Exhibit
10.29


 


THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE HEREUNDER HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAWS AND MUST BE HELD INDEFINITELY UNLESS SUBSEQUENTLY
REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR DISPOSED
OF PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.


 


WARRANT


	
   

  	
   

  	
   

  
	
  Company:

  	
   

  	
  Prospect
  Medical Holdings, Inc.,

  
	
   

  	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  Number
  of Shares:

  	
   

  	
  Forty
  Thousand (40,000)

  
	
   

  	
   

  	
   

  
	
  Class
  of Stock:

  	
   

  	
  Common
  Stock

  
	
   

  	
   

  	
   

  
	
  Initial
  Exercise Price:

  	
   

  	
  $3.00
  per share

  
	
   

  	
   

  	
   

  
	
  Issued
  as of:

  	
   

  	
  July 3,
  1999

  
	
   

  	
   

  	
   

  
	
  Expiration
  Date:

  	
   

  	
  Seven
  (7) years after the date of this Warrant.

  



 


FOR VALUE RECEIVED, the adequacy and receipt of which is hereby acknowledged,
Prospect Medical Holdings, Inc., a Delaware corporation, hereby certifies that
IMPERIAL BANCORP, a California corporation, and its successors and assigns, are
entitled to purchase from the Company at any time and from time to time on and
after the date hereof until 12:00 midnight California local time on the
Expiration Date at an initial exercise price of THREE DOLLARS AND NO CENTS
($3.00) per share of Common Stock Forty Thousand (40,000) fully paid and
nonassessable shares of Common Stock of the Company; on the terms and
conditions hereinafter set forth.


 


The number of such shares of Common Stock and the Exercise Price are
subject to adjustment as provided in this Warrant.  Anything contained in this Warrant to the contrary
notwithstanding, the number of shares of Common Stock which may be issued upon
exercise of this Warrant by any Regulated Warrantholder shall never exceed such
amount (the “Maximum Amount”) as may be permitted under the Bank Holding
Company Act, or any successor statute, or under any other federal or state
banking laws or regulations to which such Regulated Warrantholder may be
subject at the time of such exercise. 
If the number of shares of Common Stock which may be issued upon
exercise of this Warrant exceeds the Maximum Amount, the number of shares of
Common Stock into which this Warrant may be exercised will be reduced to the
Maximum Amount and the Company will pay to the Warrantholder by check or in
cash such amount that equals (a) the difference obtained by subtracting the Exercise
Price from the Current Market Price, multiplied by


 


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(b)
the number of shares of Common Stock by which the Warrant is reduced pursuant
to this Paragraph.


 


1.                                       Certain Definitions.  As used in this Warrant, the following terms
have the following definitions:


 


“Additional Shares of Common Stock” means all shares of Common
Stock issued or issuable by the Company after the date of this Warrant.


 


“Bank” means Imperial Bank, a California banking corporation,
and its successors and assigns.


 


“Common Stock” means the Company’s Common Stock, par value $.01
per share, and includes any common stock of the Company of any class or classes
resulting from any reclassification or reclassifications thereof which is not
limited to a fixed sum or percentage of par value in respect of the rights of
the holders thereof to participate in dividends and in the distribution of
assets upon the voluntary or involuntary liquidation, dissolution or winding up
of the Company.


 


“Company” means Prospect Medical Holdings,
Inc., a Delaware corporation.


 


“Convertible Securities” means evidence of indebtedness, shares
of stock or other securities which are at any time directly or indirectly
convertible into or exchangeable for Additional Shares of Common Stock.


 


“Current Market Price” of a share of Common Stock or of any
other security as of a relevant date means: (i) the Fair Value thereof as
determined in accordance with clause (ii) of the definition of Fair Value with
respect to Common Stock or any other security that is not listed on a national
securities exchange or traded on the over-the-counter market or quoted on
NASDAQ, and (ii) the average of the daily closing prices for the ten (10)
trading days before such date (excluding any trades which are not bona fide
arm’s length transactions) with respect to Common Stock or any other security
that is listed on a national securities exchange or traded on the
over-the-counter market or quoted on NASDAQ. 
The closing price for each day shall be (i) the last sale price of
shares of Common Stock or such other security, regular way, on such date or, if
no such sale takes place on such date, the average of the closing bid and asked
prices thereof on such date, in each case as officially reported on the
principal national securities exchange on which the same are then listed or
admitted to trading, or (ii) if no shares of Common Stock or if no securities
of the same class as such other security are then listed or admitted to trading
on any national securities exchange, the average of the reported closing bid
and asked prices thereof on such date in the over-the-counter market as shown
by the National Association of Securities Dealers automated quotation system
or, if no shares of Common Stock or if no securities of the same class as such
other security are then quoted in such system, as published by the National
Quotation Bureau, Incorporated or any similar successor organization, and in
either case as reported by any member firm of the New York Stock Exchange
selected by the Warrantholders.


 


“Exchange Act” means the Securities Exchange Act of 1934.


 


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“Exercise Period” means the period commencing on the date hereof
and ending at 12:00 midnight California local time on the Expiration Date.


 


“Exercise Price” means initially Three Dollars and No Cents
($3.00) per share, subject to adjustment as provided in this Warrant.


 


“Expiration Date” means the date that is Seven (7) years after
the date of this Warrant.


 


“Fair Value” means: (i) with respect to a share of Common Stock
or any other security, the Current Market Price thereof, and (ii) with respect
to any other property, assets, business or entity, an amount determined in
accordance with the following procedure: The Company and the holders of the
Warrants and Warrant Shares, as applicable, shall use their best efforts to
mutually agree to a determination of Fair Value within ten (10) days of the
date of the event requiring that such a determination be made.  If the Company and such holders are unable
to reach agreement within said ten (10) day period, the Company and such
holders shall within ten (10) days of the expiration of the ten (10) day period
referred to above each retain a separate independent investment banking firm
(which firm shall not be the investment banking firm regularly retained by the
Company).  If either the Company or such
holders fails to retain such an investment banking firm during such period, then
the independent investment banking firm retained by such holders or the
Company, as the case may be, acting alone, shall take the actions outlined
below.  Such firms shall determine
(within thirty (30) days of their being retained) the Fair Value of the
security, property, assets, business or entity, as the case may be, in question
and deliver their opinion in writing to the Company and to such holders.  If such firms cannot jointly make the
determination, then, unless otherwise directed by agreement of the Company and
such holders, such firms, in their sole discretion, shall choose another
investment banking firm independent of the Company and such holders, which firm
shall make the determination and render an opinion as promptly as
practicable.  In either case, the
determination so made shall be conclusive and binding on the Company and such
holders.  The fees and expenses of any
such determination made by any and all such independent investment banking
firms shall be paid by the Company.  If
there is more than one holder of Warrants, and/or Warrant Shares entitled to a
determination of Fair Value in any particular instance, each action to be taken
by the holders of such Warrants and/or Warrant Shares under this
Section shall be taken by a majority in interest of such holders and the
action taken by such majority (including as to any mutual agreement with the
Company with respect to Fair Value and as to any selection of investment
banking firms) shall be binding upon all such holders.  In the case of a determination of the Fair
Value per share of Common Stock, the Company and such holders shall not take
into consideration, and shall instruct all such investment banking firms not to
take into consideration, any premium for shares representing control of the
Company, any discount for any minority interest therein or any restrictions on
transfer under applicable federal and state securities laws or otherwise.


 


“Indemnified Party” and “Indemnifying Party” have the
meanings set forth in Section 1l(e)(iii).


 


“Loan Agreement” means that certain Amended and Restated
Revolving Credit Agreement, dated as of July 3, 1999 between the Company
and Bank, as amended or restated from time to time.


 


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“Prior Warrants” has the meaning ascribed to such term in
Paragraph 6(c)(iii)(A) hereof.


 


“Registrable Stock” means: (i) all Warrant Shares which are
issuable to the Warrantholders pursuant to the Warrants, whether or not the
Warrants have in fact been exercised and whether or not such Warrant Shares
have in fact been issued, (ii) all Warrant Shares acquired by the
Warrantholders pursuant to the Warrants, (iii) any shares of Common Stock,
whether or not such shares of Common Stock have in fact been issued, and stock
or other securities of the Company issued upon conversion of, in a stock split
or reclassification of, or a stock dividend or other distribution on, or in
substitution or exchange for, or otherwise in connection with, such Warrant
Shares.  For purposes of Section 11,
a Warrantholder of record shall be treated as the record holder of the related
Warrant Shares and other securities issuable pursuant to the Warrants.


 


“Regulated Warrantholder” means any Warrantholder which is, or
the parent of which is, subject to the Bank Holding Company Act, or any
successor statute, or any other federal or state banking laws and regulations.


 


“Securities Act” means the Securities Act of 1933, as amended.


 


“Warrant(s)” means this Warrant and any warrants issued in
exchange or replacement of this Warrant or upon transfer hereof.


 


“Warrantholder” means
IMPERIAL BANCORP, a California corporation, and its successors and assigns.


 


“Warrant Shares”
means shares of Common Stock issuable to Warrantholders pursuant to the
Warrants.


 


2.                                       Exercise of Warrant. 
This Warrant may be exercised, in whole or in part, at any time and from
time to time during the Exercise Period by written notice to the Company and
upon payment to the Company of the Exercise Price (subject to adjustment as
provided herein) for the shares of Common Stock in respect of which the Warrant
is exercised.


 


3.                                       Form of Payment of Exercise Price. 
Anything contained herein to the contrary notwithstanding, at the option
of the Warrantholders, the Exercise Price may be paid in any one or a
combination of the following forms: (a) by wire transfer to the Company, (b) by
the Warrantholder’s check to the Company, (c) by the cancellation of any
indebtedness owed by the Company and/or any subsidiaries of the Company to the
Warrantholder, and/or (d) by the surrender to the Company of Warrants, Warrant
Shares, Common Stock and/or other securities of the Company and/or any
subsidiaries of the Company having a Fair Value equal to the Exercise Price.


 


4.                                       Cashless Exercise/Conversion.  In
lieu of exercising this Warrant as specified in Sections 2 and 3 above, the
Warrantholders may from time to time at the Warrantholders’ option convert this
Warrant, in whole or in part, into a number of shares of Common Stock of the
Company determined by dividing (A) the aggregate Fair Value of such shares or other
securities otherwise


 


4

















 


issuable
upon exercise of this Warrant minus the aggregate Exercise Price of such shares
by (B) the Fair Value of one such share.


 


5.                                       Certificates for Warrant Shares; New Warrant.  The
Company agrees that the Warrant Shares shall be deemed to have been issued to
the Warrantholders as the record owner of such Warrant Shares as of the close
of business on the date on which payment for such Warrant Shares has been made
(or deemed to be made by conversion) in accordance with the terms of this
Warrant.  Certificates for the Warrant
Shares shall be delivered to the Warrantholders within a reasonable time, not
exceeding five (5) days, after this Warrant has been exercised or
converted.  A new Warrant representing
the number of shares, if any, with respect to which this Warrant remains
exercisable also shall be issued to the Warrantholders within such time so long
as this Warrant has been surrendered to the Company at the time of exercise.


 


6.                                       Adjustment of Exercise Price, Number of
Shares and Nature of Securities Issuable Upon Exercise of Warrants.


 


(a)                                  Exercise Price: Adjustment of Number of
Shares.  The Exercise Price shall be subject to
adjustment from time to time as hereinafter provided.  Upon each adjustment of the Exercise Price, the Warrantholders
shall thereafter be entitled to purchase, at the Exercise Price resulting from
such adjustment, a number of shares determined by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment and dividing
the product thereof by the Exercise Price resulting from such adjustment.


 


(b)                                 Adjustment of Exercise Price Upon Issuance of
Common Stock.  If and whenever after the date hereof the
Company shall issue or sell Additional Shares of Common Stock without
consideration or for a consideration per share less than the Exercise Price
then in effect immediately prior to the issuance or sale of such shares, then
the Exercise Price in effect immediately prior to such issuance or sale of such
shares shall be reduced to the lesser of (a) the amount of such consideration
per share of Additional Shares so issued (with the consideration being deemed
to be $.01 per share for issuances for no consideration), and (b) the Current
Market Price of the Common Stock.


 


No adjustment of the Exercise Price, however, shall be made in an
amount less than $.01 per share, but any such lesser adjustment shall be
carried forward and shall be made at the time and together with the next
subsequent adjustment which, together with any adjustments so carried forward,
shall amount to $.01 per share or more.


 


The provisions of this Section 6(b) shall not apply to any
Additional Shares of Common Stock which are distributed to holders of Common
Stock pursuant to a stock split for which an adjustment is provided for under
Section 6(f).


 


(c)                                  Further Provisions for Adjustment of Exercise
Price Upon Issuance of Additional Shares of Common Stock and Convertible
Securities.  For purposes of Section 6(b), the
following provisions shall also be applicable:


 


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(i)                                     In case at any time on or after the date
hereof, the Company shall declare any dividend, or authorize any other
distribution, upon any stock of the Company of any class, payable in Additional
Shares of Common Stock or by the issuance of Convertible Securities, such
declaration or distribution shall be deemed to have been issued or sold (as of
the record date) without consideration and shall thereby cause an adjustment in
the Exercise Price as required by Section 6(b).


 


(ii)                                  (A)                              In case at any time on or after the date hereof, the Company shall in
any manner issue or sell any Convertible Securities, whether or not the rights
to exchange or convert thereunder are immediately exercisable, there shall be
determined the price per share for which Additional Shares of Common Stock are
issuable upon the conversion or exchange thereof, such determination to be made
by dividing (a) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange thereof by (b) the maximum aggregate
number of Additional Shares of Common Stock issuable upon conversion or
exchange of all such Convertible Securities for such minimum aggregate amount
of additional consideration; and such issue or sale shall be deemed to be an
issue or sale for cash (as of the date of issue or sale of such Convertible
Securities) of such maximum number of Additional Shares of Common Stock at the
price per share so determined, and shall thereby cause an adjustment in the
Exercise Price, if such an adjustment is required by Section 6(b) hereof.


 


(B)                                If such Convertible Securities shall by their
terms provide for an increase or increases, with the passage of time, in the
amount of additional consideration, if any, payable to the Company, or in the
rate of exchange upon the conversion or exchange thereof, the adjusted Exercise
Price shall, upon any such increase becoming effective, be increased to such
Exercise Price as would have been in effect had the adjustments made upon the
issuance of such Convertible Securities been made upon the basis of (and the
total consideration received therefor) (a) the issuance of the number of shares
of Common Stock theretofore actually delivered upon the exercise of such Convertible
Securities, (b) the issuance of all Common Stock, all Convertible Securities
and all rights and options to purchase Common Stock issued after the issuance
of such Convertible Securities, and (c) the original issuance at the time of
such change of any such Convertible Securities then still outstanding; provided,
however, that any such increase or increases shall not exceed, in the
aggregate, the amount of the original reduction of the Exercise Price
attributable to the Convertible Securities.


 


(C)                                If any rights of conversion or exchange
evidenced by such Convertible Securities shall expire without having been
exercised, the adjusted Exercise Price shall forthwith be readjusted to such
Exercise Price as would have been in effect had an adjustment with respect to
such Convertible Securities been made on the basis that the only Additional
Shares of Common Stock issued or sold were those issued upon the conversion or
exchange of such Convertible Securities, and that they were issued or sold for
the consideration actually received by the Company upon such exercise, plus the
consideration, if any, actually received by the Company for the granting of
such Convertible Securities.


 


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(iii)                               (A)                              In case at any time on or after the date hereof, the Company shall in
any manner grant or issue any rights or options to subscribe for, purchase or
otherwise acquire Additional Shares of Common Stock, whether or not such rights
or options are immediately exercisable, except for: (x) four hundred
seventy-seven thousand one hundred nineteen (477,119) shares of Common Stock
issuable upon exercise of those outstanding employee stock options which are in
existence as of the date hereof, (y) two hundred six thousand three hundred sixty
(206,360) shares of Common Stock issuable upon the exercise of warrants in
existence as of the date hereof, other than this Warrant, but including a
warrant for 132,375 shares of Common Stock issued to Bank on July 3,1997,
as amended and restated and a warrant for Sixty Thousand Three Hundred and
Fifty (60,350) shares of Common Stock issued to Bank on February 6, 1998,
as amended and restated (the “Prior Warrants”), and issuable under certain
other agreements of the Company which agreements are in existence as of the
date hereof and (z) 35,000 shares of Common Stock reserved for issuance upon
the exercise of options granted by the Company in an acquisition permitted
under the Loan Agreement, as such shares of Common Stock are more fully set
forth in Section 12(a) below, there shall be determined the price per
share for which Additional Shares of Common Stock are issuable upon the
exercise of such rights or options, such determination to be made by dividing
(a) the total amount, if any, received or receivable by the Company as
consideration for the granting of such rights or options, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the exercise of such rights or options if the maximum number of Additional
Shares were issued pursuant to such rights or options for such minimum
aggregate amount of additional consideration, by (b) the maximum number of
Additional Shares of Common Stock of the Company issuable upon the exercise of
all such rights or options for such minimum aggregate amount of additional
consideration; and the granting of such rights or options shall be deemed to be
an issue or sale for cash (as of the date of the granting of such rights or
options) of such maximum number of Additional Shares of Common Stock at the
price per share so determined, and shall thereby cause an adjustment in the
Exercise Price, if such an adjustment is required by Section 6(b) hereof.


 


(B)                                If such rights or options shall by their
terms provide for an increase or increases, with passage of time, in the amount
of additional consideration payable to the Company upon the exercise thereof,
the adjusted Exercise Price shall, upon any such increases becoming effective,
be increased to such Exercise Price as would have been in effect had the
adjustments made upon the issuance of such rights or options been made upon the
basis of (and the total consideration received therefor) (a) the issuance of
the number of shares of Common Stock theretofore actually delivered upon the
exercise of such rights or options, (b) the issuance of all Common Stock, all
rights and options and all Convertible Securities issued after the issuance of
such rights and options, and (c) the original issuance at the time of such
change of any such rights or options then still outstanding; provided, however,
that any such increase or increases in the Exercise Price shall not exceed, in
the aggregate, the amount of the original reduction of the Exercise Price
attributable to the grant of such rights or options.


 


(C)                                If any such rights or options shall expire
without having been exercised, the adjusted Exercise Price shall forthwith be
readjusted to such Exercise Price as would have been in effect had an
adjustment with respect to such rights or options been made on the basis that
the only Additional Shares of Common Stock so issued or sold were those issued
or sold upon


 


7

















 


the
exercise of such rights or options and that they were issued or sold for the
consideration actually received by the Company upon such exercise, plus the
consideration, if any, actually received by the Company for the granting of
such rights or options.


 


(iv)                              (A)                              In case at any time on or after the date hereof, the Company shall
grant any rights or options to subscribe for, purchase or otherwise acquire
Convertible Securities, there shall be determined the price per share for which
Additional Shares of Common Stock are issuable upon the exchange or conversion
of such Convertible Securities if such rights or options were exercised, such
determination to be made by dividing (a) the total amount, if any, received or
receivable by the Company as consideration for the issuance of such rights or
options, plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the exercise of such rights or options if the
maximum number of Convertible Securities were issued pursuant to such rights or
options for such minimum aggregate amount of additional consideration, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Company upon the exchange or conversion of such Convertible Securities if the
maximum number of Additional Shares were issued pursuant to such Convertible
Securities for such minimum aggregate amount of additional consideration, by
(b) the maximum aggregate number of Additional Shares of Common Stock issuable
upon the exchange or conversion of the Convertible Securities for such minimum
aggregate amount of additional consideration; and the issue or sale of such
rights or options shall be deemed to be an issue or sale for cash (as of the
date of the granting of such rights or options) of such maximum number of
Additional Shares of Common Stock at the price per share so determined, and thereby
shall cause an adjustment in the Exercise Price, if such an adjustment is
required by Section 6(b).


 


(B)                                If such rights or options to subscribe for or
otherwise acquire Convertible Securities shall by their terms provide for an
increase or increases, with the passage of time, in the amount of additional
consideration payable to the Company upon the exercise, exchange or conversion
thereof, the adjusted Exercise Price shall, forthwith upon any such increase
becoming effective, be increased to such Exercise Price as would have been in
effect had the adjustments made upon the issuances of such rights or options
been made upon the basis of (and the total consideration received therefor) (a)
the issuance of the number of shares of Common Stock theretofore actually
delivered upon the exchange or conversion of such Convertible Securities, (b)
the issuances of all Common Stock and all rights, options and Convertible
Securities issued after the issuance of such rights and options, and (c) the
original issuances at the time of such change of any such rights, options and
Convertible Securities issued upon exercise of such rights or options which are
then still outstanding; provided, however, that any such increase or increases
shall not exceed, in the aggregate, the amount of the original reduction of the
Exercise Price attributable to the grant of such rights or options.


 


(C)                                If any such rights, options or rights of
conversion or exchange of such Convertible Securities shall expire without
having been exercised, exchanged or converted, the adjusted Exercise Price
shall forthwith be readjusted to such Exercise Price as would have been in
effect had an adjustment been made with respect to such rights, options or
rights of conversion or exchange of such Convertible Securities on the basis
that the only Additional Shares of Common Stock so issued or sold were those
issued or sold upon the exercise of such rights or options and


 


8

















 


exchange
or conversion of such Convertible Securities and that they were issued or sold
for the consideration actually received by the Company upon exercise of such
rights and options and exchange or conversion of such Convertible Securities,
plus the consideration, if any, actually received by the Company for the
granting of such rights, options or Convertible Securities.


 


(v)                                 In any case where an adjustment has been made
in the Exercise Price upon the issuance of Convertible Securities or any rights
or options to purchase Convertible Securities or Additional Shares of Common
Stock pursuant to this Section 6(c), no further adjustment shall be made
at the time of the conversion of any such Convertible Securities or at the time
of the exercise of any such rights or options.


 


(vi)                              In case at any time on or after the issuance
of this Warrant any shares of Common Stock or Convertible Securities shall be
issued or sold for a consideration other than cash, the amount of the
consideration other than cash payable to the Company shall be deemed to be the
Fair Value of such consideration. 
Whether or not the consideration so received is cash, the amount thereof
shall be determined after deducting therefrom any expenses incurred or any
underwriting commissions or concessions or discounts paid or allowed by the Company
in connection therewith.


 


(vii)                           In case at any time the Company shall fix a
record date of the holders of its Common Stock for the purpose of entitling
them (a) to receive a dividend or other distribution payable in Common Stock,
Convertible Securities or rights or options to purchase either thereof, or (b)
to subscribe for or purchase Common Stock, Convertible Securities or rights or
options to purchase either thereof, then such record date shall be deemed to be
the date of the issue or sale of the shares of Common Stock deemed, pursuant to
this Section 6(c), to have been issued or sold upon the declaration of
such dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.


 


(viii)                        The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the purposes of this
Section 6(c).


 


(d)                                 Reorganization,
Reclassification, Consolidation, Merger or Sale.  If any capital reorganization or reclassification of the capital
stock of the Company, or any consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of its assets to
another corporation shall be effected in such a way that holders of Common
Stock shall be entitled to receive cash, stock, securities or assets with
respect to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions shall be made whereby the Warrantholders shall thereafter
have the right to purchase and receive upon the basis and upon the terms and
conditions specified in this Warrant upon exercise of this Warrant and in lieu
of the shares of the Common Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby,
such cash, shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for a number of outstanding shares of Common
Stock equal to the number of shares


 


9

















 


of such Common Stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby, and in any such case appropriate provision shall be
made with respect to the rights and interest of the Warrantholders to the end
that the provisions hereof (including, without limitation, provisions for
adjustments of the Exercise Price and of the number of shares purchasable and
receivable upon the exercise of this Warrant) shall thereafter be applicable,
as nearly as may be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof.  The Company shall not effect any consolidation, merger or sale of
all or substantially all of the assets of the Company unless prior to or
simultaneous with the consummation thereof the successor corporation (if other
than the Company) resulting from such consolidation, merger or purchase of such
assets shall assume, by written instrument executed and mailed or delivered to
the Warrantholders, the obligation to deliver to such Warrantholders such cash
(or cash equivalent), shares of stock, securities or assets as, in accordance
with the foregoing provisions, the Warrantholders may be entitled to receive
and containing the express assumption of such successor corporation of the due
and punctual performance and observance of each provision of this Warrant to be
performed and observed by the Company and of all liabilities and obligations of
the Company hereunder; provided, however, in the case of any
consolidation or merger of the Company with another corporation or the sale of
all or substantially all of its assets to another corporation effected in such
a manner that the holders of Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock, then, at
the election of each Warrantholder, in lieu of receiving such stock, securities
or assets, such Warrantholder shall receive cash equal to the Fair Value of the
Common Stock issuable upon exercise of the Warrant, less the Exercise Price
payable upon exercise thereof.


 


In case any Additional Shares of Common Stock or Convertible Securities
or any rights or options to purchase any Additional Shares of Common Stock or
Convertible Securities shall be issued in connection with any merger of another
corporation into the Company, except for any acquisitions made by the Company
with the proceeds of the loan from Bank as set forth in the Loan Agreement, of
management service organizations which manage medical practices, the amount of
consideration therefor shall be deemed to be the Fair Value of such portion of
the assets of such merged corporation as the Board of Directors of the Company
shall in good faith determine to be attributable to such Additional Shares of
Common Stock, Convertible Securities or rights or options, as the case may be,
and the Exercise Price shall be adjusted in accordance with this
Section 6(d).


 


(e)                                  Company to Prevent Dilution.  In
case at any time or from time to time conditions arise by reason of action
taken by the Company which are not adequately covered by the provisions of this
Section 6, and which might materially and adversely affect the exercise
rights of the Warrantholders under any provision of this Warrant, unless the
adjustment necessary shall be agreed upon by the Company and the
Warrantholders, the Board of Directors of the Company shall appoint a firm of
independent certified public accountants of recognized national standing (who
have not been employed by the Company within the last five years), acceptable
to the Warrantholders, who at the Company’s expense shall give their opinion
upon the adjustment, if any, on a basis consistent with the standards
established in the other provisions of this Section 6, necessary with
respect to the Exercise Price and the number of shares purchasable upon
exercise of the Warrants, so as to preserve, without dilution, the exercise
rights of the Warrantholders.  Upon
receipt of such opinion, such Board of Directors shall forthwith make the
adjustments described therein.


 


10

















 


(f)                                    Stock Splits and Reverse Splits.  In
case at any time the Company shall subdivide its outstanding shares of Common
Stock into a greater number of shares, the Exercise Price in effect immediately
prior to such subdivision shall be proportionately reduced and the number of
shares of Common Stock purchasable pursuant to this Warrant immediately prior
to such subdivision shall be proportionately increased, and conversely, in case
at any time the Company shall combine its outstanding shares of Common Stock
into a smaller number of shares, the Exercise Price in effect immediately prior
to such combination shall be proportionately increased and the number of shares
of Common Stock purchasable upon the exercise of this Warrant immediately prior
to such combination shall be proportionately reduced.


 


(g)           Dissolution,
Liquidation and Winding-Up.  In case
the Company shall, at any time prior to the expiration of this Warrant,
dissolve, liquidate or wind up its affairs, the Warrantholders shall be
entitled, upon the exercise of this Warrant, to receive, in lieu of the shares
of Common Stock of the Company which such Warrantholders would have been
entitled to receive, the same kind and amount of assets as would have been
issued, distributed or paid to such Warrantholders upon any such dissolution,
liquidation or winding up with respect to such shares of Common Stock of the
Company, had such Warrantholders been the holders of record of the Warrant
Shares receivable upon the exercise of this Warrant on the record date for the
determination of those persons entitled to receive any such liquidating
distribution.  After any such
dissolution, liquidation or winding up which shall result in any cash distribution
in excess of the Exercise Price provided for by this Warrant, the
Warrantholders may, at each such Warrantholder’s option, exercise the same
without making payment of the Exercise Price, and in such case the Company
shall, upon the distribution to said Warrantholders, consider that said Exercise
Price has been paid in full to it and in making settlement to said
Warrantholders, shall deduct from the amount payable to such Warrantholders an
amount equal to such Exercise Price.


 


(h)                                 Noncash Consideration.  In
case any Additional Shares of Common Stock or Convertible Securities or any
rights or options to purchase any Additional Shares of Common Stock or
Convertible Securities shall be issued for a consideration in a form other than
cash, the amount of such consideration shall be deemed to be the Fair Value
thereof.


 


(i)                                     Accountants’ Certificate.  In
each case of an adjustment in the number of shares of Common Stock or other
stock, securities or property receivable on the exercise of the Warrants, the
Company at its expense shall cause independent public accountants of recognized
standing selected by the Company and acceptable to the Warrantholders to
compute such adjustment in accordance with the terms of this Warrant and
prepare a certificate setting forth such adjustment and showing in detail the
facts upon which such adjustment is based, including a statement of (a) the
consideration received or to be received by the Company for any Additional
Shares of Common Stock, rights, options or Convertible Securities issued or
sold or deemed to have been issued or sold, (b) the number of shares of Common
Stock of each class outstanding or deemed to be outstanding, (c) the adjusted
Exercise Price and (d) the number of shares issuable upon exercise of this
Warrant.  The Company will forthwith
mail a copy of each such certificate to each Warrantholder.


 


11

















 


7.                                       Special Agreements of the Company.


 


(a)                                  Reservation of Shares.  The
Company covenants and agrees that all Warrant Shares will, upon issuance, be
validly issued, fully paid and nonassessable and free from all preemptive
rights of any stockholder, and from all taxes, liens and charges with respect
to the issue thereof.  The Company
further covenants and agrees that during the period within which the rights represented
by this Warrant may be exercised, the Company will at all times have
authorized, and reserved, a sufficient number of shares of Common Stock to
provide for the exercise of the rights represented by this Warrant.  The Company hereby covenants and agrees to
take all such action as may be necessary to assure that the par value per share
of the Common Stock is at all times equal to or less than the Exercise Price.


 


(b)                                 Avoidance of Certain Actions.  The
Company will not, by amendment of its Articles or Certificate of Incorporation
or through any reorganization, transfer of assets, consolidation, merger, issue
or sale of securities or otherwise, avoid or take any action which would have
the effect of avoiding the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in carrying out all of the provisions of this Warrant and in
taking all of such action as may be necessary or appropriate in order to
protect the rights of the Warrantholders against dilution or other impairment
of their rights hereunder.


 


(c)                                  Securing Governmental Approvals.  If
any shares of Common Stock required to be reserved for the purposes of exercise
of this Warrant require registration with or approval of any governmental
authority under any federal law (other than the Securities Act) or under any
state law before such shares may be issued upon exercise of this Warrant, the
Company will, at its expense, as expeditiously as possible, cause such shares
to be duly registered or approved, as the case may be.


 


(d)                                 Listing on Securities Exchanges; Registration.  If,
and so long as, any class of the Company’s Common Stock shall be listed on any
national securities exchange (as defined in the Exchange Act), the Company
will, at its expense, obtain and maintain the approval for listing upon
official notice of issuance of all Warrant Shares and maintain the listing of
Warrant Shares after their issuance; and the Company will so list on such
national securities exchange, will register under the Exchange Act (or any
similar statute then in effect), and will maintain such listing of, any other
securities that at any time are issuable upon exercise of this Warrant if and
at the time any securities of the same class shall be listed on such national
securities exchange by the Company.


 


(e)                                  Information Rights.  So
long as the Warrantholders hold this Warrant and/or any of the Warrant Shares,
the Company shall deliver to the Warrantholders (i) promptly after mailing, copies
of all communications to the shareholders of the Company, (ii) within ninety
(90) days after the end of each fiscal year of the Company, the annual audited
financial statements of the Company certified by the independent public
accountants of recognized standing, and (iii) within forty-five (45) days after
the end of each of the first three quarters of each fiscal year, the Company’s
quarterly, unaudited financial statements.


 


12

















 


(f)                                    Preemptive Rights.  In
the event the Company offers to the Company’s shareholders the right to
purchase any securities of the Company, then all shares of Common Stock
issuable pursuant to the Warrants shall be deemed to be issued and outstanding
and held by the Warrantholders and the Warrantholders shall be entitled to
participate in such rights offering.


 


(g)                                 Compliance with Law.  The
Company shall comply with all applicable laws, rules and regulations of the
United States and of all states, municipalities and agencies and of any other
jurisdiction applicable to the Company and shall do all things necessary to
preserve, renew and keep in full force and effect and in good standing its
corporate existence and authority necessary to continue its business.


 


8.                                       Fractional Shares.  No
fractional shares or scrip representing fractional shares shall be issued upon
the exercise of this Warrant.  With
respect to any fraction of a share called for upon exercise hereof, the Company
shall pay to the Warrantholder an amount in cash equal to such fraction
multiplied by the Current Market Value of one share of Common Stock.


 


9.                                       Notices of Stock Dividends, Subscriptions,
Reclassifications, Consolidations, Mergers, etc.  If
at any time: (i) the Company shall declare a cash dividend (or an increase in
the then existing dividend rate), or declare a dividend on Common Stock payable
otherwise than in cash out of its net earnings after taxes for the prior fiscal
year; or (ii) the Company shall authorize the granting to the holders of Common
Stock of rights to subscribe for or purchase any shares of capital stock of any
class or of any other rights; or (iii) there shall be any capital
reorganization, or reclassification, or redemption of the capital stock of the
Company, or consolidation or merger of the Company with, or sale of all or
substantially all of its assets to, another corporation or firm; or (iv) there
shall be a voluntary or involuntary dissolution, liquidation or winding up of
the Company, then the Company shall give to the Warrantholders at the addresses
of such Warrantholders as shown on the books of the Company, at least twenty
(20) days prior to the applicable record date hereinafter specified, a written
notice summarizing such action or event and stating the record date for any
such dividend or rights (or, if a record date is not to be selected, the date
as of which the holders of Common Stock of record entitled to such dividend or
rights are to be determined), the date on which any such reorganization,
reclassification, consolidation, merger, sale of assets, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected the holders of Common Stock of record shall be entitled to
effect any exchange of their shares of Common Stock for cash (or cash
equivalent), securities or other property deliverable upon any such
reorganization, reclassification, consolidation, merger, sale of assets,
dissolution, liquidation or winding up.


 


10.                                 Registered Holder; Transfer of Warrants or
Warrant Shares.


 


(a)                                  Maintenance of Registration Books; Ownership
of this Warrant.  The Company shall keep at its principal
office a register in which the Company shall provide for the registration,
transfer and exchange of this Warrant. 
The Company shall not at any time, except upon the dissolution,
liquidation or winding-up of the Company, close such register so as to result
in preventing or delaying the exercise or transfer of this Warrant.


 


13

















 


(b)                                 Exchange and Replacement. 
This Warrant is exchangeable upon surrender hereof by the registered
holder to the Company at its principal office for new Warrants of like tenor
and date representing in the aggregate the right to purchase the number of
shares purchasable hereunder, each of such new Warrants to represent the right
to purchase such number of shares as shall be designated by said registered
holder at the time of surrender. 
Subject to compliance with all restrictions and provisions of this
Warrant, this Warrant and all rights hereunder are transferable in whole or in
part upon the books of the Company by the registered holder hereof in person or
by duly authorized attorney, and new Warrants shall be made and delivered by
the Company, of the same tenor and date as this Warrant but registered in the
name of the transferee(s), upon surrender of this Warrant, duly endorsed, to
said office of the Company.  Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will make and deliver a
new Warrant of like tenor, in lieu of this Warrant, without requiring the
posting of any bond or the giving of any other security.  This Warrant shall be promptly cancelled by
the Company upon the surrender hereof in connection with any exchange, transfer
or replacement.  The Company shall pay
all expenses, taxes and other charges payable in connection with the
preparation, execution and delivery of Warrants pursuant to this
Section 10.


 


(c)                                  Warrants and Warrant Shares Not Registered.  The
holder of this Warrant, by accepting this Warrant, represents and acknowledges
that this Warrant and the Warrant Shares are not being registered under the
Securities Act on the grounds that the issuance of this Warrant and the
offering and sale of such Warrant Shares are exempt from registration under
Section 4(2) of the Securities Act as not involving any public offering.


 


11.                                 Registration.


 


(a)                                  Required Registration. 
After three (3) years from the date of this Warrant, whenever the
Company shall receive a written request therefor from any holder or holders of
at least 10% of the Registrable Stock, the Company shall promptly prepare and
file a registration statement under the Securities Act covering the Registrable
Stock which is the subject of such request and shall use its best efforts to
cause such registration statement to become effective as expeditiously as
possible.  Upon the receipt of such
request, the Company shall promptly give written notice to all holders of
Registrable Stock that such registration is to be effected.  The Company shall include in such
registration statement such Registrable Stock for which it has received written
requests to register such shares by the holders thereof within thirty (30) days
after the effectiveness of the Company’s written notice to such other
holders.  The Registrable Stock owned by
the Warrantholder under this Warrant shall receive priority over all other
shares of stock included in a registration statement under this
Section 1l(a).  Notwithstanding the
above, the Company is obligated to effect only one (1) registration pursuant to
this Section 1l(a).


 


(b)                                 Incidental Registration. 
Each time the Company shall determine to file a registration statement
under the Securities Act (other than on Form S-8 or Form S-4) in connection
with the proposed offer and sale for money of any of its securities by it or by
any of its security holders, the Company will give written notice of its
determination to all holders of Registrable Stock.  Upon the written request of a holder of any Registrable Stock,
the Company will cause all


 


14

















 


such
Registrable Stock, the holders of which have so requested registration thereof,
to be included in such registration statement, all to the extent requisite to
permit the sale or other disposition by the prospective seller or sellers of
the Registrable Stock to be so registered in accordance with the terms of the
proposed offering.  If the registration
statement is to cover an underwritten distribution, the Company shall use its
best efforts to cause the Registrable Stock requested for inclusion pursuant to
this Section 1l(b) to be included in the underwriting on the same terms
and conditions as the securities otherwise being sold through the
underwriters.  If, in the good faith
judgment of the managing underwriter of such public offering, the inclusion of
all of the Registrable Stock requested to be registered would materially and
adversely affect the successful marketing of the other shares proposed to be
offered, then the shares to be sold by the Company, the Registrable Stock to be
included in such offering and the other shares of Common Stock to be included
in such offering shall each be reduced pro rata in proportion to the number of
shares of Common Stock proposed to be included in such offering by each holder
of such shares and by the Company.


 


(c)                                  Registration Procedures.  If
and whenever the Company is required by the provisions of Section 11(a) or
11(b) to effect the registration of Registrable Stock under the Securities Act,
the Company will, at its expense, as expeditiously as possible:


 


(i)                                     In accordance with the Securities Act and the
rules and regulations of the Commission, prepare and file with the Commission a
registration statement on the form of registration statement appropriate with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective until the earlier of (x) the date on
which the securities covered by such registration statement have been sold, or
(y) one hundred eighty (180) days after the effective date thereof, and prepare
and file with the Commission such amendments to such registration statement and
supplements to the prospectus contained therein as may be necessary to keep
such registration statement effective and such registration statement and
prospectus accurate and complete until the securities covered by such registration
statement have been sold;


 


(ii)                                  If the offering is to be underwritten, in
whole or in part, enter into a written underwriting agreement with the holders
of the Registrable Stock participating in such offering and the underwriter in
form and substance reasonably satisfactory to the managing underwriter of the
public offering and the holders of the Registrable Stock participating in such
offering;


 


(iii)                               Furnish to the holders of securities
participating in such registration and to the underwriters of the securities
being registered such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus and such other documents as
such underwriters and holders may reasonably request in order to facilitate the
public offering of such securities;


 


(iv)                              Use its best efforts to register or qualify
the securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating holders
and underwriters may reasonably request;


 


15

















 


(v)                                 Notify the holders participating in such
registration, promptly after it shall receive notice thereof, of the date and
time when such registration statement and each post-effective amendment thereto
has become effective or a supplement to any prospectus forming a part of such
registration statement has been filed;


 


(vi)                              Notify such holders promptly of any request
by the Commission for the amending or supplementing of such registration statement
or prospectus or for additional information;


 


(vii)                           Prepare and file with the Commission,
promptly upon the request of any such holders, any amendments or supplements to
such registration statement or prospectus which, in the opinion of counsel for
such holders, is required under the Securities Act or the rules and regulations
thereunder in connection with the distribution of the Registrable Stock by such
holders;


 


(viii)                        Prepare and promptly file with the
Commission, and promptly notify such holders of the filing of, such amendments
or supplements to such registration statement or prospectus as may be necessary
to correct any statements or omissions if, at the time when a prospectus
relating to such securities is required to be delivered under the Securities
Act, any event has occurred as the result of which any such prospectus or any
other prospectus as then in effect may include an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading;


 


(ix)                                In case any of such holders or any
underwriter for any such holders is required to deliver a prospectus at a time
when the prospectus then in circulation is not in compliance with the
Securities Act or the rules and regulations of the Commission, prepare promptly
upon request such amendments or supplements to such registration statement and
such prospectus as may be necessary in order for such prospectus to comply with
the requirements of the Securities Act and such rules and regulations;


 


(x)                                   Advise such holders, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of any stop order
by the Commission suspending the effectiveness of such registration statement
or the initiation or threatening of any proceeding for that purpose and
promptly use its best efforts to prevent the issuance of any stop order or to
obtain its withdrawal if such stop order should be issued;


 


(xi)                                If requested by the managing underwriter or
underwriters or a holder of Registrable Stock being sold in connection with an
underwritten offering, immediately incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriters and the
holders of a majority of the Registrable Stock being sold agree should be
included therein relating to the plan of distribution with respect to such
Registrable Stock, including information with respect to the Registrable Stock
being sold to such underwriters, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the underwritten (or best
efforts underwritten) offering of the Registrable Stock to be sold in such
offering; and make all required filings of such prospectus supplement or
post-effective amendment


 


16

















 


as soon as notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment;


 


(xii)                             Cooperate with the selling holders of
Registrable Stock and the managing underwriters, if any, to facilitate the
timely preparation and delivery of certificates representing Registrable Stock
to be sold and not bearing any restrictive legends; and enable such Registrable
Stock to be in such denominations and registered in such names as the managing
underwriters may request at least two business days prior to any sale of
Registrable Stock to the underwriters;


 


(xiii)                          Prepare a prospectus supplement or
post-effective amendment to the registration statement or the related prospectus
or any document incorporated therein by reference or file any other required
documents so that, as thereafter delivered to the purchasers of the Registrable
Stock, the prospectus will not contain an untrue statement of material fact or
omit to state any material fact necessary to make the statements therein not
misleading;


 


(xiv)                         Enter into such agreements (including an
underwriting agreement) and take all such other actions in connection therewith
in order to expedite or facilitate the disposition of such Registrable Stock
and in such connection, whether or not an underwriting agreement is entered
into and whether or not the registration is an underwritten registration:


 


(A)                              make such representations and warranties to
the holders of such Registrable Stock and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to underwriters in
primary underwritten offerings;


 


(B)                                If an underwriting agreement is entered into,
the same shall set forth in full the indemnification provisions and procedures
of Section 1 l(e) hereof with respect to all parties to be indemnified
pursuant to said Section; and


 


(C)                                The Company shall deliver such documents and
certificates as may be requested by the holders of the majority of the
Registrable Stock being sold and the managing underwriters, if any, to evidence
compliance with the terms of this Section 1l(c) and with any customary
conditions contained in the underwriting agreement or other agreement entered
into by the Company.


 


The above shall be done at each closing under such underwriting or
similar agreement or as and to the extent required thereunder;


 


(xv)                            Make available for inspection by a
representative of the holders of a majority of the Registrable Stock, any
underwriter participating in any disposition pursuant to a registration
statement, and any attorney or accountant retained by the sellers or
underwriter, all financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company’s officers, directors and
employees to supply all information reasonably requested by any such
representative, underwriter, attorney or accountant in connection with the
preparation of the registration statement; provided, that any records,
information or documents that are designated


 


17

















 


by
the Company in writing as confidential shall be kept confidential by such
persons unless disclosure of such records, information or documents is required
by court or administrative order;


 


(xvi)                         Otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and make generally
available to the Company’s security holders, earning statements satisfying the
provisions of Section 11(a) of the Securities Act, no later than
forty-five (45) days after the end of any twelve (12) month period (or ninety
(90) days, if such a period is a fiscal year) (i) commencing at the end of any
fiscal quarter in which Registrable Stock is sold to underwriters in an underwritten
offering, or, if not sold to underwriters in such an offering, (ii) beginning
with the first month of the Company’s first fiscal quarter commencing after the
effective date of a registration statement;


 


(xvii)                      Not file any amendment or supplement to such
registration statement or prospectus to which a majority in interest of such
holders has objected on the grounds that such amendment or supplement does not
comply in all material respects with the requirements of the Securities Act or
the rules and regulations thereunder, after having been furnished with a copy
thereof at least five (5) business days prior to the filing thereof; provided,
however, that the failure of such holders or their counsel to review or object
to any amendment or supplement to such registration statement or prospectus
shall not affect the rights of such holders or any controlling person or
persons thereof or any underwriter or underwriters therefor under
Section 11(e) hereof; and


 


(xviii)                   At the request of any such holder (i) furnish
to such holder on the effective date of the registration statement or, if such
registration includes an underwritten public offering, at the closing provided
for in the underwriting agreement, an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, addressed to
the underwriters, if any, and to the holder or holders making such request,
covering such matters with respect to the registration statement, the
prospectus and each amendment or supplement thereto, proceedings under state
and federal securities laws, other matters relating to the Company, the
securities being registered and the offer and sale of such securities as are
customarily the subject of opinions of issuer’s counsel provided to underwriters
in underwritten public offerings, and such opinion of counsel shall
additionally cover such legal and factual matters with respect to the
registration as such requesting holder or holders may reasonably request, and
(ii) use its best efforts to furnish to such holder letters dated each such
effective date and such closing date, from the independent certified public
accountants of the Company, addressed to the underwriters, if any, and to the
holder or holders making such request, stating that they are independent
certified public accountants within the meaning of the Securities Act and
dealing with such matters as the underwriters may request, or, if the offering
is not underwritten, 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 in
all material respects with the applicable accounting requirements of the
Securities Act, and additionally covering such other financial matters,
including information as to the period ending immediately prior to the date of
such letter with respect to the registration statement and prospectus, as such
requesting holder or holders may reasonably request.


 


18

















 


(d)                                 Expenses of Registration.  All
expenses incident to the Company’s performance of or compliance with this
Warrant, including, without limitation, the following shall be borne by the
Company, regardless of whether the registration statement becomes effective:


 


(i)                                     All registration and filing fees (including
those with respect to filings required to be made with the National Association
of Securities Dealers, Inc.);


 


(ii)                                  Fees and expenses of compliance with all
securities or blue sky laws (including fees and disbursements of counsel for
the underwriters or selling holders in connection with blue sky qualifications
of the Registrable Stock and in determination of their eligibility for
investment under the laws of such jurisdictions as the managing underwriters or
holders of a majority of the Registrable Stock being sold may designate);


 


(iii)                               Printing, messenger, telephone and delivery
expenses;


 


(iv)                              Fees and disbursements of counsel for the
Company, the underwriters and for the sellers of the Registrable Stock as
hereinafter provided;


 


(v)                                 Fees and disbursements of all independent
certified public accountants of the Company (including the expenses of any
special audit and “comfort” letters required by or incident to such
performance);


 


(vi)                              Fees and disbursements of underwriters
(excluding discounts, commissions or fees of underwriters, selling brokers,
dealer managers or similar securities industry professionals relating to the
distribution of the Registrable Stock or legal expenses of any person other
than the Company and the selling holders); and


 


(vii)                           Fees and expenses of other persons retained
by the Company.


 


The Company will, in any event, pay its internal expenses (including
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the securities to
be registered on each securities exchange on which similar securities issued by
the Company are then listed, rating agency fees and the fees and expenses of
any person, including special experts, retained by the Company.


 


In connection with the registration statement required hereunder, the
Company will reimburse the holders of Registrable Stock being registered
pursuant to the registration statement for the reasonable fees and
disbursements of not more than one counsel (or more than one counsel if
conflict exists among such selling holders in the exercise of the reasonable
judgment of counsel for the selling holders and counsel for the Company) chosen
by the holders of a majority of such Registrable Stock.


 


19

















 


(e)                                  Indemnification.


 


(i)                                     The Company hereby agrees to indemnify each
of the holders of Registrable Stock against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any registration statement, preliminary or final prospectus, or other document
incident to any such registration, qualification or compliance (or in any
related registration statement, notification or the like) or any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by the Company of any rule or regulation promulgated under the
Securities Act applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration, qualification
or compliance, and to reimburse the holders of Registrable Stock (including
officers and directors of the same and controlling persons) for any legal and
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, provided, however,
that the Company will not be liable in any such case to the extent that any
such claim, loss, damage or liability arises out of or is based on any untrue
statement or omission based upon written information furnished to the Company
by Warrantholders in an instrument duly executed by Warrantholders and stated
to be specifically for use therein.


 


(ii)                                  The Warrantholders severally and not jointly
agree to indemnify the Company and its officers and directors and each person,
if any, who controls any thereof within the meaning of Section 15 of the
Securities Act and their respective successors against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement of a material fact contained in any prospectus, offering
circular or other document incident to any registration, qualification or
compliance relating to securities purchased pursuant to the Warrants (or in any
related registration statement, notification or the like) or any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading and will
reimburse the Company and each other person indemnified pursuant to this
subsection (ii) for any legal and any other expenses reasonably incurred
in connection with investigating or defending any such claim, loss, damage,
liability or action; provided, however, that this
subsection (ii) shall apply only if (and only to the extent that) such
statement or omission was made in reliance upon information (including, without
limitation, written negative responses to inquiries) furnished to the Company
by an instrument duly executed by Warrantholders and stated to be specifically
for use in such prospectus, or other document (or related registration
statement, notification or the like) or any amendment or supplement thereto.


 


(iii)                               Each party entitled to indemnification
hereunder (the “Indemnified Party”) shall give notice to the party required to
provide indemnification (the “Indemnifying Party”) promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party (at such Indemnifying Party’s
expense) to assume the defense of any claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall conduct
the defense of such claim or litigation, shall be satisfactory to the
Indemnified Party, and the Indemnified Party may participate in such defense at
such party’s expense, and provided, further, that the omission by any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1l(e) except to


 


20

















 


the
extent that the omission results in a failure of actual notice to the
Indemnifying Party and such Indemnifying Party is materially damaged solely as
a result of the failure to give notice. 
No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.


 


(iv)                              If the indemnification provided for in this Section 11(e)
is unavailable or insufficient to hold harmless an Indemnified Party in respect
of any losses, claims, damages, liabilities, expenses or actions in respect
thereof referred to herein, then the Indemnifying Party shall contribute to the
amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages, liabilities, expenses or actions in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on the one
hand, and the Indemnified Party on the other, in connection with the statements
or omissions which resulted in such losses, claims, damages, liabilities,
expenses or actions as well as any other relevant equitable considerations,
including the failure to give the notice required hereunder.  The relative fault of the Indemnifying Party
and the Indemnified Party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact
relates to information supplied by the Indemnifying Party or the Indemnified
Party and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.  The Company and the Warrantholders agree
that it would not be just and equitable if contributions pursuant to this
Section 1l(e) were determined by pro rata allocation or by any other
method of allocation which did not take account of the equitable considerations
referred to above.  The amount paid or
payable to an Indemnified Party as a result of the losses, claims, damages,
liabilities or actions in respect thereof, referred to above, shall be deemed
to include any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.  Notwithstanding the contribution provisions
of this Section 11(e), in no event shall the amount contributed by any
seller of Registrable Stock exceed the aggregate net offering proceeds received
by such seller from the sale of Registrable Stock to which such contribution or
indemnification claim relates.  No
person guilty of fraudulent misrepresentations (within the meaning of
Section 1l(f) of the Securities Act) shall be entitled to contribution
from any person who is not guilty of such fraudulent misrepresentation.


 


(v)                                 The indemnification required by this
Section 11(e) shall be made by periodic payments during the course of the
investigation or defense, as and when bills are received or expenses
incurred.  Anything contained herein to
the contrary notwithstanding, the maximum aggregate liability of any holder of
Registrable Stock under this Section 1 l(e) shall not exceed the amount of
the net proceeds actually received by such holder from the sale of its
Registrable Stock pursuant to the registration, qualification, notification or
compliance in respect of which such liability arose.


 


(f)                                    Reporting Requirements Under Exchange Act. 
From and after the effective date of the first registration statement
filed by the Company under the Securities Act, the Company shall (whether or
not it shall then be required to do so) timely file such information, documents
and reports as the Commission may require or prescribe under Section 13 or
15(d) (whichever is


 


21

















 


applicable)
of the Exchange Act.  Immediately upon
becoming subject to the reporting requirements of either Section 13 or
15(d) of the Exchange Act, the Company shall forthwith upon request furnish any
holder of Registrable Stock (i) a written statement by the Company that it has
complied with such reporting requirements, (ii) a copy of the most recent
annual or quarterly report of the Company, and (iii) such other reports and
documents filed by the Company with the Commission as such holder may reasonably
request in availing itself of an exemption for the sale of Registrable Stock
without registration under the Securities Act. 
The Company acknowledges and agrees that the purpose of the requirements
contained in this Section l l(f) is to enable any such holder to comply
with the current public information requirement contained in Rule 144 under the
Securities Act should such holder ever wish to dispose of any of the securities
of the Company acquired by it without registration under the Securities Act in reliance
upon Rule 144 (or any other similar exemptive provision).  In addition, the Company shall take such
other measures and file such other information, documents and reports as shall
hereafter be required by the Commission as a condition to the availability of
Rule 144 and Rule 144A under the Securities Act (or any similar exemptive
provision hereafter in effect).


 


(g)                                 Stockholder Information.  The
Company may require each holder of Registrable Stock as to which any
registration is to be effected pursuant to this Section 11 to furnish the
Company such information with respect to such holder and the distribution of
such Registrable Stock as shall be required by law or by the Commission in
connection therewith.


 


(h)                                 Termination of Requirements to Register.  The
obligations of the Company under Sections 11(a) and 11(b) hereof shall
terminate when all of the Registrable Stock may be sold by all holders without
restriction under the Securities Act.


 


12.                                 Representation and Warranties.  The
Company hereby represents and warrants to and covenants with each
Warrantholder, and each holder of Warrant Shares that:


 


(a)                                  Organization and Capitalization of the
Company.  The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware.  As of the date hereof, the
authorized capital of the Company consists of forty million (40,000,000) shares
of Common Stock and one million (1,000,000) shares of Preferred Stock, of which
four million four hundred forty-nine thousand three hundred ninety-two
(4,449,392) shares of Common Stock (except as has been disclosed in writing to
the Warrantholder prior to the date of this Warrant, provided that any
adjustment of such number pursuant to this exception shall be subject to
Section 6 as if issued after the date of this Warrant) and no shares of
Preferred Stock are issued and outstanding. 
The Company has, and at all times during the Exercise Period will have,
reserved for issuance pursuant to the Warrants that number of shares of Common
Stock that are issuable pursuant to the Warrants.  No unissued shares of Common Stock are reserved for any purpose
other than: (i) for issuance upon the exercise of the Warrants, (ii) six
hundred and fifty-three thousand one hundred nineteen (653,119) shares of
Common Stock reserved for issuance upon the exercise of employee stock options,
(iii) two hundred six thousand three hundred sixty (206,360) shares of Common
Stock reserved for issuance upon the exercise of warrants other than this
Warrant (but including the Prior Warrants) and under certain other agreements
of the Company as in existence on the date hereof and (iv) 35,000 shares of
Common Stock reserved for issuance upon the exercise of


 


22

















 


options
granted by the Company in an acquisition permitted by the Loan Agreement.  Except under this Warrant and the Prior
Warrants, there are no preemptive rights in effect with respect to the issuance
of any shares of Common Stock.  All the
outstanding shares of Common Stock and Preferred Stock have been validly issued
without violation of any preemptive or similar rights, are fully paid and
nonassessable and have been issued in compliance with all federal and
applicable state securities laws.


 


(b)                                 Authority.  The Company has full
corporate power and authority to execute and deliver this Warrant, to issue the
shares of Common Stock issuable upon exercise of this Warrant, and to perform
all of its obligations hereunder, and the execution, delivery and performance hereof
has been duly authorized by all necessary corporate action on its part.  This Warrant has been duly executed on
behalf of the Company and constitutes the legal, valid and binding obligation
of the Company enforceable in accordance with its terms.


 


(c)                                  No Legal Bar. 
Neither the execution, delivery or performance of this Warrant nor the
issuance of the shares of Common Stock issuable upon exercise of this Warrant
will (a) conflict with or result in a violation of the Certificate of
Incorporation or By-Laws of the Company, (b) conflict with or result in a
violation of any law, statute, regulation, order or decree applicable to the
Company or any affiliate, (c) require any consent or authorization or filing
with, or other act by or in respect of any governmental authority, or (d)
result in a breach of, constitute a default under or constitute an event
creating rights of acceleration, termination or cancellation under any
mortgage, lease, contract, franchise, instrument or other agreement to which
the Company is a party or by which it is bound.


 


(d)                                 Validity of Shares. 
When issued upon the exercise of this Warrant as contemplated herein,
the shares of Common Stock so issued will have been validly issued and will be
fully paid and nonassessable.  On the
date hereof, the par value of the Common Stock is less than the Exercise Price
per share of Common Stock.


 


13.                                 Continuing Validity.  The
Warrantholder and each holder of Warrant Shares shall continue to be entitled
to all rights to which a Warrantholder is entitled pursuant to the provisions
of this Warrant except such rights as by their terms apply solely to a
Warrantholder, notwithstanding the fact that this Warrant has been exercised or
the period of exercisability has expired. 
The Company will, at any time upon the request of the Warrantholder or a
holder of the Warrant Shares, acknowledge in writing, in form reasonably
satisfactory to the Warrantholder or such holder, the Company’s continuing
obligation to afford to the Warrantholder or such holder all rights to which
the Warrantholder or such holder shall continue to be entitled in accordance
with the provisions of this Warrant; provided, however, that if
the Warrantholder or such holder shall fail to make any such request, such
failure shall not affect the continuing obligation of the Company to afford to
the Warrantholder and such holder all such rights.


 


14.                                 Miscellaneous Provisions.


 


(a)                                           Notice of Expiration.  The
Company shall give written notice to the Warrantholders specifically advising
them of the Expiration Date and of their right to exercise the


 


23

















 


Warrants
not more than one hundred eighty (180) days and not less than ninety (90) days
before the Expiration Date.  If such
written notice is not so given, the Expiration Date shall automatically be
extended until ninety (90) days after the date that the Company gives the
Warrantholders such written notice.


 


(b)                                 Judicial Reference.


 


(i)                                     Other than the appointment of a receiver, or
the exercise of other provisional remedies (any and all of which may be
initiated pursuant to applicable law), each controversy, dispute or claim
arising out of or relating to this Warrant, which controversy, dispute or claim
is not settled in writing within thirty (30) days after the “Claim Date”
(defined as the date on which the Company or a Warrantholder gives written
notice to the other that a controversy, dispute or claim exists), will be
settled by a reference proceeding in California in accordance with the
provisions of Section 638 et seq. 
of the California Code of Civil Procedure, or their successor
section (“CCP”).  which
shall constitute the exclusive remedy for the settlement of any controversy,
dispute or claim concerning this Warrant, including whether such controversy,
dispute or claim is subject to the reference proceeding and except as set forth
above, the parties waive their rights to initiate any legal proceedings against
each other in any court or jurisdiction other than the Superior Court in
counties of Los Angeles or Orange, California (the “Court”).  The referee shall be a retired Judge of the
Court selected by mutual agreement of the parties, and if they cannot so agree
within forty-five (45) days after the Claim Date, the referee shall be promptly
selected by the Presiding Judge of the Court (or his or her
representative).  The referee shall be
appointed to sit as a temporary judge, with all of the powers for a temporary
judge, as authorized by law, and upon selection should take and subscribe to
the oath of office as provided for in Rule 244 of the California Rules of Court
(or any subsequently enacted Rule). 
Each party shall have one peremptory challenge pursuant to CCP
§ 170.6.  The referee shall (i) be
requested to set the matter for hearing within sixty (60) days after the Claim
Date and (ii) try any and all issues of law or fact and report a statement of
decision upon them, if possible, within ninety (90) days of the Claim
Date.  Any decision rendered by the referee
will be final, binding and conclusive and judgment shall be entered pursuant to
CCP §644 in any court in the State of California having jurisdiction.  Any party may apply for a reference
proceeding at any time after thirty (30) days following notice to any other
party of the nature of the controversy, dispute or claim, by filing a petition
for a hearing and/or trial.  All
discovery permitted by this Warrant shall be completed no later than fifteen
(15) days before the first hearing date established by the referee.  The referee may extend such period in the
event of a party’s refusal to provide requested discovery for any reason
whatsoever, including, without limitation, legal objections raised to such
discovery or unavailability of a witness due to absence or illness.  No party shall be entitled to “priority” in
conducting discovery.  Depositions may
be taken by either party upon seven (7) days written notice, and request for
production or inspection of documents shall be responded to within ten (10) days
after service.  All disputes relating to
discovery which cannot be resolved by the parties shall be submitted to the
referee whose decision shall be final and binding upon the parties.  Pending appointment of the referee as
provided herein, the Court is empowered to issue temporary and/or provisional
remedies, as appropriate.


 


(ii)                                  Except as expressly set forth in this
Warrant, the referee shall determine the manner in which the reference
proceeding is conducted including the time and place


 


24

















 


of
all hearings, the order of presentation of evidence, and all other questions
that arise with respect to the course of the reference proceeding.  All proceedings and hearings conducted
before the referee, except for trial, shall be conducted without a court
reporter except that when any party so requests, a court reporter will be used
at any hearing conducted before the referee. 
The party making such a request shall have the obligation to arrange for
and pay for the court reporter.  The
costs of the court reporter at the trial shall be borne equally by the parties.


 


(iii)                               The referee shall be required to determine
all issues in accordance with existing case law and the statutory laws of the
State of California.  The rules of
evidence applicable to proceedings at law in the State of California will be
applicable to the reference proceeding. 
The referee shall be empowered to enter equitable as well as legal
relief, to provide all temporary and/or provisional remedies and to enter
equitable orders that will be binding upon the parties.  The referee shall issue a single judgment at
the close of the reference proceeding which shall dispose of all of the claims
of the parties that are the subject of the reference.  The parties hereto expressly reserve the right to contest or
appeal from the final judgment or any appealable order or appealable judgment
entered by the referee.  The parties
hereto expressly reserve the right to findings of fact, conclusions of laws, a
written statement of decision, and the right to move for a new trial or a
different judgment, which new trial, if granted, is also to be a reference
proceeding under this provision.


 


(iv)                              In the event that the enabling legislation
which provides for appointment of a referee is repealed (and no successor statute
is enacted), any dispute between the parties that would otherwise be determined
by the reference procedure herein described will be resolved and determined by
arbitration.  The arbitration will be
conducted by a retired judge of the Court, in accordance with the California
Arbitration Act, §1280 through §1294.2 of the CCP as amended from time to
time.  The limitations with respect to
discovery as set forth hereinabove shall apply to any such arbitration proceeding.


 


(c)                                  Notices.  All notices hereunder shall
be in writing and shall be deemed to have been given five (5) days after being
mailed by certified mail, addressed to the address below stated of the party to
which notice is given, or to such changed address as such party may have fixed
by notice:


 


	
  To
  the Company:

  	
   

  	
  Prospect
  Medical Holdings, Inc.

  
	
   

  	
   

  	
  515
  S.  Flower Street, Suite 1640

  
	
   

  	
   

  	
  Los
  Angeles, CA 90071

  
	
   

  	
   

  	
  Attention:
  Jacob Y.  Terner, M.D., Chief
  Executive Officer

  
	
   

  	
   

  	
   

  
	
  With
  a copy (which

  	
   

  	
   

  
	
  shall
  not constitute

  	
   

  	
   

  
	
  notice)
  to:

  	
   

  	
  Dale
  S.  Miller, Esq.

  
	
   

  	
   

  	
  Miller
  & Holguin

  
	
   

  	
   

  	
  1801
  Century Park East, 7th Floor

  
	
   

  	
   

  	
  Los
  Angeles, CA 90067

  



 


25

















 


	
  To
  the

  	
   

  	
   

  
	
  Warrantholders

  	
   

  	
   

  
	
  or
  holder of

  	
   

  	
   

  
	
  Warrant
  Shares:

  	
   

  	
  IMPERIAL
  BANCORP

  
	
   

  	
   

  	
  9920
  South La Cienega Boulevard

  
	
   

  	
   

  	
  Inglewood,
  CA 90301

  
	
   

  	
   

  	
  Attention:
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
  With
  a copy (which

  	
   

  	
   

  
	
  shall
  not constitute

  	
   

  	
   

  
	
  notice)
  to:

  	
   

  	
  Richard
  M.  Baker, Esq.

  
	
   

  	
   

  	
  Senior
  Vice President and General Counsel

  
	
   

  	
   

  	
  IMPERIAL
  BANCORP

  
	
   

  	
   

  	
  9920
  South La Cienega Boulevard

  
	
   

  	
   

  	
  Inglewood,
  CA 90301

  



 


provided,
however, that any notice of change of address shall be effective only upon
receipt.


 


(d)                                 Successors and Assigns. 
This Warrant shall be binding upon and inure to the benefit of the
Company, the Warrantholders and the holders of Warrant Shares and the
successors, assigns and transferees of the Company, the Warrantholders and the
holders of Warrant Shares.


 


(e)                                  Attorneys’ Fees.  The
Company agrees to pay, on demand, all attorneys’ fees (including attorneys’
fees incurred pursuant to proceedings arising under the Bankruptcy Code) and
all other costs and expenses which may be incurred by the Warrantholders and
the holders of Warrant Shares in connection with any amendment to this Warrant
and/or in connection with the enforcement of this Warrant or in any way arising
out of, or consequential to the protection, assertion, or enforcement of the
Obligations under the Loan Agreement (or any security therefor), whether or not
suit is brought.


 


(f)                                    Entire Agreement: Amendments and Waivers.  This
Warrant sets forth the entire understanding of the parties with respect to the
transactions contemplated hereby.  The
failure of any party to seek redress for the violation or to insist upon the
strict performance of any term of this Warrant shall not constitute a waiver of
such term and such party shall be entitled to enforce such term without regard
to such forbearance.  This Warrant may
be amended, the Company may take any action herein prohibited or omit to take
action herein required to be performed by it, and any breach of or compliance
with any covenant, agreement, warranty or representation may be waived, only if
the Company has obtained the written consent or written waiver of the majority
in interest of the Warrantholders, and then such consent or waiver shall be
effective only in the specific instance and for the specific purpose for which
given.


 


(g)                                 Severability.  If
any term of this Warrant as applied to any person or to any circumstance is
prohibited, void, invalid or unenforceable in any jurisdiction, such term
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or invalidity without in any way


 


26

















 


affecting
any other term of this Warrant or affecting the validity or enforceability of
this Warrant or of such provision in any other jurisdiction.


 


(h)                                 Headings.  The headings in this Warrant
are inserted only for convenience of reference and shall not be used in the
construction of any of its terms.


 


IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officers effective as of the date first set forth above.


 


	
   

  	
  Prospect
  Medical Holdings, Inc.,

  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/
  R.  Stewart kahn

  	
   

  
	
   

  	
  Name:

  	
  R.  STEWART KAHN

  
	
   

  	
  Title:

  	
  EXECUTIVE VICE
  PRES.

  
					



 


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