WARRANT

                          To Purchase Common Stock of

                         PERENNIAL HEALTH SYSTEMS, INC.

















                                                              Warrant No. __




























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                             TABLE OF CONTENTS

1.   DEFINITIONS                                                        1
     "Additional Shares of Common Stock"                                1
     "Business Day"                                                     1
     "Change of Control:                                                1
     "Closing Date"                                                     2
     "Commission"                                                       2
     "Common Stock"                                                     2
     "Convertible Securities"                                           3
     "Current Market Price"                                             3
     "Current Warrant Price"                                            3
     "Exchange Act"                                                     3
     "Exercise Period"                                                  3
     "Expiration Date"                                                  3
     "GAAP"                                                             3
     "Holder"                                                           4
     "Lender"                                                           4
     "Majority Holders"                                                 4
     "NASD"                                                             4
     "Other Property"                                                   4
     "Person"                                                           4
     "Restricted Common Stock"                                          4
     "Securities Act"                                                   4
     "Transfer"                                                         4
     "Transfer Notice"                                                  4
     "Voting Stock"                                                     4
     "Warrants"                                                         5
     "Warrant Price"                                                    5
     "Warrant Stock"                                                    5

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

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














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4.    ADJUSTMENTS                                                       7
      4.1     Stock Dividends, Subdivisions and Combinations            8
      4.2     Certain Other Distributions                               8
      4.3     Other Provisions Applicable to Adjustments under
              this Section                                              9
      4.4     Reorganization, Reclassification, Merger,
              Consolidation or Disposition of Assets                    9

5.    NOTICES TO WARRANT HOLDERS                                       10
      5.1     Notice of Adjustments                                    10
      5.2     Notice of Certain Corporate Action                       10

6.    NO IMPAIRMENT                                                    10

7.    RESERVATION AND AUTHORIZATION OF COMMON STOCK;
      REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY      11

8.    TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS               12

9.    RESTRICTIONS ON TRANSFERABILITY                                  12
      9.1     Restrictive Legend                                       13
      9.2     Notice of Proposed Transfers; Request for Registration   13
      9.3     Required Registration                                    14
      9.4     Incidental Registration                                  14
      9.5     Registration Procedures                                  15
      9.6     Expenses                                                 17
      9.7     Indemnification and Contribution                         18
      9.8     Termination of Restrictions                              19
      9.9     Listing on Securities Exchange                           20
      9.10    Certain Limitations on Registration Rights               20
      9.11    Selection of Managing Underwriters                       20

10.   SUPPLYING INFORMATION                                            20

11.   LOSS OR MUTILATION                                               21

12.   OFFICE OF THE COMPANY                                            21

13.   FINANCIAL AND BUSINESS INFORMATION                               21
      13.1    Quarterly Information                                    21
      13.2    Annual Information                                       21
      13.3    Filings                                                  22

14.   LIMITATION OF LIABILITY                                          22





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15.   MISCELLANEOUS                                                    22
      15.1    Nonwaiver and Expenses                                   22
      15.2    Notice Generally                                         22
      15.3    Indemnification                                          23
      15.4    Remedies                                                 23
      15.5    Successors and Assigns                                   24
      15.6    Amendment                                                24
      15.7    Severability                                             24
      15.8    Headings                                                 24
      15.9    Governing Law                                            24

EXHIBIT A  SUBSCRIPTION FORM                                           26

EXHIBIT B  ASSIGNMENT FORM                                             27










































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


                                                              Warrant No. __

                                   WARRANT

                         To Purchase Common Stock of

                        PERENNIAL HEALTH SYSTEMS, INC.


     This is to certify that Daiwa Healthco-3 LLC, or registered assigns, is
entitled, at any time from time to time during the Exercise Period, to
purchase from Perennial Health Systems, Inc., a Colorado corporation (the
"Company"), an aggregate of 300,000 shares of Common Stock at a purchase price
of $1.00 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 Closing Date, other than Warrant Stock.

     "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.

     "Change of Control"  shall mean the occurrence of any of the following:

     (i) any Person or group (within the meaning of the rules under Section
13(d) of the Exchange Act) becomes the beneficial owner (within the meaning of
Rule 13d-3 of the Exchange Act), directly or indirectly, of more than 20% of
the total voting power of the then outstanding Voting Stock of the Company;

     (ii) any Person or group (within the meaning of the rules under Section
13(d) of the Exchange Act) commences or effects, or publicly announces an
intention or proposal to commence or effect, a tender offer, exchange offer,












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merger, consolidation, share exchange or other transaction if upon successful
consummation thereof such Person or group would become the beneficial owner
(within the meaning of Rule 13d-3 of the Exchange Act), directly or
indirectly, of more than 20% of the total voting power of the then outstanding
Voting Stock of the Company;

      (iii)  during any period of 24 months, individuals who at the beginning
of such period constituted the Board of Directors of the Company (together
with any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Company was approved by the
vote of a majority of the directors of the Company then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office;

          (iv) the approval by the Board of Directors of the Company (whether
or not subject to approval by the shareholders of the Company) or by the
shareholders of the Company of any plan or proposal for the liquidation or
dissolution of the Company or the distribution of all or a substantial part of
its property, assets or business to shareholders; or

          (v) the consolidation or merger of the Company with or into another
Person, a share exchange involving the Company, or the sale, transfer or other
disposition of all or substantially all the Company's property, assets or
business to another Person, or the approval by the Board of Directors of the
Company  (whether or not subject to approval by the shareholders of the
Company) or by the shareholders of the Company of any agreement, plan or
proposal providing for such a transaction, unless pursuant to the terms of
such transaction the Voting Stock of the Company outstanding immediately prior
to such transaction is changed into or exchanged for securities having a
majority of the voting power of the outstanding Voting Stock of the Person
surviving such merger or consolidation, or which acquired the Company or all
or substantially all of its property, assets and business, immediately after
giving effect to such transaction.

     "Closing Date" shall mean July __, 1999.

     "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, no par value, of the Company
as constituted on the Closing Date, and any capital stock into which such
Common Stock may thereafter be changed, and shall also include (i) capital












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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 4.4) received by or distributed to the
holders of Common Stock in the circumstances contemplated by Section 4.4.

     "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 Common
Stock, either immediately or upon the occurrence of a specified date or a
specified event or other contingency.

     "Current Market Price" shall mean, in respect of any share of Common
Stock on any date herein specified, 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 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 mean the period during which this Warrant is
exercisable pursuant to Section 2.1.

     "Expiration Date" shall mean July __, 2004.







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

     "Holder" shall mean the Person in whose name the Warrant set forth herein
is registered on the books of the Company maintained for such purpose.

     "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976.

     "Lender" shall mean Daiwa Healthco-3 LLC, a Delaware limited liability
company.

     "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 4.4.

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

     "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.

     "Voting Stock" of a Person shall mean all classes of capital stock or
other interests (including, but not limited to, partnership and limited
liability company interests) of such Person then outstanding and entitled
(without regard to the occurrence of any contingencies) to vote in the
election of directors, managers, trustees thereof.









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     "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.

     "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.

2.     EXERCISE OF WARRANT

     2.1     Manner of Exercise.  From time to time after the Closing Date and
until 5:00 P.M., New York time, on the Expiration Date, Holder may exercise
this Warrant, on any Business Day, for all or any part of the shares of Common
Stock purchasable hereunder.

     In order to exercise this Warrant, in whole or in part, Holder shall
deliver to the Company at its principal office at 325 West Main Street, Suite
1400 B, Louisville, Kentucky 40202 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 or the closing of a sale pursuant to the exercise of any tag-along
or other rights of participation by any Holder, 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 one (1)
Business Day 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









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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 the last sentence of Section 2.2 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.

     Payment of the Warrant Price shall be made at the option of the Holder in
cash or by check.

     2.2     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; if such tax or charge is imposed by law upon Holder, it
shall be paid by the Company on behalf of Holder or reimbursed by the Company
if 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.

     2.3     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.

     2.4     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, 13
and 15 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









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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 canceled.  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.

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








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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.

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

          (b)  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 Additional Shares of Common
Stock),

or shall otherwise effect any such distribution, then, upon exercise of this
Warrant, the Company shall deliver to Holder, for no additional consideration,
(on a proportionate basis if this Warrant is exercised in part) such of the










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items described in subparagraphs (a) or (b) above as Holder would have
received if it had exercised this Warrant (whether or not then exercisable)
and become the record owner of the Common Stock issuable upon exercise of this
Warrant immediately prior to the record date for such distribution, together
with any distributions or other payments with respect thereto as Holder would
have received if it had acquired such items at the same time as holders of
Common Stock.  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.  The redemption or other acquisition for value of Common Stock
by the Company or any of its subsidiaries shall be deemed a distribution of
the total consideration paid in such transaction pro rata to the holders of
all outstanding shares of Common Stock.

     If any item described in subparagraphs (a) or (b) above is distributed to
holders of Common Stock while this Warrant is outstanding then any such item
to which Holder would be entitled upon exercise of this Warrant shall at the
time of such distribution be deposited by the Company in escrow (with an
escrow agent reasonably satisfactory to Holder) to be released to Holder upon
such exercise.

     4.3     Other Provisions Applicable to Adjustments under this Section .
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.

     4.4     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 Person
(where the Company is not the surviving Person or where there is a change in
or distribution with respect to the Common Stock of the Company), effect a
share exchange, or sell, transfer or otherwise dispose of all or substantially
all its property, assets or business to another Person and, pursuant to the
terms of such reorganization, reclassification, merger, consolidation, share
exchange or disposition of assets, shares of common stock of the successor or
acquiring Person, 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 Person ("Other Property"), are to be received by or distributed to






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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 Person or of the Company,
if it is the surviving Person, and Other Property receivable upon or as a
result of such reorganization, reclassification, merger, consolidation or
disposition of assets by a holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event.  The
Company shall not consummate any such reorganization, reclassification,
merger, share exchange, consolidation or disposition of assets, unless the
successor or acquiring Person (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 by Holder in good faith 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 Warrant.  For purposes of this Section,
"common stock of the successor or acquiring Person" shall include (i) stock or
other equity interests in such Person 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 shall similarly apply to successive
reorganizations, reclassification, mergers, consolidations, share exchanges or
disposition of assets.

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, or the Company shall authorize, enter
into any agreement with respect to or effect any transactions to which Section
4.4 applies, the Company shall forthwith prepare a certificate to be executed
by the chief financial officer of the Company setting forth, in reasonable
detail, such event and the consequences thereof under the terms of this
Warrant.  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.









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     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, but not limited to,
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 establish any par value of any shares of
Common Stock issuable upon the exercise of this Warrant, (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.

     The Company shall not adopt or permit to exist any "rights plan", "poison
pill" or similar arrangement that does not exempt from its operation the
acquisition of Common Stock or other securities or assets issuable upon
exercise of this Warrant or which otherwise could reasonably be expected to
adversely affect the value of this Warrant or the Warrant Stock to Holder or
otherwise interfere with the realization of the benefits of this Warrant or
the Warrant Stock.  The Company shall not take any action that would result
in, and shall take all such action as may be necessary to prevent, Holder from
being a "significant shareholder" within the meaning of Article 106, Section
205 of the Colorado Business Corporation Act or any comparable provision of
law that may become applicable to the Company.

     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.










                                    11
<PAGE>



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

     From and after the Closing Date, 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 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 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.

     If at any time or from time to time Holder notifies the Company that it
may exercise this Warrant and that it has determined that its acquisition of
the Common Stock or other securities or assets issuable upon exercise of this
Warrant may be subject to the notification and waiting period provisions of
the HSR Act, the Company shall forthwith (and in no event more than five
Business Days after Holder's notice) file such notifications as may be
required to be filed by the Company with respect to such acquisition under the
HSR Act and shall take such other action as Holder may request to satisfy the
requirements of the HSR Act and to obtain expiration or termination of the
applicable waiting period thereunder as quickly as possible.  The Company
shall pay any required filing fee.  The Company shall not consummate any
Change of Control prior to five Business Days after expiration or termination
of any waiting period applicable to the acquisition of Common Stock or other
securities or assets upon exercise of this Warrant or enter into any agreement
providing for (or recommend or otherwise support) a Change of Control on a
basis inconsistent with the foregoing.












                                    12
<PAGE>



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.

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 July __, 1999, originally
issued by Perennial Health Systems, 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 Perennial Health Systems, 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, other than in connection with a Change in Control,








                                    13
<PAGE>



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 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
three 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






                                    14
<PAGE>



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, it will give written notice to all holders
of Warrants or Warrant Stock at least 30 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.

     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 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
under the Securities Act with respect to such securities and the intended
method of distribution (a "Registration Statement") 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







                                    15
<PAGE>



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 from the effective date of such Registration Statement;

          (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 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 Statement, 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
(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










                                    16
<PAGE>



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 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 opinion is being given as
such holders of Warrant Stock may reasonably request or as may be required by
any underwriting agreement that the Company may enter into as contemplated by
subparagraph (f).  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 or as may be required by any
underwriting agreement that the Company may enter into as contemplated in
subparagraph (f).

          (f)  enter into customary agreements (including an underwriting
agreement in such form as the managing underwriter for any offering may
reasonably request), perform its obligations thereunder, use its best efforts
to satisfy the conditions to the underwriters' obligations set forth therein)
and take such other actions as are reasonably required in order to expedite or
facilitate the disposition of such securities;

          (g)     afford such selling security holders and any underwriter,
and their respective representatives, such access to the books and records,
properties, officers, employees, attorneys and auditors of and for the Company
as they may reasonably request and otherwise cooperate in such diligence
investigations as is customary in underwritten public offerings; and

          (h)  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



                                    17
<PAGE>



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

     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








                                    18
<PAGE>



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 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 9.7 (c) were determined by pro rata
allocation or by any other method of allocation which does not take account of







                                    19
<PAGE>



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.

     The Company's obligations under this Section 9.7 are in addition to, and
not in lieu of, any obligations for indemnification or contribution to which
it may be subject under any underwriting agreement.

     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 ________________, ____, 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).

     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.  As used in this Warrant, a "securities exchange"
includes any generally recognized securities market on which the Common Stock
may be authorized for quotation (including, but not limited to, the National








                                  20
<PAGE>



Association of Securities Dealers Automated Quotation or NASDAQ) and "list"
included authorize for quotation.

    9.10     Certain Limitations on Registration Rights.  Notwithstanding the
other provisions of Section 9, the Company shall not be obligated to register
the Warrant Stock of any holder if, in the opinion of counsel to the Company
and concurred in by counsel to such holder and counsel to any investment
banking firm through which such holder proposes to dispose of such Warrant
Stock, the sale or other disposition of such holder's Warrant Stock, in the
manner proposed by such holder, may be effected without registering such
Warrant Stock under the Securities Act.

     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).

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.

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 (it
being understood that the written agreement of Lender shall be sufficient
indemnity) 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.











                                    21
<PAGE>



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;

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.








                                    22
<PAGE>



14.     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.

15.     MISCELLANEOUS

     15.1     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.

     15.2     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:

                325 West Main Street, Suite 1400B
                Louisville, Kentucky 40202

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









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<PAGE>



effectiveness of such notice, demand, request, approval, declaration, delivery
or other communication.

     15.3     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.

     15.4     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.

     15.5     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.

     15.6     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.

     15.7     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.








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<PAGE>



     15.8     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.

     15.9     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: July __ , 1999

                              PERENNIAL HEALTH SYSTEMS, INC.



                              By:____________________________
                              Name:
                              Title:

Attest:


By:_________________________
Name:
Title:
































                                    26
<PAGE>



                         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 Perennial
Health Systems, 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 the within Warrant in
                   every particular, without alteration or enlargement or any
                   change whatsoever.















                                    26
<PAGE>



                          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 __________________
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 the within Warrant in
                   every particular, without alteration or enlargement or any
                   change whatsoever.




























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