**Exhibit 2.1**

**AGREEMENT AND PLAN OFREORGANIZATION**

**AMONG**

**PROSPECT MEDICALHOLDINGS, INC.,**

**PROSPECT HEALTHADMINISTRATORS, INC.,**

**PROMED HEALTH SERVICESCOMPANY,**

**PROMED HEALTH CAREADMINISTRATORS,**

**THE PROMED EXECUTIVEOFFICERS,**

**AND**

**THEPRINCIPAL PROMED SHAREHOLDERS**

**Dated as of:  May 21, 2007**

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**AGREEMENT AND PLANOF REORGANIZATION**

This Agreement and Plan of Reorganization (the *“Agreement”*)is dated as of May 21, 2007 by and among Prospect Medical Holdings, Inc., aDelaware corporation (*“Holdings”*),Prospect Health Administrators, Inc., a California corporation and wholly-ownedsubsidiary of Holdings (*“Holdings Subsidiary”*),ProMed Health Services Company, a California corporation (*“ProMed Company”*), ProMed Health CareAdministrators, a California corporation (*“ProMedSubsidiary”*), certain executive officers of ProMed Company definedherein as the *“ProMed Executive Officers”*,**and the shareholders of ProMed Company defined herein asthe *“Principal ProMed Shareholders”* who arelisted, and are signatories, on the signature pages to this Agreement or whootherwise became a party to the Agreement by joinder. ** **The Principal ProMed Shareholders together with ProMed Company andProMed Subsidiary are collectively referred to herein as the *“ProMed Parties”*.

**RECITALS**

A.            WHEREAS,ProMedSubsidiary is engaged in the business of providing management and administrative services toindependent practice associations and medical groups pursuant to long-termmanagement agreements;

B.            WHEREAS,ProMed Companyis the sole shareholder of ProMed Subsidiary;

C.            WHEREAS, as a result of certain commonofficers, directors and/or shareholders, ProMed Company and ProMed Subsidiaryare affiliates of Pomona Valley Medical Group, Inc., dba ProMed Health MedicalGroup Network of Pomona Valley Inc., a California professional corporation (*“ProMed Pomona”*) and Upland Medical Group,A Professional Medical Corporation, dba Upland Medical Group A ProfessionalCorporation, a California professional corporation (*“ProMed Upland”*), both of which operate as independent practice associations;

D.            WHEREAS, in connection with its businessof providing management and administrative services to independent practiceassociations, ProMed Subsidiary has a management agreement with each of ProMedPomona (*“ProMed Pomona Management Agreement”*) and ProMed Upland (*“ProMed Upland Management Agreement”*);

E.             WHEREAS,Holdings, through its subsidiaries, provides management and administrativeservices to independent practice associations pursuant to long-term managementagreements, and in such capacity has a management agreement with its affiliate,Prospect Medical Group, Inc., a California professional corporation whichoperates as an independent physician association (*“Group”*),and with each of Group’s subsidiaries;

F.             WHEREAS, the parties intend that, subjectto the terms and conditions hereinafter set forth, Holdings Subsidiary shall bemerged with and into ProMed Company, with ProMed Company the survivingcorporation and continuing as a subsidiary of Holdings and Holdings therebyacquiring the business of ProMed Subsidiary (the *“Merger”*),pursuant to an Agreement of Merger and accompanying officer certificatessubstantially in the form attached hereto as Exhibit A (collectively, the *“Agreement of Merger”*) and the applicable provisions of thelaws of the State of California;

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G.            WHEREAS, the Board of Directors of eachof Holdings, Holdings Subsidiary and ProMed Company deem it advisable and inthe best interests of their respective shareholders to consummate, and haveapproved, the Merger;

H.            WHEREAS, pursuant to the Merger, amongother things, and subject to the terms and conditions of this Agreement, all ofthe issued and outstanding shares of capital stock of ProMed Company shall beconverted into the right to receive the consideration provided in Section 1.6hereof;

I.              WHEREAS, the Board of Directors of ProMedCompany has (i) determined that the consideration to be paid in the Merger tothe shareholders of ProMed Company for each ProMed Company Share (as defined inSection 1.6(a)) held by them is fair to and in the best interests of theshareholders of ProMed Company, (ii) approved this Agreement and thetransactions contemplated hereby, and (iii) recommended to such shareholdersthat they approve the Merger and this Agreement;

J.             WHEREAS, in a transaction to accompanythe Merger, (i) Group, through a subsidiary, is merging with ProMed Pomona,with ProMed Pomona as the survivor and constituting a new subsidiary of Group(the *“ProMed Pomona Acquisition”*) and(ii) Group is acquiring all the stock of ProMed Upland with ProMed Uplandconstituting a new subsidiary of Group (the *“ProMedUpland Acquisition”*);

K.            WHEREAS, the following individuals areexecutive officers of ProMed Company ProMed Pomona, ProMed Company, ProMed HCAand ProMed Upland: (i) Jeereddi Prasad, M.D., President of ProMed Company,ProMed HCA, ProMed Pomona and ProMed Upland, (ii) Kishan Thapar, M.D., theChief Executive Officer, Executive Director and Chief Medical Officer of ProMedPomona and the Executive Director of ProMed Company and ProMed HCA and theExecutive Director and Chief Medical Officer of ProMed Upland, and (iii) BahramBarhemand, the Chief Financial Officer of ProMed Company, ProMed HCA, ProMedPomona and ProMed Upland (each, a *“ProMed Executive Officer”*and collectively, the*“ProMed ExecutiveOfficers”)*;

L.             WHEREAS, Exhibit B of this Agreement setsforth the shareholders of ProMed Company which, as a result of the number ofshares they own in ProMed Company when combined with the shares they own inProMed Pomona, if any, will entitle such shareholders to aggregate MergerConsideration herein and consideration therein, if any, equal to or exceedingan aggregate of $650,000.00 (each, a *“Principal ProMedShareholder”* and collectively, the *“PrincipalProMed Shareholders”*);

M.           WHEREAS, the Principal ProMedShareholders shall be either initial signatories to this Agreement, or shallbecome a party to this Agreement prior to the Merger by means of the executionof a joinder agreement in the form of Exhibit C hereto (the *“Joinder Agreement”*); and

N.            WHEREAS, Holdings, Holdings Subsidiaryand the ProMed Parties desire to make certain representations and warrantiesand other agreements in connection with the Merger.

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**AGREEMENT**

NOW, THEREFORE, in reliance on the foregoing recitals and in and forthe consideration and representations, warranties, agreements and covenants setforth herein, the parties hereto hereby agree as follows:

**ARTICLE 1.**

**THE MERGER**

1.1           The Merger.  At theEffective Time (as defined in Section 1.2) and subject to and upon the termsand conditions of this Agreement and the applicable provisions of theCorporations Code of the State of California (the *“CaliforniaCode”*), Holdings Subsidiary shall be merged with and into ProMedCompany, the separate corporate existence of Holdings Subsidiary shall ceaseand ProMed Company shall continue as the surviving corporation and as awholly-owned subsidiary of Holdings. ProMed Company as the surviving corporation after the Merger ishereinafter sometimes referred to as the *“Surviving Corporation”*.

1.2           Effective Time.  The closing(the *“Closing”*) of the Merger and the othertransactions contemplated by this Agreement (the *“Transaction”*)shall take place at 10:00 am at the offices of Theodora Oringher Miller &Richman, PC, 2029 Century Park East, 6th Floor, Los Angeles, California on June 1,2007, in the event the conditions precedent to the performance of Holdings,Holdings Subsidiary and the ProMed Parties as set forth in Article 6 hereof aresatisfied or waived on or before June 1, 2007 (the *“ClosingDate”*).  On the Closing Date,the parties hereto shall cause the Merger to be consummated by filing theAgreement of Merger with the Secretary of State of the State of California inaccordance with the relevant provisions of applicable law.  The date and time the Merger becomeseffective in accordance with the provisions of the California Code is the *“Effective Time”*.

1.3           Effect of the Merger.  At theEffective Time, the effect of the Merger shall be as provided in the applicableprovisions of the California Code. Without limiting the generality of the foregoing, and subject thereto,at the Effective Time, all the property, rights, privileges, powers andfranchises of ProMed Company and Holdings Subsidiary shall vest in theSurviving Corporation, and all debts, liabilities and duties of ProMed Companyand Holdings Subsidiary shall become the debts, liabilities and duties of theSurviving Corporation.

1.4           Articles of Incorporation; Bylaws.

(a)           Unless otherwise determined by Holdings prior to theEffective Time, at the Effective Time, the Articles of Incorporation of ProMedCompany shall be the Articles of Incorporation of the Surviving Corporation asamended and restated as provided in Exhibit A of the Agreement of Merger.

(b)           The Bylaws of Holdings Subsidiary, as in effectimmediately prior to the Effective Time, shall be the Bylaws of the SurvivingCorporation until thereafter amended.

1.5           Directors and Officers.  Thedirector(s) of Holdings Subsidiary immediately prior to the Effective Timeshall become the director(s) of the Surviving Corporation at the EffectiveTime, each to hold office in accordance with the Articles of Incorporation andBylaws of the 

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Surviving Corporation. The officers of Holdings Subsidiary immediately prior to the EffectiveTime shall become the officers of the Surviving Corporation at the EffectiveTime, each to hold office in accordance with the Bylaws of the SurvivingCorporation.

1.6           Merger Consideration: Effect on Capital Stock. Subject to the terms and conditions of this Agreement, as of theEffective Time, by virtue of the Merger and without any action on the part ofHoldings, Holdings Subsidiary, ProMed Company or the holder of any shares ofProMed Company capital stock the following shall occur:

(a)           *Conversion of ProMed Company Shares.* Each share of ProMed Company capital stock issued and outstandingimmediately prior to the Effective Time (other than any Dissenting Shares (asdefined and to the extent provided in Section 1.7(a)) (each, a *“ProMed Company Share”*, collectively, the *“ProMed Company Shares”*) will be canceled and extinguishedand be converted automatically into the right to receive, upon surrender of thecertificate representing such ProMed Company Share in the manner provided inSection 1.8, the aggregate consideration of Twenty Two Million Eighty-FourThousand Seven Hundred Fifty Two and 00/100 Dollars ($22,084,752.00) as setforth in clauses (i) and (ii) below, *divided by, in each case,the number of ProMed Company Shares outstanding at the Effective Time (on afully diluted basis)*(the *“Merger Consideration”*):

(i)            An amount of cash equal to Eighteen Million ThreeHundred Thirty Thousand Three Hundred Forty-Four and 00/100 Dollars($18,330,344.00) or, if Holdings makes the election set forth in (iii) below,such greater amount of cash, in immediately available funds (the *“Cash Consideration”*), and

(ii)           The balance of the Merger Consideration shall be paidin shares of the common stock of Holdings, par value $0.01 per share (*“Holdings Common Stock”*) with the number of sharesdetermined by dividing (i) the dollar amount of the balance of the MergerConsideration being paid in Holdings Common Stock by (ii) the average of theclosing sales prices of Holdings Common Stock as reported by the American StockExchange for the thirty (30) consecutive trading days preceding the day onwhich Holdings makes a public announcement concerning the execution of thisAgreement (the *“Stock Consideration”*).Certificates for fractions of shares of Holdings Common Stock will not be issued.In lieu of a fraction of a share of Holdings Common Stock, each holder ofProMed Company Shares otherwise entitled to a fraction of a share of HoldingsCommon Stock shall be entitled to receive an amount of cash equal to thefraction of a share of the Holdings Common Stock to which such holder wouldotherwise be entitled, multiplied by the average of the 30 day closing salesprice referenced above for Holdings’ Common Stock.

(iii)          Notwithstanding anything to the contrary herein, whilethe Merger Consideration will remain the aggregate amount set forth in Section1.6(a) herein, Holdings has the option at any time prior to the Effective Time,to reduce the amount of the Stock Consideration and increase the amount of theCash Consideration by a like amount resulting in shareholders of ProMed Companyreceiving more cash and less Holdings Common Stock.  Holdings’ option to alter the StockConsideration and Cash Consideration by a like amount is limited to reductionsin Stock Consideration and increases in Cash Consideration and thus 

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Holdings’ option under this Section 1.6(iii) does notpermit Holdings to reduce the Cash Consideration below the amount set forth inSection 1.6(a)(i) above.

*Example:*  Currentlyunder (i) and (ii) above, Holdings is paying 83% of the Merger Consideration incash and 17%, constituting the balance, in Holdings Common Stock. Assuming forpurposes of this example that Holdings chooses to decrease the StockConsideration from the current 17% to 15% of the total Merger Consideration, theStock Consideration would be reduced from the current balance of $3,754,408 to$3,312,7122 (15% of $22,084,752) and the Cash Consideration would increase from$18,330,344 to $18,772,039 (85% of $22,084,752).

(b)           *Capital Stock of Holdings Subsidiary*. Each share of capital stock of Holdings Subsidiary issued andoutstanding immediately prior to the Effective Time shall be converted into andexchanged for one validly issued, fully paid and nonassessable share of capitalstock of the Surviving Corporation.  Eachstock certificate of Holdings Subsidiary evidencing ownership of any suchshares shall continue to evidence ownership of such shares of capital stock ofthe Surviving Corporation.

(c)           Notwithstanding anything to the contrary herein, whilethe Merger Consideration will remain the aggregate amount set forth in Section1.6(a) herein, Holdings has the option at any time prior to the Effective Time,to reduce the amount of the Stock Consideration and increase the amount of theCash Consideration by a like amount resulting in shareholders of ProMed Companyreceiving more cash and less Common Stock. Holdings’ option to alter the Stock Consideration and Cash Considerationby a like amount is limited to reductions in Stock Consideration and increasesin Cash Consideration and thus Holdings’ option under this Section 1.6(c) doesnot permit Holdings to reduce the Cash Consideration below the amount set forthin Section 1.6(a)(i) above.

*Example:* Assuming Holdings chooses to decrease the StockConsideration from that number of shares of Common Stock equivalent to$3,967,289 as set forth in Section 1.6(a)(ii), to that number of sharesequivalent to $3,725,000, for a difference of $242,289.  In doing so, Holdings shall be required toincrease the Cash Consideration by $242,289 which would result in MergerConsideration consisting of Cash Consideration of $20,078,736 and StockConsideration of $3,725,000.

1.7           Dissenting Shares.

(a)           Notwithstanding any provision of this Agreement to thecontrary, any ProMed Company Shares held by a holder who has demanded andperfected dissenters’ rights for such shares in accordance with the CaliforniaCode and who, as of the Effective Time, has not effectively withdrawn or lostsuch dissenters’ rights (*“Dissenting Shares”*),shall not be converted into or represent a right to receive the MergerConsideration pursuant to Section 1.6, but the holder thereof shall only beentitled to such rights as are granted by the California Code.

(b)           Notwithstanding the provisions of subsection (a), ifany holder of ProMed Company Shares who demands dissenters’ rights with respectto such shares under the California Code shall effectively withdraw or lose(through failure to perfect or otherwise) such dissenters’ 

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rights, then, as of the later of the Effective Timeand the occurrence of such event, such holder’s shares shall automatically beconverted into and represent only the right to receive the Merger Considerationas provided herein, without interest thereon, upon surrender of the certificaterepresenting such shares.

(c)           ProMed Company shall give Holdings (i) prompt noticeof any written demands of dissenters’ rights with regard to any ProMed CompanyShares, withdrawals of such demands, and any other instruments served pursuantto the California Code and received by ProMed Company and (ii) the opportunityto participate in all negotiations and proceedings with respect to demands fordissenters’ rights under the California Code. ProMed Company shall not, except with the prior written consent ofHoldings, voluntarily make any payment with respect to any demands fordissenters’ rights with regard to ProMed Company Shares or offer to settle orsettle any such demands.

1.8           Surrender of Certificates.

(a)           *Exchange Procedures.* Prior to the Closing, ProMed Company shall cause to be mailed to eachholder of record of a certificate or certificates (the *“Certificates”*)which immediately prior to the Effective Time represented outstanding ProMedCompany Shares whose shares were converted into the right to receive the MergerConsideration pursuant to Section 1.6, as set forth on Schedule 2.6hereto, (i) a letter of transmittal (which shall specify that delivery shall beeffected, and risk of loss and title to the Certificates shall pass to Holdingsonly at the Effective Time, which letter shall be in such form, and have suchother provisions, as ProMed Company may reasonably specify) and (ii)instructions for effecting the surrender of the Certificates in exchange forsuch holder’s share of the Merger Consideration as set forth inSection 1.6, including the cash in lieu of fractional shares into whicheach ProMed Company Share represented by such Certificate or Certificatesshall have been converted pursuant to this **Agreement.******Upon thelater of (i) the Closing Date or (ii) the date of the surrender of aCertificate for cancellation to Holdings, the holder of such Certificate shallbe entitled to receive promptly thereafter in exchange therefor the amount ofCash Consideration and Stock Consideration to which such holder is entitledunder Section 1.6 in respect of the ProMed Company Shares represented bysuch Certificate, and the Certificate so surrendered shall forthwith becancelled.  With respect to the StockConsideration, Holdings shall promptly issue instructions to its transfer agent(*“Transfer Agent”*) to issue thecertificates representing shares of Holdings Common Stock to each ProMedCompany shareholder upon Holdings’ receipt of the surrendered Certificate.  Until so surrendered, each outstandingCertificate that, prior to the Effective Time, represented ProMed CompanyShares will be deemed from and after the Effective Time, for all corporatepurposes, to evidence only the right to receive the applicable CashConsideration and Stock Consideration specified above, without interest.

(b)           *No Liability.* Notwithstanding anything to the contrary in this Section 1.8, neitherHoldings nor the Surviving Corporation hereto shall be liable to a holder ofProMed Company Shares for any amount properly paid to a public official pursuantto any applicable abandoned property, escheat or similar law.

1.9           No Further Ownership Rights in ProMed Company Shares. All Merger Consideration paid by Holdings or Holdings Subsidiary,directly or indirectly through the 

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Transfer Agent in the case of Holdings’ Common Stock,upon the surrender for exchange of ProMed Company Shares in accordance with theterms hereof shall be deemed to have been issued in full satisfaction of allrights pertaining to such ProMed Company Shares, and there shall be no furtherregistration of transfers on the records of the Surviving Corporation of ProMedCompany Shares which were outstanding immediately prior to the EffectiveTime.  If, after the Effective Time,Certificates are presented to Holdings, the Transfer Agent or the SurvivingCorporation for any reason, they shall be cancelled and exchanged as providedin this Article 1.

1.10         Lost, Stolen or Destroyed Certificates. In the event any certificates evidencing ProMed Company Shares shallhave been lost, stolen or destroyed, Holdings shall issue, and with respect tothe Stock Consideration shall cause the Transfer Agent to issue, in exchangefor such lost, stolen or destroyed certificates, upon the making of anaffidavit by the holder thereof, acceptable to the Transfer Agent and Holdings,such Merger Consideration, if any, as may be required pursuant toSection 1.6, provided, however, that Holdings or the Transfer Agent may,in their discretion and as a condition precedent to the issuance thereof,require the owner of such lost, stolen or destroyed certificates to execute alost certificate affidavit and indemnity to indemnify against any claim thatmay be made against the Surviving Corporation, Holdings or the Transfer Agentwith respect to the certificates alleged to have been lost, stolen ordestroyed.

1.11         Required Withholding.  Holdingsand/or the Surviving Corporation shall be entitled to deduct and withhold fromany consideration payable or otherwise deliverable pursuant to this Agreementto any holder or former holder of ProMed Company Shares, with notice to suchholder or former holder, such amounts as are required to be deducted orwithheld therefrom under the Internal Revenue Code of 1986, as amended or underany provision of state, local or foreign tax law or under any other applicablelegal requirement.  To the extent suchamounts so deducted or withheld are paid to the appropriate governmentalentity, such amounts shall be treated for all purposes under this Agreement ashaving been paid to the person to whom such amounts would otherwise have beenpaid.

1.12         Tax and Accounting Consequences. Each party has consulted with its own tax advisors and accountants withrespect to the tax and accounting consequences, respectively, of the Merger.

1.13         Unclaimed Merger Consideration. Any portion of the Merger Consideration made available by Holdings,either directly or indirectly though the Transfer Agent, pursuant to thisArticle 1 and not exchanged for ProMed Company Shares after the Effective Timepursuant to Section 1.8 above shall be held by Holdings and/or the TransferAgent, subject to the rights of holders of unsurrendered Certificates underthis Article 1.  Thereafter such holdersshall be entitled to look to only to such retained Merger Consideration (subjectto abandoned property, escheat and other similar laws) with respect to anyamount that may be payable upon due surrender of the Certificates held by them.

1.14         Taking of Necessary Action; Further Action. If, at any time after the Effective Time, any such further action isnecessary or desirable to carry out the purposes of this Agreement and to vestthe Surviving Corporation with full right, title and possession to all assets,property, rights, privileges, powers and franchises of ProMed Company and Holdings

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Subsidiary, the officers and directors of ProMedCompany and Holdings Subsidiary are fully authorized in the name of theirrespective corporations or otherwise to take, and will take, all such lawfuland necessary action.

1.15         Escrow.  At theClosing the parties shall deposit $1,200,000 in cash (such cash, together withall earnings thereon is referred to as the *“Escrow Cash”*),deducted from the total Merger Consideration otherwise payable to each of theshareholders of ProMed Company on a pro-rata basis, in an escrow account (*“Indemnification Escrow Account”*) to be held in suchIndemnification Escrow Agreement during the period ending two (2) years fromthe Effective Date (*“Escrow Period”*),pursuant to the terms of an escrow agreement (*“Escrow Agreement”*)negotiated prior to the Closing by ProMed Company, the Representative (asdefined in Section 1.16(a) and Holdings, with an escrow agent mutuallyacceptable to the parties (*“Escrow Agent”*).  The Indemnification Escrow shall provide asource of funds for the indemnity obligations set forth in Section 7.2(a) ofthis Agreement and, to the extent provided in Section 7.6, the indemnityobligations set forth in Section 7.2(a) of the agreement and plan ofreorganization for the ProMed Pomona Acquisition (the *“ProMedPomona Acquisition Agreement”*). The Indemnification Escrow Account established pursuant to this Section1.15 and the indemnification escrow account established pursuant to Section1.15 of the ProMed Pomona Acquisition Agreement shall be collectively referredto as the *“Indemnification Escrow Fund”*.  Except for those claims set forth in Sections7.2(b) and Section 7.4 of the Agreement and Sections 7.2(b) and 7.4 of theProMed Pomona Acquisition Agreement, the Indemnification Escrow Fund shall be theexclusive source of indemnity funds for claims of Holdings, Holdings Subsidiary and SurvivingCorporation or their respective directors, officers, employees, agents andaffiliates.   Subject to Article 7, (i)on the first business day following the first anniversary of the EffectiveDate, the Escrow Agent shall deliver 25% of the Escrow Cash in theIndemnification Escrow Account, less any such amounts applied in satisfactionof a claim for indemnification and any amounts reserved against pending claimsrelated to the indemnification obligations set forth in Article 7 and claimsrelated to the indemnification obligations in the ProMed Pomona Acquisition, toeach of ProMed Company’s former shareholders, after giving effect to the Merger(“*Former Shareholders”*) in the sameproportions as initially deposited in the Indemnification Escrow Account, and(ii) on the first business day following the conclusion of the Escrow Period,the Escrow Agent shall deliver the remaining Escrow Cash in the IndemnificationEscrow Account, less any such amounts applied in satisfaction of a claim forindemnification and any amounts reserved against pending claims related to theindemnification obligations set forth in Article 7 and claims related to theindemnification obligations in the ProMed Pomona Acquisition, to each of theFormer Shareholders in the same proportions as initially deposited in theIndemnification Escrow Account.

1.16         Representative for Purposes of Escrow Agreement,Indemnification Escrow Fund, and Closing Date Balance Sheet Reserve Amount.

(a)           In order to administer efficiently (i) theimplementation of this Agreement and/or the Escrow Agreement on behalf of theFormer Shareholders, and (ii) the settlement of any dispute with respect tothis Agreement and/or the Escrow Agreement involving the Indemnification EscrowFund, ProMed Company shall, prior to the Effective Time, designate one to threepersons to act as a representative on behalf of the Former Shareholders(collectively, 

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the *“Representative”*). By approving this Agreement, ProMed Company’s shareholders authorize andempower ProMed Company to make such designation, approve and ratify all of therights, powers and authorities provided to the Representative under the termsof this Agreement, and agree to be bound by all decisions and other actionstaken by the Representative.

(b)           From and after the Effective Time, the FormerShareholders hereby authorize the Representative (i) to take all actionnecessary in connection with the implementation of the Agreement on behalf ofthe Former Shareholders or the settlement of any dispute, including, withoutlimitation, with regard to matters pertaining to the indemnification provisionsof this Agreement and the Escrow Agreement, (ii) to give and receive allnotices required to be given under the Agreement and the Escrow Agreement, and(iii) to take any and all additional action as is contemplated to be taken byor on behalf of the Former Shareholders by the terms of this Agreement and theEscrow Agreement.

(c)           If no Representative is ever appointed or if anyRepresentative dies, becomes legally incapacitated or resigns from suchposition, another Person designated by the remaining Representatives, or ifnone remain, by the Former Shareholders holding the right to receive more than50% in interest of the Escrow Cash (the *“Requisite FormerShareholders”*), who shall be identified to Holdings as soon aspracticable, shall fill such vacancy and shall be deemed to be theRepresentative for all purposes of this Agreement; provided, however, that nochange in the Representative shall be effective until Holdings is given writtennotice of such change.  If no Representative is then currently serving,the Representative shall be deemed to be the Requisite Former Shareholders.

(d)           All decisions and actions by the Representative asprovided in this Section 1.16 or under the Escrow Agreement shall be bindingupon all of the Former Shareholders, and no Former Shareholders shall have theright to object, dissent, protest or otherwise contest the same.

(e)           By their execution and/or approval of this Agreementand the Merger, ProMed Company and its shareholders agree that:

(i)            Holdings, the Surviving Corporation and the EscrowAgent shall be able to rely conclusively on the instructions and decisions ofthe Representative as to any actions required or permitted to be taken by theRepresentative hereunder (including the Closing Date Balance Sheet ReserveAmount) and under the Escrow Agreement, and no party hereunder shall have anycause of action against Holdings, the Surviving Corporation or the Escrow Agentfor any action taken by Holdings, the Surviving Corporation or the Escrow Agentin reliance upon the instructions or decisions of the Representative;

(ii)           all actions, decisions and instructions of theRepresentative shall be conclusive and binding upon all of the FormerShareholders and no Former Shareholder shall have any cause of action againstthe Representative for any action taken, decision made or instruction given bythe Representative under this Agreement, the Escrow Agreement, except for fraudor willful breach of this Agreement by the Representative; and

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(iii)          the provisions of this Section 1.16 are independentand severable, shall constitute an irrevocable power of attorney, coupled withan interest and surviving death, granted by the Former Shareholders to theRepresentative and shall be binding upon the executors, heirs, legalrepresentatives and successors of each Former Shareholder.

(iv)          In taking any action hereunder and under the EscrowAgreement, the Representative shall be protected in relying upon any notice,paper or other document reasonably believed by it to be genuine, or upon anyevidence reasonably deemed by it, in its good faith judgment, to be sufficient;provided, however, that the Representative shall not waive any rights withrespect to any individual Former Shareholder(s)’ interest(s) if such waiverwould have the effect of disproportionately and adversely affecting suchindividual Former Shareholders(s) as compared to the interests of the otherFormer Shareholders, without the prior consent of the affected FormerShareholder(s).  The Representative shall not be liable to Holdings or theFormer Shareholders for any act performed or omitted to be performed by him inthe good faith exercise of his duties and shall be liable only in the case offraud or willful breach of this Agreement by the Representative.  TheRepresentative may consult with counsel in connection with his duties hereunderand shall be fully protected in any act taken, suffered or permitted by him ingood faith in accordance with the advice of counsel.  The Representativeshall not be responsible for determining or verifying the authority of anyperson acting or purporting to act on behalf of any party to this Agreement.

1.17         Piggy-Back RegistrationRights.  All Holdings Common Stockissued as part of the Merger Consideration shall be entitled to those “piggy-backregistration rights” set forth on Exhibit D hereof subject to each shareholder’sexecution of the Investment Representation Certificate described in Section 5.7hereof wherein, among other things, such shareholder agrees to be subject tothe terms and conditions of such piggy-back registration rights set forth inExhibit D.

**ARTICLE 2.**

**REPRESENTATIONS AND WARRANTIES OF PROMED COMPANY,PROMED SUBSIDIARY, AND THE PRINCIPAL PROMED SHAREHOLDERS**

In order to induce Holdings and Holdings Subsidiary to enter into thisAgreement and to consummate the Transaction, ProMed Company and ProMedSubsidiary make the representations and warranties set forth in this Article 2,excepting only the representation and warranty in Section 2.10(a), whichrepresentation and warranty is made by each of the Principal ProMedShareholders.

2.1           Organization; Subsidiaries. ProMed Company and ProMed Subsidiary are corporations duly organized,validly existing and in good standing in the State of California.  ProMed Company and ProMed Subsidiary have all requisite corporate power andauthority to own, lease, and operate their assets and to carry on theirrespective businesses as now being conducted. ProMed Company has no partially-owned or wholly-ownedsubsidiaries other than the membership interest in ProMed Properties, LLC, aCalifornia limited liability company as set forth in Section 4.6 hereof (*“ProMed LLC”*).  ProMedSubsidiary has no partially-ownedor wholly-owned subsidiaries.

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2.2           Minute Book and Stock Records. The minute books and stock records of ProMed Company and ProMedSubsidiary are complete and accurate in all material respects and allsignatures included therein are the genuine signatures of the persons indicatedas signing.  True, correct and completecopies of such minute books and stock records (which include a complete andaccurate copy of the Articles of Incorporation and Bylaws and all amendments toboth) of ProMed Company and ProMed Subsidiary have previously been delivered toHoldings.  Neither ProMed Company norProMed Subsidiary is in default under or in violation of any provision of itsArticles of Incorporation or its Bylaws.

2.3           Authorization.  Each ofProMed Company and ProMed Subsidiary has the power and authority to enter intothis Agreement and to consummate the Transaction.  All actions on the part of ProMed Company andProMed Subsidiary necessary for the authorization, execution, delivery andperformance of this Agreement and the consummation of the Transaction,including all necessary approvals by the shareholders of ProMed Company, havebeen or will be taken prior to the Closing Date, and this Agreement (includingexhibits, schedules and the ancillary agreements) constitutes the legal, validand binding obligation of each of ProMed Company, ProMed Subsidiary and thePrincipal ProMed Shareholders enforceable against them in accordance with its terms,except as enforceability may be restricted, limited or delayed by applicablebankruptcy, insolvency, fraudulent conveyance, or other laws affecting creditor’srights generally, and except as enforceability is subject to general principlesof equity.

2.4           No Consent Required.  Except as setforth on Schedule 2.4, neither the execution and delivery of thisAgreement by ProMed Company, ProMed Subsidiary or the Principal ProMedShareholders, nor the performance by them of their obligations under thisAgreement, requires the consent, approval, order or authorization of, orregistration, declaration or filing with any governmental entity or any thirdparty that will not have been obtained and delivered to Holdings and/orHoldings Subsidiary prior to the Closing Date except for the filing of theAgreement of Merger with the Secretary of State of the State of California.

2.5           No Violation of Other Agreements; No Conflicts.

(a)           Neither the execution and delivery of this Agreementnor the consummation or performance of the Transaction violates, conflicts withor results in a breach of, or shall violate, conflict with or result in abreach of any lease, contract, document or agreement to which any of the ProMedParties is a party or by which any of the ProMed Parties may be bound.

(b)           Neither the execution and delivery of this Agreementnor the consummation or performance of the Transaction, will, directly orindirectly (with or without the giving of notice, or lapse of time, or both):

(i)            contravene, conflict with, or result in a violation ofany provision of the organizational documents of ProMed Company or ProMedSubsidiary;

(ii)           contravene, conflict with, or result in a violation ofany order, judgment or decree to which any of the ProMed Parties may besubject; or

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(iii)          contravene, conflict with or result in a violation ofany of the terms or requirements, or give any governmental body the right torevoke, withdraw, suspend, cancel, terminate or modify, any governmentalauthorization that is held by any of the ProMed Parties.

2.6           Capital Structure.  Theauthorized capital stock of ProMed Company consists of 10,000,000 shares ofcommon stock, no par value, of which 8,360 shares are issued andoutstanding.  The authorized capitalstock of ProMed Subsidiary consists of 10,000,000 shares of common stock, nopar value, of which 10,000 shares are issued and outstanding.  All of the ProMed Company Shares and ProMedSubsidiary Shares have been validly issued, are fully paid and non-assessable. Schedule2.6(a) contains a list of each holder of record of ProMed Company Shares(each, a *“ProMed Company Shareholder”* andcollectively, the *“ProMed Company Shareholders”*))and the number of ProMed Company Shares held by such holders.  All ProMed Subsidiary Shares are owned byProMed Company.   Except for those stockoptions set forth on Schedule 2.6(b), all of which will be paid,cancelled or otherwise no longer outstanding at the Effective Time inaccordance with Section 6.2(l) hereof, there are no options, warrants, rights,shareholder agreements or other instruments or agreements outstanding givingany person the right to acquire any shares of capital stock of ProMed Companyor ProMed Subsidiary, nor are there any commitments to issue or execute anysuch options, warrants, rights, shareholder agreements or other instruments oragreements.  There are no outstandingstock appreciation rights or similar rights outstanding with respect to any ofthe capital stock of ProMed Company or ProMed Subsidiary nor are there anyinstruments, or agreements giving anyone the right to acquire any suchrights.  Should those persons set forthon Schedule 2.6(b) exercise all of their stock options prior to the EffectiveTime as provided in Section 4.7 hereof, ProMed Company will have 8,717 sharesof its common stock outstanding at the time of the Merger.

2.7           Year End and Certain Interim Financial Statements. ProMed Company and ProMed Subsidiary have provided Holdings with (i) theconsolidated balance sheets and income statements of ProMed Company and ProMedSubsidiary, for the fiscal years ended September 30, 2006 and September 30,2005 as such have been audited by Deloitte & Touche LLP (the *“2006 Year End Financial Statements”*) and(ii) the unaudited interim balance sheets and income statements of ProMed Companyand ProMed Subsidiary for the monthly periods subsequent to September 30, 2006and ending March 31, 2007 (the *“MarchInterim Financial Statements”,*which together with all monthly Interim Financial Statements prior toMarch 1, 2007, the*“Interim FinancialStatements”)*.  The 2006Year End Financial Statements and the Interim Financial Statements fairlypresent in all material respects the financial condition and results ofoperation of ProMed Company and ProMed Subsidiary as of the date and for the periodsset forth therein and the 2006 Year End Financial Statements and the InterimFinancial Statements, have been prepared in accordance with GAAP, applied on aconsistent basis throughout the periods covered thereby, except in the case ofthe 2006 Year End Financial Statements, as may be indicated in the notesthereto and except that the Interim Financial Statements do not contain notesand, as unaudited statements, are subject to normal recurring audit adjustmentsconsistent with past practice.   Since thedate of the March Interim Financial Statements there has not been any materialadverse change to the financial condition of ProMed Company or ProMedSubsidiary, including no material difference in the assets and liabilities ofProMed Company and/or ProMed Subsidiary as shown on the March Interim FinancialStatements.

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2.8           No Undisclosed Liabilities. Except as set forth in Schedule 2.8, neither ProMed Company norProMed Subsidiary has any liabilities or obligations of any nature (whetherabsolute, accrued, contingent, or otherwise) except: (i) for those shown on the2006 Year End Financial Statements and the March Interim Financial Statements;and (ii) those incurred subsequent to March 31, 2007 in the ordinary course ofbusiness conducted in a manner consistent with past practices and custom.

2.9           Tax Matters.  ProMedCompany and ProMed Subsidiary are “C” corporations and have always been “C”corporations.  ProMed Company and ProMedSubsidiary have each timely filed all income and franchise tax returns requiredto be filed by them and have timely paid in full all Taxes (defined below) owedby them for the periods ending on September 30, 2006 and has properly accrued,in accordance with GAAP, on the March Interim Financial Statements all Taxesfor all periods ending on March 31, 2007. Except as set forth in Schedule 2.9, all tax returns filed by oron behalf of ProMed Company and ProMed Subsidiary are true, accurate andcomplete in all material respects. Except as set forth in Schedule 2.9, (i) no action or proceedingfor the assessment or collection of any Taxes is pending against either ofProMed Company or ProMed Subsidiary, (ii) no deficiency, assessment or otherformal claim for any Taxes has been asserted or made against any of ProMedCompany or ProMed Subsidiary that has not been fully paid or finally settled;and (iii) no issue has been formally raised by any taxing authority inconnection with an audit or examination of any return of Taxes.  Except as set forth in Schedule 2.9,no federal or state income tax returns of any of ProMed Company or ProMedSubsidiary have been audited or examined, and there are no outstandingagreements or waivers extending the applicable statutory periods of limitationfor such Taxes for any period.  All Taxesthat ProMed Company and ProMed Subsidiary have been required to collect orwithhold have been duly withheld or collected and, to the extent required, havebeen paid to the proper taxing authority. *“Taxes”* means taxes, charges, fees,levies, or assessments including, without limitation, income, excise, property,withholding, payroll, sales and franchise taxes, imposed by federal, state,county, local or foreign government or subdivision or agency thereof, andincluding any interest, penalties or additions.

2.10         Title to ProMed Company Shares and ProMed SubsidiaryShares.

(a)           Each Principal ProMed Shareholder represents andwarrants that he or she is the owner, beneficially and of record, of onehundred percent (100%) of the ProMed Company Shares, set forth opposite his orher name on Schedule 2.6(a), free and clear of all liens, encumbrances,security interests, equities, options, claims charges or other restrictions ofany kind (*“Liens”*).

(b)           ProMed Company is, and at the Closing Date will be,the owner, beneficially and of record, of one hundred percent (100%) of theProMed Subsidiary Shares.  ProMed Companyowns the ProMed Subsidiary Shares free and clear of all Liens.

2.11         Real Property.

(a)           Except for the indirect interest in the buildinglocated at 4150 E. Concours Street, Ontario, CA 91764 (*“OntarioBuilding”*) solely as a result of ProMed Company’s membership inProMed LLC and ProMed LLC’s interest in ProMed LP (as defined in Section 4.5)

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which owns five percent (5%) of the Ontario Building,neither ProMed Company nor ProMed Subsidiary owns any real property, nor hasany of them ever owned any real property.

(b)           Schedule 2.11 contains a true, correct and complete list (includingthe name of the lessor and termination date) of all leases, subleases and otheragreements under which ProMed Company and/or ProMed Subsidiary uses or has theright to occupy any real property. Neither ProMed Company nor ProMed Subsidiary is delinquent on anycharges under such leases, subleases or other agreements.

2.12         Tangible Personal Property.

(a)           Each of ProMed Company and ProMed Subsidiary has good,marketable and valid title to all tangible personal property owned by it freeand clear of all Liens.

(b)           Each item of furniture, equipment and other tangiblepersonal property with an original cost of $1,000 or more that is owned byProMed Company and/or ProMed Subsidiary and used in the conduct of its businessis listed in Schedule 2.12(b) (the *“AggregateTangible Personal Property”*).

(c)           All items constituting the Aggregate Tangible PersonalProperty will be retained by ProMed Company and ProMed Subsidiary until theClosing and considered part of the Transaction subject to the disposition inthe ordinary course of business consistent with past practice (the *“Tangible Personal Property”*).  None of the Tangible Personal Property shallbe sold nor encumbered by a Lien except as specifically contemplated by thisAgreement.  All of the Tangible PersonalProperty are in good operating condition, subject to reasonable wear andtear.  Except for the representation setforth above, the Tangible Personal Property is sold “AS IS-WHERE IS” with nowarranty or representation of any kind as to its physical condition.

2.13         Intellectual Property.  Schedule 2.13 lists all intellectualproperty owned by ProMed Company and/or ProMed Subsidiary.  Each of ProMed Company and ProMed Subsidiaryowns its respective trade name, as set forth on Schedule 2.13.  Neither ProMed Company nor ProMed Subsidiarypays, nor does any know of any reason it is obligated to pay, any royalties,license fees or other amounts to any person or entity as a result of the use ofthe trade names set forth on Schedule 2.13.  To the knowledge of ProMed Company and/orProMed Subsidiary, their use of such trade names does not infringe on the rightsof any third party.  Additionally, ProMedCompany and ProMed Subsidiary are owners of the website set forth on Schedule2.13 (the *“ProMed Website”*), and allownership interests of ProMed Company and ProMed Subsidiary in the ProMedWebsite are free and clear of any Liens without any obligation to payroyalties, license fees, or other amounts to any person or entity, other thanroutine renewal fees owing to the registrar of the domain name for the ProMedWebsite.

2.14         Contracts.  Schedule2.14 sets forth a list of all contracts, arrangements, and commitments(whether oral or written) to which ProMed Company and/or ProMed Subsidiary is aparty, or by which it is bound, which are material to the business of ProMedCompany and/or ProMed Subsidiary (the *“Material Contracts”*).  Material Contracts shall consist of anycontract, arrangement or commitment (i) with insurance companies, managed careplans, hospitals, employers or other third parties to which health careservices are provided to patients, or (ii) not 

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entered into in the ordinary course of business, or(iii) which involves an expenditure or receipt of funds greater than $10,000per year; or (iv) which is not terminable without penalty and cause on 30 daysor less notice, or (v) with physicians or other providers of medical services,or (vi) between ProMed Company or ProMed Subsidiary and any physician or personknown to ProMed Company or ProMed Subsidiary to be an affiliate of anyphysician, regardless of the amount of payments called for, required or madethereunder, or (vii) between ProMed Company or ProMed Subsidiary and anyshareholder, executive officer or director of ProMed Company, ProMed Subsidiaryor an affiliate of such shareholder, executive officer or director (includingany contracts with Chaparral Medical Group, Inc. dba ChaparralClinics owned by Jeereddi Prasad, M.D.), or (viii) which is an employment agreement; or (ix) any othercontract or agreement whether written or oral to which ProMed Company or ProMedSubsidiary is a party or to which it is bound as to which the breach,nonperformance, cancellation or failure to renew by any party thereto wouldhave a material adverse effect on the business, assets, condition (financial orotherwise) or results of operations of ProMed Company or ProMedSubsidiary.  Material Contracts shallspecifically include the ProMed Pomona Management Agreement, and the ProMedUpland Management Agreement.  ProMedCompany and ProMed Subsidiary have, prior to the Closing, delivered to Holdingsa correct and complete copy of each Material Contract.  Each of the Material Contracts is a legal,valid, binding, enforceable agreement of the applicable ProMed Party, in fullforce and effect, except as enforceability may be restricted, limited ordelayed by applicable bankruptcy, insolvency, fraudulent conveyance, or otherlaws affecting creditor’s rights generally, and except as enforceability issubject to general principles of equity. Except as set forth on Schedule 2.14, there is not now and, tothe knowledge of ProMed Company and ProMed Subsidiary, there has not beenclaimed or alleged by any person or entity, that a default exists, or an eventthat with notice or lapse of time or both would constitute a default or eventof default, on the part of the respective ProMed Party, or to the knowledge ofProMed Company and ProMed Subsidiary, any other party thereto.  Except as set forth on Schedule 2.14,no consent from, or notice to any third person or governmental entity isrequired in order to maintain in full force and effect any of the MaterialContracts, other than consents that have been obtained and are unconditionaland in full force and effect, except as enforceability may be restricted,limited or delayed by applicable bankruptcy, insolvency, fraudulent conveyance,or other laws affecting creditor’s rights generally, and except asenforceability is subject to general principles of equity, or consents thatwill be obtained which will be unconditional and in full force and effect,except as enforceability may be restricted, limited or delayed by applicablebankruptcy, insolvency, fraudulent conveyance, or other laws affecting creditor’srights generally, and except as enforceability is subject to general principlesof equity, and such notices that have been given and copies of such consentshave been delivered to Holdings.

All Material Contracts which constitute *“affiliate agreements”* are noted as such on Schedule 2.14.

For purposes of this Agreement *“affiliate”* means any corporation or other business entitycontrolled by, controlling, or under common control with ProMed Company, ProMed Subsidiary and/or any ProMedCompany Shareholder and, “control”means direct or indirect beneficial ownership of ten (10) percent or more ofthe voting stock, or ten (10) percent or more interest in the income of suchcorporation or other business entity, or service as an officer or director ofsuch other corporation or other business entity.

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2.15         Legal Proceedings.  Except as setforth on Schedule 2.15(a) (*“Existing/ThreatenedClaims”*), there is no pending claim, suit, action, investigation,legal or administrative proceeding (*“Proceeding”*),and, to the knowledge of ProMed Company and/or ProMed Subsidiary, no person,entity or authority (including, but not limited to, any employee, agent, contractoror provider of ProMed Company and/or ProMed Subsidiary) has threatened tocommence any Proceeding or any investigation that could lead to a Proceeding:(i) against ProMed Company and/or ProMed Subsidiary (including, withoutlimitation, any workers’ compensation, Equal Employment Opportunity Commissionor Americans With Disability Act claims) or that otherwise relates to or mayaffect the business of ProMed Company and/or ProMed Subsidiary or any of theother assets owned or used by ProMed Company and/or ProMed Subsidiary; or (ii)that challenges, or that may have the effect of preventing, delaying, makingillegal, or otherwise interfering with, any part of the Transaction.  To the knowledge of ProMed Company and/orProMed Subsidiary, no person, entity or authority (including, but not limitedto, any employee, agent, contractor or provider of ProMed Company and/or ProMedSubsidiary) has threatened to commence any Proceeding or any investigation thatcould lead to a Proceeding against any employee, agent, contractor or providerof any of the ProMed Parties for conduct which would give rise to a potentialindemnification obligation of ProMed Company and/or ProMed Subsidiary.  There is no outstanding order, judgment,writ, injunction or decree of any court or any federal, state, local or othergovernmental department, commission, board, bureau, agency or instrumentality,to which ProMed Company and/or ProMed Subsidiary or any of the other assetsowned or used by ProMed Company and/or ProMed Subsidiary, is subject that hasnot been fully complied with to the satisfaction of such governmentalentity.  Except as set forth on Schedule2.15(b), to the knowledge of ProMed Company and/or ProMed Subsidiary thecosts of defense, and any amount that may be owing upon any judgment orsettlement of the Existing/Threatened Claims are covered by one or more of theinsurance policies described in Section 2.18, subject only to thecustomary deductibles set forth in such insurance policies.

2.16         Compliance with Laws.  NeitherProMed Company nor ProMed Subsidiary is in violation of any law, rule,regulation or administrative or judicial order pertaining to the assets or thebusiness of ProMed Company and/or ProMed Subsidiary (including, withoutlimitation, licensing, health care, federal, state or local laws relating tokickbacks, illegal referrals, illegal billings or the like, drug enforcement,securities, zoning, building, environmental, immigration, civil rights andoccupational health and safety laws, regulations, ordinances and codes) whichwould have a material adverse effect on the assets or the business of ProMedCompany or ProMed Subsidiary or would have the effect of delaying, makingillegal or otherwise interfering with, any part of the Transaction.  To the best of its knowledge, ProMed Companyand ProMed Subsidiary have no reason to anticipate that existing circumstancesare likely to result in violations of any of the foregoing.

2.17         Employees.  Set forth on Schedule2.17 are the following:

(a)           A complete and accurate list of the names, titles,dates of hire and rates of pay of all employees of ProMed Company and ProMedSubsidiary as of the date hereof.  Exceptas set forth separately on Schedule 2.17, (i) all employees are “at will” employees, and no written or oralemployment, consultant or independent contractor agreement exists with respectto ProMed Company and/or ProMed Subsidiary to which ProMed Company and/orProMed Subsidiary may be bound, (ii)  noemployees are members of a labor union in connection with 

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their employment with ProMed Company and/or ProMedSubsidiary or subject to a collective bargaining agreement with ProMed Companyand/or ProMed Subsidiary, and (iii)  tothe knowledge of ProMed Company and ProMed Subsidiary, no employees are subjectto or party to any contract or agreement restricting their ability to freelyengage or compete in any business.

(b)           A description of each employee benefit or compensationplan, including without limitation, pension, retirement, deferred compensation,profit sharing, bonus or incentive, medical, dental, health insurance and lifeinsurance or other employee benefit plans, arrangements or undertakings ofProMed Company and/or ProMed Subsidiary applicable to its employees; and

(c)           A complete and accurate list of all holiday andvacation pay accrued as of March 31, 2007 for all employees of ProMed Companyand/or ProMed Subsidiary.

Except as set forth in Schedule 2.17, neither ProMed Company norProMed Subsidiary is a party to, bound by, nor do they maintain or make anycontribution to, nor have they incurred any expense with respect to anyemployment agreement, pension, retirement, deferred compensation, profitsharing, bonus or incentive plan, medical, dental or other health insuranceplan, life insurance plan, or other employee benefit plan, program, arrangementor undertaking, whether or not legally binding (including, without limitation,any “employee benefit plan” as defined in Section 3(3) of the federal EmployeeRetirement Income Security Act (*“ERISA”*)),under which employees of ProMed Company and/or ProMed Subsidiary are eligibleto participate or derive a benefit (collectively *“EmployeePlans”* and individually *“Employee Plan”*).

(d)           As of the Closing, there will be no liability ofProMed Company and/or ProMed Subsidiary which has not been properly accrued onthe Subsequent Interim Financial Statements for any Employee Plan or unpaidcompensation, tax withholdings, wrongful termination, Federal InsuranceContribution Act and disability payments of any kind with respect to anyemployee or independent contractor providing services to ProMed Company and/orProMed Subsidiary, including without limitation, vacation pay, sick leave pay,personal day pay, severance pay and bonus pay.

2.18         Insurance.  Schedule2.18 contains a list of all insurance policies maintained by or for thebenefit of ProMed Company and/or ProMed Subsidiary through the Closing Date,including errors and omission, stop-loss (reinsurance), directors and officers,general liability, worker’s compensation and malpractice insurance policies(the *“Insurance Policies”*).  The Insurance Policies are in full force andeffect as of the date hereof in accordance with their respective terms, andsuch Insurance Policies will continue in full force and effect through theClosing Date.

2.19         Management; Powers of Attorney.  Schedule2.19 sets forth all current appointed and acting officers and directors ofProMed Company and ProMed Subsidiary (or other applicable managers or governingboard members) and lists all general and special powers of attorney granted byProMed Company and ProMed Subsidiary, including the names of theattorneys-in-fact appointed under those powers of attorney and the respectivedates in which those powers were granted.

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2.20         No Bankruptcy Proceedings. Neither ProMed Company nor ProMed Subsidiary has (i) made a generalassignment for the benefit of creditors, (ii) filed any voluntary petition inbankruptcy or suffered the filing of an involuntary petition by its creditors,(iii) suffered the appointment of a receiver to take possession of all orsubstantially all of its assets, property or business, (iv) suffered theattachment or other judicial seizure of all or substantially all of its assets,property or business, (v) admitted in writing its inability to pay its debts asthey come due, or (vi) made an offer of settlement, extension or compromise toits creditors generally.

2.21         Licensure.  As of thedate hereof, each of the employees of ProMed Company and/or ProMed Subsidiarywho is required to be licensed in connection with the delivery of health careservices is duly licensed without restriction.

2.22         Environmental.  ProMedCompany and ProMed Subsidiary have complied with all federal, state and localenvironmental laws, rules and regulations as in effect on the date hereofapplicable to its business and its assets. To the knowledge of ProMed Company and ProMed Subsidiary, no hazardousor toxic waste, substance, material or pollutant (as those or similar terms aredefined under the Comprehensive Environmental Response, Compensation and LiabilityAct of 1980, as amended, 42 U.S.C.  9601et seq., Toxic Substances Control Act, 15 U.S.C.  2601 et seq., the Resource Conservation andRecovery Act of 1976, 42 U.S.C.  6901 etseq.  or any other applicable federal,state and local environmental law, statute, ordinance, order, judgment, rule orregulation relating to the environment or the protection of human health (*“Environmental Laws”*)), including but not limited to, anyasbestos or asbestos related products, oils or petroleum-derived compounds,CFCs or PCBs, have been released, emitted or discharged or are currentlylocated in, on, under, or about the real property on which the assets or thebusiness of ProMed Company or ProMed Subsidiary are located.  The assets of ProMed Company and/or ProMedSubsidiary and their use thereof, and ProMed Company’s and/or ProMed Subsidiary’soperation of their businesses, are not in violation of any Environmental Lawsnor any occupational, safety and health law now in effect.

2.23         Confidentiality and Non-Compete Arrangements. Except as set forth on Schedule 2.23, neither ProMed Company norProMed Subsidiary is a party to or is bound or affected by, any confidentialityor non-compete agreements or arrangements, or any acquisition or sale or otheragreements that contain any confidentiality or non-compete agreements orarrangements, that are currently in effect, or are contained in agreements orarrangements that have lapsed but which contain continuing confidentiality ornon-compete obligations, agreements or arrangements.

2.24         Inspections.  Schedule2.24 sets forth accurately and fully describes all inspections of ProMedCompany and/or ProMed Subsidiary conducted by any governmental agency or healthplan at any time during the five (5) year period preceding the date of thisAgreement, which inspection detected matters requiring correction ormodification, and where such violation has not been resolved to thesatisfaction of such inspecting party. ProMed Company and ProMed Subsidiary have delivered a copy of allinspection reports referred to in this Section 2.24 which reflect all matterswhich were noted by any and all such governmental agencies or health plans asrequiring correction or modifications which were requested or recommended.

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2.25         Billing Practices.  All billingpractices performed by ProMed Subsidiary on behalf of ProMed Pomona and/orProMed Upland to all third parties including, but not limited to, Medicare,Medicaid and private insurance companies, have been true, fair and correct andin compliance with all applicable laws, regulations and policies of all suchthird party payors, and to the knowledge of ProMed Pomona and/or ProMedSubsidiary, neither ProMed Pomona or ProMed Upland has billed for or receivedany payment or reimbursement in excess of amounts permitted by law.

2.26         Absence of Certain Business Practices. Neither ProMed Subsidiary nor to the knowledge of ProMed Subsidiary, anyof its agents has, on behalf of ProMed Pomona and/or ProMed Upland, directly orindirectly (i) offered to pay or solicited any remuneration, in cash or inkind, to, or made any financial arrangements with, any past or presentcustomers, past or present suppliers, contractors, third parties, or third partypayors of ProMed Pomona or ProMed Upland in order to obtain business orpayments from such persons; other than entertainment activities in the ordinaryand lawful course of business; (ii) given or received, or agreed to give orreceive, or is aware that there has been made or that there is any agreement tomake or receive, any gift or gratuitous payment of any kind, nature ordescription (whether in money, property or services) to any customer orpotential customer, supplier or potential supplier, contractor, third partypayor or any other person other than in connection with promotional orentertainment activities in the ordinary and lawful course of business; (iii)made or agreed to make, or is aware that there has been made or that there isany agreement to make any contribution, payment or gift of funds or propertyto, or for the private use of, any governmental official, employee or agentwhere either the contribution, payment or gift or the purpose of suchcontribution, payment or gift is or was illegal under the laws of the UnitedStates or under the laws of any state thereof or any other jurisdiction underwhich such payment, contribution or gift was made; (iv) established ormaintained any unrecorded fund or asset for any purpose or made any false orartificial entries on any of its books or records for any reason; or (v) madeor agreed to make or is aware that there has been made or that there is anyintention to make, any payment to any person with the intention orunderstanding that any part of such payment would be used for any purpose otherthan that described in the documents supporting such payment.

2.27         Permits.  Schedule2.27 sets forth a list of all permits, licenses and approvals from federal,state, local and foreign governmental and regulatory bodies (collectively *“Permits”*) held by ProMed Company and/or ProMed Subsidiaryand relating to the assets which are a part of the Transaction.  Such Permits constitute all of the Permitsnecessary to conduct the business of ProMed Company and/or ProMed Subsidiary,as applicable, in the manner now conducted by ProMed Company and/or ProMedSubsidiary.  No breach of any such Permitcurrently exists, nor has any event occurred which through the passage of timeor the giving of notice or both, would constitute a breach thereunder.  To the knowledge of ProMed Company and/orProMed Subsidiary, none of the Permits is to be or proposed to be suspended,canceled or revoked or amended, modified or limited in any fashion.

2.28         Recoupment.  To theknowledge of ProMed Company and/or ProMed Subsidiary in its capacity as agentof ProMed Pomona and ProMed Upland with respect to billings, there is no actionor threatened action for recoupment against ProMed Pomona or ProMed Upland, noris there any request for payments by ProMed Pomona or ProMed Upland to Medicareor of reimbursement from ProMed Pomona or ProMed Upland by Medicare, nor by anyother agency 

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affiliated with Medicare, nor by or from anythird-party reimburser, including, without limitation, any insurance carrier,pre-paid plan, or any other similar entity, nor does ProMed Company or ProMedSubsidiary have knowledge of any basis for such recoupment by any party.  To the knowledge of ProMed Company and/orProMed Subsidiary, none of the accounts of ProMed Pomona or ProMed Upland hasbeen acquired by unlawful special arrangements or kickbacks, or other unlawfulacts.

2.29         Disclosure.  Norepresentation or warranty by ProMed Company and/or ProMed Subsidiary containedin this Agreement or in respect of the exhibits, schedules, lists or otherdocuments delivered to Holdings and/or Holdings Subsidiary by ProMed Company,ProMed Subsidiary or any Principal ProMed Shareholder and referred to herein ortherein, and no statement contained in any certificate furnished or to befurnished by or on behalf of ProMed Company and/or ProMed Subsidiary pursuanthereto or thereto, or in connection with the Transaction, contains, or willcontain as of the date such representation or warranty is made or suchcertificate is or will be furnished, any untrue statement of a material fact,or omits, or will omit to state as of the date such representation or warrantyis made or such certificate is or will be furnished, any material fact which isknown to the party making the representation or warranty to be necessary tomake the statements contained herein or therein, in light of the circumstancesunder which they were made, not misleading.

2.30         Bank Accounts.  A correct andcomplete list of all bank accounts of ProMed Company and ProMed Subsidiary (*“ProMed Bank Accounts”*) and the persons authorized to accesssuch accounts and to incur indebtedness on behalf of ProMed Company and/orProMed Subsidiary, is set forth in Schedule 2.30 of this Agreement.  Except as set forth on Schedule 2.30,all monies in the ProMed Bank Accounts are in cash (and not securities of anynature) and constitute “good funds” subject to immediate withdrawal byHoldings.

2.31         Brokers’ and Finders’ Fees. None of ProMed Company, ProMed Subsidiary or any Principal ProMed Shareholderhas incurred any liability to any broker, finder or agent for any brokeragefees, finder’s fees or commissions with respect to the transactionscontemplated by this Agreement, and if ProMed Company, ProMed Subsidiary or anyPrincipal ProMed Shareholder has incurred any such liability, such liabilityshall be and remain the sole responsibility of ProMed Company, ProMedSubsidiary and the Principal ProMed Shareholders, and the Principal ProMedShareholders shall indemnify, defend and hold Holdings harmless from andagainst any and all liabilities, losses, damages, claims, causes of action,costs and expenses (including without limitation, reasonable attorneys’ fees),arising out of or relating to such liability.

2.32         Information Statement.  The informationincluded in the information statement to be supplied by ProMed Company inconnection with the meeting of, or solicitation of written consents from,ProMed Company’s shareholders to consider the approval and adoption of this **Agreement** and the approval of the Merger (the *“Information Statement”*) shall not, at the time of themailing of such Information Statement, and at the time of the meeting or voteof the shareholders of ProMed Company, contain any untrue statement of amaterial fact or omit to state any material fact required to be made in theInformation Statement or necessary to make the statements in the InformationStatement, in light of the circumstances in which they are made, not false ormisleading.  The Information Statementsupplied to the shareholders will comply as 

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to form in all material respects with the provisionsof the California Code and the rules and regulations thereunder.

2.33         Board Approval.  The Board ofDirectors of ProMed Company has determined (i) that the Merger is fair to,and in the best interests of, ProMed Company and its shareholders and(ii) to recommend that its shareholders approve and adopt this Agreementand approve the Merger.

**ARTICLE 3.**

**REPRESENTATIONS AND WARRANTIES OF HOLDINGSAND HOLDINGS SUBSIDIARY**

In order to induce ProMed Company, ProMed Subsidiary and the PrincipalProMed Shareholders to enter into this Agreement and to consummate theTransaction, Holdings and Holdings Subsidiary make the representations andwarranties set forth in this Article 3.

3.1           Organization.  Holdings is acorporation duly organized, validly existing and in good standing under thelaws of the State of Delaware.  HoldingsSubsidiary is a corporation duly organized, validly existing and in goodstanding under the laws of the State of California.  Holdings and Holdings Subsidiary have all requisite authority to own,lease, and operate their assets and to carry on their business as currentlybeing conducted.

3.2           Authorization.  Each ofHoldings and Holdings Subsidiary has the power and authority to enter into thisAgreement and to consummate the Transaction. All actions on the part of Holdings and Holdings Subsidiary necessaryfor the authorization, execution, delivery and performance of this Agreementand the consummation of the Transaction have been or will be taken prior to theClosing Date, and this Agreement (including exhibits, schedules and theancillary agreements) constitutes the legal, valid and binding obligation ofHoldings and Holdings Subsidiary, enforceable against them in accordance withits terms, except as enforceability may be restricted, limited or delayed byapplicable bankruptcy, insolvency, fraudulent conveyance, or other lawsaffecting creditor’s rights generally, and except as enforceability is subjectto general principles of equity.

3.3           No Consent Required.  Except as setforth in Schedule 3.3, neither the execution and delivery of thisAgreement by Holdings or Holdings Subsidiary nor the performance by them oftheir obligations under this Agreement requires the consent, approval, order orauthorization of, or registration, declaration or filing with any governmentalentity or any third party that will not have been obtained and delivered toProMed Company and/or ProMed Subsidiary prior to the Closing Date, except forthe filing of the Agreement of Merger with the Secretary of State of the Stateof California.

3.4           No Violation of Other Agreements; No Conflicts.

(a)           Neither the execution and delivery of this Agreementnor consummation or performance of the Transaction violates, conflicts with orresults in a breach of, or shall violate, conflict with or result in a breachof any lease, contract, document or agreement to which Holdings and/or HoldingsSubsidiary is a party or by which Holdings and/or Holdings Subsidiary may bebound.

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(b)           Neither the execution and delivery of this Agreementnor the consummation or performance of the Transaction will, directly orindirectly (with or without the giving of notice, or lapse of time, or both):

(i)            contravene, conflict with, or result in a violation ofany provision of the organizational documents of Holdings and/or HoldingsSubsidiary;

(ii)           contravene, conflict with, or result in a violationof, any legal requirement or any order, judgment or decree to which Holdingsand/or Holdings Subsidiary may be subject; or

(iii)          contravene, conflict with, or result in a violation ofany of the terms or requirements of, or give any governmental body the right torevoke, withdraw, suspend, cancel, terminate, or modify, any governmental authorizationthat is held by Holdings and/or Holdings Subsidiary.

Except as specifically contemplated by this Agreement and as requiredunder the Securities Act and any applicable state securities laws, Holdings isnot required to obtain any consent, authorization or order of, or make anyfiling or registration with, any court or governmental agency in order for itto execute, deliver or perform any of its obligations under or contemplated bythis Agreement in accordance with the terms hereof or thereof.  All consents, authorizations, orders, filingsand registrations which Holdings is required to obtain pursuant to thepreceding sentence have been obtained or will be obtained prior to Closing.

3.5           Capital Structure.  Theauthorized capital stock of Holdings consists of 40,000,000 shares of CommonStock and 5,000,000 shares of preferred stock, par value $0.01 (*“Preferred Stock”*) of which 7,939,990 shares of Common Stockand zero shares of Preferred Stock were issued and outstanding as of May 10,2007 as reflected in Holdings’ most recent quarterly report filed May 15, 2007with the Securities and Exchange Commission (*“SEC”*).  All of the outstanding shares have beenvalidly issued and are fully paid and non-assessable.  Except as disclosed in the SEC Documents (asdefined in Section 3.7), no shares of Common Stock are subject tooutstanding options, warrants, rights, shareholder agreements or otherinstruments or agreements outstanding giving any person the right to acquireany shares of capital stock of Holdings, nor are there any commitments to issueor execute any such options, warrants, rights, shareholder agreements or otherinstruments or agreements.  There are nooutstanding stock appreciation rights or similar rights outstanding withrespect to any of the capital stock of Holdings nor are there any instruments,or agreements giving anyone the right to acquire any such rights.

3.6           Issuance of Securities.  The CommonStock is duly authorized and, upon issuance in accordance with the termshereof, shall be duly issued, fully paid and non-assessable, and free from allLiens.

3.7           SEC Documents; Holdings Consolidated FinancialStatements.  Since May 27, 2004 when Holdings became a SECreporting company, Holdings has filed all reports, schedules, forms, statementsand other documents required to be filed by it with the SEC under theSecurities Exchange Act of 1934, as amended (the *“ExchangeAct”*) (all of the foregoing filed 

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prior to the date hereof or amended after the datehereof and all exhibits included therein and financial statements and schedulesthereto and documents incorporated by reference therein, being hereinafterreferred to as the *“SEC Documents”*).  Holdings has delivered to the ProMed Partiesor their representatives, or made available through the SEC’s website athttp://www.sec.gov, true and complete copies of the SEC Documents.  As of their respective dates, the financialstatements of Holdings disclosed in the SEC Documents (the *“HoldingsConsolidated Financial Statements”*) complied as to form in allmaterial respects with applicable accounting requirements and the publishedrules and regulations of the SEC with respect thereto.  Such Holdings Consolidated FinancialStatements have been prepared in accordance with GAAP, applied on a consistentbasis throughout the periods covered thereby (except (i) as may be otherwiseindicated in such Holdings Consolidated Financial Statements or the notesthereto, or (ii) in the case of unaudited interim statements, to the extentthey may exclude footnotes or may be condensed or summary statements and asunaudited statements, are subject to normal recurring audit adjustmentsconsistent with past practice) and, fairly present in all material respects thefinancial position of Holdings as of the dates thereof and the results of itsoperations.  The Holdings ConsolidatedFinancial Statements do not contain any untrue statement of a material fact oromit to state any material fact necessary in order to make the statementstherein, in light of the circumstances under which they were made, notmisleading.

3.8           Legal Proceedings.  There is nopending Proceeding, and, to the knowledge of Holdings and/or HoldingsSubsidiary, no person has threatened to commence any Proceeding thatchallenges, or that may have the effect of preventing, delaying, makingillegal, or otherwise interfering with, any part of the Transaction.

3.9           Compliance with Laws.  NeitherHoldings nor Holdings Subsidiary is in violation of any rule, regulation oradministrative or judicial order pertaining to the assets or the business ofHoldings or Holdings Subsidiary (including, without limitation, licensing,health care, federal, state or local laws relating to kickbacks, illegalreferrals, illegal billings or the like, drug enforcement, securities, zoning,building, environmental, immigration, civil rights and occupational health andsafety laws, regulations, ordinances and codes) which would have the effect ofpreventing, delaying, making illegal or otherwise interfering with, any part ofthe Transaction.  To its knowledge,neither Holdings nor Holdings Subsidiary has reason to anticipate that existingcircumstances are likely to result in violations of any of the foregoing.

3.10         Disclosure.  Norepresentation or warranty by Holdings and/or Holdings Subsidiary contained inthis Agreement or in respect of the exhibits, schedules, lists or otherdocuments delivered to the ProMed Parties by Holdings and/or HoldingsSubsidiary and referred to herein or therein, and no statement contained in anycertificate furnished or to be furnished by or on behalf of Holdings and/orHoldings Subsidiary pursuant hereto or thereto, or in connection with thetransactions contemplated hereby, contains, or will contain as of the date suchrepresentation or warranty is made or such certificate is or will be furnished,any untrue statement of a material fact, or omits, or will omit to state as ofthe date such representation or warranty is made or such certificate is or willbe furnished, any material fact which is known to the party making therepresentation or warranty to be necessary to make the statements containedherein or therein, in light of the circumstances under which they were made,not misleading.

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3.11         Brokers’ and Finders’ Fees. Neither Holdings nor Holdings Subsidiary has incurred any liability toany broker, finder or agent for any brokerage fees, finder’s fees orcommissions with respect to the transactions contemplated by this Agreement,and if Holdings or Holdings Subsidiary has incurred any such liability, suchliability shall be and remain the sole responsibility of Holdings and HoldingsSubsidiary, and Holdings and Holdings Subsidiary shall indemnify, defend andhold the ProMed Parties harmless from and against any and all liabilities,losses, damages, claims, causes of action, costs and expenses (includingwithout limitation, reasonable attorneys’ fees), arising out of or relating tosuch liability.

3.12         Financing.  Holdingsshall use its best efforts to take, or cause to be taken, all actions and todo, or cause to be done, all things necessary, proper or advisable to arrangefinancing acceptable to Holdings to fund the Cash Consideration.

**ARTICLE 4.**

**COVENANTS OF PROMED COMPANY, PROMED SUBSIDIARY ANDPRINCIPAL PROMED SHAREHOLDERS**

In order to induce Holdings and Holdings Subsidiary to enter into thisAgreement and to consummate the Transaction, ProMed Company, ProMed Subsidiary,and the Principal ProMed Shareholders, enter into the agreements set forth inthis Article 4.

4.1           Conduct of Business - Negative Covenants.  Fromthe date hereof until the Effective Time, each of ProMed Company and ProMedSubsidiary shall not, without the prior written consent of Holdings andHoldings Subsidiary, which consent shall not be unreasonably withheld, conductthe business of ProMed Company and/or ProMed Subsidiary other than in theordinary course of ProMed Company and ProMed Subsidiary’s respective businessesas conducted through the date hereof or commit or suffer any material act oromission which deviates from the ordinary course of ProMed Company and ProMedSubsidiary’s business as conducted through the date hereof.  Without limiting the generality of theforegoing, from the date of execution of this Agreement until the EffectiveTime, neither ProMed Company nor ProMed Subsidiary shall, without the priorwritten consent of Holdings and Holdings Subsidiary, which consent shall not beunreasonably withheld:

(a)           institute any new method of purchase, sale, lease,management, accounting or operation or engage in any transaction or activity,enter into any agreement or make any commitment or amend any existing materialagreement other than as contemplated by this Agreement, except in the ordinarycourse of its business and consistent with past practice;

(b)           change or amend its Articles of Incorporation orBy-Laws or propose any such change or amendment;

(c)           offer, issue, authorize or sell any shares of thecapital stock or other securities (such term as used in this subsection shallinclude, without limitation, debt securities) of ProMed Company and/or ProMedSubsidiary of any kind whatsoever, or acquire directly or indirectly, byredemption or otherwise, any such capital stock, reclassify or split-up anysuch capital stock, declare or pay any dividends thereon in cash, securities orother property, or make any other distribution with respect thereto, or grantor enter into any stock options, warrants, or 

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other rights to acquire securities of ProMed Companyand/or ProMed Subsidiary or enter into any other contracts or commitments ofany kind with respect to the issuance of additional shares of capital stock orother securities of ProMed Company and/or ProMed Subsidiary;

(d)           (i) borrow or agree to borrow any funds, whetherdirectly or by way of guaranty or otherwise, or (ii) except in the ordinarycourse of business and consistent with past practice, incur, or assume orbecome subject to any obligation or liability (absolute or contingent);

(e)           pay, discharge, waive, satisfy, compromise or adjustany claim, liability or obligation (absolute, accrued, contingent or otherwise)of an amount in excess of $10,000, other than as contemplated by this Agreementor occurring in the ordinary course of business and consistent with pastpractice;

(f)            prepay any obligation having a fixed maturity of morethan 90 days from the date such obligation was incurred other than ascontemplated by this Agreement or occurring in the ordinary course of businessand consistent with past practice;

(g)           permit or allow any of its property or assets (real,personal or mixed, tangible or intangible) to be subjected to any mortgage,pledge, lien or other encumbrance except in the ordinary course of business andconsistent with past practice;

(h)           cancel any debts or waive any claims or rights ofsubstantial value or sell, transfer, or otherwise dispose of any of itsproperties or assets, except in the ordinary course of its business andconsistent with past practice;

(i)            dispose of any rights to the use of any patent,trademark, service mark, trade name or copyright, or dispose of or disclose toany person any trade secret, formula, process or know-how not theretofore amatter of public knowledge, except in the ordinary course of its business andconsistent with past practice;

(j)            grant any general increase in the compensation ofofficers or employees (including any such increase pursuant to any bonus,pension, profit sharing or other plan or commitment) or any increase in thecompensation (including salary and bonus) payable or to become payable to anyofficer except in the ordinary course of business and consistent with pastpractice;

(k)           appoint or remove from office any officers of ProMedCompany and/or ProMed Subsidiary other than as contemplated by this Agreement;

(l)            make any payment to or sell, transfer or lease anyproperties or assets to, or enter into any agreement or arrangement with, anyof the officers or directors of ProMed Company and/or ProMed Subsidiary or anyother affiliate thereof, except in the ordinary course of its business andconsistent with past practice;

(m)          enter into any contract, commitment or transaction notin the usual and ordinary course of its business, other than transactionscontemplated by, or referred to in, this Agreement;

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(n)           change, or initiate a change of, any of the banking,safe deposit or power of attorney arrangements effective as of the date hereof,except for changes in the signatories on the accounts of ProMed Company and/orProMed Subsidiary, provided such changes are contemplated by this Agreement andProMed Company and/or ProMed Subsidiary shall have given Holdings and HoldingsSubsidiary prior written notice of any such change in signatories and Holdingsapproves same;

(o)           write down the value of any inventory (includingwrite-downs by reason of shrinkage or mark-down) or write off as uncollectibleany notes or accounts receivable, except for immaterial write-downs ofinventory or accounts receivable in the ordinary course of business andconsistent with past practice;

(p)           merge, consolidate, reorganize or liquidate ProMedCompany and/or ProMed Subsidiary;

(q)           file a voluntary petition on behalf of ProMed Companyand/or ProMed Subsidiary under the U.S. Bankruptcy Code or any other bankruptcyor insolvency law or any other law for relief of debtors;

(r)            change, amend or terminate a Material Contractconstituting an affiliate agreement under Section 2.14 except as contemplatedby this Agreement or with the written consent of Holdings and HoldingsSubsidiary; or

(s)           agree or commit, whether in writing or otherwise, todo any of the foregoing.

Notwithstanding the foregoing, ProMed Company and/or ProMed Subsidiarymay at any time prior to the Closing Date, (i) pay the Stay Bonuses describedin Section 5.3 and (ii) distribute cash to any or all of the ProMed CompanyShareholders provided such distribution shall not cause ProMed Company orProMed Subsidiary to violate the covenant set forth in Section 4.4 or any otherrepresentation, warranty, covenant or agreement provided herein.

4.2           Conduct of Business - Affirmative Covenants. Prior to the Effective Time, each of ProMed Company and ProMedSubsidiary will conduct its business in the ordinary course and will:

(a)           maintain its good standing and qualification to dobusiness in all jurisdictions where it is required to be qualified to do business,and all licenses, permits, franchises, rights and privileges which arenecessary for the conduct of its business;

(b)           continue at its expense to maintain all of itsproperty and equipment in customary repair, order and working condition,reasonable wear and use excepted;

(c)           duly comply with all laws, regulatory requirements andagreements to which it, or any of its properties or assets, is subject or bywhich it is bound;

(d)           maintain in force and effect the current insuranceupon its properties and with respect to the conduct of its business;

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(e)           use best efforts to keep intact its present businessorganization and keep available the services of its present officers, employeesand agents; and

(f)            maintain accurately its books, records and accounts.

4.3           Interim Financial Statements Prior to Closing. ProMed Company and ProMed Subsidiary shall provide Holdings with theinterim balance sheets and income statements of ProMed Company and ProMedSubsidiary for each of the monthly periods commencing on March 1, 2007 throughthe month preceding the Closing Date promptly upon completion but in no eventlater than five days before the Closing Date (the *“Subsequent Monthly Interim Financial Statements”*). TheSubsequent Monthly Financial Statements shall fairly present in all materialrespects the financial condition and results of operation of ProMed Company andProMed Subsidiary as of the date and for the periods set forth therein andshall be prepared in accordance with GAAP, applied on a consistent basis throughoutthe periods covered thereby, except that such Subsequent Monthly InterimFinancial Statements may exclude footnotes, and, as unaudited statements, aresubject to normal recurring audit adjustments consistent with past practice.  On the Closing Date there shall not have beenany material adverse change to the financial condition of ProMed Company orProMed Subsidiary as shown on the Subsequent Monthly Financial Statements,including no material adverse change in the assets and liabilities of ProMed Companyand/or ProMed Subsidiary as shown on the March Interim Financial Statements;provided, however that Holdings acknowledges that ProMed Company and ProMedSubsidiary may make the payment of the Stay Bonuses and the distribution to theProMed Company Shareholders described in the last paragraph of Section 4.1(c)subject to satisfaction of the cash Closing requirements set forth inSection 4.4.

4.4           Required Cash and Accounts Receivable at Closing. ProMed Company and ProMed Subsidiary shall have at Closing cash andaccounts receivable in an amount not less than the total liabilities orobligations of ProMed Company and ProMed Subsidiary, respectively, (whetherabsolute, accrued, contingent, or otherwise) incurred or accrued as of theClosing Date.  The accounts receivableincluded in the Subsequent Interim Financial Statement and the Closing DateBalance Sheet, are or will be, as the case may be, valid and existing andrepresent monies due for services performed in the ordinary course of business.

4.5           No Shop.  Between thedate of this Agreement and the Closing Date neither ProMed Company nor ProMedSubsidiary, nor any of their affiliates, agents or representatives, shalldirectly or indirectly solicit, initiate, encourage, entertain or support anyinquiry, proposal, or other offer from any other party relating to anytransaction involving, directly or indirectly, the merger of ProMed Companyand/or ProMed Subsidiary or the purchase of the assets or stock of ProMedCompany and/or ProMed Subsidiary or any possible transaction or series oftransactions as an alternative to the transactions contemplated hereby (*“Competing Proposal”*). To the extent ProMed Company, ProMed Subsidiary or any Principal ProMedShareholder or any of ProMed Company’s other shareholders, affiliates, agentsor representatives receives any Competing Proposal, they shall promptly informHoldings of such Competing Proposal and shall advise the potential purchaserthat ProMed Company and ProMed Subsidiary are subject to this Agreement andtherefore will not hold any discussions with such potential purchaser.

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ProMed Company, ProMed Subsidiary and the Principal ProMed Shareholdersrecognize that (i) the covenants and the restrictions contained in this Section4.5 are necessary, fundamental, and required for the protection of thetransactions contemplated by this Agreement; (ii) such covenants relate tomatters which are of a special, unique, and extraordinary character that givessuch covenants a special, unique and extraordinary value; and (iii) a breach ofthe covenants contained in this Section 4.5 will result in irreparable harm anddamage to Holdings which cannot be adequately compensated by a monetary award.In the event of such breach, and without limiting the right of Holdings to seekany other remedy or relief to which it may be entitled at law or in equity,each of ProMed Company, ProMed Subsidiary and the Principal ProMed Shareholdersconsent, without challenge or contest, to the immediate remedy of a temporaryrestraining order, preliminary injunction, or such other form of injunctive orequitable relief in favor of Holdings as may be used by any court of competentjurisdiction to restrain or enjoin ProMed Company, ProMed Subsidiary or any ofthe Principal ProMed Shareholders from breaching such covenant or tospecifically enforce the provisions of this Section 4.5.  ProMed Company, ProMed Subsidiary and thePrincipal ProMed Shareholders hereby waive any requirements that Holdingssecure or post a bond in connection with obtaining injunctive relief or anyother equitable relief.

4.6           ProMed LLC.  ProMedCompany is the owner of 100% of the membership interest in ProMed LLC.  ProMed LLC is the owner of a five percent(5%) equity interest in ProMed Properties, L.P. (*“ProMed LP”*) which owns the OntarioBuilding in which ProMed Company and ProMed Subsidiary currently maintain theiroffices.  ProMed Company agrees that itshall sell all of its equity interest in ProMed LLC, and shall resign from anymanagement or other positions with ProMed LLC, prior to the Closing Date.  On the Closing Date, (a) all indebtedness andother amounts (i) owed by ProMed Company or ProMed Subsidiary to ProMed LLC orProMed LP or (ii) owed by ProMed LLC or ProMed LP to either ProMed Company orProMed Subsidiary shall be paid, cancelled, or eliminated (whether or not thendue) and (b) any Liens relating to any of the aforesaid indebtedness or amountsshall be cancelled and shall be discharged of record.  On the Closing Date, neither ProMed Companynor ProMed Subsidiary shall have any obligation, contractual or otherwise, toeither ProMed LLC or ProMed LP except for nondelinquent rents for periodscommencing on or after the Effective Time under the lease for Suite 100 of theOntario Building described in Schedule 2.11.

4.7           Outstanding Stock Options of ProMed Company.  Asprovided in Section 2.6 and reflected on Schedule 2.6(b), ProMed Company has anaggregate of 357 stock options outstanding. Section 2.6 and Section 6.2(l) require that there are no optionsoutstanding at the Effective Time. ProMed Company has advised Holdings, that ProMed Company’s Stock OptionPlan provides for the exercise of these stock options immediately prior to achange of control and thus immediately prior to the Merger. ProMed Company hasadvised Holdings that all shareholders holding options have represented toProMed Company that they intend to exercise their stock options prior to theMerger and thus, an additional 357 shares of its common stock, for an aggregateof 8,717, shall be outstanding at the time of the Merger.

4.8           Closing Date Balance Sheet. Promptly upon completion, but no later than twenty five (25) daysfollowing the Closing Date, the Principal ProMed Shareholders and the ProMedExecutive Officers shall deliver to Holdings and the Surviving Corporation theunaudited balance sheet of ProMed Company and ProMed Subsidiary for the periodending on the Closing 

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Date prepared in accordance with GAAP.(the “*Closing Date Balance Sheet*”).  As required by Section 4.4, ProMed Companyand ProMed Subsidiary shall be obligated to have cash and/or accountsreceivable in an amount to cover all of their liabilities or obligations as ofthe Closing Date.  ProMed Company andProMed Subsidiary hereby covenant that all liabilities and obligations (whetherabsolute, accrued, contingent, or otherwise) incurred or accrued as of theClosing Date shall be set forth on the Closing Date Balance Sheet.

**ARTICLE 5.**

**ADDITIONAL AGREEMENTS OF THE PARTIES**

In order to induce Holdings and Holdings Subsidiary to enter into thisAgreement and to consummate the Transaction, ProMed Company, ProMed Subsidiary,and the Principal ProMed Shareholders, on the one hand, and Holdings, on theother hand, enter into the agreements set forth in this Article 5.

5.1           Non-Competition of ProMed Executive Officers. As material inducement for the Transaction, each of the ProMed ExecutiveOfficers are simultaneously herewith executing a non-competitionagreement.  Jeereddi Prasad, M.D. shallexecute that non-competition agreement attached as Exhibit E (the *“Prasad Non-Compete Agreement”*), Kishan Thapar shall executethat non-competition agreement attached as Exhibit F (the *“ThaparNon-Compete Agreement”*), and Bahram Bahremand shall execute thatnon-competition agreement attached as Exhibit G (the “*BahremandNon-Compete Agreement*”, and together with the Prasad Non-CompeteAgreement and Thapar Non-Compete Agreement are collectively, the *“Executive Officer Non-Compete Agreements”*).  The parties acknowledge that a portion of theMerger Consideration is being allocated to the Executive Officer Non-CompeteAgreements and the non-competition covenant of the Principal ProMedShareholders in Section 5.2 (*“Covenant Allocation”*).The Covenant Allocation shall not be deemed an estimate or measurement ofdamages incurred or suffered by Holdings or the Surviving Corporation in theevent of a breach of the Executive Officer Non-Compete Agreements or thenon-competition provisions in Section 5.2 below.

5.2           Non-Competitionof Principal ProMed Shareholders.

(a)           As a material inducement for the Transaction, exceptas permitted in Section 5.2 (b), during the period commencing at the EffectiveTime and ending on the date that is two (2) years thereafter, each PrincipalProMed Shareholder (other than any of the Principal ProMed Shareholders who areProMed Executive Officers and are a party to and bound by the Executive OfficerNon-Competition Agreements) agrees that he, she or it shall not, individuallyor in any combination, directly or indirectly, as an owner, shareholder,director, officer, trustee, partner, associate, consultant, principal, agent,contractor, employee or otherwise: (i) engage, participate in, form, contract,aid, or hold any interest in *(x)* anindependent physician association (IPA) or managed care organization (includingbut not limited to an HMO, PPO, or self-insured employer plan), or otherwiseengage in any business of contracting, directly or indirectly, with an IPA ormanaged care organization (including but not limited to an HMO, PPO, or self-insuredemployer plan) for the provision of services within the Territory other thanpersonally-provided patient care services, or *(y)*an entity that manages any IPA, which is, or as of the Effective Time, wouldbecome, competitive with any aspect of ProMed Company, ProMed Subsidiary,Holdings 

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or any Affiliate of Holdings within the Territory (the “*Non-Competition Restricted Activities*”) and (ii) *(y)* solicit, or attempt to solicit, any customers, business,clients or employees of ProMed Company, ProMed Subsidiary, Holdings or anyAffiliate of Holdings (including, but without limitation, third party payors)to reduce or discontinue their business or employment relationship with ProMedCompany, ProMed Subsidiary, Holdings, or any Affiliate of Holdings or *(x)* disrupt, damage, impair or interfere with the businessof ProMed Company, ProMed Subsidiary, Holdings, or any Affiliate of Holdings(the “*MSO/IPA Non-Solicitation Restricted Activities*”which together with the “Non-Competition Restricted Activities” are collectively,the *“Restricted Activities”*).

For purposes of this Section5.2, Territory means the California counties of Los Angeles, San Bernardino andOrange.

(b)           The Restricted Activities shall not prohibit anyPrincipal ProMed Shareholder (i) from owning up to five percent (5%) of anyclass of securities of any publicly traded company, (ii) from contracting withIPAs or managed care entities for the provision of personally-provided patientcare services nor restrict such Principal ProMed Shareholder from practicingmedicine generally, and (iii). (iii) from continuing to engage in aNon-Competition Restricted Activity in which such Principal ProMed Shareholderwas engaged in as of the Effective Date, which activities have been disclosedto Group prior to the Effective Time

(c)           For purposes of this Agreement, “Affiliates” ofHoldings shall mean, Prospect Medical Systems, Inc., a Delaware corporation,Prospect Medical Group, a California professional corporation, Pinnacle HealthResources, a California corporation, Sierra Medical Management, Inc., aDelaware corporation, Sierra Primary Care Medical Group, a Medical corporation,a California professional corporation, Nuestra Familia Medical Group, Inc., aCalifornia professional corporation, Santa Ana/Tustin Physicians Group, Inc., aCalifornia professional corporation, Pegasus Medical Group, Inc., a Californiaprofessional corporation, Antelope Valley Medical Associates, Inc., aCalifornia professional corporation, Prospect Health Source Medical Group,Inc., a California professional corporation, Prospect Professional Care MedicalGroup, Inc., a California professional corporation, Prospect NWOC MedicalGroup, Inc., a California professional corporation, APAC Medical Group, Inc., aCalifornia professional corporation, StarCare Medical Group, Inc., a Californiaprofessional corporation, Prospect Hospital Advisory Services, Inc., a Delawarecorporation, Genesis Healthcare of Southern California, Inc., a Medical Group,a California professional corporation, Prospect Physician Associates, Inc., aCalifornia professional corporation, Prospect Advantage Network, Inc., aCalifornia corporation, ProMed Upland, ProMed Company, ProMed Subsidiary andProMed Pomona.

(d)           Each Principal ProMed Shareholder recognizes that thecovenants in this Section 5.2, and the territorial, time and otherlimitations with respect thereto, are reasonable and properly required for theadequate protection of the acquisition of the ProMed Company shares held bysuch Principal ProMed Shareholder in exchange for the Merger Consideration, andagrees that such limitations are reasonable with respect to its activities,business and public purpose.  EachPrincipal ProMed Shareholder agrees and acknowledges that the violation of thecovenants or agreements in this Section 5.2 would cause irreparable injuryto ProMed Company and Holdings and that the remedy at law for any violation orthreatened violation thereof would 

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be inadequate and that, in addition to whatever otherremedies may be available at law or in equity, ProMed Company and Holdingsshall be entitled to temporary and permanent injunctive or other equitablerelief without the necessity of proving actual damages or posting bond.  The parties hereto also waive any requirementof proving actual damages in connection with the obtaining of any suchinjunctive or other equitable relief.

(e)           It is the intention of each party hereto that theprovisions of this Section 5.2 shall be enforced to the fullest extentpermissible under the laws and the public policies of the state of California,but that the unenforceability (or the modification to conform with such laws orpublic policies) of any provisions hereof shall not render unenforceable orimpair the remainder of this Agreement. Accordingly, if any term or provision of this Section 5.2 shall bedetermined to be illegal, invalid or unenforceable, either in whole or in part,this Agreement shall be deemed amended to delete or modify, as necessary, theoffending provisions and to alter the balance of this Agreement in order torender the same valid and enforceable to the fullest extent permissible asaforesaid.

5.3           Employees.  The partiesagree that Holdings or one of Holdings’ affiliates will offer an employmentcontract to each of the ProMed Executive Officers, namely: (i) Jeereddi Prasad,M.D., (ii) Kishan Thapar, M.D., and (iii) Bahram Bahremand, commencing atClosing pursuant to the terms and conditions of those employment agreementsattached as Exhibit H (the *“Prasad EmploymentAgreement”*), Exhibit I (the *“Thapar EmploymentAgreement”*) and Exhibit J, (the *“Bahremand EmploymentAgreement”*), respectively. The parties acknowledge that as consideration for executing the ThaparEmployment Agreement and Bahremand Employment Agreement, ProMed Pomona intendsto pay stay bonuses in the amount of $1,560,336 to each of Kishan Thapar, M.D.and Bahram Bahremand prior to the Closing (*“Stay Bonuses”*).

5.4           Knowledge Standard.  Whenever arepresentation, warranty, covenant or agreement is qualified by the statement “tothe knowledge of”, the knowledge of ProMed Company and ProMed Subsidiary shallbe deemed to be the actual knowledge of Jeereddi Prasad, M.D., Kishan Thapar,M.D. and Bahram Barhemand, in each case after reasonable inquiry.  Whenever a representation, warranty, covenantor agreement is qualified by the statement “to the knowledge of” eitherHoldings or Holdings Subsidiary, knowledge shall be deemed to be the actualknowledge of Jacob Y.  Terner, M.D.,Chief Executive Officer of Holdings, Mike Heather, Chief Financial Officer ofHoldings, and R. Stewart Kahn, Executive Vice President of Holdings, in eachcase after reasonable inquiry.

5.5           Tax Matters; Liability; Preparation and Filing of TaxReturns.

(a)           Adequate Provision for Taxes. The Subsequent Monthly Interim Financial Statements shall reflect thatProMed Company and ProMed Subsidiary have made adequate provision for accruedbut unpaid taxes for the period covered by such Subsequent Monthly InterimFinancial Statements.

(b)           Liability for Taxes.  The PrincipalProMed Shareholders will be liable for, and shall have properly accrued on theSubsequent Monthly Interim Financial Statements, all Taxes imposed on ProMedCompany and/or ProMed Subsidiary, or for which ProMed Company and/or ProMedSubsidiary may otherwise be liable, for any Pre-Closing Tax Period (as defined 

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below).  TheProMed Parties shall also be liable for any Taxes arising as a result of anybreach of the representation contained in Section 2.9 and the covenantscontained in this Section 5.5, whether incurred before or after the ClosingDate.  *“Pre-ClosingTax Period”* means any period (including the portion of any StraddlePeriod as defined in (c) below) ending on or before the date before the ClosingDate.

(c)           Straddle Periods.  Whenever itis necessary to determine the liability for Taxes of ProMed Company and/orProMed Subsidiary for a period that begins before or after the day prior to theClosing Date (a *“Straddle Period”*), thedetermination of the Taxes of ProMed Company and/or ProMed Subsidiary for theportion of the Straddle Period ending on and including, and the portion of theStraddle Period beginning after, the day prior to the Closing Date will bedetermined by assuming that the Straddle Period consisted of two taxable yearsor periods, one which ended at the close of the day prior to the Closing Dateand the other which began at the beginning of the day of the Closing Date, and,items of income, gain, deduction, loss or credit of ProMed Company and/orProMed Subsidiary for the Straddle Period will be allocated between two taxableyears or periods on a “closing of the books basis” by assuming that the booksof ProMed Company and/or ProMed Subsidiary were closed at the close of the dayprior to the Closing Date, provided, however, that exceptions, allowances ordeductions that are calculated on an annual basis, such as the deduction fordepreciation, will be apportioned between such two taxable years or periods ona daily basis.

(d)           Tax Returns.  Holdings willbe responsible for causing the preparation and filing of all tax returns thatare required to be filed by or with respect to ProMed Company and ProMedSubsidiary for the period commencing October 1, 2006 and ending on September30, 2007 provided, however, that the Principal ProMed Shareholders shall beresponsible for and liable for any taxes due for the Pre-Closing Period whichhas not been properly accrued on the Subsequent Monthly Interim FinancialStatements for the period covered by such Subsequent Monthly Interim FinancialStatements or properly accrued and shown on the records of ProMed Company andProMed Subsidiary for the period ending on the Closing Date.  No later than 30 days before the due date forfiling any tax return described in this subsection (d) which is required to beprepared by Holdings after Closing involving any Pre-Closing Tax Period,Holdings will deliver such tax return to the Principal ProMed Shareholders fortheir review. Holdings and the Principal ProMed Shareholders will attempt toresolve in good faith any disagreement arising out of any tax return.  If any such disagreement cannot be resolved,Holdings and the Principal ProMed Shareholders will jointly select anindependent accounting firm to act as an arbitrator to resolve suchdisagreement in accordance with the terms of this Agreement.  The independent accounting firm’sdetermination with respect to any such tax return will be final and bindingupon the parties and all parties will file (or amend, if applicable) theirrespective tax returns in accordance with such determination.  Any fees and expenses related to theengagement of the independent accounting firm will be shared equally byHoldings on the one hand and the Principal ProMed Shareholders on the otherhand.

(e)           Contest Provisions.  Promptlyafter receipt by Holdings or the Principal ProMed Shareholders of writtennotice of the assertion or commencement of any claim, audit, examination orother proposed change or adjustment by the Internal Revenue Service or anystate, local or foreign taxing authority having jurisdiction over ProMedCompany and/or ProMed Subsidiary or any of its assets (*“TaxAuthority”*) relating to Taxes of ProMed Company and/or 

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ProMed Subsidiary with respect to a Pre-Closing TaxPeriod (a *“Tax Claim”*), the recipient will promptlynotify Holdings or the Principal ProMed Shareholders, as applicable.  Such notice will contain factual information(to the extent known) describing the asserted Tax Claim in reasonable detailand will include copies of any notice or other document received from anyTaxing Authority in respect of any such asserted Tax Claim.  The failure of the Principal ProMedShareholders to receive prompt notice from Holdings as provided in thisAgreement will not relieve the Principal ProMed Shareholders of any of his indemnificationobligations under this Agreement except to the extent such failure has amaterial adverse effect on the Principal ProMed Shareholders’ ability to defendthe Tax Claim.  The Principal ProMedShareholders will have the right to represent ProMed Company’s and/or ProMedSubsidiary’s interests in any Tax audit or administrative or court proceedingrelating to Pre-Closing Tax Periods as to any issues that could materiallyaffect the Principal ProMed Shareholders’ liability for Taxes or indemnificationobligations, and to employ counsel (reasonably acceptable to Holdings) of thePrincipal ProMed Shareholders’ choice at its expense; provided, however, thatHoldings and their representatives will be permitted, at their expense, to bepresent at any such audit or proceeding. Notwithstanding the foregoing, the Principal ProMed Shareholders willnot be able to settle, either administratively or after the commencement oflitigation, any claim for Taxes that would adversely affect the liability forTaxes of Holdings, ProMed Company or ProMed Subsidiary for any period after theClosing Date without the written consent of Holdings unless the PrincipalProMed Shareholders makes adequate provision to the satisfaction of Holdings toindemnify Holdings against the effects of any such settlement.

(f)            Assistance and Cooperation. After the Closing Date, the Principal ProMed Shareholders and Holdingswill:

(i)            timely sign and deliver such certificates or forms asmay be reasonably necessary or appropriate to establish an exemption from (orotherwise reduce), or file tax returns or other reports with respect to sales,transfer and similar Taxes;

(ii)           assist as reasonably requested by the other party inpreparing any tax return which such other party is responsible for preparingand filing in accordance with this Section 5.5 (including providing the otherparty with reasonable access to financial records for such purposes);

(iii)          cooperate in a reasonable manner in preparing for anyaudits of, or disputes with taxing authorities regarding, any tax returns ofProMed Company and/or ProMed Subsidiary; and

(iv)          make available to the other party and to any taxingauthority as reasonably requested all information, records, and documentsrelating to Taxes of ProMed Company and/or ProMed Subsidiary.

5.6           Due Diligence Access and Investigation. ProMed Company and ProMed Subsidiary shall, through the Closing Date,(a) afford Holdings and its representatives and attorneys (collectively, the *“Prospect Advisors”*) full and free access to ProMed Companyand ProMed Subsidiary’s properties, contracts, books and records, and otherdocuments and data during normal business hours, (b) furnish Holdings and theProspect Advisors with copies of all 

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such contracts, books and records, and other existingdocuments and data as Holdings may reasonably request, and (c) furnish Holdingsand the Prospect Advisors with such additional financial, operating, and otherdata and information as Holdings may reasonably request, including suchinformation necessary to allow Holdings to make a determination of the adequacyand sufficiency of the internal controls of ProMed Company and ProMedSubsidiary (collectively, *“Due Diligence Materials”*).  ProMed Company and ProMed Subsidiary shallpermit the Prospect Advisors to make copies of the Due DiligenceMaterials.  Neither Holdings nor theProspect Advisors shall disclose the contents of any of said Due DiligenceMaterials to any third party without prior written consent of the PrincipalProMed Shareholders, except: (i) as required by law; (ii) as may be reasonablynecessary in connection with any litigation or dispute arising out of thisAgreement or any of the transactions contemplated hereunder; (iii) informationcontained in any such materials that was already in the possession of Holdingsprior to the date of commencement of negotiations between the ProMed Partiesand Holdings; (iv) information contained in any such materials that is orbecomes generally available to the public other than as a result of a disclosureby Holdings or its agents or employees in violation of this Section and (v) asnecessary in the reasonable operation of the business of ProMed Company andProMed Subsidiary and the management obligations of the same after the ClosingDate.

5.7           Investment Representation Certificate. ProMed Company acknowledges that the Holdings CommonStock which constitutes the Stock Consideration has not been registered underthe Securities Act of 1933, as amended (the *“Securities Act”*).  ProMed Company acknowledges that the HoldingsCommon Stock is being offered and sold pursuant to an exemption fromregistration contained in the Securities Act. To rely on such exemption, ProMed Company acknowledges that it isnecessary that each shareholder who receives Stock Consideration execute aninvestment representation certificate in the form attached as Exhibit K (*“Investment Representation Certificate”*). ProMed Company agrees to provide the Investment RepresentationCertificate to each shareholder of ProMed Company as an exhibit to itsInformation Statement and inform each shareholder of Holdings’ requirement thatHoldings receives an executed Investment Representation Certificate from eachshareholder receiving Stock Consideration and each shareholder desiring thepiggy-back registration rights described in Section 1.15 hereof.

5.8           Information Statement.  ProMedCompany has prepared the Information Statement to be sent to the ProMed CompanyShareholders to solicit votes or written consents of the ProMed CompanyShareholders in connection with the transactions contemplated by thisAgreement, including the Merger, and has delivered a copy of such InformationStatement to Holdings.  Holdings willcooperate with ProMed Company in providing necessary information forpreparation of the Information Statement. ProMed Company agrees to call aspecial meeting of the ProMed Company Shareholders or to solicit votes of theProMed Company Shareholders by written consent as soon as possible after theexecution of this Agreement (subject to applicable notice periods), for thepurpose of approving the Merger and authorizing the transactions contemplatedhereby.  The Board of Directors of ProMedCompany, subject to their fiduciary duties, will recommend that the ProMedCompany Shareholders approve the Merger and the transactions contemplatedhereby.  ProMed Company will obtain thenecessary approval of its shareholders as required by California law toeffectuate the Merger prior to Closing.

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5.9           Attorney Fees of ProMed Company and ProMed Subsidiary. The legal fees of ProMed Company and ProMed Subsidiary with respect tothe negotiation and drafting of the documentation in connection with the Mergerand the other transactions contemplated hereunder, which have not been accruedon the Subsequent Monthly Financial Statements but are still outstandingimmediately after the Closing, shall be borne solely by the Principal ProMedShareholders at no expense to ProMed Company and/or ProMed Subsidiary.

5.10         Bank Accounts.  ProMedCompany and ProMed Subsidiary shall, prior to Closing, provide City NationalBank, which is the bank where the ProMed Bank Accounts are located (*“ProMed Bank”*) with all documentation required to beprovided by ProMed Company and ProMed Subsidiary to allow Holdings access tothe funds in the ProMed Bank Accounts upon the Effective Time.

5.11         Notification.  Between thedate of this Agreement and the Closing Date, the ProMed Parties and Holdingsagree to promptly notify each other in writing if they become aware of any factor condition that causes or constitutes a breach of any of theirrepresentations and warranties as of the date of this Agreement, or if theybecome aware of the occurrence after the date of this Agreement of any fact orcondition that would (except as expressly contemplated by this Agreement) causeor constitute a breach of any such representation or warranty had suchrepresentation or warranty been made as of the time of occurrence or discoveryof such fact or condition.  If prior tothe Closing any event, condition, fact or circumstance that is required to bedisclosed pursuant to this Section 5.11 requires any change to any of theSchedules to this Agreement, or if any such event, condition, fact orcircumstance would require such a change assuming a Schedule was dated as ofthe date of the occurrence, existence or discovery of such event, condition,fact or circumstance, then ProMed Company and the Principal ProMed Shareholdersshall promptly deliver to Holdings an update to the Schedule (a *“Schedule Update”*) specifying such change.  Holdings shall have 5 business days to reviewsuch Schedule Update and absent an objection by Holdings within such 5 dayperiod, such Schedule Update shall be deemed to supplement or amend theSchedule for the purpose of determining the accuracy of any of therepresentations and warranties made by ProMed Company or the Principal ProMedShareholders in this Agreement as of the Closing.

5.12         Post-Closing Balance Sheet Reconciliation: ClosingDate Balance Sheet.  Within three (3) business days of thedelivery of the Closing Date Balance Sheet as provided by Section 4.8, Holdingsand Representative shall effect a reconciliation of the cash and accountsreceivable, on the one hand, and the liabilities and obligations of ProMedCompany amd ProMed Subsidiary, on the other hand (the *“ClosingDate Balance Sheet Reconciliation”*). To effect the Closing Date Balance Sheet Reconciliation, the partiesshall meet and compare the cash and accounts receivable shown on the ClosingDate Balance Sheet Reserve Amount (*“Balance Sheet Cash + A/RAmounts”*) to the amount of cash and accounts receivable that was inexistence in ProMed Company and ProMed Subsidiary on the Closing Date (in thecase of the accounts receivable the parties will consider any accountsreceivable that was determined since the date of the Closing to now beuncollectable and reflect that as a decrease in the total amount of cash andaccounts receivable left in Promed Company and ProMed Subsidiary) (*“Closing Date Cash + A/R”*) and will compare the liabilitiesand obligations showing on the Closing Date Balance Sheet (*“BalanceSheet Liabilities”*) to the liabilities and obligations shown on theSubsequent Monthly Interim Financial Statement for which the Closing Date Cash+ A/R relates (*“Originally*

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*Estimated Liabilities”*). If the Balance Sheet Liabilities were greater than the amount of theClosing Date Cash + A/R, plus an additional 10% above such Closing DateCash + A/R (the (*“Downward Balance Sheet ReconciliationThreshold Amount”*) then to the extent of the dollar amount by whichthe Balance Sheet Liabilities exceeds the Downward Balance Sheet ReconciliationThreshold Amount (*“Principal Shareholder Balance SheetReimbursement Amount”*), Holdings shall have the right to effect animmediate withhold from the Indemnification Escrow Account in the amount of thePrincipal Shareholder Balance Sheet Reimbursement Amount.  On the other hand, if the Balance Sheet Liabilitieswere less than the amount of the Closing Date Cash + A/R less an additional 10%below such Closing Date Cash + A/R (*“Upward Balance SheetReconciliation Threshold Amount”*) (such difference constituting the *“Holdings Balance Sheet Reimbursement Amount),* Holdingsshall be required to immediately deposit the dollar amount of the HoldingsBalance Sheet Reimbursement Amount in the Indemnification Escrow Account fordistribution to the Former Shareholders in accordance with the terms of theEscrow Agreement.

Example: Assume the Closing Date Cash + A/R is$5,000,000, thus the Downward Balance Sheet Reconciliation Threshold Amount is$5,500,000 and the Upward Reconciliation Threshold Amount is $4,500,000.  If the Balance Sheet Liabilities are$5,600,000, then the Principal Shareholder Balance Sheet Reimbursement Amountthat would be owed by the Principal Shareholders out of the IndemnificationEscrow Amount would total $100,000 ($5,600,000 - $5,500,000).  Conversely, if the Balance Sheet Liabilitiesare $4,400,000, then the Holdings Balance Sheet Reimbursement Amount owed byHoldings by means of a credit to the Indemnification Escrow Amount would be$100,000 ($4,500,000 - $4,400,000).

Notwithstanding the foregoing, the reconciliation ofliabilities and obligations in reliance on the Closing Date Balance Sheet shallnot constitute a waiver by Holdings, the Surviving Corporation or theirrespective directors, officers, employees, agents and affiliates, or shall nototherwise limit the indemnification obligations of the Principal ProMedShareholders and the ProMed Executive Officers under Article 7 hereof, for abreach of Sections 2.8, 4.4 and/or 4.8 to the extent any liabilities andobligations are not shown on the Closing Date Balance Sheet in accordance withthe representations, covenants or agreements of those Sections as to matters asof the Closing Date or the Effective Time or the accounts receivable on theClosing Date Balance Sheet, or any portion thereof, is deemed not collectible.

5.13         Good Faith.  ProMedCompany, ProMed Subsidiary and the Principal ProMed Shareholders on the onehand, and Holdings and Holdings Subsidiary on the other hand, agree that theywill perform their obligations under this Agreement in good faith.

5.14         Best Efforts.  So long asthis Agreement remains in effect, ProMed Company, ProMed Subsidiary and thePrincipal ProMed Shareholders on the one hand, and Holdings on the other hand,shall use their respective best efforts to cause the Transaction to beconsummated as soon as reasonably practicable. ProMed Company, ProMed Subsidiary and the Principal ProMed Shareholderson the one hand, and Holdings on the other hand, shall proceed as soon aspracticable in the procurement of permits, consents and approvals and in thetaking of any other action, and the satisfaction of all other requirementsprescribed by law or otherwise necessary for consummation of the Transaction onthe terms herein provided, and shall diligently prosecute the same.

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5.15         Further Assurances.  ProMedCompany, ProMed Subsidiary and the Principal ProMed Shareholders on the onehand, and Holdings and Holdings Subsidiary on the other hand, agree that at anytime and from time to time after the Closing Date they will execute and deliverto any other party such further instruments or documents as may reasonably berequired to give effect to the Transaction.

**ARTICLE 6.**

**DELIVERIES AND CONDITIONS**

6.1           Deliveries by ProMed Company, ProMed Subsidiary andthe ProMed Shareholders on the Closing Date.  On theClosing Date, ProMed Company, ProMed Subsidiary, and the Principal ProMedShareholders shall deliver to Holdings:

(a)           A copy of the Articles of Incorporation of ProMedCompany and ProMed Subsidiary, with all amendments thereto, and certificate ofgood standing from the State of California, both of which shall be certified asof a date within ten days prior to the Closing Date by the Secretary of Stateof California.

(b)           A certificate of tax good standing of ProMed Companyand ProMed Subsidiary from the Franchise Tax Board issued as of a date withinten days of the Closing Date.

(c)           A certificate executed by the President of ProMedCompany and ProMed Subsidiary confirming (i) the truth and correctness in allmaterial respects of all of ProMed Company and ProMed Subsidiary’srepresentations and warranties in this Agreement as of the Closing Date and asof all times between the date hereof and the Closing Date, and (ii) that allagreements and covenants of ProMed Company and ProMed Subsidiary specifiedherein to be complied with prior to the Closing Date have been complied with.

(d)           A certificate of the Secretary of ProMed Company andProMed Subsidiary dated the Closing Date and accompanying resolutionsreflecting that the necessary corporate action by the Board of Directors ofProMed Company and ProMed Subsidiary and by shareholders of ProMed Company andProMed Subsidiary has been taken to authorize the consummation by ProMedCompany and ProMed Subsidiary of the Transaction.

(e)           Letters of resignation of all officers and directorsof ProMed Company and ProMed Subsidiary dated the Closing Date.

(f)            The Prasad Employment Agreement, the Thapar EmploymentAgreement and the Bahremand Employment Agreement.

(g)           The Prasad Non-Compete Agreement, the ThaparNon-Compete Agreement and the Barhemand Non-Compete Agreement.

(h)           Joinder Agreements from all Principal ProMedShareholders who are not listed on the signature page of this Merger Agreement.

(i)            A legal opinion from counsel to ProMed Company andProMed Subsidiary as to the matters set forth in Exhibit L.

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6.2           Conditions to the Obligations of Holdings and HoldingsSubsidiary.  The obligation to pay the MergerConsideration as set forth in this Agreement and to consummate the Transactionis conditioned upon satisfaction, or waiver by Holdings in writing, of all ofthe following on or before the Closing Date:

(a)           All of the representations and warranties of ProMedCompany, ProMed Subsidiary, and the Principal ProMed Shareholders in thisAgreement must have been accurate in all material respects as of the date ofthis Agreement, and must be accurate in all material respects as of the ClosingDate as if made on the Closing Date, except for such representations andwarranties that address matters as of a specific date, which need only to havebeen true and accurate as of such date.

(b)           All of the agreements, covenants and obligations thatProMed Company, ProMed Subsidiary, and the Principal ProMed Shareholders arerequired to perform or to comply with pursuant to this Agreement at or prior tothe Closing Date must have been duly performed and complied with in allmaterial respects.

(c)           Each document required to be delivered pursuant toSection 6.1 hereof must have been delivered to Holdings.

(d)           Since the date of this Agreement, there must not havebeen commenced or threatened against the ProMed Company Shareholders, ProMedCompany or ProMed Subsidiary, or any officer or director of ProMed Company orProMed Subsidiary, any proceeding (i) involving any challenge to, or seekingdamages or other relief in connection with part of the Transaction, or (ii)that may have the effect of preventing, delaying, making illegal, or otherwiseinterfering with any part of the Transaction.

(e)           Holdings shall have satisfactorily (in the solediscretion of Holdings) completed its due diligence investigation of ProMedCompany and ProMed Subsidiary

(f)            Holdings shall have obtained satisfactory (in the solediscretion of Holdings) financing for the cash portion of the MergerConsideration.

(g)           There shall have been no material adverse changes tothe financial condition of ProMed Company or ProMed Subsidiary subsequent toits March Interim Financial Statement.

(h)           The parties shall have obtained all necessary consentsand approvals to the Transaction, including, without limitation, all Board ofDirectors and all shareholder consents and all necessary consents or approvalsof third parties.

(i)            The parties shall have obtained all necessaryapprovals from applicable state and federal regulatory authorities.

(j)            All options set forth on Schedule 2.6(b) shall havepaid, cancelled or otherwise no longer outstanding.

(k)           ProMed Company shall have executed the Agreement ofMerger.

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(l)            ProMed Company shall haveidentified a Representative and caused the Representative to become a party tothe Escrow Agreement.

(m)          ProMed Company, the EscrowAgent and the Representative shall have executed and delivered the EscrowAgreement.

(n)           All conditions to the closings of the ProMed PomonaAcquisition and the ProMed Upland Acquisition, respectively, have beensatisfied and the consummation of each transaction is occurring simultaneouslywith the Closing herein.

6.3           Deliveries by Holdings and Holdings Subsidiary on theClosing Date.  On the Closing Date, Holdings and HoldingsSubsidiary shall deliver to the ProMed Parties.

(a)           Certificates executed by the Chief Executive Officerof Holdings and Holdings Subsidiary confirming (i) the truth and correctness inall material respects of all of Holdings’ and Holdings Subsidiary’srepresentations and warranties in this Agreement as of the Closing Date and asof all times between the date hereof and the Closing Date, and (ii) that allagreements and covenants of Holdings and Holdings Subsidiary specified hereinto be complied with prior to the Closing Date have been complied with.

(b)           Certificate of the secretary of Holdings and HoldingsSubsidiary dated the Closing Date, and accompanying resolutions reflecting thatthe necessary corporate action by the Board of Directors of Holdings andHoldings Subsidiary to authorize the consummation by Holdings and HoldingsSubsidiary of the Transaction.

(c)           The Prasad Employment Agreement, the Thapar EmploymentAgreement and the Bahremand Employment Agreement.

(d)           The Prasad Non-Compete Agreement, the ThaparNon-Compete Agreement and the Barhemand Non-Compete Agreement.

(e)           A legal opinion from counsel to Holdings and HoldingsSubsidiary as to the matters set forth in Exhibit M.

(f)            The Merger Consideration described in Section 1.6hereof.

6.4           Conditions to the Obligations of ProMed Company,ProMed Subsidiary, and the Principal ProMed Shareholders. The obligations of ProMed Company, ProMed Subsidiary, and the PrincipalProMed Shareholders to consummate the Transaction is conditioned uponsatisfaction, or waiver by ProMed Company, ProMed Subsidiary, and the PrincipalProMed Company Shareholders in writing, of all of the following on or beforethe Closing Date:

(a)           All of the representations and warranties of Holdingsand Holdings Subsidiary in this Agreement must have been accurate in allmaterial respects as of the date of this Agreement, and must be accurate in allmaterial respects as of the Closing Date as if made on the Closing Date, exceptfor such representations and warranties that address matters as of a specificdate, which need only to have been true and accurate as of such date.

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(b)           All of the agreements, covenants and obligations thatHoldings and Holdings Subsidiary are required to perform or to comply withpursuant to this Agreement at or prior to the Closing Date must have been dulyperformed and complied with in all material respects.

(c)           Each document required to be delivered pursuant toSection 6.3 hereof must have been delivered to ProMed Company, ProMedSubsidiary, and the ProMed Company Shareholders.

(d)           Since the date of this Agreement, there must not havebeen commenced or threatened against Holdings or any officer or director ofHoldings, any Proceeding (i) involving any challenge to, or seeking damages orother relief in connection with, any part of the Transaction, or (ii) that mayhave the effect of preventing, delaying, making illegal, or otherwiseinterfering with any part of the Transaction. Any third party approvals orconsents required to be obtained to effectuate the Transaction shall have beenreceived.

(e)           The Merger shall have been approved by theshareholders of Holdings Subsidiary in accordance with the California Code.

(f)            Holdings Subsidiary shall have executed the Agreementof Merger.

(g)           ProMed Company, the Escrow Agent and theRepresentative shall have executed the Escrow Agreement.

**ARTICLE 7.**

**INDEMNIFICATION; REMEDIES**

7.1           Indemnification Period.  As used inthis Article 7, the *“Indemnification Period”*shall be that period of time commencing on the Closing Date and continuing fortwo (2) years thereafter.

7.2           Indemnification of Holdings, Holdings Subsidiary andSurviving Corporation.

(a)           The Principal ProMed Shareholders and the ProMedExecutive Officers shall, jointly and severally, indemnify, defend and holdharmless Holdings, Holdings Subsidiary and Surviving Corporation and theirdirectors, officers, employees, agents and affiliates from and against any andall damage, loss, liability and expense (including without limitation (A)reasonable expenses of investigation and reasonable attorneys’ fees andreasonable expenses in connection with any action, suit or proceeding, (B) anyfees and expenses in connection with the retention of counsel to pursueinsurance coverage, (C) any amounts paid to defend, litigate, settle, satisfy ajudgment, or otherwise resolve disputes with the insurance carrier, if any, orthe claimant, and (D) all amounts not covered by insurance incurred or sufferedby Holdings, Holdings Subsidiary or the Surviving Corporation arising out of:

(i)            any breach of the representations, warranties,covenants or agreements of ProMed Company, ProMed Subsidiary and/or anyPrincipal ProMed Shareholder set forth herein excepting only any breach of therepresentation and warranty set forth in Section 

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2.10(a) hereof for which liability is on a several,rather than joint and several basis, as more fully described in Subsection (b)below;

(ii)           any failure by ProMed Company, ProMed Subsidiary, thePrincipal ProMed Shareholders or the ProMed Executive Officers to perform orcomply with any covenant contained in this Agreement that is required to beperformed or complied with by ProMed Company, ProMed Subsidiary or thePrincipal ProMed Shareholders and/or the ProMed Executive Officers as set forthherein; and/or

(iii)          any action against Holdings, Holdings Subsidiary orSurviving Corporation or any of their affiliates arising from or based upon anallegation of intentional tortious conduct by any officer, employee or agent ofProMed Company or ProMed Subsidiary (including, but not limited to, any claimsof wrongful termination, sexual harassment, racial or sexual discrimination)that occurred prior to the Closing Date (collectively,the*“Prospect Indemnifiable Damages”*).

Notwithstanding the foregoing, except as otherwisespecifically provided in Section 7.2(b) and/or 7.4, none of the PrincipalProMed Shareholders or ProMed Executive Officers shall be obligated toindemnify Holdings, Holdings Subsidiary, or Surviving Corporation for anyProspect Indemnifiable Damages in excess of the Escrow Cash in theIndemnification Escrow Account (the “*Indemnification EscrowCash” or “Indemnification Cap”).* Holdings, Holdings Subsidiary, and/or Surviving Corporation may obtainindemnification for any Prospect Indemnifiable Damages to which this Section7.2(a) relates only if it makes a claim for indemnification within theIndemnification Period defined in Section 7.1, except as otherwise provided inSection 7.2 and Section 7.4.

(b)           The Principal ProMed Shareholders and the ProMedExecutive Officers shall, on a several basis, indemnify, defend and holdharmless Holdings, Holdings Subsidiary, and Surviving Corporation and theirdirectors, officers, employees, agents and affiliates from and against any andall damage, loss, liability and expense (including without limitation (A)reasonable expenses of investigation and reasonable attorneys’ fees andreasonable expenses in connection with any action, suit or proceeding, (B) anyfees and expenses in connection with the retention of counsel to pursueinsurance coverage, (C) any amounts paid to defend, litigate, settle, satisfy ajudgment, or otherwise resolve disputes with the insurance carrier, if any, orthe claimant, and (D) all amounts not covered by insurance incurred or sufferedby Holdings, Holdings Subsidiary or Surviving Corporation arising out of anybreach by such Principal ProMed Shareholder or ProMed Executive Officer of hisor her representation and warranty provided in Section 2.10

Each Principal ProMed Shareholder and ProMed ExecutiveOfficer shall be liable for a breach of the representation and warrantydescribed in Subsection (b) above on a several basis.  The liability of each Principal ProMedShareholder and ProMed Executive Officer under this Subsection (b) shall be upto, but shall not exceed, the amount set forth by the name of such PrincipalProMed Shareholder and/or ProMed Executive Officer on Schedule 7.2(b),which amount represents their Merger Consideration for their ProMed CompanyShares (the *“Individual Indemnification Limit”*).  In addition, claims for indemnification underthis 

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Subsection (b) are not subject to the Indemnification Period defined inSection 7.1 and thus may be brought at any time subject to the applicablestatute of limitations period.

7.3           Indemnification of the ProMed Company Shareholders(including the Principal ProMed Shareholders) and the ProMed Executive Officers. Holdings, Holdings Subsidiary and Surviving Corporation jointly andseverally, agree to hold harmless, defend and indemnify the ProMed CompanyShareholders and the ProMed Executive Officers from and against any and alldamage, loss, liability and expense (including without limitation (A)reasonable expenses of investigation and reasonable attorneys’ fees andreasonable expenses in connection with any action, suit or proceeding, (B) anyfees and expenses in connection with the retention of counsel to pursueinsurance coverage, (C) any amounts paid to defend, litigate, settle, satisfy ajudgment, or otherwise resolve disputes with the insurance carrier, if any, orthe claimant; and (D) all amounts not covered by insurance incurred or sufferedby any ProMed Company Shareholder and/or any of the ProMed Executive Officersarising out of (i) any breach of the representations, warranties, covenants oragreements of Holdings set forth herein, and/or (ii) any failure by Holdings,Holdings Subsidiary or Surviving Corporation to perform or comply with anycovenant contained in this Agreement that is required to be performed orcomplied with by Holdings, Holdings Subsidiary or Surviving Corporation as setforth herein (the *“Seller IndemnifiableDamages”*).  Notwithstandingthe foregoing, none of Holdings, Holdings Subsidiary nor Surviving Corporationshall be obligated to indemnify any ProMed Company Shareholder for SellerIndemnifiable Damages in excess of the Indemnification Cap.  The ProMed Company Shareholders and theProMed Executive Officers may obtain indemnification for any SellerIndemnifiable Damages to which this Section 7.3 relates only if it makes aclaim for indemnification within the Indemnification Period defined in Section7.1.

7.4           Exclusion of Prospect Indemnifiable Damages fromIndemnification Period and Indemnification Cap. Notwithstanding anything in this Agreement to the contrary, neither theIndemnification Period nor the Indemnification Cap shall apply to limitProspect Indemnifiable Damages with respect to claims of Holdings, HoldingsSubsidiary or Surviving Corporation: described in (i) and (ii) below, which ineach case (A) shall be limited as to period by the statute of limitationsperiod applicable to claims of that particular nature and (B) shall be limitedas to amount as to any particular Principal ProMed Shareholder or ProMedExecutive Officer by the amount of their Individual Indemnification Limit.

(i)            under Section 7.2(iii); and/or

(ii)           fraud.

Each Principal ProMed Shareholder and ProMed Executive Officer shall beliable for the items described in (i) and (ii) on a joint and several basiswith the other Principal ProMed Shareholders and other ProMed ExecutiveOfficers up to, but not exceeding, the amount of their IndividualIndemnification Limit.

7.5           Indemnification Procedures. A party seeking indemnification (the *“Indemnitee”*)shall use its best efforts to minimize any liabilities, damages, deficiencies,claims, judgments, assessments, costs and expenses in respect of whichindemnity may be sought under this Agreement. The Indemnitee shall give prompt written notice to the party from whom 

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indemnification is sought (the *“Indemnitor”*)of the assertion of a claim for indemnification, but in no event longer thantwenty (20) days after service of process in the event litigation is commencedagainst the Indemnitee by a third party. No such notice of assertion of a claim shall satisfy the requirements ofthis Section 7.5 unless it describes in reasonable detail and in good faith thefacts and circumstances, to the extent known by Indemnitee, upon which theasserted claim for indemnification is based. If any action or proceeding shall be brought in connection with anyliability or claim to be indemnified hereunder, the Indemnitee shall providethe Indemnitor twenty (20) calendar days to decide whether to defend suchliability or claim.  During such period,the Indemnitee shall take all necessary steps to protect the interests ofitself and the Indemnitor, including the filing of any necessary responsivepleadings, the seeking of provisional relief or other action necessary tomaintain the status quo, subject to reimbursement from the Indemnitor of itsexpenses in doing so.  The Indemnitor shall(with, if necessary, reservation of rights) defend such action or proceeding atits expense, using counsel selected by the insurance company insuring againstany such claim and undertaking to defend such claim, or by other counselselected by it and approved by the Indemnitee, which approval shall not beunreasonably withheld or delayed.  TheIndemnitor shall keep the Indemnitee fully apprised at all times of the statusof the defense and shall consult with the Indemnitee prior to the settlement ofany indemnified matter.  The Indemniteeagrees to use reasonable efforts to cooperate with the Indemnitor in connectionwith its defense of indemnifiable claims. In the event the Indemnitee has a claim or claims against any thirdparty arising out of or connected with the indemnified matter, then uponreceipt of indemnification, the Indemnitee shall fully assign to the Indemnitorthe entire claim or claims to the extent of the indemnification actually paidby the Indemnitor and the Indemnitor shall thereupon be subrogated with respectto such claim or claims of the Indemnitee.

7.6           Indemnification Escrow Account of ProMed Pomona;Cross-Default.  Notwithstanding anything to the contrary inthis Agreement, Holdings and the surviving corporation under the ProMed PomonaAcquisition and their respective directors, officers, employees, agents andaffiliates may seek indemnification for a claim under Section 7.2(a) of theProMed Pomona Acquisition Agreement from the Indemnification Escrow Account tothe extent funds in the indemnification escrow account established pursuant tothe ProMed Pomona Acquisition Agreement (the *“ProMedPomona Indemnification Escrow Account”*) have been applied insatisfaction of claims for indemnification or have been reserved againstpending claims related to the indemnification obligations under the ProMedPomona Acquisition Agreement, leaving a deficiency for claims under the ProMedPomona Acquisition Agreement.  Thus,funds in the Indemnification Escrow Fund, which includes the ProMed IndemnificationEscrow Account and the Indemnification Escrow Account for the ProMed PomonaAcquisition, may be used for claims under this Agreement as well as claimsunder the ProMed Pomona Acquisition Agreement to the extent of the cash thereinand, are therefore cross-defaulted to the extent of such funds.  Inversely, to the extent funds in theIndemnification Escrow Account have been applied in satisfaction of claims forindemnification or have been reserved against pending claims related to theindemnification obligations under this Agreement, leaving a deficiency forclaims under this Agreement, Holdings, and Surviving Corporation and theirrespective directors, officers, employees, agents and affiliates, may seekindemnification for claims under Section 7.2(a) of this Agreement from theProMed Pomona Indemnification Escrow Account.

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7.7           No Effect on ProMed Pomona Acquisition and/or ProMedUpland Acquisition.  The indemnification limitations contained inthis Article 7 do not serve to limit the indemnification obligations of theparties in the ProMed Company Acquisition and/or the ProMed UplandAcquisition.  Therefore, each PrincipalProMed Shareholder who is also a principal shareholder, or each ProMedExecutive Officer who is also an executive officer, in the ProMed Pomona and/orProMed Upland transactions and is expressly subject in the ProMed Pomona and/orProMed Upland transactions to an indemnification obligation therein, shall beobligated to indemnify Group, Holdings, Holdings’ affiliate, ProMed Pomona orProMed Upland to the extent provided in such acquisition documents.  The parties acknowledge that no PrincipalProMed Shareholder or ProMed Executive Officer shall be obligated to indemnifyanyone for losses under Section 7.2 or Section 7.4 of this Agreement in anamount exceeding the aggregate consideration received in the ProMed Pomona,ProMed Company and ProMed Upland transactions. Except for the items set forth in Section 7.2(b) and Section 7.4 hereof,no Principal ProMed Shareholder or ProMed Executive Officer shall be obligatedto indemnify anyone in excess of the Escrow Cash in the Indemnification EscrowAccount.  With respect to items set forthin Section 7.2(b) and Section 7.4 hereof, no Principal ProMed Shareholder orProMed Executive Officer shall be obligated to indemnify anyone for claimsunder this Agreement in excess of their particular Individual IndemnificationLimit.  Likewise, none of the SurvivingCorporation, Holdings, Holdings Subsidiary nor any affiliate of Holdings shallbe obligated to indemnify anyone in excess of the amount of funds constitutingthe Indemnification Escrow Fund for claims under this Agreement and/or theProMed Company Acquisition Agreement.

7.8           Determination of Adverse Consequences. Any calculation of Prospect Indemnifiable Damages in respect of theindemnification obligations of the Principal ProMed Shareholders and thePrincipal ProMed Shareholders under this Article 7 shall be net of the amountof any insurance recovery actually received by any of Holdings, ProMed Companyor ProMed Subsidiary.  Holdings shall usecommercially reasonable efforts to secure any applicable insurance recoveriesto the extent applicable.

**ARTICLE 8.**

**TERMINATION**

8.1           Termination Events.  The Agreementmay, by notice given prior to or at the Closing, be terminated as follows:

(a)           Upon the mutual written consent of Holdings andHoldings Subsidiary on the one hand and the ProMed Parties on the other hand ,this Agreement may be terminated on such terms and conditions as agreed; or

(b)           By written notice of Holdings and Holdings Subsidiaryon the one hand and the ProMed Parties on the other hand if ProMed Company,ProMed Subsidiary, or any of the ProMed Company Shareholders breaches in anymaterial respect any of its representations or warranties or defaults in anymaterial respect in the observance or in the due and timely performance of anyof its covenants or agreements herein contained and such breach or defaultshall not be cured prior to the earlier of the Closing Date or 30 days of thedate of notice of breach or default served by Holdings or Holdings Subsidiary;or

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(c)           By written notice of the ProMed Parties on the onehand to Holdings and Holdings Subsidiary on the other hand if Holdings orHoldings Subsidiary breaches in any material respect any of its representationsor warranties or defaults in any material respect in the observance or in thedue and timely performance of any of its covenants or agreements hereincontained and such breach or default shall not be cured prior to the earlier ofthe Closing Date or 30 days of the date of notice of breach or default servedby the ProMed Parties; or

(d)           By written notice of Holdings and Holdings Subsidiaryto the ProMed Parties or by the ProMed Parties to Holdings and HoldingsSubsidiary if any court of competent jurisdiction shall have issued any order,decree or ruling or taken any other action restraining, enjoining or otherwiseprohibiting the contemplated transactions; or

(e)           By written notice of Holdings and Holdings Subsidiaryto the ProMed Parties, or by the ProMed Parties to Holdings and HoldingsSubsidiary, if any court, legislative body or governmental or regulatoryauthority has taken, or is reasonably expected to take, any action that wouldmake the consummation of the transactions contemplated hereby inadvisable orundesirable as determined by Holdings or the ProMed Parties in its solediscretion; or

(f)            By written notice of Holdings and Holdings Subsidiaryto the ProMed Parties if it shall become apparent in the judgment of Holdingsand Holdings Subsidiary reasonably exercised that any condition to Holdings’and Holdings Subsidiary’s obligation to close as set forth in Article 6 hereofwill not be satisfied before the Closing Date; or

(g)           By written notice of the ProMed Parties to Holdingsand Holdings Subsidiary if it shall become apparent in the judgment of theProMed Parties reasonably exercised that any condition to the ProMed Parties’obligation to close as set forth in Article 6 hereof will not be satisfiedbefore the Closing Date.

Notwithstanding the foregoing, no party hereto may effect a terminationhereof at such time such party is in material default or breach of thisAgreement.

8.2           Effect of Termination.  Each party’sright of termination under Section 8.1 is in addition to any other rights itmay have under this Agreement or otherwise, and the exercise of a right totermination will not be an election of remedies.  If this Agreement is terminated pursuant toSection 8.1, all further obligations of the parties under this Agreement willterminate, provided, however, that if this Agreement is terminated by a partybecause of the breach of the Agreement by the other party or because one ormore of the conditions to the terminating party’s obligations under thisAgreement is not satisfied as a result of the other party’s failure to complywith its obligations under this Agreement, the terminating party’s right topursue all legal remedies will survive such termination unimpaired.

8.3           Liquidated Damages.

(a)           Notwithstanding anything to the contrary in thisAgreement, if this Agreement is terminated for any reason other than pursuantto Section 8.1(a), Section 8.1(c), Section 8.1(d), Section 8.1(e) or Section8.1(g) hereof, the parties agree and acknowledge that Holdings will sufferdamages that are not practicable to ascertain. Accordingly, in the event this Agreement is terminated for any reasonother than Section 8.1(a), Section 8.1(c), Section 8.1(d), 

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Section 8.1(e) or Section 8.1(g) hereof, Holdingsshall be entitled to the sum of Two Hundred Fifty Thousand Dollars ($250,000)payable by ProMed Company as liquidated damages.  Holdings and ProMed Company agree that theforegoing liquidated damages are reasonable considering all the circumstancesexisting as of the date hereof and constitute the parties good faith estimateof the actual damages reasonably expected to result from the termination ofthis Agreement other than under Section 8.1(a), 8.1(c), Section 8.1(d), Section8.1(e) or Section 8.1(g). Notwithstanding the foregoing, the parties agree that if Holdingsreceives the $250,000 liquidated damages amount from ProMed Company as a resultof a termination under this Article 8, Group shall not be able to collect anyadditional liquidated damages fee under its agreements with ProMed Pomona andProMed Upland as a result of a termination of those agreements, to the extentGroup or Holdings’ receipt of such liquidated damages would exceed $250,000 inthe aggregate for the termination of the agreements with ProMed Upland andProMed Pomona.

(b)           Notwithstandinganything to the contrary in this Agreement, ifthis Agreement is terminated for any reason other than pursuant to Section8.1(a), Section 8.1(b), Section 8.1(d), Section 8.1(e) or Section 8.1(f)hereof, the parties agree and acknowledge that ProMed Company will sufferdamages that are not practicable to ascertain. Accordingly, in the event this Agreement is terminated for any reasonother than Section 8.1(a), Section 8.1(b), Section 8.1(d), Section 8.1(e) orSection 8.1(f) hereof, ProMed Company shall be entitled to the sum of TwoHundred Fifty Thousand Dollars ($250,000) payable by Holdings as liquidateddamages.  Holdings and ProMed Companyagree that the foregoing liquidated damages are reasonable considering all thecircumstances existing as of the date hereof and constitute the parties goodfaith estimate of the actual damages reasonably expected to result from thetermination of this Agreement other than under Section 8.1(a), Section 8.1(b),Section 8.1(d), Section 8.1(e) or Section 8.1(f).  Notwithstanding the foregoing, the partiesagree that if ProMed Company receives the $250,000 liquidated damages amountfrom Holdings as a result of a termination under this Article 8, neither ProMedPomona nor ProMed Upland shall not be able to collect any additional liquidateddamages fee under the agreements for the ProMed Pomona Acquisition and theProMed Upland Acquisition as a result of a termination of those agreements, tothe extent ProMed Pomona or ProMed Upland’ receipt of such liquidated damageswould exceed $250,000 in the aggregate for the termination of the agreementswith ProMed Upland and ProMed Pomona.

**ARTICLE 9.**

**MISCELLANEOUS**

9.1           Entire Agreement.  This Agreement, together with all exhibits and schedules hereto, and all documentsreferred to herein, constitutes the entire agreement between the parties withrespect to the subject matter hereof, supersedes all other and prior agreementson the same subject, whether written or oral, and contains all of the covenants and agreements between the partieswith respect to the subject matter hereof. Each party to this Agreement acknowledges that no representations,inducements, promises, or agreements orally or otherwise, have been made by theparty(ies), or by anyone acting on behalf of any party, that are not identifiedherein, and that no other agreement, statement, or promise not contained inthis Agreement shall be valid or binding. Certain mattersthat are listed in the Schedules to this Agreement are for informationalpurposes only and in no event shall the listing of any matters in theseSchedules be deemed to constitute an admission that such matters are requiredto be listed therein by the terms 

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of this Agreement or thatsuch matters are otherwise material.  Inno event shall the listing of any matters in these Schedules be deemed orinterpreted to broaden or otherwise amplify any representations or warrantiescontained in the Agreement.

9.2           Arbitration.  In the eventof a dispute under this Agreement which is not resolved after good faithnegotiation, either Holdings, Holdings Subsidiary or the Surviving Corporationon the one hand or the ProMed Parties on the other hand may demand arbitrationof the matter and the matter shall be settled by arbitration conducted by a singleneutral arbitrator.  Any such arbitrationshall be held in Los Angeles County, California under the rules then in effectof the American Arbitration Association. The decision shall be written and shall be supported by, as agreed bythe parties, either a reasoned award or findings of fact and conclusions whichshall set forth the award, judgment, decree or order awarded by thearbitrator.  The prevailing party to anarbitration shall be entitled to recovery from the non-prevailing party of thefees of the arbitrator, the administrative costs of the arbitration, and theexpenses, including, without limitation, reasonable attorneys’ fees and costs,reasonably incurred by it in connection with the arbitration.  Judgment upon any award rendered by thearbitrator may be entered in any court having jurisdiction.  Notwithstanding the foregoing, the partiesshall have the rights to discovery in accordance with California Code of CivilProcedure Section 1283.05.

9.3           Successors andAssigns.  This Agreement and all documents andagreements referred to herein shall be binding upon and shall inure to thebenefit of the parties and their respective heirs (as applicable), legalrepresentatives, and permitted successors and assigns.  No party may assign this Agreement or therights, interests or obligations hereunder except by mutual written consent ofthe parties hereto.

9.4           NoWaiver.  No waiver of any term, provision or conditionof this Agreement, whether by conduct or otherwise, in any one or moreinstances, shall be deemed to be or be construed as a further or continuingwaiver of any such term, provision or condition or as a waiver of any otherterm, provision or condition of this Agreement.

9.5           Counterparts.  This Agreement, and any amendments hereto,may be executed in counterparts, each of which shallconstitute an original document, but which together shall constitute one andthe same instrument.

9.6           Headings.  The section headingscontained in this Agreement are inserted for convenience only and shall notaffect in any way the meaning or interpretation of this Agreement.

9.7           Notices.  Any notices requiredor permitted to be given hereunder by any party to the other shall be inwriting and shall be deemed delivered upon personal delivery; twenty-four (24)hours following deposit with a courier for overnight delivery; or five (5)business days following deposit in the U.S. Mail, registered or certified mail, postage prepaid, return- receiptrequested, addressed to the parties at the following addresses or to such otheraddresses as the parties may specify in writing:

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| If to ProMed Company:         |   | ProMed  Health Services Company 

4150  E. Concours St., Suite 100 

Ontario,  CA 91764 

Attn:  Jeereddi Prasad, M.D.                       |
|-------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------|
|                          |   |                                                                                                                                         |
| If to ProMed Subsidiary       |   | ProMed  Health Care Administrators 

4150  E. Concours St., Suite 100 

Ontario,  CA 91764 

Attn:  Jeereddi Prasad, M.D.                    |
|                          |   |                                                                                                                                         |
| In each case, with a copy to: |   | Stradling  Yocca Carlson & Rauth

660  Newport Center Drive, 16th floor  

Newport  Beach, CA 92660

Attn:  Shivbir S. Grewal, Esq. |
|                          |   |                                                                                                                                         |
| If to Holdings:               |   | Prospect  Medical Holdings, Inc.

 400 Corporate Pointe, Suite 525 

Culver  City, CA 90230 

Attn:  Jacob Y. Terner, M.D.              |
|                          |   |                                                                                                                                         |
| If to Holdings Subsidiary:    |   | Prospect  Medical Holdings, Inc.

400  Corporate Pointe, Suite 525 

Culver  City, CA 90230 

Attn:  Jacob Y. Terner, M.D.                   |
|                          |   |                                                                                                                                         |
| In each case, with a copy to: |   | Theodora  Oringher Miller & Richman 

2029 Century Park East, 6th Floor 

Los  Angeles, CA 90067 

Attn:  Dale S. Miller, Esq.           |

 

9.8           GoverningLaw.  This Agreementshall be governed by and construed in accordance with the laws of the State ofCalifornia.

9.9           Amendment.  This Agreement may be amended at any time byagreement of the parties, provided that any amendment shall be in writing andexecuted by all parties.

9.10         Severability.  If any provision of this Agreement is held bya court of competent jurisdiction to be invalid or unenforceable, the remainingprovisions will nevertheless continue in full force and effect, unless suchinvalidity or unenforceability would defeat an essential business purpose ofthis Agreement.

9.11         Feesand Expenses.  Except as otherwise explicitly set forthherein, each party shall bear its own expenses including, without limitation, attorneys’and accountants’ fees in connection with the preparation of this Agreement andthe transactions contemplated hereby.

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9.12         Exhibitsand Schedules.  All exhibits and schedules attached to thisAgreement are incorporated herein by this referenceand all references herein to *“Agreement”*shall mean this Agreement together with all such exhibits and schedules to bedelivered at the execution of this Agreement or upon the Closing Date.

9.13         Timeof Essence.  Time is expressly made of the essence of thisAgreement and each and every provision hereof of which time of performance is afactor.

9.14         Attorneys’Fees.  Should anyparty institute any action or procedure to enforce this Agreement or anyprovision hereof, or for damages by a declaration of rights hereunder includingwithout limitation arbitration, the prevailing party in any such action orproceeding shall be entitled to receive from the other party all costs andexpenses, including without limitation reasonable attorneys’ fees, incurred bythe prevailing party in connection with such action or proceeding.

9.15         FurtherAssurances.  The parties shall take such actions andexecute and deliver such further documentation as may reasonably be required inorder to give effect to the transaction contemplated by this Agreement and theintentions of the parties hereto.

9.16         References to Dollars. All references to *“dollars”* and *“$”* shall mean United States dollars.

9.17         Construction. Whenever in this Agreement the context so requires, references to themasculine shall be deemed to include the feminine and the neuter, reference tothe neuter shall be deemed to include the masculine and feminine, references tothe plural shall be deemed to include the singular and the singular to includethe plural and references to the words *“and”* and *“or”* shall be deemed to include the inclusive usage *“and/or.”*

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IN WITNESS WHEREOF, the undersigned have executed thisAgreement as of the date first written above.
| * * | *“Holdings”*                |
|----------|---------------------------------------|
| * * | * *                              |
|     | PROSPECT  MEDICAL HOLDINGS, INC.      |
|     |                                  |
|     |                                  |
|     | By:                                   |   |   |
|     |                                  | Jacob Y. Terner,  M.D. |   |
|     |                                  | Chief Executive  Officer |   |
|     |                                  |   |   |
|     |                                  |   |   |
| * * | *“Holdings  Subsidiary”*    |
| * * | * *                              |
|     | PROSPECT HEALTH  ADMINISTRATORS, INC. |
|     |                                  |
|     |                                  |
|     | By:                                   |   |   |
|     |                                  | Jacob Y. Terner,  M.D. |   |
|     |                                  | Chief Executive  Officer |   |
|     |                                  |   |   |
|     |                                  |   |   |
| * * | *“ProMed  Company”*         |
| * * | * *                              |
|     | PROMED  HEALTH SERVICES COMPANY       |
|     |                                  |
|     |                                  |
|     | By:                                   |   |   |
|     |                                  | Jeereddi Prasad,  M.D. |   |
|     |                                  | President |   |

 

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|          | *“ProMed  Subsidiary”*                                                      |
|----------|---------------------------------------------------------------------------------------|
| * * | * *                                                                              |
|     | PROMED  HEALTH CARE ADMINISTRATORS                                                    |
|     |                                                                                  |
|     |                                                                                  |
|     | By:                                                                                   |   |   |
|     |                                                                                  | Jeereddi Prasad,  M.D. |   |
|     |                                                                                  | President |   |
|     |                                                                                  |   |   |
|     |                                                                                  |   |   |
| * * | *“Principal  ProMed Shareholder” and “ProMed Executive  Officer”* |
|     |                                                                                  |   |   |
|     |                                                                                  |   |   |
|     |                                                                                  |   |
|     | Jeereddi Prasad,  M.D.                                                                |   |
|     |                                                                                  |   |
|     |                                                                                  |   |
| * * | *“Principal  ProMed Shareholder” and “ProMed Executive  Officer”* |
|     |                                                                                  |   |   |
|     |                                                                                  |   |   |
|     |                                                                                  |   |
|     | Barham  Bahremand                                                                     |   |
|     |                                                                                  |   |
|     |                                                                                  |   |
| * * | *“Principal  ProMed Shareholder” and “ProMed Executive  Officer”* |
|     |                                                                                  |   |
|     |                                                                                  |   |
|     |                                                                                  |   |
|     | Kishan  Thapar, M.D.                                                                  |   |
|          |                                                                                       |  |  |  |

 

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