WARRANT

                           To Purchase Common Stock of

                         Community Care of America, Inc.









                                  Warrant No. 1
                    No. of Shares of Common Stock: 1,787,568







Doc # 1397641


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                                TABLE OF CONTENTS

1.         DEFINITIONS.....................................................1

2.         EXERCISE OF WARRANT.............................................5
           2.1       Manner of Exercise....................................5
           2.2       Cashless Exercise.....................................6
           2.3       Payment of Taxes......................................6
           2.4       Fractional Shares.....................................6
           2.5       Continued Validity....................................7

3.         TRANSFER, DIVISION AND COMBINATION..............................7
           3.1       Transfer..............................................7
           3.2       Division and Combination..............................7
           3.3       Expenses..............................................7
           3.4       Maintenance of Books..................................7

4.         ADJUSTMENTS.....................................................8
           4.1       Stock Dividends, Subdivisions and Combinations........8
           4.2       Certain Other Distributions...........................8
           4.3       Issuance of Additional Shares of Common Stock.........9
           4.4       Issuance of Warrants or Other Rights.................11
           4.5       Issuance of Convertible Securities...................11
           4.6       Superseding Adjustment...............................12
           4.7       Other Provisions Applicable to Adjustments 
                     under this Section...................................13
           4.8       Reorganization, Reclassification, Merger, 
                     Consolidation or Disposition of Assets...............15
           4.9       Other Action Affecting Common Stock..................16
           4.10      Certain Limitations..................................16
           4.11      Adjustment to Number of Shares of Common 
                     Stock Purchasable Hereunder..........................16

5.         NOTICES TO WARRANT HOLDERS.....................................17
           5.1       Notice of Adjustments................................17
           5.2       Notice of Certain Corporate Action...................17

6.         NO IMPAIRMENT..................................................17

7.         RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION
           WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY.................18

8.         TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS.............18


                                        i

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9.         RESTRICTIONS ON TRANSFERABILITY...............................19
           9.1       Restrictive Legend..................................19
           9.2       Notice of Proposed Transfers; Request for 
                     Registration........................................19
           9.3       Required Registration...............................20
           9.4       Incidental Registration.............................20
           9.5       Registration Procedures.............................21
           9.6       Expenses............................................23
           9.7       Indemnification and Contribution....................24
           9.8       Termination of Restrictions.........................25
           9.9       Listing on Securities Exchange......................26
           9.10      Certain Limitations on Registration Rights..........26
           9.11      Selection of Managing Underwriters..................26

10.        SUPPLYING INFORMATION.........................................26

11.        LOSS OR MUTILATION............................................27

12.        OFFICE OF THE COMPANY.........................................27

13.        FINANCIAL AND BUSINESS INFORMATION............................27
           13.1      Quarterly Information...............................27
           13.2      Annual Information..................................27
           13.3      Filings.............................................28

14.        APPRAISAL.....................................................28

15.        LIMITATION OF LIABILITY.......................................28

16.        REPURCHASE BY THE COMPANY OF WARRANT..........................28
           16.1      Obligation to Repurchase Warrant....................29
           16.2      Determination and Payment of Repurchase Price.......29

17.        MISCELLANEOUS.................................................30
           17.1      Nonwaiver and Expenses..............................30
           17.2      Notice Generally....................................30
           17.3      Indemnification.....................................31
           17.4      Remedies............................................31
           17.5      Successors and Assigns..............................31
           17.6      Amendment...........................................31
           17.7      Severability........................................32
           17.8      Headings............................................32
           17.9      Governing Law.......................................32


                                       ii

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EXHIBIT A  SUBSCRIPTION FORM.............................................33

EXHIBIT B  ASSIGNMENT FORM...............................................34

EXHIBIT C CONVERSION FORM................................................35


                                       iii

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                                        1

THIS  WARRANT AND THE  SECURITIES  REPRESENTED  HEREBY HAVE NOT BEEN  REGISTERED
UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED  IN VIOLATION OF SUCH ACT, THE RULES AND  REGULATIONS  THEREUNDER OR
THE PROVISIONS OF THIS WARRANT.


No. of Shares of Common Stock: up to 1,787,568                    Warrant No. 1

                                     WARRANT

                           To Purchase Common Stock of

                         Community Care of America, Inc.


           This is to  certify  that Daiwa  Healthco-2  LLC,  or its  registered
assigns  ("Holder"),  is  entitled,  at any time or from time to time during the
Exercise  Period,  to purchase from Community Care of America,  Inc., a Delaware
corporation  (the  "Company"),  an aggregate of up to 1,787,568 shares of Common
Stock at a  purchase  price of  $0.0025  per share,  subject  to  adjustment  as
provided herein,  all on the terms and conditions and pursuant to the provisions
hereinafter set forth.

1.         DEFINITIONS

           As used in this  Warrant,  the  following  terms have the  respective
meanings set forth below:

           "Additional  Shares of Common  Stock" shall mean all shares of Common
Stock issued by the Company after the date hereof, other than Warrant Stock.

           "Appraised Value" shall mean, in respect of any share of Common Stock
on any date herein  specified,  the fair saleable  value of such share of Common
Stock  (determined  without  giving  effect to the  discount  for (i) a minority
interest,  (ii) a lack of  voting  power or (iii) any lack of  liquidity  of the
Common  Stock  or to the  fact  that the  Company  may  have no class of  equity
registered  under the  Exchange  Act) as of the last day of most  recent  fiscal
month to end within 60 days prior to such date specified,  based on the value of
the Company,  as determined by an investment banking firm selected in accordance
with the terms of Section 14,  adjusted to reflect the  aggregate  consideration
receivable by the Company or the aggregate  principal  amount of indebtedness of
the  Company  extinguishable  upon the  issuance of any and all  securities  not
outstanding  but deemed to be  outstanding  in the  computation,  divided by the
number of Fully Diluted Outstanding shares of Common Stock.

           "Book Value"  shall mean,  in respect of any share of Common Stock on
any date herein specified, the consolidated  stockholders' equity of the Company
as of the  last  day of any  month  immediately  preceding  such  date  plus the
aggregate consideration receivable by the Company or


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                                        2

the aggregate  principal  amount of indebtedness  of the Company  extinguishable
upon the issuance of any and all  securities  not  outstanding  but deemed to be
outstanding  in the  computation of Fully Diluted  Outstanding  shares of Common
Stock, divided by the number of Fully Diluted Outstanding shares of Common Stock
as  determined  in  accordance  with GAAP by any firm of  independent  certified
public  accountants of recognized  national standing selected by the Company and
reasonably acceptable to the Majority Holders.

           "Business Day" shall mean any day that is not a Saturday or Sunday or
a day on which  banks in the City of New York are  required or  permitted  to be
closed.

           "Commission" shall mean the Securities and Exchange Commission or any
other federal  agency then  administering  the  Securities Act and other federal
securities laws.

           "Common  Stock" shall mean the common  stock,  par value  $0.0025 per
share of the Company as  constituted  on the date hereof,  and any capital stock
into which such Common Stock may  thereafter be changed,  and shall also include
(i)  capital  stock  of  the  Company  of any  other  class  (regardless  of how
denominated)  issued  to  the  holders  of  shares  of  Common  Stock  upon  any
reclassification  thereof,  excluding any class which provides for (A) dividends
at a fixed rate  which  rate does not vary based on the net income or  operating
results  of  the  Company  and/or  its  subsidiaries,  (B)  a  preference  as to
liquidation  which is limited to the  consideration  received by the Company for
such stock and (C) no right of redemption and (ii) shares of common stock of any
successor or acquiring  corporation  (as defined in Section 4.8)  received by or
distributed to the holders of Common Stock in the circumstances  contemplated by
Section 4.8.

           "Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable, with or
without payment of additional  consideration in cash or property, for Additional
Shares of Common Stock, either immediately or upon the occurrence of a specified
date or a specified event.

           "Current  Market Price" shall mean, in respect of any share of Common
Stock on any date  herein  specified,  (a) the  higher of (x) the Book Value per
share of Common  Stock at such date,  and (y) the  Appraised  Value per share of
Common Stock as at such date,  or (b) if there shall then be a public market for
the Common Stock,  the higher of (x) the Book Value per share of Common Stock at
such date,  and (y) the average of the daily  market  prices for 30  consecutive
Business Days  commencing  45 days before such date.  The daily market price for
each  such  Business  Day  shall be (i) the last  sale  price on such day on the
principal  stock  exchange on which such Common Stock is then listed or admitted
to trading,  (ii) if no sale takes place on such day on any such  exchange,  the
average  of the  last  reported  closing  bid and  asked  prices  on such day as
officially  quoted on any such  exchange,  (iii) if the Common Stock is not then
listed or  admitted  to trading on any stock  exchange,  the average of the last
reported  closing  bid and  asked  prices  on such  day in the  over-the-counter
market, as furnished by the National Association of Securities Dealers Automatic
Quotation System or the National  Quotation  Bureau,  Inc., (iv) if neither such
corporation at the time is engaged in the business of reporting such prices,  as
furnished by any


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                                        3

similar firm then engaged in such business,  or (v) if there is no such firm, as
furnished by any member of the NASD  selected  mutually by the Majority  Holders
and the Company or, if they cannot agree upon such selection, as selected by two
such members of the NASD, one of which shall be selected by the Majority Holders
and one of which shall be selected by the Company.

           "Current  Warrant  Price"  shall  mean the  price at which a share of
Common  Stock may be  purchased  at any date  pursuant  to the  exercise of this
Warrant  on such  date;  the  initial  Current  Warrant  Price is  stated in the
preamble on to this Warrant.

           "Exchange  Act" shall mean the  Securities  Exchange Act of 1934,  as
amended,  or any similar federal  statute,  and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.

           "Exercise Period" shall have the meaning set forth in Section 2.1.

           "Expiration  Date"  shall  mean  the  fifth  anniversary  of the date
hereof.

           "Fully Diluted  Outstanding"  shall mean, when used with reference to
Common  Stock,  at any date as of which the  number of shares  thereof  is to be
determined,  all shares of Common Stock  Outstanding at such date and all shares
of Common Stock  issuable in respect of this Warrant on such date, and all other
options or warrants to  purchase,  or  securities  convertible  into,  shares of
Common  Stock  outstanding  on such date which  would be deemed  outstanding  in
accordance  with GAAP for purposes of  determining  book value or net income per
share on a fully-diluted basis.

           "GAAP" shall mean  generally  accepted  accounting  principles in the
United States of America from time to time in effect.

           "Loan  and  Security  Agreement"  shall  mean the  Loan and  Security
Agreement,  dated as of December 23, 1996 as amended,  modified or  supplemented
from time to time, or any successor agreement between such parties.

           "Majority Holders" shall mean the Holders of Warrants exercisable for
in  excess of 50% of the  aggregate  number  of  shares  of  Common  Stock  then
purchasable upon exercise of all Warrants, whether or not then exercisable.

           "NASD" shall mean the National  Association  of  Securities  Dealers,
Inc., or any successor corporation thereto.

           "Other Property" shall have the meaning set forth in Section 4.8.

           "Outstanding"  shall mean,  when used with reference to Common Stock,
at any date as of which the number of shares  thereof is to be  determined,  all
issued shares of Common Stock,


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                                        4

except  shares  then owned or held by or for the  account of the  Company or any
subsidiary  thereof,  and shall  include  all  shares  issuable  in  respect  of
outstanding  scrip or any  certificates  representing  fractional  interests  in
shares of Common Stock.

           "Permitted  Issuances"  shall mean (i) the  issuance  of  warrants or
stock  options to the Company's  management  employees for the purchase of up to
965,000 shares of Common Stock, (ii) the issuance of shares of Common Stock upon
exercise of the warrants and options referred to in clause (i).

           "Person" shall mean any individual, sole proprietorship, partnership,
limited  liability  company,  joint venture,  trust,  association,  corporation,
institution,  other entity or government (whether federal,  state, county, city,
municipal or otherwise,  including,  without  limitation,  any  instrumentality,
division, agency, body or department thereof).

           "Registration  Statement" shall have the meaning set forth in Section
9.4.

           "Restricted  Common  Stock"  shall mean shares of Common  Stock which
are, or which upon their  issuance on the  exercise  of this  Warrant  would be,
evidenced by a certificate  bearing the restrictive  legend set forth in Section
9.1(a).

           "Securities  Act" shall mean the  Securities Act of 1933, as amended,
or any similar federal statute,  and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.

           "Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any  interest in either  thereof,  which would  constitute  a sale thereof
within the meaning of the Securities Act.

           "Transfer Notice" shall have the meaning set forth in Section 9.2.

           "Warrants"  shall mean this  Warrant  and all  warrants  issued  upon
transfer,  division or combination of, or in substitution for, any thereof.  All
Warrants  shall at all times be identical as to terms and  conditions  and date,
except  as to the  number of  shares  of  Common  Stock  for  which  they may be
exercised and, to the extent  provided in Section  4.3(d),  the Current  Warrant
Price.

           "Warrant  Price"  shall  mean an  amount  equal to (i) the  number of
shares of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.

           "Warrant  Stock" shall mean the shares of Common  Stock  purchased by
the holders of the Warrants upon the exercise thereof.



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                                        5

2.         EXERCISE OF WARRANT

           2.1 MANNER OF  EXERCISE.  At any time and from time to time after the
earliest of (A) the date of the  satisfaction  by the  Company of the  principal
outstanding  in excess of the Basic  Borrowing  Amount  pursuant to the Loan and
Security Agreement, (B) the occurrence of an Event of Default under the Loan and
Security  Agreement and (C) April 1, 1998 until 5:00 P.M., New York time, on the
Expiration Date (the "Exercise  Period"),  Holder may exercise this Warrant,  on
any  Business  Day,  for all or any part of the number of shares of Common Stock
purchasable hereunder on such date.

           In order to exercise this Warrant,  in whole or in part, Holder shall
deliver to the  Company at its  principal  office at 3050 North  Horshoe  Drive,
Suite 260,  Naples,  Florida 34104 or at the office or agency  designated by the
Company  pursuant  to Section 12, (i) a written  notice of Holder's  election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased, (ii) payment of the Warrant Price and (iii) this Warrant;
provided,  that any notice of exercise  given  hereunder may be made  contingent
upon the happening of, and effective concurrently with the effectiveness of, any
event,  including,  without  limitation,  the  participation of any Holder in or
closing of any public offering  proposed to be effected by the Company,  if such
contingency  and such event are  specified in such notice.  Such notice shall be
substantially in the form of the subscription  form appearing at the end of this
Warrant as Exhibit A, duly  executed  by Holder or its agent or  attorney.  Upon
receipt thereof, the Company shall, as promptly as practicable, and in any event
within five (5) Business  Days  thereafter,  execute or cause to be executed and
deliver  or cause  to be  delivered  to  Holder a  certificate  or  certificates
representing  the aggregate  number of full shares of Common Stock issuable upon
such  exercise,  together  with  cash in lieu of any  fraction  of a  share,  as
hereinafter  provided.  The stock certificate or certificates so delivered shall
be, to the extent possible, in such denomination or denominations as such Holder
shall  request in the notice and shall be  registered  in the name of Holder or,
subject to Section 9, such other name as shall be designated in the notice. This
Warrant  shall  be  deemed  to have  been  exercised  and  such  certificate  or
certificates shall be deemed to have been issued, and Holder or any other Person
so  designated  to be named  therein  shall be deemed to have become a holder of
record of such shares for all purposes, as of the date the notice, together with
the cash or check or checks and this  Warrant,  is  received  by the  Company as
described above and all taxes required to be paid by Holder, if any, pursuant to
Section 2.3 prior to the issuance of such shares have been paid. If this Warrant
shall have been exercised in part, the Company shall, at the time of delivery of
the certificate or certificates  representing Warrant Stock, deliver to Holder a
new Warrant  evidencing the rights of Holder to purchase the unpurchased  shares
of Common Stock called for by this Warrant, which new Warrant shall in all other
respects  be  identical  with  this  Warrant,  or,  at the  request  of  Holder,
appropriate  notation  may be made on this  Warrant  and the  same  returned  to
Holder.  Notwithstanding any provision herein to the contrary, the Company shall
not be required to register  shares in the name of any Person who acquired  this
Warrant (or part hereof) or any Warrant Stock  otherwise than in accordance with
this  Warrant.  Payment of the Warrant  Price shall be made at the option of the
Holder by certified or official bank check.



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                                        6

           2.2 CASHLESS  EXERCISE.  Notwithstanding  the provisions set forth in
Section  2.1,  if, at any time during the Exercise  Period,  the Current  Market
Price of one share of Common Stock is greater than the Current Warrant Price (at
the date of calculation as set forth below),  in lieu of exercising this Warrant
(or any portion  thereof) for cash, the Holder may elect to convert such Warrant
(or  portion  thereof)  into the number of shares of Common  Stock  equal to the
value (as  determined  below) of this  Warrant  (or the  portion  thereof  being
canceled) by surrender  of this Warrant at the  principal  office of the Company
together with written notice of such election  (pursuant to the Conversion  Form
attached  hereto as Exhibit C), in which event the Company shall issue to Holder
a number of shares of Common Stock computed using the following formula:

                                   X = Y (A-B)
                                        A

where

X=         the number of shares of Common  Stock to be issued to the Holder upon
           conversion  of this  Warrant  (or portion  thereof)  pursuant to this
           Section 2.1

Y=         the number of shares of Common Stock  purchasable under this Warrant,
           or if only a portion of this Warrant is being exercised,  the portion
           of this Warrant being exercised (at the date of such calculation)

A=         the Current Market Price of one share of Common Stock (at the date of
           such calculation)

B=         the  Current   Warrant  Price  (as  adjusted  to  the  date  of  such
           calculation)

           2.3 PAYMENT OF TAXES.  All shares of Common Stock  issuable  upon the
exercise of this Warrant  pursuant to the terms hereof shall be validly  issued,
fully paid and  nonassessable  and without any  preemptive  rights.  The Company
shall pay all expenses in connection with, and all taxes and other  governmental
charges  that may be imposed  with  respect to, the issue or  delivery  thereof,
unless  such tax or charge is  imposed  by law upon  Holder,  in which case such
taxes or charges  shall be paid by Holder.  The Company  shall not be  required,
however,  to pay any tax or other charge imposed in connection with any transfer
involved in the issue of any  certificate  for shares of Common  Stock  issuable
upon exercise of this Warrant in any name other than that of Holder.

           2.4 FRACTIONAL  SHARES.  The Company shall not be required to issue a
fractional  share of  Common  Stock  upon  exercise  of any  Warrant.  As to any
fraction of a share which the Holder of one or more  Warrants,  the rights under
which are  exercised  in the same  transaction,  would  otherwise be entitled to
purchase upon such exercise,  the Company shall pay a cash adjustment in respect
of such final  fraction in an amount  equal to the same  fraction of the Current
Market Price per share of Common Stock on the date of exercise.



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                                        7

           2.5  CONTINUED  VALIDITY.  A holder of shares of Common  Stock issued
upon the exercise of this Warrant,  in whole or in part (other than a holder who
acquires  such  shares  after the same have been  publicly  sold  pursuant  to a
Registration  Statement  under the  Securities  Act or sold pursuant to Rule 144
thereunder),  shall  continue to be entitled  with respect to such shares to all
rights to which it would have been  entitled as Holder under  Sections 9, 10 and
16 of this  Warrant.  The  Company  will,  at the time of each  exercise of this
Warrant,  in whole or in part,  upon the  request of the holder of the shares of
Common Stock issued upon such exercise hereof,  acknowledge in writing,  in form
reasonably  satisfactory to such holder, its continuing  obligation to afford to
such holder all such rights;  provided,  however, that if such holder shall fail
to make  any  such  request,  such  failure  shall  not  affect  the  continuing
obligation of the Company to afford to such holder all such rights.

3.         TRANSFER, DIVISION AND COMBINATION

           3.1 TRANSFER.  Subject to compliance with Section 9, transfer of this
Warrant and all rights  hereunder,  in whole or in part,  shall be registered on
the books of the Company to be maintained  for such purpose,  upon  surrender of
this Warrant at the principal  office of the Company  referred to in Section 2.1
or the office or agency  designated  by the  Company  pursuant  to  Section  12,
together with a written assignment of this Warrant  substantially in the form of
Exhibit B hereto  duly  executed  by Holder or its agent or  attorney  and funds
sufficient to pay any transfer  taxes payable upon the making of such  transfer.
Upon such surrender and, if required,  such payment,  the Company shall, subject
to Section 9,  execute  and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the  denomination  specified in such  instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the portion
of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A
Warrant,  if properly assigned in compliance with Section 9, may be exercised by
a new Holder for the  purchase of shares of Common  Stock  without  having a new
Warrant issued.

           3.2 DIVISION AND COMBINATION.  Subject to Section 9, this Warrant may
be divided or  combined  with other  Warrants  upon  presentation  hereof at the
aforesaid  office or  agency  of the  Company,  together  with a written  notice
specifying the names and  denominations  in which new Warrants are to be issued,
signed by Holder or its agent or attorney.  Subject to  compliance  with Section
3.1 and  with  Section  9, as to any  transfer  which  may be  involved  in such
division or combination,  the Company shall execute and deliver a new Warrant or
Warrants  in  exchange  for the Warrant or Warrants to be divided or combined in
accordance with such notice.

           3.3 EXPENSES. The Company shall prepare, issue and deliver at its own
expense  (other than  transfer  taxes) the new  Warrant or  Warrants  under this
Section 3.

           3.4  MAINTENANCE  OF BOOKS.  The Company  agrees to maintain,  at its
aforesaid  office or agency,  books for the registration and the registration of
transfer of the Warrants.



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                                        8

4.         ADJUSTMENTS

           The  number  of shares of Common  Stock  for which  this  Warrant  is
exercisable  and the Current  Warrant Price shall be subject to adjustment  from
time to time as set forth in this Section 4. The Company  shall give each Holder
notice of any event  described  below which  requires an adjustment  pursuant to
this  Section  4 at the  time of such  event in  accordance  with  Section  5.1.
Notwithstanding  anything to the contrary in this Section 4, no adjustment under
this Section 4 (other than subsection 4.1(c)) shall increase the Current Warrant
Price or decrease the number of shares of Common Stock for which this Warrant is
exercisable  except  for  (i)  any  rescission  adjustment  required  to be made
pursuant to the first sentence of Section 4.6 and (ii) any  adjustment  required
to be made pursuant to Section 4.11.

           4.1 STOCK DIVIDENDS,  SUBDIVISIONS AND COMBINATIONS.  If any time the
Company shall:

                     (a) take a record of the  holders of its  Common  Stock for
           the purpose of  entitling  them to receive a dividend  payable in, or
           other distribution of, Additional Shares of Common Stock,

                      (b) subdivide its outstanding  shares of Common Stock into
           a larger number of shares of Common Stock, or

                      (c) combine its outstanding  shares of Common Stock into a
           smaller number of shares of Common Stock,

then (i) the  number  of  shares of Common  Stock  for  which  this  Warrant  is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record  holder of the same
number of  shares  of  Common  Stock  for  which  this  Warrant  is  exercisable
immediately  prior to the  occurrence  of such event would own or be entitled to
receive  after the happening of such event,  and (ii) the Current  Warrant Price
shall be adjusted  to equal (A) the  Current  Warrant  Price  multiplied  by the
number of  shares  of  Common  Stock  for  which  this  Warrant  is  exercisable
immediately  prior to the  adjustment  divided  by (B) the  number of shares for
which this Warrant is exercisable immediately after such adjustment.

           4.2 CERTAIN  OTHER  DISTRIBUTIONS.  If at any time the Company  shall
take a record of the holders of its Common  Stock for the  purpose of  entitling
them to receive any dividend or other distribution of:

                     (a)  cash  (other  than a  cash  distribution  or  dividend
           payable  out of  earnings  for the year in which  such  dividend  was
           declared  or earned  surplus  legally  available  for the  payment of
           dividends under the laws of the  jurisdiction of incorporation of the
           Company),



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                                        9

                     (b) any  evidences of its  indebtedness,  any shares of its
           stock or any other  securities  or property of any nature  whatsoever
           (other than cash,  Convertible  Securities  or  Additional  Shares of
           Common Stock), or

                     (c) any  warrants  or  other  rights  to  subscribe  for or
           purchase any evidences of its  indebtedness,  any shares of its stock
           or any other securities or property of any nature  whatsoever  (other
           than cash,  Convertible  Securities  or  Additional  Shares of Common
           Stock),

then (i) the  number  of  shares of Common  Stock  for  which  this  Warrant  is
exercisable  shall be  increased to equal the product of the number of shares of
Common Stock for which this  Warrant is  exercisable  immediately  prior to such
adjustment  multiplied  by a fraction  (A) the  numerator  of which shall be the
Current Market Price per share of Common Stock at the date of taking such record
and (B) the denominator of which shall be such Current Market Price per share of
Common  Stock  minus the amount of cash and the amount  (as  determined  in good
faith by the Board of Directors of the Company and  supported by an opinion from
an investment  banking firm of recognized  national  standing  acceptable to the
Majority  Holders)  of any and all such  evidences  of  indebtedness,  shares of
stock,  other  securities  or  property or  warrants  or other  subscription  or
purchase rights distributable to a holder of one share of Common Stock, and (ii)
the Current  Warrant  Price  shall be reduced to equal (A) the  Current  Warrant
Price  multiplied by the number of shares of Common Stock for which this Warrant
is exercisable  immediately prior to the adjustment divided by (B) the number of
shares for which this Warrant is exercisable  immediately after such adjustment;
provided, that if the event requiring adjustment by this Section 4.2 would cause
the  Current  Warrant  Price to be equal to or less than $0, no such  adjustment
shall be made and the Company shall distribute to each Holder such cash, any and
all evidences of indebtedness,  shares of stock, other securities or property or
warrants or other subscription or purchase rights that would be distributable to
such Holder had such Holder  exercised  this Warrant  immediately  prior to such
distribution. A reclassification of the Common Stock (other than a change in par
value, or from par value to no par value or from no par value to par value) into
shares of Common  Stock and shares of any other class of stock shall be deemed a
distribution by the Company to the holders of its Common Stock of such shares of
such other  class of stock  within the  meaning of this  Section 4.2 and, if the
outstanding  shares of Common  Stock  shall be changed  into a larger or smaller
number of shares of Common Stock as a part of such reclassification, such change
shall be  deemed  a  subdivision  or  combination,  as the  case may be,  of the
outstanding shares of Common Stock within the meaning of Section 4.1.

           4.3 ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. (a) If at any time
the Company shall (except as hereinafter  provided) issue or sell any Additional
Shares  of Common  Stock,  other  than  Permitted  Issuances,  in  exchange  for
consideration  in an amount per  Additional  Share of Common Stock less than the
Current  Warrant  Price at the time the  Additional  Shares of Common  Stock are
issued,  then (i) the Current Warrant Price as to the number of shares for which
this Warrant is exercisable prior to such adjustment shall be reduced to a price
determined  by  dividing  (A) an  amount  equal to the sum of (x) the  number of
shares of Common Stock


<PAGE>


                                       10

Outstanding  immediately  prior  to such  issue or sale  multiplied  by the then
existing Current Warrant Price, and (y) the  consideration,  if any, received by
the Company upon such issue or sale, by (B) the total number of shares of Common
Stock  Outstanding  immediately after such issue or sale; and (ii) the number of
shares of Common Stock for which this Warrant is exercisable  shall be increased
to equal the product obtained by multiplying the Current Warrant Price in effect
immediately  prior to such issue or sale by the number of shares of Common Stock
for which this Warrant is  exercisable  immediately  prior to such issue or sale
and dividing the product thereof by the Current Warrant Price resulting from the
adjustment made pursuant to clause (i) above.

           (b) If at any time the Company shall (except as hereinafter provided)
issue or sell any  Additional  Shares  of Common  Stock,  other  than  Permitted
Issuances,  for  consideration in an amount per Additional Share of Common Stock
less than the  Current  Market  Price,  then (i) the  number of shares of Common
Stock for which this  Warrant is  exercisable  shall be  increased  to equal the
product  obtained by multiplying  the number of shares of Common Stock for which
this  Warrant  is  exercisable  immediately  prior  to such  issue  or sale by a
fraction  (A) the  numerator  of which  shall be the  number of shares of Common
Stock Outstanding  immediately after such issue or sale, and (B) the denominator
of which shall be the number of shares of Common Stock  Outstanding  immediately
prior to such  issue or sale  plus the  number of  shares  which  the  aggregate
offering  price of the total  number of such  Additional  Shares of Common Stock
would  purchase at the then Current Market Price;  and (ii) the Current  Warrant
Price as to the number of shares for which this Warrant is exercisable  prior to
such  adjustment  shall be reduced to a price  determined  by  multiplying  such
Current  Warrant  Price by a fraction  (X) the  numerator  of which shall be the
number of shares for which this Warrant is exercisable immediately prior to such
issue or sale; and (Y) the denominator of which shall be the number of shares of
Common Stock purchasable immediately after such issue or sale.

           (c) If at any time the Company (except as hereinafter provided) shall
issue or sell any  Additional  Shares  of Common  Stock,  other  than  Permitted
Issuances,  in exchange for  consideration in an amount per Additional Shares of
Common  Stock which is less than the Current  Warrant  Price and Current  Market
Price at the time  the  Additional  Shares  of  Common  Stock  are  issued,  the
adjustment  required under this Section 4.3 shall be made in accordance with the
formula in paragraph (a) or (b) above which results in the lower Current Warrant
Price  following  such  adjustment.  The provisions of paragraphs (a) and (b) of
Section 4.3 shall not apply to any issuance of Additional Shares of Common Stock
for which an adjustment  is provided  under Section 4.1 or 4.2. No adjustment of
the number of shares of Common Stock for which this Warrant shall be exercisable
shall be made under paragraph (a) or (b) of Section 4.3 upon the issuance of any
Additional  Shares of Common Stock which are issued  pursuant to the exercise of
any  warrants  or other  subscription  or  purchase  rights or  pursuant  to the
exercise of any conversion or exchange rights in any Convertible Securities,  if
any such  adjustment  shall  previously have been made upon the issuance of such
warrants or other rights or upon the issuance of such Convertible Securities (or
upon the issuance of any warrant or other rights  therefor)  pursuant to Section
4.4 or Section 4.5.



<PAGE>


                                       11

           (d) If any  Additional  Shares of Common Stock,  other than Permitted
Issuances,  are issued or sold in exchange  for  consideration  in an amount per
Additional  Share of Common Stock equal to or greater  than the Current  Warrant
Price and the Current Market Price at the time the Additional Shares are issued,
then (i) the  number  of  shares of Common  Stock  for  which  this  Warrant  is
exercisable  shall be increased to equal the product obtained by multiplying the
number of  shares  of  Common  Stock  for  which  this  Warrant  is  exercisable
immediately  prior to such  adjustment  by a fraction (A) the numerator of which
shall be the number of shares of Common Stock Outstanding  immediately after the
issuance of such Additional  Shares of Common Stock,  and (B) the denominator of
which  shall be the  number of shares of Common  Stock  Outstanding  immediately
prior to the issuance of such  Additional  Shares of Common Stock;  and (ii) the
Current  Warrant Price as to the number of shares of Common Stock for which this
Warrant is exercisable prior to such adjustment shall not change but the Current
Warrant Price for each of the  incremental  number of shares of Common Stock for
which this Warrant becomes  exercisable  after such adjustment shall be equal to
the amount of such consideration per Additional Share of Common Stock.

           4.4 ISSUANCE OF WARRANTS OR OTHER RIGHTS.  If at any time the Company
shall  take a record of the  holders  of its  Common  Stock for the  purpose  of
entitling  them to receive a  distribution  of, or shall in any manner  (whether
directly  or by  assumption  in a merger in which the  Company is the  surviving
corporation)  issue or sell,  any warrants or other  rights to subscribe  for or
purchase any Additional  Shares of Common Stock or any  Convertible  Securities,
whether or not the rights to  exchange  or convert  thereunder  are  immediately
exercisable,  then the Current  Warrant Price and the number of shares of Common
Stock for which this Warrant is then  exercisable  shall be adjusted as provided
in Section  4.3 on the basis that the  maximum  number of  Additional  Shares of
Common Stock issuable pursuant to all such warrants or other rights or necessary
to effect the conversion or exchange of all such Convertible Securities shall be
deemed to have been issued and  outstanding  and the Company shall have received
all of the consideration  payable therefor, if any, as of the date of the actual
issuance of such warrants or other rights. No further adjustments of the Current
Warrant  Price or the  number of shares for which  this  Warrant is  exercisable
shall be made upon the actual issue of such Common Stock or of such  Convertible
Securities  upon  exercise of such  warrants or other  rights or upon the actual
issue of such Common Stock upon such conversion or exchange of such  Convertible
Securities.

           4.5 ISSUANCE OF  CONVERTIBLE  SECURITIES.  If at any time the Company
shall  take a record of the  holders  of its  Common  Stock for the  purpose  of
entitling  them to receive a  distribution  of, or shall in any manner  (whether
directly  or by  assumption  in a merger in which the  Company is the  surviving
corporation)  issue or sell,  any  Convertible  Securities,  whether  or not the
rights to exchange or convert thereunder are immediately  exercisable,  then the
Current  Warrant  Price and the number of shares of Common  Stock for which this
Warrant is then exercisable  shall be adjusted as provided in Section 4.3 on the
basis that the maximum number of Additional  Shares of Common Stock necessary to
effect the conversions or exchange of all such  Convertible  Securities shall be
deemed to have been issued and  outstanding  and the Company shall have received
all of the  consideration  payable  therefor,  if any,  as of the date of actual
issuance


<PAGE>


                                       12

of such  Convertible  Securities.  No adjustment of the Current Warrant Price or
the number of shares for which this Warrant is  exercisable  shall be made under
this  Section 4.5 upon the  issuance  of any  Convertible  Securities  which are
issued  pursuant  to the  exercise  of any  warrants  or other  subscription  or
purchase rights therefor, if any such adjustment shall previously have been made
upon the issuance of such  warrants or other rights  pursuant to Section 4.4. No
further  adjustments  of the Current  Warrant  Price or the number of shares for
which this  Warrant is  exercisable  shall be made upon the actual issue of such
Additional  Shares  of  Common  Stock  or of such  Convertible  Securities  upon
exercise  of such  warrants  or other  rights or upon the  actual  issue of such
Additional  Shares of Common  Stock upon such  conversion  or  exchange  of such
Convertible Securities.

           4.6 SUPERSEDING  ADJUSTMENT.  If, at any time after any adjustment of
the  Current  Warrant  Price and the number of shares of Common  Stock for which
this  Warrant is  exercisable  shall have been made  pursuant  to Section 4.4 or
Section 4.5 as the result of any  issuance of  warrants,  rights or  Convertible
Securities,

                     (a) such warrants or rights,  or the right of conversion or
           exchange in such other Convertible Securities,  shall expire, and all
           or a portion of such  warrants or rights,  or the right of conversion
           or  exchange  with  respect  to  all  or  a  portion  of  such  other
           Convertible  Securities,  as the case  may be,  shall  not have  been
           exercised, or

                     (b) the  consideration per share for which shares of Common
           Stock are issuable  pursuant to such warrants or rights, or the terms
           of such other Convertible Securities, shall be increased or decreased
           solely by virtue of  provisions  therein  contained  for an automatic
           increase  or  decrease  in such  consideration  per  share  upon  the
           occurrence of a specified date or event,

then such previous adjustment shall be rescinded and annulled and the Additional
Shares of Common  Stock  which were  deemed to have been issued by virtue of the
computation  made in  connection  with the  adjustment so rescinded and annulled
shall no longer be  deemed  to have been  issued by virtue of such  computation.
Thereupon,  a  recomputation  shall be made of the  effect of such  warrants  or
rights or other Convertible Securities on the basis of

                     (c)  treating  the  number of  Additional  Shares of Common
           Stock or other  property,  if any,  theretofore  actually  issued  or
           issuable  pursuant to the previous  exercise of any such  warrants or
           rights or any such right of  conversion  or exchange,  as having been
           issued  on the  date  or  dates  of any  such  exercise  and  for the
           consideration actually received and receivable therefor, and

                     (d) treating any such  warrants or rights or any such other
           Convertible  Securities which then remain  outstanding as having been
           granted  or issued  immediately  after the time of such  increase  or
           decrease,  as the case may be,  of the  consideration  per  share for
           which  shares of Common Stock or other  property  are issuable  under
           such warrants or rights or


<PAGE>


                                       13

           other  Convertible  Securities;  whereupon  a new  adjustment  of the
           Current  Warrant  Price and the number of shares of Common  Stock for
           which this Warrant is  exercisable  shall be made pursuant to Section
           4.4 or  Section  4.5,  as  appropriate,  which new  adjustment  shall
           supersede the previous adjustment so rescinded and annulled;

provided,  that no rescission or  recomputation  adjustment  shall be made under
this  Section  4.6 in respect  of any  portion  of this  Warrant  which has been
exercised  prior  to the  occurrence  of any  action  otherwise  requiring  such
rescission or recomputation adjustment.

           4.7 OTHER  PROVISIONS  APPLICABLE TO ADJUSTMENTS  UNDER THIS SECTION.
The following provisions shall be applicable to the making of adjustments of the
Current  Warrant  Price and the number of shares of Common  Stock for which this
Warrant is exercisable provided for in this Section 4:

                     (a)  Computation of  Consideration.  To the extent that any
           Additional  Shares of Common Stock or any  Convertible  Securities or
           any  warrants  or other  rights  to  subscribe  for or  purchase  any
           Additional Shares of Common Stock or any Convertible Securities shall
           be issued for cash consideration,  the consideration  received by the
           Company  therefor  shall be the  amount of the cash  received  by the
           Company  therefor,  or, if such Additional  Shares of Common Stock or
           Convertible  Securities are offered by the Company for  subscription,
           the subscription price, or, if such Additional Shares of Common Stock
           or  Convertible  Securities are sold to  underwriters  or dealers for
           public offering without a subscription  offering,  the initial public
           offering price (in any such case  subtracting (x) any amounts paid or
           receivable  for  accrued  interest or accrued  dividends  and (y) any
           compensation,  discounts or expenses  paid or incurred by the Company
           for and in the  underwriting of, or otherwise in connection with, the
           issuance  thereof).  To the extent that such issuance  shall be for a
           consideration  other  than  cash,  then,  except as herein  otherwise
           expressly provided,  the amount of such consideration shall be deemed
           to be the  fair  value  of  such  consideration  at the  time of such
           issuance as determined in good faith by the Board of Directors of the
           Company.  In case  any  Additional  Shares  of  Common  Stock  or any
           Convertible  Securities  or any warrants or other rights to subscribe
           for or purchase such Additional Shares of Common Stock or Convertible
           Securities shall be issued in connection with any merger in which the
           Company issues any securities,  the amount of consideration  therefor
           shall be deemed to be the fair value,  as determined in good faith by
           the Board of Directors of the Company,  of such portion of the assets
           and business of the  nonsurviving  corporation  as such Board in good
           faith shall determine to be attributable to such Additional Shares of
           Common Stock,  Convertible  Securities,  warrants or other rights, as
           the case may be.  The  consideration  for any  Additional  Shares  of
           Common  Stock  issuable  pursuant to any  warrants or other rights to
           subscribe  for or  purchase  the  same  shall  be  the  consideration
           received by the Company for  issuing  such  warrants or other  rights
           plus the lowest  amount of  additional  consideration  payable to the
           Company  upon  exercise  of  such  warrants  or  other  rights.   The
           consideration  for any  Additional  Shares of Common  Stock  issuable
           pursuant to the terms of any Convertible


<PAGE>


                                       14

           Securities  shall be the  consideration  received  by the Company for
           issuing  warrants or other rights to subscribe  for or purchase  such
           Convertible Securities, plus the consideration paid or payable to the
           Company  in  respect  of the  subscription  for or  purchase  of such
           Convertible   Securities,   plus  the  lowest  amount  of  additional
           consideration,  if any,  payable to the Company  upon the exercise of
           the right of conversion or exchange in such  Convertible  Securities.
           In case of the  issuance  at any  time of any  Additional  Shares  of
           Common Stock or Convertible  Securities in payment or satisfaction of
           any dividends  upon any class of stock other than Common  Stock,  the
           Company  shall be deemed to have  issued  such  Additional  Shares of
           Common Stock or Convertible Securities for no consideration. Whenever
           the Board of  Directors  of the  Company  shall be required to make a
           determination  in good faith of the fair value of any  consideration,
           such  determination  shall, if requested by the Majority Holders,  be
           supported by an opinion of an  investment  banking firm of recognized
           national  standing  selected by the Company  and  acceptable  to such
           Holders, with all costs thereof borne by the Company.

                     (b) When  Adjustments to Be Made. The adjustments  required
           by  this  Section  4 shall  be  made  whenever  and as  often  as any
           specified event requiring an adjustment shall occur,  except that any
           adjustment  of the  number of shares of Common  Stock for which  this
           Warrant  is  exercisable  that would  otherwise  be  required  may be
           postponed  (except in the case of a  subdivision  or  combination  of
           shares of the Common  Stock,  as provided  for in Section 4.1) up to,
           but not  beyond the date of  exercise  if such  adjustment  either by
           itself  or  with  other  adjustments  not  previously  made  adds  or
           subtracts less than 0.1% of the shares of Common Stock for which this
           Warrant  is  exercisable  immediately  prior  to the  making  of such
           adjustment.  Any  adjustment  representing a change of less than such
           minimum  amount  (except as  aforesaid)  which is postponed  shall be
           carried  forward and made as soon as such  adjustment,  together with
           other adjustments required by this Section 4 and not previously made,
           would result in a minimum adjustment or on the date of exercise.  For
           the purpose of any adjustment, any specified event shall be deemed to
           have occurred at the close of business on the date of its occurrence.

                      (c) Fractional  Interests.  In computing adjustments under
           this Section 4,  fractional  interests in Common Stock shall be taken
           into account to the nearest 1/10th of a share.

                     (d) When Adjustment Not Required. If the Company shall take
           a record  of the  holders  of its  Common  Stock for the  purpose  of
           entitling them to receive a dividend or  distribution or subscription
           or purchase rights and shall,  thereafter and before the distribution
           to stockholders  thereof,  legally abandon its plan to pay or deliver
           such dividend,  distribution,  subscription or purchase rights,  then
           thereafter no adjustment shall be required by reason of the taking of
           such  record  and any  such  adjustment  previously  made in  respect
           thereof shall be rescinded and annulled.



<PAGE>


                                       15

                     (e) Escrow of Warrant Stock. If after any property  becomes
           distributable  pursuant to this  Section 4 by reason of the taking of
           any  record  of  the  holders  of  Common  Stock,  but  prior  to the
           occurrence  of the  event  for which  such  record  is taken,  Holder
           exercises this Warrant,  then any  additional  shares of Common Stock
           and other  property  issuable upon exercise  solely by reason of such
           adjustment  shall be held in escrow for  Holder by the  Company to be
           issued to Holder upon and to the extent that the event actually takes
           place. Notwithstanding any other provision to the contrary herein, if
           the event  for  which  such  record  was  taken  fails to occur or is
           rescinded,  then  such  escrowed  shares  shall be  cancelled  by the
           Company and escrowed property returned.

                     (f)  Challenge  to Good Faith  Determination.  Whenever the
           Board  of  Directors  of the  Company  shall  be  required  to make a
           determination  in good faith of the fair value of any item under this
           Section  4, such  determination  may be  challenged  in good faith by
           Holder,  and any dispute shall be resolved by an  investment  banking
           firm of  recognized  national  standing  selected  by the Company and
           acceptable  to such  Holder,  with  all  costs  thereof  borne by the
           Company.

                     (g)  Current  Warrant  Price  Not  Less  than  $.0025.  If,
           following any reduction of the Current  Warrant Price and increase in
           the  number  of shares of  Common  Stock  for  which the  Warrant  is
           exercisable  made  pursuant to this  Section 4, except any  reduction
           made pursuant to subsections  4.1(a) or 4.1(b),  the Current  Warrant
           Price is reduced to an amount less than $.0025,  the Current  Warrant
           Price shall be increased (without any further change in the number of
           shares of Common  Stock for which  this  Warrant is  exercisable)  to
           equal the lesser of (x) the Current Warrant Price  immediately  prior
           to such adjustment and (y) $.01. However, for purposes of calculating
           any  subsequent  adjustment  pursuant to this  Section 4 (except this
           Section 4.7(g)) any increase in the Current Warrant Price pursuant to
           this Section 4.7(g) shall be disregarded.

           4.8  REORGANIZATION,   RECLASSIFICATION,   MERGER,  CONSOLIDATION  OR
DISPOSITION  OF  ASSETS.  In case the  Company  shall  reorganize  its  capital,
reclassify  its  capital  stock,  consolidate  or  merge  with or  into  another
corporation  (where the Company is not the surviving  corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business  to another  corporation  and,  pursuant to the terms of such
reorganization,   reclassification,  merger,  consolidation  or  disposition  of
assets, shares of common stock of the successor or acquiring corporation, or any
cash,  shares of stock or other securities or property of any nature  whatsoever
(including  warrants or other subscription or purchase rights) in addition to or
in lieu of  common  stock of the  successor  or  acquiring  corporation  ("Other
Property"),  are to be received by or distributed to the holders of Common Stock
of the  Company,  then each Holder shall have the right  thereafter  to receive,
upon  exercise  of such  Warrant,  the  number of shares of common  stock of the
successor or acquiring  corporation  or of the Company,  if it is the  surviving
corporation,  and  Other  Property  receivable  upon  or  as a  result  of  such
reorganization, reclassification, merger, consolidation or disposition of assets
by a holder of the


<PAGE>


                                       16

number of  shares  of  Common  Stock  for  which  this  Warrant  is  exercisable
immediately   prior  to  such  event.  In  case  of  any  such   reorganization,
reclassification,  merger, consolidation or disposition of assets, the successor
or acquiring  corporation (if other than the Company) shall expressly assume the
due and  punctual  observance  and  performance  of each and every  covenant and
condition of this  Warrant to be  performed  and observed by the Company and all
the obligations and liabilities hereunder,  subject to such modifications as may
be deemed  appropriate (as determined by resolution of the Board of Directors of
the Company) in order to provide for  adjustments  of shares of the Common Stock
for which this Warrant is  exercisable  which shall be as nearly  equivalent  as
practicable to the  adjustments  provided for in this Section 4. For purposes of
this Section 4.8 "common stock of the successor or acquiring  corporation" shall
include  (i) stock of such  corporation  of any class which does not provide for
(A)  dividends  at a fixed  rate  which does not vary based on the net income or
operating results of the Company and/or its subsidiaries, (B) a preference as to
liquidation  which is limited to the  consideration  received by the Company for
such stock and (C) a right of redemption and (ii) any evidences of indebtedness,
shares of stock or other  securities  which are convertible into or exchangeable
for any such stock,  either  immediately or upon the arrival of a specified date
or the  happening  of a  specified  event and any  warrants  or other  rights to
subscribe  for or purchase  any such stock.  The  foregoing  provisions  of this
Section   4.8   shall   similarly    apply   to   successive    reorganizations,
reclassification, mergers, consolidations or disposition of assets.

           4.9 OTHER ACTION  AFFECTING COMMON STOCK. If at any time or from time
to time the Company shall take any action in respect of its Common Stock,  other
than the payment of dividends  described  in Section  4.2(a) or any other action
described in this Section 4, then, unless such action will not have a materially
adverse  effect upon the rights of the  Holders,  the number of shares of Common
Stock or other stock for which this Warrant is  exercisable  and/or the purchase
price  thereof  shall be  adjusted  in such  manner as may be  equitable  in the
circumstances.

           4.10  CERTAIN  LIMITATIONS.  Notwithstanding  anything  herein to the
contrary,  the Company agrees not to enter into any transaction which, by reason
of any adjustment  hereunder,  would cause the Current  Warrant Price to be less
than the par value per share of Common Stock.

           4.11  ADJUSTMENT  TO NUMBER OF  SHARES  OF COMMON  STOCK  PURCHASABLE
HEREUNDER.  In the event and on each occasion that, pursuant to the terms of the
Loan and  Security  Agreement,  the  Company  reduces  the  amount of  principal
outstanding in excess of the Basic Borrowing  Amount (as defined in the Loan and
Security Agreement) by at least $300,000 (the amount of any such reduction,  the
"Reduction Amount"), the number of shares of Common Stock for which this Warrant
is exercisable shall be adjusted to a number of shares as follows.  In the event
that the Current  Market  Price of one share of Common Stock on the date of such
event is equal to or less than such Current  Market Price onApril 1, 1998,  then
the number of shares of Common Stock for which this Warrant is exercisable shall
be adjusted to a number of shares equal in value to the value of this Warrant on
April 1, 1998 minus the Reduction  Amount.  In the event that the Current Market
Price of one share of Common  Stock on the date of such  event is  greater  than
such Current Market Price on April 1, 1998, then the number of shares of


<PAGE>


                                       17

Common  Stock for which this  Warrant is  exercisable  shall be  decreased  by a
number of shares equal in value to the  Reduction  Amount  valued at the Current
Market Price of one share of Common Stock on the date of such event.

5.         NOTICES TO WARRANT HOLDERS

           5.1 NOTICE OF ADJUSTMENTS.  Whenever the Current Warrant Price or the
number of shares of Common Stock for which this Warrant is exercisable  shall be
adjusted   pursuant  to  Section  4,  the  Company  shall  forthwith  prepare  a
certificate to be executed by the chief financial officer of the Company setting
forth, in reasonable  detail,  the event requiring the adjustment and the method
by which such adjustment was calculated (including a description of the basis on
which the Board of  Directors  of the Company  determined  the fair value of any
evidences of  indebtedness,  shares of stock,  other  securities  or property or
warrants or other  subscription or purchase rights referred to in Section 4.2 or
4.7(a)),  specifying the number of shares of Common Stock for which this Warrant
is exercisable  and (if such adjustment was made pursuant to Section 4.8 or 4.9)
describing  the number and kind of any other  shares of stock or Other  Property
for which this Warrant is  exercisable,  and any change in the purchase price or
prices thereof,  after giving effect to such  adjustment or change.  The Company
shall  promptly  cause an executed copy of such  certificate  to be delivered to
each Holder in  accordance  with  Section  15.2.  The Company  shall keep at its
office  or  agency  designated  pursuant  to  Section  12  copies  of  all  such
certificates  and cause the same to be available  for  inspection at said office
during normal  business  hours by any Holder or any  prospective  purchaser of a
Warrant designated by a Holder thereof.

           5.2 NOTICE OF CERTAIN CORPORATE ACTION.  The Holder shall be entitled
to the same rights to receive notice of corporate action as any holder of Common
Stock.

6.         NO IMPAIRMENT

           The Company shall not by any action  including,  without  limitation,
amending  its  certificate  of  incorporation  or  through  any  reorganization,
transfer  of assets,  consolidation,  merger,  dissolution,  issuance or sale of
securities or any other voluntary action,  avoid or seek to avoid the observance
or  performance  of any of the terms of this  Warrant,  but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or  appropriate to protect the rights of Holder
against  impairment.  Without  limiting the  generality  of the  foregoing,  the
Company  will (a) not  increase  the par value of any  shares  of  Common  Stock
receivable  upon the exercise of this Warrant above the amount payable  therefor
upon such exercise immediately prior to such increase in par value, (b) take all
such action as may be  necessary  or  appropriate  in order that the Company may
validly and legally  issue fully paid and  nonassessable  shares of Common Stock
upon the  exercise of this  Warrant,  and (c) use its best efforts to obtain all
such  authorizations,  exemptions  or consents from any public  regulatory  body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.



<PAGE>


                                       18

           Upon the request of Holder,  the Company  will at any time during the
period this Warrant is outstanding  acknowledge in writing, in form satisfactory
to Holder,  the continuing  validity of this Warrant and the  obligations of the
Company hereunder.

7.         RESERVATION AND AUTHORIZATION OF COMMON STOCK;
           REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL
           AUTHORITY

           From and  after  the date  hereof,  the  Company  shall at all  times
reserve and keep  available  for issue upon the exercise of Warrants such number
of its authorized  but unissued  shares of Common Stock as will be sufficient to
permit the exercise in full of all  outstanding  Warrants.  All shares of Common
Stock which shall be so issuable,  when issued upon  exercise of any Warrant and
payment therefor in accordance with the terms of such Warrant, shall be duly and
validly issued and fully paid and  nonassessable,  and not subject to preemptive
rights.

           Before taking any action which would cause an adjustment reducing the
Current  Warrant Price below the then par value, if any, of the shares of Common
Stock  issuable  upon  exercise  of the  Warrants,  the  Company  shall take any
corporate  action  which may be  necessary in order that the Company may validly
and legally  issue fully paid and  nonassessable  shares of such Common Stock at
such adjusted Current Warrant Price.

           Before  taking any action which would result in an  adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, the Company shall take all actions  required,  including,
without limitation, amending its certificate of incorporation, to ensure that it
has a sufficient  number of shares of authorized  and unissued  shares of Common
Stock in order to permit the exercise of the Warrants  following such adjustment
and obtain all such  authorizations or exemptions  thereof, or consents thereto,
as  may  be  necessary  from  any  public   regulatory  body  or  bodies  having
jurisdiction thereof.

           If any shares of Common  Stock  required to be reserved  for issuance
upon  exercise  of  Warrants  require  registration  or  qualification  with any
governmental  authority  under  any  federal  or state  law  (otherwise  than as
provided in Section 9) before such shares may be so issued,  the Company will in
good faith and as expeditiously as possible and at its expense endeavor to cause
such shares to be duly registered.

8.         TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS

           In the case of all dividends or other distributions by the Company to
the holders of its Common Stock with respect to which any provision of Section 4
refers to the taking of a record of such holders,  the Company will in each such
case take such a record and will take such record as of the close of business on
a Business  Day.  The Company  will not at any time,  except  upon  dissolution,
liquidation  or winding up of the  Company,  close its stock  transfer  books or
Warrant transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.


<PAGE>


                                       19

9.         RESTRICTIONS ON TRANSFERABILITY

           The  Warrants  and  the  Warrant  Stock  shall  not  be  transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section  9,  which  conditions  are  intended  to  ensure  compliance  with  the
provisions of the  Securities Act with respect to the Transfer of any Warrant or
any Warrant Stock. Holder, by acceptance of this Warrant,  agrees to be bound by
the provisions of this Section 9.

           9.1  RESTRICTIVE  LEGEND.  (a) Except as  otherwise  provided in this
Section 9, each certificate for Warrant Stock initially issued upon the exercise
of this Warrant, and each certificate for Warrant Stock issued to any subsequent
transferee of any such certificate, shall be stamped or otherwise imprinted with
a legend in substantially the following form:

                     "The shares  represented by this  certificate have not been
           registered  under the  Securities  Act of 1933,  as amended,  and are
           subject to the conditions  specified in a certain Warrant dated April
           14,1997,  originally  issued by  Community  Care of America,  Inc. No
           transfer of the shares represented by this certificate shall be valid
           or effective until such conditions have been fulfilled. A copy of the
           form of said Warrant is on file with the Secretary of Community  Care
           of America,  Inc. The holder of this  certificate,  by  acceptance of
           this  certificate,  agrees  to be  bound  by the  provisions  of such
           Warrant."

                      (b) Except as  otherwise  provided in this Section 9, each
           Warrant  shall be stamped  or  otherwise  imprinted  with a legend in
           substantially the following form:

                     "This Warrant and the  securities  represented  hereby have
           not been registered under the Securities Act of 1933, as amended, and
           may not be  transferred  in  violation  of such  Act,  the  rules and
           regulations thereunder or the provisions of this Warrant."

           9.2 NOTICE OF PROPOSED TRANSFERS; REQUEST FOR REGISTRATION.  Prior to
any Transfer or attempted  Transfer of any Warrants or any shares of  Restricted
Common Stock, the holder of such Warrants or Restricted  Common Stock shall give
ten days'  prior  written  notice (a  "Transfer  Notice") to the Company of such
holder's   intention  to  effect  such  Transfer,   describing  the  manner  and
circumstances of the proposed  Transfer,  and obtain from counsel to such holder
who  shall be  reasonably  satisfactory  to the  Company,  an  opinion  that the
proposed  Transfer  of such  Warrants  or such  Restricted  Common  Stock may be
effected  without  registration  under the Securities  Act. After receipt of the
Transfer  Notice and opinion,  the Company shall,  within five days thereof,  so
notify the holder of such  Warrants  or such  Restricted  Common  Stock and such
holder shall  thereupon be entitled to Transfer such Warrants or such Restricted
Common  Stock,  in  accordance  with the  terms  of the  Transfer  Notice.  Each
certificate,  if any,  evidencing such shares of Restricted  Common Stock issued
upon such  Transfer  shall  bear the  restrictive  legend  set forth in  Section
9.1(a),  and each Warrant issued upon such Transfer  shall bear the  restrictive
legend set forth in Section  9.1(b),  unless in the opinion of such counsel such
legend is not required in order to ensure  compliance  with the Securities  Act.
The holder of the Warrants or the


<PAGE>


                                       20

Restricted  Common Stock,  as the case may be, giving the Transfer  Notice shall
not be entitled to transfer such Warrants or such Restricted  Common Stock until
receipt of notice from the Company under this Section 9.2(a).

           The holder of  Warrants  and  Warrant  Stock  shall have the right to
request registration of such Warrant Stock pursuant to Sections 9.3 and 9.4.

           9.3 REQUIRED  REGISTRATION.  After receipt of a written  request from
the holders of Warrants and/or Warrant Stock  representing at least an aggregate
of 30% of the total of (i) all shares of Warrant  Stock then subject to purchase
upon  exercise  of all  Warrants  and (ii) all  shares  of  Warrant  Stock  then
outstanding,  requesting  that the Company  effect the  registration  of Warrant
Stock  issuable  upon the exercise of such  holder's  Warrants or of any of such
holder's  Warrant Stock under the  Securities  Act and  specifying  the intended
method or methods of disposition  thereof, the Company shall promptly notify all
holders of Warrants and Warrant  Stock in writing of the receipt of such request
and each such holder,  in lieu of  exercising  its rights under Section 9.4, may
elect (by written  notice sent to the Company  within ten Business Days from the
date of such holder's receipt of the  aforementioned  Company's  notice) to have
its shares of Warrant Stock included in such  registration  thereof  pursuant to
this Section 9.3.  Thereupon the Company shall, as expeditiously as is possible,
use its best efforts to effect the registration  under the Securities Act of all
shares of Warrant  Stock which the Company has been so  requested to register by
such holders for sale, all to the extent  required to permit the disposition (in
accordance  with the intended  method or methods  thereof,  as aforesaid) of the
Warrant Stock so registered;  provided,  however,  that the Company shall not be
required to effect more than two  registrations of any Warrant Stock pursuant to
this Section 9.3,  unless the Company  shall be eligible to file a  registration
statement on Form S-3 (or other comparable short form) under the Securities Act,
in which  event  there  shall be no limit on the  number  of such  registrations
pursuant to this Section 9.3.

           9.4 INCIDENTAL  REGISTRATION.  If the Company at any time proposes to
file on its  behalf  and/or  on  behalf  of any of its  security  holders  ("the
demanding security  holders") a registration  statement under the Securities Act
on any  form  (other  than a  registration  statement  on Form S-4 or S-8 or any
successor  form  for  securities  to be  offered  in a  transaction  of the type
referred to in Rule 145 under the  Securities Act or to employees of the Company
pursuant  to  any  employee   benefit  plan,   respectively)   for  the  general
registration  of securities to be sold for cash with respect to its Common Stock
or any other class of equity  security  (as  defined in Section  3(a)(11) of the
Exchange Act) of the Company (a "Registration Statement"),  it will give written
notice to all holders of  Warrants or Warrant  Stock at least 60 days before the
initial filing with the Commission of such Registration Statement,  which notice
shall set forth the intended method of disposition of the securities proposed to
be registered  by the Company.  The notice shall offer to include in such filing
the  aggregate  number of shares of Warrant  Stock,  and the number of shares of
Common Stock for which this Warrant is exercisable, as such holders may request.



<PAGE>


                                       21

           Each holder of any such Warrants or any such Warrant  Stock  desiring
to have Warrant Stock registered under this Section 9.4 shall advise the Company
in  writing  within 30 days  after the date of  receipt  of such  offer from the
Company,  setting forth the amount of such Warrant Stock for which  registration
is requested.  The Company shall thereupon  include in such filing the number of
shares of Warrant Stock for which  registration is so requested,  subject to the
next sentence,  and shall use its best efforts to effect  registration under the
Securities Act of such shares. If the managing  underwriter of a proposed public
offering  shall  advise  the  Company  in  writing  that,  in its  opinion,  the
distribution of the Warrant Stock  requested to be included in the  registration
concurrently  with  the  securities  being  registered  by the  Company  or such
demanding security holder would materially and adversely affect the distribution
of such securities by the Company or such demanding  security  holder,  then all
selling security holders (other than any demanding security holder who initially
requested such registration) shall reduce the amount of securities each intended
to  distribute  through such  offering on a pro rata basis.  Except as otherwise
provided in Section 9.6, all expenses of such registration shall be borne by the
Company.

           9.5  REGISTRATION  PROCEDURES.  If the  Company  is  required  by the
provisions of this Section 9 to use its best efforts to effect the  registration
of any of its  securities  under  the  Securities  Act,  the  Company  will,  as
expeditiously as possible:

                     (a) prepare  and file with the  Commission  a  Registration
           Statement with respect to such securities and use its best efforts to
           cause such Registration  Statement to become and remain effective for
           a period of time required for the  disposition of such  securities by
           the holders thereof;

                     (b) prepare and file with the  Commission  such  amendments
           and  supplements  to such  Registration  Statement and the prospectus
           used  in  connection  therewith  as may be  necessary  to  keep  such
           Registration Statement effective and to comply with the provisions of
           the Securities  Act with respect to the sale or other  disposition of
           all  securities  covered  by such  Registration  Statement  until the
           earlier of such time as all of such  securities have been disposed of
           in a public offering or the expiration of 180 days;

                     (c) furnish to such selling security holders such number of
           copies of a  summary  prospectus  or other  prospectus,  including  a
           preliminary  prospectus,  in conformity with the  requirements of the
           Securities Act, and such other  documents,  as such selling  security
           holders may reasonably request;

                     (d) use  its  best  efforts  to  register  or  qualify  the
           securities  covered by such  Registration  Statement under such other
           securities or blue sky laws of such  jurisdictions  within the United
           States  and  Puerto  Rico as each  holder  of such  securities  shall
           request  (provided,  however,  the Company  shall not be obligated to
           qualify as a foreign corporation to do business under the laws of any
           jurisdiction in which it is not then qualified or to file any general
           consent to service or process), and do such other reasonable acts and
           things


<PAGE>


                                       22

           as may be  required of it to enable  such  holder to  consummate  the
           disposition in such  jurisdiction  of the securities  covered by such
           Registration Statement;

                     (e)  furnish,  at  the  request  of any  holder  requesting
           registration  of Warrant  Stock  pursuant to Section 9.3, on the date
           that such shares of Warrant Stock are  delivered to the  underwriters
           for sale pursuant to such  registration  or, if such Warrant Stock is
           not  being  sold   through   underwriters,   on  the  date  that  the
           Registration  Statement  with respect to such shares or Warrant Stock
           becomes  effective,   (1)  an  opinion,   dated  such  date,  of  the
           independent counsel representing the Company for the purposes of such
           registration,  addressed  to the  underwriters,  if any,  and if such
           Warrant  Stock is not being sold  through  underwriters,  then to the
           holders making such request, stating that such Registration Statement
           has become  effective  under the  Securities  Act and that (i) to the
           best  knowledge  of  such  counsel,  no  stop  order  suspending  the
           effectiveness  thereof  has been issued and no  proceedings  for that
           purpose have been instituted or are pending or contemplated under the
           Securities  Act,  (ii)  the  Registration   Statement,   the  related
           prospectus,  and each amendment or supplement  thereto,  comply as to
           form in all material respects with the requirements of the Securities
           Act  and the  applicable  rules  and  regulations  of the  Commission
           thereunder  (except  that such  counsel need express no opinion as to
           financial  statements  contained therein),  (iii) the descriptions in
           the  Registration  Statement or the  prospectus,  or any amendment or
           supplement  thereto,  of all legal  matters and  contracts  and other
           legal  documents or  instruments  are accurate and fairly present the
           information required to be shown, and (iv) such counsel does not know
           of any legal or governmental  proceedings,  pending or  contemplated,
           required to be described in the Registration Statement or prospectus,
           or any  amendment or supplement  thereto,  which are not described as
           required,  nor of any  contracts  or documents  or  instruments  of a
           character  required to be described in the Registration  Statement or
           prospectus, or any amendment or supplement thereto, or to be filed as
           exhibits to the  Registration  Statement  which are not described and
           filed or  incorporated  by reference as required;  such counsel shall
           also  confirm  that he has no  reason  to  believe  that  either  the
           Registration  Statement  or  the  prospectus,  or  any  amendment  or
           supplement  thereto (other than  financial  material as to which such
           counsel need make no  statement)  contains any untrue  statement of a
           material fact or omits to state a material fact required to be stated
           therein or necessary to make the statements  therein, in light of the
           circumstances  in which made, not misleading;  and (2) a letter dated
           such date, from the independent  certified public  accountants of the
           Company,  addressed to the underwriters,  if any, and if such Warrant
           Stock is not being  sold  through  underwriters,  then to the  holder
           making such request and, if such  accountants  refuse to deliver such
           letter to such  holder,  then to the  Company  stating  that they are
           independent  certified public  accountants  within the meaning of the
           Securities  Act and that,  in the  opinion of such  accountants,  the
           financial statements and other financial data of the Company included
           in the Registration Statement or the prospectus,  or any amendment or
           supplement  thereto,  comply as to form in all material respects with
           the applicable  accounting  requirements  of the Securities Act. Such
           opinion of counsel shall  additionally cover such other legal matters
           with respect to the registration in respect of which such


<PAGE>


                                       23

           opinion  is  being  given  as  such  holders  of  Warrant  Stock  may
           reasonably request. Such letter from the independent certified public
           accountants  shall  additionally  cover such other financial  matters
           (including  information  as to the  period  ending  not  more  than 5
           Business  Days prior to the date of such  letter) with respect to the
           registration  in respect of which such  letter is being  given as the
           holders  holding a majority of the Warrant  Stock being so registered
           may reasonably request;

                     (f)  entered  into  customary   agreements   (including  an
           underwriting agreement in customary form) and take such other actions
           as are  reasonably  required in order to expedite or  facilitate  the
           disposition of such Warrant Stock; and

                     (g)  otherwise  use its best  efforts  to  comply  with all
           applicable  rules  and  regulations  of  the  Commission,   and  make
           available to its security holders, as soon as reasonably practicable,
           but  not  later  than  18  months  after  the  effective  date of the
           Registration  Statement, an earnings statement covering the period of
           at least 12 months  beginning  with the first  full  month  after the
           effective  date  of  such  Registration  Statement,   which  earnings
           statement  shall  satisfy  the  provisions  of  Section  11(a) of the
           Securities Act.

           It shall be a condition precedent to the obligation of the Company to
take any action  pursuant to this Section 9 in respect of the  securities  which
are to be  registered  at the request of any holder of Warrants or Warrant Stock
that such holder shall  furnish to the Company such  information  regarding  the
securities held by such holder and the intended method of disposition thereof as
the Company shall reasonably request and as shall be required in connection with
the action taken by the Company.

           9.6  EXPENSES.  All expenses  incurred in  complying  with Section 9,
including,  without limitation,  all registration and filing fees (including all
expenses  incident  to  filing  with  the  NASD),  printing  expenses,  fees and
disbursements  of counsel for the Company,  the reasonable  fees and expenses of
one  counsel for the  selling  security  holders  (selected  by those  holding a
majority  of the  shares  being  registered),  expenses  of any  special  audits
incident to or required by any such  registration and expenses of complying with
the securities or blue sky laws of any jurisdictions pursuant to Section 9.5(d),
shall be paid by the Company, except that

                     (a) all such expenses in  connection  with any amendment or
           supplement to the  Registration  Statement or  prospectus  filed more
           than  12  months  after  the  effective  date  of  such  Registration
           Statement  because any holder of Warrant  Stock has not  effected the
           disposition  of the  securities  requested to be registered  shall be
           paid by such holder; and

                     (b) the Company shall not be liable for any fees, discounts
           or commissions to any  underwriter  or any fees or  disbursements  of
           counsel for any underwriter in respect of the securities sold by such
           holder of Warrant Stock.



<PAGE>


                                       24

           9.7  INDEMNIFICATION  AND  CONTRIBUTION.  (a)  In  the  event  of any
registration  of any of the Warrant Stock under the  Securities  Act pursuant to
this Section 9, the Company shall indemnify and hold harmless the holder of such
Warrant  Stock,  such holder's  directors  and  officers,  and each other Person
(including each  underwriter)  who  participated in the offering of such Warrant
Stock  and  each  other  Person,  if  any,  who  controls  such  holder  or such
participating  Person  within the  meaning of the  Securities  Act,  against any
losses, claims,  damages or liabilities,  joint or several, to which such holder
or any such director or officer or  participating  Person or controlling  Person
may become  subject under the  Securities  Act or any other statute or at common
law,  insofar as such  losses,  claims,  damages or  liabilities  (or actions in
respect thereof) arise out of or are based upon (i) any alleged unsure statement
of  any  material  fact  contained,  on  the  effective  date  thereof,  in  any
Registration  Statement under which such  securities  were registered  under the
Securities  Act,  any  preliminary  prospectus  or  final  prospectus  contained
therein, or any amendment or supplement thereto, or (ii) any alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements  therein not misleading,  and shall reimburse such holder or such
director, officer or participating Person or controlling Person for any legal or
any other expenses reasonably incurred by such holder or such director,  officer
or participating  Person or controlling  Person in connection with investigating
or  defending  any such loss,  claim,  damage,  liability  or action;  provided,
however,  that the  Company  shall not be liable in any such case to the  extent
that any such loss,  claim,  damage or liability  arises out of or is based upon
any alleged  untrue  statement  or alleged  omission  made in such  Registration
Statement,  preliminary  prospectus,  prospectus  or amendment or  supplement in
reliance  upon and in  conformity  with  written  information  furnished  to the
Company  by such  holder  specifically  for use  therein  or (in the case of any
registration  pursuant to Section  9.3) so  furnished  for such  purposes by any
underwriter.  Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such holder or such director,  officer
or participating Person or controlling Person, and shall survive the transfer of
such securities by such holder.

           (b) Each holder of any Warrant Stock, by acceptance  thereof,  agrees
to indemnify and hold harmless the Company,  its directors and officers and each
other  person,  if any,  who  controls  the  Company  within the  meaning of the
Securities  Act against any losses,  claims,  damages or  liabilities,  joint or
several, to which the Company or any such director or officer or any such Person
may become  subject under the  Securities  Act or any other statute or at common
law,  insofar as such  losses,  claims,  damages or  liabilities  (or actions in
respect  thereof) arise out of or are based upon information in writing provided
to the Company by such holder of such Warrant Stock contained,  on the effective
date  thereof,  in  any  Registration  Statement  under  which  securities  were
registered  under  the  Securities  Act at  the  request  of  such  holder,  any
preliminary  prospectus or final prospectus  contained therein, or any amendment
or supplement thereto.

           (c) If the  indemnification  provided  for in this Section 9 from the
indemnifying  party is unavailable to an indemnified  party hereunder in respect
of any losses,  claims,  damages,  liabilities or expenses  referred to therein,
then the indemnifying  party, in lieu of indemnifying  such  indemnified  party,
shall  contribute to the amount paid or payable by such  indemnified  party as a
result  of  such  losses,  claims,  damages,  liabilities  or  expenses  in such
proportion as is


<PAGE>


                                       25

appropriate  to  reflect  the  relative  fault  of the  indemnifying  party  and
indemnified  parties in  connection  with the  actions  which  resulted  in such
losses, claims, damages,  liabilities or expenses, as well as any other relevant
equitable  considerations.  The relative  fault of such  indemnifying  party and
indemnified  parties  shall be  determined  by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information  supplied by, such indemnifying party or
indemnified  parties,  and the parties'  relative intent,  knowledge,  access to
information and  opportunity to correct or prevent such action.  The amount paid
or payable by a party as a result of the losses,  claims,  damages,  liabilities
and  expenses  referred  to above  shall be deemed to include any legal or other
fees or  expenses  reasonably  incurred  by such  party in  connection  with any
investigation or proceeding.

           The parties  hereto agree that it would not be just and  equitable if
contribution  pursuant  to  this  Section  9(c)  were  determined  by  pro  rata
allocation or by any other method of  allocation  which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent  misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to  contribution  from any Person
who was not guilty of such fraudulent misrepresentation.

           9.8  TERMINATION  OF  RESTRICTIONS.   Notwithstanding  the  foregoing
provisions  of Section 9, the  restrictions  imposed  by this  Section  upon the
transferability  of the Warrants,  the Warrant Stock and the  Restricted  Common
Stock (or Common  Stock  issuable  upon the  exercise of the  Warrants)  and the
legend  requirements of Section 9.1 shall terminate as to any particular Warrant
or share of Warrant Stock or Restricted  Common Stock (or Common Stock  issuable
upon the exercise of the Warrants)  (i) when and so long as such security  shall
have been  effectively  registered  under the  Securities  Act and  disposed  of
pursuant  thereto or (ii) when the  Company  shall have  received  an opinion of
counsel reasonably  satisfactory to it that such legend is not required in order
to ensure compliance with the Securities Act. Whenever the restrictions  imposed
by Section 9 shall terminate as to this Warrant,  as hereinabove  provided,  the
Holder  hereof shall be entitled to receive from the Company,  at the expense of
the  Company,  a new  Warrant  bearing  the  following  legend  in  place of the
restrictive legend set forth hereon:

           "THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT
           CONTAINED IN SECTION 9 HEREOF TERMINATED ON ________________, 19__,
           AND ARE OF NO FURTHER FORCE AND EFFECT."

All Warrants issued upon  registration of transfer,  division or combination of,
or in  substitution  for,  any Warrant or Warrants  entitled to bear such legend
shall have a similar legend endorsed thereon.  Wherever the restrictions imposed
by this Section shall  terminate as to any share of Restricted  Common Stock, as
hereinabove  provided,  the holder thereof shall be entitled to receive from the
Company,  at the Company's expense,  a new certificate  representing such Common
Stock not bearing the restrictive legend set forth in Section 9.1(a).



<PAGE>


                                       26

           9.9 LISTING ON  SECURITIES  EXCHANGE.  If the Company  shall list any
shares of Common Stock on any securities exchange, it will, at its expense, list
thereon,  maintain and, when necessary,  increase such listing of, all shares of
Common  Stock  issued  or,  to  the  extent  permissible  under  the  applicable
securities exchange rules, issuable upon the exercise of this Warrant so long as
any shares of Common Stock shall be so listed during any such Exercise Period.

           9.10 CERTAIN LIMITATIONS ON REGISTRATION RIGHTS.  Notwithstanding the
other provisions of Section 9:

           (i)       the Company  shall not be obligated to register the Warrant
                     Stock of any  holder  if, in the  opinion of counsel to the
                     Company  reasonably  satisfactory  to the  holder  and  its
                     counsel  (or,  if the  holder  has  engaged  an  investment
                     banking  firm,  to such  investment  banking  firm  and its
                     counsel),  the sale or other  disposition  of such holder's
                     Warrant Stock, in the manner proposed by such holder (or by
                     such  investment  banking  firm),  may be effected  without
                     registering  such Warrant Stock under the  Securities  Act;
                     and

           (ii)       the Company shall not be obligated to register the Warrant
                      Stock  of any  holder  pursuant  to  Section  9.3,  if the
                      Company has had a registration statement, under which such
                      holder  had a right to have  its  Warrant  Stock  included
                      pursuant to Section 9.3 or 9.4, declared  effective within
                      one  year  prior to the date of the  request  pursuant  to
                      Section 9.3; provided, however, that if any holder elected
                      to have shares of its Warrant  Stock  included  under such
                      registration statement but some or all of such shares were
                      excluded  pursuant to the last  sentence of Section 9.3 or
                      9.4,  then such  one-year  period  shall be reduced to six
                      months.

           9.11 SELECTION OF MANAGING UNDERWRITERS.  The managing underwriter or
underwriters  for any  offering of Warrant  Stock to be  registered  pursuant to
Section 9.3 shall be  selected by the holders of a majority of the shares  being
so registered  (other than any shares being registered  pursuant to Section 9.4)
and shall be reasonably acceptable to the Company.

10.        SUPPLYING INFORMATION

           The Company  shall  cooperate  with each Holder of a Warrant and each
holder of  Restricted  Common  Stock in  supplying  such  information  as may be
reasonably  necessary  for such  holder  to  complete  and file any  information
reporting forms presently or hereafter required by the Commission as a condition
to the  availability of an exemption from the Securities Act for the sale of any
Warrant or Restricted Common Stock.



<PAGE>


                                       27

11.        LOSS OR MUTILATION

           Upon  receipt by the Company  from any Holder of evidence  reasonably
satisfactory  to it of the  ownership  of and the loss,  theft,  destruction  or
mutilation of this Warrant and indemnity  reasonably  satisfactory  to it and in
case of mutilation  upon  surrender and  cancellation  hereof,  the Company will
execute and  deliver in lieu hereof a new Warrant of like tenor to such  Holder;
provided,  however,  that in the  case of  mutilation,  no  indemnity  shall  be
required if this Warrant in identifiable  form is surrendered to the Company for
cancellation.

12.        OFFICE OF THE COMPANY

           As long as any of the Warrants remain outstanding,  the Company shall
maintain an office or agency  (which may be the principal  executive  offices of
the Company) where the Warrants may be presented for exercise,  registration  of
transfer, division or combination as provided in this Warrant.

13.        FINANCIAL AND BUSINESS INFORMATION

           13.1 QUARTERLY INFORMATION.  The Company will deliver to each Holder,
as soon as practicable  after the end of each of the first three quarters of the
Company,  and in any event within 45 days  thereafter,  one copy of an unaudited
consolidated  balance sheet of the Company and its  subsidiaries as at the close
of such quarter, and the related unaudited consolidated statements of income and
changes in  financial  position of the Company for such quarter and, in the case
of the second and third quarters, for the portion of the fiscal year ending with
such quarter, setting forth in each case in comparative form the figures for the
corresponding  periods in the previous  fiscal year.  Such financial  statements
shall be prepared by the Company in accordance  with GAAP and accompanied by the
certification  of the  Company's  chief  executive  officer  or chief  financial
officer  that such  financial  statements  are  complete and correct and present
fairly the consolidated financial position, results of operations and changes in
financial  position of the Company  and its  subsidiaries  as at the end of such
quarter and for such year-to-date period, as the case may be.

           13.2 ANNUAL  INFORMATION.  The Company will deliver to each Holder as
soon as practicable after the end of each fiscal year of the Company, and in any
event within 90 days thereafter, one copy of:

                      (i) an audited  consolidated  balance sheet of the Company
           and its subsidiaries as at the end of such year, and

                      (ii) audited consolidated  statements of income,  retained
           earnings  and  changes in  financial  position of the Company and its
           subsidiaries for such year;



<PAGE>


                                       28

setting forth in each case in comparative form the figures for the corresponding
periods in the previous  fiscal year; all prepared in accordance  with GAAP, and
which  audited  financial  statements  shall be  accompanied  by (i) an  opinion
thereon of the independent  certified public  accountants  regularly retained by
the Company,  or any other firm of independent  certified public  accountants of
recognized  national  standing selected by the Company and (ii) a report of such
independent certified public accountants confirming any adjustment made pursuant
to Section 4 during such year.

           13.3  FILINGS.  The Company will file on or before the required  date
all  regular  or  periodic  reports  (pursuant  to the  Exchange  Act)  with the
Commission and will deliver to Holder promptly upon their becoming available one
copy of each  report,  notice  or proxy  statement  sent by the  Company  to its
stockholders generally,  and of each regular or periodic report (pursuant to the
Exchange   Act)  and  any   Registration   Statement,   prospectus   or  written
communication (other than transmittal letters) (pursuant to the Securities Act),
filed by the Company with (i) the Commission or (ii) any securities  exchange on
which shares of Common Stock are listed.

14.        APPRAISAL

           The  determination  of the Appraised  Value per share of Common Stock
shall be made by an investment  banking firm of nationally  recognized  standing
selected  by  the  Company  and  acceptable  to  the  Majority  Holders.  If the
investment  banking  firm  selected  by the  Company  is not  acceptable  to the
Majority  Holders and the Company and the  Majority  Holders  cannot  agree on a
mutually  acceptable  investment banking firm, then the Majority Holders and the
Company shall each choose one such  investment  banking firm and the  respective
chosen firms shall agree on another investment banking firm which shall make the
determination.  The Company  shall  retain,  at its sole cost,  such  investment
banking  firm as may be  necessary  for the  determination  of  Appraised  Value
required by the terms of this Warrant.

15.        LIMITATION OF LIABILITY

           No provision hereof,  in the absence of affirmative  action by Holder
to purchase shares of Common Stock,  and no enumeration  herein of the rights or
privileges of Holder hereof, shall give rise to any liability of such Holder for
the  purchase  price of any Common  Stock or as a  stockholder  of the  Company,
whether  such  liability  is  asserted  by the  Company or by  creditors  of the
Company.

16.        REPURCHASE BY THE COMPANY OF WARRANT

           16.1      OBLIGATION TO REPURCHASE WARRANT.

           (a) Upon the earlier of (i) April 1, 1998 and (ii) 10  Business  Days
after delivery of an Event Notice  (defined  below) with respect to the proposed
consummation of a merger,  sale of all or substantially  all of the property and
assets of the Company or sale of the majority of the


<PAGE>


                                       29

outstanding  shares of Common  Stock of the  Company  (each,  an  "Event")  (the
"Repurchase Date"), the Company shall repurchase this Warrant in its entirety in
the manner  set forth in  Section  16.2  below,  from such  Holder for an amount
determined  by  multiplying  (i) the number of shares of Common Stock subject to
this  Warrant by (ii) the  difference  between (A) the higher of (i) the Current
Market  Price of one share of Common  Stock on the date of such  notice and (ii)
the Current  Market  Price of one share of Common  Stock on [March 11, 1997] and
(B) the Current  Warrant Price per share of Common Stock as of the relevant date
described in Section 16.2.  Nothing herein shall preclude the exercise by Holder
of any portion of this Warrant exercisable at any time prior to such repurchase.

                                                                                
                                                                                
                    (b) The  Company  shall give the Holder at least 20 Business
Days' written notice prior to the consummation of an Event (the "Event Notice").

                    (c) The Company hereby agrees that the repurchase obligation
set  forth in  paragraph  (a)  hereof  shall  be a  condition  precedent  to the
consummation of any Event.

           16.2      DETERMINATION AND PAYMENT OF REPURCHASE PRICE.

                    (a) The purchase price for any  repurchase  pursuant to this
Section 16 (the  "Repurchase  Price")  shall be determined as of 5 days prior to
the applicable Repurchase Date. On the Repurchase Date, each Holder shall assign
to the Company such Holder's  Warrant or portion thereof being  repurchased,  as
the case may be,  without any  representation  or warranty,  by the surrender of
such  Holder's  Warrant at the  principal  office of the Company  referred to in
Section 2.1 against payment  therefor of the Repurchase  Price by, at the option
of such Holder,  (i) wire transfer to an account in a bank located in the United
States  designated  by such  Holder  for such  purpose  or (ii) a  certified  or
official bank check drawn on a member of the New York Clearing  House payable to
the order of such Holder.

                    (b) Each  Holder  shall have the right at any time to object
to the determination of

Book  Value,  if  relevant  to the  determination  of the  Repurchase  Price  by
specifying  in writing to the Company the nature of its  objection  and,  unless
such  objection is resolved by  agreement  of the Company and such  Holder,  the
Company  and such  Holder  shall  each have the right to  subject  the  disputed
determination  to  separate  firms  of  independent  accountants  of  recognized
national  standing for a joint resolution of the objection of such Holder (which
firms  of  independent  accountants  may,  in  either  case,  be  the  firms  of
accountants  regularly  retained by the Company or such  Holder).  If such firms
cannot  jointly  resolve the objection of such Holder,  then,  unless  otherwise
directed by agreement of the Company and such Holder,  such firms shall in their
sole discretion choose another firm of independent  certified public accountants
of recognized national standing, which is not the regular auditor of such Holder
or the Company,  which firm shall resolve such  objection.  In either case,  for
purposes hereof the determination so made shall be conclusive and binding on the
Company,  such Holder and all Persons claiming under or through any of them, and
any adjustment in the  determination  of Book Value and the Repurchase Price per
share of Common Stock resulting from such determination  shall be made. The cost
of any


<PAGE>


                                       30

such determination shall be borne by the Company if it results in an increase of
the aggregate  Repurchase Price for all shares of Common Stock issuable upon the
exercise  hereof and by such Holder if it results in no adjustment or a decrease
of the aggregate  Repurchase  Price for all shares of Common Stock issuable upon
the exercise hereof.

                    (c) In the event that the  determination  of the  Repurchase
Price  requires an opinion from an investment  banking firm or accounting  firm,
all costs and fees associated therewith shall be paid by the Company.

17.        MISCELLANEOUS

           17.1  NONWAIVER  AND  EXPENSES.  No course of dealing or any delay or
failure to exercise any right hereunder on the part of Holder shall operate as a
waiver of such right or otherwise prejudice Holder's rights, powers or remedies.
If the Company fails to make, when due, any payments provided for hereunder,  or
fails to comply with any other provision of this Warrant,  the Company shall pay
to Holder such  amounts as shall be  sufficient  to cover any costs and expenses
including,  but not limited to, reasonable  attorneys' fees,  including those of
appellate proceedings, incurred by Holder in collecting any amounts due pursuant
hereto  or in  otherwise  enforcing  any  of  its  rights,  powers  or  remedies
hereunder.

           17.2  NOTICE  GENERALLY.   Any  notice,  demand,  request,   consent,
approval,  declaration,  delivery or other  communication  hereunder  to be made
pursuant to the provisions of this Warrant shall be  sufficiently  given or made
if in writing and either  delivered in person with receipt  acknowledged or sent
by registered or certified  mail,  return receipt  requested,  postage  prepaid,
addressed as follows:

                     (a) If to any  Holder or holder of  Warrant  Stock,  at its
           last known address  appearing on the books of the Company  maintained
           for such purpose.

                     (b)       If to the Company at
                               3050 North Horshoe Drive, Suite 260
                               Naples, Florida 34104

or at such  other  address  as may be  substituted  by  notice  given as  herein
provided.  The giving of any notice required  hereunder may be waived in writing
by the party  entitled to receive such notice.  Every notice,  demand,  request,
consent, approval, declaration,  delivery or other communication hereunder shall
be  deemed to have  been  duly  given or served on the date on which  personally
delivered, with receipt acknowledged,  or three (3) Business Days after the same
shall  have been  deposited  in the  United  States  mail.  Failure  or delay in
delivering  copies  of  any  notice,  demand,  request,  approval,  declaration,
delivery or other communication to the person designated above to receive a copy
shall in no way  adversely  affect the  effectiveness  of such  notice,  demand,
request, approval, declaration, delivery or other communication.



<PAGE>


                                       31

           17.3  INDEMNIFICATION.  The  Company  agrees  to  indemnify  and hold
harmless Holder from and against any liabilities,  obligations, losses, damages,
penalties,  actions,  judgments, suits, claims, costs, attorneys' fees, expenses
and disbursements of any kind which may be imposed upon, incurred by or asserted
against Holder in any manner relating to or arising out of (i) Holder's exercise
of this  Warrant  and/or  ownership  of any  shares of Warrant  Stock  issued in
consequence  thereof,  or (ii) any litigation to which Holder is made a party in
its  capacity as a  stockholder  of the  Company;  provided,  however,  that the
Company  will not be  liable  hereunder  to the  extent  that  any  liabilities,
obligations,  losses, damages,  penalties,  actions,  judgments,  suits, claims,
costs,  attorneys'  fees,  expenses  or  disbursements  are  found  in  a  final
non-appealable  judgment  by a  court  to  have  resulted  from  Holder's  gross
negligence,  bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.

           17.4 REMEDIES.  Each holder of Warrant and Warrant Stock, in addition
to being entitled to exercise all rights granted by law,  including  recovery of
damages,  will be entitled to specific performance of its rights under Section 9
of this Warrant.  The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of  Section 9 of this  Warrant  and  hereby  agrees to waive the  defense in any
action for specific performance that a remedy at law would be adequate.

           17.5  SUCCESSORS  AND ASSIGNS.  Subject to the provisions of Sections
3.1 and 9, this  Warrant  and the rights  evidenced  hereby  shall  inure to the
benefit of and be binding upon the  successors of the Company and the successors
and assigns of Holder. The provisions of this Warrant are intended to be for the
benefit  of all  Holders  from  time  to  time of this  Warrant,  and  shall  be
enforceable by any such Holder.

           17.6  AMENDMENT.  This Warrant and all other Warrants may be modified
or amended or the  provisions  hereof  waived  with the  written  consent of the
Company and the Majority Holders,  provided that no such Warrant may be modified
or amended to reduce the number of shares of Common Stock for which such Warrant
is  exercisable  or to increase  the price at which such shares may be purchased
upon  exercise  of such  Warrant  (before  giving  effect to any  adjustment  as
provided therein) without the prior written consent of the Holder thereof.



<PAGE>


                                       32


           17.7 SEVERABILITY.  Wherever possible, each provision of this Warrant
shall  be  interpreted  in  such  manner  as to be  effective  and  valid  under
applicable  law, but if any  provision of this Warrant shall be prohibited by or
invalid under  applicable law, such provision shall be ineffective to the extent
of such  prohibition or invalidity,  without  invalidating the remainder of such
provision or the remaining provisions of this Warrant.

           17.8  HEADINGS.  The  headings  used  in  this  Warrant  are  for the
convenience of reference  only and shall not, for any purpose,  be deemed a part
of this Warrant.

           17.9 GOVERNING LAW. This Warrant shall be governed by the laws of the
State of New York, without regard to the provisions thereof relating to conflict
of laws.


Dated:April 14, 1997

                                               COMMUNITY CARE OF AMERICA, INC.



                                               By:____________________________
                                      Name:
                                     Title:

                                               DAIWA HEALTHCO-2 LLC



                                               By:_____________________________
                                      Name:
                                     Title:


<PAGE>


                                       33

                           EXHIBIT A SUBSCRIPTION FORM

                 [To be executed only upon exercise of Warrant]

           The  undersigned   registered  owner  of  this  Warrant   irrevocably
exercises  this  Warrant  for the  purchase of _____  Shares of Common  Stock of
Community Care of America, Inc. and herewith makes payment therefor,  all at the
price and on the terms and  conditions  specified  in this  Warrant and requests
that  certificates  for the shares of Common  Stock  hereby  purchased  (and any
securities or other property  issuable upon such exercise) be issued in the name
of and delivered to _______________ whose address is  ____________________  and,
if such  shares of Common  Stock  shall not  include all of the shares of Common
Stock issuable as provided in this Warrant, that a new Warrant of like tenor and
date for the  balance  of the  shares  of Common  Stock  issuable  hereunder  be
delivered to the undersigned.



                                                    ----------------------------
                           (Name of Registered Owner)



                                                    ----------------------------
                         (Signature of Registered Owner)



                                                    ----------------------------
                                                    (Street Address)



                                                    ----------------------------
                                                    (City)  (State)   (Zip Code)


NOTICE:    The signature on this  subscription  must correspond with the name as
           written  upon the face of this Warrant in every  particular,  without
           alteration.



<PAGE>


                                       34

                            EXHIBIT B ASSIGNMENT FORM


           FOR VALUE RECEIVED the undersigned  registered  owner of this Warrant
hereby  sells,  assigns and transfers  unto the Assignee  named below all of the
rights of the  undersigned  under this  Warrant,  with  respect to the number of
shares of Common Stock set forth below:

Name and Address of Assignee                 Number of Shares of Common Stock




and does hereby irrevocably  constitute and appoint  ___________________________
attorney-in-fact  to register  such  transfer on the books of Community  Care of
America, Inc. maintained for the purpose, with full power of substitution in the
premises.


Dated:_________________________      Print Name:___________________

                                     Signature:____________________

                                     Witness:______________________

NOTICE:    The signature on this  assignment  must  correspond  with the name as
           written  upon the face of this Warrant in every  particular,  without
           alteration.



<PAGE>


                                       35

                            EXHIBIT C CONVERSION FORM

The undersigned  registered owner of this Warrant hereby  irrevocably  elects to
convert,  pursuant to Section 2.2 of this  Warrant,  ____% of this  Warrant into
shares of the Common Stock of Community  Care of America,  Inc. (the  "Shares"),
and  requests  that  certificates  for the  Shares (or any  securities  or other
property  issuable upon such  conversion) be issued in the name of and delivered
to __________________  whose address is ______________ and, if such Shares shall
not include all Shares issuable as provided in this Warrant,  that a new Warrant
of like tenor and date for the balance of Shares issuable hereunder be delivered
to the undersigned.

The number of Shares to br received by the  undersigned  shall be  calculated in
accordance with the provisions of Section 2.2 of this Warrant.


                                    ----------------------------------
                                    (Name of Registered Owner)


                                    ----------------------------------
                                    (Signature of Registered Owner)



                                    ----------------------------------
                                    (Street Address)



                                    ----------------------------------
                                    (City)   (State)   (Zip Code)

NOTICE:    The signature on this  conversion  form must correspond with the name
           as written upon the face of this Warrant in every particular, without
           alteration.