answer



         admitting the material allegations of a petition filed against it in
         any such proceeding, (v) make a general assignment for the benefit of
         creditors, or (vi) take any action for the purpose of effecting any of
         the foregoing; or

                  (h)      an involuntary proceeding shall be commenced or an
         involuntary petition shall be filed seeking (i) liquidation,
         reorganization or other relief in respect of the Borrower or any
         Subsidiary or its debts, or any substantial part of its assets, under
         any federal, state or foreign bankruptcy, insolvency or other similar
         law now or hereafter in effect or (ii) the appointment of a custodian,
         trustee, receiver, liquidator or other similar official for the
         Borrower or any Subsidiary or for a substantial part of its assets, and
         in any such case, such proceeding or petition shall remain undismissed
         for a period of 60 days or an order or decree approving or ordering any
         of the foregoing shall be entered; or

                  (i)      the Borrower or any Subsidiary shall admit in writing
         its inability to pay its debts as they become due; or

                  (j)      an ERISA Event shall have occurred that, in the
         opinion of the Required Lenders, when taken together with other ERISA
         Events that have occurred, could reasonably be expected to result in
         liability to the Borrower and the Subsidiaries in an aggregate amount
         exceeding $300,000.00; or

                  (k)      any judgment or order for the payment of money in
         excess of $300,000.00 in the aggregate shall be rendered against the
         Borrower or any Subsidiary, and either (i) enforcement proceedings
         shall have been commenced by any creditor upon such judgment or order
         or (ii) there shall be a period of thirty (30) consecutive days during
         which a stay of enforcement of such judgment or order, by reason of a
         pending appeal or otherwise, shall not be in effect; or

                  (l)      any non-monetary judgment or order shall be rendered
         against the Borrower or any Subsidiary that could reasonably be
         expected to have a Material Adverse Effect, and there shall be a period
         of thirty (30) consecutive days during which a stay of enforcement of
         such judgment or order, by reason of a pending appeal or otherwise,
         shall not be in effect; or

                  (m)      a Change in Control shall occur or exist; or

                  (n)      any provision of any Subsidiary Guarantee Agreement
         shall for any reason cease to be valid and binding on, or enforceable
         against, any Subsidiary Loan Party, or any Subsidiary Loan Party shall
         so state in writing, or any Subsidiary Loan Party shall seek to
         terminate its Subsidiary Guarantee Agreement without the written
         consent of the Lenders; or

                  (o)      an Event of Default shall occur under any other
         agreements evidencing Indebtedness owed to any of the Lenders or under
         any Hedging Agreement executed with any of the Lenders (taking into
         account any applicable notice and cure or grace period provisions
         thereof);


then, and in every such event (other than an event with respect to the Borrower
described in clause (g) or (h) of this Section) and at any time thereafter
during the continuance of such event, the Administrative Agent may, and upon the
written request of the Required Lenders shall, by notice to the Borrower, take
any or all of the following actions, at the same or different times: (i)
terminate the Commitments, whereupon the Commitment of each Lender shall
terminate immediately; (ii) declare the principal of and any accrued interest on
the Loans, and all other Obligations owing hereunder, to be, whereupon the same
shall become due and payable immediately, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrower and
(iii) exercise all remedies contained in any other Loan Document; and that, if
an Event of Default specified in either clause (g) or (h) shall occur, the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon, and all fees, and all other
Obligations shall automatically become due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower.

                                   ARTICLE IX

                            THE ADMINISTRATIVE AGENT

         SECTION 9.1 Appointment of Administrative Agent.

                  (a)      Each Lender irrevocably appoints SunTrust Bank as the
         Administrative Agent and authorizes it to take such actions on its
         behalf and to exercise such powers as are delegated to the
         Administrative Agent under this Agreement and the other Loan Documents,
         together with all such actions and powers that are reasonably
         incidental thereto. The Administrative Agent may perform any of its
         duties hereunder by or through any one or more sub-agents appointed by
         the Administrative Agent. The Administrative Agent and any such
         sub-agent may perform any and all of its duties and exercise its rights
         and powers through their respective Related Parties. The exculpatory
         provisions set forth in this Article shall apply to any such sub-agent
         and the Related Parties of the Administrative Agent and any such
         sub-agent and shall apply to their respective activities in connection
         with the syndication of the credit facilities provided for herein as
         well as activities as Administrative Agent.

                  (b)      The Issuing Bank 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 Bank with respect thereto; provided that the
         Issuing Bank shall have all the benefits and immunities (i) provided to
         the Administrative Agent in this Article IX with respect to any acts
         taken or omissions suffered by the Issuing Bank 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 the term "Administrative Agent" as used
         in this Article IX included the Issuing Bank with respect to such acts
         or omissions and (ii) as additionally provided in this Agreement with
         respect to the Issuing Bank.


         SECTION 9.2 Nature of Duties of Administrative Agent. The
Administrative Agent shall not have any duties or obligations except those
expressly set forth in this Agreement and the other Loan Documents. Without
limiting the generality of the foregoing, (a) the Administrative Agent shall not
be subject to any fiduciary or other implied duties, regardless of whether a
Default or an Event of Default has occurred and is continuing, (b) the
Administrative Agent shall not have any duty to take any discretionary action or
exercise any discretionary powers, except those discretionary rights and powers
expressly contemplated by the Loan Documents that the Administrative Agent is
required to exercise in writing by the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 10.2), and (c) except as expressly set forth in the Loan
Documents, the Administrative Agent shall not have any duty to disclose, and
shall not be liable for the failure to disclose, any information relating to the
Borrower or any of its Subsidiaries that is communicated to or obtained by the
Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall not be liable for any action taken or not taken by it
with the consent or at the request of the Required Lenders (or such other number
or percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 10.2) or in the absence of its own gross negligence or
willful misconduct. The Administrative Agent shall not be deemed to have
knowledge of any Default or Event of Default unless and until written notice
thereof is given to the Administrative Agent by the Borrower or any Lender, and
the Administrative Agent shall not be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made in
or in connection with any Loan Document, (ii) the contents of any certificate,
report or other document delivered hereunder or thereunder or in connection
herewith or therewith, (iii) the performance or observance of any of the
covenants, agreements, or other terms and conditions set forth in any Loan
Document, (iv) the validity, enforceability, effectiveness or genuineness of any
Loan Document or any other agreement, instrument or document, or (v) the
satisfaction of any condition set forth in Article III or elsewhere in any Loan
Document, other than to confirm receipt of items expressly required to be
delivered to the Administrative Agent.

         SECTION 9.3 Lack of Reliance on the Administrative Agent. Each of the
Lenders and the Issuing Bank acknowledges that it has, independently and without
reliance upon the Administrative Agent or any other Lender and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each of the Lenders, and the
Issuing Bank also acknowledges that it will, independently and without reliance
upon the Administrative Agent or any other Lender and based on such documents
and information as it has deemed appropriate, continue to make its own decisions
in taking or not taking of any action under or based on this Agreement, any
related agreement or any document furnished hereunder or thereunder.

         SECTION 9.4 Certain Rights of the Administrative Agent. If the
Administrative Agent shall request instructions from the Required Lenders with
respect to any action or actions (including the failure to act) in connection
with this Agreement, the Administrative Agent shall be entitled to refrain from
such act or taking such act, unless and until it shall have received
instructions from such Lenders; and the Administrative Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, no Lender shall have any right of action whatsoever against the
Administrative Agent as a result of the Administrative Agent




acting or refraining from acting hereunder in accordance with the instructions
of the Required Lenders where required by the terms of this Agreement.

         SECTION 9.5 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely upon, and shall not incur any liability for relying
upon, any notice, request, certificate, consent, statement, instrument, document
or other writing believed by it to be genuine and to have been signed, sent or
made by the proper Person. The Administrative Agent may also rely upon any
statement made to it orally or by telephone and believed by it to be made by the
proper Person and shall not incur any liability for relying thereon. The
Administrative Agent may consult with legal counsel (including counsel for the
Borrower), independent public accountants and other experts selected by it and
shall not be liable for any action taken or not taken by it in accordance with
the advice of such counsel, accountants or experts.

         SECTION 9.6 The Administrative Agent in its Individual Capacity. The
bank serving as the Administrative Agent shall have the same rights and powers
under this Agreement and any other Loan Document in its capacity as a Lender as
any other Lender and may exercise or refrain from exercising the same as though
it were not the Administrative Agent; and the terms "Lenders", "Required
Lenders", "holders of Notes", or any similar terms shall, unless the context
clearly otherwise indicates, include the Administrative Agent in its individual
capacity. The bank acting as the Administrative Agent and its Affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with the Borrower or any Subsidiary or Affiliate of the Borrower as if
it were not the Administrative Agent hereunder.

         SECTION 9.7 Successor Administrative Agent.

                  (a)      The Administrative Agent may resign at any time by
         giving notice thereof to the Lenders and the Borrower. Upon any such
         resignation, the Required Lenders shall have the right to appoint a
         successor Administrative Agent, subject to the approval by the Borrower
         provided that no Default or Event of Default shall exist at such time.
         If no successor Administrative Agent shall have been so appointed, and
         shall have accepted such appointment within 30 days after the retiring
         Administrative Agent gives notice of resignation, then the retiring
         Administrative Agent may, on behalf of the Lenders and the Issuing
         Bank, appoint a successor Administrative Agent, which shall be a
         commercial bank organized under the laws of the United States of
         America or any state thereof or a bank which maintains an office in the
         United States, having a combined capital and surplus of at least
         $500,000,000.

                  (b)      Upon the acceptance of its appointment as the
         Administrative Agent hereunder by a successor, such successor
         Administrative Agent shall thereupon succeed to and become vested with
         all the rights, powers, privileges and duties of the retiring
         Administrative Agent, and the retiring Administrative Agent shall be
         discharged from its duties and obligations under this Agreement and the
         other Loan Documents. If within 45 days after written notice is given
         of the retiring Administrative Agent's resignation under this Section
         9.7 no successor Administrative Agent shall have been appointed and
         shall have accepted such appointment, then on such 45th day (i) the
         retiring Administrative Agent's resignation shall become effective,
         (ii) the retiring Administrative Agent shall thereupon be discharged
         from its duties and obligations under the Loan Documents, and




         (iii) the Required Lenders shall thereafter perform all duties of the
         retiring Administrative Agent under the Loan Documents until such time
         as the Required Lenders appoint a successor Administrative Agent as
         provided above. After any retiring Administrative Agent's resignation
         hereunder, the provisions of this Article IX shall continue in effect
         for the benefit of such retiring Administrative Agent and its
         representatives and agents in respect of any actions taken or not taken
         by any of them while it was serving as the Administrative Agent.

                                   ARTICLE X

                                  MISCELLANEOUS

         SECTION 10.1 Notices.

                  (a)      Except in the case of notices and other
         communications expressly permitted to be given by telephone, all
         notices and other communications to any party herein to be effective
         shall be in writing and shall be delivered by hand or overnight courier
         service, mailed by certified or registered mail or sent by telecopy, as
         follows:

                                         
                  To the Borrower:

                  To the Administrative Agent                 SunTrust Bank
                  For All Purposes other than                 201 Fourth Avenue North
                  Advances:                                   P.O. Box 305110
                                                              Mail Code: TN Nashville 1907
                                                              Nashville, Tennessee 37230-5110
                                                              Attention: Bill Priester
                                                              Telecopy Number: (615) 748-5117

                  To the Administrative Agent                 SunTrust Bank
                  For Advances Only:                          201 Fourth Avenue North
                                                              P.O. Box 305110
                                                              Mail Code: TN Nashville 4800
                                                              Nashville, Tennessee 37230-5110
                                                              Attention: Leigh Ann Gregory
                                                              Telecopy Number: (615) 748-4611

                  To the Issuing Bank:                        SunTrust Bank
                                                              201 Fourth Avenue North
                                                              P.O. Box 305110
                                                              Mail Code: TN Nashville 1907
                                                              Nashville, Tennessee 37230-5110
                                                              Attention: Bill Priester
                                                              Telecopy Number: (615) 748-5117

                  To any other Lender:                        the address set forth in the Administrative Questionnaire

                  


         Any party hereto may change its address or telecopy number for notices
         and other communications hereunder by notice to the other parties
         hereto. All such notices and other communications shall, when
         transmitted by overnight delivery, or faxed, be effective when
         delivered for overnight (next-day) delivery, or transmitted in legible
         form by facsimile machine, respectively, or if mailed, upon the third
         Business Day after the date deposited into the mails or if delivered,
         upon delivery; provided that notices delivered to the Administrative
         Agent, or the Issuing Bank shall not be effective until actually
         received by such Person at its address specified in this Section 10.1.

                  (b)      Any agreement of the Administrative Agent and the
         Lenders herein to receive certain notices by telephone or facsimile is
         solely for the convenience and at the request of the Borrower. The
         Administrative Agent and the Lenders shall be entitled to rely on the
         authority of any Person purporting to be a Person authorized by the
         Borrower to give such notice and the Administrative Agent and Lenders
         shall not have any liability to the Borrower or other Person on account
         of any action taken or not taken by the Administrative Agent or the
         Lenders in reliance upon such telephonic or facsimile notice. The
         obligation of the Borrower to repay the Loans and all other Obligations
         hereunder shall not be affected in any way or to any extent by any
         failure of the Administrative Agent and the Lenders to receive written
         confirmation of any telephonic or facsimile notice or the receipt by
         the Administrative Agent and the Lenders of a confirmation which is at
         variance with the terms understood by the Administrative Agent and the
         Lenders to be contained in any such telephonic or facsimile notice.

         SECTION 10.2 Waiver; Amendments.

                  (a)      No failure or delay by the Administrative Agent, the
         Issuing Bank or any Lender in exercising any right or power hereunder
         or any other Loan Document, and no course of dealing between the
         Borrower and the Administrative Agent or any Lender, shall operate as a
         waiver thereof, nor shall any single or partial exercise of any such
         right or power or any abandonment or discontinuance of steps to enforce
         such right or power, preclude any other or further exercise thereof or
         the exercise of any other right or power hereunder or thereunder. The
         rights and remedies of the Administrative Agent, the Issuing Bank and
         the Lenders hereunder and under the other Loan Documents are cumulative
         and are not exclusive of any rights or remedies provided by law. No
         waiver of any provision of this Agreement or any other Loan Document or
         consent to any departure by the Borrower therefrom shall in any event
         be effective unless the same shall be permitted by paragraph (b) of
         this Section, and then such waiver or consent shall be effective only
         in the specific instance and for the purpose for which given. Without
         limiting the generality of the foregoing, the making of a Loan or the
         issuance of a Letter of Credit shall not be construed as a waiver of
         any Default or Event of Default, regardless of whether the
         Administrative Agent, any Lender or the Issuing Bank may have had
         notice or knowledge of such Default or Event of Default at the time.

                  (b)      No amendment or waiver of any provision of this
         Agreement or the other Loan Documents, nor consent to any departure by
         the Borrower therefrom, shall in any event be effective unless the same
         shall be in writing and signed by the Borrower and the Required Lenders
         or the Borrower and the Administrative Agent with the consent of the





         Required Lenders and then such waiver or consent shall be effective
         only in the specific instance and for the specific purpose for which
         given; provided that no amendment or waiver shall: (i) increase the
         Commitment of any Lender without the written consent of such Lender,
         (ii) reduce the principal amount of any Loan or LC Disbursement or
         reduce the rate of interest thereon, or reduce any fees payable
         hereunder, without the written consent of each Lender affected thereby,
         (iii) postpone the date fixed for any payment of any principal of, or
         interest on, any Loan or LC Disbursement or interest thereon or any
         fees hereunder or reduce the amount of, waive or excuse any such
         payment, or postpone the scheduled date for the termination or
         reduction of any Commitment, without the written consent of each Lender
         affected thereby, (iv) change Section 2.18(c) in a manner that would
         alter the pro rata sharing of payments required thereby , without the
         written consent of each Lender, (v) change any of the provisions of
         this Section or the definition of "Required Lenders" or any other
         provision hereof specifying the number or percentage of Lenders which
         are required to waive, amend or modify any rights hereunder or make any
         determination or grant any consent hereunder, without the consent of
         each Lender; (vi) release any guarantor or limit the liability of any
         such guarantor under any guaranty agreement; (vii) release all or
         substantially all collateral (if any) securing any of the Obligations;
         provided further, that no such agreement shall amend, modify or
         otherwise affect the rights, duties or obligations of the
         Administrative Agent, or the Issuing Bank without the prior written
         consent of such Person.

         SECTION 10.3 Expenses; Indemnification.

                  (a)      The Borrower shall pay (i) all reasonable,
         out-of-pocket costs and expenses of the Administrative Agent, including
         the reasonable fees, charges and disbursements of counsel for the
         Administrative Agent, in connection with the syndication of the credit
         facilities provided for herein, the preparation and administration of
         the Loan Documents and any amendments, modifications or waivers thereof
         (whether or not the transactions contemplated in this Agreement or any
         other Loan Document shall be consummated), (ii) all reasonable
         out-of-pocket expenses incurred by the Issuing Bank in connection with
         the issuance, amendment, renewal or extension of any Letter of Credit
         or any demand for payment thereunder and (iii) all out-of-pocket costs
         and expenses (including, without limitation, the reasonable fees,
         charges and disbursements of outside counsel and the allocated cost of
         inside counsel) incurred by the Administrative Agent or the Issuing
         Bank in connection with the enforcement or protection of its rights in
         connection with this Agreement, including its rights under this
         Section, or in connection with the Loans made or any Letters of Credit
         issued hereunder, including all such out-of-pocket expenses incurred
         during any workout, restructuring or negotiations in respect of such
         Loans or Letters of Credit.

                  (b)      The Borrower shall indemnify the Administrative
         Agent, the Issuing Bank and each Lender, and each Related Party of any
         of the foregoing (each, an "INDEMNITEE") against, and hold each of them
         harmless from, any and all costs, losses, liabilities, claims, damages
         and related expenses, including the fees, charges and disbursements of
         any counsel for any Indemnitee, which may be reasonably incurred by or
         asserted against any Indemnitee arising out of, in connection with or
         as a result of (i) the execution or delivery of this Agreement or any
         other agreement or instrument contemplated hereby, the




         performance by the parties hereto of their respective obligations
         hereunder or the consummation of any of the transactions contemplated
         hereby, (ii) any Loan or Letter of Credit or any actual or proposed use
         of the proceeds therefrom (including any refusal by the Issuing Bank to
         honor a demand for payment under a Letter of Credit if the documents
         presented in connection with such demand do not strictly comply with
         the terms of such Letter of Credit), (iii) any actual or alleged
         presence or release of Hazardous Materials on or from any property
         owned by the Borrower or any Subsidiary or any Environmental Liability
         related in any way to the Borrower or any Subsidiary or (iv) any actual
         or prospective claim, litigation, investigation or proceeding relating
         to any of the foregoing, whether based on contract, tort or any other
         theory and regardless of whether any Indemnitee is a party thereto;
         provided that the Borrower shall not be obligated to indemnify any
         Indemnitee for any of the foregoing arising out of such Indemnitee's
         gross negligence or willful misconduct as determined by a court of
         competent jurisdiction in a final and nonappealable judgment.

                  (c)      The Borrower shall pay, and hold the Administrative
         Agent and each of the Lenders harmless from and against, any and all
         present and future stamp, documentary, indebtedness taxes, and other
         similar taxes incurred with respect to perfecting its and their Liens
         in and against the Collateral.

                  (d)      To the extent that the Borrower fails to pay any
         amount required to be paid to the Administrative Agent, or the Issuing
         Bank under clauses (a), (b) or (c) hereof, each Lender severally agrees
         to pay to the Administrative Agent, or the Issuing Bank, as the case
         may be, such Lender's Pro Rata Share (determined as of the time that
         the unreimbursed expense or indemnity payment is sought) of such unpaid
         amount; provided that the unreimbursed expense or indemnified payment,
         claim, damage, liability or related expense, as the case may be, was
         incurred by or asserted against the Administrative Agent, the Issuing
         Bank in its capacity as such.

                  (e)      To the extent permitted by applicable law, the
         Borrower shall not assert, and hereby waives, any claim against any
         Indemnitee, on any theory of liability, for special, indirect,
         consequential or punitive damages (as opposed to actual or direct
         damages) arising out of, in connection with or as a result of, this
         Agreement or any agreement or instrument contemplated hereby, the
         transactions contemplated therein, any Loan or any Letter of Credit or
         the use of proceeds thereof.

                  (f)      All amounts due under this Section shall be payable
         promptly after written demand therefor.

         SECTION 10.4 Successors and Assigns.

                  (a)      The provisions of this Agreement shall be binding
         upon and inure to the benefit of the parties hereto and their
         respective successors and assigns, except that the Borrower may not
         assign or transfer any of its rights hereunder without the prior
         written consent of each Lender (and any attempted assignment or
         transfer by the Borrower without such consent shall be null and void).



                  (b)      Any Lender may at any time assign to one or more
         assignees all or a portion of its rights and obligations under this
         Agreement and the other Loan Documents (including all or a portion of
         its Commitment and the Loans and LC Exposure at the time owing to it);
         provided that (i) except in the case of an assignment to a Lender or an
         Affiliate of a Lender, each of the Borrower and the Administrative
         Agent (and, in the case of an assignment of all or a portion of a
         Commitment or any Lender's obligations in respect of its LC Exposure,
         the Issuing Bank) must give their prior written consent (which consent
         shall not be unreasonably withheld or delayed), (ii) except in the case
         of an assignment to a Lender or an Affiliate of a Lender or an
         assignment of the entire amount of the assigning Lender's Commitment
         hereunder or an assignment while an Event of Default has occurred and
         is continuing, the amount of the Commitment 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 $5,000,000.00
         (unless the Borrower and the Administrative Agent shall otherwise
         consent), (iii) each partial assignment shall be made as an assignment
         of a proportionate part of all the assigning Lender's rights and
         obligations under this Agreement and the other Loan Documents, (iv) the
         assigning Lender and the assignee shall execute and deliver to the
         Administrative Agent an Assignment and Acceptance, together with a
         processing and recordation fee payable by the assigning Lender or the
         assignee (as determined between such Persons) in an amount equal to
         $3,500 and (v) such assignee, if it is not a Lender, shall deliver a
         duly completed Administrative Questionnaire to the Administrative
         Agent; provided that any consent of the Borrower otherwise required
         hereunder shall not be required if an Event of Default has occurred and
         is continuing. Upon the execution and delivery of the Assignment and
         Acceptance and payment by such assignee to the assigning Lender of an
         amount equal to the purchase price agreed between such Persons, such
         assignee shall become a party to this Agreement and any other Loan
         Documents to which such assigning Lender is a party and, to the extent
         of such interest assigned by such Assignment and Acceptance, shall have
         the rights and obligations of a Lender under this Agreement, and the
         assigning Lender shall be released from its obligations hereunder to a
         corresponding extent (and, in the case of an Assignment and Acceptance
         covering all of the assigning Lender's rights and obligations under
         this Agreement, such Lender shall cease to be a party hereto but shall
         continue to be entitled to the benefits of Sections 2.14, 2.15 and 2.16
         and 10.3. Upon the consummation of any such assignment hereunder, the
         assigning Lender, the Administrative Agent and the Borrower shall make
         appropriate arrangements to have new Notes issued if so requested by
         either or both the assigning Lender or the assignee. Any assignment or
         other transfer by a Lender that does not fully comply with the terms of
         this clause (b) shall be treated for purposes of this Agreement as a
         sale of a participation pursuant to clause (c) below.

                  (c)      Any Lender may at any time, without the consent of
         the Borrower, the Administrative Agent, or the Issuing Bank, sell
         participations to one or more banks or other entities (a "Participant")
         in all or a portion of such Lender's rights and obligations under this
         Agreement (including all or a portion of its Commitment, the Loans
         owing to it and its LC Exposure); provided that (i) such Lender's
         obligations under this Agreement shall remain unchanged, (ii) such
         Lender shall remain solely responsible to the other parties hereto for
         the performance of its obligations hereunder, and (iii) the Borrower,
         the



         Administrative Agent, the Issuing Bank 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 Agreement and the
         other Loan Documents. Any agreement between such Lender and the
         Participant with respect to such participation shall provide that such
         Lender shall retain the sole right and responsibility to enforce this
         Agreement and the other Loan Documents and the sole right to approve
         any amendment, modification, consent, or waiver regarding this
         Agreement and the other Loan Documents; provided that such
         participation agreement may provide that such Lender will not, without
         the consent of the Participant, agree to any amendment, modification or
         waiver of this Agreement described in the first proviso of Section
         10.2(b) that affects the Participant.

                  (d)      Any Lender may at any time pledge or assign a
         security interest in all or any portion of its rights under this
         Agreement and its Notes (if any) to secure its obligations to a Federal
         Reserve Bank without complying with this Section; 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.

                  (e)      Notwithstanding anything to the contrary contained
         herein, any Lender (a "Granting Lender") may grant to a special purpose
         funding vehicle (an "SPV"), identified as such in writing from time to
         time by the Granting Lender to the Administrative Agent and the
         Borrower, the option to provide to the Borrower all or any part of any
         Loan that such Granting Lender would otherwise be obligated to make to
         the Borrower pursuant to this Agreement; provided that (i) nothing
         herein shall constitute a commitment by any SPV to make any Loan and
         (ii) if an SPV elects not to exercise such option or otherwise fails to
         provide all or any part of any Loan, the Granting Lender shall be
         obligated to make such Loan pursuant to the terms hereof. The making of
         a Loan by an SPV hereunder shall utilize the Commitment of the Granting
         Lender to the same extent, and as if such Loan were made by such
         Granting Lender. Each party hereto hereby agrees that no SPV shall be
         liable for any indemnity or similar payment obligation under this
         Agreement (all liability for which shall remain with the Granting
         Lender). In furtherance of the foregoing, each party hereto hereby
         agrees (which agreement shall survive the termination of this
         Agreement) that, prior to the date that is one year and one day after
         the payment in full of all outstanding commercial paper or other senior
         indebtedness of any SPV, it will not institute against, or join any
         other person in instituting against, such SPV any bankruptcy,
         reorganization, arrangement, insolvency or liquidation proceedings
         under the laws of the United States or any State. Notwithstanding
         anything to the contrary contained in this Section 10.4, any SPV may
         (i) with notice to, but without the prior written consent of, the
         Borrower and the Administrative Agent and without paying any processing
         fee therefor, assign all or a portion of its interests in any Loans to
         the Granting Lender or to any financial institutions (consented to by
         the Borrower and the Administrative Agent) providing liquidity and/or
         credit support to or for the account of such SPV to support the funding
         or maintenance of Loans and (ii) disclose on a confidential basis any
         non-public information relating to its Loans to any rating agency,
         commercial paper dealer or provider of any surety, guarantee or credit
         or liquidity enhancement to such SPV. As this Section 10.4(e) applies
         to any particular SPV, this Section may not be amended without the
         written consent of such SPV.


         SECTION 10.5 Governing Law; Jurisdiction; Consent to Service of
         Process.

                  (a)      This Agreement and the other Loan Documents shall be
         construed in accordance with and be governed by the law (without giving
         effect to the conflict of law principles thereof) of the State of
         Tennessee.

                  (b)      The Borrower hereby irrevocably and unconditionally
         submits, for itself and its property, to the non-exclusive jurisdiction
         of the United States District Court of the Middle District of
         Tennessee, and of any state court of the State of Tennessee located in
         Davidson County and any appellate court from any thereof, in any action
         or proceeding arising out of or relating to this Agreement or any other
         Loan Document or the transactions contemplated hereby or thereby, or
         for recognition or enforcement of any judgment, and each of the parties
         hereto hereby irrevocably and unconditionally agrees that all claims in
         respect of any such action or proceeding may be heard and determined in
         such Tennessee state court or, to the extent permitted by applicable
         law, such Federal court. Each of the parties hereto agrees that a final
         judgment in any such action or proceeding may be enforced in other
         jurisdictions by suit on the judgment or in any other manner provided
         by law. Nothing in this Agreement or any other Loan Document shall
         affect any right that the Administrative Agent, the Issuing Bank or any
         Lender may otherwise have to bring any action or proceeding relating to
         this Agreement or any other Loan Document against the Borrower or its
         properties in the courts of any jurisdiction.

                  (c)      The Borrower irrevocably and unconditionally waives
         any objection which it may now or hereafter have to the laying of venue
         of any such suit, action or proceeding described in paragraph (b) of
         this Section and brought in any court referred to in paragraph (b) of
         this Section. Each of the parties hereto irrevocably waives, to the
         fullest extent permitted by applicable law, the defense of an
         inconvenient forum to the maintenance of such action or proceeding in
         any such court.

                  (d)      Each party to this Agreement irrevocably consents to
         the service of process in the manner provided for notices in Section
         10.1. Nothing in this Agreement or in any other Loan Document will
         affect the right of any party hereto to serve process in any other
         manner permitted by law.

         SECTION 10.6 WAIVER OF JURY TRIAL. EACH PARTY HERETO IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.




         SECTION 10.7 Right of Setoff. In addition to any rights now or
hereafter granted under applicable law and not by way of limitation of any such
rights, each Lender and the Issuing Bank shall have the right, at any time or
from time to time upon the occurrence and during the continuance of an Event of
Default, without prior notice to the Borrower, any such notice being expressly
waived by the Borrower to the extent permitted by applicable law, to set off and
apply against all deposits (general or special, time or demand, provisional or
final) of the Borrower at any time held or other obligations at any time owing
by such Lender and the Issuing Bank to or for the credit or the account of the
Borrower against any and all Obligations held by such Lender or the Issuing
Bank, as the case may be, irrespective of whether such Lender or the Issuing
Bank shall have made demand hereunder and although such Obligations may be
unmatured. Each Lender and the Issuing Bank agree promptly to notify the
Administrative Agent and the Borrower after any such set-off and any application
made by such Lender and the Issuing Bank, as the case may be; provided that the
failure to give such notice shall not affect the validity of such set-off and
application.

         SECTION 10.8 Counterparts; Integration. This Agreement may be executed
by one or more of the parties to this Agreement on any number of separate
counterparts (including by telecopy), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. This
Agreement, the other Loan Documents, and any separate letter agreement(s)
relating to any fees payable to the Administrative Agent constitute the entire
agreement among the parties hereto and thereto regarding the subject matters
hereof and thereof and supersede all prior agreements and understandings, oral
or written, regarding such subject matters.

         SECTION 10.9 Survival. All covenants, agreements, representations and
warranties made by the Borrower herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the
Administrative Agent, the Issuing Bank or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time any
credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any fee or any
other amount payable under this Agreement is outstanding and unpaid or any
Letter of Credit is outstanding and so long as the Commitments have not expired
or terminated. The provisions of Sections 2.15, 2.16, 2.17, and 10.3 and Article
IX shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.

         SECTION 10.10 Severability. Any provision of this Agreement or any
other Loan Document held to be illegal, invalid or unenforceable in any
jurisdiction, shall, as to such jurisdiction, be ineffective to the extent of
such illegality, invalidity or unenforceability without affecting the legality,
validity or enforceability of the remaining provisions hereof or thereof; and
the illegality, invalidity or unenforceability of a particular provision in a
particular jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.



         SECTION 10.11 Confidentiality. Each of the Administrative Agent, the
Issuing Bank and each Lender agrees to take normal and reasonable precautions to
maintain the confidentiality of any information designated in writing as
confidential and provided to it by the Borrower or any Subsidiary, except that
such information may be disclosed (i) to any Related Party of the Administrative
Agent, the Issuing Bank or any such Lender, including without limitation
accountants, legal counsel and other advisors, (ii) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process,
(iii) to the extent requested by any regulatory agency or authority having
jurisdiction, (iv) to the extent that such information becomes publicly
available other than as a result of a breach of this Section, or which becomes
available to the Administrative Agent, the Issuing Bank, any Lender or any
Related Party of any of the foregoing on a nonconfidential basis from a source
other than the Borrower, (v) in connection with the exercise of any remedy
hereunder or any suit, action or proceeding relating to this Agreement or the
enforcement of rights hereunder, and (ix) subject to provisions substantially
similar to this Section 10.11, to any actual or prospective assignee or
Participant, or (vi) with the consent of the Borrower. Any Person required to
maintain the confidentiality of any information as provided for 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 such Person would accord its own confidential information.

         SECTION 10.12 Interest and Loan Charges Not to Exceed Maximum Amounts
Allowed by Law. Anything in this Agreement, the Notes, the Security Documents or
any of the other Loan Documents to the contrary notwithstanding, in no event
whatsoever, whether by reason of advancement of proceeds of the Loans,
acceleration of the maturity of the unpaid balance of the Loans or otherwise,
shall the interest and loan charges agreed to be paid to any Lender for the use
of the money advanced or to be advanced hereunder exceed the maximum amounts
collectible under applicable laws in effect from time to time. It is understood
and agreed by the parties that, if for any reason whatsoever the interest or
loan charges paid or contracted to be paid by Borrower in respect of the Loans
shall exceed the maximum amounts collectible under applicable laws in effect
from time to time, then ipso facto, the obligation to pay such interest and/or
loan charges shall be reduced to the maximum amounts collectible under
applicable laws in effect from time to time, and any amounts collected by any
Lender that exceed such maximum amounts shall be applied to the reduction of the
principal balance of the Loans and/or refunded to Borrower so that at no time
shall the interest or loan charges paid or payable in respect of the Loans
exceed the maximum amounts permitted from time to time by applicable law.

                  (remainder of page left intentionally blank)






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

                           AMERICAN HEALTHWAYS, INC.



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

                           SUNTRUST BANK
                           as Administrative Agent, as Issuing Bank, as a Lender


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

                           Revolving Commitment: $15,000,000.00

                           LC Commitment: $15,000,000.00








                           BANK OF AMERICA, N.A.


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


                           Revolving Commitment: $10,000,000.00


                           LC Commitment: $10,000,000.00









                           U.S. BANK NATIONAL ASSOCIATION


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


                           Revolving Commitment: $10,000,000.00


                           LC Commitment: $10,000,000.00

EX-10.2

                                                                    EXHIBIT 10.2

                                     FORM OF
                              REVOLVING CREDIT NOTE
$_____________________                                    Nashville, Tennessee
                                                             November 22, 2002


         FOR VALUE RECEIVED, the undersigned, AMERICAN HEALTHWAYS, INC., a
Delaware corporation (the "BORROWER"), hereby promises to pay to______________
____________________________________ (the "LENDER") or its registered assigns,
at the office of ("______________________") at ____________________, on the
Commitment Termination Date (as defined in the Amended and Restated Revolving
Credit Agreement dated as of November 22, 2002, (as the same may be amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"),
among the Borrower, the lenders from time to time party thereto and SunTrust
Bank, as administrative agent for the lenders, the lesser of (i) the principal
sum of __________ and 00/100 ($___________) or (ii) the aggregate unpaid
principal amount of all Revolving Loans made by the Lender to the Borrower
pursuant to the Credit Agreement, in lawful money of the United States of
America in immediately available funds, and to pay interest from the date
hereof on the principal amount thereof from time to time outstanding, in like
funds, at said office, at the rate or rates per annum and payable on such dates
as provided in the Credit Agreement. In addition, should legal action or an
attorney-at-law be utilized to collect any amount due hereunder, the Borrower
further promises to pay all costs of collection, including the reasonable
attorneys' fees of the Lender.

         The Borrower promises to pay interest, on demand, on any overdue
principal and, to the extent permitted by law, overdue interest from their due
dates at a rate or rates provided in the Credit Agreement.

         In no event (i) shall Advances be made hereunder in excess of the
Borrowing Base, nor (ii) shall amounts outstanding hereunder be permitted to
exceed the Borrowing Base.

         All borrowings evidenced by this Revolving Credit Note and all payments
and prepayments of the principal hereof and the date thereof shall be endorsed
by the holder hereof on the schedule attached hereto and made a part hereof or
on a continuation thereof which shall be attached hereto and made a part hereof,
or otherwise recorded by such holder in its internal records; provided that the
failure of the holder hereof to make such a notation or any error in such
notation shall not affect the obligations of the Borrower to make the payments
of principal and interest in accordance with the terms of this Revolving Credit
Note and the Credit Agreement.

         Anything in this Note or in any of the other Loan Documents to the
contrary notwithstanding, in no event whatsoever, whether by reason of
advancement of proceeds hereunder, acceleration of the maturity of the unpaid
balance hereunder or otherwise, shall the interest and loan charges agreed to be
paid to any Lender for the use of the money advanced or to be advanced hereunder
exceed the maximum amounts collectible under applicable laws in effect



from time to time. It is understood and agreed by the parties that, if for any
reason whatsoever the interest or loan charges paid or contracted to be paid by
Borrower in respect of this Note shall exceed the maximum amounts collectible
under applicable laws in effect from time to time, then ipso facto, the
obligation to pay such interest and/or loan charges shall be reduced to the
maximum amounts collectible under applicable laws in effect from time to time,
and any amounts collected by the Lender that exceed such maximum amounts shall
be applied to the reduction of the principal balance hereunder and/or refunded
to Borrower so that at no time shall the interest or loan charges paid or
payable in respect of the indebtedness evidenced herein exceed the maximum
amounts permitted from time to time by applicable law.

         This Revolving Credit Note is issued in connection with, and is
entitled to the benefits of, the Credit Agreement which, among other things,
contains provisions for the acceleration of the maturity hereof upon the
happening of certain events, for prepayment of the principal hereof prior to the
maturity hereof and for the amendment or waiver of certain provisions of the
Credit Agreement, all upon the terms and conditions therein specified. THIS
REVOLVING CREDIT NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF TENNESSEE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA.

                                          AMERICAN HEALTHWAYS, INC.


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

                                          [SEAL]









                               LOANS AND PAYMENTS





         Date                 Amount and                 Payments of       Unpaid Principal          Name of Person
                             Type of Loan                 Principal           Balance of                 Making
                                                                                 Note                   Notation
     --------------------------------------------------------------------------------------------------------------
                                                                                         

     --------------------------------------------------------------------------------------------------------------


     --------------------------------------------------------------------------------------------------------------


     --------------------------------------------------------------------------------------------------------------


     --------------------------------------------------------------------------------------------------------------


     --------------------------------------------------------------------------------------------------------------


     --------------------------------------------------------------------------------------------------------------


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     --------------------------------------------------------------------------------------------------------------


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EX-10.3

                                                                    EXHIBIT 10.3

                                    [FORM OF]
                         SUBSIDIARY GUARANTEE AGREEMENT

         SUBSIDIARY GUARANTEE AGREEMENT dated as of November 22, 2002 , among
each of the Subsidiaries listed on Schedule I hereto (each such subsidiary
individually, a "Guarantor" and collectively, the "Guarantors") of AMERICAN
HEALTHWAYS, INC., a Delaware corporation (the "Borrower"), and SUNTRUST BANK, a
Georgia banking corporation, as administrative agent (the "Administrative
Agent") for the Lenders (as defined in the Credit Agreement referred to below).

         Reference is made to the Amended and Restated Revolving Credit
Agreement dated as of November 22, 2002 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among the Borrower, the
lenders from time to time party thereto (the "Lenders") and SunTrust Bank, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"), and issuing bank (in such capacity, the "Issuing Bank"). Capitalized
terms used herein and not defined herein shall have the meanings assigned to
such terms in the Credit Agreement.

         The Lenders have agreed to make Loans to the Borrower, and the Issuing
Bank has agreed to issue Letters of Credit for the account of the Borrower,
pursuant to, and upon the terms and subject to the conditions specified in, the
Credit Agreement. Each of the Guarantors is a direct or indirect wholly-owned
Subsidiary of the Borrower and acknowledges that it will derive substantial
benefit from the making of the Loans by the Lenders, and the issuance of the
Letters of Credit by the Issuing Bank. The obligations of the Lenders to make
Loans and of the Issuing Bank to issue Letters of Credit are conditioned on,
among other things, the execution and delivery by the Guarantors of a Subsidiary
Guarantee Agreement in the form hereof. As consideration therefor and in order
to induce the Lenders to make Loans and the Issuing Bank to issue Letters of
Credit, the Guarantors are willing to execute this Subsidiary Guarantee
Agreement.

         Accordingly, the parties hereto agree as follows:

         SECTION 1. Guarantee. Each Guarantor unconditionally guarantees,
jointly with the other Guarantors and severally, as a primary obligor and not
merely as a surety, (a) the due and punctual payment of (i) the principal of and
premium, if any, and interest (including interest accruing during the pendency
of any bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding) on the Loans,
when and as due, whether at maturity, by acceleration, upon one or more dates
set for prepayment or otherwise, (ii) each payment required to be made by the
Borrower under the Credit Agreement in respect of any Letter of Credit, when and
as due, including payments in respect of reimbursement or disbursements,
interest thereon and obligations to provide cash collateral, and (iii) all other
monetary obligations, including fees, costs, expenses and indemnities, whether
primary, secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of the Loan Parties



to the Administrative Agent and the Lenders under the Credit Agreement and the
other Loan Documents, (b) the due and punctual performance of all covenants,
agreements, obligations and liabilities of the Loan Parties under or pursuant to
the Credit Agreement and the other Loan Documents; and (c) the due and punctual
payment and performance of all obligations of the Borrower, monetary or
otherwise, under each Hedging Agreement entered into with a counterparty that
was a Lender or an Affiliate of a Lender at the time such Hedging Agreement was
entered into (all the monetary and other obligations referred to in the
preceding clauses (a) through (c) being collectively called the "Obligations").
Each Guarantor further agrees that the Obligations may be extended or renewed,
in whole or in part, without notice to or further assent from it, and that it
will remain bound upon its guarantee notwithstanding any extension or renewal of
any Obligation.

         SECTION 2. Obligations Not Waived. To the fullest extent permitted by
applicable law, each Guarantor waives presentment to, demand of payment from and
protest to the Borrower of any of the Obligations, and also waives notice of
acceptance of its guarantee and notice of protest for nonpayment. To the fullest
extent permitted by applicable law, the obligations of each Guarantor hereunder
shall not be affected by (a) the failure of the Administrative Agent or any
Lender to assert any claim or demand or to enforce or exercise any right or
remedy against the Borrower or any other Guarantor under the provisions of the
Credit Agreement, any other Loan Document or otherwise, (b) any rescission,
waiver, amendment or modification of, or any release from any of the terms or
provisions of, this Agreement, any other Loan Document, any Guarantee or any
other agreement, including with respect to any other Guarantor under this
Agreement, or (c) the failure to perfect any security interest in, or the
release of, any of the security held by or on behalf of the Administrative Agent
or any Lender.

         SECTION 3. Security. Each of the Guarantors authorizes the
Administrative Agent and each of the Lenders to (a) take and hold security for
payment of this Guarantee and the Obligations and exchange, enforce, waive and
release any such security, (b) apply such security and direct the order or
manner of sale thereof as they in their sole discretion may determine and (c)
release or substitute any one or more endorsees, other guarantors of other
obligors.

         SECTION 4. Guarantee of Payment. Each Guarantor further agrees that its
guarantee constitutes a guarantee of payment when due and not of collection, and
waives any right to require that any resort be had by the Administrative Agent
or any Lender to any of the security held for payment of the Obligations or to
any balance of any deposit account or credit on the books of the Administrative
Agent or any Lender in favor of the Borrower or any other person.

         SECTION 5. No Discharge or Diminishment of Guarantee. The obligations
of each Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than the indefeasible payment in
full in cash of the Obligations), including any claim of waiver, release,
surrender, alteration or compromise of any of the Obligations, and shall not be
subject to any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of each Guarantor hereunder shall not be discharged or impaired or
otherwise affected by the failure of the Administrative Agent or any Lender to
assert any claim or demand or to enforce any remedy under the Credit Agreement,
any other Loan Document or any other agreement, by any waiver or




modification of any provision of any thereof, by any default, failure or delay,
willful or otherwise, in the performance of the Obligations, or by any other act
or omission that may or might in any manner or to the extent vary the risk of
any Guarantor or that would otherwise operate as a discharge of each Guarantor
as a matter of law or equity (other than the indefeasible payment in full in
cash of all the Obligations).

         SECTION 6. Defenses of Borrower Waived. To the fullest extent permitted
by applicable law, each Guarantor waives any defense based on or arising out of
any defense of the Borrower or the unenforceability of the Obligations or any
part thereof from any cause, or the cessation from any cause of the liability of
the Borrower, other than the final and indefeasible payment in full in cash of
the Obligations. The Administrative Agent and the Lenders may, at their
election, foreclose on any security held by one or more of them by one or more
judicial or nonjudicial sales, accept an assignment of any such security in lieu
of foreclosure, compromise or adjust any part of the Obligations, make any other
accommodation with the Borrower or any other guarantor, without affecting or
impairing in any way the liability of any Guarantor hereunder except to the
extent the Obligations have been fully, finally and indefeasibly paid in cash.
Pursuant to applicable law, each Guarantor waives any defense arising out of any
such election even though such election operates, pursuant to applicable law, to
impair or to extinguish any right of reimbursement or subrogation or other right
or remedy of such Guarantor against the Borrower or any other Guarantor or
guarantor, as the case may be, or any security.

         SECTION 7. Agreement to Pay; Subordination. In furtherance of the
foregoing and not in limitation of any other right that the Administrative Agent
or any Lender has at law or in equity against any Guarantor by virtue hereof,
upon the failure of the Borrower or any other Loan Party to pay any Obligation
when and as the same shall become due, whether at maturity, by acceleration,
after notice of prepayment or otherwise, each Guarantor hereby promises to and
will forthwith pay, or cause to be paid, to the Administrative Agent for the
benefit of the Lenders in cash the amount of such unpaid Obligations. Upon
payment by any Guarantor of any sums to the Administrative Agent, all rights of
such Guarantor against the Borrower arising as a result thereof by way of right
of subrogation, contribution, reimbursement, indemnity or otherwise shall in all
respects be subordinate and junior in right of payment to the prior indefeasible
payment in full in cash of all the Obligations. In addition, any indebtedness of
the Borrower now or hereafter held by any Guarantor is hereby subordinated in
right of payment to the prior payment in full in cash of the Obligations. If any
amount shall erroneously be paid to any Guarantor on account of (i) such
subrogation, contribution, reimbursement, indemnity or similar right or (ii) any
such indebtedness of the Borrower, such amount shall be held in trust for the
benefit of the Administrative Agent and the Lenders and shall forthwith be paid
to the Administrative Agent to be credited against the payment of the
Obligations, whether matured or unmatured, in accordance with the terms of the
Loan Documents.

         SECTION 8. Information. Each Guarantor assumes all responsibility for
being and keeping itself informed of the Borrower's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Obligations and the nature, scope and extent of the risks that such
Guarantor assumes and incurs hereunder, and agrees that none of the
Administrative Agent or the Lenders will have any duty to advise any of the
Guarantors of information known to it or any of them regarding such
circumstances or risks.


         SECTION 9.  Representations and Warranties. Each Guarantor represents
and warrants as to itself that all representations and warranties relating to it
(as a Subsidiary of the Borrower) contained in the Credit Agreement are true and
correct as of the date made.

         SECTION 10. Termination. The guarantees made hereunder (a) shall
terminate when all the Obligations have been paid in full in cash and the
Lenders have no further commitment to lend under the Credit Agreement, the LC
Exposure has been reduced to zero and the Issuing Bank has no further obligation
to issue Letters of Credit under the Credit Agreement and (b) shall continue to
be effective or be reinstated, as the case may be, if at any time payment, or
any part thereof, of any Obligation is rescinded or must otherwise be restored
by any Lender or any Guarantor upon the bankruptcy or reorganization of the
Borrower, any Guarantor or otherwise. In connection with the foregoing, the
Administrative Agent shall execute and deliver to such Guarantor or Guarantor's
designee, at such Guarantor's expense, any documents or instruments which such
Guarantor shall reasonably request from time to time to evidence such
termination and release.

         SECTION 11. Binding Effect; Several Agreement; Assignments. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the Guarantors that are contained in
this Agreement shall bind and inure to the benefit of each party hereto and
their respective successors and assigns. This Agreement shall become effective
as to any Guarantor when a counterpart hereof executed on behalf of such
Guarantor shall have been delivered to the Administrative Agent, and a
counterpart hereof shall have been executed on behalf of the Administrative
Agent, and thereafter shall be binding upon such Guarantor and the
Administrative Agent and their respective successors and assigns, and shall
inure to the benefit of such Guarantor, the Administrative Agent and the
Lenders, and their respective successors and assigns, except that no Guarantor
shall have the right to assign its rights or obligations hereunder or any
interest herein (and any such attempted assignment shall be void). If all of the
capital stock of a Guarantor is sold, transferred or otherwise disposed of
pursuant to a transaction permitted by the Credit Agreement, such Guarantor
shall be released from its obligations under this Agreement without further
action. This Agreement shall be construed as a separate agreement with respect
to each Guarantor and may be amended, modified, supplemented, waived or released
with respect to any Guarantor without the approval of any other Guarantor and
without affecting the obligations of any other Guarantor hereunder.

         SECTION 12. Waivers; Amendment. (a) No failure or delay of the
Administrative Agent in exercising any power or right hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and of the Administrative Agent hereunder and
of the Lenders under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of this Agreement or consent to any departure by any Guarantor
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver and consent shall be effective only in
the specific instance and for the purpose for which given. No notice or demand
on any Guarantor in any case shall entitle such Guarantor to any other or
further notice in similar or other circumstances.


         (b)      Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to a written agreement entered into between
the Guarantors with respect to which such waiver, amendment or modification
relates and the Administrative Agent, with the prior written consent of the
Required Lenders (except as otherwise provided in the Credit Agreement).

         SECTION 13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TENNESSEE.

         SECTION 14. Notices. All communications and notices hereunder shall be
in writing and given as provided in Section 10.01 of the Credit Agreement. All
communications and notices hereunder to each Guarantor shall be given to it at
its address set forth on Schedule I attached hereto.

         SECTION 15. Survival of Agreement; Severability. (a) All covenants,
agreements representations and warranties made by the Guarantors herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or the other Loan Document shall be considered to
have been relied upon by the Administrative Agent and the Lenders and shall
survive the making by the Lenders of the Loans and the issuance of the Letters
of Credit by the Issuing Bank regardless of any investigation made by any of
them or on their behalf, and shall continue in full force and effect as long as
the principal of or any accrued interest on any Loan or any other fee or amount
payable under this Agreement or any other Loan Document is outstanding and
unpaid or the LC Exposure does not equal zero and as long as the Commitments
have not been terminated.

         (b)      In the event one or more of the provisions contained in this
Agreement or in any other Loan Document should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision in any other jurisdiction). The parties
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

         SECTION 16. Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute a single contract (subject to Section 11), and
shall become effective as provided in Section 11. Delivery of an executed
signature page to this Agreement by facsimile transmission shall be as effective
as delivery of a manually executed counterpart of this Agreement.

         SECTION 17. Rules of Interpretation. The rules of interpretation
specified in Section 1.03 of the Credit Agreement shall be applicable to this
Agreement.

         SECTION 18. Jurisdiction; Consent to Service of Process. (a) Each
Guarantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any Tennessee State court or
Federal court of the United States of America sitting



in Nashville, Tennessee, and any appellate court from any thereof, in any action
or proceeding arising out of or relating to this Agreement or the other Loan
Documents, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such
Tennessee State court or, to the extent permitted by law, in such Federal court.
Each of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that the Administrative Agent, the Issuing Bank
or any Lender may otherwise have to bring any action or proceeding relating to
this Agreement or the other Loan Documents against any Guarantor or its
properties in the courts of any jurisdiction.

         (b)      Each Guarantor hereby irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection that
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the other Loan
Documents in any Tennessee State or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.

         (c)      Each party to this Agreement irrevocably consents to service
of process in the manner provided for notices in Section 14. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.

         SECTION 19. Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 19.

         SECTION 20. Additional Guarantors. Pursuant to Section 5.12 of the
Credit Agreement, each Subsidiary Loan Party that was not in existence on the
date of the Credit Agreement is required to enter into this Agreement as a
Guarantor upon becoming Subsidiary Loan Party. Upon execution and delivery after
the date hereof by the Administrative Agent and such Subsidiary of an instrument
in the form of Annex 1, such Subsidiary shall become a Guarantor hereunder with
the same force and effect as if originally named as a Guarantor herein. The
execution and delivery of any instrument adding an additional Guarantor as a
party to this Agreement shall not require the consent of any other Guarantor
hereunder. The rights and obligations of each Guarantor hereunder shall remain
in full force and effect notwithstanding the addition of any new Guarantor as a
party to this Agreement.




         SECTION 21. Right of Setoff. If an Event of Default shall have occurred
and be continuing, each Lender and the Issuing Bank are 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 the Issuing Bank to or for the credit or the account of any Guarantor
against any or all the obligations of such Guarantor now or hereafter existing
under this Agreement and the other Loan Documents held by such Lender or the
Issuing Bank, irrespective of whether or not such Person shall have made any
demand under this Agreement or any other Loan Document and although such
obligations may be unmatured. The rights of each Lender and the Issuing Bank
under this Section 21 are in addition to other rights and remedies (including
other rights of setoff) which such Lender or the Issuing Bank, as the case may
be, may have.

         IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.

                                GUARANTORS:

                                AMERICAN HEALTHWAY SERVICES, INC.


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


                                CARESTEPS.COM, INC.


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


                                AXONAL INFORMATION SOLUTIONS, INC.


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

ACCEPTED BY:

SUNTRUST BANK, as
Administrative Agent

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





                                SCHEDULE I TO THE
                         SUBSIDIARY GUARANTEE AGREEMENT






         GUARANTOR(S)                                                  ADDRESS
         ------------                                                  -------
                                                                    
         American Healthways Services, Inc.                            3841 Green Hills Village Drive
                                                                       Suite 300
                                                                       Nashville, Tennessee 37230-5110

         CareSteps.com., Inc.                                          3841 Green Hills Village Drive
                                                                       Suite 300
                                                                       Nashville, Tennessee 37230-5110

         Axonal Information Solutions, Inc.                            3841 Green Hills Village Drive
                                                                       Suite 300
                                                                       Nashville, Tennessee 37230-5110










                                 ANNEX 1 TO THE
                         SUBSIDIARY GUARANTEE AGREEMENT

         SUPPLEMENT NO. [        ] dated as of [      ], to the Subsidiary
Guarantee Agreement (the "Guarantee Agreement") dated as of [      ] among each
of the subsidiaries listed on Schedule I thereto (each such Subsidiary
individually, a "Guarantor" and collectively, the "Guarantors") of AMERICAN
HEALTHWAYS, INC., a Delaware corporation (the "Borrower"), and SUNTRUST BANK, a
Georgia banking corporation, as Administrative Agent (the "Administrative
Agent") for the Lenders (as defined in the Credit Agreement referred to below).

         A.       Reference is made to the Amended and Restated Revolving Credit
Agreement dated as of November 22, 2002 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among the Borrower, the
lenders from time to time party thereto (the "Lenders") and SunTrust Bank, as
Administrative Agent, and issuing bank (in such capacity, the "Issuing Bank").
Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Credit Agreement.

         B.       Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the Guarantee Agreement and
the Credit Agreement.

         C.       The Guarantors have entered into the Guarantee Agreement in
order to induce the Lenders to make Loans and the Issuing Bank to issue Letters
of Credit. Pursuant to Section 5.12 of the Credit Agreement, each Subsidiary
Loan Party that was not in existence or not a Subsidiary Loan Party on the date
of the Credit Agreement is required to enter into the Guarantee Agreement as a
Guarantor upon becoming a Subsidiary Loan Party. Section 20 of the Guarantee
Agreement provides that additional Subsidiaries of the Borrower may become
Guarantors under the Guarantee Agreement by execution and delivery of an
instrument in the form of this Supplement. The undersigned Subsidiary of the
Borrower (the "New Guarantor") is executing this Supplement in accordance with
the requirements of the Credit Agreement to become a Guarantor under the
Guarantee Agreement in order to induce the Lenders to make additional Loans and
the Issuing Bank to issue additional Letters of Credit and as consideration for
Loans previously made and Letters of Credit previously issued.

         Accordingly, the Administrative Agent and the New Guarantor agree as
follows:

         SECTION 1. In accordance with Section 20 of the Guarantee Agreement,
the New Guarantor by its signature below becomes a Guarantor under the Guarantee
Agreement with the same force and effect as if originally named therein as a
Guarantor and the New Guarantor hereby (a) agrees to all the terms and
provisions of the Guarantee Agreement applicable to it as Guarantor thereunder
and (b) represents and warrants that the representations and warranties made by
it as a Guarantor thereunder are true and correct on and as of the date hereof.
Each reference to a Guarantor in the Guarantee Agreement shall be deemed to
include the New Guarantor. The Guarantee Agreement is hereby incorporated herein
by reference.




         SECTION 2. The New Guarantor represents and warrants to the
Administrative Agent and the Lenders that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.

         SECTION 3. This Supplement may be executed in counterparts each of
which shall constitute an original, but all of which when taken together shall
constitute a single contract. This Supplement shall become effective when the
Administrative Agent shall have received counterparts of this Supplement that,
when taken together, bear the signatures of the New Guarantor and the
Administrative Agent. Delivery of an executed signature page to this Supplement
by facsimile transmission shall be as effective as delivery of a manually signed
counterpart of this Supplement.

         SECTION 4. Except as expressly supplemented hereby, the Guarantee
Agreement shall remain in full force and effect.

         SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TENNESSEE.

         SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Guarantee Agreement shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision hereof in a particular jurisdiction shall not in and of itself affect
the validity of such provision in any other jurisdiction). The parties hereto
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

         SECTION 7. All communications and notices hereunder shall be in writing
and given as provided in Section 14 of the Guarantee Agreement. All
communications and notices hereunder to the New Guarantor shall be given to it
at the address set forth under its signature below, with a copy to the Borrower.

         SECTION 8. The New Guarantor agrees to reimburse the Administrative
Agent for its out-of-pocket expenses in connection with this Supplement,
including the fees, disbursements and other charges of counsel for the
Administrative Agent.

         IN WITNESS WHEREOF, the New Guarantor and the Administrative Agent have
duly executed this Supplement to the Guarantee Agreement as of the day and year
first above written.

                                     [Name of New Guarantor]


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


                                     SUNTRUST BANK, as
                                     Administrative Agent


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

EX-11

                                                                     EXHIBIT 11


                           AMERICAN HEALTHWAYS, INC.
                       EARNINGS PER SHARE RECONCILIATION
                               NOVEMBER 30, 2002
                                  (UNAUDITED)


         The following is a reconciliation of the numerator and denominator of
basic and diluted income per share (adjusted for the stock split effective
November 2001 for the prior year period)




                                                             Three Months Ended November 30,
                                                           ----------------------------------
                                                              2002                    2001
                                                           -----------            -----------

                                                                            
Numerator:
    Net income                                             $ 3,698,653            $ 1,494,192
    Effect of dilutive securities                                   --                     --
                                                           -----------            -----------
    Numerator for diluted income per share                 $ 3,698,653            $ 1,494,192
                                                           ===========            ===========
Denominator:
   Shares used for basic income per share                   15,396,399             14,372,604
   Effect of dilutive stock options outstanding                948,717              1,225,846
                                                           -----------            -----------
   Shares used for diluted income per share                 16,345,116             15,598,450
                                                           ===========            ===========

Basic income per share:                                    $      0.24            $      0.10
                                                           ===========            ===========
Diluted income per share                                   $      0.23            $      0.10
                                                           ===========            ===========

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 Quarterly Report of American Healthways, Inc. (the
"Company") on Form 10-Q for the period ending November 30, 2002, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Thomas G. Cigarran, Chairman of the Board and 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/ Thomas G. Cigarran
- -------------------------------------------------------
Thomas G. Cigarran
Chairman of the Board and Chief Executive Officer

January 13, 2003

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 Quarterly Report of American Healthways, Inc. (the
"Company") on Form 10-Q for the period ending November 30, 2002, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Mary A. Chaput, Executive Vice President and Chief Financial 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/ Mary A. Chaput
- -------------------------------------------------------
Mary A. Chaput
Executive Vice President and Chief Financial Officer

January 13, 2003