MEDICAL ALLIANCE INC, S-1, 1996-08-09

MEDICAL ALLIANCE INC
S-1, 1996-08-09

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 9, 1996.
REGISTRATION NO. 333-
===============================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------

FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
MEDICAL ALLIANCE, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
TEXAS 8099 73-1347577
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Number) Identification Number)
</TABLE>

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

MARK NOVY
MEDICAL ALLIANCE, INC.
2445 GATEWAY DRIVE, SUITE 150
IRVING, TEXAS 75063
(214) 580-8999
(Name, address, including zip code, and telephone number, including area
code, of registrant's principal executive offices and agent for service)
---------------------

COPIES TO:

<TABLE>
<S> <C>
THOMAS W. HUGHES
WALTER EARL BISSEX
RICHARD F. DAHLSON WINSTEAD SECHREST & MINICK P.C.
JACKSON & WALKER, L.L.P. 5400 RENAISSANCE TOWER
901 MAIN STREET, SUITE 6000 1201 ELM STREET
DALLAS, TEXAS 75202 DALLAS, TEXAS 75270
(214) 953-5896 (214) 745-5400
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
---------------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
---------------------

CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
TITLE OF EACH CLASS AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO TO BE OFFERING PRICE AGGREGATE AMOUNT OF
BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Common Stock, par value
$0.002 per share........... shares $ $29,900,000 $10,310
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>

(1) Includes shares subject to the exercise of the Underwriters'
over-allotment option.

(2) Estimated solely for purposes of calculating the registration fee.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
===============================================================================
<PAGE> 2

MEDICAL ALLIANCE, INC.

CROSS REFERENCE SHEET

PURSUANT TO ITEM 501(B) OF REGULATION S-K

<TABLE>
<CAPTION>
ITEM
NUMBER ITEM LOCATION IN PROSPECTUS
- ------ ------------------------------------------ ------------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of
Prospectus.............................. Facing Page; Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus........................... Inside Front and Outside Back Cover Pages
of Prospectus
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges...... Prospectus Summary; Risk Factors
4. Use of Proceeds........................... Use of Proceeds
5. Determination of Offering Price........... Outside Front Cover Page of Prospectus;
Underwriting
6. Dilution.................................. Dilution
7. Selling Security Holders.................. *
8. Plan of Distribution...................... Outside Front Cover Page of Prospectus;
Underwriting
9. Description of Securities to be
Registered.............................. Description of Capital Stock
10. Interests of Named Experts and Counsel.... Legal Matters; Experts
11. Information with Respect to the
Registrant.............................. Outside Front Cover Page of Prospectus;
Prospectus Summary; Risk Factors; The
Company; Use of Proceeds; Dividend
Policy; Dilution; Capitalization;
Selected Consolidated Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management;
Certain Transactions; Principal
Shareholders; Description of Capital
Stock; Shares Eligible for Future Sale;
Underwriting; Legal Matters; Experts;
Additional Information; Consolidated
Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. *
</TABLE>

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

* Not Applicable
<PAGE> 3

SUBJECT TO COMPLETION, DATED AUGUST 9, 1996

PROSPECTUS

[MEDICAL ALLIANCE, INC. LOGO]

COMMON STOCK

------------------------------
All of the shares of Common Stock, $0.002 par value per share
(the "Common Stock"), offered hereby are being sold by Medical Alliance, Inc.
("Medical Alliance" or the "Company"). Prior to this offering (the "Offering"),
there has been no public market for the Common Stock of the Company. It is
currently estimated that the initial public offering price will be between
$ and $ per share. See "Underwriting" for a discussion of the factors to
be considered in determining the initial public offering price. The Company has
applied to have the Common Stock approved for listing on the Nasdaq National
Market under the symbol "MAII."

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

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 6.
------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
<S> <C> <C> <C>
=============================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- ---------------------------------------------------------------------------------------------
Per Share............................... $ $ $
- ---------------------------------------------------------------------------------------------
Total(3)................................ $ $ $
=============================================================================================
</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $500,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
additional shares of Common Stock, on the same terms and conditions
as set forth above, to cover over-allotments, if any. If such option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."

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

The shares of Common Stock are being offered severally by the Underwriters,
subject to prior sale, when, as and if accepted by the Underwriters and subject
to conditions including their right to reject orders, in whole or in part. It is
expected that delivery of the shares will be made at the offices of Bear,
Stearns & Co. Inc., 245 Park Avenue, New York, New York 10167, on or about
, 1996.
------------------------------

BEAR, STEARNS & CO. INC. EQUITABLE SECURITIES CORPORATION

THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE> 4

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

MEDICAL ALLIANCE, INC.

[LOGO]

THE NATION'S LEADING PROVIDER OF SERVICES TO
CREATE TEMPORARY SURGICAL SITES IN THE PHYSICIAN OFFICE

SERVING APPROXIMATELY 2,500 PHYSICIANS
ACROSS THE U.S.

MEDICAL SURGICAL SERVICES

AESTHETIC ELECTIVE SERVICES

DISTRICT OFFICES

FACILITATING PROCEDURES IN GYNECOLOGY, UROLOGY, PODIATRY,
DERMATOLOGY, OTOLARYNGOLOGY AND PLASTIC SURGERY.

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

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

The Company intends to furnish to its shareholders annual reports
containing audited consolidated financial statements certified by independent
public accountants for each year and quarterly reports containing unaudited
consolidated financial statements for the first three quarters of each fiscal
year.
<PAGE> 5

[LOGO]

CREATING TEMPORARY SURGICAL SITES IN THE PHYSICIAN'S OFFICE
TO BENEFIT PAYORS, PHYSICIANS AND PATIENTS

<TABLE>
<S> <C> <C>
INCREASED PHYSICIAN IMPROVED PROCEDURAL COST- HIGH QUALITY MEDICAL SERVICES
PRODUCTIVITY EFFECTIVENESS
- - Ability to perform a broad - Lower facility cost - Physician training and
array - Lower personnel cost credentialing
of procedures - High quality patient care - Protocols and standards for
- - On-site technical assistance office-based procedures
- - Optimizes procedure - Procedure documentation
scheduling
BENEFICIARIES
- PAYORS
- PHYSICIANS
- PATIENTS
GREATER ACCESS TO ADVANCED
MEDICAL TECHNOLOGIES ENHANCED PATIENT SATISFACTION
- - State-of-the-art laser technologies - Lower out-of-pocket expenditures
- - Devices for minimally invasive surgery - Shorter recovery times
- - Integrated medical systems delivered in - Reduced anesthesia requirements
office - Increased scheduling flexibility
</TABLE>
<PAGE> 6

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed financial data, including the
Consolidated Financial Statements and the notes thereto, appearing elsewhere in
this Prospectus. Unless otherwise indicated, all information contained in this
Prospectus: (i) assumes that the Underwriters' over-allotment option is not
exercised, (ii) has been adjusted to give effect to a 1.561-for-1 stock split,
effected through a stock dividend, prior to the consummation of the Offering,
and (iii) has been adjusted to give effect to the conversion of the outstanding
shares of Convertible Preferred Stock into Common Stock upon consummation of the
Offering. "Medical Alliance" or the "Company" refers to Medical Alliance, Inc.
and its subsidiaries.

THE COMPANY

Medical Alliance provides a complete range of services used to create
temporary surgical sites in physician offices in 40 states and Canada and
believes it is the leading provider of such services in the United States. The
Company's services facilitate the migration of established surgical procedures
and advanced medical technologies from hospitals and outpatient surgery centers
to a lower-cost setting, the physician's office. Payors, physicians and patients
benefit from the Company's services through reduced costs for surgical
procedures, increased physician productivity, greater access to advanced medical
technologies and improved patient satisfaction. The Company currently maintains
a network of approximately 2,500 physicians who have utilized the Company's
services and has over 100 managed care contracts that in aggregate cover
approximately 16 million lives. Currently, physicians in the Company's network
perform approximately 6,000 procedures monthly using the Company's services. The
Company's services include:

- Providing on-site technical personnel and medical equipment on a
scheduled basis;

- Monitoring and documenting preoperative, intraoperative and postoperative
procedures;

- Returning the physician's office to its pre-procedure condition;

- Establishing procedural safety and quality assurance protocols for
office-based procedures;

- Facilitating physician training and qualification; and

- Physician credentialing pursuant to contracts with managed care
organizations.

The Company provides its services along two primary business lines: medical
surgical and aesthetic elective services. The Company's medical surgical
services allow physicians to perform approximately 25 different office-based
surgical procedures across numerous specialties, including gynecology, podiatry,
urology and otolaryngology. The Company's aesthetic elective services are
utilized primarily by plastic surgeons and dermatologists for cosmetic
procedures such as skin resurfacing, vascular and pigmented lesion treatment,
and tattoo removal. The Company is generally reimbursed for providing its
medical surgical services by third-party payors, including through contracts
with managed care organizations, and is paid directly by patients for any
required copayments and deductibles. For providing its aesthetic elective
services, the Company is paid directly by patients, generally at the time of
service. The Company derived approximately 64% and 33% of its net revenues in
1995 from the provision of medical surgical and aesthetic elective services,
respectively. None of the Company's net revenues is derived from Medicare or
Medicaid reimbursement.

According to Medical Data International, Inc. ("MDI"), total surgical
procedures in the United States have increased by 12.4% from 25.8 million
procedures in 1990 to 29.0 million procedures in 1994. Over this period, the
number of surgeries performed in an outpatient setting as a percentage of total
surgeries performed annually in the United States has increased. The volume of
outpatient surgical procedures has grown by 71.8% over this period, from 11.0
million procedures, or approximately 43% of total surgeries in 1990, to 18.9
million procedures, or approximately 65% of total surgeries in 1994.
Furthermore, the prevalence of surgical procedures occurring in a physician's
office has increased, representing approximately 12% of total outpatient
procedures performed in 1994 as compared to approximately 6% in 1990. The
Company believes that a broader array of procedures, including more complex
surgeries, is currently being performed in an outpatient

3
<PAGE> 7

setting than was performed in a similar setting in 1990 and believes that the
migration of outpatient procedures to a physician's office will continue.

The Company also believes that the number of aesthetic elective procedures
performed annually in the United States will continue to grow, primarily due to
the development of new technologies for cosmetic procedures, increased public
awareness, shorter recovery times and the aging of the "baby boom" generation.
According to an American Academy of Cosmetic Surgery survey (the "AACS Survey"),
approximately 2.7 million cosmetic procedures were performed in the United
States in 1994. The Company believes that a majority of such procedures are or
can be performed in a physician's office. According to a survey by the American
Society of Plastic and Reconstructive Surgeons (the "ASPRS Survey"), patients
between the ages of 35 and 50 represented 41% of the cosmetic procedures
performed in the United States in 1994, and the number of people who say they
approve of cosmetic surgery, either for themselves or others, has increased 50%
in the last decade. According to the ASPRS Survey, approximately 36% of the
cosmetic procedures performed in 1994 were performed in a physician's office.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company.............. shares
Common Stock to be outstanding after the
Offering(1).................................... shares
Use of proceeds.................................. To repay indebtedness, make capital
expenditures, including the acquisition
of medical equipment, and hire additional
personnel, and for working capital and
general corporate purposes, including
possible acquisitions. See "Use of
Proceeds."
Reserved Nasdaq National Market symbol........... MAII
</TABLE>

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

(1) Excludes 902,315 shares of Common Stock issuable upon the exercise of
outstanding stock options granted under the Company's Amended and Restated
1994 Long-Term Incentive Plan (the "Incentive Plan") (60,106 of which are
exercisable at the initial offering price, assumed to be $ ) at a
weighted average exercise price of $ per share, 294,379 shares of Common
Stock reserved for future option grants or awards under the Incentive Plan
and 49,330 shares of Common Stock issuable upon the exercise of outstanding
warrants at a weighted average exercise price of $1.69 per share. See
"Management -- Incentive Plan" and "Description of Capital
Stock -- Warrants."

4
<PAGE> 8

SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)

<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
------------------------
ACTUAL AS ADJUSTED(5)
------ --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash.................................................................. $1,432 $ 23,252
Working capital....................................................... 2,345 24,165
Total assets.......................................................... 8,931 30,751
Total debt and capital lease obligations.............................. 3,813 457
Convertible preferred stock........................................... 2 --
Total shareholders' equity............................................ 2,758 24,578
</TABLE>

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

(1) Operating expenses include salaries and benefits expense, selling, general
and administrative expense and provision for uncollectible accounts.

(2) Adjusted to give effect to the sale of the shares of Common Stock
offered hereby at an assumed offering price of $ per share, the
application of a portion of the estimated net proceeds therefrom to repay
indebtedness and the conversion of the outstanding Convertible Preferred
Stock into shares of Common Stock as if each had occurred on January 1,
1995. See "Use of Proceeds."

(3) Number of physicians who have used the Company's services to perform an
office-based procedure during the last three months of the period.

(4) Number of mobile field units in service is as of end of period.

(5) "As Adjusted" amounts reflect the sale of shares of Common Stock
offered hereby at an assumed offering price of $ per share and the
application of a portion of the estimated net proceeds therefrom to repay
indebtedness. See "Use of Proceeds."

5
<PAGE> 9

RISK FACTORS

In addition to the other information contained in this Prospectus,
prospective investors should carefully consider the risk factors set forth below
in evaluating an investment in the shares of Common Stock offered hereby.

UNCERTAINTY OF MARKET ACCEPTANCE

There can be no assurance that any of the Company's existing or future
services will gain or maintain market acceptance among physicians, patients and
third-party payors. The Company believes that market acceptance of office-based
procedures, including those performed using the Company's services, depends upon
various factors including: (i) the Company's ability to provide evidence to the
medical community of the efficacy of office-based procedures and the
corresponding benefits to payors, physicians and patients, (ii) the willingness
of physicians to perform and patients to undergo procedures in the physician's
office which have traditionally been performed in a hospital or outpatient
facility, (iii) the willingness of physicians to perform and patients to undergo
procedures under local rather than under general anesthesia, (iv) the
willingness of physicians to utilize the Company's services rather than perform
office-based procedures utilizing their employees and medical equipment, and (v)
the continued availability of third-party reimbursement for certain procedures
performed using the Company's services.

RISK OF ACQUIRING ADVANCED TECHNOLOGY

The Company's future success will depend in large part on the Company's
ability to provide advanced medical technology to physicians. The medical device
industry is characterized by rapid and significant technological change. The
acquisition of medical technology requires substantial expenditures, and there
can be no assurance that the Company will be successful in identifying,
acquiring and receiving timely delivery of technology for which sufficient
demand will exist and that such technology will not become obsolete during its
anticipated product life cycle. There can be no assurance that the Company's
strategy to obtain medical technology through relationships with medical
equipment manufacturers and distributors will be successful or, if successful,
that such relationships can be maintained. In addition, the medical equipment
utilized by the Company requires approval by the Food and Drug Administration
(the "FDA"), and there can be no assurance that such medical equipment will
receive or retain FDA approval for desired current and future applications. The
loss of any FDA approval for such equipment could have a material adverse effect
on the Company's operating results or financial condition. Furthermore, the
medical equipment industry has been characterized by extensive litigation
regarding patents and other intellectual property rights. There can be no
assurance that manufacturers or distributors of medical equipment utilized by
the Company will obtain or retain patents or other intellectual property rights
related to the equipment used by the Company. The Company has entered into an
agreement to be the exclusive mobile provider of Palomar Medical Technologies,
Inc.'s ("Palomar") EpiLaser(TM) in the United States. The loss of such agreement
could have a material adverse effect on the Company's operating results or
financial condition. See "-- Regulation of and Change in the Health Care
Industry" and "Business -- Business Strategy -- Establishing Strategic Alliances
with Medical Equipment Manufacturers."

MANAGEMENT OF GROWTH

The Company has recently experienced, and may continue to experience,
growth in its geographic area of operations, the breadth of services it provides
and the number of its employees. To accommodate recent growth, compete
effectively and manage any future growth, the Company will be required to
continue to implement and improve operational, financial and management
information systems, procedures and controls on a timely basis and to expand,
train, and manage its work force, the failure of any of which could have a
material adverse effect on the Company's operating results or financial
condition. In 1995, the Company began implementation of a new management
information system and expects to continue such implementation through 1997. The
Company's future success will depend, in part, on the successful implementation
of the Company's management information system. See "Business -- Information
Systems."

6
<PAGE> 10

GROWTH THROUGH ACQUISITIONS

The Company's strategy includes growth through acquisitions. There can be
no assurance that the Company will be able to successfully identify, complete or
integrate any acquisition. In addition, there can be no assurance that any
future acquisition will not have a material adverse effect upon the Company's
operating results or financial condition, particularly during the period in
which the operations of the acquired business are being integrated into the
Company. Furthermore, the Company's ability to make acquisitions may depend upon
its ability to obtain financing, and there can be no assurance that financing
will be available to the Company on acceptable terms, or at all. The Company
continually assesses potential acquisition candidates. The Company currently has
no agreement or understanding with respect to any future acquisitions. See
"Business -- Business Strategy."

COMPETITION

The market for aesthetic elective services is highly competitive. The
Company believes that the heightened interest in aesthetic procedures among
physicians and patients, the development of advanced technologies used for
aesthetic procedures and the industry practice of requiring immediate cash
payment for such services will create increased competition in this segment.
Competition in the provision of medical surgical services may also increase
because these services are becoming more accepted by physicians, patients and
third-party payors and because the medical equipment used in providing such
services is readily available from various sources. The Company competes with
companies that offer medical equipment to physicians' offices on either a rental
or a fee-for-service basis, and with hospitals and surgery centers that provide
comparable surgical services. In addition, other health care providers may enter
the market for the provision of temporary office-based surgical services. The
Company also competes with other providers in the health care industry for
access to technology, relationships with third-party payors and relationships
with physicians. Any of these competitors may have greater financial and other
resources than the Company. It is also possible that competitors of the Company
could obtain exclusive rights to technology that the Company currently offers or
expects to offer. The health care industry is highly competitive and is subject
to continuing changes in the manner in which health care services are provided
and the manner in which providers are selected and paid. The Company believes
that the trend toward managed care could increase the competition to obtain
contracts with managed care organizations and other third-party payors. There
can be no assurance that competition will not adversely effect the Company's
operating results or its ability to maintain or increase net revenues. As a
consequence of the foregoing, the Company may not be able to execute its
business strategies or may be required to significantly alter such strategies,
either of which actions could have a material adverse effect upon the Company's
operating results or financial condition. See "Business -- Business Strategy"
and "Business -- Competition."

REIMBURSEMENT RISK

The Company believes that its success will depend, in part, upon the
Company's ability to maintain and develop contracts with managed care
organizations and other third-party payors for reimbursement of its medical
surgical services. The health care industry is experiencing a trend toward cost
containment, and third-party payors are seeking to reduce the cost and control
the utilization of health care services and to negotiate reduced payment
schedules with service providers. There can be no assurance that the Company
will be able to negotiate satisfactory arrangements with managed care
organizations or other third-party payors under such conditions, or at all. See
"Business -- Business Strategy -- Continuing the Development of Managed Care
Contracts."

DEPENDENCE ON KEY PERSONNEL

The Company's future performance is substantially dependent upon the
continued services of its senior management and other key personnel. Because the
Company has a relatively small number of employees, its dependence on retaining
its employees is particularly significant. There can be no assurance that the
Company's current employees will continue to work for the Company. The loss of
the services of one or more of the Company's key employees could adversely
affect the Company's operating results or financial condition.

7
<PAGE> 11

In addition, the Company's growth in revenues has resulted, to a significant
degree, from the hiring and training of new field personnel. The Company's
continued growth will depend, in part, on its ability to attract and retain high
quality field and other personnel. The Company may need to grant additional
stock options to key employees and to provide similar or other forms of
incentive compensation to attract and retain key personnel. See "Management."

REGULATION OF AND CHANGE IN THE HEALTH CARE INDUSTRY

The health care industry is subject to extensive federal and state
regulation. Promulgation of new laws and regulations, or changes in or
reinterpretations of existing laws or regulations, may significantly affect the
Company's business, operating results or financial condition. There can be no
assurance that a review of the Company's operations by courts or regulatory
authorities will not result in a determination that could adversely affect the
operations of the Company. In addition, there can be no assurance that the
regulatory environment in which the Company operates will not change
significantly in the future, which change could adversely affect the Company's
operations, financial condition, business opportunities or future expansion.
Furthermore, the manufacturers of medical equipment utilized by the Company are
subject to extensive regulation by the FDA. Failure of such manufacturers to
comply with FDA regulations could result in the loss of approval by the FDA of
such medical equipment, which could adversely affect the Company's operating
results or financial condition. As consolidation among physician provider groups
continues and provider networks continue to be created, purchasing decisions may
shift to persons with whom the Company has not had prior contact. There can be
no assurance that the Company will be able to maintain its physician, payor or
manufacturer relationships under such circumstances. See "-- Risk of Acquiring
Advanced Technology," "-- Competition" and "Business -- Government Regulation."

POTENTIAL EXPOSURE TO LIABILITY

Physicians, hospitals and other providers in the health care industry are
subject to lawsuits which may allege medical malpractice or other claims. Many
of these lawsuits result in substantial defense costs and judgments or
settlements. The Company does not engage in the practice of medicine, nor does
it control the practice of medicine by physicians utilizing its services or
their compliance with regulatory requirements directly applicable to such
physicians or physician groups. However, the services provided by the Company to
physicians, including actions by its technicians, its establishment of protocols
and its training programs, could give rise to liability claims. The Company
maintains professional and general liability insurance in amounts deemed
appropriate by management. Although the Company has to date not been a party to
any material litigation, including litigation relating to the practice of
medicine, there can be no assurance that the Company will not become involved in
such litigation in the future, that any claim or claims arising from such
litigation will not exceed the Company's insurance coverage or that such
coverage will continue to be available. See "Business -- Insurance."

CONTROL BY DIRECTORS AND EXECUTIVE OFFICERS

Following the consummation of the Offering, the directors and executive
officers of the Company will beneficially own approximately % of the
outstanding shares of Common Stock of the Company. Although such directors and
executive officers do not have any arrangements or understandings among
themselves with respect to the voting of the shares of Common Stock beneficially
owned by them, acting together such persons may be able to effectively control
the Company and direct its affairs and business, including making determinations
with respect to a change in control of the Company, future issuance of Common
Stock or other securities by the Company, declaration of dividends on the Common
Stock and the election of directors. Such control by such existing shareholders
could have the effect of delaying, deferring or preventing a change of control
of the Company which could deprive the Company's shareholders of the opportunity
to sell their shares of Common Stock at prices higher than prevailing market
prices. See "Principal Shareholders."

8
<PAGE> 12

FLUCTUATIONS IN QUARTERLY RESULTS

The Company's quarterly revenues and operating results have varied
significantly in the past and may continue to do so in the future. Quarterly
revenues and operating results will depend upon, among other factors: (i)
seasonal demand for the Company's services, (ii) the timing of new service
introductions by the Company, (iii) the timing of regulatory and third-party
reimbursement approvals, (iv) the timing of acquisitions or entry into new
markets, and (v) the timing of expenditures for medical equipment. Accordingly,
period-to-period comparisons of the Company's revenues and operating results
should not be relied upon as an indication of future performance, and the
results of any quarterly period may not be indicative of the results for a full
year. See "Selected Consolidated Financial Data" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

ABSENCE OF PRIOR PUBLIC MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK
PRICE

Prior to the Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market for the
Common Stock will develop or be sustained after the Offering. The initial public
offering price of the Common Stock will be determined by negotiations between
the Company and the Underwriters and may not be indicative of the market price
of the Common Stock after the Offering. From time to time after the Offering,
there may be significant volatility in the market price for the Common Stock.
Quarterly operating results of the Company, changes in general conditions in the
economy or the health care industry, or other developments affecting the Company
or its competitors, could cause the market price of the Common Stock to
fluctuate substantially. The equity markets have, on occasion, experienced
significant price and volume fluctuations that have affected the market prices
for many companies' securities and that have often been unrelated to the
operating performance of such companies. Any fluctuations that occur in the
equity markets following consummation of the Offering may adversely affect the
market price of the Common Stock. See "Underwriting."

ADVERSE IMPACT OF SHARES ELIGIBLE FOR FUTURE SALE

Sale of shares of Common Stock (including shares issued upon the exercise
of outstanding options and warrants) in the public market after the Offering, or
the perception that such sales could occur, could adversely affect the market
price of the Common Stock. Such sales also might make it more difficult for the
Company to sell equity or equity-related securities in the future at times and
prices that the Company deems appropriate. Upon consummation of the Offering,
the Company will have shares of Common Stock outstanding. The
shares offered hereby will be freely tradable without restriction,
unless purchased by an affiliate of the Company. The remaining shares
are restricted securities (the "Restricted Shares") that may be sold only if
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or sold in accordance with an applicable exemption from registration, such as
Rule 144 promulgated under the Securities Act ("Rule 144"). Of these shares,
less than 2% will be available for sale upon the effective date of the
Registration Statement (the "Effective Date") of which this Prospectus is a
part. Beginning 180 days after the Effective Date, the remainder of these
Restricted Shares will become eligible for sale under Rule 144 or Rule 701
promulgated under the Securities Act ("Rule 701") upon the expiration of
agreements not to sell such shares (the "Lock-up Agreements"). In addition,
348,124 shares subject to currently vested stock options and warrants will
become eligible for sale in the public market upon the expiration of the Lock-up
Agreements. See "Underwriting" and "Shares Eligible for Future Sale."

ANTI-TAKEOVER PROVISIONS

Certain provisions of the Company's Articles of Incorporation and Bylaws
may have the effect of delaying, deferring or preventing a change in control of
the Company, which could deprive the Company's shareholders of the opportunity
to sell their shares of Common Stock at prices higher than prevailing market
prices. Such provisions could also limit the price that certain investors might
be willing to pay in the future for shares of the Company's Common Stock. See
"Description of Capital Stock -- Certain Anti-Takeover Provisions."

9
<PAGE> 13

BROAD DISCRETION WITH RESPECT TO ALLOCATION OF NET PROCEEDS

The Company expects to use a portion of the net proceeds of the Offering to
make capital expenditures, including the acquisition of medical equipment and to
hire additional personnel. The Company has not yet identified the specific uses
for such net proceeds and will, therefore, retain broad discretion as to the
allocation of a significant portion of the net proceeds of the Offering. Pending
such uses, the Company intends to invest the net proceeds in short-term,
interest-bearing, investment-grade securities. See "Use of Proceeds."

SUBSTANTIAL DILUTION AND ABSENCE OF DIVIDENDS

The purchasers of the shares of Common Stock offered hereby will experience
immediate and substantial dilution in the net tangible book value of their
shares of Common Stock as a result of the Offering. In the event the Company
issues additional Common Stock in the future, including shares that may be
issued in connection with future acquisitions or upon the exercise of
outstanding options or warrants, purchasers of Common Stock in the Offering may
experience further dilution in the net tangible book value per share of the
Common Stock of the Company. See "Dilution." The Company has never paid any cash
dividends on its Common Stock and it does not anticipate paying cash dividends
on its Common Stock in the foreseeable future. See "Dividend Policy."

10
<PAGE> 14

THE COMPANY

The Company was incorporated under Texas law in August 1989. The Company's
principal executive offices are located at 2445 Gateway Drive, Suite 150,
Irving, Texas 75063. The Company's telephone number is (214) 580-8999.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Common Stock offered
hereby are estimated to be $21,820,000 ($25,168,000 if the Underwriters'
over-allotment option is exercised in full), assuming an initial public offering
price of $ per share and after deducting underwriting discounts and
commissions, and estimated Offering expenses payable by the Company.

The Company intends to use approximately $3.4 million of the net proceeds
to repay indebtedness under the Company's term loans and revolving credit
facility, which loans bear interest at rates ranging from 0.5% to 1.5% over the
prime rate (which rates ranged from 8.75% to 9.75% as of June 30, 1996) and have
maturity dates ranging from May 30, 1997 to May 15, 2000. The proceeds of such
loans were used to retire indebtedness of the Company and acquire medical
equipment. See "Certain Transactions." The Company anticipates that it will also
use a portion of the net proceeds of the Offering to acquire additional medical
equipment and hire additional field and corporate personnel. The remaining net
proceeds will be used for working capital and general corporate purposes,
including possible acquisitions. The Company currently has no agreement or
understanding with respect to any future acquisitions. Pending such uses, the
Company intends to invest the net proceeds of the Offering in short-term,
interest-bearing, investment-grade securities.

DIVIDEND POLICY

The Company has never paid any cash dividends on its Common Stock. The
Company does not anticipate paying cash dividends on its Common Stock in the
foreseeable future and intends to continue its present policy of retaining
earnings for use in the operations of the Company.

11
<PAGE> 15

DILUTION

The pro forma net tangible book value of the Company as of June 30, 1996,
after giving effect to the conversion of all outstanding shares of Convertible
Preferred Stock into Common Stock on a 1.561 to 1 basis upon consummation of the
Offering, was $2,573,677 or $0.71 per share of Common Stock. Pro forma net
tangible book value per share is determined by dividing the Company's total net
tangible book value (total tangible assets less total liabilities) by the pro
forma number of shares of Common Stock outstanding after giving effect to such
conversion. Without taking into account any other changes in such pro forma net
tangible book value after June 30, 1996, other than to give effect to the sale
of shares of Common Stock offered hereby at an assumed initial public
offering price of $ per share and the application of the estimated net
proceeds therefrom, the pro forma net tangible book value of the Company as of
June 30, 1996 would have been $24,393,677 million or $ per share. This
represents an immediate increase in pro forma net tangible book value of $
per share to existing shareholders and an immediate dilution of $ per share
to new investors purchasing Common Stock in the Offering. The following table
illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share(1).................. $
------
Pro forma net tangible book value per share before the Offering... $ 0.71
------
Increase per share attributable to the Offering...................
------
Pro forma net tangible book value per share after the Offering......
------
Dilution per share to new investors(2).............................. $
======
</TABLE>

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

(1) Assumed initial offering price before deduction of underwriting discounts
and commissions and estimated expenses of the Offering to be paid by the
Company.

(2) As of June 30, 1996, there were options outstanding to purchase a total of
902,315 shares of Common Stock (60,106 of which are exercisable at the
initial offering price, assumed to be $ ) at a weighted average exercise
price of $ per share and warrants outstanding to purchase a total of
49,330 shares of Common Stock at a weighted average exercise price of $1.69
per share. To the extent that any of such options and warrants are
exercised, there will be further dilution to new investors. See
"Management -- Incentive Plan."

The following table summarizes, as of June 30, 1996, the difference between
the existing shareholders and the new investors with respect to the number of
shares of Common Stock purchased (or to be purchased) from the Company, the
total consideration paid (or to be paid) and the average price per share paid
(or to be paid) by the existing shareholders and the new investors, including
net proceeds from the Offering:

<TABLE>
<CAPTION>
PRO FORMA
SHARES PURCHASED(1)(2) TOTAL CONSIDERATION(2) AVERAGE
------------------------ -------------------------- PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
--------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders.............. 3,632,069 % $ 3,393,807 12.4% $ 0.93
New investors...................... 24,000,000 87.6
--------- ----- ----------- -----
Total.................... 100.0% $27,393,807 100.0%
========= ===== =========== =====
</TABLE>

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

(1) Assumes no exercise of outstanding options and warrants. See
"Management -- Incentive Plan."

(2) Gives effect to the conversion of the Convertible Preferred Stock into
Common Stock upon consummation of the Offering.

12
<PAGE> 16

CAPITALIZATION

The following table sets forth: (i) the total capitalization of the Company
as of June 30, 1996, (ii) the pro forma capitalization of the Company as of June
30, 1996, reflecting the conversion of the outstanding shares of Convertible
Preferred Stock into Common Stock, and (iii) such pro forma capitalization as
adjusted to give effect to the sale of the shares of Common Stock
offered hereby at an assumed initial public offering price of $ per share
and the application of a portion of the estimated net proceeds therefrom to
repay approximately $3.4 million of indebtedness.

<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
-----------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------ -------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt (including current portion of long-term
debt)(1)............................................... $ 700 $ 700 $ --
Long-term debt (excluding current portion)(1)............ 2,655 2,655 --
------ -------
Total debt..................................... 3,356 3,356 --
------ -------
Shareholders' equity:
Preferred Stock, par value $0.002; authorized:
2,000,000 shares actual, 5,000,000 shares pro forma
and pro forma as adjusted; issued and outstanding:
797,500 actual, no shares pro forma and pro forma as
adjusted(2)......................................... 2 -- --
Common Stock, par value $0.002; authorized 10,000,000
shares actual, 30,000,000 shares pro forma and pro
forma as adjusted; issued and outstanding: 2,387,172
shares actual, 3,632,069 shares pro forma and
shares pro forma as adjusted(3)........... 5 7
Capital in excess of par value......................... 2,918 2,918 24,734
Accumulated deficit.................................... (157) (157) (157)
Treasury shares at cost, 26,896 shares of Common
Stock............................................... (9) (9) (9)
------ ------- -------
Total shareholders' equity..................... 2,758 2,758
------ ------- -------
Total capitalization........................... $6,114 $6,114 $
====== ======= =======
</TABLE>

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

(1) Excludes capital lease obligations.

(2) Includes 435,000 shares of Series A Convertible Preferred Stock issued and
outstanding and 362,500 shares of Series B Convertible Preferred Stock
issued and outstanding.

(3) Excludes 902,315 shares of Common Stock issuable upon the exercise of
outstanding stock options granted under the Incentive Plan, (60,106 of which
are exercisable at the initial offering price, assumed to be $ ) at a
weighted average exercise price of $ per share, 294,379 shares of Common
Stock reserved for future option grants or rewards under the Incentive Plan
and 49,330 shares of Common Stock issuable upon the exercise of outstanding
warrants at a weighted average exercise price of $1.69 per share. See
"Management -- Incentive Plan" and "Description of Capital
Stock -- Warrants."

13
<PAGE> 17

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth selected consolidated financial data for the
Company for the periods and at the dates indicated. The Company's statement of
operations data for each of the years in the four year period ended December 31,
1995 and its balance sheet data as of December 31, 1992, 1993, 1994 and 1995 are
derived from the Company's financial statements which have been audited by
Coopers & Lybrand L.L.P., independent certified public accountants. The
Company's statement of operations data for the year ended December 31, 1991 and
the balance sheet data as of December 31, 1991, as well as the Company's
statement of operations data for each of the six months ended June 30, 1995 and
1996, and its balance sheet data as of June 30, 1995 and 1996, are derived from
the Company's unaudited financial statements, which in the opinion of management
reflect all adjustments, consisting of only normal recurring adjustments,
necessary for a fair presentation of the information set forth therein. Results
for the six months ended June 30, 1996 are not necessarily indicative of the
results that may be expected for the full fiscal year. The selected consolidated
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Consolidated
Financial Statements and related notes included elsewhere herein.

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------- ----------------
1991 1992 1993 1994 1995 1995 1996
------ ------ ------ ------ ------- ------ ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Revenues........................................... $1,827 $3,148 $3,720 $5,262 $11,177 $4,854 $8,395
Costs and Expenses:
Salaries and benefits................................ 980 1,358 1,643 2,005 3,721 1,686 2,749
Selling, general, and administrative................. 601 1,089 1,214 1,817 3,620 1,539 2,801
Depreciation and amortization........................ 193 283 333 293 719 265 653
Provision for uncollectible accounts................. 400 605 551 781 1,885 743 1,423
------ ------- ------- ------- ------- ------- -------
Total costs and expenses....................... 2,174 3,335 3,741 4,896 9,945 4,233 7,625
------ ------- ------- ------- ------- ------- -------
Operating income (loss)........................ (347) (187) (21) 365 1,232 621 770
Other (income) expense:
Interest income and other, net....................... (1) (3) (2) (6) 12 10 (12)
Interest expense..................................... 126 143 158 179 247 131 151
------ ------- ------- ------- ------- ------- -------
Income (loss) before income taxes.............. (472) (327) (177) 192 973 480 632
Income tax expense (benefit)........................... -- 26 (26) -- 395 195 263
------ ------- ------- ------- ------- ------- -------
Net income (loss).............................. $(472) $(353) $(150) $192 $578 $285 $369
====== ======= ======= ======= ======= ======= =======
Net income (loss) applicable to common stock........... $(472) $(353) $(225) $117 $311 $18 $282
====== ======= ======= ======= ======= ======= =======
Earnings (loss) per share.............................. $ $ $ $ $ $ $
====== ======= ======= ======= ======= ======= =======
Weighted average number of common shares and common
share equivalents....................................
Dividends declared on convertible preferred stock...... $0 $0 $75 $75 $87 $87 $87
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF JUNE 30,
------------------------------------------------- ----------------
1991 1992 1993 1994 1995 1995 1996
------ ------- ------- ------- ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash................................................. $ 12 $ 34 $ 101 $ 109 $1,409 $ 65 $1,432
Working capital...................................... 123 191 121 126 1,913 50 2,345
Total assets......................................... 839 1,382 1,544 2,698 6,443 4,098 8,931
Total debt and capital lease obligations............. 1,077 855 1,101 1,566 2,354 1,825 3,813
Convertible preferred stock.......................... -- 1 1 1 2 1 2
Retained earnings (deficit).......................... (793) (1,146) (1,297) (1,105) (526) (819) (157)
Total shareholders' equity........................... (548) 70 (154) 123 2,431 792 2,758
</TABLE>

14
<PAGE> 18

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the Consolidated
Financial Statements and the notes thereto that appear elsewhere in this
Prospectus.

GENERAL

The Company commenced operations in Oklahoma in August 1989 by providing
medical surgical services to gynecologists in their offices. The Company's
initial focus was to develop contracts with managed care organizations and other
third-party payors and to expand into new markets. By the end of 1991, the
Company had operations in 14 states. The Company continued to expand its range
of services, and introduced during 1993 its second business line by offering
aesthetic elective services. Currently, the Company provides medical surgical
and aesthetic elective services in 40 states and Canada to a network of
approximately 2,500 physicians.

The Company has completed the following three acquisitions: (i) in October
1995, the Company acquired the assets of Mobile Surgical Services of Central
Florida, Inc., a company that offered medical equipment rental services in
central Florida; (ii) in March 1996, the Company acquired the assets of Maasai
Mobile Surgical Services, Inc., a company that offered medical equipment rental
services throughout Utah, Colorado, Washington, Arizona, Nevada and Oregon; and
(iii) in June 1996, the Company acquired the assets of Mobile Laser Services,
Inc., a company that offered medical equipment rental services in Illinois. All
of such acquisitions were accounted for under the purchase method and,
accordingly, are included in the Company's consolidated financial statements
from their respective dates of acquisition.

The following table sets forth certain information regarding the Company's
net revenues generated from its medical surgical and aesthetic elective
services.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS
-------------------------------------------------- ENDED
1991 1992 1993 1994 1995 JUNE 30, 1996
------ ------ ------ ------ ------ -------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Medical Surgical Services:
Net revenues.................... $1,827 $3,148 $3,565 $4,189 $7,148 $ 4,416
Percentage of total net
revenues..................... 100% 100% 95.8% 79.6% 64.0% 52.6%
Aesthetic Elective Services:
Net revenues.................... -- -- $82 $863 $3,653 $ 3,783
Percentage of total net
revenues..................... -- -- 2.2% 16.4% 32.7% 45.1%
Other:
Net revenues.................... -- -- $73 $210 $376 $196
Percentage of total net
revenues..................... -- -- 2.0% 4.0% 3.3% 2.3%
</TABLE>

The net revenues generated by aesthetic elective procedures are typically
collected at the time of service directly from a patient which allows the
Company to minimize the likelihood of uncollected charges. In addition, such
charges are not subject to reimbursement review by third-party payors. The
charges for medical surgical services may have a co-pay or deductible which is
generally collected from a patient at the time of service. However, charges for
these services are primarily billed directly to third party payors, which
subject them to denied reimbursement.

15
<PAGE> 19

RESULTS OF OPERATIONS

The following table sets forth certain statement of operations data
expressed as a percentage of net revenues for the periods indicated:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------- -------------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net revenues........................... 100.0% 100.0% 100.0% 100.0% 100.0%
Salaries and benefits expense.......... 44.2 38.1 33.3 34.7 32.7
Selling, general and administrative
expense.............................. 32.6 34.5 32.4 31.7 33.4
Depreciation and amortization.......... 9.0 5.6 6.4 5.5 7.8
Provision for uncollectible
accounts............................. 14.8 14.8 16.9 15.3 16.9
Operating income (loss)................ (0.6) 6.9 11.0 12.8 9.2
Interest expense....................... 4.2 3.3 2.3 2.9 1.7
Income tax expense (benefit)........... (0.7) -- 3.5 4.0 3.1
Net income (loss)...................... (4.0) 3.7 5.2 5.9 4.4
</TABLE>

SIX MONTHS ENDED JUNE 30, 1996 AND 1995

NET REVENUES. Net revenues increased from $4.9 million to $8.4 million, an
increase of $3.5 million or 73%. This increase was attributable to the growth in
total procedure volume, which increased from 16,671 for the six months ended
June 30, 1995, to 32,909 for the six months ended June 30, 1996, an increase of
16,238 or 97%. Medical surgical procedures increased from 8,736 for the six
months ended June 30, 1995, to 12,690 for the six months ended June 30, 1996, an
increase of 3,954 or 45%, which contributed to 24% of the total increase in
procedure volume. Aesthetic elective procedures increased from 7,935 for the six
months ended June 30, 1995, to 20,219 for the six months ended June 30, 1996, an
increase of 12,284 or 155%, which contributed to 76% of the total increase in
procedure volume.

The average net revenue per case decreased from $291 for the six months
ended June 30, 1995, to $255 for the six months ended June 30, 1996, a decrease
of $36 per case or 12%. This decrease was attributable to a change in case mix
with aesthetic elective procedures, which had a lower average net revenue per
case of $187, increasing as a percentage of total procedures from 48% for the
six months ended June 30, 1995, to 61% for the six months ended June 30, 1996.

SALARIES AND BENEFITS EXPENSE. Salaries and benefits expense increased from
$1.7 million for the six months ended June 30, 1995, to $2.7 million for the six
months ended June 30, 1996, an increase of $1.0 million or 63%. This increase
was due to the hiring of additional field and corporate personnel to support the
Company's growth in procedure volume. Total employees for the Company increased
from 77 on June 30, 1995, to 113 on June 30, 1996, an increase of 47%. Salaries
and benefits expense as a percentage of net revenues decreased from 34.7% to
32.7%.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense increased from $1.5 million for the six months ended June
30, 1995, to $2.8 million for the six months ended June 30, 1996, an increase of
$1.3 million or 82%. This increase was primarily due to an increase in operating
lease expense from $175,000 for the six months ended June 30, 1995, to $654,000
for the six months ended June 30, 1996, an increase of $479,000 or 274%.
Selling, general and administrative expense as a percentage of net revenue
increased from 31.7% to 33.4% primarily as a result of increases in operating
lease expense as a percent of net revenues.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased from
$265,000 for the six months ended June 30, 1995, to $653,000 for the six months
ended June 30, 1996, an increase of $388,000 or 146%. This increase was due to
the addition of $2.6 million in capital equipment during the twelve months ended
June 30, 1996.

PROVISION FOR UNCOLLECTIBLE ACCOUNTS. Provision for uncollectible accounts
increased from $743,000 for the six months ended June 30, 1995, to $1.4 million
for the six months ended June 30, 1996, an increase of

16
<PAGE> 20

$680,000 or 91%. As a percentage of net revenue, provision for uncollectible
accounts increased from 15.3% to 16.9%. This increase was primarily due to an
increase in provisions relating to medical surgical revenues.

OPERATING INCOME (LOSS). Operating income increased from $621,000 for the
six months ended June 30, 1995, to $770,000 for the six months ended June 30,
1996, an increase of $149,000 or 24%. As a percentage of net revenues, operating
income decreased from 12.8% for the six months ended June 30, 1995, to 9.2% for
the six months ended June 30, 1996. This decrease was primarily due to an
increase in selling, general and administrative expense, provision for
uncollectible accounts and depreciation of new capital as a percentage of net
revenues.

INTEREST EXPENSE. Interest expense increased from $131,000 for the six
months ended June 30, 1995, to $151,000 for the six months ended June 30, 1996,
an increase of $20,000 or 15%. The Company's average debt balance increased from
$1.7 million for the six months ended June 30, 1995, to $3.1 million for the six
months ended June 30, 1996.

INCOME TAX PROVISION (BENEFIT). Income tax provision increased from
$195,000 for the six months ended June 30, 1995, to $263,000 for the six months
ended June 30, 1996, an increase of $68,000 or 35%. The income tax provision
increased primarily as a result of income before income taxes increasing from
$480,000 for the six months ended June 30, 1995, to $632,000 for the six months
ended June 30, 1996. The Company's effective tax rate increased from 40.6% for
the six months ended June 30, 1995, to 41.6% for the six months ended June 30,
1996.

NET INCOME (LOSS). As a result of the items discussed above, the Company's
net income increased from $285,000 for the six months ended June 30, 1995, to
$369,000 for the six months ended June 30, 1996.

YEARS ENDED DECEMBER 31, 1995 AND 1994

NET REVENUES. Net revenues increased from $5.3 million for the year ended
December 31, 1994, to $11.2 million for the year ended December 31, 1995, an
increase of $5.9 million or 112%. This increase was attributable to growth in
procedure volume, which increased from 15,153 for the year ended December 31,
1994, to 39,640 for the year ended December 31, 1995, an increase of 24,487 or
162%. Medical surgical procedures increased from 9,656 for the year ended
December 31, 1994, to 19,509 for the year ended December 31, 1995, an increase
of 9,853 or 102%, which contributed to 40% of the total increase in procedure
volume. Aesthetic elective procedures increased from 5,497 for the year ended
December 31, 1994, to 20,131 for the year ended December 31, 1995, an increase
of 14,634 or 266%.

The average net revenue per case decreased from $347 for the year ended
December 31, 1994, to $282 per case for the year ended December 31, 1995, a
decrease of $65 or 19%. This decrease was attributable to a change in case mix
to include a larger percentage of aesthetic elective procedures. The average net
revenue per case for aesthetic elective procedures was $181 during 1995,
compared to average net revenue per case for medical surgical procedures of
$366.

SALARIES AND BENEFITS EXPENSE. Salaries and benefits expense increased from
$2.0 million for the year ended December 31, 1994, to $3.7 million for the year
ended December 31, 1995, an increase of $1.7 million or 86%. This increase was
caused by growth in the Company's procedure volume, the introduction of two new
procedures, and an increase in the total number of employees from 50 as of
December 31, 1994, to 81 at December 31, 1995, an increase of 62%. Salaries and
benefits expense as a percentage of net revenues decreased from 38.1% to 33.3%
due to increases in net revenues exceeding the increases in salaries and
benefits expense.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense increased from $1.8 million for the year ended December
31, 1994, to $3.6 million for the year ended December 31, 1995, an increase of
$1.8 million or 99%. Selling, general and administrative expense as a percentage
of net revenues decreased slightly from 34.5% for the year ended December 31,
1994, to 32.4% for the year ended December 31, 1995, due to increases in net
revenues exceeding the increases in selling, general, and administrative
expense.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased from
$293,000 for the year ended December 31, 1994, to $719,000 for the year ended
December 31, 1995, an increase of $426,000 or

17
<PAGE> 21

145%, resulting primarily from the addition of approximately $2.0 million in new
medical equipment during the year ended December 31, 1995.

PROVISION FOR UNCOLLECTIBLE ACCOUNTS. Provision for uncollectible accounts
increased from $781,000 for the year ended December 31, 1994, to $1.9 million
for the year ended December 31, 1995, an increase of $1.1 million or 141%. As a
percentage of net revenue, provision for uncollectible accounts increased from
14.8% for the year ended December 31, 1994, to 16.9% for the year ended December
31, 1995.

OPERATING INCOME (LOSS). Operating income increased from $365,000 for the
year ended December 31, 1994, to $1.2 million for the year ended December 31,
1995, an increase of $867,000 or 237%. As a percentage of net revenues,
operating income increased from 6.9% for the year ended December 31, 1994, to
11.0% for the year ended December 31, 1995. This increase was primarily the
result of the Company's ability to increase net revenue per employee during
1995.

INTEREST EXPENSE. Interest expense increased from $179,000 for the year
ended December 31, 1994, to $247,000 for the year ended December 31, 1995, an
increase of $68,000 or 38%. This increase was due to an increase in the average
debt outstanding from $1.3 million for the year ended December 31, 1994, to $2.0
million for the year ended December 31, 1995.

INCOME TAX PROVISION (BENEFIT). Income tax provision was $395,000 for the
year ended December 31, 1995. The Company did not record an income tax provision
for the year ended December 31, 1994. The Company's effective tax rate increased
to 40.6% for the year ended December 31, 1995, due to the utilization of the net
operating loss carryforward during 1994.

NET INCOME. As a result of the items discussed above, the Company's net
income increased from $192,000 for the year ended December 31, 1994, to $578,000
for the year ended December 31, 1995.

YEARS ENDED DECEMBER 31, 1994 AND 1993

NET REVENUES. Net revenues increased from $3.7 million for the year ended
December 31, 1993, to $5.3 million for the year ended December 31, 1994, an
increase of $1.6 million or 41%. This increase was attributable to growth in
procedure volume, which increased from 9,154 for the year ended December 31,
1993, to 15,153 for the year ended December 31, 1994, an increase of 5,999 or
66%. Medical surgical procedures increased from 8,494 for the year ended
December 31, 1993, to 9,656 for the year ended December 31, 1994, an increase of
1,162 or 14%, which contributed to 19% of the total increase in procedure
volume. Aesthetic elective procedures increased from 660 for the year ended
December 31, 1993, to 5,497 for the year ended December 31, 1994, an increase of
4,837 or 733%.

Average net revenue per case decreased from $406 for the year ended
December 31, 1993, to $347 for the year ended December 31, 1994, a decrease of
$59 or 15%. This decrease was attributable to a change in case mix to include a
larger percentage of aesthetic elective procedures. The average net revenue per
case for aesthetic elective procedures was $133 during the year ended December
31, 1994, compared to average net revenue per case for medical surgical
procedures of $448.

SALARIES AND BENEFITS EXPENSE. Salaries and benefits expense increased from
$1.6 million for the year ended December 31, 1993, to $2.0 million for the year
ended December 31, 1994, an increase of $362,000 or 22%. This increase was due
to an increase in the number of employees from 41 as of December 31, 1993, to 50
as of December 31, 1994, an increase of 22% to support the growth in the
Company's procedure volume. Salaries and benefits expense as a percentage of net
revenues decreased from 44.2% to 38.1% due to increases in net revenues
exceeding the increases in salaries and benefits expense.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administration expenses increased from $1.2 million for the year ended December
31, 1993, to $1.8 million for the year ended December 31, 1994, an increase of
$603,000 or 50%. Selling, general and administrative expenses as a percentage of
net revenues increased from 32.6% for the year ended December 31, 1993, to 34.5%
for the year ended December 31, 1994, primarily as a result of increases in
professional fees.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization decreased from
$333,000 for the year ended December 31, 1993, to $293,000 for the year ended
December 31, 1994, a decrease of $40,000 or 12%.

18
<PAGE> 22

This decrease was the result of several units becoming fully depreciated during
1994, which was partially offset by the addition of $744,000 in new medical
equipment during the year ended December 31, 1994.

PROVISIONS FOR UNCOLLECTIBLE ACCOUNTS. Provision for uncollectible accounts
increased from $551,000 for the year ended December 31, 1993, to $781,000 for
the year ended December 31, 1994, an increase of $230,000 or 42%. As a
percentage of net revenue, provision for uncollectible accounts was 14.8% for
the years ended December 31, 1993 and 1994, respectively.

OPERATING INCOME (LOSS). Operating income improved from an operating loss
of $21,000 for the year ended December 31, 1993, to operating income of $365,000
for the year ended December 31, 1994, an increase of $386,000. As a percentage
of net revenue, operating income (loss) increased from (0.6%) for the year ended
December 31, 1993, to 6.9% for the year ended December 31, 1994. This increase
was primarily the result of the Company's ability to increase net revenue per
employee during 1994.

INTEREST EXPENSE. Interest expense increased from $158,000 for the year
ended December 31, 1993, to $179,000 for the year ended December 31, 1994, an
increase of $21,000 or 13%. This increase was primarily due to the addition of
$600,000 of capital leases for medical equipment.

NET INCOME (LOSS). As a result of the items discussed above, the Company's
net income improved from a net loss of $150,000 for the year ended December 31,
1993, to net income of $192,000 for the year ended December 31, 1994.

LIQUIDITY AND CAPITAL RESOURCES

From its inception through 1993, the Company's operating expenses
significantly exceeded its net revenues, resulting in an accumulated retained
deficit of approximately $1.3 million as of December 31, 1993. Since 1993, the
Company has recorded positive earnings, which have reduced the accumulated
retained deficit to $526,383 as of December 31, 1995 and to $157,238 as of June
30, 1996. The Company has funded its operations primarily through the private
placement of equity securities, bank borrowings and cash provided by operations.
The majority of the equity capital raised by the Company has been raised from
the private placement of $2.2 million of equity securities, including $750,000
raised in July 1992, and approximately $1.5 million raised in November 1995. The
Company obtained a $2.0 million credit facility from NationsBank in June, 1995.
Such facility is composed of several tranches which bear interest rates ranging
from prime plus 0.5% to prime plus 1.5%. The net proceeds from such facility
were used to retire outstanding debt and to purchase medical equipment. The
Company's facility with NationsBank of Texas, N.A. was increased to $4.3 million
in March, 1996. See "Certain Transactions." As of June 30, 1996, there was
approximately $3.4 million outstanding under such facility.

The Company generated cash from its operations of $13,000, $274,000 and
$917,000 for the years ended December 31, 1993, 1994 and 1995, respectively, and
$469,000 and $595,000 for the six months ended June 30, 1995 and 1996,
respectively. For its investing activities, the Company consumed $56,000,
$126,000 and $1.9 million for the years ended December 31, 1993, 1994 and 1995,
respectively, and $884,000 and $2.0 million for the six months ended June 30,
1995 and 1996, respectively, primarily for the acquisition of medical equipment.
Capital expenditures were $36,000, $130,000 and $1.9 million for the years ended
December 31, 1993, 1994 and 1995, respectively, and $891,000 and $1.5 million
for the six months ended June 30, 1995 and 1996, respectively. Net cash provided
by (used in) financing activities were $90,000, ($136,000) and $2.3 million for
the years ended December 31, 1993, 1994 and 1995, respectively, and $378,000 and
$1.4 million for the six months ended June 30, 1995 and 1996, respectively. The
cash provided from financing activities in 1995 was primarily provided by the
proceeds from bank borrowings and the sale of 362,500 shares of Series B
Convertible Preferred Stock.

The Company estimates that its total capital expenditures will be
approximately $3.7 million in 1996 and approximately $4.7 million in 1997. The
Company believes that the net proceeds from the Offering and cash provided by
operating activities will be sufficient to fund its operations through 1998.
However, there can be no assurance that the Company will not require additional
financing in the near future, and that if needed, it will be available on terms
satisfactory to the Company, or at all.

19
<PAGE> 23

BUSINESS

INTRODUCTION

- Providing on-site technical personnel and medical equipment on a
scheduled basis;

- Monitoring and documenting preoperative, intraoperative and postoperative
procedures;

- Returning the physician's office to its pre-procedure condition;

- Establishing procedural safety and quality assurance protocols for
office-based procedures;

- Facilitating physician training and qualification; and

- Physician credentialing pursuant to contracts with managed care
organizations.

The Company's services benefit payors, physicians and patients by lowering costs
for surgical procedures, increasing physician productivity, broadening access to
advanced medical technologies and improving patient satisfaction.

The Company is a leader in facilitating the migration of established
surgical procedures and the latest advanced medical technologies from hospitals
and outpatient surgery centers to a lower-cost setting, the physician's office.
An increasing number of minimally invasive procedures are being performed with
local anesthesia in physicians' offices using technologically advanced medical
equipment. The Company currently maintains a network of approximately 2,500
physicians who have utilized the Company's services and has over 100 managed
care contracts that in aggregate cover approximately 16 million lives.
Currently, physicians in the Company's network perform approximately 6,000
procedures monthly using the Company's services.

The Company provides its services along two primary business lines: medical
surgical and aesthetic elective services. The Company's medical surgical
services allow physicians to perform approximately 25 different office-based
surgical procedures across numerous specialties, including gynecology, podiatry,
urology and otolaryngology. The Company's aesthetic elective services are
utilized primarily by plastic surgeons and dermatologists for laser procedures
such as skin resurfacing, vascular and pigmented lesion treatment, and tattoo
removal. The Company is generally reimbursed for providing its medical surgical
services by third-party payors, including through contracts with managed care
organizations, and is paid directly by patients for any required copayments and
deductibles. For providing its aesthetic elective services, the Company is paid
directly by patients, generally at the time of service. The Company derived
approximately 64% and 33% of its net revenues in 1995 from the provision of
medical surgical and aesthetic elective services, respectively. None of the
Company's net revenues is derived from Medicare or Medicaid reimbursement.

MARKET OVERVIEW

Medical Surgical

The continued increase in health care costs at a rate significantly higher
than that of overall inflation has caused managed care companies, indemnity
insurers, government agencies and other payors to employ a variety of strategies
designed to reduce the cost and control the utilization of health care services.
In particular, payors have created incentives for health care providers to
deliver high-quality health care services in lower cost settings. Initially,
numerous surgical, diagnostic and other medical procedures that were
traditionally performed in a hospital were transferred to an outpatient setting,
predominantly the outpatient section of a hospital or an ambulatory surgery
center. In continuation of this trend, many established procedures that are
performed in an outpatient setting can now be transferred to the physician's
office because

20
<PAGE> 24

such procedures can be performed at a lower cost and without the risk of general
anesthesia while maintaining the quality of care. The transfer of such
procedures to the physician's office has continued to accelerate as a result of:
(i) the introduction of advanced medical technology that allows physicians to
perform a broader array of office-based procedures, (ii) the development of
training programs and clinical protocols for office-based procedures, and (iii)
the patient's desire to undergo procedures in a more comfortable setting, with
reduced risk, pain and recovery time. The migration of such procedures to the
physician's office benefits payors, providers and patients through lower
procedure costs (as compared to similar procedures performed in a hospital or
outpatient surgery center), increased provider productivity, broader access by
physicians and patients to advanced technologies and treatments, and an
increased level of patient satisfaction.

According to MDI, total surgical procedures in the United States have
increased by 12.4% from 25.8 million procedures in 1990 to 29.0 million
procedures in 1994. Over this period, the number of surgeries performed in an
outpatient setting as a percentage of total surgeries performed annually in the
United States has increased. The volume of outpatient surgical procedures has
grown by 71.8% over this period, from 11.0 million procedures, or approximately
43% of total surgeries in 1990, to 18.9 million procedures, or approximately 65%
of total surgeries in 1994. Furthermore, the prevalence of surgical procedures
occurring in a physician's office has increased, representing approximately 12%
of total outpatient procedures performed in 1994 as compared to approximately 6%
in 1990. The Company believes that a broader array of procedures, including more
complex surgeries, is currently being performed in an outpatient setting than
was performed in a similar setting in 1990 and believes that the migration of
outpatient procedures to a physician's office will continue.

Aesthetic Elective

The Company believes that the number of aesthetic elective procedures
performed annually in the United States will continue to grow, primarily due to
the development of new technologies for cosmetic procedures, increased public
awareness, shorter recovery times and the aging of the "baby boom" generation.
According to the AACS Survey, approximately 2.7 million cosmetic procedures were
performed in the United States in 1994. The Company believes that a majority of
such procedures are or can be performed in a physician's office. According to
the ASPRS Survey, patients between the ages of 35 and 50 represented 41% of the
cosmetic procedures performed in the United States in 1994, and the number of
people who say they approve of cosmetic surgery, either for themselves or
others, has increased 50% in the last decade. According to the ASPRS Survey,
approximately 36% of the cosmetic procedures performed in 1994 were performed in
a physician's office. The Company believes that the vast majority of the
aesthetic procedures are performed in an outpatient setting and that such
procedures will increasingly be transferred to physician's office. The benefits
derived from performing aesthetic procedures in an office-based setting are
similar to those associated with medical surgical procedures, and include lower
procedure costs, increased provider productivity, broader access by physicians
and patients to advanced technologies and treatments, and an increased level of
patient satisfaction.

BUSINESS STRATEGY

The Company's goal is to enhance its position as a provider of services to
the emerging market for physician office-based procedures. The Company intends
to achieve its goal by employing four primary strategies:

Increasing Utilization of the Company's Services in Existing Markets

The Company plans to expand by facilitating the transfer of an increasing
percentage of outpatient procedures to a physician's office where the Company's
services may be utilized. The Company intends to achieve such expansion through:
(i) marketing efforts designed to cause existing network physicians to transfer
more outpatient procedures performed by them to their offices, (ii) the
expansion of the Company's physician network, either through ongoing marketing
efforts or the acquisition of mobile medical equipment providers that maintain
relationships with physicians, (iii) the provision of a full range of applicable
services to all physicians in its network, and (iv) the introduction of new
services and technologies which will enable

21
<PAGE> 25

additional procedures to be performed in a physician's office. In addition, the
Company plans to increase the services which are eligible for reimbursement
under its existing managed care contracts and to assist in the establishment of
incentives and/or mandates by payors for their network physicians to perform
office-based procedures using the Company's services.

Expanding the Company's Operations into New Markets

The Company employs a two-phase strategy to enter new markets. In the
initial phase, the Company offers aesthetic elective services (which are paid
for by patients generally at the time of service) while establishing a network
of physicians who utilize such aesthetic elective services and seeks to develop
relationships with local managed care organizations for the provision of medical
surgical services. This initial phase may include acquisitions. In the second
phase, the Company negotiates managed care contracts and introduces its medical
surgical services to such managed care payors' network physicians and seeks to
expand the network of physicians using its medical surgical services. In some
cases, the Company will also seek to capitalize on its managed care
relationships in existing markets by gaining access to such payors' covered
lives in markets not currently served by the Company. This two-phase expansion
strategy allows the Company to utilize a single infrastructure to support both
business lines and use cash flow generated from aesthetic elective services to
offset the relatively higher costs associated with establishing reimbursement of
medical surgical services under third-party payor contracts.

Continuing the Development of Managed Care Contracts

The Company is designated as a preferred provider for medical surgical
services in over 100 payor contracts, including contracts with health plans
owned by United HealthCare Corporation, Prudential Healthcare, CIGNA Healthcare
and Blue Cross Blue Shield entities in six states, which contracts cover in
aggregate approximately 16 million lives. The Company plans to establish
additional contractual relationships with managed care organizations and other
third-party payors as a preferred or mandated provider to physicians of
office-based surgical services. As a preferred provider, the Company negotiates
a pre-determined fee schedule for its services and obtains enhanced access to
the payor's physician network in order to market its services directly to such
physicians. The Company believes that payors contract with the Company because
the Company's services provide a turn-key solution that assists payors in
transferring established surgical procedures to a lower cost setting while
maintaining the quality of care.

Establishing Strategic Alliances with Medical Equipment Manufacturers

The Company has strategic alliances with manufacturers and distributors of
medical equipment that enable it to provide advanced medical technology to
physicians while reducing the risk of ownership to the Company. The Company
believes manufacturers often encounter significant challenges in selling
sophisticated medical equipment to physicians. Physicians are generally
reluctant to purchase such medical equipment because: (i) physicians generally
are not able to ensure sufficient procedure volume to recover the cost of
acquiring, using and maintaining the equipment, (ii) physicians generally do not
want to assume the risk of technological obsolescence, and (iii) such equipment
is generally available to them through hospitals, outpatient surgery centers and
mobile medical equipment providers. As a result, manufacturers are considering
new opportunities for distribution of their medical equipment along
non-traditional lines, such as through services offered by the Company.

Medical equipment manufactures have sought alliances with the Company
because it serves as a unique distribution channel through which such
manufacturers can market their products directly to physicians and third-party
payors, shorten the period required to gain market acceptance and assist in the
training of physicians to use their equipment. In addition, manufacturers can
participate in per procedure revenue sharing contracts with the Company on a
negotiated basis. The Company benefits from such alliances by gaining
preferential access to new technology, including exclusive use of certain
proprietary technology, and reducing its ownership risk through revenue and risk
sharing arrangements. The Company has entered into an agreement to be the
exclusive mobile provider for Palomar's EpiLaser(TM) in the United States for
the markets the Company currently serves, and has the ability to serve new
markets in the United States on an exclusive

22
<PAGE> 26

basis, subject to certain conditions. The EpiLaser(TM) has recently received FDA
approval for use in certain aesthetic procedures, and the Company anticipates
that it will commence offering such services in 1997.

SERVICES PROVIDED BY THE COMPANY

The Company offers a complete range of services used to create temporary
surgical sites in physicians' offices. The Company facilitates the migration of
established outpatient procedures and advanced medical technologies to
physicians' offices by providing a broad array of services which enables
physicians to provide high quality, cost-effective medical care in their
offices. The Company's services include the following:

On-Site Technical Personnel

The Company provides on-site technical personnel who create the temporary
surgical setting in a physician's office, assist the physician in the set-up and
operation of medical equipment, and are present during, and document relevant
aspects of, the office-based procedure. The Company provides training to its
field technicians, including intensive classroom instruction and hands-on
training covering various technical and clinical aspects of office-based
procedures as well as the Company's surgical services. In addition, the Company
provides continuing education to its technical personnel in the form of training
programs covering advanced medical technology and current and new procedures.

Provision of On-Site Medical Technology

The Company provides medical technology using mobile field units that
include all of the medical equipment and related instruments, accessories and
disposable supplies utilized by the Company's network physicians to perform
certain office-based procedures. Mobile field units are composed of such
equipment and are delivered to the physician's office by a field technician on a
scheduled basis. The Company has organized its mobile field units into the three
configurations listed below, the first two of which are used to provide medical
surgical services and the third of which is used to provide aesthetic elective
services:

Mobile Surgical Unit ("MSU"). The MSU may be configured utilizing the
following technologies: CO(2) laser, flashlamp pulsed dye laser,
electrosurgical generator, hospital grade smoke evacuator and related
instrumentation and accessories. The equipment delivered in the MSU is used
to perform procedures in gynecology, podiatry, urology and otolaryngology.
As of June 30, 1996, the Company had 49 MSUs in service.

Mobile Endoscopy Unit ("MEU"). The MEU may be configured utilizing the
following technologies: medical digital camera system, video monitor,
printer and recorder, CO(2) and fluid sufflation, related instrumentation
and accessories, and one of the following endoscopes: hysteroscope,
laparoscope or arthroscope. The equipment delivered in the MEU is used to
perform procedures in gynecology and podiatry. As of June 30, 1996, the
Company had 13 MEUs in service.

Mobile Aesthetic Laser Unit ("MALU"). The MALU may be configured utilizing
the following technologies: Q-switched Nd: YAG laser, flashlamp pulsed dye
laser, ultrapulse CO(2) laser and related instrumentation and accessories.
The equipment delivered in the MALU is used to perform procedures in
plastic surgery and dermatology. As of June 30, 1996, the Company had 64
MALUs in service.

In utilizing the Company's services, one of the Company's network
physicians will schedule an office-based procedure for a specified date and
time. If appropriate, the Company will verify a patient's insurance coverage and
obtain any necessary precertification from the third-party payor. Prior to
arrival of the patient, a field technician will create a temporary surgical
setting in the physician's office that meets the Company's preoperative protocol
and will configure the transportable medical equipment in accordance with the
Company's procedure guidelines. Prior to performing the procedure, the physician
and/or his or her staff is required to inspect the temporary surgical setting,
test and accept all medical equipment, and record such acceptance in the field
technician's delivery log. Following the patient recovery period in the
physician's office, the field technician returns the physician's office to its
pre-procedure condition.

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<PAGE> 27

Procedure Monitoring and Documentation

The Company's on-site technical personnel are present during, and document
relevant aspects of, the office-based procedures, including patient billing
data, and information regarding disposables consumed, sterilization procedures
performed and adherence to the Company's established guidelines and standards,
including preoperative, intraoperative and postoperative instructions.

Establishment of Procedural Safety and Quality Assurance Protocols

The Company has established procedural safety and quality assurance
protocols and standards for the use of its surgical services in physicians'
offices that are set forth in its Alternate Site Quality Protocol, Standards and
Guidelines. The Company utilizes this manual to assist managed care
organizations in documenting the Company's operations to satisfy requirements
for receiving accreditation under the National Committee for Quality Assurance
(NCQA) and other accrediting organizations. The Company's standard field
operating procedures include Occupational Safety and Health Administration
safety procedures incorporating the use of personal protective equipment and
sterilization of equipment, and provide step-by-step preoperative,
intraoperative and postoperative instructions. The Company recognized that there
was an absence of documented office-based procedures and clinical protocols in
the physician marketplace, as well as methods for measuring and documenting
compliance therewith. Accordingly, the Company created its Optimal In-Office
Surgical Suite Guidelines manual for its network physicians, which includes
guidelines, standards and regulations and a comprehensive self-assessment
checklist for surgeries performed in the physician's office without general
anesthesia. The standards established by the Company serve as guidelines to
assist physicians in satisfying quality requirements set by managed care
organizations and accrediting authorities, as well as in complying with
applicable government regulations and manufacturers' specifications.

Physician Training Seminars

The Company conducts seminars to train physicians and their staff in the
use of medical equipment and related technology provided by the Company through
its services and receives a fee from physicians for attending such seminars.
Since 1993, approximately 2,200 physicians have participated in over 100 of the
Company's seminars. The Company developed and introduced its physician training
seminars in response to the high demand for physician training created by the
introduction of new medical technology. The Company retains highly qualified
physician faculty to conduct these seminars, which present such topics as
medical laser physics and safety, light and tissue interaction, clinical
applications and treatment parameters, procedure demonstrations, as well as to
conduct hands-on laboratory sessions. Physician participants in the Company's
seminars generally receive a peer reference manual, video tapes, patient
awareness and market information, and a certificate that documents that the
participant has completed the Company's training seminar.

Physician Credentialing

The Company performs physician credentialing, including on behalf of
managed-care payors, utilizing standards established by its Medical Director
which are based upon standards generally recognized by the medical profession.
The Company's services are offered only to those practitioners who have provided
documentation of certified training and/or competence relevant to the procedures
to be performed, including use of the technology provided in conjunction with
such services. For certain procedures, the Company requires physicians to
maintain hospital or surgery privileges relative to such procedures, including
the use of any technology for performance thereof. Physician credentialing
information is maintained by the Company and reviewed periodically by the
Medical Director and other key personnel.

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<PAGE> 28

PROCEDURES

The following tables set forth certain information regarding medical
surgical and aesthetic elective procedures which are or may be performed in the
physician's office utilizing the Company's services:

Medical Surgical Procedures

The Company facilitated a total of 19,509 and 12,690 medical surgical
procedures for the year ended December 31, 1995, and for the six months ended
June 30, 1996, respectively. The Company's services are used by physicians to
perform approximately 25 different office-based medical surgical procedures,
including the procedures listed in the table below:

<TABLE>
<CAPTION>
ESTIMATED NUMBER
OF PROCEDURES
OCCURRING IN THE DESCRIPTION/APPLICATION OF
UNITED STATES IN PROCEDURES PERFORMED
PROCEDURE BY SPECIALTY 1995(1) UTILIZING COMPANY SERVICES
- ----------------------------------------------- ---------------- -----------------------------------------------
<S> <C> <C>
GYNECOLOGY:
Colposcopy with loop electrode excision of 127,007
cervix 202,741 Laser or electrosurgical assisted cervical
70,222 procedures to remove abnormal cells and/or to
Conization of cervix: loop electrode collect pathology.
excision
Laser ablation of cervix
Cystourethroscopy 1,917,317 Diagnostic endoscopy of bladder.
Dilation and Curettage 867,148 Dilation and curettage, diagnostic and/or
therapeutic (non-obstetrical), may be replaced
by office-based diagnostic hysteroscopy.
Hysteroscopy, diagnostic 206,789
Endoscopy of uterus to diagnose and treat
Hysteroscopy, surgical 332,114 causes of abnormal uterine bleeding.
Laparoscopy, diagnostic 418,464 Endoscopy of abdomen to diagnose causes of
pelvic pain and infertility.
Treatment of vaginal lesions 50,259
Laser destruction of genital lesions and warts.
Treatment of vulva lesions 210,165
PODIATRY:
Endoscopic plantar fasciotomy 35,474 Surgical release of the plantar fascia (tendon)
to relieve chronic heel pain.
PODIATRY/DERMATOLOGY:
Treatment of warts and skin lesions 8,547,056 Laser destruction of warts, including the
non-invasive removal of planters warts.
DERMATOLOGY/PLASTIC SURGERY:
Treatment of cutaneous vascular lesions 108,376 Laser destruction of surface lesions created or
fed by blood vessels such as port wine
birthmarks.
UROLOGY:
Treatment of condyloma lesions 67,251 Laser destruction of genital lesions and warts.
OTOLARYNGOLOGY:
Laser assisted uvulapalatoplasty, 65,073 Laser assisted procedure to reshape and reduce
uvulectomy and palatopharyngoplasty uvula to reduce snoring and treat sleep apnea.
Tonsillectomy and adenoidectomy 806,330 Laser assisted removal of tonsils and adenoids.
</TABLE>

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

(1) Based upon information obtained from MDI relating to the total number of
procedures performed by licensed physicians in the U.S. during 1995 on both
an inpatient and outpatient basis. Includes procedures performed utilizing
methods and/or technologies not offered by the Company but which may be
converted to procedures which utilize the Company's services. The total
number of procedures performed in 1995 represents projections made by MDI
based upon the actual number of such procedures performed during 1994.

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<PAGE> 29

Aesthetic Elective Procedures

The Company facilitated a total of 20,131 and 20,219 aesthetic elective
procedures for the year ended December 31, 1995, and for the six months ended
June 30, 1996, respectively. The Company facilitates all of the following
office-based cosmetic procedures listed in the table below:

<TABLE>
<CAPTION>
PROCEDURE SELECTED INFORMATION REGARDING ELIGIBLE PROCEDURES
- ------------------------------------- ----------------------------------------------------------------------------
<S> <C>
Laser Treatment of Tattoos According to a survey published in the Archives of Dermatology in April
1996, the number of people in the United States who have tattoos is
estimated to range from 7 to 20 million.
Laser Treatment of Pigmented Lesions Candela Laser Corporation estimates that over 28 million people in the
(brown spots of the skin) United States are potential patients for the treatment of pigmented lesions,
and the potential market for such treatments is projected at $2 billion.
Laser Treatment of Facial It is reported in Cutaneous Laser Surgery, The Art and Science of Selective
Telangiectasia (spider veins of the Photothermolysis, published in 1994, that spider telangiectasias occur in
face) approximately 15% of the adult population.
Laser Treatment of Vascular The American Academy of Dermatology reports that more than 10 in 100 babies
Birthmarks (hemangiomas and port have vascular birthmarks, and the port wine birthmark occurs in 3 in 1,000
wine birthmarks) infants.
Laser Treatment of Stretch Marks According to Medical Laser Insight, it has been reported that stretch marks
appear on the abdomen and/or breast of 90% of all pregnant women.
Laser Skin Resurfacing of Facial Many patients who were previously candidates for face lifts, chemical peels
Wrinkles and Acne Scarring and dermabrasions are now receiving laser skin resurfacing instead.
According to the AACS, there were approximately 55,000 face lifts, 254,000
chemical peels and 52,000 dermabrasions performed in the United States in
1994.
Laser Blepharoplasty (eyelid surgery) According to the AACS, there were approximately 90,000 eyelid surgeries
performed in the United States in 1994.
Laser Treatment of Psoriasis According to a report published by the National Psoriasis Foundation,
psoriasis affects up to 5 million people in the United States.
</TABLE>

Future Services

The Company maintains an ongoing program to develop and introduce new
medical surgical and aesthetic elective services to its network of physicians
and managed care payors. The Company actively coordinates the development of new
medical surgical services with its managed care payors in order to facilitate
the transfer of an increasing number of procedures from a hospital or outpatient
setting to the physician's office. The Company anticipates that by the end of
1998 it will expand its medical surgical services to include treatment of
abnormal uterine bleeding and enlarged prostate (benign prostatic hyperplasia).
Within aesthetic elective services, the Company anticipates that it will
commence offering services for laser-based hair removal in 1997 and anticipates
introducing services for the treatment of leg spider veins by the end of 1997.
According to Medical Laser Report, the market for hair removal by electrolysis
in the United States exceeds $1 billion annually. According to the American
Academy of Dermatology, up to 80 million adults in the United States suffer from
spider veins and varicose veins, and the worldwide market for leg vein
treatments is estimated at $1 billion.

REIMBURSEMENT AND PAYMENT

For its services, the Company charges fees that are payable by either the
patient, a managed care organization or an indemnity insurance company. For
medical surgical services rendered by the Company pursuant to a contract with a
managed care organization, the Company bills the managed care payor based upon a
pre-determined fee schedule. For medical surgical services that are reimbursed
under an indemnity plan, the Company generally bills and collects 20% of the
Company's charges from the patient at the time services are rendered and bills
the patient's insurance indemnity carrier for the remaining balance. For
aesthetic elective services, generally the Company charges on a per-case basis
and its fees are payable by the patient, generally at the time the services are
rendered. The Company believes that its per-case billing practices for such
services are preferred by physicians over the flat rate rental fee that many of
its competitors charge. None of the Company's net revenues is derived from
Medicare or Medicaid reimbursement.

26
<PAGE> 30

SALES AND MARKETING

The Company currently operates in 40 states and Canada. The Company has
divided its service area into four regions ("Regions") encompassing an aggregate
of 19 districts ("Districts"). The Company maintains an office in each District.
Each Region is managed by a Regional Vice President who is responsible for
meeting the Company's sales and operational objectives within his or her
Region(s). The Company anticipates that as it enters new markets, additional
Regions will be created and additional Regional Vice Presidents will be hired.

Within each District, the Company employs a District Manager, a District
Representative and one or more field technicians. The District Manager is
responsible for physician recruitment, managed care contract development,
operations management, customer service and personnel development. District
Representatives are designated to oversee the marketing and development of a
particular product line or specialty focus within their respective designated
geographic area. Field technicians specialize in a particular clinical and/or
technical area within their respective designated geographic area and are
assigned mobile field units for use in their assigned specialties.

The Company actively seeks to increase its network of physicians through
its marketing efforts. The Company employs a variety of marketing methods to
identify qualified physicians in a community who are performing procedures
utilizing services and/or technology similar to those offered by the Company.
The Company also exhibits at local and national medical conferences to gain
exposure to target markets. In addition, through its physician training
seminars, the Company is able to educate physicians on the services provided by
the Company.

The Company also pursues the development of relationships with managed care
organizations. The Company seeks to enter into agreements which enable the
Company to be reimbursed for medical surgical services performed on plan
members. In addition, the Company seeks the support of medical directors and
utilization departments within contracted managed care organizations in order to
establish policies which provide incentives and/or mandate physician use of the
Company's surgical services. The Company's efforts to gain such support include
the demonstration of quality, cost effectiveness and clinical appropriateness of
the Company's medical surgical services for selected procedures.

SUPPLIERS OF MEDICAL TECHNOLOGY

In conjunction with its other services, the Company offers a wide range of
medical technology for use in performing office-based procedures. Such medical
technology is obtained directly from manufacturers and distributors of medical
equipment. Prior to obtaining any medical equipment, the Company performs
extensive research on existing and developing medical technology in order to
determine the optimal equipment to acquire. In order to enhance its access to
medical technology, the Company seeks to establish strategic alliances with
manufacturers and distributors of medical equipment generally during the
development stage of a selected product. Such strategic alliances may include
agreements based upon per-procedure or other revenue sharing arrangements. In
certain circumstances, the Company may seek to become the exclusive mobile
provider for a certain technology.

INFORMATION SYSTEMS

In 1995 the Company began implementation of an information system that
includes a wide area network to link its Districts to its corporate office and
information databases. The system is decentralized and allows for data
acquisition by field personnel within each District and maintenance of all data
captured at a central corporate database that is accessible on a real-time
basis. The Company has completed the first three of six implementation phases
which included the installation of a network driven by multiple file servers, an
in-house voice mail system and software to link the Districts to the corporate
billing and collection system. The last three phases of implementation include
the integration of the Company's general ledger and financial reporting systems,
the implementation of voice activated software and the installation of cellular
equipped portable computers to all field personnel. The Company anticipates
completion of the implementation of this system by the end of 1997.

27
<PAGE> 31

GOVERNMENT REGULATION

The health care industry is subject to extensive federal and state
regulation of physicians, other health care providers, managed care
organizations and other third-party payors. Health care regulation affects the
Company's operations both directly and indirectly. Many states require
regulatory approval, including certificates of need, before establishing or
expanding certain types of health care facilities or offering certain health
care services. Several states in which the Company operates prohibit the
corporate practice of medicine except by professional medical corporations or
associations. The Company provides only nonphysician services and does not
exercise influence or control over the practice of medicine by the physicians to
whom it provides its services. In addition, the laws of many states prohibit
physicians from splitting fees with non-physicians, and some states have
promulgated statutes that prohibit the solicitation, payment, receipt or
offering of any direct or indirect remuneration for referral of patients and
that prohibit referrals by physicians for designated health services to entities
with which they have a financial relationship. The Company believes that its
current and planned activities are in material compliance with applicable laws
and regulation as currently interpreted. There can be no assurance, however,
that a review of the Company's business by courts or regulatory authorities will
not result in a determination that could adversely affect the operations of the
Company. In addition, there can be no assurance that the regulatory environment
in which the Company operates will not change significantly in the future, which
change could adversely affect the Company's operations, financial condition,
business opportunities or future expansion.

The manufacturers of medical devices utilized by the Company are subject to
extensive regulation by the FDA. Failure of the manufacturer of such devices to
comply with FDA regulations could result in the loss of approval by the FDA of
such medical devices. In addition, physicians in the Company's network are
subject to significant federal and state regulation. The ability of the Company
to operate profitably will depend in part upon its network physicians, the
manufacturers of its medical devices and its third-party payors obtaining and
maintaining all necessary licenses, certificates of need and other approvals,
and operating in compliance with applicable health care regulations.

The Company's services involve the handling of chemical and biological
substances and regulated waste materials, some of which may be considered
contaminated, hazardous or toxic. The Company is subject to state and federal
laws that regulate labor and environmental matters such as the handling and
disposal of regulated medical wastes, the release of pollutants and contaminants
into the air and water, and the protection of employees who may be exposed to
blood or other potentially infectious materials including those which may
contain bloodborne pathogens such as hepatitis B virus. The Company is also
subject to federal and state laws relating to business conduct and general
employee matters. The Company believes that it is in material compliance with
applicable laws.

COMPETITION

The Company competes with companies that offer medical equipment to
physicians' offices on either a rental or a fee-for-service basis and with
hospitals and surgery centers that provide comparable surgical services. The
Company also competes with other providers in the health care industry for
access to technology, relationships with third-party payors and relationships
with physicians. The Company believes the trend toward managed care could
increase the competition to obtain contracts with third-party payors. The health
care industry is highly competitive and is subject to continuing changes in the
manner in which such services are provided and the manner in which providers are
selected and paid. Some of the Company's competitors have substantially greater
financial and other resources than the Company. In addition, competitors of the
Company could obtain exclusive rights to provide mobile surgical services for
products that the Company currently offers or expects to offer.

28
<PAGE> 32

patients and third-party payors and the medical equipment used in providing such
services is readily available from various sources.

The Company believes that competition in the provision of services to
create temporary office-based surgical settings is based on the price, quality,
breadth and availability of services. The Company considers its comprehensive
high quality services, trained on-site technical personnel, "per case" billing
for certain services and strategic relationships with payors and medical device
manufacturers to be important factors in enabling it to compete effectively. The
Company believes that it is the only national provider of medical surgical
services for use in performing office-based procedures that has developed
contracts with managed care organizations.

INSURANCE

The Company maintains professional, general and product liability insurance
in amounts deemed appropriate by management. The Company carries an aggregate of
$10 million of general and public liability insurance coverage, which covers
premises, operations and product liability, and a $1 million professional
liability insurance policy.

PROPERTIES

The Company leases 15 offices within its service area that range in size
from approximately 100 to 400 square feet under agreements with varying terms
and renewal options, and annual rent ranging from $2,220 to $5,400. The Company
currently leases approximately 10,000 square feet for its corporate executive
offices located in Irving, Texas. The lease agreement for its corporate
headquarters stipulates annual rental payments that increase from $124,525 to
$134,487, during the term of the lease, and expires in 2002.

EMPLOYEES

As of June 30, 1996, the Company had 113 employees, including 78 employees
in field operations. The Company anticipates hiring additional employees
following consummation of the Offering, primarily in field operations. None of
the Company's employees is represented by a union and the Company believes that
it maintains good relations with its employees.

LEGAL PROCEEDINGS

To date, the Company has not been involved in any material claim or legal
proceeding relating to the use of its surgical services or otherwise. In the
future, the Company may become involved from time to time in various legal
proceedings and claims incident to the normal conduct of its business. See "Risk
Factors."

29
<PAGE> 33

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The following table sets forth certain information with respect to the
directors, executive officers and key employees of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
Paul R. Herchman(1)........................ 40 Chairman of the Board, Chief Executive
Officer and President
David A. Kallenberger, M.D. ............... 47 Medical Director and Director
Kevin D. O'Brien........................... 39 Senior Vice President, Sales, Marketing and
Operations
Michael G. Wallace......................... 31 Senior Vice President, Chief Financial
Officer and Treasurer
Leo Lopez.................................. 51 Director
Thomas A. Montgomery(2).................... 39 Director
Morris G. Moreland(1)(2)................... 64 Director
Leon Pritzker.............................. 73 Director
Jim Silcock(1)(2).......................... 46 Director
Mark Novy.................................. 30 Controller and Secretary
Clyde Hutchinson........................... 31 Regional Vice President of Sales and
Operations
Jay Farris................................. 36 Vice President, Business Development
Mark Rubino................................ 30 Regional Vice President of Sales and
Operations
Rona P. McGarvey........................... 47 Director of Patient Accounts
</TABLE>

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

(1) Member of the Compensation Committee

(2) Member of the Audit Committee

EXECUTIVE OFFICERS

The executive officers of the Company are elected annually by the Board of
Directors of the Company (the "Board") and serve at the discretion of the Board.

PAUL R. HERCHMAN is a co-founder of the Company and has served as Chairman
of the Board, Chief Executive Officer and President since its inception in 1989.
From 1986 to 1989, Mr. Herchman was a sales representative for Sun Medical,
Inc., a distributor of medical equipment. Prior thereto, Mr. Herchman served in
sales positions with Chesebrough-Ponds USA Co. in its Hospital Products
Division, from 1984 to 1986, and with Johnson & Johnson in its Ortho
Pharmaceutical Division, from 1982 to 1984. Mr. Herchman received a Bachelor of
Science degree from Texas Tech University.

DAVID A. KALLENBERGER, M.D. is a co-founder of the Company and has served
as a director and as the Medical Director since its inception in 1989. Dr.
Kallenberger is a practicing physician specializing in obstetrics and
gynecology, and has been practicing at Integris Baptist Medical Center in
Oklahoma City, Oklahoma since 1981. Dr. Kallenberger serves as a Clinical
Professor in the Department of Obstetrics/Gynecology at the University of the
Oklahoma Health Science Center and as the Program Director of the Henry G.
Bennett Fertility Institute at Integris Baptist Medical Center. Dr. Kallenberger
received his Medical Doctorate degree from The University of Oklahoma.

KEVIN D. O'BRIEN has served as Senior Vice President, Sales, Marketing and
Operations of the Company since September 1992. From the Company's inception in
1989 to December 1990, Mr. O'Brien served as a District Manager of the Company,
and from January 1991 to September 1992 as a Regional Vice President of Sales
and Operations. Mr. O'Brien co-founded Dental Plan of America, Inc., a prepaid
dental health plan based in Oklahoma, and served as its marketing director from
1983 to 1984. From 1982 to 1983, Mr. O'Brien

30
<PAGE> 34

was a sales representative in the patient care division of Procter & Gamble Co.
Mr. O'Brien received a Bachelor of Science degree from the University of Texas
at Dallas.

MICHAEL G. WALLACE has served as the Treasurer of the Company since April
1993, as Senior Vice President since November 1995 and as the Chief Financial
Officer since June 1996. From April 1993 to November 1995, Mr. Wallace also
served as Vice President of Finance. From June 1991 to April 1993, Mr. Wallace
served as Senior Accountant for Medical Care America, Inc., an owner-operator of
outpatient surgery centers, and as a Regional Accountant for Medical Care
America, Inc., from January 1990 to June 1991. From 1988 to 1990, Mr. Wallace
served as an accountant for Woodland Investment Company. Mr. Wallace has also
served as a director of Global Healthnet, Inc., a software service company in
the health care industry, since March 1996. Mr. Wallace is a Certified Public
Accountant and received a Bachelor of Business Administration degree from
Southwest Texas State University.

BOARD OF DIRECTORS

In addition to Paul R. Herchman and David A. Kallenberger, M.D., the Board
includes:

LEO LOPEZ, a director of the Company since 1994, has served as the
President and Chief Executive Officer of Eligibility Services, Inc., a company
that provides business management and information management services to the
health care industry, since 1989. Prior thereto, Mr. Lopez served as Vice
President of Donaldson, Lufkin & Jenrette Securities Corporation from 1988 to
1990 in the Public Finance Group in Dallas, Texas and from 1986 to 1988 in the
Healthcare Finance Group in New York, New York. Mr. Lopez received a Bachelor of
Science Degree in Business Administration from Washington University and a
Masters of Health Administration degree from the Washington University School of
Medicine.

THOMAS A. MONTGOMERY, is a co-founder of the Company and has served as a
director of the Company since 1989. Mr. Montgomery is a partner of Montgomery,
Jessup & Co., L.L.P., an accounting firm. From December 1982 to December 1990,
Mr. Montgomery served in various capacities with Arthur Andersen & Co., and as
the Senior Tax Manager of the Enterprise Group since 1985. Mr. Montgomery
received a Bachelor of Business Administration degree from Texas Tech University
and a Master of Science degree from Texas Tech University.

MORRIS G. MORELAND, a director of the Company since 1991, has served as
Vice President and Chief Financial Officer of Satana Corporation ("Satana"), an
investment company. Mr. Moreland is a Certified Public Accountant and received a
Bachelor of Business Administration degree from West Texas A & M University.

LEON PRITZKER, a director of the Company since 1989, has been self-employed
as a management consultant since 1990. From 1985 to 1990, Mr. Pritzker served as
the Executive Vice President of Campbell Taggart, Inc. From 1967 to 1984, Mr.
Pritzker served in various capacities with Anheuser-Busch Companies, Inc., most
recently as Director, Management Systems Group. Mr. Pritzker is a fellow of the
American Statistical Association. Mr. Pritzker received a Bachelor of Science
degree from College of the City of New York and a Master of Arts degree from the
University of Pennsylvania.

JIM SILCOCK, a director of the Company since February 1996, has served as a
general partner of Mapleleaf Capital Ltd., and as a general partner of
Sunwestern Associates III, a general partner of Sunwestern Investment Fund III,
a venture capital fund, since 1988 and as a general partner of T.V.P. Associates
Limited the general partner of Texas Venture Partners, a venture capital fund,
since 1984. Mr. Silcock received a Bachelor of Arts from Dartmouth College and a
Master of Business Administration from the Amos Tuck School of Business
Administration at Dartmouth College.

KEY EMPLOYEES

MARK NOVY has served as Controller and Secretary of the Company since May
1995. Prior to joining the Company, from July 1988 to April 1995, Mr. Novy
served as a Senior Accountant, and most recently as the Financial Analyst and
Market Chief Financial Officer of the Northeast Market for Columbia/HCA

31
<PAGE> 35

HealthCare Corporation, Ambulatory Surgery Division. Mr. Novy is a Certified
Public Accountant and received a Bachelor of Business Administration degree from
the University of Texas at Arlington.

CLYDE HUTCHINSON has served as a Regional Vice President of Sales and
Operations of the Company since January 1993. Prior thereto, Mr. Hutchinson
served as a District Manager of the Company from August 1990 to December 1992.
Mr. Hutchinson received a Bachelor of Science degree from Mississippi State
University.

JAY FARRIS has served as Vice President, Business Development since July
1996. Prior thereto, Mr. Farris served as a Regional Vice President of Sales and
Operations since January 1991. Prior thereto, Mr. Farris served as District
Manager of the Company from March 1990 to January 1991. Mr. Farris received a
Bachelor of Science degree from the University of Oklahoma.

MARK RUBINO has served as a Regional Vice President of Sales and Operations
of the Company since November 1995. Prior thereto, Mr. Rubino served as District
Manager of the Company from April 1991 to November 1995. Mr. Rubino received a
Bachelor of Science degree from Elizabeth Town College.

RONA P. MCGARVEY has served as Director of Patient Accounts of the Company
since June 1996. Prior to joining the Company in June 1996, Ms. McGarvey served
as Business System Analyst with Columbia/HCA HealthCare Corporation, Ambulatory
Surgery Division, in Dallas, Texas from October 1994 to May 1996. Ms. McGarvey
served as Information System Analyst for Medical Care International in Dallas,
Texas from March 1990 to October 1994, as Regional Office Coordinator for
Medivision, Inc., Houston, Texas from 1986 to 1990, and as Business Office
Manager at National Medical Care in The Woodlands, Texas from 1984 to 1986. Ms.
McGarvey received a Bachelor of Business in Education degree from Youngstown
State University.

TERM OF OFFICE FOR DIRECTORS; CLASSIFIED BOARD

Directors are elected by the Company's shareholders and serve until their
successors are elected and qualified. Upon consummation of the Offering, the
Board will be divided into three classes: Class A, Class B and Class C.
Directors will serve for staggered three-year terms, except with respect to the
initial terms of Class A and Class B directors which will expire at the annual
meetings of shareholders in 1997 and 1998, respectively. Directors for each
class will be elected at the annual meeting of shareholders held in the year in
which the term for such class expires and will serve thereafter for three years,
or until their earlier death, resignation or removal, or until their successors
are elected and qualified. Upon consummation of the Offering, the Class A
Directors will be Leon Pritzker and Morris G. Moreland; the Class B Directors
will be Jim Silcock and Thomas A. Montgomery; and the Class C Directors will be
Paul R. Herchman, David A. Kallenberger, M.D. and Leo Lopez.

BOARD COMMITTEES

The Company has established an Audit Committee and a Compensation
Committee. The Audit Committee makes recommendations to the Board regarding the
appointment of independent auditors, reviews the plan and scope of any audit of
the Company's financial statements and reviews the Company's significant
accounting policies and related matters. The Compensation Committee makes
recommendations to the Board regarding the compensation of executive officers
and the administration of the Incentive Plan.

COMPENSATION OF DIRECTORS

Upon consummation of the Offering, it will be the policy of the Company
that directors who are not employees of the Company ("Independent Directors")
will receive $500 for each Board meeting attended. All directors of the Company
will be reimbursed for travel, lodging and other out-of-pocket expenses in
connection with their attendance at Board and committee meetings. Under the
terms of the Incentive Plan, so long as the Company is a reporting company
subject to the terms of the Securities Exchange Act of 1934, as amended,
Independent Directors will receive an option to purchase 2,500 shares of Common
Stock upon his or her initial election to the Board and an option to purchase
1,500 shares of Common Stock at each annual meeting of the shareholders
thereafter while he or she continues to serve as a director of the Company. Such
options will be non-qualified stock options, will have an exercise price equal
to the fair market value of the

32
<PAGE> 36

Common Stock at the date of grant, will become exercisable one-third on the date
of grant and one-third each on the second and third anniversaries thereof, and
will expire ten years from the date of grant. As of June 30, 1996, the current
Independent Directors and their affiliated entities have been granted options to
purchase a total of 29,659 shares of Common Stock at exercise prices ranging
from $1.28 to $2.56 per share pursuant to the Incentive Plan. See "-- Incentive
Plan."

COMPENSATION COMMITTEE, INTERLOCKS AND INSIDER PARTICIPATION

During 1995, the Compensation Committee made recommendations to the Board
regarding compensation of the Company's executive officers and the Board
approved all of such recommendations. The Compensation Committee was comprised
of Paul R. Herchman and Morris G. Moreland during 1995. Other than Mr. Herchman,
no officer, former officer or employee served on the Compensation Committee. No
executive officer of the Company served as a member of the compensation
committee or similar committee or board of directors of any other entity which
an executive officer thereof served on the Compensation Committee or Board. See
"Certain Transactions."

INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY

Upon consummation of the Offering, the Company's Articles of Incorporation
will provide that, to the fullest extent permitted by Texas law, no director
shall be liable to the Company or its shareholders for monetary damages for
breach of fiduciary duty as a director and each director will be indemnified to
the maximum extent permitted by such law. By virtue of these provisions, a
director of the Company will not be personally liable for monetary damages for a
breach of such director's fiduciary duty except for liability for (i) breach of
the duty of loyalty to the Company or to its shareholders, (ii) acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) dividends or stock repurchases or redemptions that are
unlawful under the Texas Business Corporation Act (the "TBCA") and (iv) any
transaction from which such director receives an improper personal benefit. In
addition, the Company's Articles of Incorporation will provide that if the TBCA
is amended to authorize the further elimination or limitation of the liability
of a director, then the liability of the directors will be eliminated or limited
to the fullest extent permitted by the TBCA, as amended.

The Company intends to enter into indemnification agreements with each of
the Company's directors and executive officers. The indemnification agreements
will require, among other things, that the Company indemnify its directors and
executive officers to the fullest extent permitted by law and advance to the
directors and executive officers all related expenses, subject to reimbursement
if it is subsequently determined that indemnification is not permitted. The
Company will also be required to indemnify and advance all expenses incurred by
directors and executive officers seeking to enforce their rights under the
indemnification agreements. Although the form of indemnification agreement
offers substantially the same scope of coverage afforded by provisions in the
Company's Articles of Incorporation and Bylaws, it provides greater assurance to
directors and executive officers that indemnification will be available,
because, as a contract, it cannot be modified unilaterally in the future by the
Board or by the shareholders to eliminate the rights it provides.

33
<PAGE> 37

EXECUTIVE COMPENSATION

The Summary Compensation Table below sets forth certain information
regarding compensation paid or accrued for services rendered to the Company for
the year ended December 31, 1995 to the Company's Chief Executive Officer and
each of the Company's other executive officers whose total annual salary and
bonuses earned during the year ended December 31, 1995, exceeded $100,000
(collectively referred to herein as the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
1995 ANNUAL COMPENSATION -------------------------
--------------------------------- SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION SALARY BONUS COMPENSATION OPTIONS(1) COMPENSATION
- ---------------------------------------- -------- ------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Paul R. Herchman........................ $132,000 $77,000 $5,700(2) 48,391 --
Chairman of the Board, Chief Executive
Officer and President
Kevin D. O'Brien........................ 105,000 51,000 -- 46,830 --
Senior Vice President, Sales,
Marketing and Operations
</TABLE>

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

(1) Represents shares of Common Stock underlying stock options granted to the
Named Executive Officers during 1995 pursuant to the Incentive Plan.

(2) Represents a monthly automobile allowance paid to Mr. Herchman, and
premiums on a life insurance policy, of which Mr. Herchman's spouse is the
beneficiary, paid by the Company on Mr. Herchman's behalf.

The following table sets forth certain information with respect to options
granted to the Named Executive Officers during the year ended December 31, 1995.
The Company has not granted any stock appreciation rights.

OPTION GRANTS IN 1995

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUES AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(3)
OPTIONS EMPLOYEES PRICE PER EXPIRATION ---------------------
NAME GRANTED IN 1995 SHARE(1) DATE(2) 5% 10%
- ----------------------------- ---------- ---------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Paul R. Herchman............. 46,830 15% $2.56 09/16/99 $ $
1,561 1 2.56 08/15/97
Kevin D. O'Brien............. 46,830 16 2.56 09/16/99
</TABLE>

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

(1) Options were granted at an exercise price equal to the fair market value of
the Common Stock on the date of grant, as determined by the Board.

(2) Most of the options granted to the Named Executive Officers are subject to
vesting and, accordingly, may expire before the dates indicated.

(3) The 5% and 10% assumed annual compound rates of stock price appreciation
are mandated by the rules of the Securities and Exchange Commission and
do not represent the Company's estimate or projection of future Common
Stock prices.

34
<PAGE> 38

The following table sets forth certain information with respect to
unexercised options held by the Named Executive Officers as of December 31,
1995. No stock options were exercised by the Named Executive Officers during
1995.

AGGREGATE OPTION VALUES AT DECEMBER 31, 1995

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS AT MONEY OPTIONS AT
DECEMBER 31, 1995 DECEMBER 31, 1995(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Paul R. Herchman............................... 18,732 46,830 $ $
Kevin D. O'Brien............................... 87,416 46,830
</TABLE>

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

(1) These values assume a valuation of $ per share (the mid-point of the
estimated public offering price range) at December 31, 1995. Value is
calculated based on the difference between the option exercise price and
$ multiplied by the number of shares of Common Stock underlying the
option.

INCENTIVE PLAN

The Incentive Plan, which amended and restated the Company's previous stock
compensation plan, became effective on December 31, 1994. The Incentive Plan
authorizes the issuance of incentive and non-qualified stock options and
restricted stock awards to directors, key employees and advisors of the Company.
The Incentive Plan is administered by the Compensation Committee or such other
committee comprised of at least two nonemployee directors as may be appointed by
the Board. The committee generally has the authority to fix the terms and number
of options and restricted stock awards to be granted and to determine the
employees or other persons who will receive awards; provided that Independent
Directors receive non-qualified stock options under the Incentive Plan
automatically upon election as a director and upon each annual meeting of the
Shareholders thereafter while he or she continues to serve as a director of the
Company. The aggregate number of shares of Common Stock for which options may be
granted or for which restricted stock grants may be made under the Incentive
Plan is 1,324,290, subject to adjustment for stock splits and other capital
adjustments. See "-- Compensation of Directors."

Each option granted pursuant to the Incentive Plan is exercisable at any
time upon or after vesting and expires on the date determined by the committee,
but in no event will any option expire later than ten years from the date of
grant. With respect to a participant who is an employee or advisor, each option
expires within three months after the date the participant ceases to be an
employee or advisor, unless the participant is terminated for "cause," dies or
becomes permanently disabled, or unless the option is a non-qualified stock
option and the committee determines to extend the term of the option. If a
participant ceases to be an employee or advisor due to death or permanent
disability, or a nonemployee director ceases to serve as a director due to
death, the participant or his legal representative may exercise all vested
options during the following 12-month period (or if the option is a
non-qualified stock option, such longer period as the committee may determine),
provided that no options may be exercised after the expiration of the initial
term. If the employee, advisor or nonemployee director is terminated for
"cause," the option will automatically expire. The exercise price of each
incentive stock option granted will be determined by the committee, but shall
not be less than 100% of the fair market value of the Common Stock at the time
such incentive stock option is granted. The maximum aggregate fair market value
of Common Stock, determined at the time an incentive stock option is granted,
with respect to which incentive stock options are exercisable for the first time
by any participant during any calendar year, may not exceed $100,000. The price
at which shares of Common Stock may be acquired pursuant to the exercise of a
non-qualified stock option will be determined by the committee. Options are not
transferable other than by will or the laws of descent or distribution, pursuant
to a qualified domestic relations order, or if permitted by the committee,
non-qualified stock options may be transferred to a member of a participant's
immediate family, and may be exercised during the lifetime of the optionee only
by the optionee or the optionee's authorized representative. A vesting schedule
for the options is indicated in each option agreement as determined by the
committee. The committee has agreed that if Messrs. Herchman, O'Brien or Wallace
are terminated without cause, that all non-vested options held by such
terminated executive officer shall be immediately exercisable.

35
<PAGE> 39

Shares of Common Stock awarded under restricted stock grants are subject to
restrictions prohibiting their sale, assignment, transfer or encumbrance for a
period of time specified by the committee and will revert to the Company if the
participant's relationship with the Company terminates during such period of
restriction, unless such termination is due to the death, disability or
retirement of the participant. Upon the death or disability of a participant,
the restrictions pertaining to the shares of Common Stock terminate and the
stock is no longer subject to forfeiture. Upon the retirement of a participant,
the restrictions pertaining to the shares of Common Stock shall continue for the
original period, unless shortened by the committee, and the stock is no longer
subject to forfeiture. A vesting schedule in the restricted stock agreement
indicates the restriction period and the rate at which the restrictions lapse.

The Company has outstanding options to purchase in the aggregate 902,315
shares of Common Stock under the Incentive Plan, 348,124 of which are vested and
exercisable. The Company expects that options will continue to be granted to
eligible persons as part of the Company's incentive-based compensation program.

EMPLOYMENT AGREEMENTS

The Company has entered into an Employment Agreement with Paul Herchman,
dated as of January 1, 1994, as amended (the "Herchman Agreement"). The Herchman
Agreement may be terminated by the Company upon 12 months prior notice and may
be terminated by Mr. Herchman upon three months prior notice. The Herchman
Agreement provides that Mr. Herchman receive a base salary of $145,200 per year
and is eligible to receive bonuses based upon the Company's financial
performance. The Herchman Agreement requires Mr. Herchman to maintain the
confidentiality of the Company's proprietary information during his employment
and thereafter and prohibits Mr. Herchman from competing with the Company during
his employment and for a period of one year thereafter.

The Company has entered into an Employment Agreement with Kevin O'Brien,
dated as of January 1, 1995, as amended (the "O'Brien Agreement"). The O'Brien
Agreement provides that Mr. O'Brien will receive a base salary of $115,500 per
year and is eligible to receive bonuses based upon the Company's performance.
The O'Brien Agreement is terminable by the Company with 6 months prior notice
and may be terminated by Mr. O'Brien upon 3 months prior notice. The O'Brien
Agreement requires Mr. O'Brien to maintain the confidentiality of the Company's
proprietary information during his employment and for a period of four years
thereafter and prohibits Mr. O'Brien from competing with the Company during his
employment and for a period of one year thereafter.

The Company has entered into an Employment Agreement with Michael G.
Wallace, dated as of January 1, 1995, as amended (the "Wallace Agreement"). The
Wallace Agreement provides that Mr. Wallace will receive a base salary of
$84,000 per year and is eligible to receive bonuses based upon the Company's
performance. The Wallace Agreement is terminable by the Company with 6 months
prior notice and may be terminated by Mr. Wallace upon 3 months prior notice.
The Wallace Agreement requires Mr. Wallace to maintain the confidentiality of
the Company's proprietary information during his employment and for a period of
four years thereafter and prohibits Mr. Wallace from competing with the Company
during his employment and for a period of one year thereafter.

CERTAIN TRANSACTIONS

On November 17, 1995, the Company entered into a Preferred Stock Purchase
Agreement (the "Series B Purchase Agreement") with various investors, pursuant
to which the Company issued an aggregate of 362,500 shares of Series B
Convertible Preferred Stock (the "Series B Preferred") to such investors at a
purchase price of $4.00 per share ($1.45 million in the aggregate). In such
offering, Morris G. Moreland and Satana, of which Mr. Moreland is a director,
acquired an aggregate of 163,662 shares of Series B Preferred, and Mapleleaf
Capital, Ltd., Sunwestern Investment Fund III and Sunwestern Cayman 1988
Partners, affiliated entities of Jim Silcock, acquired an aggregate of 171,067
shares of Series B Preferred. For a description of the Series B Preferred, see
Note 6 of the Notes to Consolidated Financial Statements.

36
<PAGE> 40

On July 27, 1995, the Company granted Paul R. Herchman a warrant to
purchase up to 15,610 shares of Common Stock at an exercise price of $2.56 per
share, which warrant vested upon the date of grant and expires in September
1999. This warrant was granted to Mr. Herchman in consideration for his personal
guaranty of the obligations of the Company under its revolving credit facility
and term loans with NationsBank of Texas, N.A. (the "NationsBank Loans"). A
portion of the net proceeds from the Offering will be used to repay such
indebtedness in full. See "Use of Proceeds."

In connection with the issuance and amendment of a promissory note by the
Company to Satana, the Company issued to Satana in January 1991 and July 1992, a
warrant to purchase up to an aggregate of 468,300 shares of Common Stock
exercisable as follows: 93,660 shares at $0.64 per share on or before July 10,
1995, and 374,640 shares at $1.28 per share on or before December 31, 1997.
During 1994, Satana exercised a portion of the warrant to acquire 93,660 shares
of Common Stock at a discounted price of $0.53 per share. During 1995, Satana
exercised the remaining portion of the warrant to acquire 374,640 shares of
Common Stock at a discounted price of $0.80 per share. See Notes 4 and 7 to
Consolidated Financial Statements.

On November 26, 1991, MJ Capital Corporation ("MJ Corporation") loaned the
Company $35,000 (the "MJ Corporation Loan") bearing interest at a rate of 16%
per annum. In February of 1992, an additional $10,000 was advanced to the
Company and on December 31, 1992 the balance, including $8,392 of accrued
interest, was consolidated into the MJ Corporation Loan. On May 12, 1993,
Montgomery, Jessup and Company L.L.P. ("MJC") loaned the Company $13,000 bearing
an interest rate of 16% per annum with an additional loan of $2,500 in May of
1993 (the "MJC Loan"). On September 30, 1993, MJ Corporation and MJ Partners
became partners of MJ Capital Partners, L.P. ("MJ Partners"). In connection
therewith, MJ Corporation contributed the MJ Corporation Loan to MJ Partners and
MJC contributed the MJC Loan, together with $8,961 of fees due to MJC for
accounting services rendered, to MJ Partners, all of which amounts were
consolidated into the MJ Partners Note described below.

On September 5, 1991, MJ Partners loaned the Company $95,000 evidenced by a
promissory note (the "MJ Partners Note") bearing interest at a rate of 16% per
annum. In addition to the consolidation of the MJ Corporation Loan and MJC Loan,
during 1991, 1992, 1993 and 1994, MJ Partners loaned the Company additional
amounts under the MJ Partners Note of $78,000, $50,000, $190,000 and $57,500,
respectively, and rolled an aggregate of $46,148 of accrued interest back into
the MJ Partners Note during such period. The MJ Partners Note was paid on June
29, 1995 with proceeds from the NationsBank Loans.

The Company issued the following warrants to certain partners of MJ
Partners in connection with additional advances under the MJ Partners Note, all
of which warrants expire on March 31, 1997: (i) On August 15, 1993, the Company
granted to Columbia General Corporation warrants to purchase up to 23,416 shares
of Common Stock exercisable as follows: 11,708 shares immediately with the
remaining 11,708 shares on or after August 16, 1994 at an exercise price of
$1.28 per share; (ii) On October 17, 1993, the Company granted to Robert
Matthews warrants to purchase up to 2,810 shares of Common Stock exercisable as
follows: 1,405 shares immediately with the remaining 1,405 shares on or after
October 18, 1994 at an exercise price of $1.28 per share; (iii) On May 31, 1994,
the Company granted Thomas H. Montgomery warrants to purchase up to 4,214 shares
of Common Stock exercisable as follows: 2,107 shares immediately and the
remaining 2,107 shares on or after May 31, 1995, at an exercise price of $1.28
per share; (iv) On August 1, 1994, the Company granted to Mr. Montgomery
warrants to purchase up to 1,404 shares of Common Stock exercisable as follows:
702 shares immediately and the remaining 702 shares on or after August 1, 1995,
at an exercise price of $1.28 per share, which remaining portion was canceled in
connection with the repayment of the MJ Partners Note; (v) On August 15, 1994,
the Company granted to Mr. Montgomery warrants to purchase up to 2,810 shares of
Common Stock exercisable as follows: 1,405 shares immediately and the remaining
1,405 shares on or after August 15, 1995, at an exercise price of $1.28 per
share, which remaining portion was canceled in connection with the repayment of
the MJ Partners Note; and (vi) On August 31, 1994, the Company granted to Shelly
Burks warrants to purchase up to 2,342 shares of Common Stock exercisable as
follows: 1,171 shares immediately and the remaining 1,171 shares on or after
August 31, 1995, at an exercise price of $1.28 per share, which remaining
portion was canceled in connection with the repayment of the MJ Partners Note.

Mr. Montgomery, a Director of the Company, is the President of MJ
Corporation and the general partner of MJC and MJ Partners.

37
<PAGE> 41

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of June 30, 1996, and as adjusted to reflect
the sale of the shares of Common Stock offered hereby, by (i) all persons who
are beneficial owners of 5% or more of the Common Stock, (ii) each director of
the Company, (iii) each Named Executive Officer and (iv) all executive officers
and directors of the Company as a group.

<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED
NUMBER OF SHARES -------------------------------------
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) BEFORE OFFERING AFTER OFFERING(2)
- -------------------------------------------- --------------------- --------------- -----------------
<S> <C> <C> <C>
NAMED EXECUTIVE OFFICERS
Paul R. Herchman(3)......................... 501,827 13.7% %
Kevin D. O'Brien(4)......................... 104,119 2.8
DIRECTORS
David A. Kallenberger, M.D.(5).............. 192,003 5.3
Leo Lopez(6)................................ 1,561 --
Thomas A. Montgomery(7)..................... 211,125 5.8
Morris G. Moreland(8)....................... 583,958 16.1
Leon Pritzker(9)............................ 80,454 2.2
Jim Silcock(10)............................. 949,193 26.1
All executive officers and directors as a
group (9 persons)(11)..................... 2,661,018 69.5
OTHER 5% SHAREHOLDERS
Mapleleaf Capital, Ltd.(12)................. 738,330 20.3
Satana Corporation(13)...................... 492,645 13.6
</TABLE>

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

* Less than 1%.

(1) Unless otherwise indicated below, the persons and entities named in the
table have sole voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where applicable.
Shares of Common Stock subject to options or warrants that are currently
exercisable or exercisable within 60 days are deemed to be outstanding and
to be beneficially owned by the person or entity holding such options. Data
in this table gives effect to the conversion of the outstanding shares of
Convertible Preferred Stock into Common Stock upon consummation of the
Offering.

(2) Assumes that the Underwriters' over-allotment option to purchase up to
shares from the Company is not exercised.

(3) Includes 18,732 shares underlying currently exercisable options to purchase
Common Stock and 15,610 shares underlying currently exercisable warrants to
purchase Common Stock. The business address of Mr. Herchman is 2445 Gateway
Drive, Suite 150, Irving, Texas 75063.

(4) Includes 87,416 shares underlying currently exercisable options to purchase
Common Stock.

(5) Includes 24,976 shares underlying currently exercisable options to purchase
Common Stock. The business address of Dr. Kallenberger is 3433 N.W. 56th
Street, Suite 310, Oklahoma City, Oklahoma 73112.

(6) Includes 1,561 shares underlying a currently exercisable option to purchase
Common Stock.

(7) Includes 23,415 shares underlying currently exercisable options to purchase
Common Stock, 5,151 shares underlying currently exercisable warrants to
purchase Common Stock, 7,805 shares of Common Stock held by Mr.
Montgomery's spouse's profit sharing plan and 15,610 shares of Common Stock
held by MJC's profit sharing plan, of which Mr. Montgomery is a partner. As
a partner of MJC, Mr. Montgomery may be deemed to be the indirect
beneficial owner of the shares beneficially owned by MJC by virtue of his
authority to make investment decisions regarding the voting and disposition
of such shares. The business address of Mr. Montgomery is 5220 Spring
Valley, Suite 600, Dallas, Texas 75240.

38
<PAGE> 42

(8) Includes the shares of Common Stock beneficially owned by Satana, of which
Mr. Moreland is an executive officer. As an executive officer of Satana,
Mr. Moreland may be deemed to the indirect beneficial owner of the shares
beneficially owned by Satana by virtue of his authority to make investment
decisions regarding the voting and disposition of such shares. Mr. Moreland
disclaims beneficial ownership of the shares beneficially owned by Satana.
The business address of Mr. Moreland is National Plaza 2, Suite 102,
Amarillo, Texas 79101.

(9) Includes 1,561 shares underlying a currently exercisable option to purchase
Common Stock.

(10) Includes the shares beneficially owned by Mapleleaf Capital, Ltd., 109,649
shares beneficially owned by Sunwestern Cayman 1988 Partners, 101,214
shares beneficially owned by Sunwestern Investment Fund III, all of which
are affiliates of Mr. Silcock. Mr. Silcock may be deemed to the indirect
beneficial owner the shares beneficially owned by such entities by virtue
of his authority to make investment decisions regarding the voting and
disposition of such shares. Mr. Silcock disclaims beneficial ownership of
the shares owned by Mapleleaf Capital, Ltd., Sunwestern Cayman 1988
Partners and Sunwestern Investment Fund III. The business address of Mr.
Silcock is 12221 Merit Drive, Suite 935, Dallas, Texas 75251.

(11) Includes the shares referenced in footnotes (3) - (10), 18,690 additional
shares and 17,171 additional shares underlying currently exercisable
options to purchase Common Stock.

(12) Includes 1,561 shares underlying a currently exercisable option to purchase
Common Stock. The business address of Mapleleaf Capital, Ltd. is 12221
Merit Drive, Suite 935, Dallas, Texas 75251.

(13) Includes 1,561 shares underlying a currently exercisable option to purchase
Common Stock. The business address of Satana Corporation is National Plaza
2, Suite 102, Amarillo, Texas 79101.

39
<PAGE> 43

DESCRIPTION OF CAPITAL STOCK

GENERAL

As of the date of this Prospectus, the authorized capital stock of the
Company consists of 10,000,000 shares of Common Stock, par value $0.002 per
share, and 2,000,000 shares of Preferred Stock, par value $0.002 per share,
issuable in Series. Simultaneously upon consummation of the Offering, the
Articles of Incorporation of the Company will be amended to authorize 30,000,000
shares of Common Stock, par value $0.002 per share, and 5,000,000 shares of
Preferred Stock, par value $0.002 per share. Upon the consummation of the
Offering, there will be shares of Common Stock outstanding (
shares if the Underwriters over-allotment option is exercised in full) and no
shares of Preferred Stock outstanding. On August 2, 1996, the Board of Directors
approved a 1.561 to 1 stock split, effected through a stock dividend. The
description of capital stock has been retroactively adjusted to give effect for
this dividend.

COMMON STOCK

As of the date of this Prospectus, there are 2,387,172 shares of Common
Stock outstanding held by 60 record holders. Each holder of Common Stock is
entitled to one vote per share held of record in the election of Directors and
for all other matters submitted to a vote of the shareholders. Except as
otherwise required by Texas law, a majority vote is sufficient for any act of
the shareholders. Upon consummation of the Offering, there will be no cumulative
voting rights applicable to any shares of Common Stock. All shares of Common
Stock are entitled to participate pro rata in distributions and in such
dividends as may be declared by the Board out of funds legally available
therefor, subject to any preferential dividend and the setting aside of sinking
funds or redemption accounts of outstanding shares of Preferred Stock, if any.
Subject to the prior rights of creditors, all shares of Common Stock are
entitled in the event of liquidation, dissolution or winding up of the Company
to participate ratably in the distribution of all the remaining assets of the
Company after distribution in full of preferential amounts, if any, to be
distributed to holders of Preferred Stock. Holders of Common Stock have no
preemptive rights or right to convert their shares into other securities. The
outstanding shares of Common Stock are and the shares of Common Stock to be
outstanding upon the completion of the Offering will be fully paid and
non-assessable. The rights, preferences and privileges of holders of Common
Stock are subject to, and may be adversely affected by, the rights of any series
of Preferred Stock which the Company may issue in the future.

PREFERRED STOCK

Upon consummation of the Offering, the Board may, without further action by
the Company's shareholders, authorize, from time to time, issuance of up to
5,000,000 shares of Preferred Stock in series and may, at the time of issuance,
determine the powers, rights, preferences and limitations of any such series.
Satisfaction of any dividend preferences on outstanding shares of Preferred
Stock would reduce the amount of funds available for the payment of dividends on
Common Stock. Holders of Preferred Stock would be entitled to receive a
preference payment in the event of any liquidation, dissolution or winding up of
the Company before any payment is made to the holders of Common Stock. Although
there is no current intention to do so, the Board may, without shareholder
approval, issue shares of a class or series of Preferred Stock with voting and
conversion rights which could adversely affect the voting power or dividend
rights of the holders of Common Stock and may have the effect of delaying,
deferring or preventing a change in control of the Company.

The Company has authorized the issuance of 435,000 shares of Series A
Convertible Preferred Stock and 362,500 shares of Series B Convertible Preferred
Stock. Immediately prior to the consummation of the Offering, there were 435,000
shares of Series A Convertible Preferred Stock outstanding held by one holder of
record and 362,500 shares of Series B Convertible Preferred Stock outstanding
held by 16 holders of record. See Notes 5 and 6 of the Notes to Consolidated
Financial Statements for a description of the Series A Convertible Preferred
Stock and Series B Convertible Preferred Stock, respectively. Concurrently with
the consummation of the Offering, all of the outstanding shares of Series A
Convertible Preferred Stock and Series B Convertible Preferred Stock will be
converted into shares of Common Stock on a 1.561 to 1 basis. Upon consummation
of the Offering, no shares of Preferred Stock will be outstanding.

40
<PAGE> 44

WARRANTS

As of June 30, 1996, there were warrants outstanding to purchase 49,330
shares of Common Stock at a weighted average exercise price of $1.69 per share.
The warrants were issued in connection with the issuance of debt instruments by
the Company. All of the warrants are currently exercisable. Warrants covering
33,720 shares will expire by their terms in March 1997, and warrants covering
15,610 shares will expire by their terms in September 1999.

REGISTRATION RIGHTS

The Company has entered into the Series A Convertible Preferred Stock
Purchase Agreement (the "Series A Preferred Stock Agreement") and a Series B
Convertible Stock Purchase Agreement (the "Series B Preferred Stock Agreement")
which give certain rights to the holders of the equivalent of 1,244,898 shares
of Common Stock to demand that the Company register shares of Common Stock under
the Securities Act, subject to certain conditions. In order for the holders
("Series A Rights Holders") of Series A Preferred Stock or of Common Stock
converted from Series A Preferred Stock to effect a demand for registration, the
Series A Preferred Stock Agreement requires that the holders of at least 50% of
all such shares request the registration of at least 45% of the total shares of
Common Stock that are issued or issuable upon conversion of the Series A
Preferred Stock. In order for the holders ("Series B Rights Holders") of Series
B Preferred Stock or of Common Stock converted from Series B Preferred Stock to
effect a demand for registration, the Series B Preferred Stock Agreement
requires that the holders of at least 40% of all such shares request the
registration of at least 45% of the total shares of Common Stock that are issued
or issuable upon conversion of the Series B Preferred Stock. An unlimited number
of demands may be made; however, the Company has an obligation to complete only
two registrations at the demand of the Series A Rights Holders and only two
registrations at the demand of the Series B Rights Holders. The expenses of the
first such registration on behalf of each of the Series A Rights Holders and
Series B Rights Holders will be borne by the Company; the expenses of subsequent
registrations will be borne by the respective selling shareholders. In addition,
once the Company is eligible to effect a registration of its securities under
Form S-3, each group of Series A Rights Holders and Series B Rights Holders may
effect a demand for registration on Form S-3 if the holders of 25% of such
rights holders' shares request such registration. An unlimited number of demands
for registration on Form S-3 may be made; however, the Company has an obligation
to complete only one such registration during any one fiscal year. All rights
holders have waived such rights with respect to the Offering and have agreed not
to demand registration of any of their shares for a period of one year following
the Effective Date pursuant to the Lock-up Agreements.

In addition to demand registration rights, each group of rights holders has
unlimited "piggyback" registration rights pursuant to which the rights holders
will have the right to request that the Company register their respective shares
under the Securities Act at the expense of the Company (excluding all
underwriting discounts, selling commissions and applicable stock transfer
taxes), unless in connection with an underwritten public offering, the principal
underwriter reasonably and in good faith recommends that the respective rights
holders' shares be excluded from the offering. All rights holders have waived
such rights with respect to the Offering and have agreed not to demand
registration of any of their shares for a period of one year following the
Effective Date pursuant to the Lock-up Agreements.

Satana and Morris G. Moreland have registration rights equivalent to those
of the Series A Rights Holders with respect to 421,470 shares and 46,830 shares
of Common Stock held by Satana and Morris G. Moreland, respectively. Satana and
Morris G. Moreland have waived their registration rights in connection with the
Offering and has agreed not to demand registration of any of its shares for a
period of one year following the Effective Date pursuant to the Lock-up
Agreements.

CERTAIN ANTI-TAKEOVER PROVISIONS

Certain provisions of the Company's Articles of Incorporation and Bylaws
may be deemed to have an anti-takeover effect and may delay, defer or prevent a
tender offer or takeover attempt that a shareholder may consider to be in the
best interests of the Company or its shareholders, including those attempts that
may

41
<PAGE> 45

result in a premium over the then current market price for the Common Stock. The
Company's Bylaws provide that the Board may adopt, amend or repeal the Bylaws
and that the number of directors shall be as fixed from time to time by
resolution of the Board. Upon consummation of the Offering, the Board will be
divided into three classes that are elected for staggered three-year terms, and
accordingly, only one-third of the total number of directors will be replaced or
re-elected each year. In addition, shareholders do not have the right to
cumulative voting for the election of directors and the Bylaws provide that the
shareholders may only remove a director for cause. These provisions, in addition
to the existence of authorized but unissued capital stock, may have the effect,
either alone or in combination with each other, of making more difficult or
discouraging an acquisition of the Company or other change in control deemed
undesirable by the Board. See "Description of Capital Stock -- Preferred Stock."

TRANSFER AGENT AND REGISTRAR

Upon consummation of the Offering, the transfer agent and registrar for the
Common Stock will be Chemical Mellon Shareholder Services.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offering, there has been no public market for the Common Stock
and there can be no assurance that a significant public market for the Common
Stock will develop or be sustained after the Offering. Future sales of
substantial amounts of Common Stock in the public market could adversely affect
market prices prevailing from time to time and could impair the Company's
ability to raise capital through sale of its equity securities. Sales of
substantial amounts of Common Stock of the Company in the public market after
the restrictions lapse could adversely affect the prevailing market price and
the ability of the Company to raise equity capital in the future.

Upon completion of the Offering, the Company will have outstanding
shares of Common Stock. Of these shares, the shares of
Common Stock offered hereby will be tradeable without restriction under the
Securities Act, except for any shares acquired by an "affiliate" of the Company
(as that term is defined in the Securities Act and regulations promulgated
thereunder). The remaining 3,632,069 shares are "restricted securities" within
the meaning of Rule 144 and may be publicly sold only if registered under the
Securities Act or sold in accordance with an applicable exemption from
registration, such as Rule 144. The beneficial owners of more than 98% of the
Restricted Shares have entered into Lock-up Agreements which provide that, with
certain limited exceptions, the shareholder will not offer, sell, contract to
sell, grant an option to purchase, make a short sale or otherwise dispose of or
engage in any hedging or other transaction that is designed or reasonably
expected to lead to a disposition of any shares of Common Stock or any option or
warrant to purchase shares of Common Stock or any securities exchangeable for or
convertible into shares of Common Stock for a period of 180 days after the
Effective Date without the prior written consent of Bear, Stearns & Co. Inc. The
remainder, less than 2% of the Restricted Shares, will be available for sale
upon the Effective Date. Beginning 180 days after the Effective Date, the
remainder of the Restricted Shares will become eligible for sale under Rule 144
or Rule 701 upon the expiration of the Lock-up Agreements. In addition, 348,103
shares subject to currently vested stock options and warrants will become
eligible for sale in the public market upon the expiration of the Lock-up
Agreements.

In general, under Rule 144 as currently in effect, beginning 90 days after
the Effective Date, a person (or persons whose shares are aggregated) who has
beneficially owned Restricted Shares for at least two years, including an
affiliate of the Company, is entitled to sell, within any three month period, a
number of shares that does not exceed the greater of (i) 1% of the then
outstanding shares of Common Stock (approximately shares immediately
after the Offering) or (ii) an amount equal to the average weekly reported
volume of trading in the Common Stock during the four calendar weeks preceding
such sale. Sales under Rule 144 are also subject to certain manner of sale
limitations, notice requirements and the availability of current public
information about the Company. A person (or persons whose shares are aggregated)
who is not deemed an affiliate of the Company and who has beneficially owned
Restricted Shares for at least three years is entitled to sell such shares under
Rule 144 without regard to these volume or other limitations. Restricted Shares

42
<PAGE> 46

properly sold in reliance on Rule 144 are thereafter freely tradeable without
restrictions or registration under the Securities Act, unless thereafter held by
an affiliate of the Company. In addition, Rule 701 permits any employee, officer
or director of or consultant to the Company who purchased his or her shares
pursuant to a written compensatory plan or contract to sell such shares without
having to comply with the holding period requirements of Rule 144 and, in the
case of non-affiliates, without having to comply with the public information,
volume limitation or notice provisions of Rule 144.

The Company anticipates that it will file a registration statement on Form
S-8 under the Securities Act to register all of the shares of Common Stock
issued or reserved for future issuance under the Incentive Plan. Subject to the
Lockup Agreements, upon filing of such registration statement, shares purchased
upon the exercise of options covered thereby would generally be available for
resale in the public market, subject to Rule 144 volume limitations applicable
to affiliates of the Company.

Pursuant to the Registration Rights Agreements, the holders of the
Convertible Preferred Stock have been accorded the right to require the Company,
at the Company's expense, to register up to all of their 1,244,898 shares of
Common Stock under the Securities Act. See "Description of Capital Stock --
Registration Rights." Pursuant to the Lock-up Agreements, such persons have
agreed not to exercise such registration rights for a period of one year
following the Effective Date, without the prior written consent of Bear, Stearns
& Co. Inc.

UNDERWRITING

Subject to certain terms and conditions contained in the Underwriting
Agreement (the "Underwriting Agreement"), the underwriters named below (the
"Underwriters"), for whom Bear, Stearns & Co. Inc. and Equitable Securities
Corporation are acting as representatives (the "Representatives"), have
severally agreed to purchase from the Company an aggregate of shares of
Common Stock. The number of shares of Common Stock that each Underwriter has
agreed to purchase is set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Bear, Stearns & Co. Inc. .................................................
Equitable Securities Corporation..........................................

--------
Total...........................................................
========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase shares of Common Stock are subject to approval of
certain legal matters by counsel and to certain other conditions precedent. If
any of the shares of Common Stock are purchased by the Underwriters pursuant to
the Underwriting Agreement, all such shares of Common Stock (other than shares
of Common Stock covered by the over-allotment option described below) must be so
purchased.

Prior to the Offering, there has been no established public trading market
for the Common Stock. The initial price to the public for the Common Stock
offered hereby has been determined in negotiations between the Company and the
Representatives. Among the factors to be considered in such negotiations have
been the history of and the prospects for the industry in which the Company
competes, an assessment of the Company's

43
<PAGE> 47

management, the past and present operations of the Company, the historical
results of operations of the Company, the prospects for future earnings of the
Company, the general condition of the securities markets at the time of the
Offering, and the recent market prices of securities of generally comparable
companies. There can be no assurance that an active trading market will develop
for the Common Stock or that the Common Stock will trade in the public market
subsequent to the Offering at or above the initial offering price.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Act, or to contribute to payments
that the Underwriters may be required to make in respect thereof.

The Company has been advised by the Representatives that the Underwriters
propose to offer the Common Stock to the public initially at the price set forth
on the cover page of this Prospectus and to certain dealers (who may include the
Underwriters) at such price less a concession not to exceed $ per
share. The Underwriters may allow, and such dealers may allow, discounts not in
excess of $ per share to any Underwriter and certain other dealers.

The Company has granted to the Underwriters an option to purchase up to an
aggregate of solely additional shares of Common Stock at the initial
public offering price, less underwriting discounts and commissions to cover
overallotments. Such option may be exercised at any time until 30 days after the
date of the final Prospectus relating to the Offering. To the extent that the
Underwriters exercise such option, each of the Underwriters will be committed,
subject to certain conditions, to purchase a number of option shares
proportionate to such Underwriters' initial commitment as indicated in the
preceding table.

The holders of over 98% of the outstanding capital stock of the Company,
including all of the Company's directors and executive officers, have agreed not
to offer, pledge, issue, sell, contract to sell, grant any option to purchase or
otherwise dispose (or announce any offer, sale, grant of any option to purchase
or other disposition) of any shares of Common Stock, or any securities
convertible into, or exercisable or exchangeable for, shares of Common Stock for
a period of 180 days after the date of the final Prospectus relating to the
Offering, without the prior written consent of Bear, Stearns & Co. Inc. In
addition, holders of the Company's Convertible Preferred Stock have agreed not
to exercise certain rights to have their shares of Company Common Stock
registered under the Securities Act for a period of the year following the
Effective Date, without the prior written consent of Bear, Stearns & Co. Inc.
See "Shares Eligible for Future Sale."

The Underwriters do not intend to sell shares of Common Stock to any
account over which they exercise discretionary authority.

Julie E. Silcock, a Senior Managing Director of Bear, Stearns & Co. Inc.,
is the wife of Jim Silcock, a general partner of Mapleleaf Capital, Ltd. and a
director of the Company. Mapleleaf Capital, Ltd., together with its affiliates,
is the largest holder of the Company's Common Stock. Ms. Silcock may be deemed
to beneficially own certain shares of the Company's Common Stock held by
Mapleleaf Capital, Ltd. and its affiliates due to her marital relationship with
Mr. Silcock. See "Principal Shareholders."

LEGAL MATTERS

The validity of the issuance of the shares of Common Stock offered hereby
and certain other legal matters will be passed upon for the Company by Jackson &
Walker, L.L.P., Dallas, Texas. A partner of Jackson & Walker, L.L.P.
beneficially owns 10,927 shares of Common Stock of the Company. Certain legal
matters in connection with the issuance of the shares of Common Stock offered
hereby will be passed upon for the Underwriters by Winstead Sechrest & Minick
P.C., Dallas, Texas.

EXPERTS

The consolidated financial statements and financial statement schedule of
Medical Alliance, Inc. and its subsidiaries at December 31, 1994 and 1995, and
for each of the years in the three-year period ended December 31, 1995,
appearing in this Prospectus and Registration Statement have been audited by
Coopers & Lybrand L.L.P., independent accountants and are included herein and
elsewhere in the Registration Statement in reliance upon such reports and
schedule given upon the authority of said firm as experts in accounting and
auditing.

44
<PAGE> 48

ADDITIONAL INFORMATION

The Company has filed with the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, a Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act with respect to the shares of Common Stock
offered hereby. This Prospectus constitutes a part of the Registration Statement
and does not contain all of the information set forth in the Registration
Statement or the exhibits and schedules thereto, certain parts of which have
been omitted in accordance with the rules and regulations of the Commission. For
further information pertaining to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement, including the exhibits
and schedules thereto. Statements made in this Prospectus concerning the
provisions of any documents to which reference is made are not necessarily
complete and, in the case of documents filed as exhibits to the Registration
Statement, reference is made to the copy of the documents so filed for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference. The Registration Statement
and the exhibits and schedules thereto filed with the Commission may be
inspected and copied at the public reference facility maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the regional offices of the Commission located at 75 Park
Place, Room 1228, New York, New York 10007 and Suite 1400, Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60621-2511. Copies of such
material may also be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.

45
<PAGE> 49

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
MEDICAL ALLIANCE, INC. AND SUBSIDIARIES
Report of Independent Accountants.................................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996....... F-3
Consolidated Statements of Operations for the years ended December 31, 1993, 1994 and
1995 and the six months ended June 30, 1995 and 1996.............................. F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended
December 31, 1993, 1994 and 1995 and the six months ended June 30, 1996........... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994 and
1995 and for the six months ended June 30, 1995 and 1996.......................... F-6
Consolidated Notes to Financial Statements........................................... F-7
</TABLE>

F-1
<PAGE> 50

As discussed in Note 16 to the consolidated financial statements, the
Company's Board of Directors approved a 1.561 to 1 stock split effected through
a stock dividend to occur prior to the effective date of this registration
statement. The accompanying consolidated financial statements have been
retroactively adjusted to reflect the stock split effected through a stock
dividend as if it had occurred. Additionally, as discussed in Note 2 (Earnings
Per Share) to the consolidated financial statements, the Company has outstanding
common stock and other potentially dilutive instruments for which the earnings
per share calculation is subject to Securities and Exchange Commission Staff
Accounting Bulletin ("SAB") Topic 4-D. As neither the initial public offering
price nor the number of securities to be offered by this registration statement
has been determined, the Company is unable to calculate earnings per share with
respect to those instruments subject to SAB Topic 4-D and, therefore, no
disclosure of earnings per share has been made. The following is the
accountants' report we will issue after (1) the stock split effected through a
stock dividend occurs; (2) the range of maximum offering price and maximum
number of shares to be offered is included in the preliminary prospectus; and
(3) the Company completes the calculation and presentation of earnings per share
in the consolidated financial statements in accordance with generally accepted
accounting principles and SAB Topic 4-D:

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
Medical Alliance, Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheets of
Medical Alliance, Inc. and Subsidiaries (the "Company"), as of December 31,
1994 and 1995 and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the three years
in the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Medical Alliance, Inc. and Subsidiaries as of December 31, 1994
and 1995, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.

Dallas, Texas
July 17, 1996, except for Note 16 as to
which the date is August 2, 1996 and , 1996

F-2
<PAGE> 51

MEDICAL ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995 AND JUNE 30, 1996

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- JUNE 30,
1994 1995 1996
---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............................ $ 93,656 $1,385,654 $1,404,985
Restricted cash...................................... 15,035 22,854 26,900
Accounts receivable, less allowance for doubtful
accounts of $449,881, $1,113,314 and $1,514,926,
respectively...................................... 1,386,714 2,568,686 3,399,029
Prepaid expenses and other current assets............ 124,665 230,322 440,512
---------- ---------- ----------
Total current assets......................... 1,620,070 4,207,516 5,271,426
---------- ---------- ----------
Property and equipment, net............................ 809,354 2,192,791 3,474,655
---------- ---------- ----------
Other assets:
Deferred income taxes................................ 256,972 -- --
Intangible assets, net of amortization of
approximately $44,000, $3,000 and $23,000,
respectively...................................... 11,526 43,056 184,536
---------- ---------- ----------
Total other assets........................... 268,498 43,056 184,536
---------- ---------- ----------
Total assets................................. $2,697,922 $6,443,363 $8,930,617
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................... $ 241,951 $ 316,367 $ 562,026
Accrued expenses..................................... 343,766 801,555 1,147,328
Current maturities of:
Long-term debt.................................... 275,875 366,667 700,452
Capital lease obligations......................... 209,826 284,633 317,894
Deferred income taxes................................ 256,972 365,616 41,780
Deferred revenue..................................... 165,907 159,337 156,842
---------- ---------- ----------
Total current liabilities.................... 1,494,297 2,294,175 2,926,322
Long-term debt, net of current maturities.............. 688,912 1,443,819 2,655,335
Capital lease obligations, net of current maturities... 391,280 258,296 138,922
Deferred income taxes.................................. -- 16,547 451,825
---------- ---------- ----------
Total liabilities............................ 2,574,489 4,012,837 6,172,404
---------- ---------- ----------
Stockholders' equity:
Series A convertible preferred stock, $0.002 par
value, 2,000,000 shares authorized; 435,000 shares
issued and outstanding; aggregate liquidation
preferences of $928,500, $893,500 and $893,500,
respectively...................................... 870 870 870
Series B convertible preferred stock, $0.002 par
value, 362,500 shares authorized, issued and
outstanding; aggregate liquidation preferences of
$0, $1,450,000 and $1,450,000, respectively....... -- 725 725
Common stock, $0.002 par value, 10,000,000 shares
authorized and 1,894,024, 2,339,421 and 2,387,172
shares issued and outstanding, respectively....... 3,788 4,678 4,774
Capital in excess of par value....................... 1,232,257 2,959,586 2,918,032
Accumulated deficit.................................. (1,104,532) (526,383) (157,238)
Treasury stock at cost, 17,230 shares................ (8,950) (8,950) (8,950)
---------- ---------- ----------
Total stockholders' equity................... 123,433 2,430,526 2,758,213
---------- ---------- ----------
Total liabilities and stockholders' equity... $2,697,922 $6,443,363 $8,930,617
========== ========== ==========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-3
<PAGE> 52

MEDICAL ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEARS ENDED DECEMBER 31, 30,
--------------------------------------- ------------------------
1993 1994 1995 1995 1996
---------- ---------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenue...................... $3,720,268 $5,261,763 $11,177,138 $4,854,109 $8,395,480
---------- ---------- ----------- ---------- ----------
Costs and expenses:
Salaries and benefits.......... 1,643,306 2,005,262 3,721,169 1,686,252 2,748,810
Selling, general and
administrative.............. 1,214,320 1,816,859 3,620,394 1,539,224 2,800,838
Depreciation and
amortization................ 333,090 293,093 718,767 264,573 652,710
Provision for uncollectible
accounts.................... 550,521 781,176 1,884,709 743,196 1,422,737
---------- ---------- ----------- ---------- ----------
Total costs and
expenses............. 3,741,237 4,896,390 9,945,039 4,233,245 7,625,095
---------- ---------- ----------- ---------- ----------
Operating income
(loss)............... (20,969) 365,373 1,232,099 620,864 770,385
---------- ---------- ----------- ---------- ----------
Other (income) expense:
Interest income and other,
net......................... (1,860) (5,528) 11,953 9,644 (12,110)
Interest expense............... 157,846 178,722 246,655 130,735 150,658
---------- ---------- ----------- ---------- ----------
Total other expense.... 155,986 173,194 258,608 140,379 138,548
---------- ---------- ----------- ---------- ----------
Income (loss) before income
taxes.......................... (176,955) 192,179 973,491 480,485 631,837
Provision (benefit) for income
taxes.......................... (26,474) -- 395,342 195,129 262,692
---------- ---------- ----------- ---------- ----------
Net income (loss)................ (150,481) 192,179 578,149 285,356 369,145
---------- ---------- ----------- ---------- ----------
Less preferred stock dividend.... (75,000) (75,000) (87,000) (87,000) (87,000)
Less charge for cancelation of
put feature described in Note
7.............................. -- -- (180,000) (180,000) --
---------- ---------- ----------- ---------- ----------
Net income (loss) applicable to
common stock................... $ (225,481) $ 117,179 $ 311,149 $ 18,356 $ 282,145
========== ========== =========== ========== ==========
Net income (loss) per share...... $ $ $ $ $
========== ========== =========== ========== ==========
Weighted average number of common
shares and common share
equivalents (in thousands).....
---------- ---------- ----------- ---------- ----------
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-4
<PAGE> 53

MEDICAL ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1996

<TABLE>
<CAPTION>
SERIES A SERIES B TOTAL
PREFERRED STOCK PREFERRED STOCK COMMON STOCK CAPITAL IN STOCKHOLDERS'
---------------- ---------------- ------------------ EXCESS OF ACCUMULATED TREASURY EQUITY
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT PAR VALUE DEFICIT STOCK (DEFICIT)
------- ------ ------- ------ --------- ------ ---------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 1,
1993.......... 375,000 $750 1,776,949 $3,554 $1,221,111 $(1,146,230) $ (8,950) $ 70,235
Issuance of
common stock
for note
receivable... 23,415 47 1,453 1,500
Series A
preferred
stock
dividend.... (75,000) (75,000)
Net loss...... (150,481) (150,481)
------- ---- ------- ---- --------- ------ ---------- ----------- --------- -----------
Balance at
December 31,
1993.......... 375,000 750 1,800,364 3,601 1,147,564 (1,296,711) (8,950) (153,746)
Issuance of
common stock
(Satana
warrants
exercised)... 93,660 187 59,813 60,000
Issuance of
preferred
stock for
cash
(Mapleleaf
Capital
warrants
exercised)... 60,000 120 99,880 100,000
Series A
preferred
stock
dividend.... (75,000) (75,000)
Net income.... 192,179 192,179
------- ---- ------- ---- --------- ------ ---------- ----------- --------- -----------
Balance at
December 31,
1994.......... 435,000 870 1,894,024 3,788 1,232,257 (1,104,532) (8,950) 123,433
Issuance of
preferred
stock......... 362,500 $725 1,439,207 1,439,932
Exercise of
warrant in
exchange for
debt payable
to Satana
Corporation... 374,640 749 479,251 480,000
Charge for
cancelation
of put
feature
described in
Note 7...... (180,000) (180,000)
Options
exercised... 60,723 121 50,179 50,300
Issuance of
common stock
related to
acquisition... 10,034 20 25,692 25,712
Series A
preferred
stock
dividend.... (87,000) (87,000)
Net income.... 578,149 578,149
------- ---- ------- ---- --------- ------ ---------- ----------- --------- -----------
Balance at
December 31,
1995.......... 435,000 870 362,500 725 2,339,421 4,678 2,959,586 (526,383) (8,950) 2,430,526
Issuance of
common stock
(unaudited)... 4,293 9 10,991 11,000
Options
exercised
(unaudited)... 43,458 87 34,455 34,542
Series A
preferred
stock
dividend
(unaudited)... (87,000) (87,000)
Net income
(unaudited)... 369,145 369,145
------- ---- ------- ---- --------- ------ ---------- ----------- --------- -----------
Balance at June
30, 1996
(unaudited)... 435,000 $870 362,500 $725 2,387,172 $4,774 $2,918,032 $ (157,238) $ (8,950) $ 2,758,213
======= ==== ======= ==== ========= ====== ========== =========== ========= ===========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-5
<PAGE> 54

MEDICAL ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996

YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------- -------------------------
1993 1994 1995 1995 1996
--------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)...................................... $(150,481) $ 192,179 $ 578,149 $ 285,356 $ 369,145
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Provision for uncollectible accounts................. 550,521 781,176 1,884,709 743,196 1,422,737
Depreciation and amortization........................ 350,090 293,093 718,767 264,573 652,710
Deferred income taxes................................ (26,474) -- 382,163 192,435 111,442
Changes in assets and liabilities net of effects from
acquisitions:
Accounts receivable................................ (691,573) (1,414,948) (3,066,681) (1,343,072) (2,253,080)
Prepaid expenses and other current assets.......... (66,431) 10,515 (105,657) (66,354) (210,190)
Accounts payable and accrued expenses.............. 24,330 269,872 577,794 428,789 504,432
Deferred revenue................................... 23,395 142,512 (6,570) (35,455) (2,495)
Other.............................................. -- -- (45,589) -- --
--------- ----------- ----------- ----------- -----------
Net cash provided by operating activities........ 13,377 274,399 917,085 469,468 594,701
--------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures................................... (36,142) (130,231) (1,850,112) (891,172) (1,499,190)
Payment for acquisitions............................... -- -- (35,000) -- (493,840)
Change in restricted cash.............................. (19,630) 4,595 (7,819) 7,301 (4,046)
--------- ----------- ----------- ----------- -----------
Net cash used in investing activities............ (55,772) (125,636) (1,892,931) (883,871) (1,997,076)
--------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Payment of dividends on preferred stock................ -- (115,000) (122,000) (35,000) --
Repayment of capital lease obligations................. (16,134) (80,025) (244,543) (108,602) (151,113)
Repayment of long-term debt............................ (88,260) (148,833) (1,161,190) (1,023,713) (183,336)
Proceeds from issuance of preferred stock.............. -- 100,000 1,439,932 -- --
Proceeds from issuance of common stock................. -- 50,000 50,300 -- 34,542
Proceeds from issuance of long-term debt............... 205,500 57,500 2,293,819 1,575,260 1,728,635
Other.................................................. (11,303) -- 11,526 (30,000) (7,022)
--------- ----------- ----------- ----------- -----------
Net cash provided by (used in) financing
activities..................................... 89,803 (136,358) 2,267,844 377,945 1,421,706
--------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents............................................ 47,408 12,405 1,291,998 (36,458) 19,331
Cash and cash equivalents at beginning of year........... 33,843 81,251 93,656 93,656 1,385,654
--------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of year................. $ 81,251 $ 93,656 $ 1,385,654 $ 57,198 $ 1,404,985
========= =========== =========== =========== ===========
Supplemental disclosures of cash flow information:
Interest paid.......................................... $ 82,467 $ 172,222 $ 247,990 $ 130,735 $ 146,374
Income taxes paid...................................... -- -- 5,000 -- 93,956
Supplemental schedule of noncash investing and financing
activities:
Issuance of note payable in payment for accounts
payable, advances and interest....................... 56,294 -- -- -- --
Issuance of common stock for note receivable........... 1,500 -- -- -- --
Preferred stock dividend declared...................... 75,000 35,000 -- 87,000 87,000
Capital lease obligations incurred..................... 85,400 613,925 186,366 186,366 65,000
Exercise of warrant in exchange for outstanding debt
and cancelation of put feature described in Note 7:
Common stock and capital in excess of par value...... -- -- 480,000 -- --
Debt................................................. -- -- 300,000 -- --
The Company has acquired businesses, as follows:
Fair value of assets acquired........................ $ 242,765 $ 351,198
Goodwill recorded.................................... 45,589 142,642
Less:
Fair value of common stock......................... (25,712) --
Cash paid.......................................... (35,000) (493,840)
----------- -----------
Liabilities assumed.................................. $ 227,642 $ --
=========== ===========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-6
<PAGE> 55

MEDICAL ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
(INFORMATION OF AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)

1. ORGANIZATION:

Medical Alliance, Inc. ("Medical Alliance") provides mobile surgical
services which allow certain minimally invasive operative procedures to be
performed in the physician's office. Medical Alliance was incorporated in Texas
in 1989 and is headquartered in Irving, Texas. Medical Alliance provides its
services throughout the United States and Canada. Medical Alliance entered into
two new lines of business in 1993 through wholly-owned subsidiaries. MAI Safety
Compliance Services, Inc. provides assistance to physician offices and other
alternate site health-care facilities to comply with O.S.H.A. standards.
Physicians Marketing Services, Inc. provides group advertising services to
physicians who utilize Medical Alliance's mobile medical services.

The accompanying consolidated financial statements include the accounts of
Medical Alliance and its wholly-owned subsidiaries (the "Company"). All
significant intercompany transactions have been eliminated.

Interim Financial Information

The consolidated balance sheet as of June 30, 1996, the consolidated
statements of stockholders' equity for the six months then ended, and the
consolidated statements of operations and cash flows for the six months ended
June 30, 1995 and 1996, have been prepared by the Company without audit. In the
opinion of management, all adjustments (which include only normal, recurring
adjustments) necessary to present fairly the financial position at June 30,
1996, and the results of operations and cash flows for all periods presented
have been made. The results of operations for the interim periods are not
necessarily indicative of the operating results for the full year.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets, particularly accounts
receivable, and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements, and the reported amounts of revenues
and expenses during the reporting period. Actual results may, in some instances,
differ from previously estimated amounts.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Cash and Cash Equivalents -- The Company considers all investments with
initial maturities of 90 days or less at the time of purchase to be cash
equivalents. The Company maintains a significant portion of its cash balances
with one financial institution. These deposit accounts are insured by the
Federal Deposit Insurance Corporation ("FDIC") up to a limit of $100,000 per
account. At December 31, 1995 and June 30, 1996, the Company had approximately
$1,115,000 and $1,008,000 invested in short-term U.S. government treasury
securities. As a result of the foregoing, the Company believes that credit and
market risk in such instruments is minimal.

Property and Equipment -- Property and equipment are recorded at cost.
Depreciation is provided by the straight-line method over existing useful lives
ranging from three to five years. Repairs and maintenance are charged directly
to expense as incurred. Maintenance contracts are amortized over their
respective contracted period.

Intangibles -- Debt issuance costs were amortized on a straight-line basis
over the periods of the respective debt and organization costs were amortized on
a straight-line basis over a five-year period. Goodwill is the excess of the
purchase price over the fair value of net assets acquired and is being amortized
on a straight-line basis over three years. The carrying value of goodwill is
continually reviewed for recoverability. If

F-7
<PAGE> 56

MEDICAL ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

the review indicates that goodwill will not be recoverable, as determined based
on undiscounted cash flows, the carrying value of the goodwill is reduced by the
estimated short-fall of discounted cash flows.

Income Taxes -- The Company recognizes deferred tax liabilities and assets
for the expected future tax consequences of events that have been recognized in
the Company's consolidated financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
difference between the financial statement carrying amounts and tax bases of
assets and liabilities using enacted tax rates in effect in the years in which
the differences are expected to reverse. Valuation allowances, if any, are
established when necessary to reduce deferred tax assets to the amount that is
more likely than not to be realized. Income tax expense is the tax payable for
the period and the change during the period in deferred tax assets and
liabilities.

Revenue Recognition -- The Company recognizes revenue in most instances
upon completion of the surgical procedures performed with the Company's
equipment. Revenue for procedures that require two or more treatments and is
collected as a global fee, is recognized in equal amounts over the course of the
treatments. Revenue is presented net of contractual allowances and field
discounts.

Deferred Revenue -- The Company organizes certain advertising campaigns and
training seminars for physician utilizers. Revenues are recognized when the
advertising is run or seminars are held. Additionally, certain procedures
require multiple treatments and revenues received in advance are deferred until
subsequent procedures are performed.

Long Lived Assets -- Effective January 1, 1996 the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. There was no material effect from the adoption of this
Statement.

Stock-Based Compensation -- The Company has elected to account for employee
stock-based compensation as prescribed in Accounting Principles Board (APB) No.
25 as opposed to the fair value method prescribed by (SFAS) No. 123 "Accounting
for Stock-Based Compensation." However, pro forma disclosure as prescribed by
SFAS No. 123 for all such equity awards will be included in the annual financial
statements.

Earnings Per Share -- Net income (loss) per common share is based on
reported net income (loss) less the Series A Preferred Stock dividend and the
charge for cancellation of the put feature (See Note 7). The resulting amount is
presented as income (loss) applicable to common stock. Such income (loss)
applicable to common stock in each period presented is divided by the weighted
average number of outstanding common and common equivalent shares using the
treasury stock method adjusted for the stock split described in Note 16.
Earnings per share for all common stock and common stock warrants, options and
other potentially dilutive instruments issued one year before the initial public
offering have been computed in accordance with Securities and Exchange
Commission Staff Accounting Bulletin ("SAB") Topic 4-D. The SAB requires that
such shares issued at a price less than the per share Offering price be included
in the calculation of common stock and common stock equivalents as if such
shares were outstanding for all periods presented, even when anti-dilutive. With
respect to these shares, the Company has also used the treasury stock method
based on the Offering price as the purchase price.

F-8
<PAGE> 57

MEDICAL ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT:

Property and equipment consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- JUNE 30,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Medical equipment............................. $ 1,048,470 $ 2,764,090 $ 4,484,444
Furniture and fixtures........................ 123,731 223,356 332,259
Transportation................................ -- 7,000 67,956
Leasehold improvements........................ 3,702 11,877 11,877
Equipment under capital leases................ 700,032 886,398 910,479
----------- ----------- -----------
1,875,935 3,892,721 5,807,015
Less accumulated depreciation and
amortization................................ (1,066,581) (1,699,930) (2,332,360)
----------- ----------- -----------
Net property and equipment.................... $ 809,354 $ 2,192,791 $ 3,474,655
=========== =========== ===========
</TABLE>

Accumulated amortization related to equipment under capital leases was
approximately $91,000, $363,000 and $502,000 at December 31, 1994, 1995 and June
30, 1996, respectively.

4. LONG-TERM DEBT:

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1994 1995 1996
--------- ---------- -----------
<S> <C> <C> <C>
Revolving bank credit agreement at prime plus
1/2%; interest payments due monthly; principal
due 1997....................................... $ -- $ 250,000 $ 250,000
Bank term loan at prime plus 1 1/2% with varying
monthly principal and interest payments; final
payment due 2000............................... -- 643,819 643,819
Bank term loan at prime plus 1 1/2%; monthly
principal and interest payments; final payment
due 1998....................................... -- 916,667 733,333
Bank term loan at prime plus 3/4%; monthly
principal and interest payments beginning in
1997; final payment due 2000................... -- -- 1,728,635
Note to MJ Capital Partners, L.P. at 16%; varying
principal and interest payments; final payment
due 1997....................................... 607,974 -- --
Subordinated note to Satana Corporation at 10%;
varying monthly principal and interest
payments; final payment due 1996............... 356,813 -- --
--------- ---------- -----------
964,787 1,810,486 3,355,787
Less current maturities.......................... (275,875) (366,667) (700,452)
--------- ---------- -----------
$ 688,912 $1,443,819 $ 2,655,335
========= ========== ===========
</TABLE>

F-9
<PAGE> 58

MEDICAL ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Prime rate was 8 1/2% and 8 1/4% at December 31, 1995 and June 30, 1996,
respectively.

The annual principal requirements for the five years subsequent to June 30,
1996 are as follows:

<TABLE>
<S> <C>
YEARS ENDING DECEMBER 31
Remaining 1996....................................................... $ 183,333
1997................................................................. 1,095,861
1998................................................................. 974,151
1999................................................................. 790,818
2000................................................................. 311,624
----------
$3,355,787
==========
</TABLE>

The bank term loans and revolving credit agreement originated in 1995, with
varying principal and interest payments through 2000. Effective March 20, 1996,
the Company and the bank modified the term loans and revolving credit agreement
which increased the term loan agreement from $1,750,000 to $3,750,000 and
increased the revolving credit agreement from $250,000 to $500,000. The loans
and revolving credit are collateralized by Company assets and a personal
guarantee of a major shareholder.

Under the terms of the bank debt, the Company is subject to certain
covenants, including restrictions on dividend payments, the redemption or
repurchase of stock and stock equivalents and limitations on indebtedness. In
addition, the loan agreement contains restrictive covenants which, among other
things, require the Company to obtain directors' and officers' liability
insurance.

As noted above the Company and the bank modified the term loan and
revolving credit agreement. The amended and restated term and revolving credit
agreement requires annual audited financial statements by May 31 for the prior
fiscal year. The Company has not complied with this covenant and has obtained a
waiver from the bank which is effective until January 1, 1997.

The note with Satana Corporation ("Satana"), which originated in 1991, was
collateralized by Company assets, and was modified in July 1992 to extend the
maturity date to December 1996. On June 28, 1995, Satana exercised a warrant to
acquire 374,640 shares of common stock in exchange for the outstanding debt owed
to Satana Corporation (Note 7).

The note with MJ Capital Partners, L.P. and MJ Capital Corporation
originated in 1991 and was collateralized by equipment and certain accounts
receivable. Additional loans have been obtained from these companies
periodically since the origination date. During 1993, MJ Capital Corporation
became a partner in MJ Capital Partners, L.P., at which time the loans from
those parties were combined into a single note. The note was paid in full in
1995.

5. SERIES A PREFERRED STOCK AND PREFERRED STOCK WARRANTS:

On July 10, 1992 the Company entered into a Preferred Stock Purchase
Agreement (the "Series A Agreement") with Mapleleaf Capital, Ltd. The Company
issued an aggregate of 375,000 shares of Series A Convertible Preferred Stock
("Series A Preferred Stock") in exchange for cash of $2.00 per share. In
connection with this transaction, the Company converted subordinated debt of
certain shareholders into shares of common stock at a conversion rate of one
share of common stock for every $2.00 of subordinated debt as described above.

The shares of Series A Preferred Stock were issued with warrants attached
to purchase up to 60,000 shares of Series A Preferred Stock. The warrants were
exercisable at $2.00 per share and expired in 1995. The warrants were exercised
on July 1, 1994 at $1.67 per share which approximated the fair value for other
trades in the Company's common stock. The Series A Preferred Stock was
convertible into common stock at a ratio

F-10
<PAGE> 59

MEDICAL ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

of 1 to 1 initially. However, upon issuance of common stock or common stock
equivalents, the conversion ratio is subject to an anti-dilution adjustment
pursuant to the Series A Agreement for all convertible preferred stock.
Effective with the stock dividend discussed in Note 16, the conversion ratio for
the Series A Preferred Stock will be 1.561 to 1 as approved by the Board of
Directors. The Series A Preferred Stock is convertible at the election of the
holder at any time, or automatically with the closing of an underwritten
qualified public offering (as defined in the Series A Agreement). If the Company
has not completed a qualified public offering on or prior to December 31, 1997,
the Company has the right, but not the obligation to repurchase all remaining
shares of Series A Preferred Stock.

The Series A Preferred Stock requires a $.20 per share annual dividend
commencing on June 30, 1993 which is cumulative if unpaid. Dividends paid for
the years ended December 31, 1993, 1994 and 1995 were $0, $115,000 and $122,000,
respectively. The Company was not in compliance with certain covenants of the
Series A Agreement including the timely issuance of its year-end audited
consolidated financial statements, the timely issuance of a budgeted operating
forecast and a loan to an employee which exceeds the designated limit. The
Company has obtained appropriate waivers from the Series A Preferred Stock
shareholder effective until January 1, 1997.

The Company has reserved 679,035 shares of common stock for the conversion
of all outstanding Series A Preferred Stock.

6. SERIES B PREFERRED STOCK:

On November 17, 1995 the Company entered into a Preferred Stock Purchase
Agreement (the "Series B Agreement") with various investors. The Company issued
an aggregate of 362,500 shares of Series B Convertible Preferred Stock ("Series
B Preferred Stock") in exchange for cash of $4.00 per share.

The Series B Preferred Stock was convertible into common stock at a ratio
of 1 to 1 initially. However, upon issuance of common stock or common stock
equivalents, the conversion ratio is subject to an anti-dilution adjustment
pursuant to the Series B Agreement for all convertible preferred stock.
Effective with the stock dividend discussed in Note 16, the conversion ratio for
the Series B Preferred Stock will be 1.561 to 1 as approved by the Board of
Directors. The Series B Preferred Stock is convertible at the election of the
holders at any time, or automatically with the closing of an underwritten
qualified public offering (as defined in the Series B Agreement). There is no
annual dividend requirement in the Series B Agreement. However, the Company was
not in compliance with certain covenants of the Series B Agreement including the
timely issuance of its year-end audited consolidated financial statements, the
timely issuance of a budgeted operating forecast, and a loan to an employee
which exceeds the designated limit. The Company has obtained appropriate waivers
from all Series B Preferred Stock shareholders effective until January 1, 1997.

The Company has reserved 565,863 shares of common stock for the conversion
of all outstanding Series B Preferred Stock.

7. COMMON STOCK AND COMMON STOCK WARRANTS:

A warrant to purchase up to 374,640 shares of common stock was granted to
Satana on January 17, 1991 as part of the note agreement (see Note 4). This
warrant includes a put feature, whereby the holder of the shares acquired via
the exercise of the warrant could require the Company to redeem the shares based
on a formula price. The Satana note was modified in July 1992, at which time
Satana was granted a warrant to purchase an additional 93,660 shares of the
Company's common stock. During the year ended December 31, 1994, the holder
exercised the $.64 per share warrant to purchase 93,660 shares of common stock
at a price of $0.53 per share. The Company recorded interest expense of
approximately $10,000 as a result of this transaction. During the year ended
December 31, 1995, the holder exercised the warrant to acquire 374,640 shares of
common stock in exchange for the outstanding debt owed to Satana Corporation and
cancelation of

F-11
<PAGE> 60

MEDICAL ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

the put feature. The difference between the carrying value of the debt
instrument, which approximated fair value, and the exercise price of the
warrants has been accounted for as a reduction of capital in excess of par value
and has been deducted from net income for purposes of computing net income
applicable to common stock in the accompanying statement of operations.

A warrant to purchase up to 23,415 shares of common stock at $1.28 per
share was granted to Columbia General Corporation on August 15, 1993 as part of
the restructured MJ Capital Partners note. The warrant expires on March 31,
1997.

A warrant to purchase 2,810 shares of common stock was granted in 1993 as
part of the restructured MJ Capital Partners note. The warrant expires on March
31, 1997. Warrants to purchase up to 10,771 shares of common stock at $1.28 per
share were granted in 1994 in connection with advances under the MJ Capital
Partners note. Warrants to purchase 3,278 shares of common stock at $1.28 per
share were canceled in 1995 as part of the early retirement of the MJ Capital
Partners note. The remaining warrants expire on March 31, 1997.

A warrant to purchase up to 15,610 shares of common stock at $2.56 per
share was granted in 1995 to a major stockholder in return for a personal
guarantee of the bank debt. This warrant vested immediately and expires in 1999.

The Company has reserved 49,328 shares of common stock for the conversion
of all outstanding common stock warrants as of December 31, 1995 and June 30,
1996.

The Company's debt and Series A and Series B Preferred Stock agreements
restrict the Company from making dividend payments other than the Series A
Preferred Stock dividend.

8. STOCK OPTIONS:

The Company implemented an Incentive Stock Option Plan (the "Plan") in
January of 1990. In 1994, the Company amended and restated the Plan, which
increased the number of options available for issuance to 1,168,190 shares of
the Company's common stock. In December of 1995, the Company revised the Plan
covering up to 1,324,290 shares of the Company's common stock. The options have
varying expiration dates through September 16, 1999. At December 31, 1995 and
June 30, 1996, options for 441,170 and 294,436 shares remain available for
issuance under the Plan. Options to purchase an equivalent number of shares of
the Company's common stock are as follows:

<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
----------- -----------
<S> <C> <C>
Total outstanding at January 1, 1993.................................. 293,999 122,289
======== =======
Granted during 1993 at $1.28 per share................................ 220,882 21,074
Exercised at $.06 per share........................................... (23,415) (23,415)
Canceled during 1993 at $1.28 per share............................... (78,050) (31,220)
Outstanding at December 31, 1993
$1.28 per share..................................................... 357,470 159,222
$ .58 per share..................................................... 39,025 39,025
$ .32 per share..................................................... 16,921 16,921
-------- -------
Total outstanding at December 31, 1993................................ 413,416 215,168
======== =======
</TABLE>

F-12
<PAGE> 61

MEDICAL ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
-------- -------
<S> <C> <C>
Granted during 1994 at $1.28 per share................................ 116,295 30,440
Canceled during 1994 at $1.28 per share............................... (40,586) (7,025)
Outstanding at December 31, 1994
$1.28 per share..................................................... 433,179 298,151
$ .58 per share..................................................... 39,025 39,025
$ .32 per share..................................................... 16,921 16,921
-------- -------
Total outstanding at December 31, 1994................................ 489,125 354,097
======== =======
Granted during 1995 at $2.56 per share................................ 679,035 30,440
Exercised at $1.28 per share.......................................... (21,698) (21,698)
Exercised at $.58 per share........................................... (39,025) (39,025)
Canceled during 1995 at $2.56 per share............................... (285,663) --
Canceled during 1995 at $1.28 per share............................... (22,791) (9,522)
Outstanding at December 31, 1995
$2.56 per share..................................................... 393,373 30,440
$1.28 per share..................................................... 388,689 266,931
$ .32 per share..................................................... 16,921 16,921
-------- -------
Total outstanding at December 31, 1995................................ 798,983 314,292
======== =======
Granted during 1996 at $2.56 per share................................ 159,222 --
Granted during 1996 at an assumed public offering price of $ per
share............................................................... 60,099 --
Exercised at $1.28 per share.......................................... (26,537) (26,537)
Exercised at $.32 per share........................................... (16,921) (16,921)
Canceled during 1996 at $2.56 per share............................... (67,123) (31,220)
Canceled during 1996 at $1.28 per share............................... (5,464) --
Outstanding at June 30, 1996
$2.56 per share..................................................... 485,520 30,440
$1.28 per share..................................................... 356,689 317,664
Assumed public offering price of $ per share.................... 60,106 --
-------- -------
Total outstanding at June 30, 1996.................................... 902,315 348,103
======== =======
</TABLE>

During 1993, the Company granted 9,366 nonqualifying stock options at $1.28
each vesting immediately of which 7,805 were exercised in 1995 and the remaining
1,561 were exercised in 1996. During 1995, the Company granted 10,927
nonqualifying stock options at $2.56 each vesting immediately and expiring on
August 15, 1997.

During 1995, the Company granted 472,203 performance based stock options
under the Plan at an exercise price of $2.56 each contingent upon the Company
exceeding certain pretax earnings levels which are determined by the Board of
Directors. Although the Company achieved the earnings levels as determined by
the Board, the market value of the Company's common stock did not exceed the
exercise price of $2.56 per share. Therefore, no charge to earnings was recorded
by the Company. Approximately 195,000 of the performance based stock options
were earned in 1995, however, these options do not vest until December 31, 1997.
The remaining options were canceled during 1995.

F-13
<PAGE> 62

MEDICAL ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

9. INCOME TAXES:

The income tax provision consisted of the following:

<TABLE>
<CAPTION>
SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
--------------------------------- ---------------------
1993 1994 1995 1995 1996
--------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Current provisions:
Federal..................... $ -- $ -- $ -- $ -- $124,010
State....................... -- -- 13,179 6,505 27,240
--------- -------- -------- --------- --------
Total current....... -- -- 13,179 6,505 151,250
--------- -------- -------- --------- --------
Deferred provisions:
Federal..................... (26,474) -- 310,925 153,463 91,371
State....................... -- -- 71,238 35,161 20,071
--------- -------- -------- --------- --------
Total deferred...... (26,474) -- 382,163 188,624 111,442
--------- -------- -------- --------- --------
Total provisions
(benefit)......... $ (26,474) $ -- $395,342 $ 195,129 $262,692
========= ======== ======== ========= ========
</TABLE>

For the years ended December 31, 1993, 1994 and 1995 the Company generated
tax net operating losses. At December 31, 1995, the Company had tax net
operating loss carryforwards of approximately $799,000 which will begin to
expire in the year 2007. For the years ended December 31, 1993, 1994 and 1995
and for the six months ended June 30, 1996, the Company recognized the benefits
of tax operating carryforwards of approximately $0, $0, $39,000 and $619,000,
respectively.

The components of the net deferred tax asset (liability) as of December 31,
1994 and 1995 and June 30, 1996 were as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Current:
Net operating loss carryforward............... $ -- $ 238,757 $ --
Accrual to cash conversion.................... (256,972) (642,963) --
Change from cash to accrual for tax
purposes................................... -- -- (80,370)
Other......................................... -- 38,590 38,590
--------- --------- ---------
Net current asset (liability) before valuation
allowance.................................. (256,972) (365,616) (41,780)
Less valuation allowance...................... -- -- --
--------- --------- ---------
Net current asset (liability)................. $(256,972) $(365,616) $ (41,780)
========= ========= =========
Noncurrent:
Book vs. tax depreciation differences......... $ 28,793 $ (16,547) $ 36,014
Net operating loss carryforwards.............. 254,771 -- --
Change from cash to accrual for tax
purposes................................... -- -- (482,223)
Other......................................... -- -- (5,616)
--------- --------- ---------
Net noncurrent asset (liability) before
valuation allowance........................ 283,564 (16,547) (451,825)
Less valuation allowance...................... (26,592) -- --
--------- --------- ---------
Net noncurrent asset (liability).............. $ 256,972 $ (16,547) $(451,825)
========= ========= =========
</TABLE>

F-14
<PAGE> 63

MEDICAL ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The effective income tax rate varies from the federal statutory rate for
the years ended December 31, 1993, 1994, 1995 and six months ended June 30, 1995
and 1996 as follows:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, JUNE 30,
------------------------ -------------
1993 1994 1995 1995 1996
----- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Federal statutory rate........................ (34.0)% 34.0% 34.0% 34.0% 34.0%
Disallowance of meals and entertainment....... 4.6 4.6 1.8 1.5 1.8
(Reduction) addition to valuation allowance... 19.4 (37.4) -- -- --
State taxes (net of federal benefit).......... -- -- 5.7 5.7 4.9
Other......................................... (5.0) (1.2) (0.9) (0.6) 0.8
---- ---- ----
- - -
------ ------
Effective income tax rate..................... (15.0)% 0.0% 40.6% 40.6% 41.5%
====== ====== ===== ===== =====
</TABLE>

10. LEASE COMMITMENTS:

The Company leases office space and vans under operating leases and certain
medical equipment under both capital and operating leases. The Company currently
leases office space under noncancelable operating leases which expire on various
dates through July 2002.

The Company has strategic alliances with manufacturers wherein the
manufacturer is paid a portion of the revenues generated by the Company's
equipment for certain benefits including access to the technology and periodic
equipment upgrades. These arrangements can be canceled with a 90 day notice and
are not included in the future minimum rental payments.

Future minimum rental payments under these capital and operating leases
subsequent to June 30, 1996 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- ----------
<S> <C> <C>
YEAR ENDING DECEMBER 31
Remaining 1996.............................................. $ 180,806 $ 486,335
1997........................................................ 285,031 818,725
1998........................................................ 36,656 568,325
1999........................................................ -- 145,288
2000........................................................ -- 131,997
Thereafter.................................................. -- 201,731
--------- ----------
Total future minimum lease payments......................... 502,493 $2,352,401
==========
Less amounts representing interest.......................... (45,677)
---------
Present value of future minimum lease payments.............. 456,816
Less current maturities..................................... (317,894)
---------
Long-term capital lease obligations......................... $ 138,922
=========
</TABLE>

Rent expense for the years ended December 31, 1993, 1994, 1995 and six
months ended June 30, 1995 and 1996 under operating leases was approximately
$103,000, $310,000, $946,000 and $302,000 and $1,257,000, respectively.

F-15
<PAGE> 64

MEDICAL ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

11. CONCENTRATION OF SUPPLIERS:

The Company currently buys its laser equipment, the main component of its
services, from three suppliers. Although there are a limited number of
manufacturers of this equipment, management believes that other suppliers could
provide similar laser equipment on comparable terms.

12. RELATED PARTIES:

The Company paid Montgomery, Jessup and Co., L.L.P. ("MJ"), certified
public accountants, and affiliates of MJ Capital Partners, L.P. and MJ Capital
Corporation, approximately $62,000 in 1993, $13,000 in 1994, and $20,000 in
1995, for professional fees. The Company owed MJ and its affiliates
approximately $616,000 at December 31, 1994, for professional fees and loans. MJ
and its affiliates own 295,216 shares of the Company's common stock and 15,571
shares of Series B Preferred Stock.

Satana's Vice President owns 60,145 shares of common stock and 19,966
shares of Series B Convertible Preferred Stock. The Company had a note payable
to Satana of approximately $357,000 at December 31, 1994.

Approximately $13,000, $32,000 and $27,000 in medical supplies were
purchased from a company owned by the relative of an officer and stockholder of
the Company during 1993, 1994 and 1995, respectively.

13. EMPLOYEE BENEFITS:

Effective January 1, 1993, a tax deferred savings plan under Section 401(k)
of the Internal Revenue Code was established. The plan covers all full-time
employees who are twenty-one years of age with one year of service. Employees
may contribute to the plan up to a maximum of 20% of their salary with a maximum
contribution of $9,240 in 1995. Employees are immediately vested in their
contributions. The Company may contribute an amount as determined by the Board
of Directors. Effective January 1, 1996, the Company began matching 15% of
employee contributions.

14. ACQUISITIONS:

On October 30, 1995, the Company completed the acquisition of substantially
all of the assets of Mobile Surgical Services, Inc., a Florida laser rental
company. For cash paid of $35,000 and 10,034 shares of common stock valued at
$2.56 per share, the Company recorded assets and assumed liabilities as follows:

<TABLE>
<S> <C>
Property and equipment........................................... $ 242,765
Goodwill......................................................... 45,589
Accounts payable................................................. (227,642)
---------
$ 60,712
=========
</TABLE>

The purchase agreement contains a contingent consideration clause whereby
the Company will pay an additional $25,000 by July 31, 1996 if specific gross
revenues are generated in Florida. The acquisition has been accounted for under
the purchase method of accounting and, accordingly, the operating results of
Mobile Surgical Services, Inc. have been included in the consolidated operating
results since the date of acquisition. The pro forma effect of the acquisition
was not material to the results of operations or financial position of the
Company.

Subsequent to year end, the Company completed two acquisitions for a total
purchase price of approximately $494,000. These asset purchases were accounted
for under the purchase method of accounting resulting in the recording of
approximately $143,000 in goodwill and approximately $351,000 in property and

F-16
<PAGE> 65

MEDICAL ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

equipment. The pro forma effect of the acquisition was not material to the
results of operations or financial position of the Company.

15. FAIR VALUE OF FINANCIAL INSTRUMENTS:

The following methods and assumptions were used in estimating fair values:

Cash and Cash Equivalents, Accounts Receivable, Accounts Payable and
Accrued Expenses

The carrying value in the balance sheet approximates fair value.

Long-Term Debt

The fair value of the Company's long-term debt is estimated based on the
quoted market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities. The carrying
value in the balance sheet approximates fair value.

16. SUBSEQUENT EVENT:

On August 2, 1996, the Board of Directors approved a 1.561 to 1 stock split
to occur prior to the Effective Date, effected through a stock dividend, whereby
each common stock shareholder will receive an additional .561 shares for each
share owned. In connection with the split effected through a stock dividend,
common stock was credited and capital in excess of par value was charged for the
aggregate par value of the shares that were issued. In accordance with SAB Topic
4-C, the accompanying consolidated financial statements and related footnotes
have been retroactively adjusted to give effect for this stock split effected
through a stock dividend.

F-17
<PAGE> 66

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

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR ANY OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL, OR IN WHICH THE PERSON MAKING SUCH
OFFER IS NOT AUTHORIZED TO DO SO, OR TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO
MAKE SUCH AN OFFER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................. 3
Risk Factors........................ 6
The Company......................... 11
Use of Proceeds..................... 11
Dividend Policy..................... 11
Dilution............................ 12
Capitalization...................... 13
Selected Consolidated Financial
Data.............................. 14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................... 15
Business............................ 20
Management.......................... 30
Certain Transactions................ 36
Principal Shareholders.............. 38
Description of Capital Stock........ 40
Shares Eligible for Future Sale..... 42
Underwriting........................ 43
Legal Matters....................... 44
Experts............................. 44
Additional Information.............. 45
Index to Consolidated Financial
Statements........................ F-1
</TABLE>

UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

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

LOGO

COMMON STOCK

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

PROSPECTUS

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

BEAR, STEARNS & CO. INC.

EQUITABLE SECURITIES CORPORATION

, 1996

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 67

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following is a statement of estimated expenses to be incurred in
connection with the issuance and distribution of the Common Stock covered by
this Registration Statement (other than underwriting discounts and commissions),
all of which will be paid by Medical Alliance, Inc. (the "Registrant"), are as
follows:

<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee...................... $10,310
National Association of Securities Dealers, Inc. Filing Fee.............. 3,490
Nasdaq National Market Listing Fee.......................................
Accounting Fees and Expenses.............................................
Legal Fees and Expenses..................................................
Blue Sky Fees and Expenses...............................................
Transfer Agent Fee and Registrar.........................................
Printing and Engraving Fee Expenses......................................
Miscellaneous............................................................
-------
Total.......................................................... $
=======
</TABLE>

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

* To be provided by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Upon consummation of the Offering, Registrant's Articles of Incorporation
will provide that, to the fullest extent permitted by Texas law, directors and
former directors of the Registrant will not be liable to the Registrant or its
shareholders for monetary damages for breach of fiduciary duty as a director.
Texas law does not currently authorize the elimination or limitation of the
liability of a director to the extent the director is found liable for (i) any
breach of the director's duty of loyalty to the Registrant or its shareholders,
(ii) acts or omissions not in good faith that constitute a breach of duty of the
director or which involve intentional misconduct or a knowing violation of law,
(iii) transactions from which the director received an improper benefit, whether
or not the benefit resulted from an action taken within the scope of the
director's office, or (iv) acts or omissions for which the liability of a
director is expressly provided by law.

The Registrant's Articles of Incorporation and Bylaws will grant mandatory
indemnification to directors and officers of the Registrant to the fullest
extent authorized under the Texas Business Corporation Act. In general, a Texas
corporation may indemnify a director or officer who was, is or is threatened to
be made, a named defendant or respondent in a proceeding by virtue of his
position in the corporation, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, in the case of criminal proceedings, had no reasonable cause
to believe his conduct was unlawful. A Texas corporation may indemnify a
director or officer in an action brought by or in the right of the corporation
only if such director or officer was not found liable to the corporation, unless
or only to the extent that a court finds him to be fairly and reasonably
entitled to indemnity for such expenses as the court deems proper.

The Registrant intends to enter into Indemnity Agreements with its
directors and executive officers. Pursuant to such agreements, the Registrant
will, to the extent permitted by applicable law, indemnify such persons against
all expenses, judgments, fines and penalties incurred in connection with the
defense or settlement of any actions brought against them by reason of the fact
that they were directors or officers of the Registrant or assumed certain
responsibilities at the direction of the Registrant.

The Company maintains a $1 million directors and officers liability
insurance policy.

Reference is made to Section of the Form of Underwriting Agreement
contained as Exhibit 1.1, which provides for indemnification of the directors
and officers of the Registrant signing the Registration Statement

II-1
<PAGE> 68

and certain controlling persons of the Registrant against certain liabilities,
including those arising under the Securities Act in certain instances by the
Underwriters.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

The securities sold by the Company during the last three years have not
been registered under the Securities Act. There were no underwriting discounts
or commissions on the sale of these securities. The holders of the securities
referred to below agreed to take their securities for investment and not with a
view to the distribution thereof. The certificates representing the securities
contained legends identifying certain restrictions on the transferability
thereof. The following information gives effect to the 1.561-for-1 stock split,
effected through a stock dividend prior to the consummation of the Offering, but
does not give effect to the conversion of Convertible Preferred Stock into
Common Stock effected upon consummation of the Offering.

Common Stock

The following sets forth information pertaining to sales of Common Stock by
the Company during the last three years. Exemption from registration of the
shares of Common Stock listed below is claimed under Section 4(2) of the
Securities Act and Rule 701.

<TABLE>
<CAPTION>
PURCHASER DATE SHARES CONSIDERATION
- ------------------------------------------------- ------------------- ------- -------------
<S> <C> <C> <C>
Satana Corporation............................... July 1, 1994 93,660 $ 60,000
Cheri Stephens................................... June 2, 1995 2,185 $ 2,800
Mapleleaf Capital Ltd............................ June 25, 1995 1,561 2,000
Morris G. Moreland............................... June 28, 1995 46,830 60,000
Satana Corporation............................... June 28, 1995 327,810 420,000
Russ Rickle...................................... September 21, 1995 5,017 12,856(1)
Steve Stringfellow............................... September 21, 1995 5,017 12,856(1)
Thomas A. Montgomery............................. October 1, 1995 39,025 22,500
Morris G. Moreland............................... December 13, 1995 156 200
Satana Corporation............................... December 13, 1995 1,405 1,800
Leon Pritzker.................................... December 13, 1995 1,561 2,000
David Kallenberger............................... December 13, 1995 1,561 2,000
Thomas A. Montgomery............................. December 13, 1995 1,561 2,000
Jeff Shrader..................................... December 13, 1995 11,708 15,000
John Resneder.................................... January 8, 1996 4,293 11,000(2)
Marc Johnson..................................... June 15, 1996 34,092 22,542
Todd Miller...................................... June 30, 1996 9,366 12,000
</TABLE>

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

(1) These shares were issued in consideration for the acquisition of certain
assets of Mobile Surgical Services, Inc. valued by the Company at $25,712.

(2) These shares were issued in consideration for the acquisition of certain
assets owned by Dr. Resneder valued by the Company at $11,000.

Series A Convertible Preferred Stock

On July 1, 1994 Mapleleaf Capital, Ltd. exercised a warrant to purchase
60,000 shares of Series A Preferred Stock from the Company. The purchase price
for the shares received under this warrant was $100,000. Exemption from
registration of such shares is claimed under Section 4(2) of the Securities Act.

II-2
<PAGE> 69

Series B Convertible Preferred Stock

The following sets forth information pertaining to sales of Series B
Convertible Preferred Stock by the Company during the last three years.
Exemption from registration of such shares listed below is claimed under Section
4(2) of the Securities Act.

<TABLE>
<CAPTION>
PURCHASER DATE SHARES CONSIDERATION
- --------------------------------------------------- ----------------- ------- -------------
<S> <C> <C> <C>
Satana Corporation................................. November 17, 1995 159,662 $ 638,648
Sunwestern Cayman 1988 Partners.................... November 17, 1995 70,243 280,972
Sunwestern Investment Fund III..................... November 17, 1995 64,839 259,356
Mapleleaf Capital, Ltd............................. November 17, 1995 35,985 143,940
Montgomery Jessup & Co., L.L.P..................... November 17, 1995 10,000 40,000
Morris Moreland.................................... November 17, 1995 4,000 16,000
DLJSC F.B.O. Michael Wallace, IRA.................. November 17, 1995 3,750 15,000
Sid Bonner......................................... November 17, 1995 3,071 12,284
Thomas A. Montgomery............................... November 17, 1995 2,500 10,000
Clyde Hutchinson................................... November 17, 1995 2,000 8,000
Marc Johnson....................................... November 17, 1995 2,000 8,000
Hazelle Blair...................................... November 17, 1995 1,000 4,000
Lloyd Jones........................................ November 17, 1995 1,000 4,000
Bart Tucker........................................ November 17, 1995 1,000 4,000
Jay Farris......................................... November 17, 1995 750 3,000
Kevin O'Brien...................................... November 17, 1995 700 2,800
</TABLE>

Warrants

The following sets forth information pertaining to the issuance of warrants
by the Company during the last three years. These transactions were effected
without registration of such warrants, or the underlying shares of Common Stock
or Preferred Stock, in reliance upon the exemption provided by Section 4(2) of
the Securities Act.

The Company issued the following warrants to partners of MJ Partners in
connection with additional advances under the MJ Partners Note, all of which
warrants expire on March 31, 1997: (i) On August 15, 1993, the Company granted
to Columbia General Corporation warrants to purchase up to 23,416 shares of
Common Stock exercisable as follows: 11,708 shares immediately with the
remaining 11,708 shares on or after August 16, 1994 at an exercise price of
$1.28 per share; (ii) On October 17, 1993, the Company granted to Robert
Matthews warrants to purchase up to 2,810 shares of Common Stock exercisable as
follows: 1,405 shares immediately with the remaining 1,405 shares on or after
October 18, 1994 at an exercise price of $1.28 per share; (iii) On May 31, 1994,
the Company granted Thomas A. Montgomery warrants to purchase up to 4,214 shares
of Common Stock exercisable as follows: 2,107 shares immediately and the
remaining 2,107 shares on or after May 31, 1995, at an exercise price of $1.28
per share; (iv) On August 1, 1994, the Company granted to Mr. Montgomery
warrants to purchase up to 1,404 shares of Common Stock exercisable as follows:
702 shares immediately and the remaining 702 shares on or after August 1, 1995,
at an exercise price of $1.28 per share, which remaining portion was canceled in
connection with the repayment of the MJ Partners Note; (v) On August 15, 1994,
the Company granted to Mr. Montgomery warrants to purchase up to 2,810 shares of
Common Stock exercisable as follows: 1,405 shares immediately and the remaining
1,405 shares on or after August 15, 1995, at an exercise price of $1.28 per
share, which remaining portion was canceled in connection with the repayment of
the MJ Partners Note; and (vi) On August 31, 1994, the Company granted to Shelly
Burks warrants to purchase up to 2,342 shares of Common Stock exercisable as
follows: 1,171 shares immediately and the remaining 1,171 shares on or after
August 31, 1995, at an exercise price of $1.28 per share, which remaining
portion was canceled in connection with the repayment of the MJ Partners Note.

On July 27, 1995 the Company granted Paul R. Herchman a warrant to purchase
up to 15,610 shares of Common Stock at an exercise price of $2.56 per share, of
which all 15,610 shares were purchasable

II-3
<PAGE> 70

immediately. This warrant was granted to Mr. Herchman in consideration for his
personal guaranty of the obligations of the Company under the NationsBank Loans.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- -------------------- ------------------------------------------------------------------------
<C> <S>
1.1 -- Form of Underwriting Agreement.(2)
2.1 -- Asset Purchase Agreement, dated October 30, 1995 between the Company
and Mobile Surgical Services of Central Florida, Inc.(1)
2.2 -- Asset Purchase Agreement, dated March 18, 1996 between the Company
and Maasai Inc.(1)
2.3 -- Asset Purchase Agreement, dated June 10, 1996 between the Company and
Mobile Laser Services, Inc.(1)
3.1 -- Articles of Incorporation of the Company.
3.2 -- Bylaws of the Company.
3.3 -- Form of Amended and Restated Articles of Incorporation of the
Company.(2)
3.4 -- Form of Amended and Restated Bylaws of the Company.(2)
4.1 -- Specimen of Common Stock Certificate.(2)
4.2 -- Series A Convertible Preferred Stock Purchase Agreement dated July
10, 1992 between the Company and Mapleleaf Capital, Ltd.(1)
4.3 -- Warrant to Purchase 60,000 shares of Series A Convertible Preferred
Stock of the Company dated July 10, 1992 between the Company and
Mapleleaf Capital, Ltd.
4.4 -- Series B Convertible Preferred Stock Purchase Agreement dated
November 17, 1995 by and among the Company and Satana Corporation,
Mapleleaf Capital, Ltd., Sunwestern Investment Fund III, Sunwestern
Cayman 1988 Partners, Montgomery Jessup & Company, L.L.P., Morris
Moreland, DLJSC F.B.O. Michael Wallace, IRA, Sid Bonner, Clyde
Hutchinson, Marc Johnson, Thomas A. Montgomery, Hazelle Blair, Lloyd
Jones, Bart Tucker, Jay Farris and Kevin O'Brien.(1)
4.5 -- Warrant to Purchase 468,300 Shares of Common Stock of the Company
dated July 10, 1992 between the Company and Satana Corporation.
4.6 -- Warrant to Purchase 23,416 Shares of Common Stock of the Company
dated August 15, 1993 between the Company and Columbia General
Corporation.
4.7 -- Warrant to Purchase 2,810 Shares of Common Stock of the Company dated
October 17, 1993 between the Company and Robert J. Mathews, M.D.
4.8 -- Warrant to Purchase 2,342 Shares of Common Stock of the Company dated
May 31, 1994 between the Company and Shelly Burks.
4.9 -- Warrant to Purchase 1,873 Shares of Common Stock of the Company dated
May 31, 1994 between the Company and Thomas A. Montgomery.
4.10 -- Warrant to Purchase 6,556 Shares of Common Stock of the Company dated
September 1, 1994 between the Company and Thomas A. Montgomery.
4.11 -- Warrant to Purchase 15,651 Shares of Common Stock of the Company
dated July 27, 1995 between the Company and Paul R. Herchman.
5.1 -- Opinion of Jackson & Walker, L.L.P., counsel for the Company.(2)
10.1 -- Amended and Restated Revolving Credit and Term Loan Agreement dated
March 20, 1996 between the Company and NationsBank of Texas, N.A.(1)
10.2 -- Agreement between the Company and Coherent Medical Group.(2)
10.3 -- Master Lease Agreement dated July 20, 1995 between the Company and
Cabot Medical Corporation.(2)
10.4 -- Master Services Agreement dated June 3, 1996 between the Company and
Cosmetic Technologies International.(2)
10.5 -- Joint Venture Agreement dated March 25, 1996 between the Company and
Coherent-AMT Inc.(2)
10.6 -- Medical Alliance, Inc. 1994 Amended and Restated Long-Term Incentive
Plan.
10.7 -- Employment Agreement between the Company and Paul Herchman.(2)
10.8 -- Employment Agreement between the Company and Kevin O'Brien.(2)
</TABLE>

II-4
<PAGE> 71

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- -------------------- ------------------------------------------------------------------------
<C> <S>
10.9 -- Employment Agreement between the Company and Michael G. Wallace.(2)
10.10 -- Lease Agreement.
11.1 -- Statement regarding computation of per share earnings.
21.1 -- Subsidiaries of the Company.
23.1 -- Consent of Jackson & Walker, L.L.P.(2)
23.2 -- Consent of Coopers & Lybrand, L.L.P.
24.1 -- Power of Attorney (contained on page II-7 of this Registration
Statement).
27.1 -- Financial Data Schedule.
99.1 -- Consent of Medical Data International, Inc.
</TABLE>

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

(1) Certain schedules to this Agreement have been omitted. The Company will
furnish a copy of any omitted schedule to the Commission upon request.

(2) To be filed by amendment

(b) Financial Statement Schedules:

<TABLE>
<CAPTION>
SCHEDULE PAGE
- -------- ----
<S> <C> <C>
II -- Valuation and Qualifying Accounts............................................ S-2
</TABLE>

ITEM 17. UNDERTAKINGS.

The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-5
<PAGE> 72

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Dallas,
State of Texas, on August 9, 1996.

MEDICAL ALLIANCE, INC.

By: /s/ PAUL R. HERCHMAN
---------------------------------
Paul R. Herchman, President

II-6
<PAGE> 73

POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints each of
Paul R. Herchman and Michael G. Wallace as his true and lawful attorney-in-fact
and agent, with full power to act alone, with full powers of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments)
to this Registration Statement and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, each acting alone,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, each acting alone, or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>

Chairman of the Board August 9, 1996
/s/ PAUL R. HERCHMAN Executive Officer and
- -------------------------------------------- President
Paul R. Herchman (Principal Executive Officer)

Senior Vice President, Chief August 9, 1996
/s/ MICHAEL G. WALLACE Financial Officer and
- -------------------------------------------- Treasurer
Michael G. Wallace (Principal Financial and
Accounting Officer)

/s/ DAVID A. KALLENBERGER, M.D. Medical Director August 9, 1996
- -------------------------------------------- and
David A. Kallenberger, M.D. Director

/s/ LEO LOPEZ
- -------------------------------------------- Director August 9, 1996
Leo Lopez

/s/ THOMAS A. MONTGOMERY
- -------------------------------------------- Director August 9, 1996
Thomas A. Montgomery

/s/ MORRIS G. MORELAND
- -------------------------------------------- Director August 9, 1996
Morris G. Moreland

/s/ LEON PRITZKER
- -------------------------------------------- Director August 9, 1996
Leon Pritzker

/s/ JIM SILCOCK
- -------------------------------------------- Director August 9, 1996
Jim Silcock
</TABLE>

II-7
<PAGE> 74

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
Medical Alliance, Inc. and Subsidiaries:

In connection with our audits of the consolidated financial statements of
Medical Alliance, Inc. and Subsidiaries as of December 31, 1994 and 1995 and for
each of the three years in the period ended December 31, 1995, which financial
statements are included in the Prospectus, we have also audited the financial
statement Schedule II of Medical Alliance, Inc. and Subsidiaries.

In our opinion, this financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein.

Dallas, Texas
July 17, 1996

S-1
<PAGE> 75

SCHEDULE II

MEDICAL ALLIANCE, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------------------- -------- ---------- ---------- ----------
BALANCE
AT
BEGINNING CHARGED TO BALANCE AT
OF COSTS AND END OF
PERIOD EXPENSES DEDUCTIONS PERIOD
-------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1995:
Allowance for doubtful accounts.......... $449,881 $1,884,709 $1,221,276(A) $1,113,314
Year ended December 31, 1994:
Allowance for doubtful accounts.......... 216,964 781,176 548,259(A) 449,881
Year ended December 31, 1993:
Allowance for doubtful accounts.......... 304,810 604,723 692,569(A) 216,964
</TABLE>

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

(A) Uncollectible accounts written off, net of recoveries.

S-2
<PAGE> 76

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- -------------------- ------------------------------------------------------------------------
<C> <S>
1.1 -- Form of Underwriting Agreement.(1)
2.1 -- Asset Purchase Agreement, dated October 30, 1995 between the Company
and Mobile Surgical Services of Central Florida, Inc.(2)
2.2 -- Asset Purchase Agreement, dated March 18, 1996 between the Company
and Maasai Inc.(2)
2.3 -- Asset Purchase Agreement, dated June 10, 1996 between the Company and
Mobile Laser Services, Inc.(2)
3.1 -- Articles of Incorporation of the Company.
3.2 -- Bylaws of the Company.
3.3 -- Form of Amended and Restated Articles of Incorporation of the
Company.(1)
3.4 -- Form of Amended and Restated Bylaws of the Company.(1)
4.1 -- Specimen of Common Stock Certificate.(1)
4.2 -- Series A Convertible Preferred Stock Purchase Agreement dated July
10, 1992 between the Company and Mapleleaf Capital, Ltd.(2)
4.3 -- Warrant to Purchase 60,000 shares of Series A Convertible Preferred
Stock of the Company dated July 10, 1992 between the Company and
Mapleleaf Capital, Ltd.
4.4 -- Series B Convertible Preferred Stock Purchase Agreement dated
November 17, 1995 by and among the Company and Satana Corporation,
Mapleleaf Capital, Ltd., Sunwestern Investment Fund III, Sunwestern
Cayman 1988 Partners, Montgomery Jessup & Company, L.L.P., Morris
Moreland, DLJSC F.B.O. Michael Wallace, IRA, Sid Bonner, Clyde
Hutchinson, Marc Johnson, Thomas A. Montgomery, Hazelle Blair, Lloyd
Jones, Bart Tucker, Jay Farris and Kevin O'Brien.(2)
4.5 -- Warrant to Purchase 468,300 Shares of Common Stock of the Company
dated July 10, 1992 between the Company and Satana Corporation.
4.6 -- Warrant to Purchase 23,415 Shares of Common Stock of the Company
dated August 15, 1993 between the Company and Columbia General
Corporation.
4.7 -- Warrant to Purchase 2,810 Shares of Common Stock of the Company dated
October 17, 1993 between the Company and Robert J. Mathews, M.D.
4.8 -- Warrant to Purchase 2,342 Shares of Common Stock of the Company dated
May 31, 1994 between the Company and Shelly Burks.
4.9 -- Warrant to Purchase 1,873 Shares of Common Stock of the Company dated
May 31, 1994 between the Company and Thomas A. Montgomery.
4.10 -- Warrant to Purchase 6,556 Shares of Common Stock of the Company dated
September 1, 1994 between the Company and Thomas A. Montgomery.
4.11 -- Warrant to Purchase 15,651 Shares of Common Stock of the Company
dated July 27, 1995 between the Company and Paul R. Herchman.
5.1 -- Opinion of Jackson & Walker, L.L.P., counsel for the Company.(1)
10.1 -- Amended and Restated Revolving Credit and Term Loan Agreement dated
March 20, 1996 between the Company and NationsBank of Texas, N.A.(2)
10.2 -- Agreement between the Company and Coherent Medical Group.(1)
10.3 -- Master Lease Agreement dated July 20, 1995 between the Company and
Cabot Medical Corporation.(1)
10.4 -- Master Services Agreement dated June 3, 1996 between the Company and
Cosmetic Technologies International.(1)
10.5 -- Joint Venture Agreement dated March 25, 1996 between the Company and
Coherent-AMT Inc.
10.6 -- Medical Alliance, Inc. 1994 Amended and Restated Long-Term Incentive
Plan.
10.7 -- Employment Agreement between the Company and Paul Herchman.(1)
10.8 -- Employment Agreement between the Company and Kevin O'Brien.(1)
10.9 -- Employment Agreement between the Company and Michael G. Wallace.(1)
10.10 -- Lease Agreement.
11.1 -- Statement regarding computation of per share earnings.
</TABLE>
<PAGE> 77

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- -------------------- ------------------------------------------------------------------------
<C> <S>
21.1 -- Subsidiaries of the Company.
23.1 -- Consent of Jackson & Walker, L.L.P.(1)
23.2 -- Consent of Coopers & Lybrand, L.L.P.
24.1 -- Power of Attorney (contained on page II-7 of this Registration
Statement).
27.1 -- Financial Data Schedule.
99.1 -- Consent of Medical Data International, Inc.
</TABLE>

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

(1) To be filed by amendment

(2) Certain schedules to this Agreement have been omitted. The Company will
furnish a copy of any omitted schedule to the Commission upon request.

<PAGE> 1
EXHIBIT 2.1

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (this "Agreement"), is dated as of
October 30, 1995, and is by and between Mobile Surgical Services of Central
Florida, Inc., a Florida corporation (the "Company"), and Medical Alliance,
Inc., a Texas corporation ("Purchaser").

W I T N E S S E T H :

WHEREAS, the Company desires to sell, and Purchaser desires to
purchase, certain of the assets of the Company;

NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants herein contained, and on the terms and subject to the
conditions herein set forth, the parties hereto hereby agree as follows:

ARTICLE I.

DEFINITIONS

SECTION 1.1. DEFINITIONS. In addition to terms otherwise defined in
this Agreement, as used in this Agreement, the following terms shall have the
meanings set forth below:

(a) "Assets" shall mean, with respect to the Company, the assets
and properties of the Company set forth on Exhibit 1.1(a) and the rights under
the Assumed Liabilities.

(b) "Assumed Liabilities" shall mean those fixed and determinable
liabilities of the Company listed in Exhibit 1.1(b). Except for the Assumed
Liabilities, Purchaser does not assume or agree to pay, perform or discharge
any liabilities or obligations of the Company, whether accrued, absolute,
contingent or otherwise.

ARTICLE II.

PURCHASE AND SALE

SECTION 2.1. PURCHASE AND SALE OF ASSETS. Subject to and upon the
terms and conditions contained herein, on the date hereof (the "Closing Date"),
the Company shall sell, transfer, assign, convey and deliver to Purchaser, free
and clear of all security interests, liens, claims and encumbrances, equities,
proxies, options, shareholders' agreements or restrictions (except as provided
in the Assumed Liabilities) and Purchaser shall purchase, accept and acquire
from the Company, the Assets.

SECTION 2.2. PURCHASE PRICE. The total consideration for the Assets
shall be the following:
<PAGE> 2
(a) The assumption of Assumed Liabilities;

(b) 6,428 validly issued, fully paid and nonassessable shares of
the common stock, par value $.002 per share, of Purchaser (the "Shares"); and

(c) Cash in the amount of $60,000 to be payable as follows: (i)
$35,000 payable on the date hereof (the "Closing Cash"), and (ii) $25,000
payable on or before July 31, 1996 if and only if, during the period from
January 1, 1996 through June 30, 1996 (the "Earn-out Period"), the gross
revenues generated by Purchaser for mobile aesthetic laser procedures (the
"Procedures") conducted in the State of Florida equals or exceeds (i) $180,000,
then $10,000 will be paid; (ii) $240,000, then an additional $7,500 will be
paid; and (iii) $300,000, then an additional $7,500 will be paid. Purchaser
shall use all commercially reasonable efforts to market the Procedures in the
State of Florida. Within thirty (30) days after the end of the Earn-out
Period, Purchaser shall provide to the Company the gross revenue figures for
the Earn-out Period. The Company may upon reasonable notice and at its own
expense, audit such figures.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants that the following are true and
correct as of date hereof:

SECTION 3.1 ORGANIZATION AND GOOD STANDING; QUALIFICATION. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation, with all requisite corporate
power and authority to carry on the business in which it is engaged, to own the
properties it owns, to execute and deliver this Agreement and the other
agreements contemplated hereby and to consummate the transactions contemplated
hereby and thereby. The Company is duly qualified and licensed to do business
and is in good standing in all jurisdictions where the nature of its business
makes such qualification necessary, except where the failure to be qualified or
licensed would not have a material adverse effect on the business of the
Company. The Company does not own, directly or indirectly, any of the capital
stock of any other corporation or any equity, profit sharing, participation or
other interest in any corporation, partnership, joint venture or other entity.

SECTION 3.2. CAPITALIZATION. The authorized, issued and outstanding
capital stock of the Company, and the record and beneficial holders of all
issued and outstanding capital stock of Seller, are set forth in Exhibit 3.2.

SECTION 3.3. AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by the Company of this Agreement and the other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by the Company, its board of
directors and its shareholders. This Agreement and each other

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<PAGE> 3
agreement contemplated hereby has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally or the availability of equitable
remedies.

SECTION 3.4. NO VIOLATION. Neither the execution, delivery or
performance of this Agreement or the other agreements contemplated hereby nor
the consummation of the transactions contemplated hereby or thereby will (i)
conflict with, or result in a violation or breach of the terms, conditions or
provisions of, or constitute a default under, the Articles of Incorporation or
Bylaws of the Company or any agreement, indenture or other instrument under
which the Company is bound or to which any of the Assets of the Company are
subject, or result in the creation or imposition of any security interest,
lien, charge or encumbrance upon any of the Assets of the Company or (ii)
violate or conflict with any judgment, decree, order, statute, rule or
regulation of any court or any public, governmental or regulatory agency or
body having jurisdiction over the Company or the Assets of the Company.

SECTION 3.5. CONSENTS. No consent, authorization, approval, permit
or license of, or filing with, any governmental or public body or authority,
any lender or lessor or any other person or entity is required to authorize, or
is required in connection with, the execution, delivery and performance of this
Agreement or the agreements contemplated hereby on the part of the Company.

SECTION 3.6. FINANCIAL STATEMENTS. The Company has furnished to
Purchaser its unaudited balance sheet and related unaudited statements of
income, retained earnings and cash flow for its prior two full fiscal years and
for the eight-month period ended August 31, 1995. Such financial statements
fairly present the financial condition and results of operations of the Company
as of the dates and for the periods indicated and have been prepared on a
consistent basis with prior periods, except as otherwise indicated in such
financial statements. Such financial statements reflect all liabilities of the
Company accrued, contingent or otherwise that would be required to be reflected
on a balance sheet, or in the notes thereto, prepared in accordance with
generally accepted accounting principles.

SECTION 3.7. ABSENCE OF CERTAIN CHANGES. Except for a decline
in revenues, since August 31, 1995, the Company has not suffered a material
adverse effect, contracted for the purchase of any capital asset having a cost
in excess of $5,000, incurred any indebtedness for borrowed money, incurred or
discharged any material liabilities except in the ordinary course of business,
acquired or disposed of any assets having an aggregate value in excess of
$5,000, increased the compensation of any employee, or entered into any
transaction or commitment or experienced any other event that would materially
interfere with its performance under this Agreement.

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<PAGE> 4
SECTION 3.8. EMPLOYEE MATTERS.

(a) COMPENSATION PLANS. The Company has no compensation plans,
arrangements or practices sponsored by the Company or to which the Company
contributes on behalf of its employees.

(b) EMPLOYMENT AGREEMENTS. Other than as set forth on Exhibit
3.8, the Company has no employment agreements, including without limitation,
employee leasing agreements, employee service agreements and noncompetition
agreements, to which the Company is a party with respect to its employees.

SECTION 3.9. EMPLOYEE BENEFIT PLANS. The Company has no employee
benefit plans and has not had any employee benefit plans within the three years
preceding the date hereof (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) sponsored by the
Company or to which the Company contributes or contributed on behalf of its
employees.

SECTION 3.10. TITLE; LEASED ASSETS.

(a) REAL PROPERTY. The Company owns no real property.

(b) PERSONAL PROPERTY. A description of all material tangible and
intangible personal property owned by the Company (collectively, the "Personal
Property") is set forth in Exhibit 3.10(b). The Company has good, valid and
marketable title to all the Personal Property. The Personal Property
constitutes the only personal property used in the conduct of the Company's
business. Upon consummation of the transactions contemplated hereby, Purchaser
shall receive good, valid and marketable title to the Personal Property free
and clear of all security interests, liens, claims and encumbrances.

(c) LEASES. A list of all leases of real and personal property to
which the Company is a party, either as lessor or lessee, are set forth in
Exhibit 3.10(c). All such leases are valid and enforceable in accordance with
their respective terms except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies.

SECTION 3.11. COMMITMENTS. Except as set forth in Exhibit 3.11, the
Company has not entered into, nor are the Assets of the Company or the business
of the Company bound by, whether or not in writing, any agreement, contract,
document or obligation, whether written or oral (collectively, the
"Commitments"). True, correct and complete copies of the written Commitments,
and true, correct and complete written descriptions of the oral Commitments,

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<PAGE> 5
have been delivered to Purchaser. There are no existing defaults, events of
default or events, occurrences, acts or omissions that, with the giving of
notice or lapse of time or both, would constitute defaults by the Company, and
no penalties have been incurred nor are amendments pending, with respect to the
Commitments and the Commitments are in full force and effect. The Company has
not received notice of the exercise of any right to cancel or terminate any
Commitment. None of the customers or suppliers of the Company has refused, or
communicated that it will or may refuse, to purchase or supply goods or
services, as the case may be, or has communicated that it will or may
substantially reduce the amounts of goods or services that it is willing to
purchase from, or sell to, the Company.

SECTION 3.12. PATENTS, TRADE-MARKS, SERVICE MARKS AND COPYRIGHTS.

(a) The Company does not own any patents, trade-marks, service
marks or copyrights. The Company possesses adequate licenses or other rights,
if any, therefor, without conflict with the rights of others.

SECTION 3.13. TRADE SECRETS AND CUSTOMER LISTS. The Company has the
right to use, free and clear of any claims or rights of others, all trade
secrets, customer lists and proprietary information required for the marketing
of all merchandise and services formerly or presently sold or marketed by the
Company. The Company is not using or in any way making use of any confidential
information or trade secrets of any third party, including without limitation
any past or present employee of the Company.

SECTION 3.14. TAXES. All income, excise, corporate, franchise,
property, sales, use, payroll, withholding and other taxes related to taxable
periods or portions thereof ending prior to or on the date hereof, including
without limitation governmental charges, assessments and required contributions
of the Company with respect to its business that may result in the filing of a
lien on the Assets or that may result in the imposition of transferee or other
liability on Purchaser for the payment of such taxes, have been accurately
recorded and duly paid, collected or withheld and remitted to the appropriate
governmental agency, except for current taxes not due and payable prior to or
on the date hereof (such taxes to be paid when due by the Company).

SECTION 3.15. COMPLIANCE WITH LAWS. The Company has complied in all
material respects with all laws, regulations and licensing requirements,
including without limitation, environmental laws and requirements, and has
filed with the proper authorities all necessary statements and reports. There
are no existing violations of, or any existing, pending or threatened
investigation or inquiry with respect to any federal, state or local law or
regulation that could materially affect the property or business of the
Company. The Company possesses all necessary licenses, franchises, permits and
governmental authorizations to conduct its business as now conducted.

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<PAGE> 6
SECTION 3.16. FINDER'S FEE. The Company has not incurred any
obligation for any finder's, broker's or agent's fee in connection with the
transactions contemplated hereby.

SECTION 3.17. LITIGATION. Except as set forth in Exhibit 3.17, there
are no legal actions or administrative proceedings or investigations
instituted, or to the best knowledge of the Company, threatened, against or
affecting, or that could affect, the Company, any of the Assets or the business
of the Company. The Company does not know of any basis for any such action,
proceeding or investigation.

SECTION 3.18. ACCURACY OF INFORMATION FURNISHED. All information
furnished to Purchaser by the Company hereby or in connection with the
transactions contemplated hereby is true, correct and complete in all respects
in light of the context in which such information was given or appears.

SECTION 3.19. CONDITION OF FIXED ASSETS. All of the plants,
structures and equipment included in the Assets are in good condition and
repair for their intended use in the ordinary course of business and conform in
all material respects with all applicable ordinances, regulations and other
laws and there are no known latent defects therein.

SECTION 3.20. BOOKS OF ACCOUNT. The books of account of the Company
have been kept accurately in the ordinary course of business, the transactions
entered therein represent bona fide transactions and the revenues, expenses,
assets and liabilities of the Company have been properly recorded in such
books.

SECTION 3.21. CORPORATE NAME. There are no actions, suits or
proceedings pending, or to the best knowledge of the Company, threatened,
against or affecting the Company that could result in any impairment of the
right to use the name "Mobile Surgical Services, Inc." and to the best
knowledge of the Company, the use of such name does not infringe the rights of
any third party nor is it confusingly similar with the corporate name of any
third party.

SECTION 3.22. ACCOUNTS RECEIVABLE. Exhibit 3.22 sets forth the
accounts receivable of the Company's business from sales made as of the date
hereof and the payments and rights to receive payments related thereto, and is
complete and accurate (the "Account Receivables"). The Assets do not include
the Account Receivables and shall remain the property of the Company, with the
Company being solely responsible for the collection thereof.

SECTION 3.23. CUSTOMERS. Set forth in Exhibit 3.23 is a complete and
accurate list of the customers of the Company showing, with respect to each,
the name, address and pricing and sales records relating to such customer.

SECTION 3.24. PRODUCT WARRANTIES. There is no claim against or
liability of the Company on account of product warranties or with respect to
the manufacture, sale or rental of

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<PAGE> 7
defective products and there is no basis for any such claim on account of
defective products heretofore manufactured, sold or rented that is not fully
covered by insurance.

SECTION 3.25. CERTAIN PAYMENTS. Neither the Company nor any
director, officer or employee of the Company has paid or caused to be paid,
directly or indirectly, in connection with the business of the Company: (a) to
any government or agency thereof or any agent of any supplier or customer any
bribe, kick-back or other similar payment; or (b) any contribution to any
political party or candidate (other than from personal funds of directors,
officers or employees not reimbursed by their respective employers or as
otherwise permitted by applicable law).

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser represents and warrants that the following are true and
correct as of the date hereof:

SECTION 4.1. ORGANIZATION AND GOOD STANDING. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation, with all requisite corporate power and
authority to carry on the business in which it is engaged, to own the
properties it owns, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby.

SECTION 4.2. AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by Purchaser of this Agreement and the other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by Purchaser. This Agreement and
each other agreement contemplated hereby have been duly executed and delivered
by Purchaser and constitute legal, valid and binding obligations of Purchaser,
enforceable against Purchaser in accordance with their respective terms, except
as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies.

SECTION 4.3. NO VIOLATION. Neither the execution, delivery or
performance of this Agreement or the other agreements contemplated hereby nor
the consummation of the transactions contemplated hereby or thereby will (i)
conflict with, or result in a violation or breach of the terms, conditions and
provisions of, or constitute a default under, the Articles of Incorporation or
Bylaws of Purchaser or any agreement, indenture or other instrument under which
Purchaser is bound or (ii) violate or conflict with any judgment, decree,
order, statute, rule or regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over Purchaser or the properties
or assets of Purchaser.

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<PAGE> 8
SECTION 4.4. FINDER'S FEE. Purchaser has not incurred any obligation
for any finder's, broker's or agent's fee in connection with the transactions
contemplated hereby.

ARTICLE V.

CLOSING DELIVERIES

SECTION 5.1. DELIVERIES OF THE COMPANY. On the date hereof, the
Company shall deliver to Purchaser the following, all of which shall be in a
form satisfactory to counsel to Purchaser:

(a) a Bill of Sale and an Assignment and Assumption Agreement in
the form attached as Exhibit 5.1(b) (the "Assignment and Assumption
Agreement");

(b) a copy of resolutions of the Board of Directors of the Company
authorizing the execution, delivery and performance of this Agreement and all
related documents and agreements, each certified by the Secretary of the
Company as being true and correct copies of the originals thereof subject to no
modifications or amendments;

(c) a certificate of the President of the Company as to the truth
and correctness of the representations and warranties of the Company contained
herein on and as of the date hereof;

(d) a certificate of the Secretary of the Company certifying as to
the incumbency of the directors and officers of the Company and as to the
signatures of such directors and officers who have executed documents delivered
at the Closing on behalf of the Company;

(e) a certificate, dated within 5 days of the Closing Date, of the
Secretary of State of Florida establishing that the Company is in existence,
has paid all franchise taxes and otherwise is in good standing to transact
business in its state of incorporation;

(f) certificates, dated within 5 days of the Closing Date, of the
Secretaries of State of the states in which the Company is qualified to do
business, to the effect that the Company is qualified to do business and is in
good standing as a foreign corporation in each of such states; and
(g) the executed Noncompetition Agreements (as defined below).

SECTION 5.2. DELIVERIES OF PURCHASER. On the date hereof, Purchaser
shall deliver to the Company:

(a) the Closing Cash by wire transfer;

(b) the Shares;

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<PAGE> 9
(c) the Assignment and Assumption Agreement;

(d) a copy of the resolutions of the Board of Directors of
Purchaser authorizing the execution, delivery and performance of this Agreement
and all related documents and agreements, each certified by Purchaser's
Secretary as being true and correct copies of the originals thereof subject to
no modifications or amendments;

(e) a certificate of the President of Purchaser as to the truth
and correctness of the representations and warranties of Purchaser contained
herein on and as of the date hereof;

(f) a certificate of the Secretary of Purchaser certifying as to
the incumbency of the directors and officers of Purchaser and as to the
signatures of such directors and officers who have executed documents delivered
at the Closing on behalf of Purchaser;

(g) the executed Employment Agreements (as defined below); and

(h) the executed Noncompetition Agreements (as defined below).

SECTION 5.3. OTHER DELIVERIES. On the date hereof, the following
deliveries shall be made to Purchaser:

(a) executed Employment Agreements (the "Employment Agreements")
between Purchaser and each of Steve Stringfellow and Russ Rickel in the form
attached hereto as Exhibit 5.1(i); and

(b) executed Noncompetition Agreements (the "Noncompetition
Agreements") executed by each of Steve Stringfellow, Russ Rickel, Marlene
Gregory and Richard Gregory, M.D. in the form attached hereto as Exhibit
5.3(b).

SECTION 5.4. RE-DELIVERY OF SHARES. On the date hereof, after
Purchaser has delivered the Shares to the Company, the Company shall re-deliver
3,214 of the Shares to each of Steve Stringfellow and Rickel, in consideration
for their equity ownership interest in the Company. To facilitate such
transfer, the Company hereby instructs Purchaser to deliver the Shares in two
certificates of 3,214 Shares each in the names of Steve Stringfellow and Russ
Rickel.

ARTICLE VI.

POST CLOSING MATTERS

SECTION 6.1. FURTHER INSTRUMENTS OF TRANSFER. Following the closing
of the transactions contemplated herein (the "Closing"), at the request of
Purchaser, the Company shall deliver any further instruments of transfer
reasonably requested by Purchaser, and take all reasonable action as may be
necessary or appropriate to (i) vest in Purchaser good and

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<PAGE> 10
marketable title to the Assets, (ii) transfer to Purchaser all licenses and
permits necessary for the operation of the Assets, and (iii) carry out more
effectively the provisions of this Agreement and to establish and protect the
rights created in favor of the parties hereunder.

SECTION 6.2. EMPLOYEE COMPENSATION. The Company shall remain liable
for all compensation, bonuses, benefits and other arrangements incurred by the
Company or owed by the Company to any employee of the Company as of and
following the Closing Date.

SECTION 6.3. SALES TAXES APPLICABLE TO SALES PRIOR TO OR ON THE
CLOSING DATE. The Company shall timely file all sales tax returns with respect
to sales occurring in connection with the Company's business prior to or on the
Closing Date.

SECTION 6.4. SALES AND TRANSFER TAXES. The Company shall timely pay
all sales taxes applicable to the sales reported on the tax returns referred to
in Section 6.3. The Company shall be liable for and shall indemnify Purchaser
against all sales, transfer, use, excise, registration or other taxes assessed
or payable in connection with the transfer of the Assets from the Company to
Purchaser. The Company and Purchaser shall sign, and otherwise shall cooperate
in the preparation and filing with the appropriate governmental agencies, of,
any affidavits or other transfer documents that are required in connection with
the transfer of vehicles or similar assets that constitute part of the Assets.

ARTICLE VII.

REMEDIES

SECTION 7.1. INDEMNIFICATION BY THE COMPANY. Subject to the terms
and conditions of this Article, the Company agrees to indemnify, defend and
hold Purchaser and its directors, officers, agents, attorneys and affiliates
harmless from and against all losses, claims, obligations, demands,
assessments, penalties, liabilities, costs, damages, attorneys' fees and
expenses (collectively, "Damages"), asserted against or incurred by such
indemnitees by reason of or resulting from:

(a) a breach of any representation, warranty or covenant of the
Company contained herein, in any exhibit, schedule or certificate delivered
hereunder, or in any agreement executed in connection with the transactions
contemplated hereby;

(b) any liability of the Company arising out of or relating to the
operation of the Company's business prior to or on the Closing Date to the
extent such liabilities were incurred or the events giving rise to such
liabilities occurred on or prior to the Closing Date;

(c) any product liability or breach of warranty claims relating to
products sold by the Company prior to or on the Closing Date and all general
liability claims arising out of or

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<PAGE> 11
relating to occurrences of any nature relating to the Company's business prior
to the Closing Date, whether any such claims are asserted prior to, on or after
the Closing Date;

(d) any tax filing or return or payment made, or position taken,
by the Company that any governmental authority challenges and that results in
an assertion of Damages against Purchaser;

(e) any liability related to the Company that has not been
expressly assumed by Purchaser; or

(f) the matters described in Exhibit 3.17.

SECTION 7.2. INDEMNIFICATION BY PURCHASER. Subject to the terms and
conditions of this Article, Purchaser hereby agrees to indemnify, defend and
hold the Company and its directors, officers, agents, attorneys and affiliates
harmless from and against all Damages asserted against or incurred by any of
such indemnitees by reason of or resulting from:

(a) a breach by Purchaser of any representation, warranty or
covenant of Purchaser contained herein or in any exhibit, schedule or
certificate delivered hereunder, or in any agreement executed in connection
with the transactions contemplated hereby; or

(b) the failure of Purchaser to pay, perform and discharge when
due any of the Assumed Liabilities.

SECTION 7.3. CONDITIONS OF INDEMNIFICATION. The respective
obligations and liabilities of the Company and Purchaser (the "indemnifying
party") to the other (the "party to be indemnified") under Sections 7.1 and 7.2
with respect to claims resulting from the assertion of liability by third
parties shall be subject to the following terms and conditions:

(a) Within 20 days (or such earlier time as might be required to
avoid prejudicing the indemnifying party's position) after receipt of notice of
commencement of any action evidenced by service of process or other legal
pleading, the party to be indemnified shall give the indemnifying party written
notice thereof together with a copy of such claim, process or other legal
pleading, and the indemnifying party shall have the right to undertake the
defense thereof by representatives of its own choosing and at its own expense;
provided that the party to be indemnified may participate in the defense with
counsel of its own choice, the fees and expenses of which counsel shall be paid
by the party to be indemnified unless (i) the indemnifying party has agreed to
pay such fees and expenses, (ii) the indemnifying party has failed to assume
the defense of such action or (iii) the named parties to any such action
(including any impleaded parties) include both the indemnifying party and the
party to be indemnified and the party to be indemnified has been advised by
counsel that there may be one or more legal defenses available to it that are
different from or additional to those available to the indemnifying party (in
which case, if the party to be indemnified informs the indemnifying party in
writing that it elects to

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<PAGE> 12
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such
action on behalf of the party to be indemnified, it being understood, however,
that the indemnifying party shall not, in connection with any one such action
or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for the party to be indemnified, which firm shall be
designated in writing by the party to be indemnified).

(b) In the event that the indemnifying party, by the 30th day
after receipt of notice of any such claim (or, if earlier, by the 10th day
preceding the day on which an answer or other pleading must be served in order
to prevent judgment by default in favor of the person asserting such claim),
does not elect to defend against such claim, the party to be indemnified will
(upon further notice to the indemnifying party) have the right to undertake the
defense, compromise or settlement of such claim on behalf of and for the
account and risk of the indemnifying party and at the indemnifying party's
expense, subject to the right of the indemnifying party to assume the defense
of such claims at any time prior to settlement, compromise or final
determination thereof.

(c) Notwithstanding the foregoing, the indemnifying party shall
not settle any claim without the consent of the party, such consent not to be
unreasonably withheld, to be indemnified unless such settlement involves only
the payment of money and the claimant provides to the party to be indemnified a
release from all liability in respect of such claim. If the settlement of the
claim involves more than the payment of money, the indemnifying party shall not
settle the claim without the prior consent of the party to be indemnified.

(d) The party to be indemnified and the indemnifying party will
each cooperate with all reasonable requests of the other.

SECTION 7.4. WAIVER. No waiver by any party of any default or breach
by another party of any representation, warranty, covenant or condition
contained in this Agreement, any exhibit or any document, instrument or
certificate contemplated hereby shall be deemed to be a waiver of any
subsequent default or breach by such party of the same or any other
representation, warranty, covenant or condition. No act, delay, omission or
course of dealing on the part of any party in exercising any right, power or
remedy under this Agreement or at law or in equity shall operate as a waiver
thereof or otherwise prejudice any of such party's rights, powers and remedies.
All remedies, whether at law or in equity, shall be cumulative and the election
of any one or more shall not constitute a waiver of the right to pursue other
available remedies.

SECTION 7.5. REMEDIES NOT EXCLUSIVE. The remedies provided in this
Article shall not be exclusive of any other rights or remedies available to one
party against the other, either at law or in equity.

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<PAGE> 13
SECTION 7.6. OFFSET. Any and all amounts owing or to be paid by
Purchaser to the Company, hereunder or otherwise shall be subject to offset and
reduction pro tanto by any amounts that may be owing at any time by the Company
to Purchaser in respect of any failure or breach of any representation,
warranty or covenant of the Company under or in connection with this Agreement
or any other agreement with Purchaser or any transaction contemplated hereby or
thereby, as reasonably determined by Purchaser.

SECTION 7.7. COSTS, EXPENSES AND LEGAL FEES. Subject to the
provisions of Section 7.1, whether or not the transactions contemplated hereby
are consummated, each party hereto shall bear its own costs and expenses
(including attorneys' fees), except that each party hereto agrees to pay the
costs and expenses (including reasonable attorneys' fees and expenses) incurred
by the other parties in successfully (x) enforcing any of the terms of this
Agreement or (y) proving that another party breached any of the terms of this
Agreement.

ARTICLE VIII.

MISCELLANEOUS

SECTION 8.1. AMENDMENT. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto.

SECTION 8.2. ASSIGNMENT. Neither this Agreement nor any right
created hereby or in any agreement entered into in connection with the
transactions contemplated hereby shall be assignable by any party hereto,
except by Purchaser to an affiliate of Purchaser.

SECTION 8.3. PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARIES.
Except as otherwise provided herein, the terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and assigns of the parties hereto. Neither this
Agreement nor any other agreement contemplated hereby shall be deemed to confer
upon any person not a party hereto or thereto any rights or remedies hereunder
or thereunder, except that each Releasee shall have the benefit of Section 2.3
above.

SECTION 8.4. ENTIRE AGREEMENT. This Agreement and the agreements
contemplated hereby constitute the entire agreement of the parties regarding
the subject matter hereof, and supersede all prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof.

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<PAGE> 14
illegal, invalid or unenforceable provision, there shall be added automatically
as part of this Agreement a provision as similar in its terms to such illegal,
invalid or unenforceable provision as may be possible and be legal, valid and
enforceable.

SECTION 8.6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
The representations, warranties and covenants contained herein shall survive
the Closing and all statements contained in any certificate, exhibit or other
instrument delivered by or on behalf of the Company or Purchaser pursuant to
this Agreement shall be deemed to have been representations and warranties by
the Company or Purchaser, as the case may be, and, notwithstanding any
provision in this Agreement to the contrary, shall survive the Closing for a
period of two years, except for representations and warranties with respect to
any tax or tax-related matters, any ERISA matters or indemnification provisions
for the violation of any environmental law which shall survive the Closing
until the running of any applicable statutes of limitation.

SECTION 8.7. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS (BUT NOT THE RULES GOVERNING
CONFLICTS OF LAWS) OF THE STATE OF TEXAS.

SECTION 8.8. CAPTIONS. The captions in this Agreement are for
convenience of reference only and shall not limit or otherwise affect any of
the terms or provisions hereof.

SECTION 8.9. GENDER AND NUMBER. When the context requires, the
gender of all words used herein shall include the masculine, feminine and
neuter and the number of all words shall include the singular and plural.

SECTION 8.10. REFERENCE TO AGREEMENT. Use of the words "herein",
"hereof", "hereto" and the like in this Agreement shall be construed as
references to this Agreement as a whole and not to any particular Article,
Section or provision of this Agreement, unless otherwise noted.

SECTION 8.11. CONFIDENTIALITY; PUBLICITY AND DISCLOSURES. Each party
shall keep this Agreement and its terms confidential, and shall make no press
release or public disclosure, either written or oral, regarding the
transactions contemplated by this Agreement without the prior knowledge and
consent of the other parties hereto; provided that the foregoing shall not
prohibit any disclosure to attorneys, accountants, investment bankers or other
agents of the parties.

SECTION 8.12. NOTICE. Any notice or communication hereunder or in
any agreement entered into in connection with the transactions contemplated
hereby must be in writing and given by depositing the same in the United States
mail, addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, or by delivering the same in person.
Such notice shall be deemed received on the date on which it is hand-delivered

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<PAGE> 15
or on the third business day following the date on which it is so mailed. For
purposes of notice, the addresses of the parties shall be:

If to Purchaser: Medical Alliance, Inc.
8200 Springwood Drive, Suite 200
Irving, Texas 75063
Attention: Michael Wallace

with a copy to: Jackson & Walker, L.L.P.
901 Main Street, Suite 6000
Dallas, Texas 75202
Attention: Richard F. Dahlson

If to the Company: Mobile Surgical Services of Central Florida, Inc.
225 South Swoope
Maitland, Florida 32751
Attention: Marlene Gregory

with a copy to: Kenneth R. Uncapher
Tukdarian & Uncapher, P.A.
537 North Magnolia Avenue
Post Office Box 949
Orlando, Florida 32802

Any party may change its address for notice by written notice given to the
other parties in accordance with this Section.

SECTION 8.13. CHOICE OF FORUM. The parties hereto agree that should
any suit, action or proceeding arising out of this Agreement or the other
Agreements contemplated hereby be instituted by any party hereto (other than a
suit, action or proceeding to enforce or realize upon any final court judgment
arising out of this Agreement), such suit, action or proceeding shall be
instituted only in a state or federal court in Dallas County, Texas. Each of
the parties hereto consents to the in personam jurisdiction of any state or
federal court in Dallas County, Texas and waives any objection to the venue of
any such suit, action or proceeding. The parties hereto recognize that courts
outside Dallas County, Texas may also have jurisdiction over suits, actions or
proceedings arising out of this Agreement, and in the event that any party
hereto shall institute a proceeding involving this Agreement in a jurisdiction
outside Dallas County, Texas, the party instituting such proceeding shall
indemnify any other party hereto for any losses and expenses that may result
from the breach of the foregoing covenant to institute such proceeding only in
a state or federal court in Dallas County, Texas, including without limitation
any additional expenses incurred as a result of litigating in another
jurisdiction, such as reasonable fees and expenses of local counsel and travel
and lodging expenses for parties, witnesses, experts and support personnel.

- 15 -
<PAGE> 16
SECTION 8.14. COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.

EXECUTED as of the date first above written.

MEDICAL ALLIANCE, INC.

By: /s/ Paul Herchman
--------------------------
Its: President
-------------------------

MOBILE SURGICAL SERVICES, INC.

By: /s/ Steve Stringfellow
---------------------------
Its: President
--------------------------

- 16 -
<PAGE> 17
LIST OF EXHIBITS

<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C> <C>
1.1(a) - Assets
1.1(b) - Assumed Liabilities
3.2 - Capitalization
3.8 - Employment Agreements
3.10(b) - Personal Property
3.10(c) - Leases
3.11 - Commitments
3.12 - Proprietary Rights
3.22 - Accounts Receivable
3.23 - Customers
5.1(b) - Assignment and Assumption Agreement
5.3(a) - Employment Agreements
5.3(b) - Noncompetition Agreements
</TABLE>

<PAGE> 1
EXHIBIT 2.2

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (this "Agreement"), is dated as of March
18, 1996, and is by and between MAASAI, Inc., a Delaware corporation (the
"Company"), and Medical Alliance, Inc., a Texas corporation ("Purchaser").

W I T N E S S E T H :

WHEREAS, the Company desires to sell, and Purchaser desires to
purchase, all of the assets of the Company's mobile laser services business
(the "Division");

ARTICLE I.
DEFINITIONS

SECTION 1.1. DEFINITIONS. In addition to terms otherwise defined in
this Agreement, as used in this Agreement, the following terms shall have the
meanings set forth below:

(a) "Assets" shall mean all of the business, properties and assets
(real and personal, tangible and intangible) of the Division of every kind and
wherever situated that are owned by the Company or in which the Company has any
right or interest (including, without limitation, the assets and properties of
the Division set forth on Exhibit 1.1(a) attached hereto and all contract
rights, customer lists, files copyrights, marketing materials and trademark and
tradename rights).

(b) "Indebtedness" shall mean the liabilities of the Company
pertaining to the Division as listed in Exhibit 1.1(b) attached hereto.

ARTICLE II.
PURCHASE AND SALE

SECTION 2.1. PURCHASE AND SALE OF ASSETS. Subject to and upon the
terms and conditions contained herein, on the date hereof (the "Closing Date"),
the Company shall sell, transfer, assign, convey and deliver to Purchaser, free
and clear of all security interests, liens, claims and encumbrances, equities,
proxies, options, shareholders' agreements or restrictions and Purchaser shall
purchase, accept and acquire from the Company, the Assets.

SECTION 2.2. PURCHASE PRICE. The total consideration for the Assets
shall be the following: (a) the pay-off at the closing of the transactions
contemplated herein (the "Closing") of the Indebtedness; and (b) cash in the
amount of $126,000 payable at the Closing. Except for the pay-off of the
Indebtedness, Purchaser does not assume or agree to pay, perform or
<PAGE> 2
discharge any liabilities or obligations of the Company, whether accrued,
absolute, contingent or otherwise.

SECTION 2.3. USE OF NAME. The Company hereby grants to Purchaser a
royalty-free non-exclusive license to utilize the "MAASAI" name, and any
derivatives thereof, in connection with the business being purchased hereunder
for a period of six (6) months from and after the date hereof.

ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants that the following are true and
correct as of date hereof:

SECTION 3.2. AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by the Company of this Agreement and the other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by the Company. This Agreement
and each other agreement contemplated hereby has been duly executed and
delivered by the Company and constitutes the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies.

SECTION 3.3. NO VIOLATION. Neither the execution, delivery or
performance of this Agreement or the other agreements contemplated hereby nor
the consummation of the transactions contemplated hereby or thereby will (i)
conflict with, or result in a violation or breach of the terms, conditions or
provisions of, or constitute a default under, the Articles of Incorporation or
Bylaws of the Company or any agreement, indenture or other instrument under
which the Company is bound or to which any of the Assets of the Company are
subject, or result in the creation or imposition of any security interest,
lien, charge or encumbrance upon any of the Assets of the Company or (ii)
violate or conflict with any judgment, decree, order, statute, rule or
regulation of any court or any public, governmental or regulatory agency or
body having jurisdiction over the Company or the Assets of the Company.

- 2 -
<PAGE> 3
SECTION 3.4. CONSENTS. No consent, authorization, approval, permit
or license of, or filing with, any governmental or public body or authority,
any lender or lessor or any other person or entity is required to authorize, or
is required in connection with, the execution, delivery and performance of this
Agreement or the agreements contemplated hereby on the part of the Company.

SECTION 3.5. INDEBTEDNESS. The amount of the Indebtedness does
not exceed $251,000.00.

SECTION 3.6. TITLE; LEASED ASSETS. The Assets do not include any
real property. A description of all material tangible and intangible personal
property owned by the Company and utilized by the Division (collectively, the
"Personal Property") is set forth in Exhibit 3.6(a). The Company has good,
valid and marketable title to all the Personal Property. The Personal Property
constitutes the only personal property used in the conduct of the Division's
business. Upon consummation of the transactions contemplated hereby, Purchaser
shall receive good, valid and marketable title to the Personal Property free
and clear of all security interests, liens, claims and encumbrances. A list of
all leases of real and personal property to which the Company is a party,
either as lessor or lessee, and relating to the Division are set forth in
Exhibit 3.6(b). All such leases are valid and enforceable in accordance with
their respective terms except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies.

SECTION 3.7. COMMITMENTS. Except as set forth on Exhibit 3.7, with
respect to the Division, the Company has not entered into, nor are the Assets
of the Company or the business of the Company bound by, whether or not in
writing, any agreement, contract, document or obligation, whether written or
oral (collectively, the "Commitments"). True, correct and complete copies of
the written Commitments, and true, correct and complete written descriptions of
the oral Commitments, have been delivered to Purchaser. There are no existing
defaults, events of default or events, occurrences, acts or omissions that,
with the giving of notice or lapse of time or both, would constitute defaults
by the Company, and no penalties have been incurred nor are amendments pending,
with respect to the Commitments and the Commitments are in full force and
effect. The Company has not received notice of the exercise of any right to
cancel or terminate any Commitment. None of the customers or suppliers of the
Company (with respect to the Division) has refused, or communicated that it
will or may refuse, to purchase or supply goods or services, as the case may
be, or has communicated that it will or may substantially reduce the amounts of
goods or services that it is willing to purchase from, or sell to, the Company.

SECTION 3.8. PATENTS, TRADE-MARKS, SERVICE MARKS AND COPYRIGHTS. With
respect to the Division, the Company does not own any patents, trade-marks,
service marks or copyrights. With respect to the Division, the Company
possesses adequate licenses or other rights, if any, therefor, without conflict
with the rights of others.

- 3 -
<PAGE> 4
SECTION 3.9. TRADE SECRETS AND CUSTOMER LISTS. With respect to the
Division, the Company has the right to use, free and clear of any claims or
rights of others, all material trade secrets, customer lists and proprietary
information required for the marketing of all merchandise and services formerly
or presently sold or marketed by the Company. With respect to the Division,
the Company is not using or in any way making use of any confidential
information or trade secrets of any third party, including without limitation
any past or present employee of the Company.

SECTION 3.10. TAXES. All income, excise, corporate, franchise,
property, sales, use, payroll, withholding and other taxes related to taxable
periods or portions thereof ending prior to or on the date hereof, including
without limitation governmental charges, assessments and required contributions
of the Company with respect to its business that may result in the filing of a
lien on the Assets or that may result in the imposition of transferee or other
liability on Purchaser for the payment of such taxes, have been accurately
recorded and duly paid, collected or withheld and remitted to the appropriate
governmental agency, except for current taxes not due and payable prior to or
on the date hereof (such taxes to be paid when due by the Company).

SECTION 3.11. COMPLIANCE WITH LAWS. With respect to the Division,
the Company has complied in all material respects with all laws, regulations
and licensing requirements, including without limitation, environmental laws
and requirements, and has filed with the proper authorities all necessary
statements and reports. There are no existing violations of, or any existing,
pending or threatened investigation or inquiry with respect to any federal,
state or local law or regulation that could materially affect the property or
business of the Company. The Company possesses all necessary licenses,
franchises, permits and governmental authorizations to conduct the business of
the Division as now conducted.

SECTION 3.12. FINDER'S FEE. The Company has not incurred any
obligation for any finder's, broker's or agent's fee in connection with the
transactions contemplated hereby.

SECTION 3.13. LITIGATION. There are no legal actions or
administrative proceedings or investigations instituted, or to the best
knowledge of the Company, threatened, against or affecting, or that could
affect, the Company, any of the Assets or the business of the Division. The
Company does not know of any basis for any such action, proceeding or
investigation.

SECTION 3.14. ACCURACY OF INFORMATION FURNISHED. All information
furnished to Purchaser by the Company hereby or in connection with the
transactions contemplated hereby is true, correct and complete in all respects
in light of the context in which such information was given or appears.

SECTION 3.15. CONDITION OF ASSETS. All of the plants, structures and
equipment included in the Assets are in good condition and repair for their
intended use in the ordinary course of

- 4 -
<PAGE> 5
business and conform in all material respects with all applicable ordinances,
regulations and other laws and there are no known latent defects therein.

SECTION 3.16. ACCOUNTS RECEIVABLE. Exhibit 3.16 sets forth the
accounts receivable of the Division's business from sales made as of the date
hereof and the payments and rights to receive payments related thereto, and is
complete and accurate (the "Account Receivables"). The Assets do not include
the Account Receivables and shall remain the property of the Company, with the
Company being solely responsible for the collection thereof.

SECTION 3.17. CUSTOMERS. Set forth in Exhibit 3.17 is a complete and
accurate list of the customers of the Division showing, with respect to each,
the name, address and pricing and sales records relating to such customer.

SECTION 3.18. PRODUCT WARRANTIES. With respect to the Division,
there is no claim against or liability of the Company on account of product
warranties or with respect to the manufacture, sale or rental of defective
products and there is no basis for any such claim on account of defective
products heretofore manufactured, sold or rented that is not fully covered by
insurance.

SECTION 3.19. CERTAIN PAYMENTS. With respect to the Division,
neither the Company nor any director, officer or employee of the Company has
paid or caused to be paid, directly or indirectly, in connection with the
business of the Company: (a) to any government or agency thereof or any agent
of any supplier or customer any bribe, kick-back or other similar payment; or
(b) any contribution to any political party or candidate (other than from
personal funds of directors, officers or employees not reimbursed by their
respective employers or as otherwise permitted by applicable law).

ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser represents and warrants that the following are true and
correct as of the date hereof:

- 5 -
<PAGE> 6
executed and delivered by Purchaser and constitute legal, valid and binding
obligations of Purchaser, enforceable against Purchaser in accordance with
their respective terms, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies.

SECTION 4.4. FINDER'S FEE. Purchaser has not incurred any obligation
for any finder's, broker's or agent's fee in connection with the transactions
contemplated hereby.

ARTICLE V.
CLOSING DELIVERIES

SECTION 5.1. DELIVERIES OF THE COMPANY. On the date hereof, the
Company shall deliver to Purchaser the following, all of which shall be in a
form satisfactory to counsel to Purchaser:

(a) a Bill of Sale in the form attached as Exhibit 5.1(a) (the
"Bill of Sale");

(c) a certificate of the Secretary of the Company certifying as to
the incumbency of the directors and officers of the Company and as to the
signatures of such directors and officers who have executed documents delivered
at the Closing on behalf of the Company;

(d) a certificate, dated within 5 days of the Closing Date, of the
Secretary of State of Delaware establishing that the Company is in existence,
has paid all franchise taxes and otherwise is in good standing to transact
business in its state of incorporation;

(e) certificates, dated within 5 days of the Closing Date, of the
Secretaries of State of the states in which the Company is qualified to do
business, to the effect that the Company is qualified to do business and is in
good standing as a foreign corporation in each of such states; and

- 6 -
<PAGE> 7
(f) the executed Noncompetition Agreements (as defined below).

SECTION 5.2. DELIVERIES OF PURCHASER. On the date hereof, Purchaser
shall deliver to the Company:

(a) the Closing Cash by wire transfer;

(b) the Bill of Sale;

(c) a copy of the resolutions of the Board of Directors of
Purchaser authorizing the execution, delivery and performance of this Agreement
and all related documents and agreements, each certified by Purchaser's
Secretary as being true and correct copies of the originals thereof subject to
no modifications or amendments;

(d) a certificate of the Secretary of Purchaser certifying as to
the incumbency of the directors and officers of Purchaser and as to the
signatures of such directors and officers who have executed documents delivered
at the Closing on behalf of Purchaser;

(e) the executed Employment Agreements (as defined below); and

(f) the executed Noncompetition Agreements (as defined below).

SECTION 5.3. OTHER DELIVERIES. On the date hereof, the following
deliveries shall be made to Purchaser:

(a) executed Employment Agreements (the "Employment Agreements")
between Purchaser and each of Darla Odle, Milt Hanks and Greg Stephenson in the
forms attached hereto as Exhibit 5.3(a); and

(b) executed Noncompetition Agreements (the "Noncompetition
Agreements") executed by each of Ned Warner and Kraig Higginson in the forms
attached hereto as Exhibit 5.3(b).

ARTICLE VI.
POST CLOSING MATTERS

SECTION 6.1. FURTHER INSTRUMENTS OF TRANSFER. Following the Closing,
at the request of Purchaser, the Company shall deliver any further instruments
of transfer reasonably requested by Purchaser, and take all reasonable action
as may be necessary or appropriate to (i) vest in Purchaser good and marketable
title to the Assets, (ii) transfer to Purchaser all licenses and permits
necessary for the operation of the Assets, and (iii) carry out more effectively
the provisions of this Agreement and to establish and protect the rights
created in favor of the parties hereunder.

- 7 -
<PAGE> 8
SECTION 6.2. EMPLOYEE COMPENSATION. The Company shall remain liable
for all compensation, bonuses, benefits and other arrangements incurred by the
Company or owed by the Company to any employee of the Company as of and
following the Closing Date.

SECTION 6.3. SALES TAXES APPLICABLE TO SALES PRIOR TO OR ON THE
CLOSING DATE. The Company shall timely file all sales tax returns with respect
to sales occurring in connection with the Division's business prior to or on
the Closing Date.

ARTICLE VII.
REMEDIES

(b) any liability of the Company arising out of or relating to the
operation of the Division's business prior to or on the Closing Date to the
extent such liabilities were incurred or the events giving rise to such
liabilities occurred on or prior to the Closing Date;

(c) any claims arising out of or relating to occurrences of any
nature relating to the Division's business prior to the Closing Date, whether
any such claims are asserted prior to, on or after the Closing Date;

(d) any tax filing or return or payment made, or position taken,
by the Company that any governmental authority challenges and that results in
an assertion of Damages against Purchaser; or

- 8 -
<PAGE> 9
(e) any liability related to the Company that has not been
expressly assumed by Purchaser.

Notwithstanding anything herein to the contrary, the Company's liability under
this Section 7.1 shall be limited to $377,000 in the aggregate, except for the
matters set forth in (c) above, which shall be unlimited and in addition to
such $377,000 limitation.

(b) the failure of Purchaser to pay, perform and discharge when
due any of the Assumed Liabilities.

(c) any claims arising out of or relating to occurrences of any
nature relating to MAI's (Purchaser's) operation of the Division's business on
or after the date of the Closing Date, whether any such claims are asserted on
or after the Closing Date.

- 9 -
<PAGE> 10
not have the right to assume the defense of such action on behalf of the party
to be indemnified, it being understood, however, that the indemnifying party
shall not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys at any time for the party
to be indemnified, which firm shall be designated in writing by the party to be
indemnified).

(d) The party to be indemnified and the indemnifying party will
each cooperate with all reasonable requests of the other.

SECTION 7.5. REMEDIES NOT EXCLUSIVE. The remedies provided in this
Article shall not be exclusive of any other rights or remedies available to one
party against the other, either at law or in equity.

SECTION 7.6. COSTS, EXPENSES AND LEGAL FEES. Subject to the
provisions of Section 7.1, whether or not the transactions contemplated hereby
are consummated, each party hereto shall

- 10 -
<PAGE> 11
bear its own costs and expenses (including attorneys' fees), except that each
party hereto agrees to pay the costs and expenses (including reasonable
attorneys' fees and expenses) incurred by the other parties in successfully (x)
enforcing any of the terms of this Agreement or (y) proving that another party
breached any of the terms of this Agreement.

ARTICLE VIII.
MISCELLANEOUS

SECTION 8.1. AMENDMENT. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto.

SECTION 8.5. SEVERABILITY. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under present or future laws
effective during the term hereof, such provision shall be fully severable and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.

- 11 -
<PAGE> 12
a period of two years, except for representations and warranties with respect
to any tax or tax-related matters, any ERISA matters or indemnification
provisions for the violation of any environmental law which shall survive the
Closing until the running of any applicable statutes of limitation.

SECTION 8.8. CAPTIONS. The captions in this Agreement are for
convenience of reference only and shall not limit or otherwise affect any of
the terms or provisions hereof.

If to Purchaser: Medical Alliance, Inc.
8200 Springwood Drive, Suite 200
Irving, Texas 75063
Attention: Michael Wallace

- 12 -
<PAGE> 13
with a copy to: Jackson & Walker, L.L.P.
901 Main Street, Suite 6000
Dallas, Texas 75202
Attention: Richard F. Dahlson

If to the Company: MAASAI, Inc.
188 West River Park Drive, Suite 200
Provo, Utah 84604
Attention: Ned Warner

with a copy to: Kruse, Landa & Maycock, L.L.C.
50 West Broadway (300 South)
Eighth Floor, Bank One Tower
Salt Lake City, Utah 64101-2034
Attention: Howard S. Landa

Any party may change its address for notice by written notice given to the
other parties in accordance with this Section.

SECTION 8.13. COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.

EXECUTED as of the date first above written.

MEDICAL ALLIANCE, INC.

By: /s/ Mike Wallace
------------------------------------
Its: Senior Vice President
------------------------------------
MAASAI INC.

By: /s/ Ned Warner
------------------------------------
Its: President
------------------------------------

- 13 -
<PAGE> 14
LIST OF EXHIBITS

<TABLE>
<S> <C>
1.1(a) - Assets
1.1(b) - Assumed Liabilities
3.6(a) - Personal Property
3.6(b) - Leases
3.7 - Commitments
3.16 - Accounts Receivable
3.17 - Customers
5.1(a) - Bill of Sale
5.3(a) - Employment Agreements
5.3(b) - Noncompetition Agreements
</TABLE>

<PAGE> 1
EXHIBIT 2.3

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (this "Agreement"), is dated as of June
10, 1996, and is by and between Medical Alliance, Inc., a Texas corporation
("Purchaser") and Mobile Laser Services, Inc., an Illinois corporation ("MLS").

W I T N E S S E T H :

WHEREAS, MLS desires to sell, and Purchaser desires to purchase, all
of the assets of MLS's mobile laser services business (the "Business") set
forth in Exhibit 1 (the "Assets");

ARTICLE I.
PURCHASE AND SALE

SECTION 1.1. PURCHASE AND SALE OF ASSETS. Subject to and upon the
terms and conditions contained herein, on June 12, 1996 or such other time as
the parties mutually agree (the "Closing Date"), MLS shall sell, transfer,
assign, convey and deliver to Purchaser, free and clear of all security
interests, liens, claims and encumbrances, equities, proxies, options,
shareholders' agreements or restrictions and Purchaser shall purchase, accept
and acquire from MLS, the Assets.

SECTION 1.2. PURCHASE PRICE. The total consideration for the Assets
shall be cash in the amount of $115,000 the ("Purchase Price") payable at the
closing of the transactions contemplated herein (the "Closing"). Purchaser
does not assume or agree to pay, perform or discharge any liabilities or
obligations of MLS with respect to the Assets, whether accrued, absolute,
contingent or otherwise.

ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF MLS

MLS represents and warrants that the following are true and correct as
of date hereof:

SECTION 2.1 TITLE. The Assets do not include any real property. MLS
has good, valid and marketable title to the Assets. Upon consummation of the
transactions contemplated hereby, Purchaser shall receive good, valid and
marketable title to the Assets free and clear of all security interests, liens,
claims and encumbrances.

SECTION 2.2. CONDITION OF ASSETS. All of the equipment included in
the Assets are in good condition and repair for their intended use in the
ordinary course of business and conform in all material respects with all
applicable ordinances, regulations and other laws and there are no known latent
defects therein.
<PAGE> 2
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser represents and warrants that the following are true and
correct as of the date hereof:

SECTION 3.1. ORGANIZATION AND GOOD STANDING. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation, with all requisite corporate power and
authority to carry on the business in which it is engaged, to own the
properties it owns, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby.

SECTION 3.2. AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by Purchaser of this Agreement and the other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by Purchaser. This Agreement and
each other agreement contemplated hereby have been duly executed and delivered
by Purchaser and constitute legal, valid and binding obligations of Purchaser,
enforceable against Purchaser in accordance with their respective terms, except
as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies.

SECTION 3.3. NO VIOLATION. Neither the execution, delivery or
performance of this Agreement or the other agreements contemplated hereby nor
the consummation of the transactions contemplated hereby or thereby will (i)
conflict with, or result in a violation or breach of the terms, conditions and
provisions of, or constitute a default under, the Articles of Incorporation or
Bylaws of Purchaser or any agreement, indenture or other instrument under which
Purchaser is bound or (ii) violate or conflict with any judgment, decree,
order, statute, rule or regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over Purchaser or the properties
or assets of Purchaser.

ARTICLE IV.
CLOSING DELIVERIES

SECTION 4.1. DELIVERIES OF MLS. On the date hereof, MLS shall
deliver to Purchaser the following, all of which shall be in a form
satisfactory to counsel to Purchaser:

(a) a Bill of Sale in the form attached as Exhibit 4.1(a) (the
"Bill of Sale");

(b) the executed Noncompetition Agreement by and between MLS and
Purchaser attached as Exhibit 4.1(b) (the "Noncompetition Agreement");

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<PAGE> 3
(c) the executed Noncompetition Agreement by and between Purchaser
and Dr. Daniel Luetkehans attached as Exhibit 4.1(c) (the "Daniel Luetkehans
Noncompetition Agreement");

(d) the executed Noncompetition Agreement by and between Purchaser
and Carol Luetkehans attached as Exhibit 4.1(d) (the "Carol Luetkehans
Noncompetition Agreement"); and

(e) a full and complete list of every customer of MLS.

SECTION 4.2. DELIVERIES OF PURCHASER. On the date hereof, Purchaser
shall deliver to MLS:

(a) the Purchase Price by wire transfer;

(b) the executed MLS Noncompetition Agreement;

(d) the executed Carol Luetkehans Noncompetition Agreement.

ARTICLE V.
POST CLOSING MATTERS

SECTION 5.1. FURTHER INSTRUMENTS OF TRANSFER. Following the Closing,
at the request of Purchaser, MLS shall deliver any further instruments of
transfer reasonably requested by Purchaser, and take all reasonable action as
may be necessary or appropriate to (i) vest in Purchaser good and marketable
title to the Assets, (ii) transfer to Purchaser all licenses and permits
necessary for the operation of the Assets, and (iii) carry out more effectively
the provisions of this Agreement and to establish and protect the rights
created in favor of the parties hereunder.

SECTION 5.2. RETREATMENT OF MLS PATIENTS. Following the Closing, the
Purchaser shall continue to treat MLS patients who require multiple treatments
at no charge for a period of ninety days following the first treatment that the
patient received from MLS.

ARTICLE VI.
MISCELLANEOUS

SECTION 6.1. AMENDMENT. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto.

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<PAGE> 4
SECTION 6.2. ASSIGNMENT. Neither this Agreement nor any right
created hereby or in any agreement entered into in connection with the
transactions contemplated hereby shall be assignable by any party hereto,
except by Purchaser to an affiliate of Purchaser.

SECTION 6.3. PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARIES.
Except as otherwise provided herein, the terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and assigns of the parties hereto. Neither this
Agreement nor any other agreement contemplated hereby shall be deemed to confer
upon any person not a party hereto or thereto any rights or remedies hereunder
or thereunder.

SECTION 6.4. ENTIRE AGREEMENT. This Agreement and the agreements
contemplated hereby constitute the entire agreement of the parties regarding
the subject matter hereof, and supersede all prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof.

SECTION 6.5. SEVERABILITY. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under present or future laws
effective during the term hereof, such provision shall be fully severable and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.

SECTION 6.6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
The representations, warranties and covenants contained herein shall survive
the Closing and all statements contained in any certificate, exhibit or other
instrument delivered by or on behalf of MLS or Purchaser pursuant to this
Agreement shall be deemed to have been representations and warranties by MLS or
Purchaser, as the case may be, and, notwithstanding any provision in this
Agreement to the contrary, shall survive the Closing for a period of two years.

SECTION 6.7. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS (BUT NOT THE RULES GOVERNING
CONFLICTS OF LAWS) OF THE STATE OF TEXAS.

SECTION 6.8. CAPTIONS. The captions in this Agreement are for
convenience of reference only and shall not limit or otherwise affect any of
the terms or provisions hereof.

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<PAGE> 5
SECTION 6.9. GENDER AND NUMBER. When the context requires, the
gender of all words used herein shall include the masculine, feminine and
neuter and the number of all words shall include the singular and plural.

SECTION 6.10. REFERENCE TO AGREEMENT. Use of the words "herein",
"hereof", "hereto" and the like in this Agreement shall be construed as
references to this Agreement as a whole and not to any particular Article,
Section or provision of this Agreement, unless otherwise noted.

SECTION 6.11. CONFIDENTIALITY; PUBLICITY AND DISCLOSURES. Each party
shall keep this Agreement and its terms confidential, and shall make no press
release or public disclosure, either written or oral, regarding the
transactions contemplated by this Agreement without the prior knowledge and
consent of the other parties hereto; provided that the foregoing shall not
prohibit any disclosure to attorneys, accountants, investment bankers or other
agents of the parties.

SECTION 6.12. NOTICE. Any notice or communication hereunder or in
any agreement entered into in connection with the transactions contemplated
hereby must be in writing and given by depositing the same in the United States
mail, addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, or by delivering the same in person.
Such notice shall be deemed received on the date on which it is hand-delivered
or on the third business day following the date on which it is so mailed. For
purposes of notice, the addresses of the parties shall be:

If to Purchaser: Medical Alliance, Inc.
8200 Springwood Drive, Suite 200
Irving, Texas 75063
Attention: Michael Wallace

with a copy to: Jackson & Walker, L.L.P.
901 Main Street, Suite 6000
Dallas, Texas 75202
Attention: Richard F. Dahlson

If to MLS: Mobile Laser Services, Inc.
1 N141 County Farm Road, Suite 230
Winfield, IL 60190

With a copy to: Dave Winthers
1 N141 County Farm Road, Suite 230
Winfield, IL 60190

Any party may change its address for notice by written notice given to the
other parties in accordance with this Section.

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<PAGE> 6
SECTION 6.13. COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.

EXECUTED as of the date first above written.

MEDICAL ALLIANCE, INC.

By: /s/ Mike Wallace
------------------------------------
Its: Sr. Vice President & CEO
-----------------------------------

MOBILE LASER SERVICES, INC.

By: /s/ Carol Luetkehans
------------------------------------
Carol Luetkehans, President.

Attest: /s/ Dave Winthers, Secretary
--------------------------------

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<PAGE> 7
List of Exhibits

1. Assets Transferred to Medical Alliance, Inc.

2. Bill of Sale

3. Noncompetition Agreement

<PAGE> 1
EXHIBIT 3.1

Filed
In the Office of the
Secretary of State of Texas
June 14, 1989
Clerk IB
Corporate Section

ARTICLES OF INCORPORATION

LASER SUPPORT SERVICES, INC.

The undersigned natural person of the age of eighteen (18) years or
more, acting as incorporator of a corporation under the Texas Business
Corporation Act, does hereby adopt the following Articles of Incorporation for
such corporation.
ARTICLE ONE

The name of the corporation is LASER SUPPORT SERVICES, INC.

ARTICLE TWO

The period of its duration is perpetual.

ARTICLE THREE

The purpose for which the corporation is organized is to transact any
legal and lawful business transaction.

ARTICLE FOUR

The aggregate number of shares which the corporation shall have the
authority to issue is 1,000,000 shares of voting common stock with a par value
of $.02. The shares shall have identical rights and privileges in every
respect.

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<PAGE> 2
ARTICLE FIVE

The corporation will not commence business until it has received for
issuance of its shares, consideration of the value of One Thousand and No/100
Dollars ($1,000.00), consisting of money, labor done or property actually
received.

ARTICLE SIX

No shareholder or other person shall have any preemptive right
whatsoever.

ARTICLE SEVEN

Directors shall be elected by plurality vote. Cumulative voting shall
not be permitted.

ARTICLE EIGHT

The street address of the initial registered office of the corporation
is 500 First National Bank, Amarillo, Texas 79101, and the name of the initial
registered agent at such address is Marc C. Johnson.

ARTICLE NINE

The number of directors constituting the initial Board of Directors is
one (1), and the name and addresses of the person who is to serve as director
until the first annual meeting of the shareholders, or until their successors
are elected and qualified is:

Name Address
---- -------
Marc C. Johnson 1505 South Parker, Amarillo, TX 79102

ARTICLE TEN

No director of the corporation shall be liable to the corporation or
its shareholders for monetary damages for an act or omission in the director's
capacity as a director, except that the liability of a director for the
following actions shall be eliminated or limited: (1) a breach of a

2
<PAGE> 3
director's duty of loyalty to the corporation or its shareholders; (2) an act
or omission not in good faith or that involves intentional misconduct or a
known violation of the law; (3) a transaction from which a director received an
improper benefit, whether or not the benefit resulted from an action taken
within the scope of the director's office; (4) an act or omission for which the
liability of a director is expressly provided for by statute; or (5) an act
related to an unlawful stock repurchase or payment of a dividend.

ARTICLE ELEVEN

The name and address of the incorporator is:

Name Address
---- -------
Marc C. Johnson 500 First National Bank Building,
Amarillo, TX 79102

EXECUTED this 9th day of June, 1989.

/s/ Marc C. Johnson
--------------------------------
Marc C. Johnson

STATE OF TEXAS )
)
COUNTY OF POTTER )

BEFORE ME, the undersigned Notary Public, on the 9th day of June,
1989, personally appeared MARC C. JOHNSON, being by me first duly sworn, who
severally declared that he is the person who signed the foregoing document as
incorporator, and that the statements contained therein are true.

[Seal] Marsha O. Meredith
Notary Public, State of Texas /s/ Marsha O. Meredith
My Commission Expires: 2-12-91 --------------------------------
Notary Public In and for The
State of Texas

Print Name:
---------------------

My Commission Expires:
----------

3
<PAGE> 4
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION OF
LASER SUPPORT SERVICES, INC.

ARTICLE I

The name of the corporation is Laser Support Services, Inc.

ARTICLE II

The document to be corrected is the Articles of Incorporation for
Laser Support Services, Inc. which was filed in the office of the Secretary of
State on June 14, 1989.

ARTICLE III

Article VII of the Articles of Incorporation of Laser Support
Services, Inc. stated: "Directors shall be elected by plurality vote.
Cumulative voting shall not be permitted."

ARTICLE IV

Article VII of the Articles of Incorporation should be amended to read
as follows: "Directors shall be elected by plurality vote. Cumulative voting
shall be permitted."

ARTICLE V

The shareholders of the Corporation adopted the above-described
Amendment on September 14, 1989.

ARTICLE VI

The number of outstanding shares on that date was 50,000, with all
50,000 shares entitled to vote on the Amendment.

ARTICLE VII

All 50,000 shares voted for the Amendment.

By: /s/ Paul Herchman
--------------------------------
, President
---------------------

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<PAGE> 5
Filed
In the Office of the
Secretary of State of Texas
July 10, 1992
Corporations Section

ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION
OF
LASER SUPPORT SERVICES, INC.

__________________

Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act (the "Act"), Laser Support Services, Inc., a corporation
organized and existing under the laws of the State of Texas, hereby adopts the
following Articles of Amendment to its Articles of Incorporation and

DOES HEREBY CERTIFY:

FIRST: The name of the corporation is Laser Support Services, Inc.

SECOND: That the shareholders of the corporation have duly adopted
effective June 30, 1992, the following amendments amending its Articles of
Incorporation as follows:

RESOLVED, that Article One of the Articles of Incorporation be amended
to change the name of the corporation to "Medical Alliance, Inc.," and such
Article One as amended, shall read in its entirety as follows:

ARTICLE ONE

The name of the corporation is MEDICAL ALLIANCE, INC.

RESOLVED, that Article Four of the Articles of Incorporation of the
corporation be amended in its entirety to (1) increase the authorized number of
shares of common stock of the corporation to 10,000,000, and to create a new
class of stock to be designated "Preferred Stock", (ii) provide the Board of
Directors the power to fix the rights of and issue from time to time one or
more series of Preferred Stock, (iii) provide the preferences, voting powers,
qualifications, special or relative rights of a series of Preferred Stock, the
"Series A Convertible Preferred Stock", (iv) decrease the par value of the
common stock of the corporation and (v)

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<PAGE> 6
effect a stock split of all of the common stock of the corporation, including
any shares of common stock that may be purchased pursuant to any outstanding
options to purchase common stock, in the ratio of 10 to 1, and such Article
Four as amended, shall read in its entirety as follows:

ARTICLE FOUR

A. The aggregate number of shares that the corporation shall have
authority to issue is 12,000,000 shares. Such shares shall be issued in two
classes of stock to be designated "Preferred Stock", which may be issued from
time to time in one or more series, and "Common Stock", respectively. The
number of shares of Preferred Stock authorized is 2,000,000 shares, having a
par value of $.002 per share. The number of shares of Common Stock authorized
is 10,000,000 shares, having a par value of $.002 per share.

Preferred Stock may be issued in one or more series as may be
determined from time to time by the Board of Directors. All shares of any one
series of Preferred Stock will be identical except as to the date of issue and
the dates from which dividends on shares of the series issued on different
dates will cumulate, if cumulative. Authority is hereby expressly granted to
the Board of Directors to authorize the issuance of one or more series of
Preferred Stock, and to fix by resolution or resolutions providing for the
issue of each such series the voting powers, designations, preferences, and
relative, participating, optional, redemption, conversion, exchange or other
special rights, qualifications, limitations or restrictions of such series, and
the number of shares in each series, to the full extent now or hereafter
permitted by law.

B. The corporation is authorized to issue 435,000 shares of
"Series A Convertible Preferred Stock (the "Series A Stock"). The preferences,
voting powers, qualifications, special or relative rights or privileges of the
shares of Series A Stock are as follows:

1. Dividends.

(a) Each share of Series A Stock will have the right to receive,
in preference to the holders of the Common Stock or any other junior stock,
cumulative dividends equal to $0.20 per annum. The Board of Directors shall
declare such dividends at an appropriate meeting, and such dividends shall be
due and payable annually to the holders of the Series A Stock on June 30 of
each year beginning June 30, 1993 (each a "Dividend Payment Date"). The
dividends payable to the holders of the Series A Stock shall be cumulated so
that if on any Dividend Payment Date full dividends upon the outstanding Series
A Stock shall not have been paid in accordance with the provisions of this
paragraph, then the deficiency shall be declared and paid, or set apart for
payment, before any dividends shall be declared and paid, or set apart for
payment upon the Common Stock, or any junior stock.

Any dividends not declared or paid to holders of Series A
Stock when due, because the corporation lacks the legal surplus and the use of
corporate funds for payment of

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<PAGE> 7
the dividend would result in liability of directors or officers of the
corporation, or because the use of the corporate funds for payment of such
dividends is otherwise prohibited by law, shall remain payable until such time
that the corporation shall have the legal surplus to pay such dividends. At
the time the corporation shall have such legal surplus, the dividends shall
become immediately due and payable.

(b) The corporation shall not declare or pay any dividend on
shares of Common Stock before June 30, 1994. On or after June 30, 1997 the
corporation may (if the corporation has paid all dividends due to holders of
Series A Stock pursuant to paragraph (a) of this Section 1) declare and pay
dividends on the shares of Common Stock; such dividends, however, shall not on
a per share basis, except as provided in this paragraph (b), exceed the per
share dividends accrued and paid to the Series A Stock (calculated on a per
share Common Stock equivalent basis) after such date; and holders of shares of
Series A Stock shall not be entitled to such dividend payable on shares of
Common Stock upon conversion of such shares of Series A Stock if the equivalent
dividend has already been paid on the shares of Series A Stock. Any dividend
declared and paid by the corporation in excess of the dividend described in the
preceding sentence shall be paid in equal amounts on each share of Common Stock
and Series A Stock (on a per share Common Stock equivalent basis).

2. Liquidation, Dissolution or Winding Up.

(a) If any liquidation, dissolution or winding up of the
corporation occurs (a "Liquidation"), whether voluntary or involuntary, the
holder of each share of Series A Stock outstanding will be entitled to be paid
out of the assets of the corporation available for distribution to shareholders
an amount equal to $2.00 per share of Series A Stock, plus any accrued but
unpaid dividends (whether declared or not) on such share (the "Preferential
Distribution") before any payment may be made to the holders of any class of
stock ranking junior to the Series A Stock on liquidation. If the assets to be
distributed to the holders of the Series A Stock under the previous sentence
are insufficient to permit payment of the full Preferential Distribution, then
all of the assets of the corporation available for distribution to the
shareholders of the corporation will be distributed to such holders pro rata,
based upon the ratio that the number of shares of Series A Stock held by such
holder bears to the total number of shares of Series A Stock then outstanding.
After the Preferential Distribution has been made to such holders, or funds
necessary for such payment have been set aside by the corporation in trust for
payment to such holders, any assets remaining for distribution will be
distributed to the holders of the Common Stock or other stock junior to the
Series A Stock.

(b) If assets other than cash are to be distributed to the holders
of the Series A Stock, the Board of Directors will first determine the value of
any non-cash assets for such purpose, and will notify all holders of shares of
Series A Stock of its determination. The value of such assets for purposes of
the distribution will be determined by the Board of Directors in good faith,
unless the holders of a majority of the outstanding shares of Series A Stock
object in writing to the corporation within 15 days after the date of such
notice. If an objection occurs within such period, the valuation of assets for
purposes of distribution will be determined by

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<PAGE> 8
appraisal in which (i) the objecting shareholders name in their notice one
appraiser, (ii) the Board of Directors by a majority vote names a second
appraiser within 15 days from the receipt of such notice, (iii) the two
appraisers then select a mutually acceptable third appraiser, and (iv) the
three appraisers determine the valuation of such assets by majority vote, or if
no majority concurs, then the appraisal which is neither the highest nor lowest
will be binding. If the valuation as determined by the Board of Directors is
not less than ninety-five percent (95%) of valuation as determined by the
appraisers as indicated above, the holders of the Series A Stock will pay the
costs of the appraisers, and otherwise, the corporation will bear the costs of
the appraisal.

(c) A consolidation or merger of the corporation (except as
explained below) or a sale of all or substantially all of the assets of the
corporation will be regarded as a Liquidation within the meaning of this
Section 2, although each holder of Series A Stock will have the right to elect
treatment under Section 4(i) in lieu of receiving payment in Liquidation under
this Section 2. A sale of substantially all of the assets of the corporation
will mean the sale or other disposition of more than a majority of the value of
such assets, based upon the fair market value of such assets.

3. Voting Power.

(a) Unless otherwise stated or as required by law, the holder of
each share of Series A Stock will be entitled to vote on all matters with the
Common Stock as a single class, and not as a separate class or series. Each
share of Series A Stock will entitle the holder to the number of votes per
share equal to the full number of shares of Common Stock into which each share
of Series A Stock is convertible on the record date for such vote. The holders
of the Series A Stock shall receive notice of and shall be entitled to attend
in person or by proxy any meeting of shareholders.

(b) (i) Until the earlier of: (A) a Qualified Public Offering
(as defined in on 4(b)(i) below); or (B) less than 50,000 shares of
Series A Stock are outstanding, the holders of the Series A Stock
shall be entitled, voting as a single class, to elect one director of
the corporation.

(ii) (A) If the corporation has not (I) completed a
Qualified Public Offering, or (II) provided the holders of Series A
Stock with an opportunity to sell the Series A Stock in a bona fide
transaction which would result in the per share proceeds as provided
in Section 6.8(g) of the Series A Convertible Preferred Stock Purchase
Agreement dated as of July 10, 1992 (the "Preferred Stock Purchase
Agreement"), or (III) repurchased the Series A Stock pursuant to the
terms of Section 9 of the Preferred Stock Purchase Agreement (or
attempted to repurchase the Series A Stock and the holder of such
shares did not accept such offer pursuant to Section 9), then the
holders of the Series A Stock, if, any, on and after July 15, 1998,
shall be entitled to elect a majority of the members of the Board of
Directors. If and when the rights of the holders of Series A Stock
pursuant to this paragraph become operative, the authorized number of
members of the

8
<PAGE> 9
Board of Directors of the corporation shall automatically be increased
to the extent necessary to establish the number of members of the
Board of Directors at a number that would permit the holders of Series
A Stock to elect a majority. Whenever such right of the holders of
the Series A Stock shall become operative, such right shall be
exercised initially either at a special meeting of the holders of the
Series A Stock called for that purpose or at any annual meeting of
shareholders held for the purpose of electing directors, and
thereafter at all annual meetings until such right terminates.

(B) At any time at which the voting rights of the
holders of the Series A Stock provided above in paragraph (A) shall
have become operative and not have been exercised, the holders of the
Series A Stock may designate the additional members of the Board of
Directors by a written consent of a majority of such holders.

(C) Upon termination of the right of the holders
of the Series A Stock to vote for directors provided in paragraph (A)
(due to the fact that there are no shares of Series A Stock then
outstanding), the term of office of any director then in office
elected by the Series A Stock pursuant to paragraph (A) shall
terminate immediately and the authorized number of members of the
Board of Directors shall automatically be decreased to such number
existing prior to the increase described in paragraph (A) above. If
the office of any director elected by the holders of the Series A
Stock pursuant to paragraph (A) becomes vacant by reason of death,
resignation, retirement, disqualification, removal from office or
otherwise, then the procedure provided for in the immediately
preceding paragraph shall be used to fill the vacancy.

(D) The Bylaws of the corporation shall
automatically be deemed amended from time to time to provide for the
increase in the maximum authorized number of members of the Board of
Directors and for the election procedure as provided by hereof.

(iii) In electing the directors to be elected by the
holders of the Series A Stock, each holder of such stock shall have
one vote for each share thereof held. Any director elected by the
holders of the Series A Stock pursuant to the provisions of this
paragraph (b) of Section 3 may be removed at any time, with or without
cause, only by the affirmative vote of the holders of a majority of
the shares of Series A Stock then issued and outstanding. If any
vacancies occur in the Board of Directors of the corporation by reason
of the death, resignation, retirement, disqualification or removal
from office or otherwise of any director elected by the holders of the
Series A Stock pursuant to this paragraph (b), then the holders of the
Series A Stock shall elect a successor and the director so chosen
shall hold office until the next annual election of directors and
until his successor shall have been duly elected and qualified, unless
sooner displaced.

(c) In addition to the voting rights granted in paragraphs (a) and
(b) of this Section 3, as long as at least 50,000 shares of A Stock are
outstanding, the holders of the Series A Stock will be entitled to vote as a
class separately from all other classes of stock of the

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<PAGE> 10
corporation, and an affirmative vote of the holders of a majority of the shares
of the Series A Stock then outstanding will be required for shareholder
approval, on the following matters:

(i) Authorizing or issuing any additional shares of
Series A Stock, or other equity security that is senior to the Series
A Stock as to liquidation preferences, redemption preferences,
dividend rights or voting rights, or that is on parity with the
Series A Stock as to dividend rights or voting rights (that have been
specifically provided to (A) holders of Series A Stock in these
Articles of Incorporation, (B) Investors pursuant to the terms of the
Preferred Stock Purchase Agreement or (C) Mapleleaf pursuant to the
terms of the Amended and Restated Stock Buy and Sell Agreement dated
as of July 10, 1992), provided, however, that similar voting rights
may be granted to other holders of equity securities so long as such
rights do not interfere with or change the aforementioned voting
rights; or authorize or create any shares of any other class or series
or any warrants, bonds, debentures, notes or other obligations
convertible into or exchangeable for, or having rights to purchase any
shares of the corporation having any such preference;

(ii) Reclassifying the shares of Common Stock, or any
shares of stock hereafter created which are junior to the Series A
Stock, into shares of Series A Stock or into shares having preference
or priority senior to the Series A Stock, or on parity with the Series
A Stock as to dividend rights or voting rights (except to the extent
provided in (i) above);

(iii) Amending or repealing any provision of these Articles
of Incorporation if such action would adversely change the
designations, relative rights and preferences of the Series A Stock
under these Articles of Incorporation; or

(iv) Authorizing any merger or consolidation of the
corporation with or into any other corporation or entity, authorize
the sale of substantially all of the assets of the corporation (as
such term is defined in Section 2, above) except a Qualified Sale, or
authorize any other type of voluntary Liquidation, except in a
transaction with a wholly-owned subsidiary of the corporation in which
the Series A Stock survives with the same rights and privileges as are
currently existing.

4. Conversion. The holders of the Series A Stock have the
following conversion rights:

(a) Any shares of the Series A Stock may, at the option of the
holder, be converted at any time into fully- paid and nonassessable shares of
Common Stock. The number of shares of Common Stock issuable upon conversion
will be the product obtained by multiplying the Applicable Conversion Rate (as
determined under Section 4(d), below) by the number of shares of Series A Stock
being converted.

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(b) (i) Each share of Series A Stock outstanding will
automatically be converted into Common Stock (b upon the Applicable
Conversion Rate in effect at that time) simultaneously with the
closing of an underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of Common Stock with an aggregate selling
price (before deducting underwriting discounts and commissions) of at
least $10.0 million at a per share price of at least $7.00 (subject to
adjustment for intervening stock splits, stock dividends and the like)
(a "Qualified Public Offering").

(ii) If the public offering specified in Section (4)(b)(i)
occurs, the outstanding shares of Series A Stock will be converted
automatically without any further action by the holders of such
shares, whether or not the certificates representing such shares are
surrendered to the corporation or its transfer agent. The corporation
will not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon such conversion unless certificates
evidencing the Series A Stock are either delivered to the corporation
or any transfer agent, or the holder notifies the corporation or any
transfer agent that such certificates have been lost, stolen or
destroyed, and executes an agreement satisfactory to the corporation
to indemnify the corporation from any loss incurred by it in
connection with such issuance.

(c) Upon the conversion of the Series A Stock pursuant to either
Section 4(a) or 4(b), any accrued but unpaid dividends (whether declared or
not) shall be immediately due and payable by the corporation. Any amount of
dividends unpaid by the corporation on the date of such conversion shall
thereafter bear interest at NationsBank's base rate (or other rate comparable
to the prime rate), adjusted on the first day of each calendar quarter, until
fully paid.

(d) The conversion rate in effect at any time (the "Applicable
Conversion Rate") will equal the quotient obtained by dividing $2.00 by the
Applicable Conversion Value, calculated as provided below.

(e) The Applicable Conversion Value in effect initially will be
$2.00.

(f) After July 10, 1992, in each of the events specified in this
Section 4(f), the Applicable Conversion Value will simultaneously be adjusted
by dividing the Applicable Conversion Value then in effect by a fraction, the
numerator of which will be the number of shares of Common Stock outstanding
immediately after the specified event, and the denominator of which will be the
number of shares of Common Stock outstanding immediately prior to the specified
event, and the quotient so obtained will then be the Applicable Conversion
Value: (i) issuing additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock, (ii) subdividing outstanding shares
of Common Stock into a greater number of shares of the Common Stock, or (iii)
combining outstanding shares of the Common Stock into a smaller number of
shares of the Common Stock.

11
<PAGE> 12
(g) If the corporation at any time while there are any shares of
Series A Stock outstanding issues any shares of Common Stock or securities
convertible into Common Stock ("Additional Common Shares") other than adjusted
under Section 4(f) or as permitted below, at a price per share less than the
Applicable Conversion Value in effect immediately prior to such is then (i), if
the issuances occur on or before December 31, 19932 the Applicable Conversion
Value will be reduced to the issuance price of the Additional Common Shares and
(ii), if the issuance occurs after December 31, 1993, the Applicable Conversion
Value will be reduced to an amount determined by multiplying the Applicable
Conversion Value by a fraction (a) the numerator of which shall be (I) the
number of shares of Common Stock outstanding immediately prior to such issue or
sale, plus (2) the number of shares of Common Stock that the aggregate
consideration received by the corporation for the total number of Additional
Common Shares so issued would purchase at such Applicable Conversion Value and
(b) the denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issue or sale plus the number of such
Additional Common Shares so issued. The issuance of Additional Common Shares
for consideration above the then Applicable Conversion Value will not increase
the Applicable Conversion Value.

The following will not be considered issuances of Additional Common
Shares:

(i) the issuance of Common Stock upon conversion of
Series A Stock or as a dividend or distribution on the Series A Stock;

(ii) the corporation's issuance of up to an aggregate of
(a) 150,000 shares of Common Stock or options to purchase Common
Stock, on or before December 31, 1993, or (b) up to an aggregate of
twelve percent (12%) of the Common Stock (including options to
purchase Common Stock) on a then fully diluted basis, at any time
after December 31, 1993 (including shares issuable under options
outstanding on the date hereof and those shares under (g)(ii)(a)), to
employees or consultants of the corporation upon the exercise of
rights under an employee stock purchase or option plan or other
contracts or arrangements approved by the Board of Directors of the
corporation (the "Option Shares"). The 150,000 shares of Common Stock
described in this paragraph will be subject to appropriate adjustment
for any unissued shares if any event specified in Section 4(f) occurs,
and any such increases will not be considered to be Additional Common
Shares;

(iii) the issuance of Common Stock upon the exercise of
options and warrants of the corporation outstanding as of July 10,
1992;

(iv) the issuance of Common Stock for which an appropriate
adjustment has already been made under Section 4(f); and

(v) the issuance of Series A Stock upon the exercise of
the Investors Warrants (as hereinafter defined).

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<PAGE> 13
The holders of a majority of the shares outstanding of Series A Stock
may also determine that other issuances of Common Stock will not be considered
as the issuance of Additional Common Shares.

If any part of the consideration received by the corporation for the
issuance of Common Stock consists of property other than cash, such
consideration will have the same value as recorded on the books of the
corporation for the receipt of such property, as long as such value was
determined reasonably and in good faith by the Board of Directors and
appropriate notice and opportunity for objection (comparable to the notice and
objection procedure outlined in Section 2(b)) is provided to the holders of the
shares of Series A Stock.

For the purpose of this Section 4(g), the issuance of any warrants
(except the Warrants to purchase up to 60,000 shares of Series A Stock dated
July 10, 1992 issued to certain Holders (as that term is defined in the
Warrants) (the "Investors Warrants")), options (except the options exercisable
into Option Shares) or other subscription or purchase rights for shares of
Common Stock and the issuance of any securities convertible into shares of
Common Stock (or the issuance of any warrants, options or any rights with
respect to such convert securities) (except for the issuance of Series A Stock
upon exercise, in whole or in part, of the Investors Warrants) will be
considered an issuance of Common Stock at such time if the Net Consideration
Per Share that may be received by the corporation for such Common Stock (as
hereinafter determined) is less than the Applicable Conversion Value at the
time of such issuance and, except as otherwise provided, an adjustment in the
Applicable Conversion Value will be made as provided in this Section 4(g) as if
such Common Stock were issued at such Net Consideration Per Share. No
adjustment of the Applicable Conversion Value shall be made under this Section
4(j) upon the issuance of any additional shares of Common Stock that are issued
on the exercise of any warrants, options or other subscription or purchase
rights or on the exercise of any conversion or exchange rights in any
convertible securities if an adjustment previously has been, made on the
issuance of such warrants, options or other rights. Any adjustment of the
Applicable Conversion Value with respect to this paragraph will be disregarded
if the rights to acquire shares of Common Stock upon exercise or conversion of
the warrants, options, rights or convertible securities giving rise to such
adjustment expire or are canceled without having been exercised (to the extent
of the number of shares covered by those rights expired or canceled), so that
the Applicable Conversion Value effective immediately upon such cancellation or
expiration will be equal to the Applicable Conversion Value in effect
immediately prior to the time of the issuance of the expired or canceled
warrants, options, rights or convertible securities, with such additional
adjustments as would have been made to that Applicable Conversion Value had the
expired or canceled warrants, options, rights or convertible securities not
been issued. If the terms of any warrants, options, other subscription or
purchase rights or convertible securities previously issued by the corporation
are changed to change the Net Consideration Per Share payable or the number of
shares of Common Stock issuable thereunder, the Applicable Conversion Value
will be recomputed as of the date of the change to give effect to such change.
For purposes of this paragraph, the Net Consideration Per Share that may be
received by the corporation will mean the total amount of consideration, if
any, received by the corporation for the issuance of such warrants, options,
rights of convertible securities, plus the minimum amount

13
<PAGE> 14
of consideration, if any, payable to the corporation upon exercise or
conversion, divided by the aggregate number of shares of Common Stock that
would be issued if all such warrants, options, subscriptions, or other purchase
rights or convertible securities were exercised or converted at such Net
Consideration Per Share.

(h) If the Common Stock issuable upon the conversion of the Series
A Stock is changed into the same or different number of shares of any class or
classes of stock (other than a subdivision or combination of shares or stock
dividend provided for above, or a reorganization, merger, consolidation or sale
of assets provided for elsewhere in this Section 4), then the holder of each
share of Series A Stock will have the right to convert such share into the
shares of stock and other property receivable by holders of the number of
shares of Common Stock into which such shares of Series A Stock might have been
converted immediately prior to such reclassification or change.

(i) If at any time a capital reorganization (other than a
subdivision, combination, reclassification or exchange of shares provided for
in Section 4(h)), a merger or consolidation involving the corporation, or the
sale of all or substantially all of the corporation's properties and assets to
any other person occurs, then the holders of the Series A Stock will have the
right to receive upon conversion of the Series A Stock the number of shares of
stock or other property of the corporation (or of the successor corporation)
which a holder of Common Stock would have the right to receive on such event.
In that event, each holder of Series A Stock will have the option of electing
treatment under either this Section 4(i) or on 2(c), above, notice of which
election must be submitted by the holder in writing to the corporation at its
principal offices no later than fifteen (15) days after the date of the
corporation's notice of such event, which will notify the holder of such
alternative. If the corporation is the surviving entity in a capital
reorganization or merger, or if the shareholders of the corporation hold a
majority of the outstanding capital stock of the surviving corporation
following such consolidation or merger, then the holders of the Series A Stock
shall have the right to continue as holders of Series A Stock having rights and
preferences as nearly comparable to those rights held prior to the
reorganization or merger as practicable.

(j) If an adjustment of the Applicable Conversion Rate occurs, the
corporation will furnish each holder of Series A Stock with a certificate,
prepared by the chief financial officer of the corporation, showing such
adjustment and explaining the facts upon which such adjustment is based. No
adjustment will be made for amounts less than one cent per share, although any
adjustment not made due to this sentence will be taken into account on any
subsequent adjustment.

(k) To exercise the conversion privilege, a holder of Series A
Stock must surrender the certificate or certificates representing the shares
being converted to the corporation at its principal, office along with written
notice requesting conversion. The certificate or certificates for shares of
Series A Stock surrendered must be accompanied by proper assignment to the
corporation or in blank. The date when both such written notice and
certificate(s) are received by the corporation (or the date of an automatic
conversion, as discussed below) will be the

14
<PAGE> 15
"Conversion Date." As promptly as practicable after the Conversion Date, the
corporation will issue and deliver to the holder of the shares of Series A
Stock being converted, a certificate or certificates for the number of full
shares of Common Stock issuable upon the conversion of Series A Stock. In the
case of an optional conversion by a holder, such conversion will be effective
immediately prior to the close of business on the Conversion Date, and at such
time the rights of the holder as holder of Series A Stock will cease, and such
holder will become the record holder of Common Stock. In the case of an
automatic conversion pursuant to Section 4(b)(i) above, such conversion shall
be deemed to have been made immediately upon the consummation of such event and
at such time the rights of the holder as holder of Series A Stock will cease,
and such holder will become the record holder of Common Stock.

(l) No fractional share of Common Stock or scrip representing
fractional shares will be issued upon conversion of Series A Stock. Instead of
any fractional share of Common Stock, the corporation will pay to the holder of
the shares of Series A Stock which were converted a cash adjustment for such
fraction equal to the equivalent market price for such fractional share (as
determined in a manner prescribed by the Board of Directors) at the close of
business on the Conversion Date.

(m) If some but not all of the shares of Series A Stock
represented by a certificate surrendered by a holder are converted, the
corporation will deliver to the holder a new certificate representing the
number of shares of Series A Stock that were not converted.

(n) The corporation will at all times reserve and keep available
out of its authorized but unissued shares of Common Stock such number as are
sufficient to permit the conversion of all outstanding shares of the Series A
Stock, and if the number of authorized but unissued shares of Common Stock will
not be sufficient to permit the conversion of all then outstanding shares of
the Series A Stock, the corporation will take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to the
required number of shares.

5. No Reissuance of Series A Stock. No share or shares of the
Series A Stock acquired by the corporation may be reissued as shares of Series
A Stock.

6. Notices of Record Date. Unless a longer period of notice is
required under applicable statute, if (a) the corporation establishes a record
date to determine the holders of any class of securities who are entitled to
receive any dividend or other distribution, or (b) any capital reorganization
of the corporation, any reclassification or recapitalization of the capital
stock of the corporation, any merger or consolidation of the corporation, and
any transfer of all or substantially all of the assets of the corporation to
any other entity or person, or any voluntary or involuntary dissolution,
liquidation or winding up of the corporation occurs, the corporation will mail
to each holder of Series A Stock at least twenty (20) days prior to the record
date a notice specifying (i) the date of such record date for the purpose of
such dividend or distribution and a description of such dividend or
distribution, (ii) the date on which any such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or winding up is

15
<PAGE> 16
expected to become effective, and/or (iii) the time, if any, when the holders
of record of Common Stock (or other securities) will be entitled to exchange
their shares of Common Stock (or other securities) for securities or other
property deliverable upon such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up.

FURTHER RESOLVED, that Article Six of the Articles of Incorporation of
the corporation be amended in its entirety to provide for the limitation of
preemptive rights held by the corporation's shareholders, and the full text of
the new Article Six is as follows:

ARTICLE SIX

No shareholder of this corporation shall, by reason of his
holding shares of any class of stock of this corporation, have any
preemptive or preferential right to purchase or subscribe for any
shares of any class of stock of this corporation, now or hereafter to
be authorized, or any notes, debentures, bonds or other securities
convertible into or carrying options, warrants or rights to purchase
shares of any class, now or hereafter to be authorized, whether or not
the issuance of any such shares or such notes, debentures, bonds or
other securities would adversely affect the dividend or voting rights
of any such shareholder, other than such rights, if any, as the Board
of Directors, at its discretion, from time to time may grant, and at
such price as the Board of Directors at its discretion may fix; and
the Board of Directors may issue shares of any class of stock of this
corporation or any notes, debentures, bonds or other securities
convertible into or carrying options, warrants or rights to purchase
shares of any class without offering any such shares of any class or
such notes, debentures, bonds or other securities either in whole or
in to the existing shareholders of any class. This provision shall
not impair contractual rights granted by the of Directors of the
corporation.

FURTHER RESOLVED, that Article Ten of the Articles of Incorporation be
amended in its entirety to provide for the full protection from liability of
the Directors for taking certain action on behalf of the corporation, as
permitted by Article 13O2-7.06 of the Texas Miscellaneous Corporation Laws Act,
as amended, and the full text of the new Article Ten is as follows:

ARTICLE TEN

Pursuant to Article 1302-7.06, Texas Miscellaneous Corporation
Laws Act, as amended, no member of the Board of Directors of the
corporation shall be liable, personally or otherwise, in any way to
the corporation or its shareholders for monetary damages caused in any
way by an act or omission occurring in the director's capacity as a
director of the corporation, except as otherwise expressly provided by
Article 1302-7.06B, as amended.

16
<PAGE> 17
FURTHER RESOLVED, that the Articles of Incorporation be amended by
adding a new Article Twelve to provide indemnification of, advancement of
expenses to, and maintenance of insurance for, certain persons as permitted by
Article 2.02-1 of the Act, and the full text of the new Article Twelve is as
follows:

ARTICLE TWELVE

The Board of Directors of the corporation, in its sole
discretion, shall have the power, on behalf of the corporation, to
indemnify persons for whom indemnification is permitted by Article
2.02-1 of the Texas Business Corporation Act (the "Act"), as amended,
to the fullest extent possible under Article 2.02-1 of the Act, as
amended, and may purchase such liability indemnification and/or other
similar insurance as the Board of Directors from time to time shall
deem necessary or appropriate, in its sole discretion.

The corporation may purchase and maintain liability,
indemnification and/or other insurance on behalf of itself, and/or for
any person who is or was a director, officer, employee or agent of the
corporation or who is or was serving at the request of the corporation
as a director, officer, trustee, employee, agent or similar
functionary of another foreign or domestic corporation, partnership,
joint venture, sole partnership, trust, employee/benefit plan or other
enterprise, against any liability asserted against and/or incurred by
the corporation or person serving in such a capacity or arising out of
his/her/its status as such a person or entity, whether or not the
corporation would otherwise have the power to indemnify such person
against that liability.

The power to indemnify and/or obtain insurance provided in
this Article Twelve shall be cumulative of any other power of the
Board of Directors and/or any rights to which such a person or entity
may be entitled by law, the Articles of Incorporation and/or Bylaws of
the corporation, contract, other agreement, vote or otherwise.

AND FURTHER RESOLVED, that the Articles of Incorporation be amended by
adding a new Article Thirteen to provide that action that is required by the
Act to be taken at an annual or special meeting of the shareholders may be
taken without such meeting, and the full text of the new Article Thirteen is as
follows:

ARTICLE THIRTEEN

Any action required by the Act to be taken at any annual or
special meeting of the shareholders of the corporation, and/or any
action that may be taken at any annual or special meeting of the
shareholders of the corporation, may be taken without a meeting,
without prior notice, and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the

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<PAGE> 18
holder or holders of shares having not less than the minimum number of
votes that would be necessary to take such action at a meeting at
which the holders of all shares entitled to vote on the action were
present and voted. Such action shall be taken in accordance with the
provisions of Article 9.10.A of the Act, as amended.

THIRD: The number of shares of the corporation outstanding at the
time of such adoption was 113,634 shares of Common Stock. The number of shares
of Common Stock entitled to vote thereon was 113,634.

FOURTH: The holders of all of the shares outstanding and entitled to
vote on said amendment have a signed written consent pursuant to Article 9.10
adopting said amendment and any written notice required by Article 9.10 has
been given.

FIFTH: That the aforesaid amendment does not in any way effect an
exchange, reclassification or cancellation of the authorized, issued or
outstanding shares of the corporation.

SIXTH: This amendment effects a decrease in the par value of the
Common Stock to $.002 per share and effects a stock split of the Common Stock
in the ratio of 10 to 1. Consequently, the stated capital of the corporation
will not be changed under or by reason of such amendment.

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<PAGE> 19
IN WITNESS WHEREOF, Laser Support Services, Inc. has caused these
Articles of Amendment to be signed by its President this 10th day of July,
1992.

LASER SUPPORT SERVICES, INC.

By:
-----------------------------------
Paul Herchman, President

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<PAGE> 20
Filed
In the Office of the
Secretary of State of Texas
Nov 17 1995
Corporations Section

ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
MEDICAL ALLIANCE, INC.

_____________________

Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act (the "Act"), Medical Alliance, Inc., a corporation organized
and existing under the laws of the State of Texas, hereby adopts the following
Articles of Amendment to its Articles of Incorporation and

DOES HEREBY CERTIFY:

FIRST: The name of the corporation is Medical Alliance, Inc.

SECOND: That the shareholders of the corporation have duly adopted
effective November 13, 1995, the following amendments amending its Articles of
Incorporation as follows:

RESOLVED, that Article Four, Section B, subsection 2(a) of the
Articles of Incorporation of the corporation be amended to revise the
liquidation, dissolution, and winding up rights of the Series A Convertible
Preferred Stock ("Series A Stock") to make reference to the Series B
Convertible Preferred Stock ("Series B Stock") and such Article Four, Section
B, subsection 2(a) shall read in its entirety as follows:

2. Liquidation, Dissolution or Winding Up.

(a) If any liquidation, dissolution or winding up of the
corporation occurs (a "Liquidation"), whether voluntary or
involuntary, the holder of each share of Series A Stock and Series B
Stock outstanding will be entitled to be paid out of the assets of the
corporation available for distribution to shareholders before any
payment may be made to the holders of any class of stock ranking
<PAGE> 21
junior to the Series A Stock and Series B Stock on liquidation. The
holders of: (i) Series A Stock shall be entitled to receive an amount
equal to $2.00 per share of Series A Stock, plus any accrued but
unpaid dividends (whether declared or not) on such share (the "Series
A Preferential Distribution"); and (ii) Series B Preferred shall be
entitled to receive an amount equal to $4.00 per share of Series B
Stock (the "Series B Preferential Distribution" and with the Series A
Preferential Distribution, the "Preferential Distribution"). If the
assets to be distributed to the holders of the Series A Stock and
Series B Stock are insufficient to permit payment of the full
Preferential Distribution, then all of the assets of the corporation
available for distribution to the shareholders of the corporation will
be distributed ratably among the holders of Series A Stock and Series
B Stock based on the Applicable Conversion Values for the Series A
Stock and the Series B Stock. After the full Preferential
Distribution has been made to such holders, or funds necessary for
such payment have been set aside by the corporation in trust for
payment to such holders, any assets remaining for distribution will be
distributed to the holders of the Common Stock or other stock junior
to the Series A Stock and Series B Stock.

RESOLVED, that Article Four, Section B, subsection 4(g) of the
Articles of Incorporation of the corporation be amended to revise the
conversion rights of Series A Stock to include a provision that the issuance of
Common Stock upon conversion of Series B Stock or as a dividend or distribution
on the Series B Stock would not be considered issuances of Additional Common
Shares, and such Article Four, Section B, subsection 4(g) shall read in its
entirety as follows:

(g) If the corporation at any time while there are any
shares of Series A Stock outstanding issues any shares of Common Stock
or securities convertible into Common Stock ("Additional Common
Shares") other than adjusted under Section 4(f) or as permitted below,
at a price per share less than the Applicable Conversion Value in
effect immediately prior to such issuance, then (i), if the issuances
occur on or before December 31, 1993, the Applicable Conversion Value
will be reduced to the issuance price of the Additional Common Shares
and (ii), if the issuance occurs after December 31, 1993, the
Applicable Conversion Value will be reduced to an amount determined by
multiplying the Applicable Conversion Value by a fraction (a) the
numerator of which shall be (1) the number of shares of Common Stock
outstanding immediately prior to such issue or sale, plus (2) the
number of shares of Common Stock that the aggregate consideration
received by the corporation for the total number of Additional Common
Shares so issued would purchase at such Applicable Conversion Value
and (b) the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issue or sale plus
the number of such Additional Common Shares so issued. The issuance
of Additional Common Shares for consideration above the then
Applicable Conversion Value will not increase the Applicable
Conversion Value.

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<PAGE> 22
The following will not be considered issuances of Additional
Common Shares:

(i) the issuance of Common Stock upon conversion of
Series A Stock or as a dividend or distribution on the Series
A Stock;

(ii) the issuance of Common Stock upon conversion of
Series B Stock or as a dividend or distribution on the Series
B Stock;

(iii) the corporation's issuance of up to an
aggregate of (a) 150,000 shares of Common Stock or options to
purchase Common Stock, on or before December 31, 1993, or (b)
up to an aggregate of twelve percent (12%) of the Common Stock
(including options to purchase Common Stock) on a then fully
diluted basis, at any time after December 31, 1993 (including
shares issuable under options outstanding on the date hereof
and those shares under (g)(iii)(a)), to employees or
consultants of the corporation upon the exercise of rights
under an employee stock purchase or option plan or other
contracts or arrangements approved by the Board of Directors
of the corporation (the "Option Shares"). The 150,000 shares
of Common Stock described in this paragraph will be subject to
appropriate adjustment for any unissued shares if any event
specified in Section 4(f) occurs, and any such increases will
not be considered to be Additional Common Shares;

(iv) the issuance of Common Stock upon the
exercise of options and warrants of the corporation
outstanding as of July 10, 1992;

(v) the issuance of Common Stock for which an
appropriate adjustment has already been made under Section
4(f); and

(vi) the issuance of Series A Stock upon the
exercise of the Investors Warrants (as hereinafter defined).

The holders of a majority of the shares outstanding of Series
A Stock may also determine that other issuances of Common Stock will
not be considered as the issuance of Additional Common Shares.

If any part of the consideration received by the corporation
for the issuance of Common Stock consists of property other than cash,
such consideration will have the same value as recorded on the books
of the corporation for the receipt of such property, as long as such
value was determined reasonably and in good faith by the Board of
Directors and appropriate notice and opportunity for objection
(comparable to the notice and objection procedure

- 22 -
<PAGE> 23
outlined in Section 2(b)) is provided to the holders of the shares of
Series A Stock.

For the purpose of this Section 4(g), the issuance of any
warrants (except the Warrants to purchase up to 60,000 shares of
Series A Stock dated July 10, 1992 issued to certain Holders (as that
term is defined in the Warrants) (the "Investors Warrants")), options
(except the options exercisable into Option Shares) or other
subscription or purchase rights for shares of Common Stock and the
issuance of any securities convertible into shares of Common Stock (or
the issuance of any warrants, options or any rights with respect to
such convertible securities) (except for the issuance of Series A
Stock upon exercise, in whole or in part, of the Investors Warrants)
will be considered an issuance of Common Stock at such time if the Net
Consideration Per Share that may be received by the corporation for
such Common Stock (as hereinafter determined) is less than the
Applicable Conversion Value at the time of such issuance and, except
as otherwise provided, an adjustment in the Applicable Conversion
Value will be made as provided in this Section 4(g) as if such Common
Stock were issued at such Net Consideration Per Share. No adjustment
of the Applicable Conversion Value shall be made under this Section
4(g) upon the issuance of any additional shares of Common Stock that
are issued on the exercise of any warrants, options or other
subscription or purchase rights or on the exercise of any conversion
or exchange rights in any convertible securities if an adjustment
previously has been made on the issuance of such warrants, options or
other rights. Any adjustment of the Applicable Conversion Value with
respect to this paragraph will be disregarded if the rights to acquire
shares of Common Stock upon exercise or conversion of the warrants,
options, rights or convertible securities giving rise to such
adjustment expire or are canceled without having been exercised (to
the extent of the number of shares covered by those rights expired or
canceled), so that the Applicable Conversion Value effective
immediately upon such cancellation or expiration will be equal to the
Applicable Conversion Value in effect immediately prior to the time of
the issuance of the expired or canceled warrants, options, rights or
convertible securities, with such additional adjustments as would have
been made to that Applicable Conversion Value had the expired or
canceled warrants, options, rights or convertible securities not been
issued. If the terms of any warrants, options, other subscription or
purchase rights or convertible securities previously issued by the
corporation are changed to change the Net Consideration Per Share
payable or the number of shares of Common Stock issuable thereunder,
the Applicable Conversion Value will be recomputed as of the date of
the change to give effect to such change. For purposes of this
paragraph, the Net Consideration Per Share that may be received by the
corporation will mean the total amount of consideration, if any,
received by the corporation for the issuance of such warrants,
options, rights or convertible securities, plus the minimum amount of
consideration, if any, payable to the corporation upon exercise or
conversion, divided by the aggregate number

- 23 -
<PAGE> 24
of shares of Common Stock that would be issued if all such warrants,
options, subscriptions, or other purchase rights or convertible
securities were exercised or converted at such Net Consideration Per
Share.

RESOLVED, that Article Four of the Articles of Incorporation of the
corporation be amended to include Section C to provide the preferences, voting
powers, qualifications, special or relative rights of a series of Preferred
Stock, the "Series B Convertible Preferred Stock" and such Article Four,
Section C shall read in its entirety as follows:

ARTICLE FOUR

* * *

C. The corporation is authorized to issue 362,500 shares of
"Series B Convertible Preferred Stock (the "Series B Stock"). The preferences,
voting powers, qualifications, special or relative rights or privileges of the
shares of Series B Stock are as follows:

1. Dividends. Except as provided in the following
sentence, no dividends will be declared or paid on the Series B Stock.
In the event the corporation declares or pays a dividend on the Common
Stock, it shall also declare or pay on a per share basis an equal
dividend on the Series B Stock as determined on an "as converted"
basis (e.g., if each share of Series B Stock is convertible into 1.5
shares of Common Stock, and the corporation declares a $1.00 per share
dividend on the Common Stock, it shall also declare a $1.50 per share
dividend on the Series B Stock).

2. Liquidation, Dissolution or Winding Up.

(a) If any Liquidation of the corporation occurs, whether
voluntary or involuntary, the holder of each share of Series A Stock
and Series B Stock outstanding will be entitled to be paid out of the
assets of the corporation available for distribution to shareholders
before any payment may be made to the holders of any class of stock
ranking junior to the Series A Sock and Series B Stock on liquidation.
The holders of: (i) Series A Stock shall be entitled to receive the
Series A Preferential Distribution; and (ii) Series B Stock shall be
entitled to receive the Series B Preferential Distribution. If the
assets to be distributed to the holders of the Series A Stock and
Series B Stock are insufficient to permit payment of the full
Preferential Distribution, then all of the assets of the corporation
available for distribution to the shareholders of the corporation will
be distributed ratably among the holders of Series A Stock and Series
B Stock based on the Applicable Conversion Value for the Series A
Stock and Series B Stock. After the full Preferential Distribution
has been made to such holders, or

- 24 -
<PAGE> 25
funds necessary for such payment have been set aside by the
corporation in trust for payment to such holders, any assets remaining
for distribution will be distributed to the holders of the Common
Stock or other stock junior to the Series A Stock and Series B Stock.

(b) If assets other than cash are to be distributed to
the holders of the Series B Stock, the Board of Directors will first
determine the value of any non-cash assets for such purpose, and will
notify all holders of shares of Series B Stock of its determination.
The value of such assets for purposes of the distribution will be
determined by the Board of Directors in good faith, unless the holders
of a majority of the outstanding shares of Series B Stock object in
writing to the corporation within 15 days after the date of such
notice. If an objection occurs within such period, the valuation of
assets for purposes of distribution will be determined by appraisal in
which (i) the objecting shareholders name in their notice one
appraiser, (ii) the Board of Directors by a majority vote names a
second appraiser within 15 days from the receipt of such notice, (iii)
the two appraisers then select a mutually acceptable third appraiser,
and (iv) the three appraisers determine the valuation of such assets
by majority vote, or if no majority concurs, then the appraisal which
is neither the highest nor lowest will be binding. If the valuation
as determined by the Board of Directors is not less than ninety-five
percent (95%) of valuation as determined by the appraisers as
indicated above, the holders of the Series B Stock will pay the costs
of the appraisers, and otherwise, the corporation will bear the costs
of the appraisal.

(c) A consolidation or merger of the corporation (except
as explained below) or a sale of all or substantially all of the
assets of the corporation will be regarded as a Liquidation within the
meaning of this Section 2, although each holder of Series B Stock will
have the right to elect treatment under Section 4(i) in lieu of
receiving payment in Liquidation under this Section 2. A sale of
substantially all of the assets of the corporation will mean the sale
or other disposition of more than a majority of the value of such
assets, based upon the fair market value of such assets.

3. Voting Power.

(a) Unless otherwise stated or as required by law, the holder
of each share of Series B Stock will be entitled to vote on all
matters with the Common Stock, and not as a separate class or series.
Each share of Series B Stock will entitle the holder to the number of
votes per share equal to the full number of shares of Common Stock
into which each share of Series B Stock is convertible on the record
date for such vote. The holders of the Series B Stock shall receive
notice of and shall be entitled to attend in person or by proxy any
meeting of shareholders.

- 25 -
<PAGE> 26
(b) In addition to the voting rights granted in paragraph (a)
of this Section 3, as long as at least 50,000 shares of Series B Stock
are outstanding, the holders of the Series B Stock will be entitled to
vote as a class separately from all other classes of stock of the
corporation, and an affirmative vote of the holders of a majority of
the shares of the Series B Stock then outstanding will be required for
shareholder approval, on the following matters:

(i) Authorizing or issuing any additional shares
of Series B Stock, or other equity security that is senior to
the Series B Stock as to liquidation preferences, dividend
rights or voting rights, or that is on parity with the Series
B Stock as to dividend rights or voting rights (that have been
specifically provided to (A) holders of Series B Stock in
these Articles of Incorporation or (B) "Investors" pursuant to
the terms of that certain Series B Convertible Preferred Stock
Purchase Agreement, dated as of November 17, 1995, by and
between the Company and the Investors named herein (the
"Series B Purchase Agreement"); provided, however, that
similar voting rights may be granted to other holders of
equity securities so long as such rights do not interfere with
or change the aforementioned voting rights; or authorize or
create any shares of any other class or series or any
warrants, bonds, debentures, notes or other obligations
convertible into or exchangeable for, or having rights to
purchase any shares of the corporation having any such
preference;

(ii) Reclassifying the shares of Common Stock, or
any other shares of stock hereafter created which are junior
to the Series B Stock, into shares of Series B Stock or into
shares having preference or priority senior to the Series B
Stock, or in parity with the Series B Stock as to dividend
rights or voting rights (except to the extent provided in (i)
above);

(iii) Amending or repealing any provision of these
Articles of Incorporation if such action would adversely
change the designations, relative rights and preferences of
the Series B Stock under these Articles of Incorporation; or

(iv) Authorizing any merger or consolidation of
the corporation with or into any other corporation or entity,
authorize the sale of substantially all of the assets of the
corporation, except a Qualified Sale (as such term is defined
in Section 6 of the Series B Purchase Agreement), or authorize
any other type of voluntary Liquidation, except in a
transaction with a wholly-owned subsidiary of the corporation
in which the Series B Stock survives with the same rights and
privileges as are currently existing.

4. Conversion. The holders of the Series B Stock will
have the following conversion rights:

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<PAGE> 27
(a) Any shares of the Series B Stock may, at the option
of the holder, be converted at any time into fully-paid and
nonassessable shares of Common Stock. The number of shares of
Common Stock issuable upon conversion will be the product
obtained by multiplying the Applicable Conversion Rate (as
determined under Section 4(d) below) by the number of shares
of Series B Stock being converted.

(b) (i) Each share of Series B Stock outstanding will
automatically be converted into Common Stock (based upon the
Applicable Conversion Rate in effect at that time)
simultaneously with the closing of an underwritten public
offering pursuant to an effective registration statement under
the Securities Act of 1933, as amended, covering the offer and
sale of Common Stock with an aggregate selling price (before
deducting underwriting discounts and commissions) of at least
$10.0 million at a per share price of at least $7.00 (subject
to adjustment for intervening stock splits, stock dividends
and the like) (a "Qualified Public Offering").

(ii) If the public offering specified in Section
(4)(b)(i) occurs, the outstanding shares of Series B Stock
will be converted automatically without any further action by
the holders of such shares, whether or not the certificates
representing such shares are surrendered to the corporation or
its transfer agent. The corporation will not be obligated to
issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless certificates evidencing
the Series B Stock are either delivered to the corporation or
any transfer agent, or the holder notifies the corporation or
any transfer agent that such certificates have been lost,
stolen or destroyed, and executes an agreement satisfactory to
the corporation to indemnify the corporation from any loss
incurred by it in connection with such issuance.

(c) Upon the conversion of the Series B Stock pursuant to
either Section 4(a) or 4(b) above, any declared but unpaid
dividends on the Series B Stock shall be immediately due and
payable by the corporation. Any amount of dividends unpaid by
the corporation on the date of such conversion shall
thereafter bear interest at NationsBank's base rate (or other
rate comparable to the prime rate), adjusted on the first day
of each calendar quarter, until fully paid.

(d) The conversion rate in effect at any time (the
"Applicable Conversion Rate") will equal the quotient obtained
by dividing $4.00 by the Applicable Conversion Value,
calculated as provided below.

(e) The Applicable Conversion Value in effect initially
will be $4.00.

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<PAGE> 28
(f) In each of the events specified in this Section 4(g),
the Applicable Conversion Value will simultaneously be
adjusted by dividing the Applicable Conversion Value then in
effect by a fraction, the numerator of which will be the
number of shares of Common Stock outstanding immediately after
the specified event, and the denominator of which will be the
number of shares of Common Stock outstanding immediately prior
to the specified event, and the quotient so obtained will then
be the Applicable Conversion Value: (i) issuing additional
shares of the Common Stock as a dividend or other distribution
on outstanding Common Stock, (ii) subdividing outstanding
shares of Common Stock into a greater number of shares of the
Common Stock, or (iii) combining outstanding shares of the
Common Stock into a smaller number of shares of the Common
Stock.

(g) If at any time prior to November 17, 1996, the
corporation issues any shares of Common Stock or securities
convertible into Common Stock ("Additional Common Shares")
other than adjusted under Section 4(f) or as permitted below,
at a price per share less than the Applicable Conversion Value
in effect immediately prior to such issuance, then the
Applicable Conversion Value will be reduced to an amount
determined by multiplying the Applicable Conversion Value by a
fraction (a) the numerator of which shall be (1) the number of
shares of Common Stock outstanding immediately prior to such
issue or sale, plus (2) the number of shares of Common Stock
that the aggregate consideration received by the corporation
for the total number of Additional Common Shares so issued
would purchase at such Applicable Conversion Value and (b) the
denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue or sale plus
the number of such Additional Common Shares so issued. The
issuance of Additional Common Shares for consideration above
the then Applicable Conversion Value will not increase the
Applicable Conversion Value.

The following will not be considered issuances of Additional
Common Shares:

(i) the issuance of Common Stock upon conversion of
Series A Stock or as a dividend or distribution on Series A
Stock;

(ii) the issuance of Common Stock upon conversion of
Series B Stock or as a dividend or distribution on the Series
B Stock;

(iii) the corporation's issuance of (a) Common
Stock upon the exercise of options and warrants outstanding as
of November 17, 1995 or (b) up to an aggregate of twelve
percent (12%) of the Common Stock (including options to
purchase Common Stock) on a then fully diluted

- 28 -
<PAGE> 29
basis, at any time after November 17, 1995 (including shares
issuable under options outstanding on the date hereof and those
shares under (g)(iii)(a)), to employees or consultants of the
corporation upon the exercise of rights under an employee stock
purchase or option plan or other contracts or arrangements
approved by the Board of Directors of the corporation (the
"Option Shares"); and

(iv) the issuance of Common Stock for which an
appropriate adjustment has already been made under Section
4(f).

The holders of a majority of the shares then outstanding of
Series B Stock may also determine that other issuances of Common Stock
will not be considered as the issuance of Additional Common Shares.

If any part of the consideration received by the corporation
for the issuance of Common Stock consists of property other than cash,
such consideration will have the same value as recorded on the books
of the corporation for the receipt of such property, as long as such
value was determined reasonably and in good faith by the Board of
Directors and appropriate notice and opportunity for objection
(comparable to the notice and objection procedure outlined in Section
2(b)) is provided to the holders of the shares of Series B Stock.

For the purpose of this Section 4(g), the issuance of any
warrants, options or other subscription or purchase rights for shares
of Common Stock and the issuance of any securities convertible into
shares of Common Stock (or the issuance of any warrants, options or
any rights with respect to such convertible securities) will be
considered an issuance of Common Stock at such time if the Net
Consideration Per Share that may be received by the corporation for
such Common Stock (as hereinafter determined) is less than the
Applicable Conversion Value at the time of such issuance and, except
as otherwise provided, an adjustment in the Applicable Conversion
Value will be made as provided in this Section 4(g) as if such Common
Stock were issued at such Net Consideration Per Share. No adjustment
of the Applicable Conversion Value shall be made under this Section
4(g) upon the issuance of any additional shares of Common Stock that
are issued on the exercise of any warrants, options or other
subscription or purchase rights or on the exercise of any conversion
or exchange rights in any convertible securities if an adjustment
previously has been made on the issuance of such warrants, options or
other rights. Any adjustment of the Applicable Conversion Value with
respect to this paragraph will be disregarded if the rights to acquire
shares of Common Stock upon exercise or conversion of the warrants,
options, rights or convertible securities giving rise to such
adjustment expire or are canceled without having been exercised (to
the extent of the number of shares

- 29 -
<PAGE> 30
covered by those rights expired or canceled), so that the Applicable
Conversion Value effective immediately upon such cancellation or
expiration will be equal to the Applicable Conversion Value in effect
immediately prior to the time of the issuance of the expired or
canceled warrants, options, rights or convertible securities, with
such additional adjustments as would have been made to that Applicable
Conversion Value had the expired or canceled warrants, options, rights
or convertible securities not been issued. If the terms of any
warrants, options, other subscription or purchase rights or
convertible securities previously issued by the corporation are
changed to change the Net Consideration Per Share payable or the
number of shares of Common Stock issuable thereunder, the Applicable
Conversion Value will be recomputed as of the date of the change to
give effect to such change. For purposes of this paragraph, the Net
Consideration Per Share that may be received by the corporation will
mean the total amount of consideration, if any, received by the
corporation for the issuance of such warrants, options, rights of
convertible securities, plus the minimum amount of consideration, if
any, payable to the corporation upon exercise or conversion, divided
by the aggregate number of shares of Common Stock that would be issued
if all such warrants, options, subscriptions, or other purchase rights
or convertible securities were exercised or converted at such Net
Consideration Per Share.

(h) If the Common Stock issuable upon the conversion of
the Series B Stock is changed into the same or different number of
shares of any class or classes of stock (other than a subdivision or
combination of shares or stock dividend provided for above, or a
reorganization, merger, consolidation or sale of assets provided for
elsewhere in this Section 4), then the holder of each share of Series
B Stock will have the right to convert such share into the shares of
stock and other property receivable by holders of the number of shares
of Common Stock into which such shares of Series B Stock might have
been converted immediately prior to such reclassification or change.

(i) If at any time a capital reorganization (other than a
subdivision, combination, reclassification or exchange of shares
provided for in Section 4(i)), a merger or consolidation involving the
corporation, or the sale of all or substantially all of the
corporation's properties and assets to any other person occurs, then
the holders of the Series B Stock will have the right to receive upon
conversion of the Series B Stock the number of shares of stock or
other property of the corporation (or of the successor corporation)
which a holder of Common Stock would have the right to receive on such
event. In that event, each holder of Series B Stock will have the
option of electing treatment under either this Section 4(i) or Section
2(c), above, notice of which election must be submitted by the holder
in writing to the corporation at its principal offices no later than
fifteen (15) days after the date of the corporation's notice of such
event, which will notify the holder of such alternative. If the
corporation is the surviving entity in a capital reorganization or
merger, or if the shareholders of the

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<PAGE> 31
corporation hold a majority of the outstanding capital stock of the
surviving corporation following such consolidation or merger, then the
holders of the Series B Stock shall have the right to continue as
holders of Series B Stock having rights and preferences as nearly
comparable to those rights held prior to the reorganization or merger
as practicable.

(j) If an adjustment of the Applicable Conversion Rate
occurs, the corporation will furnish each holder of Series B Stock
with a certificate, prepared by the chief financial officer of the
corporation, showing such adjustment and explaining the facts upon
which such adjustment is based. No adjustment will be made for
amounts less than one cent per share, although any adjustment not made
due to this sentence will be taken into account on any subsequent
adjustment.

(k) To exercise the conversion privilege, a holder of
Series B Stock must surrender the certificate or certificates
representing the shares being converted to the corporation at its
principal office along with written notice requesting conversion. The
certificate or certificates for shares of Series B Stock surrendered
must be accompanied by proper assignment to the corporation or in
blank. The date when both such written notice and certificate(s) are
received by the corporation (or the date of an automatic conversion,
as discussed below) will be the "Conversion Date." As promptly as
practicable after the Conversion Date, the corporation will issue and
deliver to the holder of the shares of Series B Stock being converted,
a certificate or certificates for the number of full shares of Common
Stock issuable upon the conversion of Series B Stock. In the case of
an optional conversion by a holder, such conversion will be effective
immediately prior to the close of business on the Conversion Date, and
at such time the rights of the holder as holder of Series B Stock will
cease, and such holder will become the record holder of Common Stock.
In the case of an automatic conversion pursuant to Section 4(b)(i)
above, such conversion shall be deemed to have been made immediately
upon the consummation of such event and at such time the rights of the
holder as holder of Series B Stock will cease, and such holder will
become the record holder of Common Stock.

(l) No fractional shares of Common Stock or scrip
representing fractional shares will be issued upon conversion of
Series B Stock. Instead of any fractional shares of Common Stock, the
corporation will pay to the holder of the shares of Series B Stock
which were converted a cash adjustment for such fraction equal to the
equivalent market price for such fractional share (as determined in a
manner prescribed by the Board of Directors) at the close of business
on the Conversion Date.

(m) If some but not all of the shares of Series B Stock
represented by a certificate surrendered by a holder are converted,
the corporation will deliver

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<PAGE> 32
to the holder a new certificate representing the number of shares of
Series B Stock that were not converted.

(n) The corporation will at all times reserve and keep
available out of its authorized but unissued shares of Common Stock
such number as are sufficient to permit the conversion of all
outstanding shares of the Series B Stock, and if the number of
authorized but unissued shares of Common Stock will not be sufficient
to permit the conversion of all then outstanding shares of the Series
B Stock, the corporation will take such corporate action as may be
necessary to increase its authorized but unissued shares of Common
Stock to the required number of shares.

5. No Reissuance of Series B Stock. No share or shares
of the Series B Stock acquired by the corporation may be reissued as
shares of Series B Stock.

6. Notices of Record Date. Unless a longer period of
notice is required under applicable statute, if (a) the corporation
establishes a record date to determine the holders of any class of
securities who are entitled to receive any dividend or other
distribution, or (b) any capital reorganization of the corporation,
any reclassification or recapitalization of the capital stock of the
corporation, any merger or consolidation of the corporation, and any
transfer of all or substantially all of the assets of the corporation
to any other entity or person, or any voluntary or involuntary
dissolution, liquidation or winding up of the corporation occurs, the
corporation will mail to each holder of Series B Stock at least twenty
(20) days prior to the record date a notice specifying (i) the date of
such record date for the purpose of such dividend or distribution and
a description of such dividend or distribution, (ii) the date on which
any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become
effective, and/or (iii) the time, if any, when the holders of record
of Common Stock (or other securities) will be entitled to exchange
their shares of Common Stock (or other securities) for securities or
other property deliverable upon such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or winding
up.

THIRD: The number of shares of the corporation outstanding at the
time of such adoption was 1,487,168 shares of Common Stock and 435,000 shares
of Series A Stock, all of which shares were entitled to vote thereon.

FOURTH: The holders of over 67% of the shares of Common Stock and
Series A Stock, voting together as a single class, and the holders of all of
the shares of Series A Stock,

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<PAGE> 33
voting separately as a class, and in each case outstanding and entitled to vote
on said amendment, have signed written consents pursuant to Article 9.10
adopting said amendment and any written notice required by Article 9.10 has
been given.

FIFTH: That the aforesaid amendment does not in any way effect an
exchange, reclassification or cancellation of the authorized, issued or
outstanding shares of the corporation.

IN WITNESS WHEREOF, Medical Alliance, Inc. has caused these Articles
of Amendment to be signed by its President this 16th day of November, 1995.

MEDICAL ALLIANCE, INC.

By: /s/ Paul Herchman
---------------------------------
Paul Herchman, President

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<PAGE> 1

EXHIBIT 3.2

MEDICAL ALLIANCE, INC.

AMENDED AND RESTATED
BYLAWS

ARTICLE I

SHAREHOLDERS

SECTION 1. PLACE OF HOLDING MEETINGS. All meetings of the
shareholders shall be held at the office of the corporation in Dallas, Texas,
or such other place as any one or more director or officer may from time to
time designate. Meetings may be held within or without the state of Texas.

SECTION 2. ANNUAL MEETING. The annual meeting of the shareholders
shall be held at 10:00 A.M. on the 3rd Saturday of September of each year, or
at such other date or time as may be determined by the Board of Directors. At
each annual meeting, the shareholders shall elect a Board of Directors, and
they may transact their corporate business as shall be stated in the notice of
the meeting.

SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders
may be called by the president, the secretary, the Board of Directors or the
holders of not less than one-tenth (1/10) of all the shares entitled to vote at
the meeting.

SECTION 4. LIST OF SHAREHOLDERS. At least ten days before each
meeting of shareholders, a complete list of the shareholders entitled to vote
at such meeting, arranged in alphabetical order, with the address of and the
number of voting shares registered in the name of each, will be prepared by the
officer or agent having charge of the stock transfer books. Such list will be
kept on file at the registered office of the corporation for a period of ten
days prior to such meeting and will be subject to inspection by any shareholder
at any time during usual business hours. Such list will be produced and kept
open at the time and place of the meeting during the whole time thereof, and
will be subject to the inspection of any shareholder who may be present.

SECTION 5. NOTICE OF SHAREHOLDERS' MEETINGS. Written or printed
notice, stating the time and place of the meeting, and in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered not less than ten (10) nor more than sixty (60) days before the date
of the meeting, either personally or by mail, by or at the direction of the
president, the secretary, or the person calling the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail
addressed to the shareholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon prepaid. Whenever notice of a
meeting is required, a waiver thereof in writing signed by the person entitled
to such notice, whether before or after the time stated therein, shall be
equivalent to the giving of such notice.
<PAGE> 2
SECTION 6. VOTING. Except as provided in the Articles of
Incorporation, as amended from time to time (the "Articles of Incorporation"),
each shareholder shall be entitled to one (1) vote for each share of capital
stock standing in his name on the books of the corporation on the date on which
notice of the meeting is delivered; provided, however, that if such day is less
than ten (10) days prior to the date of the meeting, the record date for
determining the shares entitled to be voted shall be the tenth (10) day prior
to the date of the meeting. At each election for directors, each shareholder
shall have the right to cumulate his votes by giving one candidate as many
votes as the number of such directors multiplied by the number of shares held
by such shareholder, or by distributing such votes on the same principal among
any number of such candidates.

SECTION 7. QUORUM. The holders, represented in person or by proxy,
of a majority of the shares entitled to vote, shall constitute a quorum at a
meeting of the shareholders.

SECTION 8. NUMBER OF VOTES REQUIRED AND MANNER OF VOTING AT
SHAREHOLDERS' MEETING. Unless by law a greater number of votes is required for
the question under consideration, the vote of the holders of a majority of the
shares present and entitled to be voted shall be the act of the shareholders'
meeting. Any qualified voter may demand a vote by ballot and in that case such
vote shall be taken.

SECTION 9. PROXIES. A shareholder may vote either in person or by
proxy executed in writing by the shareholder, or by his duly authorized
attorney in fact. No proxy shall be valid after eleven (11) months from the
date of its execution, unless otherwise provided in the proxy.

ARTICLE II

BOARD OF DIRECTORS

SECTION 1. NUMBER AND QUALIFICATIONS. The business and affairs of
the corporation shall be managed by a Board of Directors of the corporation.
Except as provided in the Articles of Incorporation and that certain Series A
Convertible Preferred Stock Purchase Agreement, dated as of July 10, 1992, the
number of directors of the corporation will be at least one and not more than
seven. Except as provided in the Articles of Incorporation, the number of
directors may be increased or decreased from time to time by amendment of the
Bylaws, but no decrease shall have the effect of shortening the term of any
incumbent director.

SECTION 2. ELECTION. Members of the initial Board of Directors shall
hold office until the first meeting of the shareholders and until their
successors shall have been elected and qualified. Thereafter, the complete
Board of Directors shall be elected at each annual meeting of the shareholders
and shall hold office until the next succeeding annual meeting and until their
successors have been elected and qualified.

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<PAGE> 3
SECTION 3. RESIGNATION. Any director may resign at any time. Such
resignation shall be made in writing and shall take effect at the time
specified therein, or if no time is specified, at the time of its receipt by
the president or secretary. No acceptance of a resignation shall be necessary
to make it effective.

SECTION 4. VACANCIES. Any vacancy occurring in the Board of
Directors may be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors. A director
elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office. Except as provided in the Articles of Incorporation,
any directorship to be filled by reason of any increase in the number of
directors shall be filled by election at an annual meeting or at a special
meeting of shareholders called for that purpose.

SECTION 5. PLACE OF MEETINGS. Meetings of the Board of Directors,
regular or special, may be held at the principal office of the corporation in
Dallas, Texas, or at such other place as the directors may determine from time
to time. All such Board of Directors meetings may be held either within or
without the state of Texas.

SECTION 6. ANNUAL MEETING. The Board of Directors shall meet each
year immediately after the annual meeting of the shareholders, at the principal
office of the corporation, or at such other place as they may determine, for
the purpose of organization, election of officers and consideration of any
other business that may properly be brought before the meeting. No notice of
any kind to either old or new members of the Board of Directors for such annual
meeting shall be necessary.

SECTION 7. OTHER MEETINGS.

(a) REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such places and times as shall
be determined from time to time by the Board of Directors.

(b) SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the president and shall be called by the
president or secretary at any time upon the request of (one (1)
director in writing. Notice of any special meeting shall be given to
each of the directors at least one (1) day prior to the time specified
for the meeting, and may be given by any means of communication.

(c) WAIVER. Any notice provided for a meeting of the Board
of Directors may be waived by a director in writing either before or
after the meeting, and attendance at any meeting shall be considered
as a waiver of any required notice, except where a director attends a
meeting for the express purpose of objecting to the transaction of any
business because such meeting is not lawfully convened.

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<PAGE> 4
SECTION 8. QUORUM. A majority of the number of directors fixed by
these bylaws shall constitute a quorum for the transaction of business. The
act of the majority of the directors present at a meeting at which a quorum is
present, shall be the act of the Board of Directors.

SECTION 9. GENERAL POWERS OF DIRECTORS. The Board of Directors shall
have the management of the business of the corporation, and subject to the
restrictions imposed by law, by the Articles of Incorporation or by these
bylaws, may exercise all of the powers of the corporation.

SECTION 10. SPECIFIC POWERS OF DIRECTORS. Without prejudice to such
general powers, it is expressly hereby declared that the directors shall have
the following powers, to-wit:

(a) To adopt and alter a common seal of the corporation;

(b) To make and change regulations not inconsistent with
these bylaws, for the management of the corporation's business and
affairs;

(c) To purchase, acquire, sell, convey, trade, lease, let,
pledge, mortgage, assign, transfer and deliver all of the property of
the corporation, real, personal, or mixed, and to authorize the
execution and acknowledgment and delivery of any and all character of
contracts, deeds, bills of sale, transfers, assignments, leases,
instruments of conveyance, mortgages, mineral deeds, oil and gas and
mineral leases, pledges, dedications, deeds of trust, and such other
instruments as may be proper, fit, necessary, or required in handling
the property of the corporation without restriction or reservation;

(d) To pay for any property purchased for the corporation
either wholly or partly in money, stocks, bonds, debentures or other
securities of the corporation;

(e) To borrow money and to make and issue notes, bonds, and
other negotiable and transferable instruments, mortgages, deeds of
trust, and trust agreements, and to do every act and thing necessary
to effectuate the same;

(f) To appoint and remove or suspend such subordinate
officers, agents, or factors as they may deem necessary, and to
determine their duties, and fix, and from time to time change, their
salaries or remuneration and to require security as and when they
think fit;

(g) To remove any officer for cause, or any officer other
than the president, secretary, treasurer, or vice president summarily
without cause, and in their discretion from time to time, to devolve
the powers and duties of any officer upon any other person from time
being;

(h) To confer upon any officer of the corporation the power
to appoint, remove, and suspend subordinate officers and agents;

-4-
<PAGE> 5
(i) To determine who shall be authorized on the corporation's
behalf to make and sign bills, notes, acceptances, endorsements,
checks, releases, receipts, contracts and other instruments;

(j) To determine who shall be entitled to vote in the name of
and on behalf of the corporation upon, or to assign and transfer any
shares of stock, bonds, or other securities of other corporations held
by the corporation;

(k) To delegate any of the powers of the Board in relation to
the ordinary business of the corporation to any standing or special
committee, or to any officer or agent (with power to subdelegate) upon
such terms as they think fit; and

(l) To call special meetings of the shareholders for any
purpose or purposes.

SECTION 11. INTERESTED DIRECTORS. No contract or transaction between
the corporation and one or more of its Directors or officers, or between the
corporation and any other corporation, partnership, association or other
organization in which one or more of the corporation's Directors or officers
are Directors or officers or have a financial interest, will be void or
voidable solely for this reason, solely because the Director or officer is
present at or participates in the meeting of the Board of Directors or
committee thereof that authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose, if: (i) the material
facts as to his relationship or interest and as to the contract or transaction
are disclosed or are known to the Board of Directors or the committee, and the
Board of Directors or committee in good faith authorizes the contract or
transaction by the affirmative vote of a majority of the disinterested
Directors, even though the disinterested Directors be less than a quorum, (ii)
the material facts as to his relationship or interest and as to the contract or
transaction are disclosed or are known to the shareholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the shareholders or (iii) the contract or transaction is fair as to
the corporation as of the time it is authorized, approved or ratified by the
Board of Directors, a committee thereof or the shareholders. Common or
interested directors may be counted in determining the presence of a quorum at
a meeting of the Board of Directors or of a committee that authorizes the
contract or transaction.

SECTION 12. COMPENSATION OF DIRECTORS. Directors shall not receive
any stated salary for their services as directors, but by resolution of the
Board a fixed fee and expenses of attendance may be allowed for attendance at
each meeting. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, or otherwise, and receiving compensation therefor.

SECTION 13. ACTION BY CONSENT. Any action required or permitted to
be taken at any meeting of the Board of Directors or any committee of the Board
of Directors may be taken without such a meeting if a consent or consents in
writing, setting forth the action so taken, is signed by all the members of the
Board of Directors or such committee, as the case may be.

-5-
<PAGE> 6
ARTICLE III

OFFICERS

SECTION 1. OFFICERS. The officers of the corporation shall consist
of a president, vice president, secretary and treasurer, and such other
officers and assistant officers as may be deemed necessary by the Board of
Directors. Any two (2) or more offices may be held by the same person. The
president shall be a member of the Board of Directors, but no other officer
need be a member of the Board.

SECTION 2. RESIGNATION. Any officer may resign at any time. Such
resignation shall be made in writing and shall become effective at the time
specified therein, or if no time is specified, at the time the notice is
delivered to the president or secretary, or the person in charge of the general
offices of the corporation. Notwithstanding the foregoing, no resignation of
any officer who is subject to an employment contract with the corporation shall
in any way remove the obligation of that person to fulfill his obligations
under his employment contract with the corporation.

SECTION 3. VACANCIES. Whenever any vacancy shall occur in any office
for any reason whatsoever, such office shall be filled by the Board of
Directors and the officer so elected shall hold office until his successor is
chosen and qualified.

SECTION 4. PRESIDENT. The president shall, when present, preside at
all meetings of the directors and act as temporary chairman at and call to
order all meetings of the shareholders; and he shall have power to call special
meetings of the shareholders and directors for any purpose or purposes, appoint
and discharge, subject to the approval of the directors, employees, and agents
of the corporation and fix their compensation, make and sign contracts and
agreements in the name and on behalf of the corporation, and while the
directors and the executive committee are not in session, he shall have general
management and control of the business and affairs of the corporation. He
shall see that the books, reports, statements, and certificates required by the
statute under which this corporation is organized or any other laws applicable
thereto are properly kept, made, and filed according to law, and he shall
generally do and perform all acts incident to the office of the president or
which are authorized or required by law.

Without limiting the generality of the foregoing, the president of the
corporation shall specifically have the power to:

(a) Purchase, lease, or rent any piece of equipment deemed
necessary in order for the corporation to conduct its business;

(b) Borrow money on behalf of the corporation to purchase,
lease, or rent any piece of equipment deemed necessary for the
operation of the business of the corporation;

-6-
<PAGE> 7
(c) Execute promissory notes, security agreements, financing
statements, or any other instrument required in order to purchase,
lease or rent the equipment described in the preceding paragraphs;

(d) Hire subordinate employees on behalf of the corporation
and to terminate, either with or without cause, the employment of such
employee subject only to the restrictions contained within any
employment contract executed between the corporation and any such
subordinate employee; and

(e) Take any other action specifically provided for in a
resolution executed by a majority of the Board of Directors of the
corporation.

SECTION 5. VICE PRESIDENT. The vice president shall be vested with
all the powers and shall perform all the duties of the president in the absence
or disability of the latter, unless or until the directors shall otherwise
determine. He shall have such other powers and perform such other duties as
shall be prescribed by the directors.

SECTION 6. SECRETARY. The secretary shall give or cause to be given,
notice of all meetings of shareholders and directors, and all other notices
required by law or by these bylaws; and in the case of his absence or refusal
or neglect to do so, any such notice may be given by any person thereunto
directed by the president or by the directors or shareholders upon whose
requisition the meeting is called as provided by these bylaws.

He shall record all the proceedings of the meetings of the corporation
and of the directors in a book to be kept for that purpose and shall perform
such other duties as may be assigned by the directors of the corporation or by
the president. He shall have the custody of the seal of the corporation and
shall affix the same to all instruments requiring it, when authorized by the
directors or the president, and attest to the same. He shall be sworn to the
faithful discharge of his duties.

SECTION 7. TREASURER. The treasurer shall have the custody of all
funds, securities, evidences of indebtedness, and other valuable documents of
the corporation; he shall receive and give or cause to be given receipts and
acquittances for monies paid in on account of the corporation and shall pay out
of the funds on hand all just debts of the corporation of whatever nature upon
maturity of the same; he shall enter or cause to be entered in books of the
corporation to be kept for that purpose, full and accurate accounts of all
monies received and paid out on account of the corporation, and whenever
required by the president or the directors, he shall render a statement of his
accounts; he shall keep or cause to be kept such other books as will show a
true record of the expenses, losses, gains, assets and liabilities of the
corporation; he shall, unless otherwise determined by the directors, have
charge of the original stock books, transfer books, and stock ledgers and act
as transfer agent in respect to the stock and securities of the corporation;
and he shall perform all of the other duties incidental to the office of
treasurer. Whenever required by the Board of Directors, he shall give the
corporation a bond for the faithful discharge of his duties in such amount and
with such surety as the Board shall

-7-
<PAGE> 8
prescribe. In addition to the foregoing, the Treasurer shall also be required
to have the books and records of the corporation audited not less than once
yearly by an accountant chosen by the treasurer and approved by a majority vote
of the Board of Directors of the corporation.

ARTICLE IV

CAPITAL STOCK

SECTION 1. CONSIDERATION FOR SHARES. The capital stock, whether
original issue or treasury shares, may be issued for such consideration as
shall be fixed from time to time by the Board of Directors, but never for less
than par.

SECTION 2. PAYMENT FOR SHARES. The consideration for the issuance of
shares may be paid, in whole or in part, in money, in property, tangible or
intangible, or in labor or services actually performed for the corporation.
When the payment of the consideration for which shares are to be issued shall
have been received by the corporation, such shares shall be deemed to be fully
paid and nonassessable. No certificates shall be issued for any share until
such share is fully paid.

SECTION 3. CERTIFICATES REPRESENTING SHARES. Each holder of the
capital stock of the corporation shall be entitled to one or more certificates
signed by the president or vice president and the secretary of the corporation,
and sealed with the seal of the corporation, certifying the number of shares
owned by him in the corporation. Such certificate shall be in the Texas
Standard form.

SECTION 4. TRANSFER OF STOCK. The shares of the corporation shall be
transferable only in the books of the corporation upon surrender of the
certificate or certificates representing the same, properly endorsed by the
registered holder or by his duly authorized attorney or legal representative.
Upon such transfer the old certificates shall be surrendered to the corporation
by the delivery thereof to the person in charge of the stock and transfer books
and ledgers, or to such other person as the directors may designate, by whom
they shall be cancelled, and new certificates shall thereupon be issued. A
record shall be made of each transfer, and whenever a transfer shall be made
for collateral security and not absolutely, it shall be so expressed in the
entry of the transfer.

ARTICLE V

MISCELLANEOUS

SECTION 1. PRINCIPAL OFFICE. The principal office of the corporation
shall be in Tulsa, Oklahoma.

-8-
<PAGE> 9
SECTION 2. SEAL. The seal of the corporation shall be circular in
form and shall contain the name of the corporation.

SECTION 3. FISCAL YEAR. The fiscal year of the corporation shall be
the calendar year.

SECTION 4. INDEMNIFICATION. The corporation will indemnify its
directors to the fullest extent permitted by the Texas Business corporation Act
and may, if and to the extent authorized by the Board of Directors, so
indemnify its officers and any other person whom it has the power to indemnify
against liability, reasonable expense or other matter whatsoever.

SECTION 5. INSURANCE. The corporation may at the discretion of the
Board of Directors purchase and maintain insurance on behalf of the corporation
and any person whom it has the power to indemnify pursuant to law, the Articles
of Incorporation, these Bylaws or otherwise.

SECTION 6. INVALID PROVISIONS. If any part of these Bylaws is held
invalid or inoperative for any reason, the remaining parts, so far as possible
and reasonable, will be valid and operative.

SECTION 7. RELATION TO ARTICLES OF INCORPORATION. These Bylaws are
subject to, and governed by, the Articles of Incorporation.

ARTICLE VI

AMENDMENTS

SECTION 1. AMENDMENTS OF BYLAWS. The shareholders, by the
affirmative vote of the holders of a majority of the stock issued and
outstanding, may at any meeting, provided the substance of the proposed
amendment shall have been stated in the notice of the meeting, amend or alter
any of these bylaws.

-9-

<PAGE> 1
EXHIBIT 4.2

MEDICAL ALLIANCE, INC.
5005 LBJ FREEWAY, SUITE 1370
DALLAS, TEXAS 75244
___________________________________________________

SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT

July 10, 1992

___________________________________________________
<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<CAPTION>
SECTION 1

DESCRIPTION OF TRANSACTION
--------------------------
Page No.
--------
<S> <C> <C>
1.1 Description of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
2.1 Organization and Standing; Certificate of Incorporation and Bylaws . . . . . . . . . . . . . . . . . . 2
2.2 Corporate Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 Material Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.8 Title to Properties and Assets; Liens, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 Compliance with Other Instruments, None Burdensome, etc . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 Litigation, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.11 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.13 Governmental Consent, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.14 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.15 Material Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 Collective Bargaining Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.19 Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.20 Use of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.21 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.22 Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.23 Brokers or Finders; Other Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.24 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.25 Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.26 Vendors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.27 Company Net Worth and Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>

(i)
<PAGE> 3
<TABLE>
<CAPTION>
SECTION 3

REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
-----------------------------------------------
<S> <C> <C>
3.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 Rule 144, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 No Public Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.6 Access to Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.7 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.8 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.9 Residency/Principal Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.10 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.11 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

SECTION 4
---------

CONDITIONS TO CLOSING OF INVESTORS
----------------------------------
4.1 Representations and Warranties Correct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 Opinion of Company's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 Secretary's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.5 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.6 Shareholders' Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.7 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.8 Articles of Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.9 Conversion of Subordinated Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.10 Restructuring of Satana Corporation Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.11 Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.12 SBA Declarations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

SECTION 5

CONDITIONS TO CLOSING OF COMPANY

5.1 Representations and Warranties Correct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.3 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.4 Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>

(ii)
<PAGE> 4
<TABLE>
<CAPTION>
SECTION 6

COVENANTS OF THE COMPANY
------------------------
<S> <C> <C>
6.1 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.2 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.3 Compensation Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.4 Key-Man Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.6 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.7 SBA Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.8 Restructuring of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.9 Directors' and Officers' Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.10 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

SECTION 7

COVENANTS OF THE INVESTORS
--------------------------
7.1 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

SECTION 8

REGISTRATION RIGHTS
-------------------
8.1 Optional Registrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.2 Required Registrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.3 Form S-3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.4 Registrable Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.5 Procedure for Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.6 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.7 Rule 144 Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.8 Obligations in a Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.9 Limitations on Subsequent Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

SECTION 9

COMPANY'S CALL
--------------
9.1 Right to Call . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.2 Procedure for Call . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.3 Right to Retain Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>

(iii)
<PAGE> 5
<TABLE>
<CAPTION>
SECTION 10

DEFAULT
-------
<S> <C> <C>
10.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.2 Remedies on Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
10.3 Board Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

SECTION 11

MISCELLANEOUS
-------------
11.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
11.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
11.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
11.4 Entire Agreement; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
11.5 Notices and Demands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
11.6 Delays or Omissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
11.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
11.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
11.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
11.10 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>

(iv)
<PAGE> 6
MEDICAL ALLIANCE, INC.

SERIES A CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT

MEDICAL ALLIANCE, INC., a Texas corporation (the "Company"), and the
persons named on the Schedule of Purchasers, attached hereto as Exhibit A
(collectively, the "Investors" and each individually, an "Investor"), enter
into this Agreement dated as of July 10, 1992, relating to the issuance by the
Company of certain of its securities.

SECTION 1

DESCRIPTION OF TRANSACTION
--------------------------

1.1 Description of Securities. The Company agrees to issue to the
Investors and the Investors agree to purchase from the Company (a) 375,000
shares of its authorized but unissued Series A Convertible Preferred Stock, par
value $.002 per share (the "Preferred Stock"), for a total purchase price of
$750,000 and (b) warrants to purchase up to 60,000 shares of Preferred Stock, a
form of which is attached as Exhibit B, for a total purchase price of $60.00
(the "Warrants"). The shares of Preferred Stock issued to the Investors
pursuant to this Agreement (including the shares issued upon exercise of the
Warrants (the "Warrant Shares")) are referred to herein as the "Preferred
Shares." The number of Preferred Shares issued (or issuable upon exercise of a
Warrant) to an Investor is that number of shares listed with such Investor's
name on Exhibit A. The Preferred Stock will be convertible into shares of its
Common Stock, $.002 par value (the "Common Stock"), as provided in the
Company's Articles of Incorporation, as amended by the Articles of Amendment,
attached hereto as Exhibit C. Any securities of the Company issued or issuable
upon conversion of the Preferred Shares (and any Common Stock issued as stock
dividends on the Preferred Shares) are referred to as "Conversion Shares."

1.2 Closing. The closing of the purchase and sale of the
Preferred Shares and, Warrants will take place at the offices of Jackson &
Walker, L.L.P., 901 Main Street, Suite 6100, Dallas, Texas, at 10:00 A.M., on
the date of this Agreement (the "Closing"), or such other time and place as
agreed to by the parties (the "Closing Date"). At the Closing, the Company
will deliver to each Investor (a) a certificate or certificates, each
registered in such Investor's name representing the Preferred Shares and (b) a
warrant or warrants, each registered in such Investor's name representing the
warrants to purchase Preferred Shares, being acquired by each Investor upon
payment of the purchase price by the Investors to the Company by check(s) in
the aggregate amount of $750,060.
<PAGE> 7
SECTION 2

REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------

The Company represents and warrants to the Investors that the
following are true and correct as of the date hereof:

2.1 Organization and Standing: Certificate of Incorporation and
Bylaws. The Company is a corporation duly organized and existing under the
laws of the State of Texas and is in good standing under such laws. The
Company has requisite corporate power and authority to own and operate its
properties and assets, and to carry on its business as presently conducted and
as proposed to be conducted. Except as set forth in Schedule 2.1, the Company
is qualified to do business as a foreign corporation in each jurisdiction where
the ownership of its properties or the conduct of its business requires such
qualification and where the failure so to be qualified would have a material
adverse effect on such corporation's business as now conducted. Schedule 2.1
sets forth a complete and accurate listing of the states where the Company
currently owns properties and/or conducts business and the Company is in the
process of qualifying to do business as a foreign corporation. The Company has
furnished the Investors with copies of its Articles of Incorporation and
Bylaws, as amended. Said copies are true, correct and complete and contain all
amendments through the Closing Date.

2.2 Corporate Power. The Company has all requisite legal and
corporate power and authority to execute and deliver this Agreement, and has
all requisite legal and corporate power and authority to sell and issue the
Preferred Shares and Warrants hereunder, to issue the Preferred Stock upon
exercise of the Warrants, to issue the Common Stock issuable upon conversion of
the Preferred Shares, and to carry out and perform its obligations under the
terms of this Agreement.

2.3 Subsidiaries. The Company has no subsidiaries and does not
otherwise own or control, directly or indirectly, any equity interest in any
corporation, association or business entity.

2.4 Capitalization. As of the Closing (after giving effect to the
issuance of the Preferred Shares) the authorized capital stock of the Company
will consist of 10,000,000 shares of Common Stock of which 1,136,340 shares
will be issued and outstanding and 2,000,000 shares of Preferred Stock, of
which 375,000 shares will be issued and outstanding. None of the shares of
Preferred Stock were issued and outstanding prior to the Closing. The
outstanding shares of capital stock of the Company have been duly authorized
and validly issued, and are fully paid and nonassessable. The Company has
reserved (a) up to 435,000 shares of Common Stock for issuance upon conversion
of the Preferred Shares (including the 60,000 shares of Preferred Stock that
may be issued to the Investors upon exercise of Warrants) and (b) up to an
aggregate of 648,350 shares of its Common Stock for issuance to (i) employees,
consultants, or directors under stock plans or arrangements approved by the
Board of Directors and (ii) Satana Corporation pursuant to that certain Warrant
to Purchase Common Stock in Laser Support

2
<PAGE> 8
Services, Inc. and Stock Repurchase Agreement dated January 17, 1991, as
amended on the date hereof (the "Satana Warrant"). Except as set forth above
or on Schedule 2.4, there are no options, warrants or other rights outstanding
to purchase any of the Company's authorized and unissued capital stock.

2.5 Authorization. All corporate action on the part of the
Company, its directors and stockholders necessary for (a) the authorization,
execution, delivery and performance of this Agreement by the Company, (b) the
authorization, sale, issuance and delivery of the Preferred Shares and Warrants
(including the Preferred Stock upon exercise of the Warrants and the Common
Stock issuable upon conversion of the Preferred Shares) and (c) the performance
of all of the Company's obligations hereunder has been taken or will be taken
prior to the Closing. This Agreement, when executed and delivered by the
Company, shall constitute a valid and binding obligation of the Company,
enforceable in accordance with its terms, except as the indemnification
provisions of Section 8.6 hereof may be limited by principles of public policy,
and subject to laws of general application relating to bankruptcy, insolvency
and the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies. The Preferred Shares, when
issued in compliance with the provisions of this Agreement, will be validly
issued, will be fully paid and nonassessable, and will have the rights,
preferences, and privileges described in Exhibit C (unless amended after the
date hereof). Common Stock issuable upon conversion of the Preferred Shares
have been duly and validly reserved and, when issued in compliance with the
provisions of this Agreement and Exhibit C, will be validly issued, and will be
fully paid and nonassessable; and the Preferred Shares and such shares of
Common Stock will be free of any liens or encumbrances, other than as set forth
in this Agreement, and any liens or encumbrances created by or imposed upon the
holders through no action of the Company; provided, however, that the Preferred
Shares and the Conversion Shares may be subject to restrictions on transfer
under state and/or federal securities laws as set forth herein and that certain
Amended and Restated Stock Buy and Sell Agreement, of even date herewith, as
may be amended from time to time (the "Shareholders' Agreement"), in
substantially the form of Exhibit D. The shares of Common Stock issuable upon
conversion of the Preferred Shares are not subject to any preemptive rights or
rights of first refusal, except as set forth in this Agreement and the
Shareholders' Agreement.

2.6 Financial Statements. The Company has delivered to each
Investor its unaudited balance sheet and unaudited statement of operations for
the fiscal year ended December 31, 1991, and unaudited balance sheet and
statement of operations for the five-month period ended May 31, 1992 (the
"Financial Statements"). The Financial Statements are complete and correct in
all material respects and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
period indicated ("GAAP"). The Financial Statements fairly present the
financial condition and results of operations of the Company at such date or
for such period, subject, in the case of the unaudited interim financial
statements, to changes resulting from normal year-end adjustments (none of
which would either, alone or in the aggregate, be materially adverse to the
financial condition or operating results of the Company). Except as shown on
Schedule 2.6, since May 31, 1992, there, has been no change in the assets,
liabilities, financial condition or operating results of the Company from that

3
<PAGE> 9
reflected in the Financial Statements, except changes in the ordinary course of
business that have not been, in the aggregate, materially adverse to the
assets, properties, financial condition, operating results or business of the
Company.

2.7 Material Liabilities. Except as set forth in Schedule 2.7,
the Company has no material liabilities or obligations, absolute or contingent
(individually or in the aggregates, other than (a) liabilities and obligations
disclosed in the Financial Statements, (b) liabilities and obligations incurred
in the ordinary course of business subsequent to May 31, 1992, and (c)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected in the Financial Statements. Schedule 2.7 sets forth a complete and
accurate listing of the Company's indebtedness for borrowed money as of the
Closing Date, which either the Company has directly or indirectly created,
incurred, assumed or guaranteed, and a description of any security for such
indebtedness.

2.8 Title to Properties and Assets; Liens, Etc. The Company has
good and marketable title to its properties and assets which it owns, and has a
valid leasehold interest in each property and asset it leases, in each case
subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than
(a) as listed in Schedule 2.8, (b) as disclosed in the Financial Statements
(including the notes thereof), (c) the lien of current taxes not yet due and
payable, and (d) possible minor liens and encumbrances which do not in any case
materially detract from the value of the property subject thereto or materially
impair the operations of the Company. Schedule 2.8 contains a complete listing
of properties and assets used in the business and operations of the Company as
of May 31, 1992, which are not owned by the Company, identifying the owner of
such properties and assets and specifying the material monetary obligations of
the Company relating to its use of such properties and assets.

2.9 Compliance with Other Instruments, None Burdensome, etc. The
Company is not in violation of any term of its Articles of Incorporation or
Bylaws, as each may have been amended from time to time, or in any material
respect of any term or provision of any material mortgage, indebtedness,
indenture, contract, agreement, instrument, judgment or decree, and to the best
of its knowledge is not in violation of any order, statute, rule or regulation
applicable to the Company where such violation would materially and adversely
affect the Company. The execution, delivery and performance of and compliance
with this Agreement, and the issuance of the Preferred Shares and the Common
Stock issuable upon conversion of the Preferred Shares, have not resulted and
will not result in any material violation of, or conflict with, or constitute a
material default under, the Company's Articles of Incorporation or Bylaws, as
each may have been amended from time to time, or any of its material
agreements, or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company.

2.10 Litigation, etc. There are no actions, suits, proceedings or
investigations pending against the Company (or, to the best of the Company's
knowledge, any threat thereof) or its properties before any court or
governmental agency (nor, to the best of the Company's

4
<PAGE> 10
knowledge, is there any reasonable threat thereof).

2.11 Employees. To the best of the Company's knowledge, no
employee of the Company is in violation of any term of any employment contract,
patent disclosure or confidentiality agreement or any other contract or
agreement relating to the relationship of such employee with the Company or any
other party. Except as disclosed on Schedule 2.11, the Company has no
employment agreements with any employees, officers or directors of the Company,
other than the agreements relating to noncompetition, inventions, copyrights,
patents and confidential information, substantially in the form provided to the
Investors. Schedule 2.11 lists the Company's (i) management, including
officers (the "Management"), and (ii) employees who are entrusted with access
to proprietary information of the Company (Management and employees entrusted
with access to proprietary information are collectively referred to as the "Key
Employees").

2.12 Registration Rights. Except as set forth in this
Agreement and Schedule 2.12, the Company is not under any contractual
obligation to register (in compliance with the filing requirements and being
deemed effective under the Securities Act of 1933, as amended (the "Securities
Act")) any of its presently outstanding securities or any of its securities
which may hereafter be issued.

2.13 Governmental Consent, etc. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with (a) the
valid execution and delivery of this Agreement, (b) the offer, sale or issuance
of the Preferred Shares and Warrants (and the Preferred Stock upon exercise of
the Warrants and the Common Stock issuable upon conversion of the Preferred
Shares), or (c) the consummation of any other transaction contemplated hereby,
except (i) for those which have been obtained on or before the Closing Date or
(ii) Qualification (or taking such action as may be necessary to secure an
exemption from qualification, if available) of the offer and sale of the
Preferred Shares and Warrants (and the Common Stock issuable upon conversion of
the Preferred Shares) under applicable Blue Sky laws, which filings and
qualifications, if required, will be accomplished in a timely manner.

2.14 Real Property. The Company enjoys peaceful and undisturbed
possession under all real property leases under which the Company is operating,
and all such leases are valid and subsisting and none of them is in default. A
listing of said leases, their terms and total lease payments is attached hereto
as Schedule 2.14. The Company does not own any real property.

2.15 Material Contracts and Commitments. Each material contract,
agreement and instrument which is material to the financial condition,
operating results or business of the Company and which the Company is a party
is listed in Schedule 2.15 attached hereto. To the Company's knowledge, all
such contracts, agreements and instruments are valid and enforceable
obligations of the parties thereto in accordance with their respective terms,
and the Company has not waived any rights thereunder.

5
<PAGE> 11
2.16 Tax Returns and Payments. The Company has fully filed or
timely extended all federal, state and local tax returns required to be filed
and is not currently delinquent or subject to penalties, as to any federal,
state and other taxes, assessments and governmental charges upon the Company
and its properties, the failure of which to file or pay would have a material
adverse effect on the financial condition or operations of the Company. The
charges, accruals and reserves on the books of the Company with respect to
federal taxes for the fiscal periods of the Financial Statements are adequate.
There are currently no agreements, waivers or other arrangements providing for
an extension of time with respect to the filing of any tax return by, or the
payment of any tax, governmental charge or deficiency by, or the assessment of
any tax, governmental charge or deficiency against, the Company. There are not
any actions, suits, proceedings, investigations or claims now pending, or to
the Company's knowledge, threatened, against the Company in respect of taxes,
governmental charges or assessments, or any matters under discussion with any
governmental authority relating to taxes, governmental charges or assessments,
or any claims for additional taxes, governmental charges or assessments
asserted by any such authority.

2.17 Collective Bargaining Agreements. The Company has no
collective bargaining agreement with its employees.

2.18 Insurance. Except as set forth on Schedule 2.18, the Company
insures, to a reasonable amount, with reputable insurance companies, so much of
its properties as corporations of similar size engaged in similar businesses
customarily would ensure properties of a similar character against loss by fire
and other causes, and maintains liability insurance of such character and in
such amounts as corporations of similar size engaged in similar businesses
customarily carry.

2.19 Proprietary Rights. The Company has ownership of, or valid
licenses to use, all patents, trademarks, copyrights and other proprietary
rights used in its business. To the best knowledge of the Company, its present
products do not infringe any patent, copyright, trademark or other proprietary
rights of others, the Company does not believe it is utilizing the inventions,
copyrights, or other proprietary rights of any employee (or person currently
intended to be hired) created prior to his employment with the Company which
the Company does not have rights to use, and the Company has not received any
notice from any third party of any such alleged infringement by the Company.
To the Company's knowledge, the Company has taken reasonable steps to establish
and preserve its ownership of all patent, trademark, copyright, trade secret
and other proprietary rights with respect to its products and technology which
are material to the operation of the Company's business and which they own and
use, although the Company has filed no registrations for patents, trademarks,
or copyrights. The Company is not aware of any infringement by others of its
patents,- trademarks, copyrights or other proprietary rights in any of its
products or technology.

2.20 Use of Funds. The Company will use the funds obtained from
the Investors pursuant to the sale and issuance of the Preferred Stock being
issued on the date hereof as shown on Schedule 2.20.

6
<PAGE> 12
2.21 Compliance with ERISA. The Company does not maintain a
pension or profit sharing plan, and is not subject to any of the funding or
vesting requirements of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or any requirement which could create an accumulated funding
deficiency within the meaning of ERISA. The Company has not incurred any
liability to the Pension Benefit Guaranty Corporation established under ERISA
(or any successor thereto under ERISA). The consummation of the transactions
set forth in this Agreement will not constitute a "prohibited transaction"
within the meaning of Section 4975 of the Internal Revenue Code of 1986, as
amended, or Section 406 of ERISA.

2.22 Offering. Subject to the accuracy of each Investor's
representations in Section 3 hereof, the offer, sale and issuance of the
Preferred Shares and Warrants to be issued in conformity with the terms of this
Agreement, and the issuance of the Common Stock to be issued upon conversion of
the Preferred Shares, constitute transactions exempt from the registration
requirements of Section 5 of the Securities Act.

2.23 Brokers or Finders; Other Offers. The Company has not
incurred, as a result of any action taken by the Company, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement.

2.24 Disclosure. To the best of the Company's knowledge, none of
the representations and warranties made by the Company in this Agreement,
including Schedule 2.24 and the other Schedules and Exhibits hereto, when taken
as a whole, contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained herein and in
the Schedules and Exhibits hereto not misleading in light of the circumstances
under which they were made. Schedule 2.24 sets forth a complete and accurate
listing of additional disclosures of material facts that the Company believes
necessary in order to make the statements contained in this Agreement not
misleading.

2.25 Customers. Schedule 2.25 sets forth an accurate and complete
listing of the Company's ten (10) largest customers for the five-month period
ended May 31, 1992. Except as disclosed on Schedule 2.25, no adverse material
changes have occurred in the Company's relationship with such customers.

2.26 Vendors. Schedule 2.26 sets forth an accurate and complete
listing of each vendor that has provided supplies or services to the Company
valued in excess of $10,000.00 for the five-month period ended May 31, 1992.
Except as disclosed on Schedule 2.26, no adverse material changes have occurred
in the Company's relationship with such vendors.

2.27 Company Net Worth and Net Income. The Company, taken together
with its "affiliates" (entities other than licensed small business investment
companies, directly or indirectly, controlling, controlled by or under common
control with the Company), is independently owned and operated, is not dominant
in its field of operation, does not have net worth in excess of $6,000,000 and
does not have average net income (after deduction for federal income taxes and
computed without benefit of loss carryovers) for the preceding two years in

7
<PAGE> 13
excess of $2,000,000. For purposes of this paragraph, the term "control" means
the possession, directly or indirectly, or the power to direct or cause the
direction of the management and policies of another, whether through the
ownership of voting securities, by contract or otherwise.

SECTION 3

REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
-----------------------------------------------

Each Investor hereby severally represents and warrants to the Company
that the following are true and correct as of the date hereof:

3.1 Organization and Good Standing. Each Investor which is a
corporation is duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is incorporated, or which is a limited
partnership is duly organized and validly existing under the laws of the
jurisdiction in which it was organized. Each Investor has all requisite power
and authority to execute and deliver this Agreement and the Shareholders'
Agreement and to carry out and perform its obligations hereunder and under the
Shareholders' Agreement.

3.2 Experience. (a) It is an accredited investor as defined under
Regulation D under the Securities Act and (b) by reason of its own business and
financial experience and that of those persons, if any, retained by it to
advise it with respect to its investment, it together with such advisors has
such knowledge, sophistication and experience in business and financial matters
so that it is capable of evaluating the merits and risks of its investment in
the Company and has the capacity to protect its own interests.

3.3 Investment. It is acquiring the Preferred Shares, the
Warrants and the underlying Common Stock for investment for its own account,
not as a nominee or agent, and not with the view to, or for resale in
connection with, any "distribution." It understands that the Preferred Shares
and Warrants and the underlying Common Stock to be purchased have not been,
within the meaning of the Securities Act, registered under the Securities Act
or any state securities laws by reason of specific exemptions from the
registration provisions of the Securities Act and any applicable state
securities laws, the availability of which depend upon, among other things, the
bona fide nature of the investment intent and the accuracy of such Investor's
representations as expressed herein.

3.4 Rule 144, etc. It acknowledges that the Preferred Shares,
Warrants and the underlying Common Stock must be held indefinitely unless
subsequently registered under the Securities Act and any applicable state
securities act or unless exemptions from such registration are available. It
is aware of the provisions of Rule 144 promulgated under the Securities Act
which permit limited resale of shares purchased in a private placement subject
to the satisfaction of certain conditions, including, among other things, the
existence of a public market for the shares, the availability of certain
current public information about the Company, the resale occurring not less
than two years after a party has purchased and paid for the security to be
sold,

8
<PAGE> 14
the sale being effected through a "broker's transaction" or in transactions
directly with a "market maker" and the number of shares being sold during any
three-month period not exceeding specified limitations.

3.5 No Public Market. It understands that no public market now
exists for any of the securities issued by the Company and that the Company has
made no assurances that a public market will ever exist for the Company's
securities.

3.6 Access to Data. It has had an opportunity to discuss the
Company's business, management and financial affairs with its management and
the opportunity to review the Company's facilities and business plan.

3.7 Authorization. The execution, delivery and performance of
this Agreement and the Shareholders' Agreement have been duly authorized by all
necessary action on the part of such Investor. This Agreement and the
Shareholders' Agreement when executed and delivered by such Investor will
constitute a valid and legally binding obligation of such Investor, enforceable
in accordance with its terms, except as the indemnification provisions of
Section 8.6 hereof may be limited by principles of public policy, and subject
to laws of general application relating to bankruptcy, insolvency and the
relief of debtors and rules of law governing specific performance, injunctive
relief or other equitable remedies.

3.8 Brokers or Finders. The Company has not, and will not, incur,
directly or indirectly, as a result of any action taken by such Investor, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement.

3.9 Residency/Principal Place of Business. It was formed under
the laws of, and its principal place of business is, the jurisdiction listed on
Exhibit A.

3.10 Purpose. It was not formed for the purpose of making an investment in
the Company.

3.11 No Breach. The execution, delivery and performance by such
Investor of this Agreement and the Shareholders' Agreement, the consummation of
the transactions contemplated hereby and thereby and the ownership of the
Preferred Shares and Warrants do not (a) conflict with or result in a breach of
the terms, conditions or provisions of the articles of incorporation, bylaws or
limited partnership agreement of such Investor (as may be applicable), or (b)
result in a violation of any investment restriction to which such Investor is
subject.

3.12 Litigation. With respect to such Investor, there is no
action, suit, proceeding, order, investigation or claim pending or, to the
knowledge of such Investor, threatened against such Investor at law or in
equity, or before or by any governmental department, commission, board, bureau,
agency or instrumentality concerning the validity of this Agreement or the
right of such Investor to enter into this Agreement or seeking to enjoin the
consummation of the transactions contemplated hereby.

9
<PAGE> 15

SECTION 4

CONDITIONS TO CLOSING OF INVESTORS
----------------------------------

Each Investor's obligations to purchase the Preferred Stock (to be
issued at the Closing) and Warrants at the Closing are, at the option of each
Investor, subject to the fulfillment as of the Closing Date of the following
conditions:

4.1 Representations and Warranties Correct. The representations
and warranties made by the Company in Section 2 of this Agreement shall be true
and correct in all material respects at and as of the Closing.

4.2 Covenants. All covenants, agreements and conditions contained
in this Agreement to be performed by the Company on or prior to the Closing
Date shall have been performed or complied with in all material respects.

4.3 Opinion of Company's Counsel. The Investor Group shall have
received from Jackson & Walker, L.L.P., counsel to the Company, an opinion
addressed to them, dated the Closing Date, with respect to the matters set
forth in Exhibit E.

4.4 Secretary's Certificate. The Company shall have delivered to
the Investors a certificate of the Secretary of the Company dated as of the
Closing Date, in the form of Exhibit F hereto.

4.5 Compliance Certificate. The Company shall have delivered to
the Investors a certificate of the Company in the form of Exhibit G hereto,
executed by the President of the Company, dated the Closing Date and
certifying, among other things, to the fulfillment of the conditions specified
in Sections 4.1 and 4.2 of this Agreement.

4.6 Shareholders' Agreement. The Investors shall have received
the Shareholders' Agreement.

4.7 Blue Sky. The Company shall have obtained all necessary Blue
Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the issuance of the Preferred Shares and
Warrants to the Investors, and the offer and sale of the Preferred Shares and
Warrants to the Investors, and the Common Stock issuable upon conversion of the
Preferred Shares.

4.8 Articles of Amendment. The Company shall have filed Articles
of Amendment with the Secretary of State of Texas in substantially the form of
Exhibit C.

4.9 Conversion of Subordinated Debt. The Company shall have
converted all of the shareholder subordinated debt as reflected in the May 31,
1992 balance sheet ("Subordinated

10
<PAGE> 16
Debt") into shares of Common Stock at a conversion rate of one (1) share of
Common Stock for every $20.00 of Subordinated Debt.

4.10 Restructuring of Satana Corporation Debt. Pursuant to the
terms described under the heading "Debt Restructuring" in the letter agreement
dated May 29, 1992 from Sunwestern Investment Group to, and accepted by, the
Company, the Company shall complete the restructuring of the Company's debt
owed to Satana Corporation, evidenced by that certain Promissory Note made to
Satana Corporation, dated January 17, 1991, in the original principal amount of
$500,000, including the revision of the Satana Warrant terms to conform
substantially with the Warrants (the "Satana Restructuring").

4.11 Legal Matters. All material matters of a legal nature which
pertain to this Agreement and the transactions contemplated hereby shall have
been reasonably approved by counsel to the Investors.

4.12 SBA Declarations. The Company shall have provided to the
Investors completed and executed Small Business Administration Forms 652
(Assurance of Compliance for Nondiscrimination) and 480 (Size Status
Declaration).

SECTION 5

CONDITIONS TO CLOSING OF COMPANY

The Company's obligation to sell and issue the Preferred Stock to be
issued at the Closing and Warrants at the Closing is, at the option of the
Company, subject to the fulfillment as of the Closing Date of the following
conditions:

5.1 Representations and Warranties Correct. The representations
and warranties made by each Investor in Section 3 of this Agreement shall be
true and correct in all material respects at and as of the Closing.

5.2 Covenants. All covenants, agreements and conditions contained
in this Agreement to be performed by the Investors on or prior to the Closing
Date shall have been performed or complied with in all material respects.

5.3 Compliance Certificate. The Investor shall have delivered to
the Company a certificate of the Investor in the form of Exhibit H hereto,
executed by an authorized officer of the Investor, dated the Closing Date and
certifying, among other things, to the fulfillment of the conditions specified
in Sections 5.1 and 5.2 of this Agreement.

5.4 Legal Matters. All material matters of a legal nature which
pertain to this Agreement and the transactions contemplated hereby shall have
been reasonably approved by counsel to the Company.

11
<PAGE> 17

SECTION 6

COVENANTS OF THE COMPANY

Until the first to occur of (i) the Investors hold less than 100,000
Preferred Shares or (ii) a Qualified Public Offering (as defined in Article
Four, Section B.4(b)(i) of the Articles of Incorporation, as amended), the
Company hereby covenants and agrees as follows:

6.1 Financial Information. The Company will mail the following
reports to each Investor:

(a) As soon as practicable after the end of each month,
and in any event within sixty (60) days thereafter, a balance sheet of the
Company as at the end of such month, and a statement of operations, and
statement of cash flow of the Company, for each month and for the current fiscal
year of the Company, to date, prepared in accordance with GAAP (or accompanied
by an explanatory note, which describes any changes in accounting principles
from those used in prior periods), together with a comparison of such statements
to the corresponding budget of the current fiscal year, changes resulting from
year-end audit adjustments, and certified by the principal financial or
accounting officer of the Company.

(b) As soon as practicable after the end of each fiscal
year, and in any event within ninety (90) days thereafter, a balance sheet of
the Company as of the end of such fiscal year, and a statement of operations
and statement of cash flow of the Company for such year, prepared in accordance
with GAAP and setting forth in each case in comparative form the figures for
the previous fiscal year (except for the first year), all in reasonable detail
and certified by the principal financial or accounting officer of the Company
and audited by and accompanied by the report of independent public accountants
of national standing i.e., one of the Big Six accounting firms) selected by the
Board of Directors.

(c) As soon as practicable, and in any event within (i)
thirty (30) days of approval of the Board of Directors following the Closing
and (ii) thereafter prior to the end of the first calendar month of each fiscal
year, a budget/operating forecast for each fiscal year of the Company, which
budget/operating forecast will be approved by the Board of Directors.

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<PAGE> 18
an agreement to hold in confidence any confidential information about the
Company received as a result of such inspection under circumstances indicating
the confidentiality of such information until the Company has publicly
disclosed such information or until disclosure is required by law or by court
order. The rights granted to any Investor under this Section 6.1 will continue
until the Company has commenced filing periodic reports with the Commission
pursuant to the requirements of Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the " 1934 Act"), and will then be
suspended, subject to resumption if the Company should thereafter cease filing
such reports.

6.2 Board of Directors. The Company shall take all appropriate
actions, including amending its bylaws, to initially set a Board of Directors
consisting of seven (7) members. Unless otherwise agreed to by the Director
nominated by the Investor, the Board of Directors will meet at least four (4)
times per year at three (3) month intervals. The Company will reimburse each
Director nominated by the Investors, and each attendee designated by the
Investors, for all direct travel expenses incurred by such Director and/or
attendee in connection with attending any board meeting or other board
functions.

6.3 Compensation Committee. At the first meeting of the Board of
Directors following the Closing, the Board shall create and select members of a
"Compensation Committee." As long as the Investors have the right, pursuant to
Section 10 of the Shareholders' Agreement to elect representatives of the Board
of Directors, the Compensation Committee shall be comprised of three members,
one of whom will be the Director nominated by the Investors and one of whom
will be the Director nominated by Satana. The Compensation Committee shall on
a yearly basis determine (i) which employees are part of Management and (ii)
the compensation for each member of Management.

6.4 Key-Man Insurance. The Company shall maintain after the
Closing for so long as the Company has an insurable interest in the life of
Paul Herchman ("Herchman"), term life insurance on the life of Herchman, in the
minimum amount of $500,000.00 with the proceeds payable to the Company.
Without the prior written approval of the Investors, the Company shall not
pledge at least $500,000.00 of the Company's interest in such term life
insurance or the proceeds thereof.

6.5 Insurance. From and after the Closing, the Company shall
maintain such other insurance with coverages and in the amounts as shall be
reasonably necessary and appropriate to protect the assets of the Company.

6.6 Intellectual Property. The Company will use all reasonable
and prudent efforts to keep confidential all know-how, trade secrets,
proprietary rights and other confidential intellectual property and information
which is material to its business or prospective business, and to provide the
Company with sufficient title to, ownership of, or rights to such intellectual
property as is or may become necessary for the conduct of its business. The
Company will use all reasonable commercial efforts to enter into such
agreements with its employees, consultants, licensees, customers and other
third parties as may be reasonably required to carry out its

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<PAGE> 19
obligations under this Section 6.6; including, but not limited to, using all
reasonable commercial efforts to enter into noncompetition and nondisclosure
agreements (in forms acceptable to Investor) with each Key Employee.

6.7 SBA Information. The Company, within twenty (20) days after
an Investor shall have made a request therefor, shall furnish to such Investor
in writing all information reasonably available to the Company which the
Investor shall request with respect to the Company or any firm or corporation
in which the Company may from time to time have or have had any interest, which
is needed in connection with the preparation of SBA Form 468 or any other
report the Investor may be required to make to any governmental agency or
regulatory authority in connection with its purchase or ownership of the
Preferred Shares, the Warrants or Common Stock issued upon conversion of the
Preferred Shares.

6.8 Restructuring of Debt. On or before December 31, 1992, the
Company shall restructure, in a manner satisfactory to the Investor, all debt
in which the Company has granted liens on its accounts receivable; except,
however, the Investor acknowledges that if the Satana Restructuring has been
completed as contemplated by Section 4.10 of this Agreement, then the Company's
debt to Satana Corporation has been satisfactorily restructured for the
purposes of this Section 6.8.

6.9 Directors' and Officers' Liability Insurance. On or before
September 15, 1992 the Company shall purchase a directors' and officers'
insurance policy with policy limits and other terms reasonably acceptable to
the Investor.

6.10 Negative Covenants. The Company shall not, without the prior
written consent of the holders of a majority of the then outstanding Preferred
Shares and Conversion Shares:

(a) except as provided in the Articles of Amendment,
declare or pay any dividends on the Common Stock;

(b) repurchase or redeem any shares of Common Stock
except pursuant to the terms of the Satana Warrant and the Warrants;

(c) make any loans or advances to employees or
consultants of the Company, other than in the ordinary course of business as
part of travel advances or advances, and other than loans to employees or
consultants of the Company approved by the Board of Directors in amounts not to
exceed $5,000 per individual or $50,000 in the aggregate at any time;

(d) enter into any guaranty arrangement, or mortgage or
pledge, or create a security interest in, or permit any subsidiary to mortgage,
pledge or create a security interest in, all or substantially all of the assets
of the Company or such subsidiary, other than a guaranty arrangement or a
security interest in the assets of the Company or such subsidiary as part of
(i) the refinancing of any Company indebtedness listed in Schedule 2.7 or (ii)
financing obtained from a national or state chartered bank or from regular
commercial financing sources for

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<PAGE> 20
accounts receivable, or (iii) any security interest related to a lease or
financing of equipment by the Company;

(e) merge or consolidate, or enter into any agreement to
merge or acquire, any other corporation, partnership or other business entity
into the Company, or acquire, or enter into any agreement to acquire,
substantially all the stock or assets of another corporation, partnership or
other business entity in any transaction or series of transactions which in the
aggregate exceed $500,000 on or prior to December 31, 1992, or $1,000,000 from
or after January 1, 1994;

(f) enter into a line of business that differs from the
current business of the Company, which currently consists of developing and
marketing a program to make laser technology available to physicians in their
offices on a rental basis (the "Business"); or

(g) sell or otherwise dispose of all or substantially all
of the assets of the Company, or merge or consolidate the Company with or into
any other corporation or corporations, except pursuant to a Qualified Sale.
For purposes of this Agreement, a "Qualified Sale" shall mean a transaction in
which the proceeds payable to the Investors for each of the Preferred Shares is
greater than or equal to the following amounts, plus all accrued and unpaid
dividends:

<TABLE>
<CAPTION>
DATE PER SHARE PROCEEDS
<S> <C>
July 1, 1992 through June 30, 1995 $7.00
July 1, 1995 through June 30, 1996 $9.00
July 1, 1996 through June 30, 1997 $11.00
</TABLE>

SECTION 7

COVENANTS OF THE INVESTORS

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<PAGE> 21
disclosure) or (c) was known by such Investor or its Affiliates prior to its
disclosure to such Investor or its Affiliates by the Company. As used herein,
an "Affiliate" of any Investor means any person who, either directly or
indirectly, through one or more intermediaries, controls, is controlled by or
is under common control with, such Investor. Notwithstanding anything to the
contrary contained in this Section 7.1, each Investor shall be entitled to
provide summaries of the financial and related information of the type
currently provided to such Investor's limited partners and/or shareholders in
the ordinary course of reporting to such persons.

SECTION 8

REGISTRATION RIGHTS

8.1 Optional Registrations. If the Company decides to register
any of its Common Stock or securities convertible into or exchangeable for
Common Stock under the Securities Act (other than a registration solely to
implement an employee benefit plan or a transaction to which Rule 145 or any
other similar rule of the Securities and Exchange Commission (the "Commission")
is applicable), the Company will promptly give written notice to the Investors,
and the Company will use all reasonable efforts to effect the registration
under the Securities Act of all Registrable Securities (as defined in Section
8.4) which the Investors request be included in such registration by a written
notice delivered to the Company within thirty (30) days after the notice given
by the Company subject to such Investor's accepting the terms of the
underwriters, including the initial public offering price and the discounts and
commissions, as agreed upon by the Company and the managing underwriter
selected by it.

If the registration involves an underwritten public offering, the
Company will not be required to register Registrable Securities in excess of
the amount that the principal underwriter reasonably and in good faith
recommends may be included in such offering. If any Registrable Securities are
not included for this reason, the Company will permit the Investors who have
requested participation to include all shares requested to be included in the
registration on a pro rata basis, based upon Common Stock owned or obtainable
by such holder.

If the Company elects to terminate any registration filed under this
Section 8.1, the Company will have no obligation to register the securities
sought to be included by the Investors in such registration. For each
registration and offering effected pursuant to this Section 8.1, all expenses
of the registration and offering (excluding all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
such Investors) and the reasonable fees and expenses of one (1) independent
counsel for the Investors will be borne by the Company.

8.2 Required Registrations. If one or more of the Investors
holding at least a fifty percent (50%) of the Conversion Shares notifies the
Company in writing that such Investor(s) intend to offer for public sale at
least forty-five percent (45%) of the shares of Common Stock issued or
issuable upon conversion of the Preferred Shares, the Company will notify all
of the

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<PAGE> 22
Investors of its receipt of such notification. Upon the written request of any
Investor delivered to the Company within fifteen (15) days after delivery from
the Company of such notification, the Company will use its best efforts to
cause the Registrable Securities as may be requested by any Investors
(including the Investor(s) giving the initial notice) to be included in a
registration statement under the Securities Act. All expenses of the first
registration pursuant to this Section 8.2 and the reasonable fees and expenses
of one (1) independent counsel for the Investors will be borne by the Company
(excluding all underwriting discounts, selling commissions and stock transfer
taxes applicable to the securities registered by such Investor). The Investors
will bear their pro rata share (based upon the securities included in the
registration) of reasonable fees and expenses associated with any subsequent
registration pursuant to this Section 8.2. The Company will not be required to
file more than two (2) registration statements pursuant to this Section 8.2,
and will not be required to file any registrations under this section until the
earlier of (a) June 30, 1994, or (b) six (6) months following the date as the
Company files a registration statement under the Securities Act. This Section
8.2 will not apply to requests for registration on Form S-3 (or successor form)
which will be governed by Section 8.3.

8.3 Form S-3. Once the Company is eligible to effect a
registration of its securities under Form S-3 (or a successor form), the
Investors will have the right to request, and the Company shall use its best
efforts to effect, registrations of shares of their Registrable Securities on
Form S-3 (but no more than one such registration during any one fiscal year) as
long as (a) Investor(s) holding at least twenty-five percent (25 %) of the then
outstanding Conversion Shares notify the Company of their desire to register at
least ten percent (10%) of the outstanding Conversion Shares and (b) the
aggregate proposed offering price (based upon the current market price of the
Common Stock) is not less than $500,000.00 for each registration.

The Company will give notice to all Investors of the request for
registration pursuant to this Section 8.3. Upon written request of any
Investor delivered to the Company within fifteen (15) days after delivery from
the Company of such notification, the Company will use all reasonable efforts
to cause the registration of all shares of Registrable Securities on Form S-3
or such successor form to the extent requested by the Investor(s). All
expenses incurred in connection with the registrations requested pursuant to
this Section 8.3, including the reasonable fees and expenses of one (1)
independent counsel for the selling Investor(s), will be borne by the Company
(excluding all underwriting discounts, selling commissions and stock transfer
taxes applicable to the securities registered by such Investor).

8.4 Registrable Securities. For the purposes of this Section 8,
the term "Registrable Securities" will mean any shares of Common Stock held by
the Investors or issuable upon conversion of Preferred Shares, and any other
shares or equity securities distributable on, with respect to, or in
substitution for such Registrable Securities, except for those that have been
sold or transferred pursuant to an effective registration statement or pursuant
to Rule 144 under the Securities Act.

8.5 Procedure for Registration. Whenever the Company is required
under this Agreement to register Common Stock, it agrees to do the following:

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<PAGE> 23
(a) Use all reasonable efforts to prepare promptly for
filing with the Commission a registration statement and such amendments and
supplements to said registration statement and the prospectus as may be
necessary to declare or keep the registration statement effective and to comply
with the provisions of the Securities Act for the period necessary to, complete
the proposed public offering, but not more than 180 days;

(b) Furnish to each selling Investor such copies of each
preliminary and final prospectus and such other documents as such Investor may
reasonably request to facilitate the public offering of his Common Stock;

(c) Enter into any underwriting agreement with provisions
reasonably required by the proposed underwriter for the selling Investor(s), if
any;

(d) Use all reasonable efforts to register or qualify the
Common Stock covered by the registration statement under the securities or
"blue-sky" laws of such jurisdictions as any selling Investor(s) may reasonably
request, although the Company will not have to register in any states that
require it to qualify to do business or subject itself to general service of
process, and for a registration under Section 8. 1, the Company will not be
required to register in more states than is necessary to permit the sale of the
securities; and

(e) The Company is not required to file a registration
statement within ninety (90) days following the effective date of any other
registration statement initiated by the Company. The Company may postpone the
filing of any registration statement required under Sections 8.2 or 8.3 for a
reasonable period of time, not to exceed ninety (90) days, if the Company has
been advised by legal counsel that such filing would require the disclosure of
a material fact, and the Company determines reasonably and in good faith that
such disclosure would have a material adverse effect on the Company.

8.6 Indemnification. Subject to applicable law, the Company will
indemnify each Investor holding Registrable Securities included in the
registration statement, and each person controlling any of them, against all
claims, losses, damages and liabilities, including legal and other expenses
reasonably incurred, arising out of any untrue or allegedly untrue statement of
a material fact contained in the registration statement, or any omission or
alleged omission to, state a material fact required to be stated in the
registration statement or necessary to make the statements not misleading, or
arising out of any violation by the Company of the Securities Act, any state
securities or "blue-sky" laws or any applicable rule or regulation. This
indemnification will not apply to any claims, losses, damages or liabilities to
the extent they arise out of or are based upon an untrue statement or omission
based upon information furnished in writing to the Company by such Investor, or
controlling person, respectively, expressly for use in the registration
statement. With respect to such untrue statement or omission in the
information furnished in writing to the Company by such Investor, such person
will indemnify the underwriters, the Company, its directors and officers, the
other persons selling securities under the registration statement and each
person controlling any of them against any losses, claims, damages, expenses or
liabilities to which any of them may become subject as a result of such

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<PAGE> 24
untrue statement or omission (including those incurred in connection with
investigating or defending against such claims).

8.7 Rule 144 Requirements. If the Company becomes subject to the
reporting requirements of the Securities Exchange Act of 1934, the Company will
use all reasonable efforts to file with the Commission such information as the
Commission may require and will use all reasonable efforts to make available
Rule 144 under the Securities Act (or any successor exemptive rule).

8.8 Obligations in a Registration. Any Investor included in any
registration agrees to furnish such information regarding such person and the
securities sought to be registered as the Company may reasonably request in
connection with the registration, qualification or compliance. If the
registration involves an underwriter, such Investor agrees, upon the request of
such underwriter, not to sell any unregistered securities of the Company for a
period of ten (10) days prior to or ninety (90) days following the effective
date of the registration statement for such offering.

8.9 Limitations on Subsequent Registration After the date hereof,
the Company will not, without the prior written consent of Investors
representing at least a majority of the Preferred Shares and Conversion Shares,
taken together as a class, enter into any agreement with any holder or
prospective holder of any securities of the Company which would allow such
holder or prospective holder (a) to make a demand registration which could
result in such registration statement being declared effective prior to the
earlier of either the date set forth in Section 8.2, or within ninety (90) days
of the effective date of any registration effective pursuant to Section 8.2, or
(b) that would allow any such holder or prospective holder to have greater
rights than the Investors under Section 8.1 or 8.3.

SECTION 9

COMPANY'S CALL

9.1 Right to Call. If on or prior to December 31, 1997, the
Company has not completed a Qualified Public Offering and complied with its
obligations under Section 8 of this Agreement or provided the holders of
Preferred Shares and/or Conversion Shares (collectively, the "Remaining
Shares') the opportunity to sell the Remaining Shares in a bona fide
transaction which would result in the per share proceeds as provided in Section
6. 10(g) above, then for any Remaining Shares outstanding on December 31, 1997,
the Company shall have the right, but not the obligation, to deliver to each of
the holders of the Remaining Shares a notice (the "Call Notice") of the
Company's intent to repurchase all of the Remaining Shares, and repurchase all
Remaining Shares tendered by the holders pursuant to the terms of Section 9.2
below. The Call Notice must be given on or before January 15, 1998.

9.2 Procedure for Call. Subject to compliance with the applicable
laws of the State of Texas regarding the repurchase of a corporation's capital
stock, the Company will purchase

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<PAGE> 25
all Remaining Shares tendered by the holders within one hundred eighty (180)
days following the Call Notice. The purchase price paid by the Company to the
holders for each of the Remaining Shares shall be a per share amount equal to
the higher of (a) two (2) times gross revenues of the Company on a consolidated
basis or (b) fifteen (15) times earnings before interest, taxes, depreciation
and amortization, on a consolidated basis, computed in accordance with GAAP,
divided by the number of then outstanding shares of voting stock of the Company
(including, without limitation, shares of Common Stock and Preferred Stock).
If either the Company or the holder disagrees with the valuation determined by
the formula above, then such party may require the purchase price to be the
fair market value as determined by an independent appraiser mutually acceptable
to the Company and the holder(s) desiring to sell their Remaining Shares. The
cost of such appraisal shall be paid by the party requesting such appraisal,
except as provided in the following sentence. If the Company and such
holder(s) cannot agree on an appraiser, then each of the Company and the
holder(s) wishing to sell shall have the right to designate an appraiser at its
own expense, and such appraisers shall jointly select a third appraiser, whose
cost shall be shared equally by the Company and the holders desiring to sell
their remaining Shares. The appraisal of fair market value which is neither
the highest nor lowest (or, if two appraisals are the same, then that amount
shall be considered the fair market value) shall be binding on the parties for
the purposes of this Section 9. The Company and the holders of the Remaining
Shares shall not disclose to the appraisers, or allow such appraisers to in any
way use or consider, any of the formulas contained in this Section 9.2. The
Company shall purchase such shares by payment of cash at the time of the
purchase; provided however, that only to the extent lawful surplus is not
available, the Company's obligation pursuant to this Section 9 shall not
expire, but continue, and the Company shall be obligated to make such cash
payment as soon as such legal surplus becomes available. The payment to such
holder(s) by the Company pursuant to this Section 9 shall be, and continue to
be until made, a legal obligation of the Company.

9.3 Right to Retain Shares. Notwithstanding the Company's right
to give a notice of intent to repurchase the Remaining Shares pursuant to this
Section 9, a holder of Remaining Shares may decline to accept the Company's
offer contained in the Call Notice, and may retain its Remaining Shares, such
election to be made in writing within fifteen (15) days after the per share
purchase price for the Remaining Shares has been conclusively determined.

9.4 Termination of Call. The Company's right to deliver a Call
Notice and to purchase the Remaining Shares shall terminate upon the occurrence
of a Qualified Public Offering or a Qualified Sale.

SECTION 10

DEFAULT

10.1 Events of Default. Each of the following events shall be an
Event of Default hereunder:

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<PAGE> 26
(a) If the Company shall default in the performance of or
compliance with any of their respective covenants contained in this Agreement
or any covenant regarding the Investors' rights under the Shareholders'
Agreement or any obligations of the Company to holders of Preferred Stock under
the terms of the Articles of Amendment, and such default shall not have been
remedied within thirty (30) days after written notice thereof shall have been
given to the Company, as applicable, by one or more of the holders of the
Preferred Shares and/or Conversion Shares;

(b) If any material representation or warranty made in
writing by or on behalf of the Company herein or pursuant hereto or otherwise
in connection with the transactions contemplated hereby shall prove to have
been false or incorrect in any material respect on the date as of which made
and the effect of falsity or incorrectness shall not have been remedied within
thirty (30) days after written notice thereof shall have been given to the
Company by one (1) or more of the holders of the Preferred Shares and/or
Conversion Shares; provided, however, that such notice and cure period shall
only be applicable if such falsity or incorrectness is capable of being
remedied within such period; and

(c) If the Company shall make an assignment for the
benefit of creditors, or shall admit in writing its inability to pay its debts
as they become due, or shall file a voluntary petition in bankruptcy, or shall
be adjudicated a bankruptcy or insolvent, or shall file any petition or answer
seeking for itself any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, or shall file any answer admitting or not contesting the
material allegations or a petition filed against the Company in any such
proceedings, or shall seek or consent to or acquiesce in the appointment of any
trustee, receiver or liquidator of the Company or of all or any substantial
part of the properties of the Company, or if the Company or its directors or
the majority shareholders shall take any action looking to the dissolution or
liquidation of the Company.

10.2 Remedies on Default. In case any one or more Events of
Default or the breach of any other agreement or covenant contained herein shall
occur and be continuing, the holder of any Preferred Share and/or Conversion
Share may proceed to protect and enforce the rights of such holder by an action
at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any other
documents executed pursuant to the transactions contemplated herein, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law. The Company
acknowledges that any breach or violation of the representations and covenants
contained in this Agreement or the Shareholders' Agreement will cause
substantial damages and irreparable harm to the Investors, and that the remedy
at law for such breach will be inadequate. In the event of any breach of this
Agreement or the Shareholders' Agreement, the Investors will be entitled to
actual damages and temporary and permanent injunctive relief to prevent the
breach or further breach or violation of any provisions of this Agreement or
the Shareholders' Agreement, without the necessity of proving actual damages.

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<PAGE> 27
If any holder of any Preferred Share and/or Conversion Share shall
give any notice or take any other action in respect of a claimed default, the
Company shall forthwith give written notice thereof to all other holders of the
Preferred Shares and/or Conversion Shares at the time outstanding describing
the notice or action and the nature of the claimed default. No course of
dealing and no delay on the part of any holder of any Preferred Shares and/or
Conversion Shares in exercising any right shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies now or hereafter
available by law, in equity, by statute or otherwise.

10.3 Board Control.

(a) In addition to the other rights provided under
Section 10.2, if an Event of Default shall occur relating to (i) the
declaration and payment of dividends on the Preferred Shares, or (ii) the
compliance with the rights of the Investors under Sections 8 or 9 hereof, then
the holders of outstanding Preferred Shares and/or Conversion Shares shall be
entitled to nominate a majority of the number of the authorized members of the
Board of Directors and the Company shall be obligated to see that such nominees
are elected pursuant to the procedures contained in Article Four, Section
B.3(b)(ii) of the Articles of Incorporation, as amended.

(b) If and when the Event of Default ceases to exist,
upon ten (10) days' notice by any shareholder, which notice shall provide
evidence satisfactory to the Board of Directors in its reasonable discretion
that the Event of Default no longer continues to exist, the authorized number
of members of the Board of Directors shall automatically be decreased to such
number existing prior to the increase described in paragraph (a) above, and
each of the members of the Board of Directors of the Company elected pursuant
to the nominations of the holders of the Preferred Shares and/or Conversion
Shares pursuant to paragraph (a) above shall be deemed to have resigned
immediately following the Board of Directors' reasonable and good faith
determination that the Event of Default no longer continues to exist.

SECTION 11

MISCELLANEOUS

11.1 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of Texas.

11.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by an Investor and
the closing of the transactions contemplated hereby; notwithstanding, however,
that the representations and warranties contained in Section 2 shall survive
only for a period of two (2) years after the Closing Date.

11.3 Successors and Assigns. Except as otherwise provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.

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11.4 Entire Agreement: Amendment. This Agreement and the other
documents delivered pursuant hereto (including those contained in the Exhibits)
at the Closing constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof, and no
party shall be liable or bound to any other party in any manner by any
warranties, representations or covenants except as specifically set forth
herein or therein. Except as expressly provided herein, neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated other than
by a written instrument signed by the party against whom enforcement of any
such amendment, waiver, discharge or termination is sought; provided, however,
that any provisions hereof may be amended, waived, discharged or terminated
upon the written consent of the Company and the holders of at least a majority
in interest of the then outstanding Preferred Shares and/or Conversion Shares,
taken as a whole.

11.5 Notices and Demands. Any notice or demand which is required
will be deemed to have been sufficiently received (except as otherwise
provided) three (3) days after being sent by certified or registered mail,
postage and charges prepaid, return receipt requested, or one (1) day after
sent by overnight delivery providing receipt of delivery, to the following
addresses: if to the Company at the address as shown on the signature page of
this Agreement, or at any other address designated by the Company to each of
the Investors in writing; if to an Investor, at its mg address as shown on
Exhibit A, or at any other address designated by such Investor to the Company
in writing.

11.6 Delays or Omissions. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to any holder
of a Preferred Share or a Conversion Share, upon any breach or default of the
Company under this Agreement, shall impair any such right, power or remedy of
such holder, nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any holder of a Preferred Share or a Conversion Share of any breach
or default under this Agreement, or any waiver on the part of any holder of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, or the other agreements executed in
furtherance of the transactions contemplated hereunder, by law or otherwise
afforded to any party, shall be cumulative and not alternative.

11.7 Expenses. The Company and each Investor agrees to pay its own
respective expenses and legal fees incurred with respect to this Agreement and
the transactions contemplated hereby; provided, however, that the Company
agrees to pay up to a maximum of $15,000, the legal fees and expenses of legal
counsel to the Investors.

11.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the Investors,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.

23
<PAGE> 29
11.9 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
invalid or unenforceable, the remainder of this Agreement shall continue in
full force and effect, and the invalid or unenforceable provision shall be
modified to the extent necessary to make it valid and enforceable; provided
that no such modification shall be effective if it materially changes the
economic benefit of this Agreement to any party.

11.10 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

24
<PAGE> 30
The foregoing agreement is hereby executed as of the date first above
written.

COMPANY

MEDICAL ALLIANCE, INC.

By: /s/ Paul Herchman
----------------------------------
Paul Herchman
President

Address: 5005 LBJ Freeway
Suite 1370
Dallas, Texas 75244

INVESTORS

MAPLELEAF CAPITAL, LTD.

By: /s/ James Silcock
----------------------------------
Its:
----------------------------------

25
<PAGE> 31
MEDICAL ALLIANCE, INC.

SALE OF 375,000 SHARES OF SERIES A CONVERTIBLE
PREFERRED STOCK TO MAPLELEAF CAPITAL, LTD.

July 10, 1992

<TABLE>
<CAPTION>
Document Item
- -------- ----
<S> <C>
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT,
dated as of July 10, 1992, between Medical Alliance, Inc.
(the "Company") and Mapleleaf Capital, Ltd. ("Mapleleaf")
(without Exhibits except Exhibit A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

WARRANT, dated as of July 10, 1992, to purchase 60,000
shares of Series A Convertible Preferred Stock of the
Company, issued by the Company to Mapleleaf . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

AMENDED AND RESTATED STOCK BUY AND SELL AGREEMENT,
dated as of July 10, 1992, between the Company and
the holders of the Company's voting stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

CERTIFICATE OF AMENDMENT to the Articles of Incorporation
of the Company, dated July 10, 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

AMENDED AND RESTATED BYLAWS of the Company, as adopted by the
Board of Directors of the Company on July 10, 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

RENEWAL, MODIFICATION AND EXTENSION AGREEMENT, dated as of
July 10, 1992, between the Company and Satana Corporation ("Satana") . . . . . . . . . . . . . . . . . . 6

WARRANT, dated as of July 10, 1992, between the Company and Satana . . . . . . . . . . . . . . . . . . . 7

PROMISSORY NOTE, dated as of July 10, 1992, in the principal amount
of $500,000, issued by the Company to Satana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

UNANIMOUS WRITTEN CONSENT OF THE BOARD OF DIRECTORS of the
Company dated as of May 29, 1992, authorizing a sale of
preferred stock of the Company and certain other matters . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>

26
<PAGE> 32
<TABLE>
<CAPTION>
Document Item
- -------- ----
<S> <C>
UNANIMOUS WRITTEN CONSENT OF SHAREHOLDERS of the Company,
dated as of June 30, 1992, approving certain Amendments to
the Company's Articles of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

UNANIMOUS WRITTEN CONSENT OF SHAREHOLDERS of the Company,
dated as of July 6, 1992, approving an increase in the
authorized number of shares of common stock of the Company
and certain other matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

MINUTES from the meeting of the Board of Directors
of the Company held on July 10, 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

COMPLIANCE CERTIFICATE executed by the President of the Company,
dated as of July 10, 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

SECRETARY'S CERTIFICATE of the Company, dated as of July 10, 1992 . . . . . . . . . . . . . . . . . . . . 14

Opinion of Jackson & Walker, L.L.P., dated as of July 10, 1992,
addressed to Mapleleaf . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>

<PAGE> 1
EXHIBIT 4.3

THIS WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 19339 AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THIS WARRANT AND THE SECURITIES MAY NOT BE SOLD, MORTGAGED,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR AN OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO THE COMPANY
THAT REGISTRATION IS NOT REQUIRED UNDER APPLICABLE SECURITIES LAWS.

THIS WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY, ENCUMBRANCES AND VOTING IMPOSED BY THE AMENDED
AND RESTATED STOCK BUY AND SELL AGREEMENT, DATED THE 10TH DAY OF JULY, 1992,
INCLUDING ANY AMENDMENTS THEREOF, A COPY OF WHICH IS ON FILE WITH THE SECRETARY
OF THE CORPORATION, AND THE CORPORATION WILL FURNISH TO THE RECORD HOLDER OF
THIS WARRANT WITHOUT CHARGE A COPY OF SUCH AGREEMENT UPON REQUEST TO THE
CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE.

60,000 Shares of Series A Convertible Preferred Stock Warrant No. 1

WARRANT
To Purchase Series A Convertible Preferred Stock of
MEDICAL ALLIANCE, INC.

1. Grant of Warrant. THIS IS TO CERTIFY THAT Mapleleaf Capital,
Ltd., or its registered assigns ("Holder"), is entitled to exercise this
Warrant to purchase from MEDICAL ALLIANCE, INC., a Texas corporation (the
"Company"), Sixty Thousand (60,000) shares of Series A Convertible Preferred
Stock, par value $.002 per share, of the Company (the "Preferred Stock"), all
on the terms and conditions and pursuant to the provisions hereinafter set
forth. This Warrant is being granted pursuant to the terms of that certain
Series A Convertible Preferred Stock Purchase Agreement of even date herewith
(the "Agreement"), and the Company and Holder intend to be bound hereby and
thereby. Any capitalized terms not defined herein will have the meanings set
forth in the Agreement. The Company acknowledges that the payment by Holder is
fair and full consideration for the rights granted to Holder hereunder, since
the Company acknowledges that, due to restrictions on the exercisability of
this Warrant and other restrictions on the rights of Holder contained herein
and in the Agreement, the value of this Warrant is contingent, speculative and
uncertain.

1
<PAGE> 2
2. Exercise Price. The exercise price per share of Preferred
Stock shall be Two Dollars ($2.00) (the "Exercise Price").

3. Exercise. (a) This Warrant may be exercised at any time or
from time to time on or after the date of issuance until the earlier of (i)
July 10, 1995 or (ii) the date of the effectiveness of a Qualified Public
Offering (as defined in Section 8.2(e) of the Agreement) (the "Expiration
Date"). If the Company files a registration statement with the Securities and
Exchange Commission for a Qualified Public Offering, then the Company shall
provide written notice to the Holder of such proposed Qualified Public Offering
as provided in Section 7.1 of the Agreement, and Holder must exercise such
Warrant within the time for including such shares in the public offering
pursuant to Section 7.1, or Holder's rights hereunder shall expire and this
Warrant shall terminate. Such exercise may occur on any day that is a business
day, unless otherwise extended pursuant to the terms of the Agreement. In
order to exercise this Warrant, in whole or in part, the Holder hereof shall
deliver to the Company at its principal office at 5005 LBJ Freeway, Suite 1370,
Dallas, Texas 75244, or at such other office as shall be designated by the
Company pursuant to the Agreement, (i) a written notice of Holder's election to
exercise this Warrant, which notice shall specify the number of shares of
Preferred Stock to be purchased pursuant to such exercise, (ii) cash or cash
equivalent payable to the order of the Company in an amount equal to the
aggregate purchase price for all shares of Preferred Stock to be purchased
pursuant to such exercise and (iii) this Warrant, accompanied by a subscription
for Preferred Stock to be purchased in the form of the Subscription appearing
at the end of this Warrant. Upon receipt thereof, the Company shall, as
promptly as practicable, and in any event within ten (10) days thereafter,
execute or cause to be executed and deliver to such Holder a certificate or
certificates representing the aggregate number of full shares of Preferred
Stock issuable upon such exercise. The stock certificate or certificates so
delivered shall be registered in the name of such Holder, or such other name as
shall be designated in said notice in which case, the Holder shall be
responsible for any applicable issue or transfer taxes. This Warrant shall be
deemed to have been exercised and such certificate or certificates shall be
deemed to have been issued, and such Holder or any other person so designated
to be named therein shall be deemed to have become a holder of record of such
shares for all purposes, as of the date that said notice, together with said
payment and this Warrant and Subscription are received by the Company as
aforesaid. The Holder of this Warrant shall not, by virtue of its ownership of
this Warrant, be entitled to any rights of a shareholder in the Company, either
at law or in equity; provided, however, such Holder shall, for all purposes, be
deemed to have become the holder of record of such shares on the date on which
this Warrant is surrendered to the Company in accordance with the immediately
preceding sentence. If the exercise is for less than all of the shares of
Preferred Stock issuable as provided in the Warrant, the Company will issue a
new Warrant of like tenor and date for the balance of such shares issuable
hereunder to the Holder. The rights of the Holder of this Warrant, by its
acceptance hereof, consents to and agrees to be bound by and to comply with all
of the provisions of this Warrant. In addition, the Holder of this Warrant, by
its acceptance hereof, agrees that as a condition of the Company issuing to
such Holder, or its designee, shares of Preferred Stock, that such Holder, or
its designee (as the case

2
<PAGE> 3
may be) shall be required to become a party to that certain Amended and
Restated Stock Buy and Sell Agreement of the Company, as may be amended from
time to time.

4. Taxes. The issuance of any shares of Preferred Stock or other
certificate upon the exercise of this Warrant shall be made without charge to
the registered Holder hereof, or for any tax in respect of the issuance of such
certificate.

5. Transfer. Subject to the provisions of the legend on the face
of this Warrant, this Warrant and all options and rights hereunder are
transferable, as to all or any part of the number of shares of Preferred Stock
purchasable upon its exercise, by the Holder hereof in person or by duly
authorized attorney on the books of the Company upon surrender of this Warrant
at the principal offices of the Company, together with the form of transfer
authorization attached hereto duly executed. The Company shall deem and treat
the registered Holder of this Warrant at any time as the absolute owner hereof
for all purposes and shall not be affected by any notice to the contrary. If
this Warrant is transferred in part, the Company shall at the time of surrender
of this Warrant, issue to the transferee a Warrant covering the number of
shares of Preferred Stock transferred and to the transferor a Warrant covering
the number of shares of Preferred Stock not transferred.

6. Cash in Lieu of Fractional Shares. The Company shall not be
required to issue fractional shares of Preferred Stock upon the exercise of
this Warrant. If the Holder of this Warrant would be entitled, upon the
exercise of any rights evidenced hereby, to receive a fractional interest in a
share of Preferred Stock, the Company shall pay a cash adjustment for such
fraction equal to the equivalent market price for such factional share (as
determined in the manner prescribed by the Board of Directors) at the close of
business on the exercise date.

7. Registration Rights. The Preferred Stock into which this
Warrant is exercisable shall have the registration rights as provided in
Section 8 of the Agreement.

8. No Dilution or Impairment. The Company will not, by amendment
of its Articles of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary act, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such actions as may
be necessary or appropriate in order to protect the rights of Holder of this
Warrant against impairment.

9. Applicable Law. THIS WARRANT HAS BEEN EXECUTED, DELIVERED AND
ACCEPTED BY THE PARTIES IN TEXAS, AND SHALL BE INTERPRETED AND THE RIGHTS OF
THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES
APPLICABLE THERETO AND THE INTERNAL LAWS OF THE STATE OF TEXAS APPLICABLE TO AN
AGREEMENT, EXECUTED, DELIVERED AND PERFORMED IN SUCH STATE.

3
<PAGE> 4
10. Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
permitted assigns of the Company and the Holder hereof and, shall be
enforceable by any such Holder.

11. Headings. Headings of the paragraphs in this Warrant are for
convenience and reference only and shall not, for any purpose, be deemed a part
of this Warrant.

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed.

DATED as of July 10, 1992.

MEDICAL ALLIANCE, INC.

By: /s/ Paul Herchman
-------------------------------
Title: President
-------------------------------

4
<PAGE> 5
MEDICAL ALLIANCE, INC.
AMENDED AND RESTATED 1994 LONG-TERM INCENTIVE PLAN

ARTICLE I
DEFINITIONS

As used in this Plan, the following terms will have the following
meanings:

1.1. Annual Shareholders Meeting has the meaning ascribed to it in
Section 4.2.

1.2. Automatic Grant Date has the meanings ascribed to it in Section
4.2(a).

1.3. Award means a grant of Options under Article IV of the Plan, a
Restricted Stock Award under Article V of the Plan, a Stock Appreciation
Rights Award under Article VI of the Plan, a Performance Share Award under
Article VII of the Plan or a Stock Unit Award under Article VIII of the
Plan.

1.4. Award Agreement means an Option Agreement, Restricted Stock
Agreement, Stock Appreciation Rights Agreement, Performance Share Agreement
or Stock Unit Agreement.

1.5. Board means the Company's Board of Directors.

1.6. Cause means an act or acts engaged in by a Participant
involving (i) a felony, (ii) fraud, (iii) embezzlement, (iv) gross or
willful neglect of duty or misconduct, (v) the commission of any act that
causes or reasonably may be expected to cause substantial injury to the
Company.

1.7. Code means the federal Internal Revenue Code of 1986, as
amended.

1.8. Committee means a committee comprised of two or more Directors
of the Company, appointed by the Board, the members of which satisfy the
requirements for eligibility set forth in Section 3.1 and which is
responsible for the administration of the Plan; provided that the full Board
may at any time, in its sole discretion, exercise any or all functions and
authority of the Committee; and provided further that, to the extent
required by Rule 16b-3, the Committee will have exclusive authority to
exercise its functions and authority in respect of the selection of officers
and Directors of the Company (other than Nonemployee Directors) to be
Participants and in respect of decisions concerning Awards to such persons.

1.9. Commission means the United States Securities and Exchange
Commission.

1.10. Company means Medical Alliance, Inc., a Texas corporation.

1.11. Director means a member of the Board of Directors of the
Company or of a subsidiary thereof.
<PAGE> 6

1.12. Disability of a Participant will be deemed to occur whenever a
Participant is rendered unable to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment that
can be expected to result in death or that has lasted or can be expected to
last for a continuing period of not less than 12 months. In the case of any
dispute as to whether or not a Participant is disabled within the meaning of
this Section, the determination of disability will be made by a licensed
physician selected by the Board and acceptable to the Participant, which
physician's decision will be final and binding.

1.13. Employee means any employee of the Company or of any of its
subsidiaries, as defined under Section 3401(c) of the Code and the
regulations promulgated thereunder.

1.14. Employment Agreement means an agreement, if any, between the
Company or any subsidiary thereof and a Participant, setting forth the terms
and conditions of the Participant's employment by the Company or such
subsidiary.

1.15. ERISA means the Employee Retirement Income Security Act of
1974, as amended.

1.16. Exchange Act means the Securities Exchange Act of 1934, as
amended.

1.17. Grant Date means, with respect to an Option, the date on which
an Option is granted, as specified in Section 4.2 or, as applicable, in
Section 4.3.

1.18. Incentive Option means an Option that by its terms is intended
to be treated as an "incentive stock option" within the meaning of Section
422 of the Code.

1.19. Market Value means, on any date, the closing price per share of
the Stock on the New York Stock Exchange on such date.

1.20. Minimum Performance Goal means the minimum objective(s)
established by the Committee that must be satisfied before any portion of a
Performance Share Award is earned. The Minimum Performance Goal may, in the
sole discretion of the Committee, be the same as or less than the
Performance Goal.

1.21. Nondiscretionary Option means a Nonstatutory Option granted to
a Nonemployee Director under Section 4.2.

1.22. Nonemployee Director means a member of the Board who is not an
Employee.

1.23. Nonstatutory Option means any Option that is not an Incentive
Option.

1.24. Option means an option to purchase Stock granted under the
Plan.

1.25. Option Agreement means a written agreement between the Company
and a Participant setting forth the terms and conditions of an Option.

-2-
<PAGE> 7

1.26. Option Price means the price to be paid by a Participant for a
share of Stock upon exercise of an Option.

1.27. Participant means a person to whom an Award has been granted.

1.28. Performance Cycle or Cycle means a period of years selected by
the Committee during which the performance of the Company and/or the
Participant is measured for the purpose of determining the extent to which
Performance Shares that have been contingently awarded with respect to such
Cycle are earned.

1.29. Performance Goal means the objective(s) established by the
Committee at the time each Performance Share Award is granted with respect
to the related Performance Cycle for the purpose of determining the extent
to which Performance Shares that have been contingently awarded for such
Cycle are earned.

1.30. Performance Share or Performance Share Award means an Award
granted pursuant to Article VII expressed as a share of Stock.

1.31. Performance Share Agreement means a written agreement between
the Company and a Participant setting forth the terms and conditions of a
Performance Share Award.

1.32. Plan means this Amended and Restated 1994 Long-Term Incentive
Plan of the Company, as may be amended from time to time.

1.33. Reporting Participant means a Participant who is subject to the
reporting requirements of Section 16 of the Exchange Act.

1.34. Restricted Stock or Restricted Stock Award means an award of
Stock granted under Article V.

1.35. Restricted Stock Agreement means a written agreement between
the Company and a Participant with respect to a Restricted Stock Award.

1.36. Retirement means resignation by the Participant on or after the
date on which the Participant has served the Company or one or more
subsidiaries thereof for at least five (5) years in the aggregate.

1.37. Rule 16b-3 means Rule 16b-3 or its successors promulgated under
the Exchange Act.

1.38. Securities Act means the Securities Act of 1933, as amended.

1.39. Section 162(m) means Section 162(m) of the Code and the
regulations promulgated thereunder.

-3-
<PAGE> 8

1.40. Stock means Common Stock, par value $0.002 per share, of the
Company or, in the event the outstanding shares of such stock are hereafter
changed into or exchanged for shares of a different security of the Company
or some other corporation, such other security.

1.41. Stock Appreciation Right or Stock Appreciation Rights Award
means an Award granted under Article VI.

1.42. Stock Appreciation Rights Agreement means an agreement between
the Company and a Participant setting forth the terms and conditions of a
Stock Appreciation Rights Award.

1.43. Stock Unit or Stock Unit Award means an award of Stock or units
granted under Article VIII.

1.44. Stock Unit Agreement means a written agreement between the
Company and a Participant setting forth the terms and conditions of a Stock
Unit Award.

1.45. Ten Percent Owner means a person who owns, or is deemed within
the meaning of Section 422(b)(6) of the Code to own, stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company (or its parent or subsidiary corporations, within the meaning of
Sections 424(e) and 424(f) of the Code). Whether a person is a Ten Percent
Owner will be determined with respect to each Option based on the facts
existing immediately prior to the Grant Date of such Option.

1.46. Vesting Year for any portion of any Incentive Option means the
calendar year in which that portion of the Option first becomes exercisable.

ARTICLE II
GENERAL

2.1. PURPOSE. This Plan is intended to encourage ownership of Stock
by Participants and to provide additional incentives for them to promote the
success of the Company's business. The Company intends that Incentive
Options granted under Article IV will qualify as "incentive stock options"
within the meaning of Section 422 of the Code.

With respect to Reporting Participants, the Plan and all transactions
under the Plan (other than certain transactions permitted by Section 4.9)
are intended to comply with all applicable conditions of Rule 16b-3. To the
extent any provision of the Plan or action by the Committee or the Board
fails to so comply, it will be deemed null and void ab initio.

2.2. TERM OF THE PLAN. Awards may be granted not later than
December 31, 2004.

2.3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Section 9.2 and subject to any additional restrictions elsewhere in the
Plan, the maximum aggregate number of shares of Stock that may be issued
from time to time pursuant to the Plan may not exceed 748,360

-4-
<PAGE> 9
shares. The maximum aggregate number of shares of Stock with respect to
which Awards may be granted to any Participant during the term of the Plan
may not exceed 50% of the total number of shares of Stock that may be issued
from time to time under the Plan. Shares to be issued pursuant to Awards
may be either authorized but unissued shares or shares held by the Company
in its treasury. If shares of Stock are reacquired by the Company pursuant
to the provisions of the Plan or if Options expire or terminate for any
reason without having been exercised in full, the reacquired shares and/or
the shares not purchased will again be available for issuance under the Plan
to the extent permitted by law.

2.4. ELIGIBILITY. Any full-time or part-time Employee, Director,
consultant or advisor of one or more of the Company or any subsidiary
thereof will be eligible to be a Participant; provided that no Awards may be
granted to any Nonemployee Directors except pursuant to the provisions of
Section 4.2; and provided further that Incentive Options may be granted only
to Employees.

2.5. ACCELERATION IN CERTAIN EVENTS. The Committee may accelerate
the exercisability of any Option (other than a Nondiscretionary Option) or
Stock Appreciation Right or waive any restrictions and/or Performance Goals
with respect to shares of Restricted Stock, Performance Shares or Stock
Units in whole or in part at any time. In addition, notwithstanding the
provisions of any Award Agreement, the following provisions will apply:

(i) Mergers and Reorganizations. In the event the Company
or its shareholders enter into an agreement to dispose of all or
substantially all of the assets of the Company by means of a sale,
merger or other reorganization, liquidation or otherwise in a
transaction in which the Company is not the surviving corporation, any
Option or Stock Appreciation Right will become immediately exercisable
with respect to the full number of shares subject to that Option or
Stock Appreciation Right and all restrictions and/or Performance Goals
will be deemed lapsed, waived and/or satisfied (as applicable) with
respect to any Restricted Stock Award, Performance Share Award or Stock
Unit Award; provided that no Option or Stock Appreciation Right will be
immediately exercisable and no restrictions or Performance Goals will
be deemed lapsed, waived and/or satisfied with respect to a Restricted
Stock Award, Performance Share Award or Stock Unit Award under this
Section 2.5 on account of any agreement of merger or other
reorganization when the shareholders of the Company immediately before
the consummation of the transaction will own at least 50% of the total
combined voting power of all classes of stock entitled to vote of the
surviving entity immediately after the consummation of the transaction.

(ii) Change in Control. All Options and Stock Appreciation
Rights will become immediately exercisable and all restrictions and/or
Performance Goals related to any Restricted Stock Award, Performance
Share Award or Stock Unit Award will be deemed lapsed, waived and/or
satisfied (as applicable) in the event any Person (other than a Person
meeting the requirements of clauses (i) and (ii) of Rule 13d-1(b)(1) or
its

-5-
<PAGE> 10
successors promulgated under the Exchange Act) meets the requirements
for becoming an Acquiring Person.

2.6. RESTRICTIONS ON ISSUE OF SHARES. Notwithstanding any other
provision of the Plan, if at any time in the reasonable opinion of the
Company the issuance of shares of Stock pursuant to an Award may constitute
a violation of law, then the Company may delay such issuance and the
delivery of a certificate for such shares of Stock until (i) approval has
been obtained from such governmental agencies, other than the Commission, as
may be required under any applicable law, rule or regulation and (ii) in the
case where such issuance would constitute a violation of a law administered
by or a regulation of the Commission, one of the following conditions has
been satisfied:

(1) the issuance of shares of Stock is effectively
registered under the Securities Act; or

(2) a no-action letter in form and substance reasonably
satisfactory to the Company with respect to the issuance of such shares
has been obtained by the Company from the staff of the Commission.

The Company will make all reasonable efforts to bring about the occurrence
of such events.

2.7. PURCHASE FOR INVESTMENT; SUBSEQUENT REGISTRATION.

(a) Unless the issuance of shares of Stock to be issued
pursuant to an Award has been effectively registered under the
Securities Act, the Company will be under no obligation to issue any
shares of Stock pursuant to an Award unless the Participant gives a
written representation to the Company that is satisfactory in form and
substance to its counsel and upon which the Company may reasonably
rely, that he is acquiring the shares of Stock issued pursuant to such
Award as an investment and not with a view to, or for sale in
connection with, the distribution of any such shares of Stock.

(b) If required in the opinion of counsel, each
certificate representing shares of Stock issued pursuant to an Award
will bear a reference to the investment representation made in
accordance with this Section 2.7 and to the fact that no registration
statement has been filed with the Commission in respect of the issuance
of such shares of Stock.

-6-
<PAGE> 11
(c) If the Company deems it necessary or desirable to
register under the Securities Act or other applicable statutes the
issuance of any shares of Stock with respect to which an Award has been
granted, or to qualify the issuance of any such shares for exemption
from the Securities Act or other applicable statutes, then the Company
will take such action at its own expense. The Company may require from
each Participant such information in writing for use in any
registration statement, prospectus, preliminary prospectus or offering
circular as is reasonably necessary for such purpose and may require
reasonable indemnity to the Company and its Directors and officers from
such holder against all losses, claims, damages and liabilities arising
from such use of the information so furnished and caused by any untrue
statement of any material fact therein or caused by the omission to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances under which they were made.

2.8. WITHHOLDING; NOTICE OF DISPOSITION OF STOCK PRIOR TO EXPIRATION
OF SPECIFIED HOLDING PERIOD.

(a) Whenever shares of Stock are to be issued pursuant to
an Award, the Company will have the right to require the Participant to
remit to the Company an amount sufficient to satisfy federal, state,
local or other withholding tax requirements (whether so required to
secure for the Company an otherwise available tax deduction or
otherwise) prior to the delivery of any certificate or certificates for
such shares of Stock.

(b) When a Participant is required to pay to the Company
an amount required to be withheld under applicable income tax laws in
connection with an Award, such payment may be made, in whole or in
part, (i) in cash, (ii) by check, (iii) if permitted by the Committee,
by delivery to the Company of shares of Stock already owned by the
Participant having a Market Value on the date on which the amount of
tax to be withheld is determined (the "Tax Date") equal to the amount
required to be withheld, (iv) with respect to Options, through the
withholding by the Company ("Company Withholding") of a portion of the
shares of Stock acquired upon the exercise of the Options (provided
that, with respect to any Option held by a Reporting Participant, at
least six months has elapsed between the grant of such Option and the
exercise involving tax withholding) or (v) in any other form of valid
consideration, as permitted by the Committee in its sole discretion;
provided that a Reporting Participant will not be permitted to satisfy
his withholding obligation through Company Withholding unless required
to do so by the Committee, in its sole discretion. The Committee may
waive or modify any limitation contained in this Section that is not
required for compliance with Rule 16b-3.

(c) The Company may require as a condition to the issuance
of shares of Stock upon exercise of an Incentive Option that the party
exercising such Option give a written representation to the Company,
which is satisfactory in form and substance to its counsel and upon
which the Company may reasonably rely, that he will report to the
Company any disposition of such shares prior to the expiration of the
holding periods

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<PAGE> 12
specified by Section 422(a)(1) of the Code. If and to the extent that
the realization of income in such a disposition imposes upon the
Company federal, state, local or other withholding tax requirements, or
any such withholding is required to secure for the Company an otherwise
available tax deduction, the Company will have the right to require
that the recipient remit to the Company an amount sufficient to satisfy
those requirements; and the Company may require as a condition to the
issuance of shares of Stock upon exercise of an Incentive Option that
the party exercising such option agree, in writing in a form
satisfactory to the Company, to make such a remittance.

2.9. RESERVATION OF STOCK. The Company must at all times during the
term of the Plan reserve or otherwise keep available such number of shares
of Stock as will be sufficient to satisfy the requirements of the Plan and
will pay all fees and expenses necessarily incurred by the Company in
connection therewith.

2.10. NO SPECIAL EMPLOYMENT OR OTHER RIGHTS. Nothing contained in the
Plan or in any Award will confer upon any Participant any right with respect
to the continuation of his employment or service with the Company (or any
subsidiary), or interfere in any way with the right of the Company (or any
subsidiary), subject to the terms of any separate employment or consulting
agreement or provision of law or certificate of incorporation or bylaws to
the contrary, at any time to terminate such employment or consulting
agreement or to increase or decrease the compensation of the Participant
from the rate in existence at the time of the grant of an Award.

ARTICLE III
ADMINISTRATION

3.1. ADMINISTRATION. Subject to the provisions of the Plan,
including without limitation the provisions of Section 4.2, the Plan will be
administered by the Committee. Each member of the Committee must qualify as
a "disinterested person" within the meaning of Rule 16b-3. In addition,
with respect to any Award that the Company intends to qualify for the
exception for qualified performance-based compensation set forth in Section
162(m), such Award must be granted solely by "outside directors" within the
meaning of such Section. Subject to Section 4.2, the Committee will have
sole discretion and authority to determine from time to time the
Participants to whom Awards will be granted and the number of shares of
Stock subject to each Award, to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to it, to determine and interpret the
terms and provisions of each Award Agreement or waive any conditions,
restrictions and/ or Performance Goals applicable to any Option or Stock
Appreciation Right (or the exercise thereof) or to any shares of Restricted
Stock, Performance Shares or Stock Units, and to make all other
determinations necessary or advisable for the administration of the Plan.
In making such determinations, the Committee may take into account the
nature of the services rendered by the respective Participants, their
present and potential contributions to the success of the Company and its
subsidiaries, and such other factors as the Committee in its sole discretion
deems relevant. The Committee's determinations on the matters referred to
in this Section 3.1 will be conclusive.

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<PAGE> 13

ARTICLE IV
OPTIONS

4.1 GRANT OF OPTIONS. The Committee may, in its sole discretion,
grant Options in accordance with the terms and conditions set forth in the
Plan. Each Option Agreement may contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as are determined
by the Committee in its sole discretion.

4.2. AUTOMATIC GRANTS OF OPTIONS TO NONEMPLOYEE DIRECTORS. During
such period of time, if any, as the Company is subject to the reporting
requirements under the Exchange Act, each nonemployee Director who is
elected or re-elected to the Board at an annual shareholders meeting or
special meeting in lieu of an annual meeting (an "Annual Shareholders
Meeting"), is hereby granted, on the date of such meeting (as used in or
with reference to this Section 4.2, an "Automatic Grant Date"), a
Nonstatutory Option to purchase 2,500 shares of Stock upon such Director's
initial election and a Nonstatutory Option to purchase 1,500 shares of Stock
at each Annual Shareholders Meeting thereafter while he or she continues to
serve as a Director or his or her re-election as a Director. Each Option
granted to a Participant under this Section 4.2 will (i) have an Option
Price equal to 100% of the Market Value of the Stock on the Automatic Grant
Date, (ii) terminate on the tenth anniversary of the Automatic Grant Date
(subject to the provisions of Section 16(b) of the Exchange Act) and (iii)
become exercisable in three equal installments as follows: 33 1/3% on the
first anniversary of the Automatic Grant Date, an additional 33 1/3% on the
second anniversary of the Automatic Grant Date, and an additional 33 1/3% on
the third anniversary of the Automatic Grant Date.

4.3. TIME OF GRANTING OPTIONS. Except as provided in Section 4.2,
the granting of an Option will take place at the time specified in the
Option Agreement.

4.4. OPTION PRICE. The Option Price under each Incentive Option may
not be less than 100% of the Market Value on the Grant Date, or less than
110% of the Market Value on the Grant Date if the Participant is a Ten
Percent Owner. The Option Price under each Nonstatutory Option will not be
so limited solely by reason of this Section 4.4.

4.5. OPTION PERIOD. No Incentive Option may be exercised later than
the tenth anniversary of the Grant Date, or, if the Participant is a Ten
Percent Owner, not later than the fifth anniversary of the Grant Date. The
option period under each Nonstatutory Option will not be so limited solely
by reason of this Section 4.5. Options other than Nondiscretionary Options
may become exercisable in such installments, cumulative or noncumulative, as
the Committee may determine.

4.6. LIMIT ON INCENTIVE OPTION CHARACTERIZATION. To the extent any
Option fails to qualify as an Incentive Option, such Option will be
considered a Nonstatutory Option.

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<PAGE> 14
4.7. EXERCISE OF OPTIONS.

(a) Method of Exercise. Each Option will be exercisable
in accordance with the terms of the Option Agreement pursuant to which
the Option was granted. No Option may be exercised for a fraction of a
share of Stock.

(b) Payment of Purchase Price. The purchase price of any
shares of Stock purchased must be paid at the time of exercise of the
Option either (i) in cash, (ii) by certified or cashier's check, (iii)
by shares of Stock, if permitted by the Committee, (iv) if then
permitted under the laws of the State of Texas and approved by the
Committee, by a promissory note for the total purchase price of the
shares of Stock being purchased, which note will contain such terms and
provisions as the Committee may approve, including without limitation
the right to repay the note partially or wholly with Stock, (v) by
delivery of a copy of irrevocable instructions from the Participant to
a broker or dealer, reasonably acceptable to the Company, to sell
certain of the shares of Stock purchased upon exercise of the Option or
to pledge them as collateral for a loan and promptly deliver to the
Company the amount of sale or loan proceeds necessary to pay such
purchase price or (vi) in any other form of valid consideration, as
permitted by the Committee in its sole discretion. If any portion of
the purchase price or a note given at the time of exercise is paid in
shares of Stock, those shares will be valued at the then Market Value.

4.8. TERMINATION OF EMPLOYMENT OR ASSOCIATION WITH THE COMPANY.

(a) Termination of Employment with the Company. If a
Participant ceases to be employed by the Company or any subsidiary
thereof because the Participant is terminated for Cause, any Options
held by that Participant will automatically expire. If a Participant's
employment is terminated for any reason other than for Cause or due to
death, such Participant's Option will be exercisable (to the extent
exercisable on the date of termination of the Participant's employment
or, if the Committee, in its sole discretion, has accelerated the
vesting of such Option, to the extent exercisable following such
acceleration) at any time within three months after he ceases to be an
Employee (or within (i) three months after termination if on account of
Retirement or (ii) 12 months after termination if on account of
Disability), unless by its terms it expires earlier or unless, with
respect to any Nonstatutory Option (other than a Nondiscretionary
Option), the Committee agrees, in its sole discretion, to extend the
term of such Option; provided that the term of any such Option will not
be extended beyond its original term. If a Participant dies while
employed by the Company or any subsidiary thereof, or within three
months after ceasing to be an Employee, such Participant's Option will
be exercisable (to the extent exercisable on the date of death, or, if
the Committee, in its sole discretion, has accelerated the vesting of
such Option, to the extent exercisable following such acceleration) at
any time within 12 months after the date of death, unless by its terms
it expires earlier or unless, with respect to any Nonstatutory Option
(other than a Nondiscretionary Option), the Committee agrees, in its
sole discretion, to extend

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<PAGE> 15
the term of such Option; provided that the term of any such Option will
not be extended beyond its original term. Military or sick leave will
not be deemed a termination of employment, provided that it does not
exceed the longer of three months or the period during which the absent
Participant's reemployment rights, if any, are guaranteed by statute or
by contract. The foregoing is qualified by the following: (i) if any
facts that would constitute Cause for termination of employment of a
Participant are brought to the attention of the Committee after the
Participant's employment with the Company or any subsidiary thereof has
ended, any Options then held by the Participant may be immediately
terminated by the Committee and (ii) if a Participant is an Employee
employed pursuant to a written Employment Agreement, the Participant's
employment with the Company will be deemed terminated for "cause" for
purposes of the Plan only if the Participant's employment is considered
under the circumstances to have been terminated for cause for purposes
of such agreement.

(b) Termination of Association with the Company. If (i) a
Nonemployee Director is removed for Cause or (ii) a consultant or
advisor or other Participant who is not an Employee has his
relationship with the Company terminated for Cause, any Options held by
any such Participant will automatically expire. In all other cases,
any Options held by such a Participant, to the extent exercisable on
the date of termination of the Participant's association with the
Company, will remain exercisable and will expire in accordance with the
terms of the applicable Option Agreement; provided that (i) if any
facts that would constitute cause for removal or termination of a
Participant who is a Nonemployee Director, consultant or advisor or
other person who is not an Employee are brought to the attention of the
Committee after such Participant's association with the Company has
ended, any Options held by such Participant may be immediately
terminated by the Committee, and (ii) if such Participant has been
retained pursuant to a written agreement, the Participant's
relationship with the Company will be deemed terminated for "cause" for
purposes of the Plan only if the Participant's association with the
Company is considered under the circumstances to have been terminated
for cause for purposes of such written agreement.

4.9. TRANSFERABILITY OF OPTIONS.

(a) Incentive Options. Incentive Options may not be
transferred or assigned other than by will or the laws of descent and
distribution and may be exercised during the lifetime of the
Participant only by the Participant or by the Participant's legally
authorized representative, and each Option Agreement in respect of an
Incentive Option will so provide. The designation by a Participant of
a beneficiary will not constitute a transfer of the Option.

(b) Nonstatutory Options.

(1) Participants Other Than Reporting
Participants. With respect to Nonstatutory Options granted
hereunder to any Participant who is not a Reporting

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<PAGE> 16
Participant, the Committee may, in its sole discretion,
provide in any Option Agreement (or in an amendment to any
existing Option Agreement) such provisions regarding
transferability of the Nonstatutory Options as the Committee,
in its sole discretion, deems appropriate.

(2) Reporting Participants. Except as may be
specified by the Committee in accordance with the following
paragraph, a Nonstatutory Option granted to a Reporting
Participant may not be transferred or assigned other than by
will or the laws of descent and distribution or pursuant to the
terms of a qualified domestic relations order, as defined by
the Code or Title I of ERISA, or the rules thereunder. The
designation by a Reporting Participant of a beneficiary will
not constitute a transfer of the Option.

The Committee may, in its sole discretion, provide in
any Option Agreement (or in an amendment to any existing Option
Agreement) that Nonstatutory Options granted hereunder to a
Reporting Participant, other than Nondiscretionary Options, may
be transferred to members of the Reporting Participant's
immediate family, trusts for the benefit of such immediate
family members and partnerships in which such immediate family
members are the only partners, provided that there cannot be
any consideration for the transfer. The Committee may waive or
modify any limitation contained in this Section that is not
required for compliance with Rule 16b-3.

4.10. LIMITATION OF RIGHTS IN STOCK. A Participant will not be
deemed for any purpose to be a shareholder of the Company with respect to
any of the shares of Stock covered by an Option, except to the extent the
Option has been exercised with respect thereto and, in addition, a
certificate has been issued therefor and delivered to the Participant or his
agent. Any Stock issued pursuant to the Option will be subject to all
restrictions upon the transfer thereof that may be now or hereafter imposed
by the Articles of Incorporation of the Company (as amended or restated from
time to time), the Bylaws of the Company (as amended or restated from time
to time) and any applicable Employment Agreement.

ARTICLE V
RESTRICTED STOCK

5.1 GRANT OF RESTRICTED STOCK AWARDS. The Committee may, in its
sole discretion, grant Restricted Stock Awards in accordance with the terms
and conditions set forth in the Plan. Each Restricted Stock Agreement may
contain such additional terms and conditions, not inconsistent with the
terms of the Plan, as are determined by the Committee in its sole
discretion.

5.2. TERMS AND CONDITIONS. Each Restricted Stock Award confers upon
the recipient thereof the right to receive a specified number of shares of
Stock in accordance with the terms

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<PAGE> 17
and conditions of each Participant's Restricted Stock Agreement. The
general terms and conditions of a Restricted Stock Award will be as follows:

(a) Any shares of Stock awarded hereunder to a Participant
will be restricted for a period of time to be determined by the
Committee for each Participant at the time of the Award, which period
shall be not less than six months nor more than ten years. The
restrictions will prohibit the sale, assignment, transfer, pledge or
other encumbrance of such shares, and will provide for possible
reversion thereof to the Company in accordance with subparagraph (b)
during the period of restriction.

(b) All Restricted Stock awarded under this Plan to a
Participant will be forfeited and returned to the Company in the event
the Participant's employment or service with the Company or a
subsidiary thereof is terminated prior to the expiration of the period
of restriction, unless the Participant's termination of employment or
service is due to his death, Disability or Retirement or unless the
Committee, in its sole discretion, waives the restrictions established
in accordance with subparagraph (a) with respect to any or all of the
shares of Restricted Stock.

(c) In the event of a Participant's death or Disability,
the restrictions established in accordance with subparagraph (a) will
lapse with respect to all Restricted Stock awarded to the Participant
prior to any such event, and the shares of Stock involved will cease to
be Restricted Stock and will no longer be subject to forfeiture to the
Company pursuant to subparagraph (b).

(d) In the event of a Participant's Retirement, the
restrictions established in accordance with subparagraph (a) will
continue to apply unless the Committee in its sole discretion shortens
the restriction period.

(e) Stock certificates issued with respect to Restricted
Stock Awards will be registered in the name of the Participant, but
will be delivered by him to the Company together with a stock power
endorsed in blank. Each such certificate will bear the following
legend:

"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
FORFEITURE, RESTRICTIONS ON TRANSFER AND CERTAIN OTHER TERMS
AND CONDITIONS SET FORTH IN THE AMENDED AND RESTATED 1994
LONG-TERM INCENTIVE PLAN OF MEDICAL ALLIANCE, INC. AND THE
AGREEMENT BETWEEN THE REGISTERED OWNER OF THE SHARES
REPRESENTED BY THIS CERTIFICATE AND MEDICAL ALLIANCE, INC.
ENTERED INTO PURSUANT TO SUCH PLAN."

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<PAGE> 18

From the time of grant of the Restricted Stock Award, the
Participant will be entitled to exercise all rights (including dividend
and voting rights) with respect to the shares represented by such
certificate, subject to forfeiture of such voting rights and the Stock
as provided in subparagraph (b).

(f) Upon the lapse of a restriction period as determined
pursuant to subparagraph (a), the Company will return the stock
certificates representing the shares with respect to which the
restriction has lapsed to the Participant or his legal representative,
and pursuant to the instruction of the Participant or his legal
representative will issue a certificate for such shares that does not
bear the legend set forth in subparagraph (e).

(g) Any other securities or assets (other than ordinary
cash dividends) that are received by a Participant with respect to
Restricted Stock awarded to him, which is still subject to restrictions
established in accordance with subparagraph (a), will be subject to the
same restrictions and will be delivered by the Participant to the
Company as provided in subparagraph (e).

5.3. NOTICE TO COMPANY OF SECTION 83(B) ELECTION. Any Participant
who exercises an election under Section 83(b) of the Code to have his
receipt of Shares of Restricted Stock taxed currently, without regard to
restrictions, must give notice to the Company of such election immediately
upon making such election. Such an election must be made within 30 days
after the effective date of issuance and cannot be revoked except with the
consent of the Internal Revenue Service.

ARTICLE VI
STOCK APPRECIATION RIGHTS

6.1. GRANT OF STOCK APPRECIATION RIGHTS. The Committee may, in its
sole discretion, grant Stock Appreciation Rights in accordance with the
terms and conditions set forth in the Plan. Each Stock Appreciation Rights
Agreement may contain such additional terms and conditions, not inconsistent
with the terms of the Plan, as are determined by the Committee in its sole
discretion.

6.2. TERMS AND CONDITIONS. A Stock Appreciation Right will entitle
a Participant to receive an amount equal to (or if the Committee shall so
determine at the time of grant, less than) the excess of the Market Value on
the date of exercise over the Market Value on the date of grant of such
right (or such other price as is set by the Committee), multiplied by the
number of shares of Stock with respect to which the Stock Appreciation Right
shall have been exercised.

6.3. FORM OF GRANT. A Stock Appreciation Right may be granted in
combination with, in addition to, or completely independent of, an Option or
any other Award.

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<PAGE> 19
6.4. FORM OF PAYMENT. Settlement of a Stock Appreciation Right may
be made (i) in cash, (ii) by certified or cashier's check, (iii) if
permitted by the Committee, in shares of Stock or (iv) in any other form of
valid consideration, as determined by the Committee in its sole discretion.
However, any Stock Appreciation Right exercised upon or subsequent to the
occurrence of an event described in Sections 2.5(i) or 2.5(ii) must be paid
in cash.

6.5. TIME LIMITATIONS. No Stock Appreciation Right may be exercised
unless the Company has complied with the reporting requirements of Section
13(a) of the Exchange Act for a period of one year immediately prior to such
exercise. In addition, no Stock Appreciation Right may be exercised until
six months after the date of grant of such right. Any election by a
Participant to exercise a Stock Appreciation Right must be made during the
period beginning on the third business day following the date of release for
publication of quarterly or annual summary statements of sales and earnings
regarding the Company and ending on the twelfth business day following such
date. This condition will be deemed to be satisfied when the specified
financial data appears on a wire service, financial news service or
newspaper of general circulation or is otherwise first made publicly
available. In the case of any particular exercise of a Stock Appreciation
Right, the Committee may waive or modify any limitation contained in this
Section that is not required for compliance with Rule 16b-3.

6.6. EXERCISE OF STOCK APPRECIATION RIGHTS; EFFECTS ON OPTIONS AND
VICE-VERSA. Each Stock Appreciation Right will be exercisable in accordance
with the terms of the Stock Appreciation Rights Agreement pursuant to which
the Stock Appreciation Right is granted. Whenever a Stock Appreciation
Right is granted in relation to an Option and the exercise of one affects
the right to exercise the other, the number of shares of Stock available
under the Option to which the Stock Appreciation Right relates will decrease
by a number equal to the number of shares of Stock for which the Stock
Appreciation Right is exercised. Upon the exercise of an Option, any
related Stock Appreciation Right will terminate as to any number of shares
of Stock subject to such Stock Appreciation Right that exceeds the total
number of shares of Stock for which the Option remains unexercised.

6.7. TRANSFERABILITY OF STOCK APPRECIATION RIGHTS.

(a) Participants Other Than Reporting Participants.
Subject to Section 6.9, with respect to Stock Appreciation Rights
granted hereunder to any Participant who is not a Reporting
Participant, the Committee may, in its sole discretion, provide in any
Stock Appreciation Rights Agreement (or in an amendment to any existing
Stock Appreciation Rights Agreement) such provisions regarding
transferability of the Stock Appreciation Rights as the Committee, in
its sole discretion, deems appropriate.

(b) Reporting Participants. Subject to Section 6.9 and
except as may be specified by the Committee in accordance with the
following paragraph, a Stock Appreciation Right granted to a Reporting
Participant may not be transferred or assigned other than by will or
the laws of descent and distribution or pursuant to the terms of a
qualified domestic relations order, as defined by the Code or Title I
of ERISA, or the

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<PAGE> 20
rules thereunder. The designation by a Reporting Participant of a
beneficiary will not constitute a transfer of the Stock Appreciation
Right.

Subject to Section 6.9, the Committee may, in its sole
discretion, provide in any Stock Appreciation Rights Agreement (or in
an amendment to any existing Stock Appreciation Rights Agreement) that
Stock Appreciation Rights granted hereunder to a Reporting Participant
may be transferred to members of the Reporting Participant's immediate
family, trusts for the benefit of such immediate family members and
partnerships in which such immediate family members are the only
partners, provided that there cannot be any consideration for the
transfer.

The Committee may waive or modify any limitation contained in
this Section that is not required for compliance with Rule 16b-3.

6.8. TERMINATION OF EMPLOYMENT OR SERVICE. Whenever a Stock
Appreciation Right is granted in relation to an Option and the exercise of
one affects the right to exercise the other, in the event of the termination
of the Participant's employment or service with the Company, the Stock
Appreciation Right may be exercised only during the period, if any, within
which the Option to which it relates may be exercised. If a Stock
Appreciation Right is granted independently of an Option under the Plan, the
following provisions will apply:

(a) Termination of Employment with the Company. If a
Participant ceases to be employed by the Company or any subsidiary
thereof because the Participant is terminated for Cause, any Stock
Appreciation Rights held by that Participant will automatically expire.
If a Participant's employment is terminated for any reason other than
Cause or due to death, such Participant's Stock Appreciation Right will
be exercisable (to the extent exercisable on the date of termination of
the Participant's employment or, if the Committee, in its sole
discretion, has accelerated the vesting of such Stock Appreciation
Right, to the extent exercisable following such acceleration) at any
time within 30 days after he ceases to be an Employee (or within (i)
three months after termination if on account of Retirement or (ii) 12
months after termination if on account of Disability), unless by its
terms it expires earlier or unless the Committee agrees, in its sole
discretion, to extend the term of such Stock Appreciation Right;
provided that the term of any such Stock Appreciation Right will not be
extended beyond its original term. If a Participant dies while
employed by the Company or any subsidiary thereof, or within three
months after ceasing to be an Employee, such Participant's Stock
Appreciation Right will be exercisable (to the extent exercisable on
the date of death, or, if the Committee, in its sole discretion, has
accelerated the vesting of such Stock Appreciation Right, to the extent
exercisable following such acceleration) at any time within 12 months
after the date of death, unless by its terms it expires earlier or
unless the Committee agrees, in its sole discretion, to extend the term
of such Stock Appreciation Right; provided that the term of any such
Stock Appreciation Right will not be extended beyond its original term.
Military or sick leave will not be deemed a termination of employment,
provided that it does not exceed the longer of three months

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<PAGE> 21
or the period during which the absent Participant's reemployment
rights, if any, are guaranteed by statute or by contract. The
foregoing is qualified by the following: (i) if any facts that would
constitute Cause for termination of employment of a Participant are
brought to the attention of the Committee after the Participant's
employment with the Company or any subsidiary thereof has ended, any
Stock Appreciation Rights then held by the Participant may be
immediately terminated by the Committee and (ii) if a Participant is an
Employee employed pursuant to a written Employment Agreement, the
Participant's employment with the Company will be deemed terminated for
"cause" for purposes of the Plan only if the Participant's employment
is considered under the circumstances to have been terminated for cause
for purposes of such agreement.

(b) Termination of Association with the Company. If a
consultant or advisor or other Participant who is not an Employee has
his relationship with the Company terminated for Cause, any Stock
Appreciation Rights held by any such Participant will automatically
expire. In all other cases, any Stock Appreciation Rights held by such
a Participant, to the extent exercisable on the date of termination of
the Participant's association with the Company, will remain exercisable
and will expire in accordance with the terms of the applicable Stock
Appreciation Rights Agreement; provided that (i) if any facts that
would constitute cause for removal or termination of a Participant who
is a consultant or advisor or other person who is not an Employee are
brought to the attention of the Committee after such Participant's
association with the Company has ended, any Stock Appreciation Rights
held by such Participant may be immediately terminated by the Committee
and (ii) if such Participant has been retained pursuant to a written
agreement, the Participant's relationship with the Company will be
deemed terminated for "cause" for purposes of the Plan only if the
Participant's association with the Company is considered under the
circumstances to have been terminated for cause for purposes of such
written agreement.

6.9. TANDEM INCENTIVE OPTION - STOCK APPRECIATION RIGHT. Whenever
an Incentive Option and a Stock Appreciation Right are granted together and
the exercise of one affects the right to exercise the other, the following
requirements shall apply:

(a) The Stock Appreciation Right will expire no later than
the expiration of the underlying Incentive Option.

(b) The Stock Appreciation Right may be for no more than
the difference between the Option Price of the underlying Incentive
Option and the Market Value of the Stock subject to the underlying
Incentive Option at the time the Stock Appreciation Right is exercised.

(c) The Stock Appreciation Right is transferable only when
the underlying Incentive Option is transferable, and under the same
conditions.

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<PAGE> 22
(d) The Stock Appreciation Right may be exercised only
when the underlying Incentive Option is eligible to be exercised.

(e) The Stock Appreciation Right may be exercised only
when the Market Value of the Stock subject to the underlying Incentive
Option exceeds the Option Price of the underlying Incentive Option.

6.10. WRITTEN NOTICE REQUIRED. Any Stock Appreciation Right will be
deemed to be exercised when written notice of exercise has been received by
the Company at its principal office from the person entitled to exercise the
Stock Appreciation Right.

ARTICLE VII
PERFORMANCE SHARES

7.1. GRANT OF PERFORMANCE SHARES. The Committee may, in its sole
discretion, grant Performance Shares in accordance with the terms and
conditions set forth in the Plan. Each Performance Share Agreement may
contain such additional terms and conditions, not inconsistent with the
terms of the Plan, as are determined by the Committee in its sole
discretion.

7.2. TERMS AND CONDITIONS. Performance Shares may be earned based
on the attainment of Performance Goals established by the Committee for a
particular Performance Cycle. The Committee may establish Performance Goals
on the basis of such criteria and to accomplish such objectives as the
Committee may from time to time select.

7.3. AMOUNT OF PAYMENT. After the end of each Performance Cycle, the
Committee will determine the number of Performance Shares earned by each
Participant with respect to the Performance Cycle in accordance with the
following:

(a) If the Performance Goal is attained or exceeded, a
Participant will be deemed to have earned the full number of
Performance Shares granted to the Participant.

(b) If the Minimum Performance Goal is not attained, a
Participant will be deemed to have earned no Performance Shares.

(c) If the Performance Goal is not attained, but the
Minimum Performance Goal is attained or exceeded, the number of
Performance Shares deemed to have been earned by a Participant will be
a portion of the Performance Shares, as determined based on a formula
established by the Committee at the time of grant.

(d) If a Participant's employment or service with the
Company or any subsidiary thereof has terminated because of death,
Disability or Retirement prior to the end of a Performance Cycle, the
number of Performance Shares such Participant will be deemed to have
earned shall be the number of Performance Shares determined as though
such Participant's employment or service had not terminated, multiplied
by a fraction,

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<PAGE> 23
the numerator of which is the number of months such Participant was
employed or served the Company or a subsidiary thereof during the
Performance Cycle (including the month during which employment or
service terminated) and the denominator of which is the total number of
months in the Performance Cycle.

(e) If the Participant's employment or service has
terminated for any reason other than death, Disability or Retirement,
such Participant will be deemed to have earned no Performance Shares
except as and to the extent the Committee may determine; provided that
the number of Performance Shares that may be so determined by the
Committee to have been earned may not exceed the number that would have
been earned had the provisions of Section 7.3(a) been applicable.

(f) At any time prior to the end of a Performance Cycle,
the Committee may adjust downward (but not upward) the Performance Goal
and/or the Minimum Performance Goal as a result of major events
unforeseen at the time the Performance Shares were awarded, such as
changes in the economy, the industry, laws affecting the operation of
the Company or any subsidiary thereof, changes in applicable tax laws
or accounting principles or any other event the Committee determines
would have a significant impact upon the probability of attaining the
previously established Performance Goal and/or Minimum Performance
Goal.

7.4. FORM OF PAYMENT. Payment in respect of earned Performance Shares
will be made to the Participant or, if the Participant has died, to the
Participant's designated beneficiary, as soon as practicable after the
expiration of the Performance Cycle and the Committee's determination under
Section 7.3. Payment in respect of earned Performance Shares may be made in
cash, in shares of Stock or a combination thereof, as determined by the
Committee in its sole discretion at the time of payment.

7.5. ADDITIONAL AWARDS. In the sole discretion of the Committee, a
Performance Share Award may provide the Participant with (i) dividends or
dividend equivalents (payable on a current or deferred basis) and (ii) cash
payments in lieu of or in addition to such Award.

ARTICLE VIII
STOCK UNIT AWARDS

8.1. GRANT OF STOCK UNIT AWARDS. The Committee may, in its sole
discretion, grant Stock Unit Awards in accordance with the terms and
conditions set forth in the Plan. Each Stock Unit Agreement may contain
such additional terms and conditions, not inconsistent with the terms of the
Plan, as are determined by the Committee in its sole discretion.

8.2 TERMS AND CONDITIONS. Stock Unit Awards may be in the form of
Stock or units, the value of which is based, in whole or in part, on the
Market Value of Stock. Stock Unit Awards will be subject to such terms,
restrictions, conditions, vesting requirements and

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<PAGE> 24
payment requirements as the Committee may determine in its sole discretion
at the time of grant, including without limitation the following:

(a) Any shares of Stock that are part of a Stock Unit
Award may be subject to restrictions on sale, assignment, transfer,
pledge or other encumbrance.

(b) Stock Unit Awards may provide for the payment of cash
consideration by the Participant or provide that the Award, and any
Stock to be issued in connection therewith, if applicable, shall be
delivered without the payment of cash consideration.

(d) Stock Unit Awards may provide for deferred payment
schedules and/or vesting over a specified period of employment or
service with the Company or any subsidiary thereof.

8.3. ADDITIONAL AWARDS. In the sole discretion of the Committee, a
Stock Unit Award may provide the Participant with (i) dividends or dividend
equivalents (payable on a current or deferred basis) and (ii) cash payments
in lieu of or in addition to such Award.

ARTICLE IX
TERMINATION, AMENDMENT AND ADJUSTMENT

9.1. TERMINATION AND AMENDMENT OF THE PLAN. The Board (or, if the
Board has specifically delegated this authority to the Committee, the
Committee) may at any time terminate the Plan or make such modifications of
the Plan as it deems advisable; provided that no amendment may be made
without approval of the shareholders of the Company if such approval is
required under the Code, Rule 16b-3 or any requirement under applicable
state law; and provided further that no amendment may be made to Section 4.2
(governing Options to Nonemployee Directors) more often than once in any
six-month period except to conform to applicable provisions of the Code or
ERISA, or the rules and regulations under either such statute. No
termination or amendment of the Plan may, without the consent of the
Participant to whom any Award has theretofore been granted, adversely affect
the rights of such Participant under such Award.

9.2. ADJUSTMENT. In the event of any stock dividend payable in
Stock or any split-up or contraction of the number of shares of Stock after
the date an Award is granted and prior to the exercise in full of an Option
or Stock Appreciation Right or the lapse, waiver and/or satisfaction of any
restrictions or Performance Goals related to a Restricted Stock Award,
Performance Share Award or Stock Unit Award, the number of shares subject to
such Award and, if applicable, the Option Price, will be proportionately
adjusted. In the event of any reclassification or change of outstanding
shares of Stock or in case of any consolidation or merger of the Company
with or into another company or in case of any sale or conveyance to

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<PAGE> 25
another company or entity of the property of the Company as a whole or
substantially as a whole, shares of stock or other securities equivalent in
kind and value to those shares a Participant would have received if he had
held the full number of shares of Stock subject to the Award immediately
prior to such reclassification, change, consolidation, merger, sale or
conveyance (together with all other shares, stock and securities thereafter
issued in respect thereof) will thereupon be subject to the Award. Upon
dissolution or liquidation of the Company, all Awards will terminate, but
the Participant will have the right, immediately prior to such dissolution
or liquidation, to exercise any Option or Stock Appreciation Right to the
extent exercisable on the date of such dissolution or liquidation. No
fraction of a share of Stock will be purchasable or deliverable upon
exercise, but in the event any adjustment hereunder of the number of shares
covered by the Award will cause such number to include a fraction of a
share, such number of shares will be adjusted to the nearest smaller whole
number of shares. In the event of changes in the outstanding Stock by
reason of any stock dividend, split-up, contraction, reclassification, or
change of outstanding shares of Stock of the nature contemplated by this
Section 9.2, the number of shares of Stock available for the purpose of the
Plan as stated in Section 2.3 will be correspondingly adjusted.

ARTICLE X
MISCELLANEOUS

10.1. AMENDMENT AND RESTATEMENT OF PRIOR PLAN. The Plan amends and
restates in its entirety that certain Statutory Incentive Stock Option Plan
of the Company, dated as of January 24, 1990, as amended (the "Prior Plan"),
such that all stock options issued under the Plan shall now be governed by,
and subject to, the Plan, and the Prior Plan is deemed to have been
superseded by the Plan and shall no longer by of any force or effect.

10.2. NOTICES AND OTHER COMMUNICATIONS. All notices and other
communications required or permitted under the Plan will be effective if in
writing and if delivered or sent by certified or registered mail, return
receipt requested (a) if to the Participant, at his residence address last
filed with the Company and (b) if to the Company, at its principal executive
offices, Attention: President, or to such other persons or addresses as the
Participant or the Company may specify by a written notice to the other from
time to time.

10.3. PLAN BINDING ON SUCCESSORS. The Plan will be binding upon the
successors and assigns of the Company.

10.4. NUMBER AND GENDER. Whenever used herein, nouns in the singular
will include the plural where appropriate, and the masculine pronoun will
include the female gender.

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<PAGE> 1
EXHIBIT 4.4

MEDICAL ALLIANCE, INC.
8200 SPRINGWOOD DRIVE, SUITE 200
IRVING, TEXAS 75063

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

SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT

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

NOVEMBER 17, 1995
<PAGE> 2
MEDICAL ALLIANCE, INC.

SERIES B CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT

MEDICAL ALLIANCE, INC., a Texas corporation (the "Company"), and the
persons named on the Schedule of Purchasers attached hereto as Exhibit A
(collectively, the "Investors" and each individually, an "Investor"), enter
into this Series B Convertible Preferred Stock Purchase Agreement, dated as of
November 17, 1995 (the "Agreement"), relating to the issuance by the Company of
certain of its securities.

SECTION 1

DESCRIPTION OF TRANSACTION

1.1 Description of Securities. The Company agrees to issue to the
Investors and the Investors agree to purchase from the Company (a) 362,500
shares of its authorized but unissued Series B Convertible Preferred Stock, par
value $.002 per share (the "Series B Stock"), for a total purchase price of
$1,450,000. The shares of Series B Stock issued to the Investors pursuant to
this Agreement are referred to herein as the "Preferred Shares". The number of
Preferred Shares issued to an Investor is that number of shares listed with
such Investor's name on Exhibit A. The Series B Stock will be convertible into
shares of its common stock, $.002 par value, of the Company (the "Common
Stock"), as provided in the Company's Articles of Incorporation, as amended by
the Articles of Amendment, attached hereto as Exhibit B. Any securities of the
Company issued or issuable upon conversion of the Preferred Shares are referred
to as "Conversion Shares."

1.2 Closing. The closing of the purchase and sale of the
Preferred Shares will take place at the offices of Jackson & Walker, L.L.P.,
901 Main Street, Suite 6100, Dallas, Texas, at 10:00 A.M., on the date of this
Agreement (the "Closing"), or such other time and place as agreed to by the
parties (the "Closing Date"). At the Closing, the Company will deliver to each
Investor a certificate or certificates, each registered in such Investor's name
representing the Preferred Shares being acquired by such Investor upon payment
of the purchase price by such Investor to the Company by check(s) (in the
aggregate amount of $1,450,000).

SECTION 2

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Investors that the
following are true and correct as of the date hereof:

2.1 Organization and Standing; Certificate of Incorporation and
Bylaws. The Company is a corporation duly organized and existing under the
laws of the State of Texas and is in good standing under such laws. The
Company has requisite corporate power and authority to own and operate its
properties and assets, and to carry on its business as presently conducted
<PAGE> 3
and as proposed to be conducted. Except as set forth in Schedule 2.1, the
Company is qualified to do business as a foreign corporation in each
jurisdiction where the ownership of its properties or the conduct of its
business requires such qualification and where the failure so to be qualified
would have a material adverse effect on the Company's business as now
conducted. Schedule 2.1 sets forth a complete and accurate listing of the
states where the Company currently owns properties and/or conducts business and
the Company is in the process of qualifying to do business as a foreign
corporation. The Company has furnished the Investors with copies of its
Articles of Incorporation and Bylaws, as amended. Said copies are true,
correct and complete and contain all amendments through the Closing Date.

2.2 Corporate Power. The Company has all requisite legal and
corporate power and authority to execute and deliver this Agreement, and has
all requisite legal and corporate power and authority to sell and issue the
Preferred Shares hereunder, to issue the Common Stock issuable upon conversion
of the Preferred Shares, and to carry out and perform its obligations under the
terms of this Agreement.

2.3 Subsidiaries. Except as set forth on Schedule 2.3, the
Company has no subsidiaries and does not otherwise own or control, directly or
indirectly, any equity interest in any corporation, association or business
entity.

2.4 Capitalization. As of the Closing (after giving effect to the
issuance of the Preferred Shares) the authorized and issued and outstanding
capital stock of the Company will be as set forth on Schedule 2.4 attached
hereto. The outstanding shares of capital stock of the Company have been duly
authorized and validly issued, and are fully paid and nonassessable. The
Company has reserved up to 362,500 shares of Common Stock for issuance upon
conversion of the Preferred Shares. Except as set forth above or on Schedule
2.4, there are no options, warrants or other rights outstanding to purchase any
of the Company's authorized and unissued capital stock. Schedule 2.4 contains
a complete and accurate listing of the Company's stock plans or other
arrangements.

2.5 Authorization. All corporate action on the part of the
Company, its directors and shareholders necessary for (a) the authorization,
execution, delivery and performance of this Agreement by the Company, (b) the
authorization, sale, issuance and delivery of the Preferred Shares and (c) the
performance of all of the Company's obligations hereunder has been taken or
will be taken prior to the Closing. This Agreement, when executed and
delivered by the Company, shall constitute a valid and binding obligation of
the Company, enforceable in accordance with its terms, except as the
indemnification provisions of Section 8.6 hereof may be limited by principles
of public policy, and subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies. The
Preferred Shares, when issued in compliance with the provisions of this
Agreement, will be validly issued, will be fully paid and nonassessable, and
will have the rights, preferences, and privileges described in Exhibit B
(unless amended after the date hereof). Common Stock issuable upon conversion
of the

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<PAGE> 4
Preferred Shares have been duly and validly reserved and, when issued in
compliance with the provisions of this Agreement and Exhibit B, will be validly
issued, and will be fully paid and nonassessable; and the Preferred Shares and
such shares of Common Stock will be free of any liens or encumbrances, other
than as set forth in this Agreement, and any liens or encumbrances created by
or imposed upon the holders through no action of the Company; provided,
however, that the Preferred Shares and the Conversion Shares may be subject to
restrictions on transfer under state and/or federal securities laws as set
forth herein and that certain Amended and Restated Stock Buy and Sell
Agreement, dated July 10, 1992, as may be amended from time to time (the
"Shareholders' Agreement"), in substantially the form of Exhibit C. The
Preferred Shares and the shares of Common Stock issuable upon conversion of the
Preferred Shares are not subject to any (a) preemptive rights which have not
been waived as of the Closing Date, or (b) rights of first refusal, except, in
each case, as set forth in this Agreement, that certain Series A Convertible
Preferred Stock Purchase Agreement, dated as of July 10, 1992, by and between
the Company and Mapleleaf Capital, Ltd., and the Shareholders' Agreement.

2.6 Financial Statements. The Company has delivered to each
Investor its audited balance sheet and audited statement of operations for the
fiscal year ended December 31, 1994, and unaudited balance sheet and statement
of operations for the seven-month period ended July 31, 1995 (the "Financial
Statements"). The Financial Statements are complete and correct in all
material respects and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the period
indicated ("GAAP"). The Financial Statements fairly present the financial
condition and results of operations of the Company at such dates or for such
periods, subject, in the case of the unaudited interim financial statements, to
changes resulting from normal year-end adjustments (none of which would either,
alone or in the aggregate, be materially adverse to the financial condition or
operating results of the Company). Except as shown on Schedule 2.6, since July
31, 1995, there has been no change in the assets, liabilities, financial
condition or operating results of the Company from that reflected in the
Financial Statements, except changes in the ordinary course of business that
have not been, in the aggregate, materially adverse to the assets, properties,
financial condition, operating results or business of the Company.

2.7 Material Liabilities. Except as set forth in Schedule 2.7,
the Company has no material liabilities or obligations, absolute or contingent
(individually or in the aggregate), other than (a) liabilities and obligations
disclosed in the Financial Statements, (b) liabilities and obligations incurred
in the ordinary course of business subsequent to July 31, 1995, and (c)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected in the Financial Statements. Schedule 2.7 sets forth a complete and
accurate listing of the Company's indebtedness for borrowed money as of the
Closing Date, which either the Company has directly or indirectly created,
incurred, assumed or guaranteed, and a description of any security for such
indebtedness.

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<PAGE> 5
2.8 Title to Properties and Assets; Liens, Etc. The Company has
good and marketable title to its properties and assets which it owns, and has a
valid leasehold interest in each property and asset it leases, in each case
subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than
(a) as listed in Schedule 2.8, (b) as disclosed in the Financial Statements
(including the notes thereof), (c) the lien of current taxes not yet due and
payable, and (d) possible minor liens and encumbrances which do not in any case
materially detract from the value of the property subject thereto or materially
impair the operations of the Company.

2.10 Litigation, etc. There are no material actions, suits,
proceedings or investigations pending against the Company (or, to the best of
the Company's knowledge, any threat thereof) or its properties before any court
or governmental agency.

2.12 Registration Rights. Except as set forth in this Agreement
and Schedule 2.12, the Company is not under any contractual obligation to
register (in compliance with the filing requirements and being deemed effective
under the Securities Act of 1933, as amended (the "Securities Act")) any of its
presently outstanding securities or any of its securities which may hereafter
be issued.

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<PAGE> 6
offer, sale or issuance of the Preferred Shares (and the Common Stock issuable
upon conversion of the Preferred Shares), or (c) the consummation of any other
transaction contemplated hereby, except (i) for those which have been obtained
on or before the Closing Date or (ii) qualification (or taking such action as
may be necessary to secure an exemption from qualification, if available) of
the offer and sale of the Preferred Shares under applicable Blue Sky laws,
which filings and qualifications, if required, will be accomplished in a timely
manner.

2.15 Material Contracts and Commitments. Each material contract,
agreement and instrument which is material to the financial condition,
operating results or business of the Company and to which the Company is a
party is listed in Schedule 2.15 attached hereto. To the Company's knowledge,
all such contracts, agreements and instruments are valid and enforceable
obligations of the parties thereto in accordance with their respective terms,
and the Company has not waived any rights thereunder.

2.16 Tax Returns and Payments. The Company has fully filed or
timely extended all federal, state and local tax returns required to be filed
and is not currently delinquent or subject to penalties, as to any federal,
state and other taxes, assessments and governmental charges upon the Company
and its properties, the failure of which to file or pay would have a material
adverse effect on the financial condition or operations of the Company. The
charges, accruals and reserves on the books of the Company with respect to
federal taxes for the fiscal periods of the Financial Statements are adequate.
There are currently no agreements, waivers or other arrangements providing for
an extension of time with respect to the filing of any tax return by, or the
payment of any tax, governmental charge or deficiency by, or the assessment of
any tax, governmental charge or deficiency against, the Company. There are not
any actions, suits, proceedings, investigations or claims now pending, or to
the Company's knowledge, threatened, against the Company in respect of taxes,
governmental charges or assessments, or any matters under discussion with any
governmental authority relating to taxes, governmental charges or assessments,
or any claims for additional taxes, governmental charges or assessments
asserted by any such authority.

2.17 Collective Bargaining Agreements. The Company has no
collective bargaining agreement with its employees.

2.18 Insurance. Set forth on Schedule 2.18 is a listing of all
insurance policies carried by the Company.

2.19 Rights. The Company has ownership of, or valid licenses to
use, all patents, trademarks, copyrights and other proprietary rights used in
its business. To the best knowledge

- 5 -
<PAGE> 7
of the Company, its present products do not infringe any patent, copyright,
trademark or other proprietary rights of others, the Company does not believe
it is utilizing the inventions, copyrights, or other proprietary rights of any
employee (or person currently intended to be hired) created prior to his
employment with the Company which the Company does not have rights to use, and
the Company has not received any notice from any third party of any such
alleged infringement by the Company. To the Company's knowledge, the Company
has taken reasonable steps to establish and preserve its ownership of all
patent, trademark, copyright, trade secret and other proprietary rights with
respect to its products and technology which are material to the operation of
the Company's business and which they own and use, including the filing, where
the Company has deemed appropriate, patents, trademarks and copyrights. The
Company is not aware of any infringement by others of its patents trademarks,
copyrights or other proprietary rights in any of its products or technology.

2.20 Use of Funds. The Company will use the funds obtained from
the Investors pursuant to the sale and issuance of the Preferred Shares being
issued on the date hereof as shown on Schedule 2.20.

2.21 Compliance with ERISA. The Company does not maintain a
pension or profit sharing plan, and is not subject to any of the funding or
vesting requirements of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or any requirement which could create an accumulated funding
deficiency within the meaning of ERISA. The Company has not incurred any
liability to the Pension Benefit Guaranty Corporation established under ERISA
(or any successor thereto under ERISA). The consummation of the transactions
set forth in this Agreement will not constitute a "prohibited transaction"
within the meaning of Section 4975 of the Internal Revenue Code of 1986, as
amended, or Section 406 of ERISA.

2.22 Offering. Subject to the accuracy of each Investor's
representations in Section 3 hereof, the offer, sale and issuance of the
Preferred Shares to be issued in conformity with the terms of this Agreement,
and the issuance of the Common Stock to be issued upon conversion of the
Preferred Shares, constitute transactions exempt from the registration
requirements of Section 5 of the Securities Act.

2.23 Brokers or Finders, Other Offers. The Company has not
incurred, as a result of any action taken by the Company, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement.

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<PAGE> 8
additional disclosures of material facts that the Company believes necessary in
order to make the statements contained in this Agreement not misleading.

SECTION 3

REPRESENTATIONS AND WARRANTIES OF THE INVESTORS

Each Investor hereby severally represents and warrants to the Company
that the following are true and correct as of the date hereof:

3.3 Investment. It is acquiring the Preferred Shares and the
underlying Common Stock for investment for its own account, not as a nominee or
agent, and not with the view to, or for resale in connection with, any
"distribution." It understands that the Preferred Shares and the underlying
Common Stock to be purchased have not been, within the meaning of the
Securities Act, registered under the Securities Act or any state securities
laws by reason of specific exemptions from the registration provisions of the
Securities Act and any applicable state securities laws, the availability of
which depend upon, among other things, the bona fide nature of the investment
intent and the accuracy of such Investor's representations as expressed herein.

3.4 Rule 144, etc. It acknowledges that the Preferred Shares and
the underlying Common Stock must be held indefinitely unless subsequently
registered under the Securities Act and any applicable state securities act or
unless exemptions from such registration are available. It is aware of the
provisions of Rule 144 promulgated under the Securities Act which permit the
resale of shares purchased in a private placement subject to the satisfaction
of certain conditions, including, among other things, the existence of a public
market for the shares, the availability of certain current public information
about the Company, the resale occurring not less than two years after a party
has purchased and paid for the security to be sold, the sale being effected
through a "broker's transaction" or in transactions directly with a "market
maker" and the number of shares being sold during any three-month period not
exceeding specified limitations.

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<PAGE> 9
3.5 No Public Market. It understands that no public market now
exists for any of the securities issued by the Company and that the Company has
made no assurances that a public market will ever exist for the Company's
securities.

3.9 Residency/Principal Place of Business. It was formed under
the laws of, and its principal place of business is, the jurisdiction listed on
Exhibit A.

3.10 Purpose. It was not formed for the purpose of making an
investment in the Company.

3.11 No Breach. The execution, delivery and performance by such
Investor of this Agreement and the Shareholders' Agreement, the consummation of
the transactions contemplated hereby and thereby and the ownership of the
Preferred Shares does not (a) conflict with or result in a breach of the terms,
conditions or provisions of the articles of incorporation, bylaws or limited
partnership agreement of such Investor (as may be applicable), or (b) result in
a violation of any investment restriction to which such Investor is subject.

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<PAGE> 10
SECTION 4

CONDITIONS TO CLOSING OF INVESTORS

Each Investor's obligations to purchase the Preferred Shares at the
Closing is, at the option of each Investor, subject to the fulfillment as of
the Closing Date of the following conditions:

4.3 Opinion of Company's Counsel. The Investors shall have
received from Jackson & Walker, L.L.P., counsel to the Company, an opinion
addressed to them, dated the Closing Date, with respect to the matters set
forth in Exhibit D attached hereto.

4.4 Secretary's Certificate. The Company shall have delivered to
the Investors a certificate of the Secretary of the Company dated as of the
Closing Date, in the form of Exhibit E attached hereto.

4.5 Blue Sky. The Company shall have obtained all necessary Blue
Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the issuance of the Preferred Shares to
the Investors, and the offer and sale of the Preferred Shares to the Investors,
and the Common Stock issuable upon conversion of the Preferred Shares.

4.6 Articles of Amendment. The Company shall have filed Articles
of Amendment with the Secretary of State of Texas in substantially the form of
Exhibit B.

4.7 Legal Matters. All material matters of a legal nature which
pertain to this Agreement and the transactions contemplated hereby shall have
been reasonably approved by counsel to the Investors.

4.8 SBA Declarations. The Company shall have provided to the
Investors (as appropriate) completed and executed Small Business Administration
Forms 652 (Assurance of Compliance for Nondiscrimination) and 480 (Size Status
Declaration).

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<PAGE> 11
SECTION 5

CONDITIONS TO CLOSING OF COMPANY

The Company's obligation to sell and issue the Preferred Shares to be
issued at the Closing is, at the option of the Company, subject to the
fulfillment as of the Closing Date of the following conditions:

5.3 Legal Matters. All material matters of a legal nature which
pertain to this Agreement and the transactions contemplated hereby shall have
been reasonably approved by counsel to the Company.

5.4 Shareholder's Agreement. Each Investor shall have become a
party to the Shareholder's Agreement.

SECTION 6

COVENANTS OF THE COMPANY

Until the first to occur of (i) the Investors hold less than 100,000
Preferred Shares or (ii) a Qualified Public Offering (as defined in Article
Four, Section C.4(b)(i) of the Articles of Incorporation, as amended), the
Company hereby covenants and agrees as follows:

6.1 Financial Information. The Company will mail the following
reports to each Investor:

(a) As soon as practicable after the end of each month,
and in any event within sixty (60) days thereafter, a balance sheet of the
Company as at the end of such month, and a statement of operations, and
statement of cash flow of the Company, for each month and for the current
fiscal year of the Company, to date, prepared in accordance with GAAP (or
accompanied by an explanatory note, which describes any changes in accounting
principles from those used in prior periods), together with a comparison of
such statements to the corresponding budget of the current fiscal year, changes
resulting from year-end audit adjustments and certified by the principal
financial or accounting officer of the Company.

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<PAGE> 12
(b) As soon as practicable after the end of each fiscal
year, and in any event within one hundred twenty (120) days thereafter, a
balance sheet of the Company as of the end of such fiscal year, and a statement
of operations and statement of cash flow of the Company for such year, prepared
in accordance with GAAP and setting forth in each case in comparative form the
figures for the previous fiscal year (except for the first year), all in
reasonable detail and certified by the principal financial or accounting
officer of the Company and audited by and accompanied by the report of
independent public accountants of national standing (i.e., one of the Big Six
accounting firms) selected by the Board of Directors.

For so long as an Investor is eligible to receive reports under this
Section 6.1, the Company will permit each Investor to inspect at the Investor's
expense any of the properties or books and records of the Company, to make
copies of extracts from such books and records and to discuss the affairs and
condition of the Company with representatives of the Company, all to such
reasonable extent and at such reasonable times and intervals as such Investor
may reasonably request. If the Investor is a person or entity other than the
Investor that is the signatory to this Agreement, the right to inspect the
properties or books or records of the Company granted under this Section 6.1
may be exercised only with the consent of the Company, which consent will not
be unreasonably withheld. Any Investor who exercises the right to inspection
must, unless otherwise required by law, at the request of the Company, sign an
agreement to hold in confidence any confidential information about the Company
received as a result of such inspection under circumstances indicating the
confidentiality of such information until the Company has publicly disclosed
such information or until disclosure is required by law or by court order. The
rights granted to any Investor under this Section 6.1 will continue until the
Company has commenced filing periodic reports with the Commission pursuant to
the requirements of Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934, as amended (the "1934 Act"), and will then be suspended, subject
to resumption if the Company should thereafter cease filing such reports.

6.2 SBA Information. The Company, within twenty (20) days after
an Investor shall have made a request therefor, shall furnish to such Investor
in writing all information reasonably available to the Company which the
Investor shall request with respect to the Company or any firm or corporation
in which the Company may from time to time have or have had any interest, which
is needed in connection with the preparation of SBA Form 468 or any other
report the Investor may be required to make to any governmental agency or
regulatory authority in connection with its purchase or ownership of the
Preferred Shares or Common Stock issued upon conversion of the Preferred
Shares.

- 11 -
<PAGE> 13
6.3 Insurance. From and after the Closing, the Company shall
maintain such insurance with coverages and in the amounts as the Company shall
reasonably determine to be necessary and appropriate to protect the assets of
the Company.

6.4 Negative Covenants. Until the occurrence of a Qualified
Public Offering (as defined in Article Four, Section C, subsection 4(b)(i) of
the Company's Articles of Incorporation), the Company shall not, without the
prior written consent of the holders of at least sixty-six and two-thirds
percent (66 - 2/3%) of the then outstanding Preferred Shares and Conversion
Shares:

(a) except as provided in the Articles of Amendment,
declare or pay any dividends on the Common Stock;

(b) repurchase or redeem any shares of Common Stock
except as provided in Schedule 6.3 attached hereto;

(c) make any loans or advances to employees or
consultants of the Company, other than in the ordinary course of business as
part of travel advances or salary advances, and other than loans to employees
or consultants of the Company approved by the Board of Directors in amounts not
to exceed $5,000 per individual or $50,000 in the aggregate at any time;

(d) enter into any guaranty arrangement, or mortgage or
pledge, or create a security interest in, or permit any subsidiary to mortgage,
pledge or create a security interest in, all or substantially all of the assets
of the Company or such subsidiary, other than a guaranty arrangement or a
security interest in the assets of the Company or such subsidiary as part of
(i) financing obtained from a national or state chartered bank or from regular
commercial financing sources for accounts receivable or (ii) any security
interest related to a lease or financing of equipment by the Company;

(f) enter into a line of business that materially differs
from the current business of the Company, which currently consists of providing
mobile surgical services to physicians offices and other alternative outpatient
settings (the "Business"); or

- 12 -
<PAGE> 14
Preferred Shares is greater than or equal to the following amounts, plus all
accrued and unpaid dividends:

DATE PER SHARE PROCEEDS
---- ------------------

July 1, 1995 through June 30, 1996 $ 9.00

July 1, 1996 through June 30, 1997 $11.00

July 1, 1997 through June 30, 1998 $13.00

6.5 SBA Repurchase Obligation. If the Company uses the proceeds
received from the sale of the Preferred Shares in violation of the rules and
regulations promulgated by the Small Business Administration (the "SBA"), it
shall give each Investor who is either a small business investment corporation
or a small business investment partnership, as defined by the rules and
regulations promulgated by the SBA (a "SBIC Purchaser"), the right in its sole
and absolute discretion to demand (regardless of the number of Preferred Shares
then held by such Investor), upon 30 days' notice, that the Company repurchase,
at the price paid hereunder by such SBIC Purchaser to the Company, all of the
Preferred Shares purchased by such SBIC Purchaser hereunder; provided, however,
that if on the date specified for repurchase in such notice, the Company shall
not have sufficient funds legally available for such repurchase, the Company
shall repurchase a pro rata portion of each such SBIC Purchaser's Preferred
Shares out of funds legally available therefor and shall repurchase the
remaining Preferred Shares of such holders as soon as practicable after the
Company has funds legally available therefor. All amounts due hereunder shall
be paid to such SBIC Purchaser by certified check, cashier's check or wire
transfer in immediately available funds. In the event any Preferred Shares are
repurchased by the Company hereunder, the stock certificates evidencing said
shares shall be surrendered by such SBIC Purchaser to the Company and canceled
by the Company. Notwithstanding the foregoing, to the extent that SBA
regulations permit the Company to cure any default under this Section 6.5, the
Company may cure such default prior to the expiration of the 30- day notice
period above, and in such case the rights of such SBIC Purchaser under this
Section 6.5 shall cease with respect to such default. Any such cure shall in
no way be deemed to limit such SBIC Purchaser's right under this Section 6.5
with respect to any subsequent default. Nothing in this Section 6.5 shall be
construed to restrict or otherwise limit such SBIC Purchaser's rights to seek
all other remedies available to it as provided hereunder, or at law or in
equity, including the remedy of specific performance. The provisions of this
Section 6.5 shall expire upon evidence satisfactory to such SBIC Purchaser that
the Company has utilized the proceeds received pursuant to this Agreement in a
manner that is consistent with their use reported to the SBA on SBA Form 1031.

- 13 -
<PAGE> 15
SECTION 7

COVENANTS OF THE INVESTORS

7.1 Confidential Information. Each Investor acknowledges that
during the course of evaluating the Company and the Business, it has had access
to, and will in the future continue to receive, or otherwise have access to,
confidential and proprietary information regarding the Company and the
Business. Each Investor hereby agrees not to disclose, and to use its
reasonable best efforts to cause its Affiliates not to disclose, to any person,
and not to use for its own account, any such information, or any information
regarding the Company or the Business which such Investor hereafter comes to
possess and which such Investor knows or has reason to believe is confidential,
without the prior express written consent of the Company unless and to the
extent that such information (a) becomes generally known to and available for
use by the public other than as a result of the breach of this Section 7.1, (b)
is required to be disclosed by law, court order or similar legal compulsion (in
which case the person being so compelled will promptly notify the Company of
such disclosure and the extent of such disclosure) or (c) was known by such
Investor or its Affiliates prior to its disclosure to such Investor or its
Affiliates by the Company. As used herein, an "Affiliate" of any Investor
means any person who, either directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control with,
such Investor. Notwithstanding anything to the contrary contained in this
Section 7.1, each Investor shall be entitled to provide summaries of the
financial and related information of the type currently provided to such
Investor's limited partners and/or shareholders in the ordinary course of
reporting to such persons.

SECTION 8

REGISTRATION RIGHTS

- 14 -
<PAGE> 16
Securities are not included for this reason, the Company will permit the
Investors who have requested participation to include all shares requested to
be included in the registration on a pro rata basis, based upon Common Stock
owned or obtainable by such holder.

8.2 Required Registrations. If one or more of the Investors
holding at least a forty percent (40%) of the Conversion Shares notifies the
Company in writing that such Investor(s) intend to offer for public sale at
least forty- five percent (45%) of the shares of Common Stock issued or
issuable upon conversion of the Preferred Shares, the Company will notify all
of the Investors of its receipt of such notification. Upon the written request
of any Investor delivered to the Company within fifteen (15) days after
delivery from the Company of such notification, the Company will use its best
efforts to cause the Registrable Securities as may be requested by any
Investors (including the Investor(s) giving the initial notice) to be included
in a registration statement under the Securities Act. All expenses of the
first registration pursuant to this Section 8.2 and the reasonable fees and
expenses of one (1) independent counsel for the Investors will be borne by the
Company (excluding all underwriting discounts, selling commissions and stock
transfer taxes applicable to the securities registered by such Investor). The
Investors will bear their pro rata share (based upon the securities included in
the registration) of reasonable fees and expenses associated with any
subsequent registration pursuant to this Section 8.2. The Company will not be
required to file more than two (2) registration statements pursuant to this
Section 8.2, and will not be required to file any registrations under this
section until the earlier of (a) December 31, 1996, or (b) six (6) months
following the date the Company files a registration statement under the
Securities Act. This Section 8.2 will not apply to requests for registration
on Form S-3 (or successor form) which will be governed by Section 8.3.

8.3 Form S-3. Once the Company is eligible to effect a
registration of its securities under Form S-3 (or a successor form), the
Investors will have the right to request, and the Company shall use its best
efforts to effect, registrations of shares of their Registrable Securities on
Form S-3 (but no more than one such registration during any one fiscal year) as
long as (a) Investor(s) holding at least twenty-five percent (25%) of the then
outstanding Conversion Shares notify the Company of their desire to register at
least ten percent (10%) of the outstanding Conversion Shares and (b) the
aggregate proposed offering price (based upon the current market price of the
Common Stock) is not less than $500,000.00 for each registration.

The Company will give notice to all Investors of the request for
registration pursuant to this Section 8.3. Upon written request of any
Investor delivered to the Company within fifteen

- 15 -
<PAGE> 17
(15) days after delivery from the Company of such notification, the Company
will use all reasonable efforts to cause the registration of all shares of
Registrable Securities on Form S-3 or such successor form to the extent
requested by the Investor(s). All expenses incurred in connection with the
registrations requested pursuant to this Section 8.3, including the reasonable
fees and expenses of one (1) independent counsel for the selling Investor(s),
will be borne by the Company (excluding all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
such Investor).

8.5 Procedure for Registration. Whenever the Company is required
under this Agreement to register Common Stock, it agrees to do the following:

(a) Use all reasonable efforts to prepare promptly for
filing with the Commission a registration statement and such amendments and
supplements to said registration statement and the prospectus as may be
necessary to declare or keep the registration statement effective and to comply
with the provisions of the Securities Act for the period necessary to complete
the proposed public offering, but not more than 180 days;

(c) Enter into any underwriting agreement with provisions
reasonably required by the proposed underwriter for the selling Investor(s), if
any;

(d) Use all reasonable efforts to register or qualify the
Common Stock covered by the registration statement under the securities or
"blue-sky" laws of such jurisdictions as any selling Investor(s) may reasonably
request, although the Company will not have to register in any states that
require it to qualify to do business or subject itself to general service of
process, and for a registration under Section 8.1, the Company will not be
required to register in more states than is necessary to permit the sale of the
securities; and

- 16 -
<PAGE> 18
material fact, and the Company determines reasonably and in good faith that
such disclosure would have a material adverse effect on the Company.

8.6 Indemnification. Subject to applicable law, the Company will
indemnify each Investor holding Registrable Securities included in the
registration statement, and each person controlling any of them, against all
claims, losses, damages and liabilities, including legal and other expenses
reasonably incurred, arising out of any untrue or allegedly untrue statement of
a material fact contained in the registration statement, or any omission or
alleged omission to state a material fact required to be stated in the
registration statement or necessary to make the statements not misleading, or
arising out of any violation by the Company of the Securities Act, any state
securities or "blue-sky" laws or any applicable rule or regulation. This
indemnification will not apply to any claims, losses, damages or liabilities to
the extent they arise out of or are based upon an untrue statement or omission
based upon information furnished in writing to the Company by such Investor, or
controlling person, respectively, expressly for use in the registration
statement. With respect to such untrue statement or omission in the
information furnished in writing to the Company by such Investor, such person
will indemnify the underwriters, the Company, its directors and officers, the
other persons selling securities under the registration statement and each
person controlling any of them against any losses, claims, damages, expenses or
liabilities to which any of them may become subject as a result of such untrue
statement or omission (including those incurred in connection with
investigating or defending against such claims).

8.9 Limitations on Subsequent Registration Rights. After the date
hereof, the Company will not, without the prior written consent of Investors
representing at least a majority of the Preferred Shares and Conversion Shares,
taken together as a class, enter into any agreement with any holder or
prospective holder of any securities of the Company which would allow such
holder or prospective holder (a) to make a demand registration which could
result in such registration statement being declared effective prior to the
earlier of either the date set forth in Section 8.2, or within ninety (90) days
of the effective date of any registration effective

- 17 -
<PAGE> 19
pursuant to Section 8.2, or (b) that would allow any such holder or prospective
holder to have greater rights than the Investors under Section 8.1 or 8.3.

SECTION 9

DEFAULT

9.1 Events of Default. Each of the following events shall be an
Event of Default hereunder:

(a) If the Company shall default in the performance of or
compliance with any of its respective covenants contained in this Agreement or
any covenant regarding the Investors' rights under the Shareholders' Agreement
or any obligations of the Company to holders of Preferred Shares under the
terms of the Articles of Amendment, and such default shall not have been
remedied within thirty (30) days after written notice thereof shall have been
given to the Company, as applicable, by one or more of the holders of the
Preferred Shares and/or Conversion Shares;

(b) If any material representation or warranty made in
writing by or on behalf of the Company herein or pursuant hereto or otherwise
in connection with the transactions contemplated hereby shall prove to have
been false or incorrect in any material respect on the date as of which made
and the effect of falsity or incorrectness shall not have been remedied within
thirty (30) days after written notice thereof shall have been given to the
Company by one or more holders of a majority of the then issued and outstanding
Preferred Shares and/or Conversion Shares; provided, however, that such notice
and cure period shall only be applicable if such falsity or incorrectness is
capable of being remedied within such period; and

(c) If the Company shall make an assignment for the
benefit of creditors, or shall admit in writing its inability to pay its debts
as they become due, or shall file a voluntary petition in bankruptcy, or shall
be adjudicated a bankrupt or insolvent, or shall file any petition or answer
seeking for itself any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, or shall file any answer admitting or not contesting the
material allegations of a petition filed against the Company in any such
proceedings, or shall seek or consent to or acquiesce in the appointment of any
trustee, receiver or liquidator of the Company or of all or any substantial
part of the properties of the Company, or if the Company or its directors or
the majority shareholders shall take any action looking to the dissolution or
liquidation of the Company.

9.2 Remedies on Default. In case any one or more Events of
Default or the breach of any other agreement or covenant contained herein shall
occur and be continuing, the holder of any Preferred Share and/or Conversion
Share may proceed to protect and enforce the rights of such holder by an action
at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any other
documents executed

- 18 -
<PAGE> 20
pursuant to the transactions contemplated herein, or for an injunction against
a violation of any of the terms hereof or thereof, or in aid of the exercise of
any power granted hereby or thereby or by law. The Company acknowledges that
any breach or violation of the representations and covenants contained in this
Agreement or the Shareholders' Agreement will cause substantial damages and
irreparable harm to the Investors, and that the remedy at law for such breach
will be inadequate. In the event of any breach of this Agreement or the
Shareholders' Agreement, the Investors will be entitled to actual damages and
temporary and permanent injunctive relief to prevent the breach or further
breach or violation of any provisions of this Agreement or the Shareholders'
Agreement, without the necessity of proving actual damages.

If any holder of any Preferred Share and/or Conversion Share shall
give any notice or take any other action in respect of a claimed default, the
Company shall forthwith give written notice thereof to all other holders of the
Preferred Shares and/or Conversion Shares at the time outstanding describing
the notice or action and the nature of the claimed default. No course of
dealing and no delay on the part of any holder of any Preferred Shares and/or
Conversion Shares in exercising any right shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies now or hereafter
available by law, in equity, by statute or otherwise.

SECTION 10

Miscellaneous

10.1 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of Texas.

10.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by an Investor and
the closing of the transactions contemplated hereby; notwithstanding, however,
that the representations and warranties contained in Section 2 shall survive
only for a period of two (2) years after the Closing Date. Notwithstanding
anything herein to the contrary, no Investor may recover damages for any breach
of any representation, warranty or covenant of the Company in this Agreement
and the documents related hereto if such Investor had actual knowledge of the
facts and circumstances giving rise to such claim prior to the Closing.

10.3 Successors and Assigns. Except as otherwise provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.

10.4 Entire Agreement; Amendment. This Agreement and the other
documents delivered pursuant hereto (including those contained in the Exhibits
and Schedules) at the Closing constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof,
and no party shall be liable or bound to any other party in any manner by any
warranties, representations or covenants except as specifically set

- 19 -
<PAGE> 21
forth herein or therein. Except as expressly provided herein, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the party against whom enforcement
of any such amendment, waiver, discharge or termination is sought; provided,
however, that any provisions hereof may be amended, waived, discharged or
terminated upon the written consent of the Company and the holders of at least
a majority in interest of the then outstanding Preferred Shares and/or
Conversion Shares, taken as a whole.

10.5 Notices and Demands. Any notice or demand which is required
will be deemed to have been sufficiently received (except as otherwise
provided) three (3) days after being sent by certified or registered mail,
postage and charges prepaid, return receipt requested, or one (1) day after
sent by overnight delivery providing receipt of delivery, to the following
addresses: if to the Company at the address as shown on the signature page of
this Agreement, or at any other address designated by the Company to each of
the Investors in writing; if to an Investor, at its mailing address as shown on
Exhibit A, or at any other address designated by such Investor to the Company
in writing.

10.6 Delays or Omissions. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to any holder
of a Preferred Share or a Conversion Share, upon any breach or default of the
Company under this Agreement, shall impair any such right, power or remedy of
such holder, nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any holder of a Preferred Share or a Conversion Share of any breach
or default under this Agreement, or any waiver on the part of any holder of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, or the other agreements executed in
furtherance of the transactions contemplated hereunder, by law or otherwise
afforded to any party, shall be cumulative and not alternative.

10.7 Expenses. The Company and each Investor agrees to pay its own
respective expenses and legal fees incurred with respect to this Agreement and
the transactions contemplated hereby; provided, however, that the Company
agrees to pay, up to a maximum of $10,000, the legal fees and expenses of one
legal counsel to the Investors.

10.8 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
invalid or unenforceable, the remainder of this Agreement shall continue in
full force and effect, and the invalid or unenforceable provision shall be
modified to the extent necessary to make it valid and enforceable; provided
that no such modification shall be effective if it materially changes the
economic benefit of this Agreement to any party.

- 20 -
<PAGE> 22
10.9 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

10.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the Investors,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.

This Agreement is hereby executed as of the date first above written.

COMPANY:

MEDICAL ALLIANCE, INC.

By: /s/ Paul Herchman
-------------------------------------------
Paul Herchman, President

Address: 8200 Springwood Drive, Suite 200
Irving, Texas 75063

INVESTORS:
---------

SATANA CORPORATION

By: /s/ Morris G. Moreland
Its:
-------------------------------------------

MAPLELEAF CAPITAL, LTD.

By: /s/ James Silcock
-------------------------------------------
Its:
-------------------------------------------

SUNWESTERN INVESTMENT FUND III

By: /s/ James Silcock
-------------------------------------------
Its:
-------------------------------------------

SUNWESTERN CAYMAN 1988 PARTNERS

By: /s/ James Silcock
-------------------------------------------

- 21 -
<PAGE> 23

Its:
-------------------------------------------

MONTGOMERY JESSUP & COMPANY L.L.P.
PROFIT SHARING PLAN F.B.O.
THOMAS A. MONTGOMERY

By: /s/ THOMAS A. MONTGOMERY
-------------------------------------------
Thomas A. Montgomery
Its:
-------------------------------------------

DLJSC F.B.O. MICHAEL WALLACE, IRA

By: /s/ MICHAEL WALLACE
-------------------------------------------
Michael Wallace
Its:
-------------------------------------------

/s/ MORRIS MORELAND
----------------------------------------------
Morris Moreland

/s/ SID BONNER
----------------------------------------------
Sid Bonner

/s/ CLYDE HUTCHINSON
----------------------------------------------
Clyde Hutchinson

/s/ MARC JOHNSON
----------------------------------------------
Marc Johnson

/s/ THOMAS A. MONTGOMERY
----------------------------------------------
Thomas A. Montgomery

/s/ HAZELLE BLAIR
----------------------------------------------
Hazelle Blair

/s/ LLOYD JONES
----------------------------------------------
Lloyd Jones

- 22 -
<PAGE> 24

/s/ BART TUCKER
-----------------------------------------------
Bart Tucker

/s/ JAY FARRIS
-----------------------------------------------
Jay Farris

/s/ KEVIN O'BRIEN
-----------------------------------------------
Kevin O'Brien

- 23 -
<PAGE> 25
EXHIBIT A

SCHEDULE OF INVESTORS

<TABLE>
<CAPTION>
Jurisdiction Where Purchase Price
Organized and of Series B
Principal Place Convertible Number of
Name and Address of Business Preferred Stock Shares
---------------- ------------------ --------------- ---------
<S> <C> <C> <C>
Satana Corporation $4.00 159,662
Plaza Two, Suite 102
Amarillo, Texas 79101
Attn: Morris Moreland

Mapleleaf Capital, Ltd. $4.00 35,985
12221 Merit Drive
Dallas, Texas 75251
Attn: Jim Silcock

Sunwestern Investment Fund III $4.00 64,839
12221 Merit Drive
Dallas, Texas 75251
Attn: Jim Silcock

Sunwestern Cayman 1988 Partners $4.00 70,243
12221 Merit Drive
Dallas, Texas 75251
Attn: Jim Silcock

Montgomery Jessup & Company $4.00 10,000
L.L.P. Profit Sharing Plan
F.B.O. Thomas A. Montgomery
5220 Spring Valley, Suite 600
Dallas, Texas 75240

Morris Moreland $4.00 4,000
Amarillo National Plaza Two
Amarillo, Texas 79101
Attn: Morris Moreland

DLJSC F.B.O. Michael Wallace, $4.00 3,750
IRA
2010 Warrior
Lewisville, Texas 75067

Sid Bonner $4.00 3,071
4925 Greenville Avenue, Suite
1105
Dallas, Texas 75206

Clyde Hutchinson $4.00 2,000
1469 Schwartz Meadow Drive
O'Fallon, Illinois 62269

Marc Johnson $4.00 2,000
800 Bell Room 1859
Houston, Texas 77002

Thomas A. Montgomery $4.00 2,500
5220 Spring Valley, Suite 600
Dallas, Texas 75240

Hazelle Blair $4.00 1,000
1508 Ben Drive
Irving, Texas 75061

Lloyd Jones $4.00 1,000
4301 Hidden Creek
Arlington, Texas 76016

Bart Tucker $4.00 1,000
P.O. Box 9320
Fort Worth, Texas 76147

Jay Farris $4.00 750
1004 Meadow Creek Drive #3122
Irving, Texas 75038

Kevin O'Brien $4.00 700
621 Stone Canyon Drive
Irving, Texas 75063
</TABLE>

Exhibit A - Page 1
<PAGE> 26
DISCLOSURE SCHEDULES

These Disclosure Schedules are delivered in connection with the Series
B Convertible Preferred Stock Purchase Agreement dated as of November 17, 1995,
by and among Medical Alliance, Inc. and certain investors listed therein (the
"Agreement"). Sections listed below correspond to Sections in the Agreement.
Items disclosed for any Section may be applicable to other Sections set forth
herein and are deemed to be disclosed for all purposes of the Agreement.

<PAGE> 27
PURCHASE OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
MEDICAL ALLIANCE, INC..

NOVEMBER 17, 1995

CLOSING INDEX

______________________________________________________________________________

1. Series B Convertible Preferred Stock Purchase Agreement, dated as of
November 17, 1995 (the "Purchase Agreement"), by and among Medical
Alliance, Inc., a Texas corporation (the "Company"), and the
purchasers who are signatories thereto, including Exhibits.

2. Disclosure Schedules to Purchase Agreement.

3. Certificate of Amendment to Articles of Incorporation of the Company.

4. First Amendment to the Amended and Restated Stock Buy and Sell
Agreement, dated as of November 2, 1995, by and among the Company and
the securityholders of the Company.

5. Second Amendment to the Amended and Restated Stock Buy and Sell
Agreement, dated as of November 17, 1995, by and among the Company and
the securityholders of the Company.

6. Right of First Refusal Letter, dated August 21, 1995, together with
Response Sheets and Acknowledgments.

7. Certificates representing the shares of Series B Convertible Preferred
Stock issued under the Purchase Agreement, together with reissuance
request of Satana Corporation.

8. Written Consent of Shareholders, dated as of November 13, 1995.

9. Unanimous Written Consent of Board of Directors of the Company, dated
November 1995.

10. Legal Opinion of Jackson & Walker, L.L.P., dated November 17, 1995.

<PAGE> 1
EXHIBIT 4.5

THIS WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, THIS WARRANT AND THE SECURITIES MAY NOT BE SOLD, MORTGAGED,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR AN OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO THE COMPANY
THAT REGISTRATION IS NOT REQUIRED UNDER APPLICABLE SECURITIES LAWS.

THIS WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY, ENCUMBRANCES AND VOTING IMPOSED BY THE AMENDED
AND RESTATED STOCK BUY AND SELL AGREEMENT, DATED THE 10TH DAY OF JULY, 1992,
INCLUDING ANY AMENDMENTS THEREOF, A COPY OF WHICH IS ON FILE WITH THE SECRETARY
OF THE CORPORATION, AND THE CORPORATION WILL FURNISH TO THE RECORD HOLDER OF
THIS WARRANT WITHOUT CHARGE A COPY OF SUCH AGREEMENT UPON WRITTEN REQUEST TO
THE CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE.

300,000 Shares of Common Stock Warrant No. 1

WARRANT
To Purchase Common Stock of
MEDICAL ALLIANCE, INC,

General

Laser Support Services, Inc. and Satana Corporation entered into a
Warrant to Purchase Common Stock in Laser Support Services, Inc. and Stock
Repurchase Agreement, dated and exercisable commencing January 17, 1991 (the
"Original Warrant Agreement"). Medical Alliance, Inc., f/n/a Laser Support
Services, Inc. has entered into an agreement with Mapleleaf Capital, Ltd., a
Texas limited partnership ("Mapleleaf"), pursuant to which Mapleleaf shall
acquire Series A Convertible Preferred Stock of Medical Alliance, Inc. (the
"Preferred Stock Acquisition"). Mapleleaf has required, as a condition
precedent to the Preferred Stock Acquisition, that the Original Warrant
Agreement be modified, and Medical Alliance, Inc. has, therefore, requested
that Satana Corporation consent to such requested modification. Satana
Corporation has agreed to modify the Original Warrant Agreement in the manner
set forth herein. Now, therefore, in consideration of the modification of the
Original Warrant Agreement, and the payment by Satana Corporation of additional
consideration in the amount of $100.00, the receipt and sufficiency of which
are hereby acknowledged, the Original Warrant Agreement is modified to read in
full as set forth herein.

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1. Grant of Warrant. THIS IS TO CERTIFY THAT Satana Corporation,
or its registered assigns ("Holder"), is entitled to exercise this Warrant to
purchase from Medical Alliance, Inc., f/n/a Laser Support Services, Inc., a
Texas corporation (the "Company"), Three Hundred Thousand (300,000) shares of
fully paid, non-assessable common stock, par value $0.002 per share, of the
Company (the "Common Stock"), all on the terms and conditions and pursuant to
the provisions hereinafter set forth. Unless otherwise specifically stated
herein, any capitalized terms not defined herein shall have the meanings set
forth in that certain Series A Convertible Preferred Stock Purchase Agreement
of even date herewith (the "Stock Purchase Agreement"), entered into between
the Company and Mapleleaf. The Company acknowledges that the payment by Holder
is fair and full consideration for the rights granted to Holder hereunder,
since the Company acknowledges that, due to restrictions on the exercisability
of this Warrant and other restrictions on the rights of Holder contained herein
and in the Stock Purchase Agreement, the value of this Warrant is contingent,
speculative and uncertain.

2. Exercise Price. The exercise price per share of Common Stock
shall be as follows:

(a) The Holder shall have the right to purchase 60,000
shares of Common Stock for the price of $1.00 per share (the "$1.00 Shares");
and

(b) The Holder shall have the right to purchase 240,000
shares of Common Stock for the price of $2.00 per share (the "$2.00 Shares").

3. Exercise. This Warrant may be exercised at any time or from
time to time on or after the date of issuance until (i) with respect to the
$1.00 Shares, July 10, 1995 (the "$1.00 Shares Expiration Date"), or (ii) with
respect to the $2.00 Shares, December 31, 1997 (the "$2.00 Shares Expiration
Date"). In order to exercise this Warrant, in whole or in part, the Holder
hereof shall deliver to the Company at its principal office at 5005 LBJ
Freeway, Suite 1370, Dallas, Texas 75244, or at such other office as shall be
designated by the Company to the Holder in writing, (i) a written notice of
Holder's election to exercise this Warrant, which notice shall specify the
number of shares of Common Stock to be purchased pursuant to such exercise,
(ii) cash or cash equivalent payable to the order of the Company in an amount
equal to the aggregate purchase price for all shares of Common Stock to be
purchased pursuant to such exercise and (iii) this Warrant, accompanied by a
subscription for Common Stock to be purchased in the form of the Subscription
attached hereto as Exhibit A. Upon receipt thereof the Company shall, as
promptly as practicable, and in any event within ten (10) days thereafter,
execute or cause to be executed and delivered to the Holder a certificate or
certificates representing the aggregate number of full shares of Common Stock
issuable upon such exercise. The stock certificate or certificates so
delivered shall be registered in the name of the Holder, or such other name as
shall be designated in said notice, in which latter case the Holder shall be
responsible for any applicable issue or transfer taxes. This Warrant shall be
deemed to have been exercised and such certificate or certificates shall be
deemed to have been issued, and the Holder or any other person so designated to
be named therein shall be deemed to have become

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a holder of record of such shares for all purposes, as of the date that said
notice, together with said payment and this Warrant and the Subscription are
received by the Company as aforesaid. The Holder of this Warrant shall not, by
virtue of its ownership of this Warrant, be entitled to any rights of a
shareholder in the Company, either at law or in equity; provided, however, such
Holder shall, for all purposes, be deemed to have become the holder of record
of such shares on the date on which this Warrant is surrendered to the Company
in accordance with the immediately preceding sentence, If the exercise is for
less than all of the shares of Common Stock issuable as provided in this
Warrant, the Company will issue a new Warrant of like tenor and date for the
balance of such shares issuable hereunder to the Holder. The Holder of this
Warrant, by its acceptance hereof, consents to and agrees to be bound by and to
comply with all of the provisions of this Warrant. In addition, the Holder of
this Warrant, by its acceptance hereof, agrees that as a condition of the
Company issuing to such Holder, or its designee, shares of Common Stock, that
such Holder, or its designee (as the case may be) shall be required to become a
party to that certain Amended and Restated Stock Buy and Sell Agreement (the
"Shareholders' Agreement") of the Company, dated July 10, 1992, as it may be
amended from time to time.

4. Taxes. The issuance of any shares of Common Stock or other
certificates upon the exercise of this Warrant shall be made without charge to
the registered Holder hereof, or for any tax in respect of the issuance of such
certificate.

5. Transfer. Subject to the provisions of the legend on the face
of this Warrant, this Warrant and all options and rights hereunder are
transferable, as to all or any part of the number of shares of Common Stock
purchasable upon its exercise, by the Holder hereof in person or by duly
authorized attorney on the books of the Company upon surrender of this Warrant
at the principal offices of the Company, together with the form of transfer
authorization attached hereto duly executed. The Company shall deem and treat
the registered Holder of this Warrant at any time as the absolute owner hereof
for all purposes and shall not be affected by any notice to the contrary. If
this Warrant is transferred in part, the Company shall at the time of surrender
of this Warrant, issue to the transferee a Warrant covering the number of
shares of Common Stock transferred and to the transferor a Warrant covering the
number of shares of Common Stock not transferred.

6. Cash in Lieu of Fractional Shares. The Company shall not be
required to issue fractional shares of Common Stock upon the exercise of this
Warrant. If the Holder of this Warrant would be entitled, upon the exercise of
any rights evidenced hereby, to receive a fractional interest in a share of
Common Stock, the Company shall pay a cash adjustment for such fraction equal
to the equivalent market price for such fractional share (as determined in the
manner prescribed by the Board of Directors) at the close of business on the
exercise date.

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7. Registration Rights.

(a) Optional Registrations. If the Company decides to
register any of its Common Stock or securities convertible into or exchangeable
for Common Stock under the Securities Act of 1933, as amended (the "Securities
Act") (other than a registration solely to implement an employee benefit plan
or a transaction to which Rule 145 or any other similar rule of the Securities
and Exchange Commission (the "Commission") is applicable), the Company will
promptly give written notice to the Holder, and the Company will use all
reasonable efforts to effect the registration under the Securities Act of all
Registrable Securities (as defined in Section 7.(d)) which the Holder requests
be included in such registration by a written notice delivered to the Company
within thirty (30) days after the notice given by the Company, subject to the
Holder's acceptance of the terms of the underwriters, including the initial
public offering price and the discounts and commissions, as agreed upon by the
Company and the managing underwriter selected by it.

If the registration involves an underwritten public offering,
the Company will not be required to register Registrable Securities in excess
of the amount that the principal underwriter reasonably and in good faith
recommends may be included in such offering. If any Registrable Securities are
not included for this reason, the Company will permit the Holder to include all
shares requested to be included in the registration on a pro rata basis, based
upon Common Stock owned or obtainable by such Holder.

If the Company elects to terminate any registration filed
under this Section 7.(a), the Company will have no obligation to register the
securities sought to be included by the Holder in such registration. For each
registration and offering effected pursuant to this Section 7.(a), all expenses
of the registration and offering (excluding all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holder) and the reasonable fees and expenses of one (1) independent counsel
for the Holder will be borne by the Company.

(b) Required Registrations. If, pursuant to Section 8.2
of the Stock Purchase Agreement, one or more of the Investors holding at least
fifty percent (50%) of the Conversion Shares notifies the Company in writing
that such Investor(s) intend to offer for public sale at least forty-five
percent (45%) of the shares of Common Stock issued or issuable upon conversion
of the Preferred Shares, the Company will notify Holder of its receipt of such
notification. Upon the written request of Holder delivered to the Company
within fifteen (15) days after delivery from the Company of such notification,
the Company will use its best efforts to cause the Registrable Securities as
may be requested by Holder and those Investors timely requesting inclusion in
the registration, to be included in a registration statement under the
Securities Act. All expenses of the first registration pursuant to this
Section 7.(b) and the reasonable fees and expenses of one (1) independent
counsel for the Holder and the Investors will be borne by the Company
(excluding all underwriting discounts, selling commissions and stock transfer
taxes applicable to the securities registered by the Holder). The Holder will
bear its pro rata share

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(based upon the securities included in the registration) of reasonable fees and
expenses associated with any subsequent registration pursuant to this Section
7.(b). The Company will not be required to file more than two (2) registration
statements pursuant to this Section 7.(b), and will not be required to file any
registrations under this section until June 30, 1994, unless the Company has
already filed a registration statement under the Securities Act prior to such
period. This Section will not apply to requests for registration on Form S-3
(or successor form) which will be governed by Section 7.(c).

(c) Forms S-3. Once the Company is eligible to effect a
registration of its securities under Form S-3 (or a successor form), the Holder
will have the right to request, and the Company shall use its best efforts to
effect, registrations of shares of the Holder's Registrable Securities on Form
S-3 (but no more than one such registration during any one fiscal year) as long
as the Holder notifies the Company of its desire to register at least 43,500
shares of Common Stock and the aggregate proposed offering price (based upon
the current market price of the Common Stock) is not less than $500,000.00 for
each registration.

The Company will give notice to the Holder of any request by
Investor(s) for registration pursuant to Section 83 of the Stock Purchase
Agreement. Upon the written request of the Holder delivered to the Company
within fifteen (15) days after delivery from the Company of such notification,
the Company will use all reasonable efforts to cause the registration of all
shares of Registrable Securities on Form S-3 or such successor form to the
extent requested by the Holder. All expenses incurred in connection with the
registration requested pursuant to this Section or Section 8.3 of the Stock
Purchase Agreement, including the reasonable fees and expenses of one (1)
independent counsel for the Holder, will be borne by the Company (excluding all
underwriting discounts, selling commissions and stock transfer taxes applicable
to the securities registered by the Holder).

(d) Registrable Securities. For the purposes of this
Section, the term "Registrable Securities" will mean any shares of Common Stock
held by the Holder or issuable upon exercise of this Warrant, and any other
shares or equity securities distributable on, with respect to, or in
substitution for such Registrable Securities, except for those that have been
sold or transferred pursuant to an effective registration statement or pursuant
to Rule 144 under the Securities Act.

(e) Procedure for Registration. Whenever the Company is
required under this Warrant (or pursuant to the Stock Purchase Agreement) to
register Common Stock, it agrees to do the following:

(i) Use all reasonable efforts to prepare
promptly for filing with the Commission a registration statement and such
amendments and supplements to said registration statement and the prospectus as
may be necessary to declare or keep the registration statement effective and to
comply with the provisions of the Securities Act for the period necessary to
complete the proposed public offering, but not for more than 180 days;

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(ii) Furnish to the Holder such copies of each
preliminary and final prospectus and such other documents as the Holder may
reasonably request to facilitate the public offering of its Registrable
Securities;

(iii) Enter into any underwriting agreement with
provisions reasonably required by the proposed underwriter for the Holder, if
any;

(iv) Use all reasonable efforts to register or
qualify the Common Stock covered by the registration statement under the
securities or "blue-sky" laws of such jurisdictions as the Holder may
reasonably request, although the Company will not have to register in any
states that require it to qualify to do business or subject itself to general
service of process, and for a registration required under Section 7.(a), the
Company will not be required to register in more states than is necessary to
permit the sale of the securities; and

(v) The Company is not required to file a
registration statement within ninety (90) days following the effective date of
any other registration statement initiated by the Company. The Company may
postpone the filing of any registration statement required under Sections 7.(b)
or 7.(c) for a reasonable period of time, not to exceed ninety (90) days, if
the Company has been advised by legal counsel that such filing would require
the disclosure of a material fact, and the Company determines reasonably and in
good faith that such disclosure would have a material adverse effect on the
Company.

(f) Indemnification. Subject to applicable law, the
Company will indemnify the Holder holding Registrable Securities included in
the registration statement, and each person controlling it, against all claims,
losses, damages and liabilities, including legal and other expenses reasonably
incurred, arising out of any untrue or allegedly untrue statement of a material
fact contained in the registration statement, or any omission or alleged
omission to state a material fact required to be stated in the registration
statement or necessary to make the statements not misleading, or arising out of
any violation by the Company of the Securities Act, any state securities or
"blue-sky" laws or any applicable rule or regulation. This indemnification
will not apply to any claims, losses, damages or liabilities to the extent they
arise out of or are based upon an untrue statement or omission based upon
information furnished in writing to the Company by the Holder, or controlling
person, respectively, expressly for use in the registration statement. With
respect to such untrue statement or omission in the information furnished in
writing to the Company by the Holder, such person will indemnify the
underwriters, the Company, its directors and officers, the other persons
selling securities under the registration statement and each person controlling
any of them against any losses, claims, damages, expenses or liabilities to
which any of them may become subject as a result of such untrue statement or
omission (including those incurred in connection with investigating or
defending against such claims).

(g) Rule 144 Requirements. If the Company becomes subject
to the reporting requirements of the Securities Exchange Act of 1934, the
Company will use all reasonable

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efforts to file with the Commission such information as the Commission may
require and will use all reasonable efforts to make available Rule 144 under
the Securities Act (or any successor exemptive rule).

(h) Obligations in a Registration. The Holder, if its
Registrable Securities are included in any registration agrees to furnish such
information regarding it and the securities sought to be registered as the
Company may reasonably request in connection with the registration,
qualification or compliance. If the registration involves an underwriter, the
Holder agrees, upon the request of such underwriter, not to sell any
unregistered securities of the Company for a period of ten (10) days prior to
or ninety (90) days following the effective date of the registration statement
for such offering.

9. Covenants of Issuer. The Company covenants and agrees that
all shares which may be issued upon the exercise of the rights represented by
this Warrant will upon issuance, be fully paid and nonassessable. 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.

10. Investment Representations. The Holder of the Warrant, by
acceptance hereof, and with reference to the Warrant and the shares of Common
Stock, issuable upon exercise of the Warrant, represents and warrants that the
Holder is acquiring such securities for the Holder's own account for investment
and not with a view to or in connection with any offering or distribution, and
the Holder has no present intention of selling or otherwise disposing of such
securities.

11. Agreement of Company to Repurchase Stock.

(a) The Company hereby grants to the Holder the right and
option, exercisable in the sole discretion of the Holder, to require the
Company to repurchase all or a portion of the $2.00 Shares in the Company
acquired or which may be acquired by the Holder pursuant to this Warrant, up to
a maximum of 240,000 shares of Common Stock, at the Repurchase Value Per Share
established in accordance with Section 11.(b). Such option shall hereinafter be
referred to as the "$2.00 Share Repurchase Option." This $2.00 Share Repurchase
Option may be exercised in whole or in part by the Holder.

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(b) The Company shall on or before March 31, 1998,
determine and deliver written notice to the Holder of the Repurchase Value Per
Share of the Common Stock of the Company, as of December 31, 1997, such
Repurchase Value Per Share to be determined, subject to the optional appraisal
provisions set forth in this Section 11.(b), in accordance with Exhibit "B."
The notice of the Company setting forth the Repurchase Value Per Share shall be
accompanied by a statement of a firm of independent certified public
accountants acceptable to the Holder to the effect that such firm concurs in
the Company's calculation of the Repurchase Value Per Share. The notice of
Repurchase Value Per Share provided to the Holder shall specify in sufficient
detail the manner in which such calculation was arrived at, including therewith
the financial data arrived at in making such calculation. The Holder shall, in
addition, be provided with access to the books and records of the Company in
order to verify such calculation. If, with respect to any determination of the
repurchase value per share in accordance with Exhibit "B," either the Company
or the Holder disagrees with the valuation as so determined, then such party
may require the purchase price with respect to such year to be the fair market
value as determined by an independent appraiser mutually acceptable to the
Company and the Holder. The cost of such appraisal shall be paid by the party
requesting such appraisal. If the Company and the Holder cannot agree on an
appraiser, then each of the Company and the Holder wishing to sell shall have
the right to designate an appraiser at its own expense, and such appraiser
shall jointly select a third appraiser, whose cost shall be shared equally by
the Company and the Holder, The appraisal of fair market value which is neither
the highest nor lowest shall be binding on the parties for the purposes of this
Section 11. Such appraisal shall be finalized and the Holder notified of the
results thereof on or before April 30, 1998.

(c) The Holder may exercise its $2.00 Share Repurchase
Option in whole or in part, during the Option Period. The Option Period shall
commence on May 1, 1998 and terminate on June 30, 1998.

The $2.00 Share Repurchase Option may be exercised by the Holder at any time
during the Option Period by delivering written notice of such election to the
Company, such notice to be substantially in the form of the Repurchase Election
attached hereto as Exhibit "C," setting forth therein the number of shares of
the Holder required to be repurchased by the Company. The purchase price shall
be the Repurchase Value Per Share multiplied by the number of shares which the
Holder requires the Company to repurchase. The purchase price shall be paid
wholly in cash, by certified check, or in other immediately available funds on
the earlier of (i) July 15, 1998 or (ii) the date that the Company repurchases
from Mapleleaf the Remaining Shares pursuant to Section 9 of the Series A
Convertible Preferred Stock Purchase Agreement dated July 10, 1992, by and
among the Company and Mapleleaf.

(d) The Company shall take such action as is necessary in
order to create and maintain sufficient corporate funds to enable the Company
to legally purchase the shares it may be required to purchase pursuant to this
Section.

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(e) Notwithstanding the foregoing, the $2.00 Share
Repurchase Option provided for in this Section 11 shall terminate upon the
successful consummation of a Qualified Public Offering, as such term is defined
in Article 4, Section B(4)(b)(i) of the Company's Articles of Incorporation, as
amended.

12. Miscellaneous Representations and Warranties. The Company
hereby represents and warrants that, as of the date of the execution of this
Warrant, the following are true and correct:

(a) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Texas;

(b) The execution, delivery, and performance by the
Company of this Warrant has been duly authorized by all necessary corporate
action and does not and will not (a) require any consent or approval of the
stockholders of the Company, (b) contravene the Company's charter or bylaws;
(c) result in a breach of or constitute a default under any promissory note,
mortgage, indenture, loan, or credit agreement, or any other agreement or
instrument to which the Company is a party.

(c) This Warrant is a legal, valid, and binding
obligation of the Company enforceable against the Company in accordance with
its terms.

13. Rights are Cumulative. The parties understand and agree that
irreparable injury would be caused to the Holder and the Company by failure to
comply with the terms of this Agreement, and that in the event of any actual or
threatened default in or breach of any of the provisions in this Agreement, the
party which is aggrieved thereby shall have the right to specific performance
and/or an injunction, as well as monetary damages and any other appropriate
relief in law or in equity which may be granted by any court in the United
States of America, and that all such rights and remedies shall be cumulative
and exclusive.

14. No Waiver. A party's failure to insist on compliance or
enforcement of any provision of this Agreement shall not affect the validity or
enforceability, or constitute a waiver of future enforcement, of that provision
or of any other provision of this Agreement by that party or any other party.

15. Amendment. This agreement may be amended or revoked only by
the written consent of all of the parties at the time of such amendment or
revocation.

16. No Usury. No attribute of this Warrant is intended to be and
shall not be deemed to constitute interest or amounts paid for the use,
forbearance or detention of money. The Company and Holder both acknowledge
that the value, if any, of the rights of the Holder pursuant to this Warrant is
entirely speculative and that it is impossible to determine at this time the
value, if any, of any rights of the Holder pursuant to this Warrant. It is
possible that the

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rights of the Holder either to acquire shares hereunder, or to require
repurchase of such shares, could, in fact, be of no value. While it is the
specific intention of both parties hereto that any rights granted to the Holder
pursuant to this Agreement shall not be deemed to constitute interest, it is
nevertheless agreed that all agreements between Company and Holder hereunder
and with respect to the loan transaction entered into between Satana
Corporation and the Company, of even date herewith, whether now existing or
hereafter arising and whether written or oral, are expressly limited so that in
no contingency or event whatsoever shall the amount paid, or agreed to be paid,
hereunder or thereunder to Satana Corporation for the use, forbearance, or
detention of any money to be loaned to the Company, or for the performance or
payment of any covenant or obligation contained herein or therein, exceed the
maximum contractual amount permissible under applicable law. If from any
circumstance whatsoever fulfillment of any provision hereof or thereof at the
time performance of such provision shall be due shall involve transcending the
limit of validity prescribed by law, then, ipso facto (and after spreading,
allocating, or prorating all funds paid or to be paid as interest or construed
to be interest as permitted by applicable law), the obligation to be fulfilled
shall be reduced to the limit of such validity, and if from any such
circumstance Satana Corporation shall ever receive anything of value deemed
interest by applicable law which would exceed the highest lawful rate, an
amount equal to any excessive interest shall be applied to the reduction of the
principal amount owing with respect to any loan or on account of any other
indebtedness and not to the payment of interest, or if such excessive interest
exceeds the unpaid principal balance of any such indebtedness, such excess
shall be refunded to the Company.

17. Notices and Demands. Any notice or demand which is required
will be deemed to have been sufficiently received (except as otherwise
provided) three (3) days after being sent by certified or registered mail
postage and charges prepaid, return receipt requested, or one day after sent by
overnight delivery providing receipt of delivery, to the following addresses:

Medical Alliance, Inc.
5005 LBJ Freeway, Suite 1370
Dallas, Texas 75224

Satana Corporation
P. 0. Box 9313
Amarillo, Texas 79105

The address of a party may be changed only by delivering written
notice of such changes of address to all other parties, in the manner provided
for herein.

18. Severability. In the event any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of this Agreement shall continue in full force and
effect, and the invalid or unenforceable provision shall be modified to the
extent necessary to make it valid and enforceable; provided that no such

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modification shall be effective if it materially changes the economic benefit
of this Agreement to any party.

19. Applicable Law. THIS WARRANT HAS BEEN EXECUTED, DELIVERED AND
ACCEPTED BY THE PARTIES IN TEXAS, AND SHALL BE INTERPRETED AND THE RIGHTS OF
THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES
APPLICABLE THERETO AND THE INTERNAL LAWS OF THE STATE OF TEXAS APPLICABLE TO AN
AGREEMENT, EXECUTED, DELIVERED AND PERFORMED IN SUCH STATE.

20. Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and, be binding upon the successors and
permitted assigns of the Company and the Holder hereof and, shall be
enforceable by any such Holder.

21. Headings. Headings of the paragraphs in this Warrant are for
convenience and reference only and shall not, for any purpose, be deemed a part
of this Warrant.

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed.

DATED as of July 10, 1992.

MEDICAL ALLIANCE, INC.

By: /s/ Thomas A. Montgomery
---------------------------------
Title: Secretary
---------------------------------

SATANA CORPORATION

By: /s/ Morris G. Moreland
---------------------------------
Morris G. Moreland, Vice President

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EXHIBIT "A" TO

WARRANT TO PURCHASE COMMON STOCK OF
MEDICAL ALLIANCE INC.

SUBSCRIPTION FORM

(To be executed only upon exercise of Warrant)

The undersigned Registered owner of this Warrant irrevocably exercises
this warrant for and purchases shares of Common Stock of Medical Alliance, Inc.
purchasable with this Warrant, and herewith makes payment therefor, all at the
price and on the terms and conditions specified in this Warrant and requests
that certificates for the shares of Common Stock hereby purchased (and any
securities or other property issuable upon such exercise) be issued in the name
of and delivered to _________________________________________ whose address is
____________________________ and if such shares of Common Stock shall not
include all of the shares of Common Stock issuable as provided in this Warrant,
that a new Warrant of like tenor and date for the balance of the shares of
Common Stock issuable thereunder to be delivered to the undersigned.

DATED: _______________________, 19___.

By:
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Its:
------------------------------------

Address:
--------------------------------

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EXHIBIT "A-1"

ASSIGNMENT FORM

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

No. of Shares
Name & Address of Assignee Common Stock
- -------------------------- ------------

and does hereby irrevocably constitute and appoint as Attorney
______________________________ to register such transfer on the books of
___________________________________ maintained for the purpose, with full power
of substitution in the premises.

DATED:__________________,19___.

By:
------------------------------------

Its:
-----------------------------------

NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatever.

The Assignee named above, by acceptance of this assignment, agrees to
be bound by the terms of this Warrant with the same force and effect as if a
signatory thereto.

--------------------------------------
(Signature)

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

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Dated:
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EXHIBIT "B" TO

WARRANT TO PURCHASE COMMON STOCK OF
MEDICAL ALLIANCE, INC.

The Repurchase Value Per Share of the Common Stock of the Company
shall be determined as set forth below. The Repurchase Value Per Share shall
equal the value of the Company utilizing the capitalized excess earnings
approach, divided by the number of shares of Common Stock issued and
outstanding as of the date of such determination (i.e., December 31, 1997).
The following principles shall apply in making the determination of Repurchase
Value Per Share, as illustrated below:

(a) Generally accepted accounting principles shall be utilized in
the determination of shareholders' equity.

(b) The average shareholders' equity for the year for which the
determination is being made, shall be the average of the shareholders' equity
of the Company on the first day of the year (January 1, 1997) and on the final
day of the year (December 31, 1997).

(c) A rate of return of ten percent per annum on the average
shareholders' equity for the respective year shall be utilized in determining
the "fair return on average shareholders' equity."

(d) Net income shall be determined in accordance with generally
accepted accounting principles. It is the intention of the parties, in this
respect, that net income shall be calculated on an "after tax" basis.
Therefore, if, at the time of the determination of the Repurchase Value Per
Share the Company is an "S" Corporation, then net income shall be calculated by
taking into account the federal income taxes that would be incurred if the
Company had been a "C" Corporation.

(e) The excess earnings of the Company shall be capitalized at the
rate of 15% as demonstrated in the computation set forth below.

(f) The computed value of the Company shall be the sum of lines
(b) + (g).

Note: The amounts utilized in illustrating the application of the formula
for computation of the Repurchase Value Per Share are assumed values for
purposes of the illustration of the mechanics of the formula. Likewise, it was
assumed, for purposes of the illustration of the mechanics of the formula only,
that the total outstanding shares as of the date of such determination were the
amounts shown. The actual values to be utilized in applying the formula, and
the actual number of shares issued and outstanding, will depend upon the actual
status of the Company at the time of determination, the results of which cannot
be forecast in advance.
<PAGE> 15
MEDICAL ALLIANCE, INC.

COMPUTATION OF VALUE OF CORPORATION
CAPITALIZED EXCESS EARNINGS APPROACH

<TABLE>
<S> <C> <C>
(a) Shareholders' Equity at beginning of the year 12,154,952
(b) Shareholders' Equity at end of the year 20,163,580
(c) Average shareholders' equity for the year [(a+b)/2] 16,159,266
(d) Fair return on net book value at 10% (c x .10) 1,615,927
(e) Net income for the year ended December 31, 19xx 7,889,097
---------
(f) Excess earnings (e-d) 6,273,170
(g) Excess earnings capitalized at 15% (f/.15) 41,821,9136
(h) Shareholders' equity at the end of the year 20,163,580
----------
(i) Computed value of the Company (b + g) 61,984,716
==========
(j) Total issued and outstanding shares 108,033
(k) Computed Repurchase Value Per Share (h/i) $ 573.76
============
</TABLE>
<PAGE> 16
EXHIBIT "C" TO
WARRANT TO PURCHASE COMMON STOCK OF
MEDICAL ALLIANCE, INC.

FORM OF $2.00 SHARE REPURCHASE OPTION ELECTION

The undersigned, hereby elects, pursuant to Section ______ of the
Warrant to Purchase Common Stock in Medical Alliance, Inc. and Stock Repurchase
Agreement, to require the Company to repurchase from the undersigned
____________________________ Common Shares of Medical Alliance, Inc. (the
"Company"), and hereby directs the Company to make payment of the Repurchase
Value Per Share of $__________________ per share therefor, for an aggregate
price of $_______________________. The Company shall pay the entire purchase
price in cash, by certified check, or in other immediately available funds.

Dated:___________________________, 199___.

SATANA CORPORATION

By:
----------------------------------

<PAGE> 1
EXHIBIT 4.6

THIS WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THIS WARRANT AND THE SECURITIES MAY NOT BE SOLD, MORTGAGED,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR AN OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO THE COMPANY
THAT REGISTRATION IS NOT REQUIRED UNDER APPLICABLE SECURITIES LAWS.

THIS WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY, ENCUMBRANCES AND VOTING IMPOSED BY THE AMENDED
AND RESTATED STOCK BUY AND SELL AGREEMENT, DATED THE 10TH DAY OF JULY, 1992,
INCLUDING ANY AMENDMENTS THEREOF, (THE "SHAREHOLDERS AGREEMENT") A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY, AND THE COMPANY WILL
FURNISH TO THE RECORD HOLDER OF THIS WARRANT WITHOUT CHARGE A COPY OF SUCH
AGREEMENT UPON WRITTEN REQUEST TO THE CORPORATION AT ITS PRINCIPAL PLACE OF
BUSINESS OR REGISTERED OFFICE.

WARRANT
To Purchase Common Stock of
MEDICAL ALLIANCE, INC.

1. Grant of Warrant. THIS IS TO CERTIFY THAT Columbia General
Corporation, or its registered assigns ("Holder"), is entitled to exercise this
Warrant to purchase from Medical Alliance, Inc., a Texas corporation (the
"Company"), Fifteen Thousand (15,000) shares (the "Shares") of fully paid,
non-assessable common stock, par value $0.002 per share, of the Company (the
"Common Stock"), all on the terms and conditions and pursuant to the provisions
hereinafter set forth. The Company acknowledges that the payment by Holder is
fair and full consideration for the rights granted to Holder hereunder, since
the Company acknowledges that, due to restrictions on the exercisability of
this Warrant and other restrictions on the rights of Holder contained herein
and in the Shareholders Agreement, the value of this Warrant is contingent,
speculative and uncertain.

2. Exercise Price. The exercise price per share of Common Stock
shall be Two Dollars ($2.00) (the "Exercise Price").

3. Exercise. Subject to the terms and conditions set forth
herein, this Warrant vests and may be exercised as follows:
<PAGE> 2
<TABLE>
<CAPTION>
Period Cumulative Number of Shares
------ ---------------------------
<S> <C>
August 15, 1993 until August 18, 1994 7,500

August 19, 1994 until March 31, 1997 15,000

After March 31, 1997 0
</TABLE>

; provided, however, that if the entire principal and interest balance of that
certain Amended and Restated Promissory Note, dated September 30, 1993, by and
between the Company and MJ Capital Partners, L.P. (the "Note"), is paid in full
prior to the vesting of any portion of this Warrant, the unvested portion of
this Warrant shall automatically be deemed canceled and not subject to further
vesting or exercise.

In order to exercise this Warrant, in whole or in part, the Holder
hereof shall deliver to the Company at its principal office at 5005 LBJ
Freeway, Suite 1370, Dallas, Texas 75244, or at such other office as shall be
designated by the Company to the Holder in writing, (i) a written notice of
Holder's election to exercise this Warrant, which notice shall specify the
number of Shares to be purchased pursuant to such exercise, (ii) cash or cash
equivalent payable to the order of the Company in an amount equal to the
aggregate Exercise Price for all Shares to be purchased pursuant to such
exercise and (iii) this Warrant, accompanied by a subscription for Common Stock
to be purchased in the form of the Subscription attached hereto as Exhibit A.
Upon receipt thereof, the Company shall, as promptly as practicable, and in any
event within ten (10) days thereafter, execute or cause to be executed and
delivered to the Holder a certificate or certificates representing the
aggregate number of full Shares issuable upon such exercise. The stock
certificate or certificates so delivered shall be registered in the name of the
Holder, or such other name as shall be designated in said notice, in which
latter case the Holder shall be responsible for any applicable issue or
transfer taxes. This Warrant shall he deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and the Holder
or any other person so designated to be named therein shall be deemed to have
become a holder of record of such Shares for all purposes as of the date that
said notice, together with said payment and this Warrant and the Subscription
are received by the Company as aforesaid. The Holder of this Warrant shall
not, by virtue of its ownership of this Warrant, be entitled to any rights of a
shareholder in the Company, either at law or in equity; provided, however, such
Holder shall, for all purposes, be deemed to have become the holder of record
of such Shares on the date on which this Warrant is surrendered to the Company
in accordance with the immediately preceding sentence. If the exercise is for
less than all of the Shares issuable as provided in this Warrant, the Company
will issue a new Warrant of like tenor and date for the balance of such Shares
issuable hereunder to the Holder. The Holder of this Warrant, by its acceptance
hereof, consents to and agrees to be bound by and to comply with all of the
provisions of this Warrant. In addition, the Holder of this Warrant, by its
acceptance hereof agrees that as a condition of the Company issuing to such
Holder, or its designee, Shares, that such Holder, or its designee (as the case
may be) shall be required to become a party to the Shareholders Agreement.

- 2 -
<PAGE> 3
4. Taxes. The issuance of any shares of Common Stock or other
certificates upon the exercise of this Warrant shall be made without charge to
the registered Holder hereof, or for any tax in respect of the issuance of such
certificate.

5. Transfer. Subject to the provisions of the legend on the face
of this Warrant, this Warrant and all options and rights hereunder are
transferable, as to all or any part of the number of shares of Common Stock
purchasable upon its exercise, by the Holder hereof in person or by duly
authorized attorney on the books of the Company upon surrender of this Warrant
at the principal offices of the Company, together with the form of transfer
authorization attached hereto duly executed. The Company shall deem and treat
the registered Holder of this Warrant at any time as the absolute owner hereof
for all purposes and shall not be affected by any notice to the contrary. If
this Warrant is transferred in part, the Company shall at the time of surrender
of this Warrant, issue to the transferee a Warrant covering the number of
shares of Common Stock transferred and to the transferor a Warrant covering the
number of shares of Common Stock not transferred.

7. No Dilution or Impairment. The Company will not, by amendment
of its Articles of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary act, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such actions as may
be necessary or appropriate in order to protect the rights of Holder of this
Warrant against impairment.

8. Covenants of Issuer. The Company covenants and agrees that
all shares which may be issued upon the exercise of the rights represented by
this Warrant will, upon issuance, be fully paid and nonassessable. 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.

9. Investment Representations. The Holder of the Warrant, by
acceptance hereof, and with reference to the Warrant and the shares of Common
Stock, issuable upon exercise of the Warrant, represents and warrants that the
Holder is acquiring such securities for the Holder's own account for investment
and not with a view to or in connection with any offering or distribution, and
the Holder has no present intention of selling or otherwise disposing of such
securities.

- 3 -
<PAGE> 4
10. Miscellaneous Representations and Warranties. The Company
hereby represents and warrants that, as of the date of the execution of this
Warrant, the following are true and correct:

(a) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Texas;

(c) This Warrant is a legal, valid, and binding
obligation of the Company enforceable against the Company in accordance with
its terms.

11. Rights are Cumulative. The parties understand and agree that
irreparable injury would be caused to the Holder and the Company by failure to
comply with the terms of this Agreement, and that in the event of any actual or
threatened default in or breach of any of the provisions in this Agreement, the
party which is aggrieved thereby shall have the right to specific performance
and/or an injunction, as well as monetary damages and any other appropriate
relief in law or in equity which may be granted by any court in the United
States of America, and that all such rights and remedies shall be cumulative
and exclusive.

12. No Waiver. A party's failure to insist on compliance or
enforcement of any provision of this Agreement shall not affect the validity or
enforceability, or constitute a waiver of future enforcement, of that provision
or of any other provision of this Agreement by that party or any other party.

13. Amendment. This agreement may be amended or revoked only by
the written consent of all of the parries at the time of such amendment or
revocation.

14. No Usury. No attribute of this Warrant is intended to be and
shall not be deemed to constitute interest or amounts paid for the use,
forbearance or detention of money. The Company and Holder both acknowledge
that the value, if any, of the rights of the Holder pursuant to this Warrant is
entirely speculative and that it is impossible to determine at this time the
value, if any, of any rights of the Holder pursuant to this Warrant. It is
possible that the rights of the Holder either to acquire shares hereunder, or
to require repurchase of such shares, could, in fact, be of no value. While it
is the specific intention of both parties hereto that any rights granted to the
Holder pursuant to this Agreement shall not be deemed to constitute interest,
it is nevertheless agreed that all agreements between Company and Holder
hereunder and with respect to the loan transaction entered into between MJ
Capital Partners, L.P. and the Company,of even date herewith, whether now
existing or hereafter arising and whether written

- 4 -
<PAGE> 5
or oral, are expressly limited so that in no contingency or event whatsoever
shall the amount paid, or agreed to be paid, hereunder or thereunder, directly
or indirectly to the Holder for the use, forbearance, or detention of any money
to be loaned to the Company, or for the performance or payment of any covenant
or obligation contained herein or therein, exceed the maximum contractual
amount permissible under applicable law. If from any circumstance whatsoever
fulfillment of any provision hereof or thereof at the time performance of such
provision shall be due shall involve transcending the limit of validity
prescribed by law, then, ipso facto (and after spreading, allocating, or
prorating all funds paid or to be paid as interest or construed to be interest
as permitted by applicable law), the obligation to be fulfilled shall be
reduced to the limit of such validity, and if from any such circumstance the
Holder shall ever receive anything of value deemed interest by applicable law
which would exceed the highest lawful rate, an amount equal to any excessive
interest shall be applied to the reduction of the principal amount owing with
respect to any loan or on account of any other indebtedness and not to the
payment of interest, or if such excessive interest exceeds the unpaid principal
balance of any such indebtedness such excess shall be refunded to the Company.

15. Notices and Demands. Any notice or demand which is required
will be deemed to have been sufficiently received (except as otherwise
provided) three (3) days after being sent by certified or registered mail,
postage and charges prepaid, return receipt requested, or one day after sent by
overnight delivery providing receipt of delivery, to the following addresses:

Medical Alliance, Inc.
5005 LBJ Freeway, Suite 1370
Dallas, Texas 75224

Columbia General Corporation
Edward O. Boshell, Jr.
_______________________________

_______________________________

The address of a party may be changed only by delivering written notice of such
changes of address to all other parties, in the manner provided for herein.

16. Severability. In the event any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of this Agreement shall continue in full force and
effect, and the invalid or unenforceable provision shall be modified to the
extent necessary to make it valid and enforceable; provided that no such
modification shall be effective if it materially changes the economic benefit
of this Agreement to any party.

17. Applicable Law. THIS WARRANT HAS BEEN EXECUTED, DELIVERED AND
ACCEPTED BY THE PARTIES IN TEXAS, AND SHALL BE INTERPRETED AND THE RIGHTS OF
THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES
APPLICABLE THERETO AND THE INTERNAL LAWS OF THE

- 5 -
<PAGE> 6
STATE OF TEXAS APPLICABLE TO AN AGREEMENT, EXECUTED, DELIVERED AND PERFORMED IN
SUCH STATE.

18. Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
permitted assigns of the Company and the Holder hereof and, shall be
enforceable by any such Holder. In order to assign this Warrant, or any part
hereof, the Holder must complete and deliver to the Company the Assignment Form
attached hereto as Exhibit B.

19. Headings. Headings of the paragraphs in this Warrant are for
convenience and reference only and shall not, for any purpose, be deemed a part
of this Warrant.

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the 15th day of October, 1993.

MEDICAL ALLIANCE, INC.

By: /s/ Paul Herchman
------------------------------------
Paul Herchman, President

COLUMBIA GENERAL CORPORATION

By: /s/ Edward O. Boshell, Jr.
-------------------------------
Edward O. Boshell, Jr.

- 6 -
<PAGE> 7
EXHIBIT "A"

SUBSCRIPTION FORM

(To be executed only upon exercise of Warrant)

The undersigned registered owner of this Warrant irrevocably exercises
this warrant for and purchases shares of Common Stock of Medical Alliance, Inc.
purchasable with this Warrant, and herewith makes payment therefor, all at the
price and on the terms and conditions specified in this Warrant and requests
that certificates for the shares of Common Stock hereby purchased (and any
securities or other property issuable upon such exercise) be issued in the name
of and delivered to ___________________________________________ whose address
is _____________________________________ and if such shares of Common Stock
shall not include all of the shares of Common stock issuable as provided in
this Warrant, that a new Warrant of like tenor and date for the balance of the
shares of Common Stock issuable thereunder to be delivered to the undersigned.

DATED: _______________________, 19__.

By:
---------------------------------
Its:
--------------------------------

Address:
----------------------------

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

-------------------------------------
<PAGE> 8
EXHIBIT B

ASSIGNMENT FORM

No. of Shares
Name & Address of Assignee Common Stock
-------------------------- --------------

and does hereby irrevocably constitute and appoint as Attorney
________________________ to register such transfer on the books of
________________________________ maintained for the purpose, with full
power of substitution in the premises.

DATED: _______________________, 19__.

By:
---------------------------------
Its:
--------------------------------

NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatever.

The Assignee named above, by acceptance of this assignment, agrees to
be bound by the terms of this Warrant with the same force and effect as if a
signatory thereto.

-------------------------------------
(Signature)

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

Dated:
-------------------------------

<PAGE> 1
EXHIBIT 4.7

THIS WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY, ENCUMBRANCES AND VOTING IMPOSED BY THE AMENDED
AND RESTATED STOCK BUY AND SELL AGREEMENT, DATED THE 10TH DAY OF JULY, 1992,
INCLUDING ANY AMENDMENTS THEREOF, (THE "SHAREHOLDERS AGREEMENT") A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY, AND THE COMPANY WILL
FURNISH TO THE RECORD HOLDER OF THIS WARRANT WITHOUT CHARGE A COPY OF SUCH
AGREEMENT UPON WRITTEN REQUEST TO THE CORPORATION AT ITS PRINCIPAL PLACE OF
BUSINESS OR REGISTERED OFFICE.

WARRANT
To Purchase Common Stock of
MEDICAL ALLIANCE, INC.

1. Grant of Warrant. THIS IS TO CERTIFY THAT Robert J. Mathews,
M.D., or his registered assigns ("Holder"), is entitled to exercise this
Warrant to purchase from Medical Alliance, Inc., a Texas corporation (the
"Company"), One Thousand Eight Hundred (1,800) shares (the "Shares") of fully
paid, non-assessable common stock, par value $0.002 per share, of the Company
(the "Common Stock"), all on the terms and conditions and pursuant to the
provisions hereinafter set forth. The Company acknowledges that the payment by
Holder is fair and full consideration for the rights granted to Holder
hereunder, since the Company acknowledges that, due to restrictions on the
exercisability of this Warrant and other restrictions on the rights of Holder
contained herein and in the Shareholders Agreement, the value of this Warrant
is contingent, speculative and uncertain.

2. Exercise Price. The exercise price per share of Common Stock
shall be Two Dollars ($2.00) (the "Exercise Price").

October 18, 1994 until March 31, 1997 1,800

After March 31, 1997 0
</TABLE>

;provided, however, that if the entire principal and interest balance of that
certain Amended and Restated Promissory Note, dated September 30, 1993, by and
between the Company and MJ Capital Partners, L.P. (the "Note"), is paid in full
prior to the vesting of any portion of this Warrant, the unvested portion of
this Warrant shall automatically be deemed canceled and not subject to further
vesting or exercise.

In order to exercise this Warrant, in whole or in part, the Holder
hereof shall deliver to the Company at its principal office at 8200 Springwood
Drive, Suite 200, Irving, Texas 75063, or at such other office as shall be
designated by the Company to the Holder in writing, (i) a written notice of
Holder's election to exercise this Warrant, which notice shall specify the
number of Shares to be purchased pursuant to such exercise, (ii) cash or cash
equivalent payable to the order of the Company in an amount equal to the
aggregate Exercise Price for all Shares to be purchased pursuant to such
exercise and (iii) this Warrant, accompanied by a subscription for Common Stock
to be purchased in the form of the Subscription attached hereto as Exhibit A.
Upon receipt thereof, the Company shall, as promptly as practicable, and in any
event within ten (10) days thereafter, execute or cause to be executed and
delivered to the Holder a certificate or certificates representing the
aggregate number of full Shares issuable upon such exercise. The stock
certificate or certificates so delivered shall be registered in the name of the
Holder, or such other name as shall be designated in said notice, in which
latter case the Holder shall be responsible for any applicable issue or
transfer taxes. This Warrant shall he deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and the Holder
or any other person so designated to be named therein shall be deemed to have
become a holder of record of such Shares for all purposes as of the date that
said notice, together with said payment and this Warrant and the Subscription
are received by the Company as aforesaid. The Holder of this Warrant shall
not, by virtue of its ownership of this Warrant, be entitled to any rights of a
shareholder in the Company, either at law or in equity; provided, however, such
Holder shall, for all purposes, be deemed to have become the holder of record
of such Shares on the date on which this Warrant is surrendered to the Company
in accordance with the immediately preceding sentence. If the exercise is for
less than all of the Shares issuable as provided in this Warrant, the Company
will issue a new Warrant of like tenor and date for the balance of such Shares
issuable hereunder to the Holder. The Holder of this Warrant, by its acceptance
hereof, consents to and agrees to be bound by and to comply with all of the
provisions of this Warrant. In addition, the Holder of this Warrant, by its
acceptance hereof agrees that as a condition of the Company issuing to such
Holder, or its designee, Shares, that such Holder, or its designee (as the case
may be) shall be required to become a party to the Shareholders Agreement.

5. Transfer. Subject to the provisions of the legend on the face
of this Warrant, this Warrant and all options and rights hereunder are
transferable, as to all or any part of the number of shares of Common Stock
purchasable upon its exercise, by the Holder hereof in person or by duly
authorized attorney on the books of the Company upon surrender of this Warrant
at the principal offices of the Company, together with the form of transfer
authorization attached hereto duly executed. The Company shall deem and treat
the registered Holder of this Warrant at any time as the absolute owner hereof
for all purposes and shall not be affected by any notice to the contrary. If
this Warrant is transferred in part, the Company shall at the time of surrender
of this Warrant, issue to the transferee a Warrant covering the number of
shares of Common Stock transferred and to the transferor a Warrant covering the
number of shares of Common Stock not transferred.

- 3 -
<PAGE> 4
10. Miscellaneous Representations and Warranties. The Company
hereby represents and warrants that, as of the date of the execution of this
Warrant, the following are true and correct:

(a) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Texas;

(c) This Warrant is a legal, valid, and binding
obligation of the Company enforceable against the Company in accordance with
its terms.

13. Amendment. This agreement may be amended or revoked only by
the written consent of all of the parries at the time of such amendment or
revocation.

Medical Alliance, Inc.
8200 Springwood Drive, Suite 200
Irving, Texas 75063

Robert J. Mathews, M.D.

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

The address of a party may be changed only by delivering written notice of such
changes of address to all other parties, in the manner provided for herein.

- 5 -
<PAGE> 6
STATE OF TEXAS APPLICABLE TO AN AGREEMENT, EXECUTED, DELIVERED AND PERFORMED IN
SUCH STATE.

19. Headings. Headings of the paragraphs in this Warrant are for
convenience and reference only and shall not, for any purpose, be deemed a part
of this Warrant.

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the 25th day of October, 1993.

MEDICAL ALLIANCE, INC.

By:
-------------------------------
Paul Herchman, President

-------------------------------
Robert J. Mathews, M.D.

- 6 -
<PAGE> 7
EXHIBIT "A"

SUBSCRIPTION FORM

(To be executed only upon exercise of Warrant)

The undersigned registered owner of this Warrant irrevocably exercises
this warrant for and purchases shares of Common Stock of Medical Alliance, Inc.
purchasable with this Warrant, and herewith makes payment therefor, all at the
price and on the terms and conditions specified in this Warrant and requests
that certificates for the shares of Common Stock hereby purchased (and any
securities or other property issuable upon such exercise) be issued in the name
of and delivered to __________________________________________________ whose
address is __________________________________________________________ and if
such shares of Common Stock shall not include all of the shares of Common stock
issuable as provided in this Warrant, that a new Warrant of like tenor and date
for the balance of the shares of Common Stock issuable thereunder to be
delivered to the undersigned.

DATED: _______________________, 19__.

By:
------------------------------------

Its:
-----------------------------------

Address:
-------------------------------

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

---------------------------------------
<PAGE> 8
EXHIBIT B

ASSIGNMENT FORM

No. of Shares
Name & Address of Assignee Common Stock
-------------------------- --------------

DATED: _______________________, 19__.

By:
-------------------------------
Its:
-------------------------------

NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatever.

The Assignee named above, by acceptance of this assignment, agrees to
be bound by the terms of this Warrant with the same force and effect as if a
signatory thereto.

-----------------------------------
(Signature)

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

Dated: ----------------------------

<PAGE> 1
EXHIBIT 4.8

THIS WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY, ENCUMBRANCES AND VOTING IMPOSED BY THE AMENDED
AND RESTATED STOCK BUY AND SELL AGREEMENT, DATED THE 10TH DAY OF JULY, 1992,
INCLUDING ANY AMENDMENTS THEREOF, (THE "SHAREHOLDERS AGREEMENT") A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY, AND THE COMPANY WILL
FURNISH TO THE RECORD HOLDER OF THIS WARRANT WITHOUT CHARGE A COPY OF SUCH
AGREEMENT UPON WRITTEN REQUEST TO THE CORPORATION AT ITS PRINCIPAL PLACE OF
BUSINESS OR REGISTERED OFFICE.

WARRANT
To Purchase Common Stock of
MEDICAL ALLIANCE, INC.

1. Grant of Warrant. THIS IS TO CERTIFY THAT Shelly Burks, or
her registered assigns ("Holder"), is entitled to exercise this Warrant to
purchase from Medical Alliance, Inc., a Texas corporation (the "Company"), One
Thousand Five Hundred (1,500) shares (the "Shares") of fully paid,
non-assessable common stock, par value $0.002 per share, of the Company (the
"Common Stock"), all on the terms and conditions and pursuant to the provisions
hereinafter set forth. The Company acknowledges that the payment by Holder is
fair and full consideration for the rights granted to Holder hereunder, since
the Company acknowledges that, due to restrictions on the exercisability of
this Warrant and other restrictions on the rights of Holder contained herein
and in the Shareholders Agreement, the value of this Warrant is contingent,
speculative and uncertain.

2. Exercise Price. The exercise price per share of Common Stock
shall be Two Dollars ($2.00) (the "Exercise Price").
<PAGE> 2
3. Exercise. Subject to the terms and conditions set forth
herein, this Warrant vests and may be exercised as follows:

<TABLE>
<CAPTION>
PERIOD CUMULATIVE NUMBER OF SHARES
------ ---------------------------
<S> <C>
The date hereof until May 30, 1995 750

May 31, 1995 until March 31, 1997 1,500

After March 31, 1997 0
</TABLE>

- 2 -
<PAGE> 3
such Holder, or its designee (as the case may be) shall be required to become a
party to the Shareholders Agreement.

5. Transfer. Subject to the provisions of the legend on the face
of this Warrant, this Warrant and all options and rights hereunder are
transferable, as to all or any part of the number of shares of Common Stock
purchasable upon its exercise, by the Holder hereof in person or by duly
authorized attorney on the books of the Company upon surrender of this Warrant
at the principal offices of the Company, together with the form of transfer
authorization attached hereto duly executed. The Company shall deem and treat
the registered Holder of this Warrant at any time as the absolute owner hereof
for all purposes and shall not be affected by any notice to the contrary. If
this Warrant is transferred in part, the Company shall at the time of surrender
of this Warrant, issue to the transferee a Warrant covering the number of
shares of Common Stock transferred and to the transferor a Warrant covering the
number of shares of Common Stock not transferred.

- 3 -
<PAGE> 4
own account for investment and not with a view to or in connection with any
offering or distribution, and the Holder has no present intention of selling or
otherwise disposing of such securities.

10. Miscellaneous Representations and Warranties. The Company
hereby represents and warrants that, as of the date of the execution of this
Warrant, the following are true and correct:

(a) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Texas;

(c) This Warrant is a legal, valid, and binding
obligation of the Company enforceable against the Company in accordance with
its terms.

13. Amendment. This agreement may be amended or revoked only by
the written consent of all of the parries at the time of such amendment or
revocation.

- 4 -
<PAGE> 5
rights granted to the Holder pursuant to this Agreement shall not be deemed to
constitute interest, it is nevertheless agreed that all agreements between
Company and Holder hereunder and with respect to the loan transaction entered
into between MJ Capital Partners, L.P. and the Company,of even date herewith,
whether now existing or hereafter arising and whether written or oral, are
expressly limited so that in no contingency or event whatsoever shall the
amount paid, or agreed to be paid, hereunder or thereunder, directly or
indirectly to the Holder for the use, forbearance, or detention of any money to
be loaned to the Company, or for the performance or payment of any covenant or
obligation contained herein or therein, exceed the maximum contractual amount
permissible under applicable law. If from any circumstance whatsoever
fulfillment of any provision hereof or thereof at the time performance of such
provision shall be due shall involve transcending the limit of validity
prescribed by law, then, ipso facto (and after spreading, allocating, or
prorating all funds paid or to be paid as interest or construed to be interest
as permitted by applicable law), the obligation to be fulfilled shall be
reduced to the limit of such validity, and if from any such circumstance the
Holder shall ever receive anything of value deemed interest by applicable law
which would exceed the highest lawful rate, an amount equal to any excessive
interest shall be applied to the reduction of the principal amount owing with
respect to any loan or on account of any other indebtedness and not to the
payment of interest, or if such excessive interest exceeds the unpaid principal
balance of any such indebtedness such excess shall be refunded to the Company.

Medical Alliance, Inc.
8200 Springwood Drive, Suite 200
Irving, Texas 75063

Shelly Burks

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

The address of a party may be changed only by delivering written notice of such
changes of address to all other parties, in the manner provided for herein.

- 5 -
<PAGE> 6
17. Applicable Law. THIS WARRANT HAS BEEN EXECUTED, DELIVERED AND
ACCEPTED BY THE PARTIES IN TEXAS, AND SHALL BE INTERPRETED AND THE RIGHTS OF
THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES
APPLICABLE THERETO AND THE INTERNAL LAWS OF THE STATE OF TEXAS APPLICABLE TO AN
AGREEMENT, EXECUTED, DELIVERED AND PERFORMED IN SUCH STATE.

19. Headings. Headings of the paragraphs in this Warrant are for
convenience and reference only and shall not, for any purpose, be deemed a part
of this Warrant.

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the 31st day of May, 1994.

MEDICAL ALLIANCE, INC.

By:
------------------------------
Paul Herchman, President

---------------------------------
Shelly Burks

- 6 -
<PAGE> 7
EXHIBIT "A"

SUBSCRIPTION FORM

(To be executed only upon exercise of Warrant)

The undersigned registered owner of this Warrant irrevocably exercises
this warrant for and purchases shares of Common Stock of Medical Alliance, Inc.
purchasable with this Warrant, and herewith makes payment therefor, all at the
price and on the terms and conditions specified in this Warrant and requests
that certificates for the shares of Common Stock hereby purchased (and any
securities or other property issuable upon such exercise) be issued in the name
of and delivered to __________________________________________________ whose
address is __________________________________________________________ and if
such shares of Common Stock shall not include all of the shares of Common stock
issuable as provided in this Warrant, that a new Warrant of like tenor and date
for the balance of the shares of Common Stock issuable thereunder to be
delivered to the undersigned.

DATED: _______________________, 19__.

By:
------------------------------------

Its:
-----------------------------------

Address:

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

---------------------------------------
<PAGE> 8
EXHIBIT B

ASSIGNMENT FORM

NO. OF SHARES
NAME & ADDRESS OF ASSIGNEE COMMON STOCK
- -------------------------- -------------

and does hereby irrevocably constitute and appoint as Attorney ________________
to register such transfer on the books of ________________________________
maintained for the purpose, with full power of substitution in the premises.

DATED: _______________________, 19__.

By:
-------------------------
Its:
------------------------

NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatever.

The Assignee named above, by acceptance of this assignment, agrees to
be bound by the terms of this Warrant with the same force and effect as if a
signatory thereto.

----------------------------
(Signature)

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

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

Dated:
----------------------

<PAGE> 1

EXHIBIT 4.9

THIS WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY, ENCUMBRANCES AND VOTING IMPOSED BY THE AMENDED
AND RESTATED STOCK BUY AND SELL AGREEMENT, DATED THE 10TH DAY OF JULY, 1992,
INCLUDING ANY AMENDMENTS THEREOF, (THE "SHAREHOLDERS AGREEMENT") A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY, AND THE COMPANY WILL
FURNISH TO THE RECORD HOLDER OF THIS WARRANT WITHOUT CHARGE A COPY OF SUCH
AGREEMENT UPON WRITTEN REQUEST TO THE CORPORATION AT ITS PRINCIPAL PLACE OF
BUSINESS OR REGISTERED OFFICE.

WARRANT
To Purchase Common Stock of
MEDICAL ALLIANCE, INC.

1. Grant of Warrant. THIS IS TO CERTIFY THAT Thomas A.
Montgomery, or his registered assigns ("Holder"), is entitled to exercise this
Warrant to purchase from Medical Alliance, Inc., a Texas corporation (the
"Company"), One Thousand Two Hundred (1,200) shares (the "Shares") of fully
paid, non-assessable common stock, par value $0.002 per share, of the Company
(the "Common Stock"), all on the terms and conditions and pursuant to the
provisions hereinafter set forth. The Company acknowledges that the payment by
Holder is fair and full consideration for the rights granted to Holder
hereunder, since the Company acknowledges that, due to restrictions on the
exercisability of this Warrant and other restrictions on the rights of Holder
contained herein and in the Shareholders Agreement, the value of this Warrant
is contingent, speculative and uncertain.

<TABLE>
<CAPTION>
PERIOD CUMULATIVE NUMBER OF SHARES
------ ---------------------------
<S> <C>
The date hereof until May 30, 1995 600

May 31, 1995 until March 31, 1997 1,200

After March 31, 1997 0
</TABLE>

- 2 -
<PAGE> 3
such Holder, or its designee (as the case may be) shall be required to become a
party to the Shareholders Agreement.

5. Transfer. Subject to the provisions of the legend on the face
of this Warrant, this Warrant and all options and rights hereunder are
transferable, as to all or any part of the number of shares of Common Stock
purchasable upon its exercise, by the Holder hereof in person or by duly
authorized attorney on the books of the Company upon surrender of this Warrant
at the principal offices of the Company, together with the form of transfer
authorization attached hereto duly executed. The Company shall deem and treat
the registered Holder of this Warrant at any time as the absolute owner hereof
for all purposes and shall not be affected by any notice to the contrary. If
this Warrant is transferred in part, the Company shall at the time of surrender
of this Warrant, issue to the transferee a Warrant covering the number of
shares of Common Stock transferred and to the transferor a Warrant covering the
number of shares of Common Stock not transferred.

10. Miscellaneous Representations and Warranties. The Company
hereby represents and warrants that, as of the date of the execution of this
Warrant, the following are true and correct:

(a) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Texas;

(c) This Warrant is a legal, valid, and binding
obligation of the Company enforceable against the Company in accordance with
its terms.

13. Amendment. This agreement may be amended or revoked only by
the written consent of all of the parries at the time of such amendment or
revocation.

Medical Alliance, Inc.
8200 Springwood Drive, Suite 200
Irving, Texas 75063

Thomas A. Montgomery

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

The address of a party may be changed only by delivering written notice of such
changes of address to all other parties, in the manner provided for herein.

19. Headings. Headings of the paragraphs in this Warrant are for
convenience and reference only and shall not, for any purpose, be deemed a part
of this Warrant.

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the 31st day of May, 1994.

MEDICAL ALLIANCE, INC.

By:
------------------------------------
Paul Herchman, President

---------------------------------------
Thomas A. Montgomery

- 6 -
<PAGE> 7
EXHIBIT "A"

SUBSCRIPTION FORM

(To be executed only upon exercise of Warrant)

The undersigned registered owner of this Warrant irrevocably exercises
this warrant for and purchases shares of Common Stock of Medical Alliance, Inc.
purchasable with this Warrant, and herewith makes payment therefor, all at the
price and on the terms and conditions specified in this Warrant and requests
that certificates for the shares of Common Stock hereby purchased (and any
securities or other property issuable upon such exercise) be issued in the name
of and delivered to __________________________________________________ whose
address is __________________________________________________________ and if
such shares of Common Stock shall not include all of the shares of Common stock
issuable as provided in this Warrant, that a new Warrant of like tenor and date
for the balance of the shares of Common Stock issuable thereunder to be
delivered to the undersigned.

DATED: _______________________, 19__.

By:
------------------------------------

Its:
-----------------------------------

Address:
-------------------------------

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

<PAGE> 8
EXHIBIT B

ASSIGNMENT FORM

No. of Shares
Name & Address of Assignee Common Stock
-------------------------- -------------

DATED:________________, 19______.

By:
------------------------------------

Its:
-----------------------------------

NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatever.

The Assignee named above, by acceptance of this assignment, agrees to
be bound by the terms of this Warrant with the same force and effect as if a
signatory thereto.

---------------------------------------
(Signature)

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

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

Dated:
---------------------------------

<PAGE> 1
EXHIBIT 4.10

THIS WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY, ENCUMBRANCES AND VOTING IMPOSED BY THE AMENDED
AND RESTATED STOCK BUY AND SELL AGREEMENT, DATED THE 10TH DAY OF JULY, 1992,
INCLUDING ANY AMENDMENTS THEREOF, (THE "SHAREHOLDERS AGREEMENT") A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY, AND THE COMPANY WILL
FURNISH TO THE RECORD HOLDER OF THIS WARRANT WITHOUT CHARGE A COPY OF SUCH
AGREEMENT UPON WRITTEN REQUEST TO THE CORPORATION AT ITS PRINCIPAL PLACE OF
BUSINESS OR REGISTERED OFFICE.

WARRANT
To Purchase Common Stock of
MEDICAL ALLIANCE, INC.

1. Grant of Warrant. THIS IS TO CERTIFY THAT Thomas A.
Montgomery, or his registered assigns ("Holder"), is entitled to exercise this
Warrant to purchase from Medical Alliance, Inc., a Texas corporation (the
"Company"), Four Thousand Two Hundred (4,200) shares (the "Shares") of fully
paid, non-assessable common stock, par value $0.002 per share, of the Company
(the "Common Stock"), all on the terms and conditions and pursuant to the
provisions hereinafter set forth. The Company acknowledges that the payment by
Holder is fair and full consideration for the rights granted to Holder
hereunder, since the Company acknowledges that, due to restrictions on the
exercisability of this Warrant and other restrictions on the rights of Holder
contained herein and in the Shareholders Agreement, the value of this Warrant
is contingent, speculative and uncertain.

2. Exercise Price. The exercise price per share of Common Stock
shall be Two Dollars ($2.00) (the "Exercise Price").

3. Exercise. Subject to the terms and conditions set forth
herein, this Warrant vests and may be exercised as follows:
<PAGE> 2
<TABLE>
<CAPTION>
PERIOD CUMULATIVE NUMBER OF SHARES
------ ---------------------------
<S> <C>
The date hereof until August 31, 1995 2,100

September 1, 1995 until August 31, 1997 4,200

After August 31, 1997 0
</TABLE>

5. Transfer. Subject to the provisions of the legend on the face
of this Warrant, this Warrant and all options and rights hereunder are
transferable, as to all or any part of the number of shares of Common Stock
purchasable upon its exercise, by the Holder hereof in person or by duly
authorized attorney on the books of the Company upon surrender of this Warrant
at the principal offices of the Company, together with the form of transfer
authorization attached hereto duly executed. The Company shall deem and treat
the registered Holder of this Warrant at any time as the absolute owner hereof
for all purposes and shall not be affected by any notice to the contrary. If
this Warrant is transferred in part, the Company shall at the time of surrender
of this Warrant, issue to the transferee a Warrant covering the number of
shares of Common Stock transferred and to the transferor a Warrant covering the
number of shares of Common Stock not transferred.

- 3 -
<PAGE> 4
10. Miscellaneous Representations and Warranties. The Company
hereby represents and warrants that, as of the date of the execution of this
Warrant, the following are true and correct:

(a) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Texas;

(c) This Warrant is a legal, valid, and binding
obligation of the Company enforceable against the Company in accordance with
its terms.

13. Amendment. This agreement may be amended or revoked only by
the written consent of all of the parries at the time of such amendment or
revocation.

Medical Alliance, Inc.
8200 Springwood Drive, Suite 200
Irving, Texas 75063

Thomas A. Montgomery

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

The address of a party may be changed only by delivering written notice of such
changes of address to all other parties, in the manner provided for herein.

- 5 -
<PAGE> 6
STATE OF TEXAS APPLICABLE TO AN AGREEMENT, EXECUTED, DELIVERED AND PERFORMED IN
SUCH STATE.

19. Headings. Headings of the paragraphs in this Warrant are for
convenience and reference only and shall not, for any purpose, be deemed a part
of this Warrant.

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the 1st day of September, 1994.

MEDICAL ALLIANCE, INC.

By:
-----------------------------------
Paul Herchman, President

-----------------------------------
Thomas A. Montgomery

- 6 -
<PAGE> 7
EXHIBIT "A"

SUBSCRIPTION FORM

(To be executed only upon exercise of Warrant)

The undersigned registered owner of this Warrant irrevocably exercises
this warrant for and purchases shares of Common Stock of Medical Alliance, Inc.
purchasable with this Warrant, and herewith makes payment therefor, all at the
price and on the terms and conditions specified in this Warrant and requests
that certificates for the shares of Common Stock hereby purchased (and any
securities or other property issuable upon such exercise) be issued in the name
of and delivered to __________________________________________________ whose
address is __________________________________________________________ and if
such shares of Common Stock shall not include all of the shares of Common stock
issuable as provided in this Warrant, that a new Warrant of like tenor and date
for the balance of the shares of Common Stock issuable thereunder to be
delivered to the undersigned.

DATED: _______________________, 19__.

By:
-----------------------------------
Its:
----------------------------------

Address:
------------------------------

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

<PAGE> 8
EXHIBIT B

ASSIGNMENT FORM

No. of Shares
Name & Address of Assignee Common Stock
-------------------------- --------------

DATED: _______________________, 19__.

By:
-----------------------------------

Its:
----------------------------------

NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatever.

The Assignee named above, by acceptance of this assignment, agrees to
be bound by the terms of this Warrant with the same force and effect as if a
signatory thereto.

-----------------------------------
(Signature)

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

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

Dated:
-----------------------------

<PAGE> 1
EXHIBIT 4.11

THIS WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY, ENCUMBRANCES AND VOTING IMPOSED BY THE AMENDED
AND RESTATED STOCK BUY AND SELL AGREEMENT, DATED THE 10TH DAY OF JULY, 1992,
INCLUDING ANY AMENDMENTS THEREOF, (THE "SHAREHOLDERS AGREEMENT") A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY, AND THE COMPANY WILL
FURNISH TO THE RECORD HOLDER OF THIS WARRANT WITHOUT CHARGE A COPY OF SUCH
AGREEMENT UPON WRITTEN REQUEST TO THE CORPORATION AT ITS PRINCIPAL PLACE OF
BUSINESS OR REGISTERED OFFICE.

WARRANT
To Purchase Common Stock of
MEDICAL ALLIANCE, INC.

1. Grant of Warrant. THIS IS TO CERTIFY THAT Paul Herchman, or
his registered assigns ("Holder"), is entitled to exercise this Warrant to
purchase from Medical Alliance, Inc., a Texas corporation (the "Company"), Ten
Thousand (10,000) shares (the "Shares") of fully paid, non-assessable common
stock, par value $0.002 per share, of the Company (the "Common Stock"), all on
the terms and conditions and pursuant to the provisions hereinafter set forth.
The Company acknowledges that the payment by Holder is fair and full
consideration for the rights granted to Holder hereunder, since the Company
acknowledges that, due to restrictions on the exercisability of this Warrant
and other restrictions on the rights of Holder contained herein and in the
Shareholders Agreement, the value of this Warrant is contingent, speculative
and uncertain.

2. Exercise Price. The exercise price per share of Common Stock
shall be Four Dollars ($4.00) (the "Exercise Price").

3. Exercise. The Warrant may be exercised, in whole or in part,
at any time on or prior to September 16, 1999. In order to exercise this
Warrant, in whole or in part, the Holder hereof shall deliver to the Company at
its principal office at 5005 LBJ Freeway, Suite 1370, Dallas, Texas 75244, or
at such other office as shall be designated by the Company to the Holder in
writing, (i) a written notice of Holder's election to exercise this Warrant,
which notice shall specify the number of Shares to be purchased pursuant to
such exercise, (ii) cash or cash equivalent payable to the order of the Company
in an amount equal to the aggregate Exercise Price for all Shares to be
purchased pursuant to such exercise and (iii) this Warrant,
<PAGE> 2
accompanied by a subscription for Common Stock to be purchased in the form of
the Subscription attached hereto as Exhibit A. Upon receipt thereof, the
Company shall, as promptly as practicable, and in any event within ten (10)
days thereafter, execute or cause to be executed and delivered to the Holder a
certificate or certificates representing the aggregate number of full Shares
issuable upon such exercise. The stock certificate or certificates so
delivered shall be registered in the name of the Holder, or such other name as
shall be designated in said notice, in which latter case the Holder shall be
responsible for any applicable issue or transfer taxes. This Warrant shall he
deemed to have been exercised and such certificate or certificates shall be
deemed to have been issued, and the Holder or any other person so designated to
be named therein shall be deemed to have become a holder of record of such
Shares for all purposes as of the date that said notice, together with said
payment and this Warrant and the Subscription are received by the Company as
aforesaid. The Holder of this Warrant shall not, by virtue of its ownership of
this Warrant, be entitled to any rights of a shareholder in the Company, either
at law or in equity; provided, however, such Holder shall, for all purposes, be
deemed to have become the holder of record of such Shares on the date on which
this Warrant is surrendered to the Company in accordance with the immediately
preceding sentence. If the exercise is for less than all of the Shares
issuable as provided in this Warrant, the Company will issue a new Warrant of
like tenor and date for the balance of such Shares issuable hereunder to the
Holder. The Holder of this Warrant, by its acceptance hereof, consents to and
agrees to be bound by and to comply with all of the provisions of this Warrant.
In addition, the Holder of this Warrant, by its acceptance hereof agrees that
as a condition of the Company issuing to such Holder, or its designee, Shares,
that such Holder, or its designee (as the case may be) shall be required to
become a party to the Shareholders Agreement.

5. Transfer. Subject to the provisions of the legend on the face
of this Warrant, this Warrant and all options and rights hereunder are
transferable, as to all or any part of the number of shares of Common Stock
purchasable upon its exercise, by the Holder hereof in person or by duly
authorized attorney on the books of the Company upon surrender of this Warrant
at the principal offices of the Company, together with the form of transfer
authorization attached hereto duly executed. The Company shall deem and treat
the registered Holder of this Warrant at any time as the absolute owner hereof
for all purposes and shall not be affected by any notice to the contrary. If
this Warrant is transferred in part, the Company shall at the time of surrender
of this Warrant, issue to the transferee a Warrant covering the number of
shares of Common Stock transferred and to the transferor a Warrant covering the
number of shares of Common Stock not transferred.

- 2 -
<PAGE> 3
such fraction equal to the equivalent market price for such fractional share
(as determined in the manner prescribed by the Board of Directors) at the close
of business on the exercise date.

10. Miscellaneous Representations and Warranties. The Company
hereby represents and warrants that, as of the date of the execution of this
Warrant, the following are true and correct:

(a) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Texas;

(c) This Warrant is a legal, valid, and binding
obligation of the Company enforceable against the Company in accordance with
its terms.

11. Rights are Cumulative. The parties understand and agree that
irreparable injury would be caused to the Holder and the Company by failure to
comply with the terms of this

- 3 -
<PAGE> 4
Agreement, and that in the event of any actual or threatened default in or
breach of any of the provisions in this Agreement, the party which is aggrieved
thereby shall have the right to specific performance and/or an injunction, as
well as monetary damages and any other appropriate relief in law or in equity
which may be granted by any court in the United States of America, and that all
such rights and remedies shall be cumulative and exclusive.

13. Amendment. This agreement may be amended or revoked only by
the written consent of all of the parries at the time of such amendment or
revocation.

14. Notices and Demands. Any notice or demand which is required
will be deemed to have been sufficiently received (except as otherwise
provided) three (3) days after being sent by certified or registered mail,
postage and charges prepaid, return receipt requested, or one day after sent by
overnight delivery providing receipt of delivery, to the following addresses:

Medical Alliance, Inc.
5005 LBJ Freeway, Suite 1370
Dallas, Texas 75224

Paul Herchman
201 Oakmont
Trophy Club, Texas 76262

The address of a party may be changed only by delivering written notice of such
changes of address to all other parties, in the manner provided for herein.

15. Severability. In the event any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of this Agreement shall continue in full force and
effect, and the invalid or unenforceable provision shall be modified to the
extent necessary to make it valid and enforceable; provided that no such
modification shall be effective if it materially changes the economic benefit
of this Agreement to any party.

16. Applicable Law. THIS WARRANT HAS BEEN EXECUTED, DELIVERED AND
ACCEPTED BY THE PARTIES IN TEXAS, AND SHALL BE INTERPRETED AND THE RIGHTS OF
THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES
APPLICABLE THERETO AND THE INTERNAL LAWS OF THE STATE OF TEXAS APPLICABLE TO AN
AGREEMENT, EXECUTED, DELIVERED AND PERFORMED IN SUCH STATE.

- 4 -
<PAGE> 5
17. Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
permitted assigns of the Company and the Holder hereof and, shall be
enforceable by any such Holder. In order to assign this Warrant, or any part
hereof, the Holder must complete and deliver to the Company the Assignment Form
attached hereto as Exhibit B.

18. Headings. Headings of the paragraphs in this Warrant are for
convenience and reference only and shall not, for any purpose, be deemed a part
of this Warrant.

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the 27th day of June, 1995.

MEDICAL ALLIANCE, INC.

By:
------------------------------------
Mike Wallace,
Chief Financial Officer

----------------------------------------
Paul Herchman

- 5 -
<PAGE> 6
EXHIBIT "A"

SUBSCRIPTION FORM

(To be executed only upon exercise of Warrant)

DATED:__________________, 19__,

By:
------------------------------------

Its: -----------------------------------

Address:
-------------------------------

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

<PAGE> 7
EXHIBIT B

ASSIGNMENT FORM

No. of Shares
Name & Address of Assignee Common Stock
-------------------------- --------------

and does hereby irrevocably constitute and appoint as Attorney ________________
________________________ to register such transfer on the books of ____________
________________________________ maintained for the purpose, with full power of
substitution in the premises.

DATED: ________________________, 19__.

By:
------------------------------------

Its:
-----------------------------------

NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatever.

The Assignee named above, by acceptance of this assignment, agrees to
be bound by the terms of this Warrant with the same force and effect as if a
signatory thereto.

----------------------------------------
(Signature)

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

Dated:
---------------------------------

<PAGE> 1
EXHIBIT 10.1

AMENDED AND RESTATED REVOLVING CREDIT
AND TERM LOAN AGREEMENT

THIS AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT
(this "Agreement") is entered into as of the 20th day of March, 1996 by and
between MEDICAL ALLIANCE, INC., a Texas corporation ("Borrower"), and
NATIONSBANK OF TEXAS, N.A., a national banking association ("Lender").

W I T N E S S E T H:

1. Borrower and Lender entered into that certain Revolving Credit
and Term Loan Agreement dated as of June 29, 1995 (the "Original Loan
Agreement"), pursuant to which Lender provided to Borrower a revolving credit
facility and a term loan facility upon the terms and subject to the conditions
set forth in the Original Loan Agreement.

2. Borrower has requested that Lender increase the amount and
extend the term of the revolving credit facility, provide to Borrower an
additional term loan facility, and modify certain other provisions contained in
the Original Loan Agreement.

3. Lender and Borrower desire, and have agreed, to amend and
restate the Original Loan Agreement in its entirety pursuant to this Agreement.

NOW, THEREFORE, in consideration of the mutual promises herein
contained and for other good valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

SECTION 1

DEFINITION OF TERMS

1.01. Definitions. As used in this Agreement, all exhibits and
schedules hereto and in any note, certificate, report or other Loan Documents
made or delivered pursuant to this Agreement, the following terms shall have
the respective meanings assigned to them in this Section 1 or in the section or
recital referred to below:

"Advance" shall mean the disbursement by Lender of a sum or sums lent
to Borrower pursuant to this Agreement.

"Agreement" shall mean this Amended and Restated Revolving Credit and
Term Loan Agreement, including the schedules and exhibits hereto, as the same
may be renewed, extended or modified from time to time.

"Affiliate" of any Person shall mean any other Person directly or
indirectly, controlling, controlled by, or under common control with, such
Person.
<PAGE> 2
"Base Rate" shall mean the variable rate of interest established from
time to time by Lender as its "prime rate" of interest (which rate of interest
is a general reference rate and may not be the lowest rate charged by Lender on
similar loans). Each change in the Base Rate shall become effective without
prior notice to Borrower automatically as of the opening of business on the
date of such change in the Base Rate.

"Borrowing Base" shall mean, as of any date, seventy-five percent
(75%) of aggregate Eligible Receivables.

"Borrowing Base Report" shall mean, as of any date of preparation, a
certificate in the form of Exhibit H attached hereto prepared, duly executed
and certified by a duly elected officer of Borrower showing the Borrowing Base
as determined by Borrower (which shall be subject to adjustment or modification
to the satisfaction of Lender) as of the date thereof, and which shall be in
form and substance acceptable to Lender.

"Business Day" shall mean any day other than a Saturday, Sunday or day
on which national banks are authorized to be closed under the laws of the state
of Texas.

"Cash Interest Expense" shall mean, for Borrower and its Subsidiaries
for any period, total interest expense in respect of Indebtedness actually paid
or that is payable during such period, including, without limitation, all
commissions, discounts and other fees and charges with respect to letters of
credit, but excluding interest expense not payable in cash, all as determined
in accordance with GAAP.

"Code" shall mean the Internal Revenue Code of 1986, as amended, and
all regulations promulgated and rulings issued thereunder.

"Collateral Documents" shall mean all security agreements, pledge
agreements, guaranty agreements and other agreements or documents executed or
delivered to secure repayment of the Obligation or any part thereof

"Consolidated Adjusted Net Income" shall mean, for any period,
consolidated net earnings (after income taxes) of Borrower and its
Subsidiaries, but excluding extraordinary gains, including gains due to (a)
sales or write-up of assets, (b) earnings of any Person newly acquired, if
earned prior to acquisition, or (c) acquisition of any securities of Borrower
or a Subsidiary.

"Consolidated Funded Debt" shall mean, for Borrower and its
Subsidiaries, the sum of the following (without duplication): (a) all
Indebtedness which would be classified as "funded indebtedness" or "long-term
indebtedness" on a consolidated balance sheet of Borrower and its Subsidiaries;
(b) all Indebtedness outstanding under a credit agreement providing for
borrowings over a period of more than one year (including indebtedness created
within one year of the maturity date); (c) the principal portion of all
obligations in respect of capital leases; and (d) all obligations under all
Guaranties.

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"Consolidated Tangible Net Worth" shall mean the total shareholder's
equity of Borrower and its Subsidiaries, less the aggregate book value of
Intangible Assets.

"Contract Rate" shall mean (a) with respect to the Revolving Note, the
rate set forth in Section 3.02(b) hereto, (b) with respect to the Term Note,
the rate set forth in Section 3.03(b), and (c) with respect to the Term B Note,
the rate set forth in Section 3.04(b).

"Current Maturities of Long-Term Debt" shall mean, as of any date, the
aggregate amount of all regularly scheduled principal payments of all
outstanding Indebtedness of Borrower and its Subsidiaries that are due and
payable within twelve (12) months of such date.

"Current Maturity Coverage Ratio" shall mean, as of any date, the
ratio of (a) Consolidated Adjusted Net Income for the twelve (12) month period
ending on the date of determination plus all non-cash items reducing
Consolidated Adjusted Net Income, less all non-cash items increasing
Consolidated Adjusted Net Income, to (b) Current Maturities of Long-Term Debt.

"Debtor Laws" shall mean all applicable liquidation, conservatorship,
bankruptcy, moratorium, arrangement, receivership, insolvency, reorganization
or similar laws from time to time in effect affecting the rights of creditors
generally.

"Dividends" in respect of any corporation, shall mean (i) cash
distributions or other distributions on, or in respect of, any class of capital
stock of such corporation, except for distributions made solely in shares of
stock of the same class, and (ii) other payments or transfers made in respect
of the redemption, repurchase or acquisition of such stock.

"EBITDA" shall mean for any period, for Borrower and its Subsidiaries,
the sum of (a) Consolidated Adjusted Net Income, plus (b) depreciation and
amortization expense, plus (c) Cash Interest Expense, plus (d) federal, state,
local and foreign income taxes deducted from Consolidated Adjusted Net Income
in accordance with GAAP.

"Eligible Receivables" shall mean only Receivables arising out of bona
fide sales made by Borrower or any Subsidiary in the ordinary course of
business, to the extent such Receivables are not in dispute and unless deemed
ineligible by a good faith reasonable determination by Lender. No Receivable
shall be an Eligible Receivable if (a) the invoice date for such receivable is
more than ninety (90) days prior to the date of determination of Eligible
Receivables, (b) if Lender reasonably believes that such Receivable may not be
paid because of the account debtors' financial inability to pay or because the
account debtor has disputed liability, asserted any right of setoff, or has
made a claim with respect to, such Receivable, other than as a minimal
adjustment in the ordinary course of business and in accordance with regular
commercial practice, (c) any such account has been placed with an attorney or
collection agency, (d) the balance due on such Receivable represents the
consignment of goods or any advancement of goods for which the sale is not
final, (e) the account debtor on any such Receivable is also a supplier or
creditor of Borrower or any Subsidiary and such account debtor has not by
written

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agreement subordinated its rights of setoff to the rights of Lender to the
satisfaction of Lender, (f) the Receivable is not subject to perfected, first
priority security interest in favor of Lender, (g) the account debtor is not
located within the United States or is the United States government or any
tribunal thereof unless appropriate assignment of claims are executed in
advance, (h) the collection of such Receivable is, in Lender's reasonable
credit judgment, otherwise insecure, or (i) such Receivable arises out of a
contract with, or order from, an account debtor that, by its terms, forbids or
makes void or unenforceable the assignment by Borrower or any Subsidiary to
Lender of the Receivable arising with respect thereto. A Receivable which is
at any time an Eligible Receivable, but which subsequently fails to meet any of
the foregoing requirements, shall forthwith cease to be an Eligible Receivable.

"Environmental Laws" shall mean any law pertaining to air, emissions,
water discharge, noise emissions, solid or liquid waste disposal, hazardous
waste or materials, industrial hygiene, or other environmental, health or
safety matters or conditions on, under or about real property or any portion
thereof, and similar laws of any Governmental Authority having jurisdiction
over real property as such laws may be amended or supplemented from time to
time, and regulations promulgated and rulings issued pursuant to such laws.

"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the regulations and published interpretations thereunder.

"ERISA Affiliate" shall mean any Subsidiary or trade or business
(whether or not incorporated) which is a member of a group of which Borrower is
a member and which is under common control with Borrower within the meaning of
Section 414 of the Code.

"Event of Default" shall have the meaning set forth in Section 9.01.

"Fixed Charges" shall mean, for any period for Borrower and its
Subsidiaries, the sum of (a) Cash Interest Expense (including the interest
component of any capital leases), and (b) operating lease expenses.

"GAAP" shall mean those generally accepted accounting principles and
practices, applied on a consistent basis, which are recognized as such by the
American Institute of Certified Public Accountants acting through its
Accounting Principles Board and the Financial Accounting Standards Board and/or
their respective successors and which are applicable in the circumstances as of
the date in question.

"Governmental Authority" shall mean, with respect to any Person, any
government (or any political subdivision or jurisdiction thereof), court,
bureau, agency or other governmental authority having jurisdiction over such
Person or any of its business, operations or properties.

"Guarantors" shall mean (a) all present and future Subsidiaries of
Borrower, and (b) Paul Herchman, and "Guarantor" shall mean any one of the
Guarantors.

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<PAGE> 5
"Guaranty" of any Person shall mean any contract or understanding of
such Person pursuant to which such Person guarantees, or in effect guarantees,
any Indebtedness of any other Person (the "Primary Obligor") in any manner,
whether directly or indirectly, including agreements to assure the holder of
the Indebtedness of the Primary Obligor against loss in respect thereof; except
that "Guaranty" shall not include endorsements, in the ordinary course of
business, of negotiable instruments or documents for deposit or collection.

"Hazardous Material" shall mean any hazardous, toxic, or dangerous
waste, substance or material defined as such in or for the purpose of any
Environmental Law.

"Indebtedness" shall mean, with respect to any Person, all
indebtedness, obligations and liabilities of such Person, including without
limitation (a) all "liabilities" which would be reflected on a balance sheet of
such Person, (b) all obligations of such Person in respect of any Guaranty,
letter of credit or bankers' acceptance, (c) all obligations of such Person in
respect of any lease (whether operating or capital), (d) all obligations,
indebtedness and liabilities secured by any lien or any security interest on
any property or assets of such Person, and (e) any obligation to redeem or
repurchase any of such Person's capital stock, warrants or stock equivalents.

"Intangible Assets" of any Person shall mean those assets of such
Person which are (a) deferred assets, other than prepaid insurance and prepaid
taxes, (b) patents, copyrights, trademarks, tradenames, franchises, goodwill,
experimental expenses and other similar assets which would be classified as
intangible assets on a balance sheet of such Person, (c) unamortized debt
discount and expense, and (d) assets located, and notes and receivables due
from obligors domiciled, outside of the United States of America.

"Investment" in any Person shall mean any investment, whether by means
of share purchase, loan, advance, extension of credit, capital contribution or
otherwise, in or to such Person, the Guaranty of any Indebtedness of such
Person, or the subordination of any claim against such Person to other
Indebtedness of such Person.

"Lien" shall mean any lien, mortgage, security interest, tax lien,
pledge, encumbrance, conditional sale or title retention arrangement, or any
other interest in property designed to secure the repayment of Indebtedness,
whether arising by agreement or under any statute or law, or otherwise.

"Loans" shall mean the Revolving Loan, the Term A Loan, and the Term B
Loan, and "Loan" shall mean any of the Revolving Loan, the Term A Loan or the
Term B Loan.

"Loan Documents" shall mean this Agreement, the Notes, the Collateral
Documents and any agreements, documents (and with respect to this Agreement,
and such other agreements and documents, any renewals, extensions, amendments
or supplements thereto) or certificates at any time executed or delivered
pursuant to the terms of this Agreement.

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<PAGE> 6
"Material Adverse Effect" shall mean any material adverse changes in,
or effect upon, (a) the validity, performance or enforceability of any Loan
Documents, (b) the financial condition or business operations of Borrower, any
Subsidiary or Guarantor, or (c) the ability of Borrower to fulfill its
obligations under the Loan Documents.

"Maximum Rate" shall mean the highest nonusurious rate of interest (if
any) permitted from day to day by applicable law. Lender hereby notifies and
discloses to Borrower that, for purposes of Tex. Rev. Civ. Stat. Ann. art.
5069-1.04, as it may from time to time be amended, the "applicable rate
ceiling" shall be the "indicated rate" ceiling from time to time in effect as
limited by article 5069-1.04(b); provided, however, that to the extent
permitted by applicable law, Lender reserves the right to change the
"applicable rate ceiling" from time to time by further notice and disclosure to
Borrower.

"Notes" shall mean the Revolving Credit Note, the Term Note, and the
Term B Note, and "Note" shall mean any of the Revolving Note, the Term Note or
the Term B Note.

"Notice of Borrowing" shall mean (a) with respect to the Revolving
Loan, a notice in the form of Exhibit B, and (b) with respect to the Term
Loans, a notice in the form of Exhibit C.

"Obligation" shall mean all present and future indebtedness,
obligations, and liabilities and all renewals and extensions thereof, or any
part thereof, now or hereafter owed to Lender by Borrower, whether arising
pursuant to any of the Loan Documents, or otherwise, and all renewals and
extensions thereof, together with all interest accruing thereon and costs,
expenses and attorneys' fees incurred in the enforcement or collection thereof.

"Original Loan Agreement" shall have the meaning set forth in the
recitals of this Agreement.

"Person" shall include an individual, corporation, joint venture,
general or limited partnership, trust, unincorporated organization, or
government, or any agency or political subdivision thereof.

"Permitted Dividends" shall mean Dividends in respect of Borrower's
Class A Preferred Stock issued and outstanding as of June 29, 1995, payable on
June 30 of each year, not to exceed in the aggregate per year the lesser of (a)
$0.20 per share, and (b) $87,000.00.

"Permitted Liens" shall mean (a) Liens in favor of Lender to secure
the Obligation, (b) pledges or deposits made to secure payment of worker's
compensation (or to participate in any fund in connection with worker's
compensation), unemployment insurance, pensions, or social security programs,
(c) Liens imposed by mandatory provisions of law such as for materialmen's,
mechanic's, warehousemen's and other like Liens arising in the ordinary course
of business, securing Indebtedness whose payment is not yet due, (d) Liens for
taxes, assessments and governmental charges or levies imposed upon a Person or
upon such Person's income, profits or property, if the same are not yet due and
payable or if the same are being contested in good

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<PAGE> 7
faith and as to which adequate reserves are maintained in accordance with GAAP,
(e) good faith deposits in connection with leases, real estate bids or
contracts (other than contracts involving the borrowing of money), pledges or
deposits to secure (or in lieu of ) surety, stay, appeal or customs bonds and
deposits to secure the payment of taxes, assessments, customs, duties or other
similar charges, (f) encumbrances consisting of zoning restrictions, easements,
or other restrictions on the use of real property, provided that such
encumbrances do not impair the use of such property for the uses intended, and
none of which is violated by existing or proposed structures or land use, and
(g) the capital leases and Liens evidenced by the financing statements listed
on Exhibit I.

"Permitted Subordinated Debt" shall mean Indebtedness of Borrower that
is subordinated to the Obligation pursuant to a written agreement containing
terms, conditions and subordination provisions acceptable to Lender, including,
without limitation, a provision stating that upon the occurrence and during the
continuance of an Event of Default under this Agreement or the Loan Documents,
no payments of principal or interest shall be made on or with respect to such
Indebtedness, or any renewals or extensions thereof.

"Plan" shall mean an employee benefit plan or other plan maintained by
Borrower or any ERISA Affiliate and which is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Code, as
amended.

"Potential Default" shall mean the occurrence of any event which with
passage of time or giving of notice or both could become an Event of Default.

"Receivables" shall mean all present and future (a) accounts,
receivables, contract rights, chattel paper, documents, tax refunds, or
payments of, or owned by, Borrower or any Subsidiary, (b) insurance proceeds,
patent rights, license rights, rights to refunds or indemnification, and other
general intangibles of every kind or nature of, or owned by, Borrower or any
Subsidiary, and (c) all forms of obligations whatsoever owing to Borrower or
any Subsidiary together with all instruments and all documents of title
representing any of the foregoing and all right, title, and interest in, and
all securities and guaranties with respect to, each Receivable.

"Revolving Loan" shall mean the revolving credit loan made or to be
made hereunder to Borrower by Lender pursuant to Section 2.01.

"Revolving Note" shall mean the Revolving Credit Note executed by
Borrower and delivered pursuant to the terms of this Agreement, together with
any renewals, extensions or modifications thereof, which note is in renewal,
extension, modification and increase of that certain Revolving Credit Note
dated June 29, 1995, executed by Borrower and payable to the order of Lender in
the original principal amount of $250,000.00.

"Scheduled Termination Date" shall mean May 30, 1997.

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<PAGE> 8
"Subsidiary" shall mean any corporation of which more than fifty
percent (50%) (in number of votes) of the issued and outstanding securities
having ordinary voting power for the election of at least a majority of the
directors is owned or controlled, directly or indirectly, by Borrower, any
Subsidiary or any combination thereof, including, without limitation, those
listed on Exhibit A.

"Temporary Cash Investment" shall mean any Investment (i) in direct
obligations of the United States of America or any agency thereof, or
obligations fully guaranteed by the United States of America or any agency
thereof, provided that such obligations mature within one year of the date of
acquisition thereof, (ii) commercial paper rated in the highest grade by two or
more national credit rating agencies and maturing not more than 180 days from
the date of creation thereof, and (iii) time deposits with, and certificates of
deposit and bankers' acceptances issued by, Lender or any United States bank
having capital surplus and undivided profits aggregating at least
$1,000,000,000.

""Termination Date" shall mean the earlier of (i) the Scheduled
Termination Date, or (ii) the date Lender's commitment to fund Advances
hereunder is terminated pursuant to Section 9.02.

"Term A Loan" shall mean the term loan made or to be made to Borrower
by Lender pursuant to Section 2.02.

"Term B Loan" shall mean the term loan made or to be made to Borrower
by Lender pursuant to Section 2.03.

"Term Loans" shall mean the Term A Loan and the Term B Loan, and "Term
Loan" shall mean either the Term A Loan or the Term B Loan.

"Term Note" shall mean the Term Note dated June 29, 1995, executed by
Borrower and payable to the order of Lender in the original principal amount of
$1,750,000.00, and delivered pursuant to the terms of the Original Loan
Agreement, together with any renewals, extensions or modifications thereof.

"Term B Note" shall mean the Term Note executed by Borrower and
payable to the order of Lender in the original principal amount of
$2,000,000.00, and delivered pursuant to the terms of this Agreement, together
with any renewals, extensions or modifications thereof.

"Term Notes" shall mean the Term Note and the Term B Note, and "Term
Note" shall mean either the Term Note or the Term B Note.

1.02. Accounting Terms. As used in this Agreement, and in the Note,
and in any certificate, report or other document made or delivered pursuant to
this Agreement, accounting terms not defined in Section 1.01, and accounting
terms partly defined in Section 1.01 to the extent not defined, shall have, as
of any date, the respective meanings given to them under

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<PAGE> 9
GAAP and all references to balance sheets or other financial statements shall
mean such statements, prepared in accordance with GAAP as of such date.

1.03. Rules of Construction. When used in this Agreement: (a) "or"
is not exclusive; (b) a reference to a law includes any amendment or
modification to such law; (c) a reference to a Person includes its permitted
successors and permitted assigns; (d) except as provided otherwise, all
references to the singular shall include the plural and vice versa; (e) except
as provided in this Agreement, a reference to an agreement, instrument or
document shall include such agreement, instrument or document as the same may
be amended, modified or supplemented from time to time in accordance with its
terms and as permitted by the Loan Documents; (f) all references to Sections
shall be to Sections of this Agreement, unless otherwise indicated; (g) all
Exhibits to this Agreement shall be incorporated into this Agreement; (h) the
words "include," "includes" and "including" shall be deemed to be followed by
the phrase "without limitation;" and (i) except as otherwise provided herein,
in the computation of time from a specified date to a later specified date, the
word "from" means "from and including" and words "to" and "until" each mean "to
but excluding."

SECTION 2

THE REVOLVING CREDIT LOAN AND THE TERM LOANS

2.01. The Revolving Credit Loan and Revolving Credit Commitment.
Subject to the terms and conditions of this Agreement, Lender agrees to extend
to Borrower, from the date hereof through the Termination Date, a revolving
line of credit which shall not exceed at any one time outstanding the lesser of
(a) $500,000.00, and (b) the Borrowing Base (the "Revolving Credit
Commitment"). Within the limits of this Section 2.01, during such period,
Borrower may borrow, repay and reborrow in accordance with this Agreement.
Borrower shall have the right, upon three (3) Business Days' prior written
notice to Lender, to permanently reduce the unutilized portion of the Revolving
Credit Commitment; provided that any partial reduction shall be in the minimum
amount of $25,000.00 or a greater integral multiple thereof.

2.02. The Term A Loan and Term A Loan Credit Commitment. Subject to
the terms and conditions of this Agreement, Lender agrees to extend to
Borrower, a term loan in multiple advances from June 29, 1995 through the
Second Conversion Date (defined below), which shall not exceed in the aggregate
$1,750,000.00 (the "Term A Loan Commitment"). Borrower may not borrow, repay
and reborrow any portion of the Term A Loan. The lesser of (a) the aggregate
amount of all Advances under the Term A Loan made between June 29, 1995 and the
earlier to occur of (i) October 31, 1995, and (ii) the date in which Advances
under the Term A Loan initially exceed $1,100,000.00 (such date being the
"Initial Conversion Date"), and (b) $1,100,000.00, is referred to herein as the
"Initial Funding Amount." The aggregate amount of all Advances under the Term
A Loan in excess of the Initial Funding Amount made between the Initial
Conversion Date and the earlier to occur of (i) May 15, 1997, and (ii) the date
in which Advances under the Term A Loan initially equal or exceed the Term A
Loan Commitment

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<PAGE> 10
(such date being the "Second Conversion Date") is referred to herein as the
"Second Funding Amount."

2.03. The Term B Loan and Term B Loan Credit Commitment. Subject to
the terms and conditions of this Agreement, Lender agrees to extend to Borrower
a term loan in multiple advances from the date hereof through the Termination
Date, which shall not exceed in the aggregate $2,000,000.00 (the "Term Loan
Commitment"). Borrower may not borrow, repay and reborrow any portion of the
Term B Loan.

2.04. Manner of Borrowing.

(a) Notice of Borrowing. Borrower shall give Lender a
Notice of Borrowing on or before 10:00 a.m. (Dallas, Texas time) on
any day an Advance under the Revolving Note or the Term Loans is
requested and shall specify the aggregate amount and requested date of
such Advance.

(b) Minimum Advances. Each Advance under the Notes shall
be in an amount of $25,000.00 or a greater integral thereof.

(c) Funding. Subject the terms and conditions in this
Agreement, not later than 2:00 p.m., Dallas, Texas time, on the date
specified, subject to the terms and conditions of this Agreement,
Lender shall make available to Borrower, at Lender's offices in
Dallas, Texas, the amount of a requested Advance in immediately
available funds.

SECTION 3

FEES, NOTES, INTEREST, AND PAYMENTS

3.01. Commitment Fees. In connection with the Original Loan
Agreement, Borrower has paid to Lender a commitment fee equal to $30,000.00.
In addition, Borrower agrees to pay to Lender, on or before the date hereof, a
commitment fee equal to $10,000.00. Borrower also agrees to pay Lender a
commitment fee of one-half of one percent (.5%) per annum on the daily unused
portion of the Revolving Credit Commitment. Such commitment fee shall be
payable quarterly in arrears on the fifteenth (15th) day of each August,
November, February and May, commencing May 15, 1996, and continuing regularly
thereafter so long as the Revolving Credit Commitment is in effect, and shall
also be payable at the maturity of the Revolving Note and upon any earlier date
of termination of the Revolving Credit Commitment. Borrower acknowledges that
the commitment fees payable hereunder are bona fide commitment fees and are
intended as reasonable compensation to Lender for committing to make funds
available to Borrower as described herein and for no other purposes.

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3.02. Revolving Note and Note Payments.

(a) Note. The Advances made under Section 2.01 by Lender
shall be evidenced by the Revolving Note in form and substance
satisfactory to Lender executed by Borrower, which Revolving Note
shall (i) be dated the date hereof, (ii) be in the amount of
$500,000.00, (iii) be payable to the order of Lender, and (iv) bear
interest in accordance with Section 3.02(b).

(b) Interest Rate. The unpaid principal of the Revolving
Note shall bear interest from the date of advance to maturity at a
rate per annum which shall from day to day be equal to the lesser of:
(i) the Base Rate in effect from day to day plus one-half of one
percent (0.5%), or (ii) the Maximum Rate. Overdue principal and
interest on the Revolving Note shall bear interest, to the extent
permitted by applicable law, at a rate per annum equal to the Maximum
Rate.

(1) Principal and Interest. The unpaid principal
of the Revolving Note, and all accrued but unpaid interest thereon,
shall be due and payable on the Termination Date. Interest on the
unpaid principal Of the Revolving Note shall also be due and payable
monthly as it accrues on the fifteenth (15th) day of each month,
commencing April 15, 1996, and on the Termination Date.

(2) Optional Prepayments. Borrower shall have
the right, from time to time, to prepay the Revolving Note, in whole
or in part, without premium or penalty, upon the payment of accrued
interest on the amount prepaid to and including the date of payment;
provided, however, that partial prepayments of principal shall be in
an amount equal to $25,000.00 or any greater integral multiple thereof
(or, if less, the unpaid principal of the Revolving Note).
Prepayments of the Revolving Note shall not reduce the Revolving
Credit Commitment.

(3) Mandatory Prepayments. Notwithstanding
anything contained herein or in the Revolving Note to the contrary, if
at any time the outstanding principal balance of the Revolving Note
and all accrued unpaid interest thereon exceeds the Borrowing Base,
Borrower shall immediately prepay the Revolving Note, in immediately
available funds, in an amount equal to such excess balance.

3.03. Term Note and Note Payments.

(a) Note. The Advances made under Section 2.02 by Lender
shall be evidenced by the Term Note executed by Borrower, which Term
Note (i) is dated June 29, 1995, (ii) is in the amount of
$1,750,000.00, (iii) is payable to the order of Lender, and (iv) bears
interest in accordance with Section 3.03(b).

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(b) Interest Rate. The unpaid principal of the Term Note
shall bear interest from the date of advance to maturity at a rate per
annum which shall from day to day be equal to the lesser of. (i) the
Base Rate in effect from day to day plus one and one-half percent
(1.5%); or (ii) the Maximum Rate. Overdue principal and interest on
the Term Note shall bear interest, to the extent permitted by
applicable law, at a rate per annum equal to the Maximum Rate.

(1) Interest. Interest on the unpaid principal
of the Term Note shall be due and payable monthly on the fifteenth
(15th) day of each month, commencing July 15, 1995, and at maturity.

(2) Principal. The unpaid principal of the Term
Note shall be due and payable as follows: (i) the Initial Funding
Amount shall be due and payable in thirty-six (36) equal monthly
installments, each in an amount equal to the Initial Funding Amount
divided by thirty-six (36), commencing on the fifteenth (15th) day of
the month immediately following the Initial Conversion Date, and
thereafter on the fifteenth (15th) day of each succeeding calendar
month; and (ii) the Second Initial Funding Amount shall be due and
payable in thirty-six (36) equal monthly installments, each in an
amount equal to the Second Funding Amount divided by thirty-six (36),
commencing on the fifteenth (15th) day of the month immediately
following the Second Conversion Date, and thereafter on the fifteenth
(15th) day of each succeeding calendar month.

(3) Optional Prepayments. Borrower shall have
the right, from time to time, to prepay the Term Note, in whole or in
part, without: premium or penalty, upon the payment of accrued
interest on the amount prepaid to and including the date of payment;
provided, however, that partial prepayments of principal shall be in
an amount equal to $25,000.00 or any greater integral multiple thereof
(or, if less, the unpaid principal of the Term Note).

3.04. Term B Note and Note Payments.

(a) Note. The Advances made under Section 2.03 by Lender
shall be evidenced by the Term B Note in form and substance
satisfactory to Lender executed by Borrower, which Term B Note shall
(i) be dated the date hereof, (ii) be in the amount of $2000,000.00;
(iii) be payable to the order of Lender, and (iv) bear interest in
accordance with Section 3.04(b).

(b) Interest Rate. The unpaid principal of the Term B
Note shall bear interest from the date of advance to maturity at a
rate per annum which shall from day to day be equal to the lesser of.
(i) the Base Rate in effect from day to day plus three-quarters of one
percent (.75%); or (ii) the Maximum Rate. Overdue principal and
interest on the Term B Note shall bear interest, to the extent
permitted by applicable law, at a rate per

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annum equal to the Maximum Rate.

(1) Interest. Interest on the unpaid principal
of the Term B Note shall be due and payable monthly on the fifteenth
(15th) day of each month, commencing April 15, 1996, and at maturity.

(2) Principal. The unpaid principal of the Term
B Note shall be due and payable as follows: (i) in thirty-five (35)
equal monthly installments, each in an amount equal to the unpaid
principal balance of the Term B Note as of the Scheduled Termination
Date divided by thirty-six (36), commencing on June 15, 1997, and
thereafter on the fifteenth (15th) day of each succeeding calendar
month through and including April 15, 2000; and (ii) in one (1) final
installment, on May 15, 2000, in the amount of the unpaid principal
balance of, and interest on, the Term B Note.

(3) Optional Prepayments. Borrower shall have
the right, from time to time, to prepay the Term B Note, in whole or
in part, without premium or penalty, upon the payment of accrued
interest on the amount prepaid to and including the date of payment;
provided, however, that partial prepayments of principal shall be in
an amount equal to $25,000.00 or any greater integral multiple thereof
(or, if less, the unpaid principal of the Term B Note).

3.05. Interest and Payments in General.

(1) Manner and Application of Payments. All
payments and prepayments by Borrower on account of principal,
interest, and fees hereunder shall be made in immediately available
funds. All such payments shall be made to Lender at its principal
office in Dallas, not later than 12:00 noon, Dallas, Texas time, on
the date due and funds received after that hour shall be deemed to
have been received by Lender on the next following Business Day. If
any payment is scheduled to become due and payable on a day which is
not a Business Day, such payment shall instead become due and payable
on the immediately following Business Day and interest on the
principal portion of such payment shall be payable at the then
applicable rate during such extension. All payments made on the Notes
shall be applied first to accrued interest and then to principal (in
the inverse order of maturity in the case of prepayments).

(2) Computation of Interest and Fees. Interest
on the Notes and the fees shall be calculated on the basis of a year
of 360 days for the actual number of days (including the first but
excluding the last) elapsed, unless the Maximum Rate shall be in
effect, in which case on the basis of a year of 365 or 366 days, as
the case may be.

(3) Recapture Rate. If the applicable Contract
Rate ever exceeds the Maximum Rate thereby causing the interest
charged under any Note to be limited to the

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<PAGE> 14
Maximum Rate, then any subsequent reductions in the applicable
Contract Rate shall not reduce the rate of interest charged under such
Note below the Maximum Rate until the total amount of interest accrued
on such Note equals the amounts of interest that would have accrued
thereon if the applicable Contract Rate had at all times been in
effect.

SECTION 4

COLLATERAL AND GUARANTIES

4.01. Collateral. To secure the performance of Borrower of the
payment and performance of the Obligation, Borrower and its Subsidiaries shall
grant to Lender a perfected, first priority, Lien in all of the assets of
Borrower and its Subsidiaries, now owned or hereafter acquired, subject only to
Permitted Liens, including all current and future Receivables, inventory,
equipment, machinery, equipment, fixtures, instruments, documents, contract
rights, general intangibles, of Borrower and its Subsidiaries, including,
without limitation, all of Borrower's and its Subsidiaries' trademarks,
tradenames, copyrights, patents, goodwill and other intangible assets, now
owned or hereafter acquired.

4.02. Guaranties. Payment of the Loans shall be unconditionally
guaranteed by Guarantors.

SECTION 5

CONDITIONS PRECEDENT

5.01. Initial Advance. The obligation of Lender to make its initial
Advance under the Revolving Loan or the Term Loans is subject to the conditions
precedent that, on or before the date of such Advance, (a) Borrower shall have
paid to Lender (i) all fees to be received by Lender pursuant to this Agreement
or any other Loan Document, and (ii) an amount equal to the estimated costs and
out-of-pocket expenses of Lender's counsel incurred in connection with the
preparation, execution and delivery of the Loan Documents and the consummation
of the transactions contemplated thereby, and (b) Lender shall have received
duly executed copies of each of the documents listed on Exhibit D, each in form
and substance satisfactory to Lender.

5.02. All Advances. The obligation of Lender to make any Advance
under this Agreement (including the initial Advance) shall be subject to the
conditions precedent that, as of the date of such Advance and after giving
effect thereto: (a) there exists no Potential Default or Event of Default; (b)
no change that would cause a Material Adverse Effect has occurred since the
date of the financial statements referenced in Section 6.06; (c) Lender shall
have received from Borrower a Notice of Borrowing dated as of the date of such
Advance and all of the statements contained in such Notice of Borrowing shall
be true and correct; (d) the representations and warranties contained in each
of the Loan Documents shall be true in all

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<PAGE> 15
material respects as though made on the date of such Advance; and (e) the
Maximum Rate exceeds the Contract Rate.

SECTION 6

REPRESENTATIONS AND WARRANTIES

To induce Lender to make the Loans hereunder, Borrower represents and
warrants to Lender that:

6.01. Organization and Good Standing. Each of Borrower and its
Subsidiaries is a corporation duly organized and in good standing under the
laws of the state of its incorporation, is duly qualified as a foreign
corporation and in good standing in all states in which it is doing business,
except where the failure to so qualify would not have a Material Adverse
Effect, has the corporate power and authority to own its properties and assets
and to transact the business in which it is engaged in each jurisdiction in
which it operates and is or will be qualified in those states wherein it
proposes to transact business in the future, except where the failure to so
qualify could not have a Material Adverse Effect.

6.02. Authorization and Power. Each of Borrower, its Subsidiaries,
and the Guarantors has full power and authority to execute, deliver and perform
the Loan Documents to be executed by such Person, all of which has been duly
authorized by all proper and necessary corporate action.

6.03. No Conflicts or Consents. Neither the execution and delivery
of the Loan Documents, nor the consummation of any of the transactions therein
contemplated, nor compliance with the terms and provisions thereof, will
contravene or materially conflict with any provision of law, statute or
regulation to which Borrower or any Subsidiary is subject, any judgment,
license, order or permit applicable to Borrower or any Subsidiary, any
indenture, loan agreement, mortgage, deed of trust, or other agreement or
instrument binding on Borrower or any Subsidiary or any provision of the
charter or bylaws of Borrower or any Subsidiary, except where such
contravention or conflict could not have a Material Adverse Effect. Other than
consents, approvals, authorizations or orders that have been obtained, no
consent, approval, authorization or order of any court, Governmental Authority,
stockholder or third party is required in connection with the execution,
delivery or performance by Borrower or any Subsidiary of any of the Loan
Documents.

6.04. Enforceable Obligations. The Loan Documents have been duly
executed and delivered by Borrower, its Subsidiaries, and each Guarantor, as
appropriate, and are the legal and binding obligations of Borrower, its
Subsidiaries, and each Guarantor, as appropriate, enforceable in accordance
with their respective terms, except as limited by Debtor Laws.

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<PAGE> 16
6.05. No Liens. Except for the Permitted Liens, all of the
properties and assets of Borrower and its Subsidiaries are free and clear of
all Liens and other adverse claims of any nature, and such Persons have good
and indefeasible title to such properties and assets.

6.06. Financial Condition. Borrower has delivered to Lender copies
of the financial statements of Borrower and its Subsidiaries, as of December
31, 1995, and of Paul Herchman as of March 17, 1995; such financial statements
are true and correct, fairly represent the respective financial condition of
Borrower, its Subsidiaries and Paul Herchman as of such date and have been
prepared in accordance with GAAP; as of the date hereof, there are no
obligations, liabilities or Indebtedness (including contingent and indirect
liabilities) of Borrower, any of its Subsidiaries or Paul Herchman which are
material and are not reflected in such financial statements; no Material
Adverse Effect has occurred since the date of such financial statements.

6.07. Full Disclosure. There is no fact known to Borrower that
Borrower has not disclosed to Lender which could have a Material Adverse
Effect. No certificate or statement delivered by Borrower to Lender in
connection with this Agreement contains any untrue statement of a material fact
or omits to state any material fact necessary to keep the statements contained
herein or therein from being misleading.

6.08. No Potential Default. No event has occurred and is continuing
which constitutes a Potential Default or an Event of Default.

6.09. Material Agreements. Neither Borrower nor any of its
Subsidiaries is in default in any material respect under any contract or
agreement to which it is a party or by which any of its properties is bound,
except where such default could not have a Material Adverse Effect.

6.10. No Litigation. Except as disclosed in writing to Lender,
there are no actions, suits or legal, equitable, arbitration or administrative
proceedings pending, or to the knowledge of Borrower threatened, against
Borrower or any of its Subsidiaries that could, if adversely determined, have a
Material Adverse Effect.

6.11. Use of Proceeds; Margin Stock. The proceeds of the Loans will
be used by Borrower solely for the purposes specified in the preamble. None of
such proceeds will be used for the purpose of purchasing or carrying any
"margin stock" as defined in Regulations G, T, U or X of the Board of Governors
of the Federal Reserve System or for any other purpose which might constitute
this transaction a "purpose credit" within the meaning of such Regulations. If
requested by Lender, Borrower will furnish to Lender a statement in conformity
with the requirements of the Federal Reserve Form U-1 referred to in said
Regulation U to the foregoing effect. No part of the proceeds of the Loans
will be used for any purpose which violates, or is inconsistent with, the
provisions of Regulation X.

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<PAGE> 17
6.12. Taxes. All tax returns required to be filed by Borrower or
any Subsidiary in any jurisdiction have been filed and all taxes (including
mortgage recording taxes), assessments, fees and other governmental charges
upon Borrower or any Subsidiary or upon any of its or their properties, income
or franchises have been paid except for taxes being contested in good faith by
appropriate proceedings diligently projected and as to which adequate reserves
have been established in accordance with GAAP.

6.13. Principal Office, Etc. The principal office, chief executive
office and principal place of business of Borrower and each Subsidiary is as
set forth on Exhibit E attached hereto. Borrower and each Subsidiary maintain
their principal records and books at such addresses.

6.14. Compliance with Law. Borrower and its Subsidiaries are in
compliance with all laws, rules, regulations, orders and decrees (including all
Environmental Laws) which are applicable to Borrower or any Subsidiary, or its
or their properties, except where noncompliance could not have a Material
Adverse Effect.

6.15. Subsidiaries. Set forth on Exhibit A is a complete and
accurate list of all Subsidiaries as of the date hereof, showing as of such
date (as to each such Subsidiary) the jurisdiction of its incorporation, the
number of shares of each class of capital stock outstanding on the date hereof,
the owner of the outstanding shares of each such class owned and the
jurisdictions in which such Subsidiary is qualified to do business as a foreign
corporation. All of the outstanding capital stock of all Subsidiaries has been
validly issued, is fully paid and nonassessable and is owned by Borrower free
and clear of all Liens, other than the security interests under the Collateral
Documents.

6.16. Casualties. Neither the business nor the properties of
Borrower or any Subsidiary are affected by any environmental hazard, fire,
explosion, accident, strike, lockout or other labor dispute, drought, storm,
hail, earthquake, embargo, act of God or other casualty (whether or not covered
by insurance), which could have a Material Adverse Effect.

6.17. Sufficiency of Capital. Borrower and each of its Subsidiaries
is, and after consummation of this Agreement and after giving effect to all
Indebtedness incurred and Liens created by Borrower and its Subsidiaries in
connection herewith will be, solvent.

6.18. Collateral Documents; Description and Location of Assets.
Upon the filing by Lender of all Collateral Documents to be filed or recorded,
Lender will have a perfected first priority Lien in all assets and properties
of Borrower and each of its Subsidiaries for which perfection may be
accomplished by the filing of a financing statement, subject only to Permitted
Liens. Borrower and its Subsidiaries, respectively, own no other assets or
property (whether real, personal, tangible or intangible) other than as
described in the Collateral Documents. All assets of Borrower and such
Subsidiary are located at the addresses listed on Exhibit E. Except in the
ordinary course of business, no asset of Borrower or any Subsidiary will be
kept at any other address.

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<PAGE> 18
6.19. Corporate Name. As of the date hereof, neither Borrower nor
any of its Subsidiaries has, during the preceding five (5) years, (a) used any
other corporate name or tradename (except for Laser Support Services, Inc.), or
(b) been the surviving corporation of a merger or consolidation or acquired all
or substantially all of the assets of any Person.

6.20. Leases. Except for the capital leases set forth on Exhibit I
and the real estate and operating leases set forth on Exhibit J, in each case
as supplemented from time to time to reflect transactions otherwise permitted
hereunder, neither Borrower nor any Subsidiary is the lessee of any real or
personal property.

6.21. ERISA. Neither Borrower nor any ERISA Affiliate has any
Plans.

6.22. Representations and Warranties. Each Notice of Borrowing
shall constitute, without the necessity of specifically containing a written
statement, a representation and warranty by Borrower that no Potential Default
or Event of Default exists and that all representations and warranties
contained in this Section 6 or in any other Loan Document are true and correct
in all material respects on and as of the date the requested Advance is to be
made.

6.23. Labor Matters. There are no controversies pending between
Borrower or any Subsidiary and any of their employees which could have a
Material Adverse Effect.

6.24. Burdensome Contracts. Neither Borrower nor any Subsidiary is
a party to, or bound by, any contract having a Material Adverse Effect.

6.25. Licenses. As of the date hereof, Exhibit G contains a list of
all licenses of Borrower and its Subsidiaries. Neither Borrower nor any of its
Subsidiaries is in default under or has otherwise violated the terms of such
licenses, the default under or violation of which could have a Material Adverse
Effect. As of the date hereof, Borrower has advised Lender, in writing, of all
regulatory defects or deficiencies under any state laws applicable to Borrower
and its Subsidiaries of which Borrower has been advised or has actual
knowledge.

6.26. Survival of Representations and Warranties. All
representations and warranties by Borrower herein shall survive delivery of the
Notes and the making of the Loans, and any investigation at any time made by or
on behalf of Lender shall not diminish Lender's right to rely thereon.

ARTICLE 7

AFFIRMATIVE COVENANTS

So long as Lender has any commitment to make Advances hereunder, and
until payment in full of the Obligation, Borrower agrees that (unless Lender
shall otherwise consent in writing):

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<PAGE> 19
7.01. Financial Statements, Reports and Documents. Borrower shall
deliver to Lender each of the following:

(a) Monthly Statements. As soon as available, and in any
event within thirty (30) days after the last day of each monthly
fiscal period of each fiscal year of Borrower, copies of the
consolidated balance sheet of Borrower and its Subsidiaries as of the
end of such monthly fiscal period, and statements of income, retained
earnings and changes in cash flow of Borrower and its Subsidiaries for
that monthly fiscal period and for the portion of the fiscal year
ending with such period, all in reasonable detail, and certified by
the chief financial officer of Borrower as being true and correct and
as having been prepared in accordance with GAAP, subject to year-end
audit adjustments;

(b) Annual Statements. As soon as available and in any
event on or before May 31 of each fiscal year of Borrower, copies of
the consolidated balance sheet of Borrower and its Subsidiaries as of
the close of such fiscal year and statements of income, retained
earnings and changes in cash flow of Borrower and its Subsidiaries for
such fiscal year, in each case setting forth in comparative form the
figures for the preceding fiscal year, all in reasonable detail and
accompanied by an opinion thereon (which shall not be qualified by
reason of any limitation imposed by Borrower) of independent public
accountants of recognized national standing selected by Borrower and
satisfactory to Lender, to the effect that (i) such consolidated
financial statements have been prepared in accordance with GAAP
(except for changes in which such accountants concur), (ii) the
examination of such accounts in connection with such financial
statements has been made in accordance with generally accepted
auditing standards and, accordingly, includes such tests of the
accounting records and such other auditing procedures as were
considered necessary in the circumstances, and (iii) in making their
audit, such accountants have not become aware of any condition or
event which would constitute a Potential Default or an Event of
Default under any of the terms or provisions of this Agreement
(insofar as any such terms or provisions pertain to accounting
matters) and, if any such condition or event then exists, specifying
the nature and period of existence thereof;

(c) Compliance Certificate. Within thirty (30) days
after the last day of each fiscal month of Borrower hereafter, a
certificate, in the form of Exhibit F attached hereto, executed by the
chief financial officer or chief executive officer of Borrower,
stating that a review of the activities of Borrower during such fiscal
quarter has been made under his supervision and that Borrower has
performed each and every obligation and covenant contained herein and
is not in default under any of the same or, if any such default shall
have occurred, specifying the nature and status thereof, and setting
forth a computation in reasonable detail as of the end of the period
covered by such statements, of compliance with Sections 8.14, 8.15,
8.16, 8.17 and 8.18;

(d) Borrowing Base Report and Equipment Summary.
Concurrently with the delivery of each of the financial statements
pursuant to paragraphs (a) and (b) above, a

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Borrowing Base Report and a summary accounts receivable aging report
(and, upon request by Lender, a listing of each Receivable, the
account debtor, the age of such Receivable and the amount of such
Receivable) and a summary of all equipment of Borrower and each
Subsidiary; and

(e) Other Information. Such other information concerning
the business, properties or financial condition of Borrower, any
Subsidiary or any Guarantor as Lender shall reasonably request
including audit reports, registration statements or other reports or
notices provided to shareholders of Borrower or filed with the
Securities and Exchange Commission.

7.02. Guarantor Statements. Borrower shall cause Paul Herchman to
deliver to Lender personal annual financial statements within one hundred and
twenty (120) days after the last day of each calendar year, in a form
prescribed by Lender or otherwise reasonably acceptable to Lender.

7.03. Payment of Taxes and Other Indebtedness. Borrower shall, and
shall cause each of its Subsidiaries to, pay and discharge (i) all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any property belonging to it, before delinquent,
(ii) all lawful claims (including claims for labor, materials and supplies),
which, if unpaid, might give rise to a Lien upon any of its property, and (iii)
all of its other Indebtedness, except as prohibited under the Loan Documents;
provided, however, that Borrower and each of its Subsidiaries shall not be
required to pay any such tax, assessment, charge, levy or claim if and so long
as the amount, applicability or validity thereof shall currently be contested
in good faith by appropriate proceedings and appropriate accruals and cash
reserves therefor have been established in accordance with GAAP.

7.04. Maintenance of Existence and Rights: Conduct of Business.
Borrower shall, and shall cause each of its Subsidiaries to, preserve and
maintain its corporate existence and, except where the failure to preserve or
maintain could not have a Material Adverse Effect, all of its rights,
privileges and franchises necessary or desirable in the normal conduct of its
business, and shall conduct its business in an orderly and efficient manner
consistent with good business practices and in accordance with all valid
regulations and orders of any Governmental Authority, except where the failure
to so conduct business could not have a Material Adverse Effect.

7.05. Notice of Default. Borrower shall furnish to Lender,
immediately upon becoming aware of the existence of any condition or event
which constitutes a Potential Default or an Event of Default, written notice
specifying the nature and period of existence thereof and the action which
Borrower is taking or proposes to take with respect thereto.

7.06. Other Notices. Borrower shall, and shall cause each of its
Subsidiaries to, promptly notify Lender of (i) any material adverse change in
its financial condition or its business, (ii) any default under any material
agreement, contract or other instrument to which it is a party or by which any
of its properties are bound, where such default could have a

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Material Adverse Effect, or any acceleration of the maturity of any
Indebtedness owing by Borrower or any Subsidiary, (iii) any material adverse
claim against or affecting Borrower or any Subsidiary or any of its Properties,
if such claim could have a Material Adverse Effect, and (iv) the commencement
of, and any material determination in, any litigation with any third party or
any proceeding before any Governmental Authority affecting Borrower or any
Subsidiary, if such litigation or proceeding could have a Material Adverse
Effect.

7.07. Operations and Properties. Borrower shall, and shall cause
each of its Subsidiaries to, (i) act prudently and or in accordance with
customary industry standards in managing and operating its assets and
properties, and (ii) keep in good working order and condition, ordinary wear
and tear excepted, all of its assets and properties which are necessary to the
conduct of its business.

7.08. Books and Records, Access. Borrower shall give any
representative of Lender access during all business hours to, and permit such
representative to examine, copy or make excerpts from, any and all books,
records and documents in the possession of Borrower and relating to its
affairs, and to inspect any of the properties of Borrower. Borrower shall, and
shall cause each of its Subsidiaries to, maintain complete and accurate books
and records of its transactions in accordance with good accounting practices.

7.09. Compliance with Law. Borrower shall, and shall cause each of
its Subsidiaries to, comply with all applicable laws, rules, regulations, and
all orders of any Governmental Authority, a breach of which could have a
Material Adverse Effect.

7.10. Insurance. Borrower shall, and shall cause each of its
Subsidiaries to, keep all insurable property, real and personal, adequately
insured at all times in such amounts and against such risks as are customary
for Persons in similar businesses operating in the same vicinity, specifically
to include a policy of hazard, casualty, fire and extended coverage insurance
covering all assets, liability insurance and worker's compensation insurance,
in every case under a policy with a financially sound and reputable insurance
company and with only such deductibles as are customary, and all (other than
worker's compensation insurance) to contain a mortgagee or loss payee clause
naming Lender as its interest may appear. Without limiting the foregoing,
Borrower shall maintain (a) product liability insurance of at least
$1,000,000.00 per occurrence and $3,000,000.00 in the aggregate, and (b) life
insurance on the life of Paul Herchman of at least $1,000,000.00.

7.11. Authorizations and Approvals. Borrower shall, and shall cause
each of its Subsidiaries to, promptly obtain, from time to time at its own
expense, all such governmental licenses, authorizations, consents, permits and
approvals as may be required to enable it to comply with its obligations
hereunder and under the other Loan Documents.

7.12. Further Assurances. Borrower shall, and shall cause each of
its Subsidiaries to, make, execute and deliver or file or cause the same to be
done, all such notices, additional agreements, mortgages, assignments,
financing statements or other assurances, and take any and

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all such other action, as Lender may, from time to time, deem reasonably
necessary or proper in connection with any of the Loan Documents, the
obligations of Borrower or any Subsidiary thereunder.

7.13. Indemnity by Borrower. Borrower shall indemnify, defend and
hold harmless Lender and its directors, officers, agents, attorneys, and
employees (individually, an "Indemnitee" and collectively, the "Indemnitees")
from and against any and all loss, liability, obligation, damage, penalty,
judgment, claim, deficiency and expense (including interest, penalties,
attorneys' fees and amounts paid in settlement) to which the Indemnitees may
become subject arising out of this Agreement and the other Loan Documents other
than those which arise by reason of the gross negligence or willful misconduct
of Lender, BUT SPECIFICALLY INCLUDING ANY LOSS, LIABILITY, OBLIGATION, DAMAGE,
PENALTY, JUDGMENT, CLAIM, DEFICIENCY OR EXPENSE ARISING OUT OF THE SOLE OR
CONCURRENT NEGLIGENCE OF LENDER. Borrower shall also indemnify, protect and
hold each Indemnitee harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
proceedings, costs, expenses (including without limitation all reasonable
attorneys' fees and legal expenses whether or not suit is brought), and
disbursements of any kind or nature whatsoever which may at any time be imposed
on, incurred by, or asserted against such Indemnitee, with respect to or as a
direct or indirect result of the violation by Borrower of any Environmental
Law; or with respect to or as a direct or indirect result of Borrower's use,
generation, manufacture, production, storage, release, threatened release,
discharge, disposal or presence of a Hazardous Material on, under, from or
about real property. The provisions of and undertakings and indemnifications
set forth in this Section 7.13 shall survive (i) the satisfaction and payment
of the Obligation in termination of this Agreement, and (ii) the release of any
Liens held by Lender on real property or the extinguishment of such Liens by
foreclosure or action in lieu thereof.

ARTICLE 8

NEGATIVE COVENANTS

So long as Lender has any commitment to make Advances hereunder, and
until payment in full of the Obligation, Borrower agrees that (unless Lender
shall otherwise consent in writing):

8.01. Limitation on Indebtedness. Borrower shall not, and shall not
permit any of its Subsidiaries to, incur, guarantee or otherwise be or become,
directly or indirectly, liable in respect of any Indebtedness, except (i)
Indebtedness arising out of this Agreement, (ii) Indebtedness secured by the
Permitted Liens (except for liabilities borrowed or guaranteed after the date
hereof), (iii) current liabilities for taxes and assessments incurred in the
ordinary course of business, (iv) Indebtedness in respect of current accounts
payable or accrued (other than for borrowed funds or purchase money
obligations) and incurred in the ordinary course of business, provided that all
such liabilities, accounts and claims shall be promptly paid and discharged
when due or in conformity with customary trade terms, (v) Indebtedness in
respect of operating

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leases, provided that the payment obligations thereunder do not exceed
$300,000.00 in the aggregate in any year during the term hereof, (vi)
Indebtedness of Borrower and its Subsidiaries as reflected in the audited
consolidated financial statement of Borrower and its Subsidiaries as of
December 31, 1995, (vii) the capital leases set forth on Exhibit I, and (viii)
the operating leases set forth on Exhibit J.

8.02. Negative Pledge. Borrower shall not, and shall not permit any
of its Subsidiaries to, create, incur, permit or suffer to exist any Lien upon
any of its property or assets, now owned or hereafter acquired, except for
Permitted Liens.

8.03. Negative Pledge Agreements. Borrower shall not, and shall
permit any of its Subsidiaries to, enter into any agreement (excluding this
Agreement or any other Loan Documents) prohibiting the creation or assumption
of any Lien upon any of its property, revenues or assets, whether now owned or
hereafter acquired, or the ability of any Subsidiary to make any payments,
directly or indirectly, to Borrower by way of dividends, advances, repayments
of loans, repayments of expenses, accruals or otherwise.

8.04. Restrictions on Dividends. Borrower shall not directly or
indirectly declare or make, or incur any liability to make, any Dividend, other
than Permitted Dividends. Borrower shall not permit any of its Subsidiaries to
directly or indirectly declare or make, or incur any liability to make, any
Dividend, except Dividends to Borrower.

8.05. Limitation on Investments. Borrower shall not, and shall not
permit any of its Subsidiaries to, make or have outstanding any Investments in
any Person, except for Borrower's and its Subsidiaries' ownership of stock of
Subsidiaries existing on the date hereof, Temporary Cash Investments and such
other "cash equivalent" investments as Lender may from time to time approve in
writing. Borrower shall not, and shall not permit any of its Subsidiaries to
make any advance of funds to any Person, or have any outstanding advance of
funds to any Person, except for loans to officers of Borrower or a Subsidiary
not to exceed $5,000.00 individually or $20,000.00 in the aggregate at any time
outstanding.

8.06. Certain Transactions. Borrower shall not, and shall not
permit any of the Subsidiaries to, enter into any transaction with, or pay any
management fees to, any Affiliate; provided, however, that Borrower and its
Subsidiaries may enter into transactions with Affiliates upon terms not less
favorable to Borrower and its Subsidiaries than would be obtainable at the time
in comparable, arms-length transactions with Persons other than Affiliates.

8.07. Executive Personnel. Borrower will not, and will not permit
any of its Subsidiary to, substantially change its present executive
management.

8.08. Issuance of Shares. Without the prior written consent of
Lender, such consent not to be unreasonably withheld, Borrower shall not, and
shall not permit any of its Subsidiaries to, issue, sell or otherwise dispose
of, any shares of its capital stock or other securities, or rights, warrants or
options to purchase or acquire any shares or securities, except for issuances

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of stock of Borrower (a) pursuant to options held by officers approved by
Borrower's Board of Directors prior to June 29, 1995, (b) to employees of
Borrower pursuant to an employee stock ownership plan, and (c) pursuant to an
initial public offering of Borrower's capital stock.

8.09. Limitation on Sale of Properties. Borrower shall not, and
shall not permit any of its Subsidiaries to (i) sell, assign, exchange, lease
or otherwise dispose of any of its properties, rights, assets or business,
whether now owned or hereafter acquired, except in the ordinary course of its
business and for a fair consideration, or (ii) sell, assign or discount any
accounts receivable.

8.10. Limitation on Subsidiaries. Borrower shall not, and shall not
permit any of its Subsidiaries to, form, incorporate, acquire or make any
Investment in any Subsidiary, except the Subsidiaries listed on Exhibit A.

8.11. Liquidation, Mergers, Consolidations and Dispositions of
Substantial Assets. Borrower shall not, and shall not permit any of its
Subsidiaries to, dissolve or liquidate, or become a party to any merger or
consolidation, or acquire by purchase, lease or otherwise all or substantially
all of the assets or capital stock of any Person, or sell, transfer, lease or
otherwise dispose of all or any substantial part of its property or assets or
business; provided, however, that the foregoing shall not operate to prevent
mergers or consolidations of any Subsidiary into Borrower or a Subsidiary (if
such transaction does not reduce the tangible net worth of the survivor), or a
sale, transfer or lease of assets by any Subsidiary to Borrower.

8.12. Lines of Business, Receivables Policy. Borrower shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly, engage in
any business other than those in which it is presently engaged, or discontinue
any of its material existing lines of business. Borrower shall not, and shall
not permit any of its Subsidiaries to, make any material change in its credit
and collection policies, which change would materially impair the
collectibility of the Receivables, or rescind, cancel or modify any Receivable,
except in the ordinary course of business.

8.13. Guaranties. Borrower shall not, and shall not permit any of
its Subsidiaries to, become or be liable in respect of any Guaranty.

8.14. Minimum Consolidated Tangible Net Worth. Borrower shall not
permit the sum of (a) Consolidated Tangible Net Worth, plus (b) Permitted
Subordinated Debt, at any time during any of the following periods, to be less
than $2,500,000.00.

8.15. Leverage Ratio. Borrower shall not permit, as of the last day
of each month during the term hereof, the ratio of (a) all Indebtedness (other
than Permitted Subordinated Debt) of Borrower and its Subsidiaries reflected on
the balance sheet of Borrower as of such date in accordance with GAAP, to (b)
the sum of (i) Consolidated Tangible Net Worth, plus (ii) Permitted
Subordinated Debt, to be greater than 2.5 to 1.0.

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8.16. Senior Funded Debt to EBITDA. Borrower shall not permit, as
of the last day of each month during the term hereof, the ratio of (a)
Consolidated Funded Debt (other than Permitted Subordinated Debt) of Borrower
and its Subsidiaries as of such date, to (b) EBITDA for the twelve (12) month
period ending on the date of determination, to be greater than 2.0 to 1.0.

8.17. Current Maturity Coverage Ratio. Borrower shall not permit,
the Current Maturity Coverage Ratio, as of the last day of each fiscal quarter
of Borrower, commencing on March 31, 1996, during the term of this Agreement,
to be less than 1.3 to 1.0.

8.18. Fixed Charge Coverage Ratio. Borrower shall not permit, as of
the last day of each month during the term hereof, the ratio of (a) the sum of
Consolidated Adjusted Net Income, plus federal, state, local and foreign income
taxes deducted from Consolidated Adjusted Net Income in accordance with GAAP,
plus Fixed Charges, to (b) Fixed Charges, in each case for the twelve (12)
month period ending on the date of determination, to be less than 1.5 to 1.0.

8.19. ERISA. Neither Borrower nor any ERISA Affiliate will create
any Plan.

8.20. Subordinated Debt. Borrower shall not amend, waive or in any
manner change any terms of any Permitted Subordinated Debt.

ARTICLE 9

EVENTS OF DEFAULT

9.01. Events of Default. An "Event of Default" shall exist if any
one or more of the following events (herein collectively called "Events of
Default") shall occur and be continuing:

(a) Borrower shall fail to pay when due the Obligation or
any part thereof, and such failure shall continue for five (5) days
after such payment became due; or

(b) any representation or warranty made under this
Agreement, or any of the other Loan Documents, shall prove to be
untrue or inaccurate in any material respect as of the date on which
such representation or warranty is made or deemed to have been made;
or

(c) default shall occur in the performance of any of the
covenants or agreements of Borrower, any Subsidiary or any Guarantor
contained herein, or in any of the other Loan Documents, and such
failure shall continue for thirty (30) days after the occurrence
thereof; or

(d) default shall occur in the payment of any
Indebtedness which individually or in the aggregate exceeds
$100,000.00 (other than the Obligation) of Borrower, any Subsidiary or
any Guarantor or default shall occur in respect of any note or credit

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<PAGE> 26
agreement relating to any such Indebtedness and such default shall
continue for more than the period of grace, if any, specified therein;
or

(e) any of the Loan Documents shall cease to be legal,
valid and binding agreements enforceable against the Person executing
the same in accordance with its terms, shall be terminated, become or
be declared ineffective or inoperative or cease to provide the
respective liens, security interests, rights, titles, interests,
remedies, powers or privileges intended to be provided thereby; or
Borrower, any Subsidiary or any Guarantor shall deny that such Person
has any further liability or obligation under any of the Loan
Documents; or

(f) Borrower, any Subsidiary or any Guarantor shall (i)
apply for or consent to the appointment of a receiver, trustee,
custodian, intervenor or liquidator of itself or of all or a
substantial part of such Person's assets, (ii) file a voluntary
petition in bankruptcy, admit in writing that such Person is unable to
pay such Person's debts as they become due or generally not pay such
Person's debts as they become due, (iii) make a general assignment for
the benefit of creditors, (iv) file a petition or answer seeking
reorganization of an arrangement with creditors or to take advantage
of any bankruptcy or insolvency laws, (v) file an answer admitting the
material allegations of, or consent to, or default in answering, a
petition filed against such Person in any bankruptcy, reorganization
or insolvency proceeding, or (vi) take corporate action for the
purpose of effecting any of the foregoing; or

(g) An involuntary proceeding shall be commenced against
Borrower, any Subsidiary or any Guarantor seeking bankruptcy or
reorganization of such Person or the appointment of a receiver,
custodian, trustee, liquidator or other similar official of such
Person, or all or substantially all of such Person's assets, and such
proceeding shall not have been dismissed within sixty (60) days of the
filing thereof; or an order, order for relief, judgment or decree
shall be entered by any court of competent jurisdiction or other
competent authority approving a petition or complaint seeking
reorganization of Borrower, any Subsidiary or any Guarantor or
appointing a receiver, custodian, trustee, liquidator or other similar
official of such Person, or of all or substantially all of such
Person's assets; or

(h) any final judgment(s) for the payment of money in
excess of the sum of $25,000.00 in the aggregate shall be rendered
against Borrower, any Subsidiary or any Guarantor and such judgment(s)
shall not be satisfied or discharged at least ten (10) days prior to
the date on which any of such Person's assets could be lawfully sold
to satisfy such judgment; or

(i) any Guarantor of the Obligation shall (if an
individual) have died, or shall (if not an individual) have dissolved,
merged, reorganized, restructured or consolidated; or

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(j) any (i) shareholder or shareholders shall, in the
aggregate, sell, transfer or convey, directly or indirectly, more than
twenty percent (20%) of the issued and outstanding capital stock of
Borrower, or (ii) third person who is not a current shareholder of
Borrower becomes the beneficial owner of more than twenty percent
(20%) of the issued and outstanding capital stock of Borrower.

9.02. Remedies Upon Event of Default. If any Event of Default shall
occur Lender may, without notice (except as provided herein), exercise any one
or more of the following rights and remedies, and any other remedies provided
in any of the Loan Documents, as Lender in its sole discretion may deem
necessary or appropriate: (i) terminate Lender's commitment to lend hereunder,
(ii) declare the Obligation or any part thereof to be forthwith due and
payable, whereupon the same shall forthwith become due and payable without
presentment, demand, protest, notice of default, notice of acceleration or of
intention to accelerate or other notice of any kind, all of which Borrower
hereby expressly waives, anything contained herein or in the Note to the
contrary notwithstanding, (iii) reduce any claim to judgment, or (iv) without
notice of default or demand, pursue and enforce any of Lender's rights and
remedies under the Loan Documents, or otherwise provided under or pursuant to
any applicable law or agreement; provided, however, that if any Event of
Default specified in Sections 9.01(f) or (g) shall occur, the Obligation shall
thereupon become due and payable concurrently therewith, and Lender's
obligation to lend shall immediately terminate hereunder, without any further
action by Lender and without presentment, demand, protest, notice of default,
notice of acceleration or of intention to accelerate or other notice of any
kind, all of which Borrower hereby expressly waives.

9.03. Performance by Lender. Should Borrower fail to perform any
covenant, duty or agreement contained in any of the Loan Documents, Lender may
perform or attempt to perform such covenant, duty or agreement on behalf of
Borrower. In such event, Borrower shall, at the request of Lender, promptly
pay any amount expended by Lender in such performance or attempted performance
to Lender at its principal office in Dallas, Texas together with interest
thereon at the Maximum Rate from the date of such expenditure until paid.
Notwithstanding the foregoing, it is expressly understood that Lender shall not
assume any liability or responsibility for the performance of any duties of
Borrower hereunder or under any of the Loan Documents and none of the covenants
or other provisions contained in this Agreement shall, or shall be deemed to,
give Lender the right or power to exercise control over the management and
affairs of Borrower.

ARTICLE 10

MISCELLANEOUS

10.01. Accounting Reports. All financial reports or projections,
furnished by any Person to Lender pursuant to this Agreement shall be prepared
in such form and such detail as shall be satisfactory to Lender, shall be
prepared on the same basis as those prepared by such Person in prior years and,
where applicable, shall be the same financial reports and projections

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as those furnished to such Person's officers and directors.

10.02. Waiver. No failure to exercise, and no delay in exercising,
on the part of Lender, any right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right. The rights of Lender
under the Loan Documents shall be in addition to all other rights provided by
law. No modification or waiver of any provision of any Loan Document, nor
consent to departure therefrom, shall be effective unless in writing and no
such consent or waiver shall extend beyond the particular case and purpose
involved. No notice or demand given in any case shall constitute a waiver of
the right to take other action in the same, similar or other instances without
such notice or demand.

10.03. Payment of Expenses. Borrower agrees to pay Lender on demand
all costs and expenses of Lender (including, without limitation, the reasonable
attorneys' fees of Lender's counsel) incurred in connection with the
preservation and enforcement of Lender's rights under the Loan Documents, and
all reasonable costs and expenses of Lender (including without limitation the
reasonable fees and expenses of Lender's counsel) in connection with the
negotiation, preparation, execution, delivery and administration of the Loan
Documents.

10.04. Notices. Any communications required or permitted to be given
by any of the Loan Documents must be (i) in writing and personally delivered or
mailed by prepaid certified or registered mail, or (ii) made by facsimile
transmission delivered or transmitted, to the party to whom such notice of
communication is directed, to the address of such party shown opposite its name
on the signature pages hereof. Any such communication shall be deemed to have
been given (whether actually received or not) on the day it is personally
delivered or, if transmitted by facsimile transmission, on the day that such
communication is transmitted as aforesaid subject to telephone confirmation of
receipt; provided, however, that any notice received by Lender after 10:00 a.m.
Dallas, Texas time on any day from Borrower pursuant to Section 2.02 or Section
3.02 (with respect to a Notice of Borrowing) shall be deemed for the purposes
of such Section to have been given by Borrower on the next succeeding day, or
if mailed, on the third day after it is marked as aforesaid. Any party may
change its address for purposes of this Agreement by giving notice of such
change to the other parties pursuant to this Section 10.04.

10.05. Governing Law. This Agreement has been prepared, is being
executed and delivered, and is intended to be performed in the State of Texas
and the substantive laws of such state and the applicable federal laws of the
United States of America shall govern the validity, construction, enforcement
and interpretation of this Agreement and all of the other Loan Documents.

10.06. Choice of Forum, Consent to Service of Process and
Jurisdiction. Any suit, action or proceeding against Borrower with respect to
this Agreement, the Note or any judgment entered by any court in respect
thereof, may be brought in the courts of the State of Texas, County of Dallas,
or in the United States courts located in the State of Texas as Lender

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in its sole discretion may elect and Borrower hereby irrevocably submits to the
nonexclusive jurisdiction of such courts for the purpose of any such suit,
action or proceeding. Borrower hereby irrevocably consents to the service of
process in any suit, action or proceeding in said court by the mailing thereof
by Lender by registered or certified mail, postage prepaid, to Borrower's
address shown opposite its name on the signature pages hereof Nothing herein or
in any of the other Loan Documents shall affect the right of Lender to serve
process in any other manner permitted by law or shall limit the right of Lender
to bring any action or proceeding against Borrower or with respect to any of
its property in courts in other jurisdiction. Borrower hereby irrevocably
waives any objections which it may now or hereafter have to the laying of venue
of any suit, action or proceeding arising out of or relating to this Agreement
or any Note brought in the courts located in the State of Texas, County of
Dallas, and hereby further irrevocably waives any claim that any such suit,
action or proceeding brought in any such court has been brought in any
inconvenient forum. Any action or proceeding by Borrower against Lender shall
be brought only in a court located in Dallas County, Texas.

10.07. Invalid Provisions. Any provision of any Loan Document held
by a court of competent jurisdiction to be illegal, invalid or unenforceable
and shall not invalidate the remaining provisions of such Loan Document which
shall remain in full force and effect and the effect thereof shall be confined
to the provision held invalid or illegal.

10.08. Maximum Interest Rate. Regardless of any provision contained
in any of the Loan Documents, Lender shall never be entitled to receive,
collect or apply as interest on the Notes any amount in excess of interest
calculated at the Maximum Rate, and, in the event that any Lender ever
receives, collects or applies as interest any such excess, the amount which
would be excessive interest shall be deemed to be a partial prepayment of
principal and treated hereunder as such; and, if the principal amount of the
Obligation is paid in full, any remaining excess shall forthwith be paid to
Borrower. In determining whether or not the interest paid or payable under any
specific contingency exceeds interest calculated at the Maximum Rate, Borrower
and Lender shall, to the maximum extent permitted under applicable law, (i)
characterize any nonprincipal payment as an expense, fee or premium rather than
as interest; (ii) exclude voluntary prepayments and the effects thereof; and
(iii) amortize, prorate, allocate and spread, in equal parts, the total amount
of interest throughout the entire contemplated term of the Notes; provided
that, if the Notes are paid and performed in full prior to the end of the full
contemplated term thereof, and if the interest received for the actual period
of existence thereof exceeds interest calculated at the Maximum Rate, Lender
shall refund to Borrower the amount of such excess or credit the amount of such
excess against the principal amount of the Notes and, in such event, Lender
shall not be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving or receiving interest in excess of interest
calculated at the Maximum Rate.

10.09. Nonliability of Lender. The relationship between Borrower and
Lender is, and shall at all times remain, solely that of Borrower and Lender
and Lender has no fiduciary or other special relationship with Borrower.

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10.10. Offset. Borrower hereby grants to Lender the right of offset,
to secure repayment of the Obligation, upon any and all moneys, securities or
other property of Borrower and the proceeds therefrom, now or hereafter held or
received by or in transit to Lender or its agents, from or for the account of
Borrower or any Guarantor, whether for safe keeping, custody, pledge,
transmission, collection or otherwise, and also upon any and all deposits
(general or special) and credits of Borrower, and any and all claims of
Borrower against Lender at any time existing.

10.11. Successors and Assigns. The Loan Documents shall be binding
upon and inure to the benefit of Borrower and Lender and their respective
successors, assigns and legal representatives; provided, however, that Borrower
may not, without the prior written consent of Lender, assign any rights,
powers, duties or obligations thereunder. Lender reserves the right to sell
all or a portion of its interest in the Loan and Lender shall have the right to
disclose any information in its possession regarding Borrower, any Subsidiary,
any Guarantor or any assets pledged to Lender in connection herewith to any
potential transferee of the Loan or any part thereof.

10.12 Conflicts. If any provisions of the Loan Documents conflict
with the provisions of this Agreement, the provisions of this Agreement shall
control.

10.13. Article 15.10(b). Borrower and Lender hereby agree that,
except for Section 15.10(b) thereof, the provisions of Art. 5069-15.01 et seq.
of the Revised Civil Statutes of Texas, 1925, as amended (regulating certain
revolving credit loans and revolving tri-party accounts) shall not apply to the
Loan Documents.

10.14. Entirety. THIS AGREEMENT, THE NOTE, AND THE OTHER LOAN
DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE
PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE
PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. THE
PROVISIONS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH BORROWER IS
A PARTY MAY BE AMENDED OR WAIVED ONLY BY AN INSTRUMENT IN WRITING SIGNED BY THE
PARTIES HERETO.

10.15. Headings. Section headings are for convenience of reference
only and shall in no way affect the interpretation of this Agreement.

10.16. Survival. All representations and warranties made by Borrower
herein shall survive delivery of the Note and the making of the Loan.

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10.17. Participations. Lender shall have the right to enter into
participation agreements with other banks with respect to the Note, and grant
participations in the rate of other loan documents but such participation shall
not affect the rights and duties of such Lender hereunder vis-a-vis Borrower.
Each actual or proposed participant shall be entitled to receive all
information received by Lender regarding the creditworthiness of Borrower,
including, without limitation, information required to be disclosed to a
participant pursuant to Banking Circular 181 (Rev., August 2, 1984), issued by
the Comptroller of the Currency (whether the actual or proposed participant is
subject to the circular or not).

10.18. No Third Party Beneficiary. The parties do not intend the
benefits of this Agreement to inure to any third party, nor shall any Loan
Document or any course of conduct by any party hereto be construed to make or
render Lender or any of its officers, directors, agents or employees liable (i)
to any materialman, supplier, contractor, subcontractor, purchaser or lessee of
any property owned by Borrower, or (ii) for debts or claims accruing to any
such Persons against Borrower.

10.19. Capital Adequacy. If, after the date hereof, Lender shall
have determined that either (i) the adoption of any applicable law, rule,
regulation or guideline regarding capital adequacy, or any change therein, or
any change in the interpretation or administration thereof by any Governmental
Authority, central bank or comparable agency charged with the interpretation or
administration thereof, or (ii) compliance by Lender (or any lending office of
Lender) with any request or directive regarding capital adequacy (whether or
not having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on Lender's
capital as a consequence of its or Borrower's obligations hereunder to a level
below that which Lender could have achieved but for such adoption, change or
compliance (taking into consideration Lender's policies with respect to capital
adequacy) by an amount deemed by Lender to be material, then from time to time,
within ten (10) days after demand by Lender, Borrower shall pay to Lender such
additional amount or amounts as will adequately compensate Lender for such
reduction. Lender will promptly notify Borrower of any event of which it has
actual knowledge, occurring after the date thereof, which will entitle Lender
to compensation pursuant to this Section 10.19. A certificate of Lender
claiming compensation under this Section 10.19 and setting forth the additional
amount or amounts to be paid to it hereunder, together with the description of
the manner in which such amounts have been calculated, shall be conclusive in
the absence of manifest error. In determining such amount, Lender may use any
reasonable averaging and attribution methods.

10.20. Multiple Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same agreement, and any of the parties hereto may execute this Agreement by
signing any such counterpart.

10.21. Arbitration. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE
PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY RELATED AGREEMENTS OR INSTRUMENTS, INCLUDING ANY CLAIM
BASED ON OR ARISING FROM AN

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ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE
FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE
RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF
ENDISPUTE, INC. (D/B/A J.A.M.S./ENDISPUTE) ("JAM.S."), AND THE "SPECIAL RULES"
SET FORTH BELOW, IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL
CONTROL, JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING
JURISDICTION, ANY PARTY TO THIS AGREEMENT MAY BRING AN ACTION, INCLUDING A
SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER
SUCH ACTION.

(A) SPECIAL RULES, THE ARBITRATION SHALL BE CONDUCTED IN
THE CITY OF AGENT'S DOMICILE AT THE TIME OF THE ARBITRATION AND ADMINISTERED BY
J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY
PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION
ASSOCIATION WILL SERVE, ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90
DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A
SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR
UP TO AN ADDITIONAL 60 DAYS.

(B) RESERVATION OF RIGHTS. NOTHING IN THIS AGREEMENT
SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE
STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT;
OR (II) BE A WAIVER BY LENDERS OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C.
Section 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT
OF LENDERS OR AGENT HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT
LIMITED TO) SET-OFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY
COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES
SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF OR THE APPOINTMENT OF A
RECEIVER. AGENTS AND LENDERS MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE
UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE,
DURING OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO
THIS AGREEMENT, AT AGENTS AND LENDERS OPTION, FORECLOSURE UNDER A DEED OF TRUST
OR MORTGAGE MAY BE ACCOMPLISHED BY ANY OF THE FOLLOWING: THE EXERCISE OF A
POWER OF SALE UNDER THE DEED OF TRUST OR MORTGAGE, OR BY JUDICIAL SALE UNDER
THE DEED OF TRUST OR MORTGAGE, OR BY JUDICIAL FORECLOSURE, NEITHER THIS
EXERCISE OF SELF HELP

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REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR
PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY
PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.

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

Address for Notice: BORROWER:

8200 Springwood Drive MEDICAL ALLIANCE, INC.,
Suite 200 a Texas corporation
Irving, Texas 75063
Attn: Mr. Paul Herchman
Telecopy No.: (214) 432-8959 By: /s/ PAUL HERCHMAN
---------------------------------
Paul Herchman
President

Address for Notice: LENDER:

901 Main Street, 7th Floor NATIONSBANK OF TEXAS, A.
P.O. Box 831000
Dallas, Texas 75283-1000
Attn: Mr. Russell Hartsfield By: /s/ RUSSELL P. HARTSFIELD
---------------------------------
Telecopy No. (214) 508-0388 Russell P. Hartsfield
Senior Vice President

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EXHIBITS

Exhibit A - Subsidiaries
Exhibit B - Form of Notice of Borrowing (Revolving Loan)
Exhibit C - Form of Notice of Borrowing (Term Loan)
Exhibit D - Closing Documents
Exhibit E - Principal Office, Chief Executive Office, Principal Place of
Business and Location of Assets
Exhibit F - Compliance Certificate
Exhibit G - Licenses
Exhibit H - Borrowing Base Report
Exhibit I - Capital Leases
Exhibit J - Real Estate Leases

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EXHIBIT 10.1 (B)

REVOLVING CREDIT NOTE

$500,000.00 Dallas, Texas March 20, 1996

FOR VALUE RECEIVED, the undersigned, MEDICAL ALLIANCE, INC., a Texas
corporation ("Maker") hereby unconditionally promises to pay to the order of
NATIONSBANK OF TEXAS, N.A. ("Payee"), at 901 Main Street, P.O. Box 831000,
Dallas, Texas 75283-1000 or at such other address given to Maker by Payee, the
principal sum of FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($500,000.00), or so
much thereof as shall be advanced prior to maturity, in lawful money of the
United States of America, together with interest (calculated on the basis of a
360-day year) on the unpaid principal balance from day-to-day remaining,
computed form the date of advance until maturity at the rate per annum which
shall from day-to-day be equal to the lesser of (a) the Maximum Rate (as defined
in the Loan Agreement defined below), or (b) one-half of one percent (.5%) in
excess of the Base Rate (hereinafter defined) in effect from day to day.

As used herein, the term "Base Rate" means the variable rate of
interest established from time to time by Payee as its "prime rate," each
change in the rate charged hereunder to become effective, without notice to
Maker, on the effective date of each change in the Base Rate. Maker
acknowledges that Payee may, from time to time, extend credit to other
borrowers at rates of interest varying from, and having no relationship to,
such general reference rate.

The principal of and interest upon this Note shall be due and payable
as follows:

(a) Interest, computed as aforesaid, shall be due and payable
monthly as it accrues, beginning on April 15, 1996, and thereafter, on
the fifteenth (15th) day of each succeeding calendar month during the
term of this Note and at maturity; and

(b) The entire unpaid principal balance of this Note shall be due
and payable in full on May 30, 1997.

This Note has been executed and delivered pursuant to, and is subject
to certain terms and conditions set forth in, that certain Amended and Restated
Revolving Credit and Term Loan Agreement (the "Loan Agreement") between Maker
and Payee, executed as of the date hereof, and is the "Revolving Note" referred
to therein. The Holder of this Note shall be entitled to the benefits provided
in the Loan Agreement. Reference is made to the Loan Agreement for a statement
of (i) the obligation of Payee to advance funds hereunder, (ii) the events upon
which the maturity of this Note may be accelerated, and (iii) Maker's right to
cure certain events of default, if any, as more fully set forth therein.

Except as provided in the Loan Agreement, Maker and each surety,
endorser, guarantor and other party ever liable for payment of any sums of money
payable on this Note, jointly and severally waive presentment, protest, notice
of protest and non-payment, or other notice of default, notice of acceleration
and intention to accelerate, and agree that their liability under this Note
shall not be affected by any renewal or extension in the time of payment hereof,
or in any indulgences, or by any release or change in any security for the
payment of this Note, and hereby consent to any and all renewals, extensions,
indulgences, releases or changes, regardless of the number of such renewals,
extensions, indulgences, releases or changes.

No waiver by Payee of any of its rights or remedies hereunder or under
any other document evidencing or securing this Note or otherwise shall be
considered a waiver of any other subsequent right or remedy of Payee; no delay
or omission in the exercise or enforcement by Payee of any rights or remedies
shall ever be construed as a waiver of any right or remedy of Payee; and no
exercise or enforcement of any such rights or remedies shall ever be held to
exhaust any right or remedy of Payee.
<PAGE> 37
Maker reserves the right to prepay the outstanding principal balance of
this Note, in whole or in part, at any time and from time to time, without
premium or penalty. Any such prepayment shall be made together with payment of
interest accrued on the amount of principal being prepaid through the date of
such prepayment, and shall be applied to the installments of principal due
hereunder in the inverse order of maturity.

Regardless of any provision contained in this Note, the Loan Agreement
or any other document executed or delivered in connection therewith, Payee shall
never be deemed to have contracted for or be entitled to receive, collect or
apply as interest on this Note (whether termed interest herein or deemed to be
interest by judicial determination or operation of law), any amount in excess of
the Maximum Rate (hereafter defined), and, in the event that Payee ever
receives, collects or applies as interest any such excess, such amount which
would be excessive interest shall be applied to the reduction of the unpaid
principal balance of this Note, and, if the principal balance of this Note is
paid in full, any remaining excess shall forthwith be paid to Maker. In
determining whether or not the interest paid or payable under any specific
contingency exceeds the highest Maximum Rate, Maker and Payee shall, to the
maximum extent permitted under applicable law, (i) characterize any
non-principle payment (other than payments which are expressly designated as
interest payments hereunder) as an expense or fee rather than as interest, (ii)
exclude voluntary pre-payments and the effect thereof, and (iii) spread the
total amount of interest throughout the entire contemplated term of this Note so
that the interest rate is uniform throughout such term; provided, that if this
Note is paid and performed in full prior to the end of the full contemplated
term hereof, and if the interest received for the actual period of existence
thereof exceeds the Maximum Rate, if any, Payee or any holder hereof shall
refund to Maker the amount of such excess, or credit the amount of such excess
against the aggregate unpaid principal balance of all advances made by the
Payee or any holder hereof under this Note at the time in question.

This Note is being executed and delivered, and is intended to be
performed in the State of Texas. Except to the extent that the laws of the
United States may apply to the terms hereof, the substantive laws of the State
of Texas shall govern the validity, construction, enforcement and
interpretation of this Note. In the event of a dispute involving this Note or
any other instruments executed in connection herewith, the undersigned
irrevocably agrees that venue for such dispute shall lie in any court of
competent jurisdiction in Dallas County, Texas.

If this Note is placed in the hands of an attorney for collection, or
if it is collected through any legal proceeding at law or in equity, or in
bankruptcy, receivership or other court proceeding, Maker agrees to pay all
reasonable costs of collection, including, but not limited to, court costs and
reasonable attorney's fees, including all costs of appeal.

This Note is in renewal, extension, modification and increase of that
certain Revolving Credit Note dated June 29, 1995, executed by Maker and
payable to the order of Payee in the original principal amount of $250,000.00.

MAKER:

MEDICAL ALLIANCE, INC.,
a Texas corporation

By: /s/ Paul Herchman
Paul Herchman
President
<PAGE> 38
EXHIBIT 10.1(C)

TERM NOTE

$2,000,000.00 Dallas, Texas March 20, 1996

FOR VALUE RECEIVED, the undersigned, MEDICAL ALLIANCE, INC., a Texas
corporation ("Maker") hereby unconditionally promises to pay to the order of
NATIONSBANK OF TEXAS, N.A. ("Payee"), at 901 Main Street, P.O. Box 831000,
Dallas, Texas 75283-1000 or at such other address given to Maker by Payee, the
principal sum of TWO MILLION AND 00/100 DOLLARS ($2,000,000.00), or so much
thereof as shall be advanced prior to maturity, in lawful money of the United
States of America, together with interest (calculated on the basis of a 360-day
year), on the unpaid principal balance from day-to-day remaining, computed from
the date of advance until maturity at the rate per annum which shall from
day-to-day be equal to the lesser of (a) the Maximum Rate (as defined in the
Loan Agreement defined below), or (b) three-quarters of one percent (.75%) in
excess of the Base Rate (hereinafter defined) in effect from day to day.

The principal of and interest on this Note shall be due and payable as
follows: (a) interest on the unpaid principal of this Note shall be due and
payable monthly on the fifteenth (15th) day of each month, commencing April 15,
1996, and at maturity; and (b) the unpaid principal of this Note shall be due
and payable (i) in thirty-five (35) equal monthly installments, each in an
amount equal to the unpaid principal balance of this Note as of the Scheduled
Termination Date (as defined in the Loan Agreement defined below) divided by
thirty-six (36), commencing on June 15, 1997 and thereafter on the fifteenth
(15th) day of each succeeding calendar month through and including April 15,
2000, and (ii) in one (1) final installment, on May 15, 2000, in the amount of
the unpaid principal balance of, and interest on, this Note.

This Note has been executed and delivered pursuant to, and is subject
to certain terms and conditions set forth in, the Amended and Restated
Revolving Credit and Term Loan Agreement (the "Loan Agreement"), and is the
"Term B Note" referred to therein. The Holder of this Note shall be entitled to
the benefits provided in the Loan Agreement. Reference is made to the Loan
Agreement for a statement of (i) the obligation of Payee to advance funds
hereunder, (ii) the events upon which the maturity of this Note may be
accelerated, and (iii) Maker's right to cure certain events of default, if any,
as more fully set forth therein.

Except as provided in the Loan Agreement, Maker and each surety,
endorser, guarantor and other party ever liable for payment of any sums of
money payable on this Note, jointly and severally waive presentment, protest,
notice of protest and non-payment, or other notice of default, notice of
acceleration and intention to accelerate, and agree that their liability under
this Note shall not be affected by any renewal or extension in the time of
payment hereof, or in any indulgences, or by any release or change in any
security for the payment of this Note, and hereby consent to any and all
renewals, extensions, indulgences, releases or changes, regardless of the
number of such renewals, extensions, indulgences, releases or changes.

<PAGE> 39
Maker reserves the right to prepay the outstanding principal balance of
this Note, in whole or in part, at any time and from time to time, without
premium or penalty. Any such prepayment shall be made together with payment of
interest accrued on the amount of principal being prepaid through the date of
such prepayment, and shall be applied to the installments of principal due
hereunder in the inverse order of maturity.

Regardless of any provision contained in this Note, the Loan Agreement
or any other document executed or delivered in connection therewith, Payee
shall never be deemed to have contracted for or be entitled to receive, collect
or apply as interest on this Note (whether termed interest herein or deemed to
be interest by judicial determination or operation of law), any amount in
excess of the Maximum Rate (hereafter defined), and, in the event that Payee
ever receives, collects or applies as interest any such excess, such amount
which would be excessive interest shall be applied to the reduction of the
unpaid principal balance of this Note, and, if the principal balance of this
Note is paid in full, any remaining excess shall forthwith be paid to Maker. In
determining whether or not the interest paid or payable under any specific
contingency exceeds the highest Maximum Rate, Maker and Payee shall, to the
maximum extent permitted under applicable law, (i) characterize any
non-principal payment (other than payments which are expressly designated as
interest payments hereunder) as an expense or fee rather than as interest, (ii)
exclude voluntary pre-payments and the effect thereof, and (iii) spread the
total amount of interest throughout the entire contemplated term of this Note
so that the interest rate is uniform throughout such term; provided, that if
this Note is paid and performed in full prior to the end of the full
contemplated term hereof, and if the interest received for the actual period of
existence thereof exceeds the Maximum Rate, if any, Payee or any holder hereof
shall refund to Maker the amount of such excess, or credit the amount of such
excess against the aggregate unpaid principal balance of all advances made by
the Payee or any holder hereof under this Note at the time in question.

MAKER:

MEDICAL ALLIANCE, INC.,
a Texas corporation

By: /s/ PAUL HERCHMAN
------------------
Paul Herchman
President
<PAGE> 40
EXHIBIT 10.1(D)

EXHIBIT D

CLOSING DOCUMENTS

1. Loan Agreement.

2. Revolving Note.

3. Term Note.*

4. Term Note B.

5. Security Agreements executed by Borrower and each Subsidiary.

6. Confirmations of Security Agreements executed by Borrower and each
Subsidiary.

7. Assignment of Life Insurance Policy.*

8. Financing Statements executed and delivered by Borrower and each
Subsidiary, as debtor, in favor of Lender, as secured party, to be filed
in the States of Texas*, Alabama*, California*, Colorado, Delaware*,
Georgia*, Iowa*, Illinois*, Indiana*, Kansas*, Kentucky*, Louisiana*,
Maryland*, Minnesota*, Missouri*, Nebraska*, Nevada*, New Jersey*, New
York*, North Carolina*, Ohio*, Oklahoma*, Oregon, Pennsylvania*, South
Carolina*, Tennessee*, Utah, Virginia*, Washington, Washington D.C.*,
and Wisconsin*.

9. Guaranties executed by Guarantors.*

10. Confirmation of Guaranty executed by Guarantors.

11. Opinion of Borrower's Counsel.

12. Officers' Certificate certifying (i) the truth and accuracy of that all
of the representations and warranties contained in the Loan Documents,
and (ii) that no event has occurred and is continuing, or would result
from the Advance, which constitutes a Potential Default or an Event of
Default.

13. Resolutions of Borrower approving the execution, delivery and
performance of the Loan Documents delivered at closing and the
transactions contemplated therein, duly adopted by Borrower's Board of
Directors and accompanied by a certificate of the Secretary of Borrower
stating that such resolutions are true and correct, have not been
altered or repealed and are in full force and effect.

14. Resolutions of each Subsidiary approving the execution, delivery and
performance of the Loan Documents delivered at closing to be executed
by such Person and the transactions contemplated therein, duly adopted
by such Subsidiary's Board of Directors and accompanied by a certificate
of the Secretary of such Subsidiary stating that such resolutions are
true and correct, have not been altered or repealed and are in full
force and effect.

15. Incumbency Certificate of Borrower and each Subsidiary certifying the
names of the officers of Borrower and each Subsidiary authorized to sign
each of the Loan Documents delivered at closing to be executed by such
Person.

16. Certificates of incorporation and good standing for Borrower and each
Subsidiary issued by the state of incorporation of each such
corporation.

17. Certificates of qualification and good standing for Borrower and each
Subsidiary issued by each of the states wherein Borrower and each
Subsidiary is qualified to do business as a foreign corporation.*

18. A copy of the Articles of Incorporation of Borrower and each
Subsidiary, and all amendments thereto, certified by the state of
incorporation and a copy of the bylaws of Borrower and each Subsidiary,
and all amendments thereto, certified by the Secretary of Borrower or
each Subsidiary, as appropriate, as being true, correct and complete as
of the date of such certification.

19. A copy of the licenses listed on Exhibit G attached hereto.

* Delivered in connection with Original Loan Agreement.

<PAGE> 41
20. Evidence satisfactory to Lender that Borrower and the Subsidiaries have
obtained the insurance policies required by the Loan Documents.

21. UCC-3 Termination Statements.*

22. Such other information as may be reasonably required by Lender.

* Delivered in connection with Original Loan Agreement.

<PAGE> 1
EXHIBIT 10.5

JOINT VENTURE AGREEMENT

This Joint Venture Agreement (the "Agreement") is entered into on this
1st day of March, 1996, by and between Medical Alliance, Inc., a Texas
corporation ("MAI") and Coherent-AMT Inc., a Canadian corporation ("AMT").

RECITALS

WHEREAS MAI is the provider of mobile medical services currently in
the United States of America and is the owner of certain intellectual property
consisting of certain service marks associated with its business; and

WHEREAS MAI desires to increase the geographical marketing area in
which it markets its services, including certain Provinces in Canada, and
desires to have assistance to market its services in the above described area;
and

WHEREAS AMT is familiar with MAI and the services it provides and
desires to provide assistance to MAI to jointly market MAI's services in
Canada; and

WHEREAS MAI is willing to have AMT provide it assistance in a joint
arrangement upon certain terms and conditions.

NOW, THEREFORE, in consideration of the above recitals, the
representations and promises herein contained and such other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereby agree as follows:

A G R E E M E N T

ARTICLE I

DEFINITIONS

1.1 Terms Defined in This Agreement. The following terms, when
used in capitalized form in this Agreement, shall have the meanings set forth
below:

(a) "Affiliate" shall mean a company controlled by, under
common control with, or controlling a party, where "control" means either (i)
the ownership, either directly or indirectly, of more than fifty percent (50%)
of the voting shares or (ii) right to elect a majority of the directors of a
company, and, in either case, where such control may be exercised without the
consent of any third party.
<PAGE> 2
(b) "Agreement" and "this Agreement" shall mean this
Joint Venture Agreement, including all Exhibits hereto and, except where the
context otherwise clearly requires, all certificates, documents and instruments
executed and/or delivered at or prior to the execution of this Agreement.

(c) "Ancillary Agreements" shall mean the License
Agreement with any other similar agreements to be entered into subsequent to or
at the time of the execution of this Agreement.

(d) "Company" shall mean Medical Alliance Canada Ltd.

(e) "Confidential Information" shall have the meaning set
forth in Section 7.1 hereof.

(f) "Default" shall mean any of the events described in
Section 12.1 hereof subject to the provisions of Sections 12.2 and 12.3 hereof.

(g) "Dollars" or "$" shall mean units of the lawful
currency of the United States of America.

(h) "Fiscal Year" shall mean the financial year of the
Company ending in each year on the 31st of December.

(i) "Force Majeure" shall mean any of the events or
conditions described in Section 13.1 hereof.

(j) "License Agreement" shall mean the license agreement
attached hereto as Exhibit "C" hereof.

(k) "Services" shall mean any or all of the services of
MAI to be sold by the Company.

(l) "Territory" shall mean the Provinces and Territories
forming the Dominion of Canada as of the date hereof.

1.2 Terms Defined in Ancillary Agreements. All terms, other than
those which are defined specifically in the Ancillary Agreements shall have the
same definition and meaning in the Ancillary Agreements as they do in this
Agreement.

JOINT VENTURE AGREEMENT PAGE 2
<PAGE> 3
ARTICLE II

PURPOSE AND SCOPE

2.1 General Purpose and Initial Scope Subject to and upon the
terms and conditions hereinafter set forth, the parties hereby agree to
establish a venture in the form of one or more jointly owned entities having
such names and being formed or organized in the manner described in Article III
hereof. Not withstanding the generalities of the objectives enumerated in the
Articles of Incorporation, the activities of the Company shall be limited to
its scope. The initial scope of the Company shall consist of the marketing and
sale of the services of the Company which have been licensed to the Company by
MAI within the Territory.

2.2 Future Scope. The scope of the Company may be expanded,
reduced or otherwise altered upon approval of the parties, provided that the
scope of the Company may be expanded to include the distribution of services or
products other than the "Services" as defined herein upon the consent of the
parties hereto, in which event such services and products shall be included
within the definition of Services for all purposes hereof.

2.3 Non-Competition. Each party agrees that, from and after the
execution date of this Agreement and during the term of this Agreement, it will
not within the Territory, either directly or through any of its affiliates,
engage in any business which is within the scope of the Company or competitive
with any such business of the Company.

ARTICLE III

FORMATION

3.1 Formation. The Parties hereby agree that they will cause to
be formed an Ontario corporation whereby each of them will hold a fifty percent
(50%) interest in the Company. It is anticipated that the Company name will be
Medical Alliance Canada Ltd. and that said Company will be organized
immediately prior to, or upon execution of this Agreement.

3.2 By-Laws. It is understood and agreed that the operation of
the Company will be governed by a set of By-laws as may be required by Ontario
law. The By-laws of the proposed Company have either been distributed,
reviewed and agreed to by each of the parties or will be mutually agreed to by
the parties upon the organization of the Company.

JOINT VENTURE AGREEMENT PAGE 3
<PAGE> 4
ARTICLE IV

CONTRIBUTION

4.1 Contribution by MAI. In consideration for their fifty percent
(50%) interest in the Company MAI will license to the Company, without fee,
certain intellectual property including but not limited to the right to use
certain service marks owned by MAI.

A copy of the License Agreement between the Company and MAI is
attached hereto as Exhibit "A" and is incorporated by reference herein. It is
understood and agreed by the parties that the License Agreement will be
executed between the Company and MAI upon the execution of this Agreement if
the Company has been organized prior to the execution of this Agreement or
immediately after the Company's organization if such organization is completed
after the execution of this Agreement.

In addition MAI will provide to the Company the following
property and services:

(a) Marketing packages for prospective customers of the
Company in the Territory,

(b) Senior Management of the Company, including a
Regional Vice President;

(d) Collection of accounts receivable of the Company; and

(e) Accounting services for the Company.

4.2 Contribution by AMT. In consideration for their fifty percent
(50%) interest in the Company, AMT will provide the Company the following
property and services:

(a) Local support personnel and services to the Company
within the Territory;

(b) Promotion of the Company's services to potential
Customers of the Company within the Territory;

(d) Medical Supplies used in the Company's operations at
AMT's cost; and

(e) Provide knowledge and guidance to the Company
regarding the marketing of the Company's services in the Territory.

4.3 Initial Cash Capital Contributions. It is agreed between the
parties that each of them will contribute the sum of $20,000 (U.S.) to the
Company in addition to the contributions

JOINT VENTURE AGREEMENT PAGE 4
<PAGE> 5
described in sections 4.1 and 4.2 above. The total sum of $40,000 (U.S.) will
be used as initial operating capital of the Company and shall be reflected as
such in the budget of the Company.

4.4 Additional Capital Contributions. It is anticipated that any
additional working capital requirements will be met by bank borrowings. In the
event that the bank line(s) of credit available to the Company become(s)
inadequate to meet its working capital requirements and cannot be increased
through other financing methods, the Managers (as hereinafter defined) of the
Company shall determine how the additional needs will be met and if the
decision is to increase the capital contribution of the parties then each of
the parties shall contribute such additional capital in the same proportion as
their initial contributions to the Company.

ARTICLE V

GOVERNANCE

5.1 Governance of the Company. Each of the parties will designate
in Exhibit "D" attached hereto and incorporated by reference herein, one
director who will be the primary representative of the party to the Company.
It is anticipated that in order to conform to the requirements of Canadian law
that the director selected by AMT will be a resident of Canada. Appointment
and election of the directors shall be for a three (3) year term.

It is anticipated that the governance of the Company will be
primarily carried out by the directors who shall be assisted by the officers of
the Company. The directors will meet from time to time as the circumstances of
the Company dictate, however in no event shall the directors meet less than
once per calendar quarter.

5.2 Officers. It is anticipated that the Company may need to
appoint or otherwise designate certain officers of the Company. If such a need
arises, the directors of the Company shall select and appoint such officers who
shall have the powers described for such office in the Company by-laws and/or
those which may be legally granted to such officer by the directors. All
officers so appointed shall serve at the sole pleasure of the directors.

5.3 Operation of the Company. It is agreed by the parties that
the directors of the Company shall serve the Company without compensation
except that they shall be reimbursed by the Company for any reasonable prior
approved travel expenses when incurred on behalf of the Company. "Travel
expenses" shall include transportation, hotel and meal expenses.

It is further understood and agreed by the parties that a
formal Budget for the Company will be generated by the Company and that the
parties shall adhere to said budget.

JOINT VENTURE AGREEMENT PAGE 5
<PAGE> 6
ARTICLE VI

DISTRIBUTIONS

6.1 Distribution of Profits and Losses. The parties understand
and agree that the declaration and distribution of profits as dividends of the
Company are governed by the laws of the Dominion of Canada and the Province
where the Company has been organized. Not withstanding the provisions of the
Articles of Incorporation and By-laws of the Company and to the extent
permitted by law, the parties intend that the profits of the Company will be
distributed at such time as the directors of the Company shall agree given the
needs of the Company for operating capital and operating reserves for equipment
purchases or replacement.

6.2 Loan Repayment Policy. Not withstanding Section 6.1 above,
the directors may be otherwise required to comply with the terms of the
Company's bank credit agreements to pay all or a portion of the balance of any
loans outstanding prior to the payment or any distribution of profits to the
parties. It is the express policy of the parties that any Company indebtedness
(other than trade debt) be repaid by the Company prior to the payment or any
distribution of profits to the parties.

ARTICLE VII

CONFIDENTIALITY

7.1 Confidential Information. "Confidential Information" shall
mean all information which is disclosed by either party to the other party,
either directly or through the affiliates of either or both, in written or
physical form which relates in any way to markets, customers, products,
patents, inventions, procedures, methods, designs, strategies, plans, assets,
liabilities, costs, revenues, profits, organization, employees, agents,
distributors or business in general; provided, however, that the following
shall not be deemed Confidential Information:

(a) information which is or becomes available to the public or to
the industry without the fault or negligence of the party receiving same;

(b) information which was already in the possession of the party
receiving same, provided that the party is able to prove such prior possession;

(c) information which is subsequently received from a third party
without notice of restriction on further disclosure; or

(d) information which is independently developed by the party
receiving same, provided the said party is able to prove such independent
development.

7.2 Non-Disclosure. Each of the parties agree (a) during the
continuance of this Agreement and for a perpetual period after termination
thereof not to (i) use any Confidential Information for any purpose other than
as permitted or required for performance by such party

JOINT VENTURE AGREEMENT PAGE 6
<PAGE> 7
under this Agreement or any Ancillary Agreement or (ii) disclose or provide any
of such Confidential Information to any third party and (b) to take all
necessary measures to prevent any such disclosure by its present and future
directors, officers, employees, agents and contractors during the said period.
Each party further agrees to cause its affiliates to comply with these
provisions in the same manner as each of them were a party.

7.3 Limitation of Prohibition. Nothing herein shall prohibit
either of the following:

(a) the use by the Company at any time after termination of this
Agreement of Confidential Information in the manner in which it had been
utilized by such Company from time to time prior to termination in the ordinary
course of its business and in compliance with the terms hereof; or

(b) the disclosure of Confidential Information to any governmental
authority if and to the extent required by applicable law, provided that such
disclosure is made on a basis providing the maximum confidentiality permitted
by law.

7.4 Solicitation of Employees. During the term of this Agreement
and for a period of one (1) year thereafter, no party thereof shall, except as
provided in this Agreement or any Ancillary Agreement, employ or contract for
the services of any person, other than a person previously employed by such
party, who at the execution date of this Agreement or at any time thereafter is
an employee of Company or of the other party or any Affiliate thereof, without
the approval of the other party.

ARTICLE VIII

REPRESENTATIONS AND WARRANTIES

In order to induce the other party to enter into and perform this
Agreement, each of the parties hereby represents and warrants to the other
party as follows:

8.1 Organization and Standing. Such party is a corporation,
limited liability company, or other lawfully recognized business organization
duly organized and validly existing under the laws of the jurisdiction of its
organization and has all requisite authority to carry on its business as now
being conducted by it.

8.2 Authority. Such party has full power and authority to execute
and deliver this Agreement and the Ancillary Agreements and the other
instruments to be executed and delivered by such party pursuant hereto and to
consummate the transactions contemplated herein. All corporate acts and other
proceedings required to be taken by or on the part of such party to authorize
its performance obligations under this Agreement and the Ancillary Agreements
have been duly and properly taken. This Agreement has been duly executed and
delivered by such party and constitutes, and the Ancillary Agreements which
when duly executed and delivered by such party will constitute, legal, valid
and binding obligations of such party enforceable in accordance with their
respective terms. Such party agrees to use its best efforts to obtain the
necessary consent of any third party to the transactions contemplated hereby.

JOINT VENTURE AGREEMENT PAGE 7
<PAGE> 8
8.3 Approvals. Except for approval or non-prohibition under any
applicable law relating to the control of mergers or prevention of restricted
practices, no approval, authorization, consent or other order or action of or
filing with any court, administrative agency or other governmental authority is
required for the execution and delivery by such party of this Agreement and the
Ancillary Agreements or its consummation of the transactions contemplated
hereby.

8.4 Litigation. Such party has no actual knowledge of any
material and adverse actions, suits, proceedings or investigations pending or
threatened against, by or affecting it in any court or by or before any
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, or before any arbitrator of any kind, with respect to, or
which may have a material effect upon, the transactions contemplated by this
Agreement or the Ancillary Agreements, except such actions, suits or
proceedings disclosed in Exhibit "B" herein, if any. Such party is not in
default with respect to any order, writ, injunction or decree of any court or
governmental department, commission, board, bureau, or agency or
instrumentality, domestic or foreign, affecting or relating to it or any of the
transactions contemplated by this Agreement or the Ancillary Agreements; nor
has such party received notice of any material violation of any laws,
ordinances, regulations or orders applicable to it or any of the transactions
contemplated herein; nor to the knowledge of such party is it in violation of
any of such laws, ordinances, regulations or orders.

8.5 Absence of Conflict.

(a) The execution and delivery of this Agreement and the
License Agreement by each party does not violate any law or conflict with such
party's or any of such party's affiliates' constitutive corporate documents or
result in a breach of, constitute a default under or conflict with any material
contract, agreement or instrument to which such party or any affiliate is a
party or by which it or its properties or any affiliate is a party or by which
it or its affiliates or any of its affiliates' properties are bound.

(b) The consummation of the transactions contemplated in
this Agreement and the License Agreement from and after the date of execution
hereof, and the fulfillment of and compliance with the terms and conditions
hereof and thereof from and after the execution date of this Agreement will not
violate any law or conflict with such Party's or any of such Party's
affiliates' constitutive corporate documents or result in a breach of,
constitute a default under or conflict with any material contract, agreement or
instrument to which such party or any affiliate is a party or by which it or
its properties or any affiliate or any of its affiliates' properties are bound.

ARTICLE IX

INDEMNITIES

9.1 Indemnification. Subject to the other provisions of this
Article, each party agrees as to its respective representations, warranties,
covenants and agreements set forth in this Agreement and in the Ancillary
Agreements to indemnify and hold harmless the other party from

JOINT VENTURE AGREEMENT PAGE 8
<PAGE> 9
and against any and all losses, liabilities, damages, expenses (including
without limitation, fees and disbursements of counsel) claims, liens or other
obligations whatsoever which:

(a) may be payable by virtue of or result from the
material inaccuracy of any representation or the breach of any warranty,
covenant or agreement made in this Agreement, the Ancillary Agreements or any
certificate or other instrument delivered pursuant hereto or thereto; or

(b) may be incurred as a result of the assertion of any
claim by any third party based upon allegations which, if true, would
constitute such material inaccuracy or breach.

9.2 Notice of Legal Action. Each party agrees to give the other
party prompt written notice of any event or assertion of which it has knowledge
concerning any such laws, liability, expense, claim, lien or other obligation
and as to which it may request indemnification hereunder. Each party will
cooperate with the other party in determining the validity of any such claim or
assertion.

9.3 Limitations. Neither party shall be liable for
indemnification under Section 9.1 hereof unless the amount of any losses,
liabilities, damages, expenses, claims, liens and obligations subject to
indemnification that are incurred or sustained by the other party shall exceed
in the aggregate sum of one thousand dollars ($1,000) or its equivalent in
other currencies (in which event the party shall be liable for the whole of
such liability, not merely the excess), nor shall either party be liable to
indemnify the other party in respect of any loss, liability, expense, claim,
lien or other obligation arising from any event or assertion of which the other
party shall have failed to provide the notice required under Section 9.2 hereof
prior to the expiration of the term of this Agreement.

9.4 Conflict with Ancillary Agreements. The provisions of this
Article as the same would apply in the case of a breach of or a default under
any provision of any Ancillary Agreement, shall not be applicable if and to the
extent that such Ancillary Agreements provide for a specific remedy or specific
damages in the case of a breach or a default thereunder or to the extent that
such Ancillary Agreements contain a provision which conflicts with this
Article.

9.5 Survival. The provisions of this Article shall survive any
termination of this Agreement for any reason whatsoever.

ARTICLE X

TRANSFER OF SHARES

10.1 Free Transfer to Substitute Shareholders. The interests of
the shareholders of the Company and any beneficial interest therein may be
freely transferred by either party or any other shareholder substituted for
such party to any Affiliate of such party subject to the requirements that such
Affiliate agree in writing to all the terms and conditions of this Agreement
and any Ancillary Agreements. Further, if any principal shareholder of a party
to

JOINT VENTURE AGREEMENT PAGE 9
<PAGE> 10
this Agreement wishes to distribute their shares to themselves individually,
their spouse or a family trust, then they may do so upon written notice to the
Company.

10.2 Prohibited Alienation. Except as provided in Section 10.1
hereof, neither party nor any of its Affiliates which are shareholders shall
sell, convey, or assign or otherwise transfer, pledge or hypothecate its shares
in the Company or any beneficial interest therein at any time during the term
of this Agreement without the prior written consent of the other party.
Company shall refuse to transfer on its books any stock certificates attempted
to be transferred in violation of this Agreement. If any shares of the Company
owned by either party or its Affiliates are offered to be or are in fact sold,
transferred, signed, taken in execution, pledged or hypothecated, in any manner
and under any circumstances, including but not limited to any bankruptcy,
insolvency, or other legal proceedings, in violation of this Article, then the
other party shall immediately upon becoming aware thereof and for a period
ending ninety (90) days after its receipt of written notice thereof have the
option to immediately terminate the terms of this Agreement and any Ancillary
Agreements, dissolve the company, and/or refuse to accept the purported
transfer on the books of the Company and activate the buy-out provisions of
this Agreement. The above restrictions shall be deemed contractual
restrictions and shall be in addition to and not in lieu of any other
restrictions on transfer of any interest in the Company stated in the Articles
of Incorporation or By-laws of the Company.

10.3 Continuing Obligations. Not withstanding anything contained
herein to the contrary, no sale, conveyance, assignment or other transfer of
the shares of the Company or any beneficial interest therein shall relieve
either party of those obligations and duties arising prior to the date thereof
which by the terms of the applicable agreement or by operation of law would
survive the termination of this Agreement.

10.4 Legend. All certificates evidencing the parties' shares in
the Company shall bear reference to the restrictions herein provided, clearly
marked thereon, including specifically a notice that the acquiring party shall
be fully bound by the terms and conditions of this Agreement.

ARTICLE XI

OFFERING, BUY-OUT AND VALUATION

11.1 Offering. The parties understand that at some future time MAI
may decide to engage in a public offering for its shares. In this event, it
may be in the best interests of MAI to acquire the Company and to exchange
shares of MAI for the shares of the parties in the Company. Contingent upon
approval of MAI's Board of Directors at the time, and the closing of any such
public offering, it is anticipated that a value of each party's shares in the
Company will have to be determined so that the amount of MAI stock to exchange
for each party's shares can also be determined. It is therefore agreed by the
parties that the value of each party's shares shall be determined in the manner
described in section 11.3 below and the resultant value shall be divided by the
mid-point per share offering price of MAI's stock as described in its offering
prospectus to determine the number of MAI shares to be exchanged, rounded to
the next whole number to avoid fractional shares.

JOINT VENTURE AGREEMENT PAGE 10
<PAGE> 11
11.2 Buy-Out. The parties agree that at some future time and under
certain circumstances MAI may wish to purchase and AMT may wish to sell the
shares owned by AMT in the Company and that it is of mutual benefit of the
parties to determine how the value of AMT's interest will be calculated. It is
therefore agreed by the parties that a purchase price will be determined by the
parties by mutual agreement and in the event no purchase price can be mutually
agreed upon then the purchase price shall be the value of AMT's shares as
determined in the manner described in section 11.3 below.

11.3 Valuation. In the event the value of the Company shall need
to be determined then said value shall be established by an independent
accounting firm who shall be engaged solely for this purpose. The directors of
the Company shall attempt to agree as to the selection of the accounting firm
and if after fifteen (15) days such agreement can not be reached, the valuation
shall be done by the international accounting firm of Deloitte and Touche or
Price Waterhouse, should Deloitte and Touche be unavailable or decline the
engagement. The parties hereby agree that such valuation shall not include the
value of the intellectual property licensed to the Company and its associated
good-will as such property is owned by MAI (provided that such valuation shall
include the goodwill associated with the business carried on by the Company
within the Territory) and that the valuation established by the independent
accounting firm shall be final and conclusive for all purposes of this
Agreement and as between the parties.

ARTICLE XII

DEFAULT

12.1 Definition. Except where otherwise indicated by the context
or where the term is otherwise defined for specific purpose, the term "Default"
shall mean any of the following described events involving or affecting either
party, such party being considered the party in default for purposes hereof:

(a) failure of such party or any of its affiliates to perform any
material obligation under or pursuant to this Agreement for any reason other
than Force Majeure, including without limitation a failure by a party to
promptly make any contribution to the Company as required by the terms of this
Agreement;

(b) in the case of any such party (i) the filing by such party of
a petition in involuntary bankruptcy or liquidation or the making of a general
assignment for the benefit of its creditors, or the consenting to the
appointment of one or more receivers, trustees or liquidators with respect to
all or any substantial part of its property under any applicable law or
statute; (ii) the filing by such party of a petition or answer seeking
reorganization, readjustment, arrangement, composition or similar relief under
the applicable bankruptcy laws or any other applicable law or statute; (iii)
such party's becoming unable to pay its debts generally as they become due; or
(iv) the filing of any involuntary petition in bankruptcy against such party,
or the appointment of one or more trustees, liquidators or receivers for such
party, which petition shall remain unabated and in effect for a period of
forty-five (45) days or more;

JOINT VENTURE AGREEMENT PAGE 11
<PAGE> 12
(c) (i) a sale, transfer, pledge or other incumbrance or the
issuance of shares or any other event, including, without limitation, merger or
consolidation, which gives effective control (ability to direct the management)
of such party to any third party not a controlling shareholder of such party as
of the execution date of this Agreement or (ii) a sale, transfer, pledge or
other encumbrance or issue of shares of any Affiliate of such party or of any
substantial asset of such party or Affiliate of such party, which is closely
related to the venture described in this Agreement or the Ancillary Agreements,
or any like event which gives effective control of such shares or assets to any
third party who is not a controlling shareholder of such party or Affiliate as
of the execution date of this Agreement, provided that such a change in control
shall not constitute a Default if prior written notice shall have been given by
the party affected to the other party and such other party shall have given its
consent in writing thereto, which consent shall not be withheld without good
commercial reason; or

(d) failure of such party or any Affiliate of such party to
perform any obligation under or pursuant to any Ancillary Agreement for any
reason other than Force Majeure and which obligation, when considered as a part
of this Agreement and the Ancillary Agreements, is material.

12.2 Notice and Cure. No Default under Sections 12.1 (a) or (d)
hereof shall be deemed to have occurred until the applicable party not in
Default shall first have given written notice of such Default to the party in
Default and the party in Default shall have failed to cure such Default through
specific performance within sixty (60) after dispatch of such written notice.
In the event of Default under Sections 12.1 (b) or (c) hereof, no such notice
need be dispatched and remedies in respect thereof as provided in Section 12.3
hereof shall be available from and after the time such events occur.

12.3 Rights upon Default. If a Default shall occur, the party not
in Default shall have the right, at any time for so long as such Default
continues, to do any one or more of the following:

(a) terminate this Agreement and the Ancillary Agreements in
accordance with Section 14.2 (b) hereof;

(b) with respect to a Default under clauses (a) and (d) of Section
12.1 only obtain injunctive relief or such other equitable remedies as are
reasonably necessary to specifically enforce this Agreement in accordance with
its terms; and/or

(c) exercise any other legal or equitable remedy such a party may
have as a result of such Default and/or treat the defaulting party's right
hereunder as suspended until the party in Default cures such Default or this
Agreement is terminated.

JOINT VENTURE AGREEMENT PAGE 12
<PAGE> 13
ARTICLE XIII

FORCE MAJEURE

13.1 Definition. As used in this Agreement, the term "Force
Majeure" with respect to either party shall mean any event or condition, not
existing as of the date of this Agreement, not reasonably foreseeable as of
such date and not reasonably within the control of such party, which prevents
in whole or material part the performance by such party of its obligations
under this Agreement or any Ancillary Agreement. Without limiting the
generality of the foregoing, events or conditions of Force Majeure shall
include acts of State or governmental action, the non-receipt of the approval
from any agency or commission of government which may be required for the
enforcement of this Agreement or the Ancillary Agreements, riots, war, acts of
terrorism, sabotage, strikes, lockouts, prolonged shortages of energy supplies,
fire, flood, hurricane, earthquake, lightning and explosion. It is expressly
agreed that the failure of any governmental agency to issue any license
required for the performance by other party of its obligations under this
Agreement or any Ancillary Agreement shall constitute "Force Majeure".

13.2 Rights in Event of Force Majeure. Either party affected by an
event or condition of Force Majeure shall, upon providing prompt written notice
to the other party, be excused from performance to the extent such event or
conditions prevents its performance, provided that the party whose performance
is so affected shall use reasonable efforts to avoid or remove the cause of
non-performance and shall continue performance hereunder immediately upon the
removal of such causes. If the event or condition of Force Majeure causing
non-performance shall continue for more than one hundred and eighty (180)
consecutive days, either party whose performance is not prevented by the event
of Force Majeure may, upon the expiration of the above period and at any time
thereafter for so long as the event or condition of Force Majeure continues,
terminate this Agreement in accordance with Article 14.2 (b) hereof.

ARTICLE XIV

TERMINATION

14.1 Term. This Agreement shall have a term ending at the earlier
of the following events; Ten (10) years from the date of execution of this
Agreement, the dissolution of the Company and/or the purchase of one party of
the other party's shares in the Company in accordance with the buy-out
provisions described in Article XI hereof.

14.2 Events Permitting Termination. Not withstanding anything to
the contrary contained herein, this Agreement, including any Ancillary
Agreements, may be terminated:

(a) by either party upon written notice to the other in the event
that the Company is not organized or formed.

JOINT VENTURE AGREEMENT PAGE 13
<PAGE> 14
(b) by either party upon written notice to the other in the event
that the other party is at the time of such notice in Default;

(c) by either party upon written notice in the event performance
by the other party of their respective obligations under this Agreement or any
Ancillary Agreements is prevented by reason of the occurrence of the event of
Force Majeure and the entitlement to give such notice exists under the
provisions of this Agreement.

(d) by mutual agreement of the parties.

(e) by the occurrence of either event described in section 11.1 or
11.2 of this Agreement.

14.3 Dissolution upon Termination. Upon termination, except in the
event of a buy-out in accordance with section 11.2 of this Agreement, the
Company will be dissolved in accordance with the laws of the jurisdiction in
which the Company has been organized. However, in either event, and
notwithstanding the Articles of Incorporation or By-laws of the Company, the
intellectual property License Agreement granted to the Company by MAI will
automatically terminate upon termination of this Agreement for any reason
whatsoever.

ARTICLE XV

COSTS

15.1 Costs of the Venture. It is hereby agreed by the parties that
the parties will be equally responsible for the costs associated with the
formation of the venture described in this Agreement, including, but not
limited to, the costs of the organization of the Company and all expenses and
legal fees associated with their establishment and organization. It is further
understood and agreed by the parties that all other costs and expenses
associated with this Agreement, whether or not the joint venture is
consummated, shall be borne solely by the party incurring them as each party
will be responsible for its own costs and expenses.

ARTICLE XVI

MISCELLANEOUS

16.1 Amendments; Waivers. This Agreement or any part hereof or any
exhibits or any addenda attached hereto may be amended, modified or additional
provisions may be added by written agreement signed by or on behalf of all the
parties hereto.

No amendments or waiver of this Agreement and no consent to any
default under this Agreement shall be effective unless the same shall be in
writing and signed by or on behalf of the party against whom such amendment,
waiver or consent is claimed. In addition, no course of dealing or failure of
any party to strictly enforce any term, right or condition of this Agreement
shall be construed as a waiver of such term, right or condition.

JOINT VENTURE AGREEMENT PAGE 14
<PAGE> 15
16.2 Assignment. Assignment by any of the parties to this
Agreement of any right, obligation or duty, in whole or in part, or any other
interest hereunder, is prohibited.

16.3 Notices. Any notice or document required or desired to be
given or delivered to any party or the Company shall be in writing and shall be
deemed given or delivered: when delivered personally or deposited in the
Canadian or United States mail, first class postage prepaid, addressed, if to
the Company, to the attention of the President (or if the President is giving
notice, to the attention of the Secretary) at its address set out on the
signature page, and if to any party, to that party (or his personal
representative or successor in interest) at his address set out on the
signature page, or with respect to any additional Parties bound by the terms of
this Agreement, at his address set forth in his agreement to become bound by
the terms of this Agreement, or at such other address as any of the parties may
previously have specified in writing to the parties giving notice.

16.4 Remedies Cumulative. Each right and remedy of any party as
provided for in this Agreement, or now or hereafter existing under applicable
laws or otherwise, shall be cumulative and concurrent and shall be in addition
to every other right or remedy provided for in this Agreement or now or
hereafter existing under applicable laws or otherwise and the exercise or
beginning of the exercise by any party of any one or more of such rights or
remedies shall not preclude the simultaneous or later exercise by any party of
any or all such other rights or remedies.

16.5 Acknowledgements. Each of the parties signatory to this
Agreement represents and acknowledges, and as to each such party affirmed, that
the following statements are true and correct and are factually accurate in all
respects:

(a) Prior to the execution of this Agreement, each party
signatory hereto has carefully read and fully understood all the provisions of
this Agreement, that each such party has consulted with or alternatively has
had the opportunity to consult with their respective attorney concerning the
terms and conditions of this Agreement, that each such party has had a full and
complete opportunity to participate in the drafting of this Agreement, and that
each such party to this Agreement is voluntarily entering into this Agreement.

(b) Each party signatory to this Agreement agrees that
there shall be no interpretation or construction of this Agreement, or any
defense asserted with respect thereto, which is based upon the fact that any of
the parties signatory hereto who is responsible for drafting all or any portion
of this Agreement.

(c) Each party signatory to this Agreement has the
authority to execute this Agreement, including, without limitation, their
signature made in any representative capacity on behalf of a party signatory
hereto.

(d) Each party signatory to this Agreement declares,
warrants and represents that no promise, inducement or agreement not herein
expressed has been made to such party, and that the terms of this Agreement,
including all Recitals are contractual and not merely a recital.

JOINT VENTURE AGREEMENT PAGE 15
<PAGE> 16

16.6 Severability. In the event any part, term or provision of
this Agreement is declared or determined to be illegal or invalid by any court
of competent jurisdiction, the validity of the remaining parts, terms and
conditions shall not be affected thereby, and the illegal or invalid part, term
or provision shall be deemed not to be contained in this Agreement.

16.7 Binding Effect. This Agreement constitutes the final and
binding understanding between and among all parties signatory hereto, and all
provisions of this Agreement shall be binding upon and inure to the benefit of,
and be enforceable by and against the respective heirs, executors,
administrators, personal representatives, successors and assigns of each party.
Each party agrees for himself and his heirs, executors, administrators,
personal representatives, successors and assigns to execute any instruments in
writing which may be necessary and proper in carrying out the purposes of this
Agreement.

16.8 Headings. The paragraph and subparagraph headings in this
Agreement are included herein for convenience of reference only, they shall not
constitute a party of this Agreement for any other purpose and shall not be
deemed to affect the meaning or construction of any of the provisions hereof.

16.9 Arbitration. Unless otherwise prohibited by Texas law, should
any controversy arise between the parties concerning this Agreement, the
interpretation thereof, the terms and provisions thereof, and/or the rights and
duties of any party, the controversy shall be settled solely by arbitration in
the following manner: Each party shall select and appoint one arbitrator who
is a person familiar with the subject matter of the dispute. The two
arbitrators appointed shall appoint a third arbitrator who possesses equivalent
qualifications. The decision in writing of any two of the arbitrators shall be
binding and conclusive on all parties. Should any party fail to appoint an
arbitrator as required by this Section within thirty (30) days after receiving
written notice from the other party to do so, the arbitrator appointed by the
other party shall act for both parties and that arbitrator's decision in
writing shall be binding and conclusive on both parties. The cost, expenses
and fees of the arbitrators shall be borne by the parties equally or may be
assessed by the arbitrators, in whole or in part, against either party to this
Agreement. Any arbitration conducted pursuant to this Section shall be
conducted in compliance with the Texas General Arbitration Act, Revised Civil
Statutes Article 224.

16.10 Governing Law. This Agreement shall be deemed to be a
contract made under the laws of the State of Texas, and the construction,
interpretation or performance of this Agreement and all transactions hereunder
shall be governed by the laws of the State of Texas.

16.11 Counterparts. This Agreement may be executed in multiple
counterparts, and each shall be deemed to be an original.

JOINT VENTURE AGREEMENT PAGE 16
<PAGE> 17
16.12 Entire Agreement. This Agreement, including any exhibits or
addenda hereto, and any written amendments hereto, constitute the entire and
exclusive Agreement between the parties and supersedes any prior or
contemporaneous agreements, representations or statements, no matter whether
written or oral.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

MEDICAL ALLIANCE, INC. COHERENT-AMT INC.

By: /s/ Paul Herchman By: /s/ Daniel Webb
------------------------------ ------------------------------
Paul Herchman

Its: President Its: Secretary

JOINT VENTURE AGREEMENT PAGE 17

<PAGE> 1
EXHIBIT 10.6

MEDICAL ALLIANCE, INC.
AMENDED AND RESTATED 1994 LONG-TERM INCENTIVE PLAN

ARTICLE I
DEFINITIONS

As used in this Plan, the following terms will have the following
meanings:

1.1. Annual Shareholders Meeting has the meaning ascribed to it in
Section 4.2.

1.2. Automatic Grant Date has the meanings ascribed to it in
Section 4.2(a).

1.3. Award means a grant of Options under Article IV of the Plan, a
Restricted Stock Award under Article V of the Plan, a Stock Appreciation Rights
Award under Article VI of the Plan, a Performance Share Award under Article VII
of the Plan or a Stock Unit Award under Article VIII of the Plan.

1.4. Award Agreement means an Option Agreement, Restricted Stock
Agreement, Stock Appreciation Rights Agreement, Performance Share Agreement or
Stock Unit Agreement.

1.5. Board means the Company's Board of Directors.

1.6. Cause means an act or acts engaged in by a Participant
involving (i) a felony, (ii) fraud, (iii) embezzlement, (iv) gross or willful
neglect of duty or misconduct, (v) the commission of any act that causes or
reasonably may be expected to cause substantial injury to the Company.

1.7. Code means the federal Internal Revenue Code of 1986, as
amended.

1.8. Committee means a committee comprised of two or more Directors
of the Company, appointed by the Board, the members of which satisfy the
requirements for eligibility set forth in Section 3.1 and which is responsible
for the administration of the Plan; provided that the full Board may at any
time, in its sole discretion, exercise any or all functions and authority of
the Committee; and provided further that, to the extent required by Rule 16b-3,
the Committee will have exclusive authority to exercise its functions and
authority in respect of the selection of officers and Directors of the Company
(other than Nonemployee Directors) to be Participants and in respect of
decisions concerning Awards to such persons.

1.9. Commission means the United States Securities and Exchange
Commission.

1.10. Company means Medical Alliance, Inc., a Texas corporation.

1.11. Director means a member of the Board of Directors of the
Company or of a subsidiary thereof.
<PAGE> 2
1.12. Disability of a Participant will be deemed to occur whenever a
Participant is rendered unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment that can be
expected to result in death or that has lasted or can be expected to last for a
continuing period of not less than 12 months. In the case of any dispute as to
whether or not a Participant is disabled within the meaning of this Section,
the determination of disability will be made by a licensed physician selected
by the Board and acceptable to the Participant, which physician's decision will
be final and binding.

1.13. Employee means any employee of the Company or of any of its
subsidiaries, as defined under Section 3401(c) of the Code and the regulations
promulgated thereunder.

1.15. ERISA means the Employee Retirement Income Security Act of
1974, as amended.

1.16. Exchange Act means the Securities Exchange Act of 1934, as
amended.

1.17. Grant Date means, with respect to an Option, the date on which
an Option is granted, as specified in Section 4.2 or, as applicable, in Section
4.3.

1.18. Incentive Option means an Option that by its terms is intended
to be treated as an "incentive stock option" within the meaning of Section 422
of the Code.

1.19. Market Value means, on any date, the closing price per share
of the Stock on the New York Stock Exchange on such date.

1.21. Nondiscretionary Option means a Nonstatutory Option granted to
a Nonemployee Director under Section 4.2.

1.22. Nonemployee Director means a member of the Board who is not an
Employee.

1.23. Nonstatutory Option means any Option that is not an Incentive
Option.

1.24. Option means an option to purchase Stock granted under the
Plan.

1.25. Option Agreement means a written agreement between the Company
and a Participant setting forth the terms and conditions of an Option.

- 2 -
<PAGE> 3
1.26. Option Price means the price to be paid by a Participant for a
share of Stock upon exercise of an Option.

1.27. Participant means a person to whom an Award has been granted.

1.29. Performance Goal means the objective(s) established by the
Committee at the time each Performance Share Award is granted with respect to
the related Performance Cycle for the purpose of determining the extent to
which Performance Shares that have been contingently awarded for such Cycle are
earned.

1.30. Performance Share or Performance Share Award means an Award
granted pursuant to Article VII expressed as a share of Stock.

1.31. Performance Share Agreement means a written agreement between
the Company and a Participant setting forth the terms and conditions of a
Performance Share Award.

1.32. Plan means this Amended and Restated 1994 Long-Term Incentive
Plan of the Company, as may be amended from time to time.

1.33. Reporting Participant means a Participant who is subject to
the reporting requirements of Section 16 of the Exchange Act.

1.34. Restricted Stock or Restricted Stock Award means an award of
Stock granted under Article V.

1.35. Restricted Stock Agreement means a written agreement between
the Company and a Participant with respect to a Restricted Stock Award.

1.36. Retirement means resignation by the Participant on or after
the date on which the Participant has served the Company or one or more
subsidiaries thereof for at least five (5) years in the aggregate.

1.37. Rule 16b-3 means Rule 16b-3 or its successors promulgated
under the Exchange Act.

1.38. Securities Act means the Securities Act of 1933, as amended.

1.39. Section 162(m) means Section l62(m) of the Code and the
regulations promulgated thereunder.

- 3 -
<PAGE> 4
1.40. Stock means Common Stock, par value $0.002 per share, of the
Company or, in the event the outstanding shares of such stock are hereafter
changed into or exchanged for shares of a different security of the Company or
some other corporation, such other security.

1.41. Stock Appreciation Right or Stock Appreciation Rights Award
means an Award granted under Article VI.

1.42. Stock Appreciation Rights Agreement means an agreement between
the Company and a Participant setting forth the terms and conditions of a Stock
Appreciation Rights Award.

1.43. Stock Unit or Stock Unit Award means an award of Stock or
units granted under Article VIII.

1.44. Stock Unit Agreement means a written agreement between the
Company and a Participant setting forth the terms and conditions of a Stock
Unit Award.

1.45. Ten Percent Owner means a person who owns, or is deemed within
the meaning of Section 422(b)(6) of the Code to own, stock possessing more than
10% of the total combined voting power of all classes of stock of the Company
(or its parent or subsidiary corporations, within the meaning of Sections
424(e) and 424(f) of the Code). Whether a person is a Ten Percent Owner will be
determined with respect to each Option based on the facts existing immediately
prior to the Grant Date of such Option.

1.46. Vesting Year for any portion of any Incentive Option mean the
calendar year in which that portion of the Option first becomes exercisable.

ARTICLE II
GENERAL

2.1. PURPOSE. This Plan is intended to encourage ownership of Stock
by Participants and to provide additional incentives for them to promote the
success of the Company's business. The Company intends that Incentive Options
granted under Article IV will qualify as "incentive stock options" within the
meaning of Section 422 of the Code.

With respect to Reporting Participants, the Plan and all transactions
under the Plan (other than certain transactions permitted by Section 4.9) are
intended to comply with all applicable conditions of Rule 16b-3. To the extent
any provision of the Plan or action by the Committee or the Board fails to so
comply, it will be deemed null and void ab initio.

2.2. TERM OF THE PLAN. Awards may be granted not later than
December 31, 2004.

2.3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Section 9.2 and subject to any additional restrictions elsewhere in the Plan,
the maximum aggregate number of shares of Stock that may be issued from time to
time pursuant to the Plan may not exceed 748,360

- 4 -

<PAGE> 1
EXHIBIT 10.10

LEASE AGREEMENT

BY AND BETWEEN

GRAYMONT PARTNERS, LTD.

AS LANDLORD,

AND

MEDICAL ALLIANCE, INC.

AS TENANT

May 20, 1996
<PAGE> 2
LEASE AGREEMENT

THIS LEASE AGREEMENT (the "Lease") made and entered into on this 6th
day of May 1996 between, GRAYMONT PARTNERS, LTD., A Texas limited partnership
(hereinafter referred to as "Landlord"), and MEDICAL ALLIANCE, INC., a Texas
Corporation (hereinafter referred to as "Tenant").

ARTICLE 1. BASIC LEASE PROVISIONS

1.01 (a) Landlord. Graymont Partners, Ltd.

(b) Address (for notices) Graywood Developments, Inc.
500 Quorum Drive
Suite 210
Dallas, Texas 75240

1.02 (a) Tenant. Medical Alliance, Inc.

(b) Address (for notices):

Prior to occupancy: After occupancy:
8200 Springwood Dr. 2445 Gateway Drive
Suite 200 Suite 150
Irving, Texas 75063 Irving, Texas 75063

Attn: Mike Wallace Attn: Mike Wallace
214/432-8171 (x208)

1.03 Lease Term. Seventy-Two (72) months or six (6) lease years.

1.04 Commencement Date of Term. July 1, 1996.

1.05 Base Rental. The Base Rental as set forth in Exhibit "A" attached hereto
and incorporated herein by this reference for all purposes.

1.06 Security Deposit. $10,377.08 due and payable upon execution of the
Lease.

1.07 Prepaid Rental. $10,377.08 due and payable upon execution of the Lease.

1.08 Tenant's Pro Rata Share. seven and seventy-one hundredths percent
(7.71%).

1.09 Rental Commencement Date. July 1, 1996 (contemplated)

1.10 Tenant's Net Rentable Area. 9,962 square feet.

1.11 Landlord's Real Estate Broker(s). Harry B. Lucas Company.

1.12 Tenant's Real Estate Broker(s). Tony Levechio and Associates.

1.13 Leased Premises. Suite(s) 150.

Each of the foregoing Basic Lease Provisions shall be construed in
conjunction with the references thereto contained in other provisions of this
Lease and shall be limited by such other provisions. Each reference in this
Lease to any of the foregoing Basic Lease Provisions shall be construed to
incorporate each term set forth hereinabove.

1.14 Lease Year. The term "Lease Year" shall mean those certain consecutive
twelve (12) calendar month periods beginning with the Commencement Date, except
that, in the event the Commencement Date begins on a day other than the first
day of the calendar month, then the first
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Lease Year shall be extended to that date which is twelve (12) calendar months
from the first day of the calendar months immediately following the
Commencement Date.

ARTICLE 2. CERTAIN LEASE DEFINITIONS

2.01 Additional Rental. Any and all amounts payable by Tenant to Landlord
hereunder, including but not limited to late charges, default interest,
Tenant's Pro Rata Share of Taxes, Insurance and Operating Expenses.

2.02 Buildings. Those certain five (5) mixed-use office buildings collectively
known as Imperial Square at Las Colinas, being situated on a tract of land in
the City of Irving, Dallas County, Texas, more particularly described in
Exhibit "B" attached hereto and incorporated herein by this reference for all
purposes.

2.03 Building. That certain individual mixed-use office building designated as
"Building #4" on Exhibit "B-1" attached and made a part hereto, being one of
the Buildings, located at Las Colinas on the tract of land in the City of
Irving, Dallas County, Texas, more particularly described on Exhibit "B"
attached hereto and incorporated herein by this reference for all purposes.

2.04 Building Standard. The type, brand, quality and/or quantity of materials
Landlord designates from time to time to be used in the construction of
improvements within the Leased Premises, the Building and/or the Property.

2.05 Common Areas. Those parts of the Buildings and other improvements now or
hereinafter placed, constructed or erected on the Property, as designated by
Landlord from time to time, including but not limited to those areas devoted
to corridors, elevator foyers, elevator service areas, restrooms, mailroom,
mechanical rooms, janitorial closets, electrical and telephone closets, vending
areas, lobby areas, the loading dock, and other similar facilities as Landlord
shall determine in its absolute discretion.

2.06 Leased Premises. The suite of offices located within the Building and
outlined on the floor plan attached to this Lease as Exhibit "C" and
incorporated herein by this reference for all purposes.

2.07 Tenant Improvements. All improvements to the Leased Premises for which
Tenant shall be responsible for the cost, whether by application of finish-out
allowance, if any, or otherwise.

2.08 Maximum Interest Rate. The greatest of the rates of interest from time to
time permitted under applicable federal and state law. To the extent of
applicability of Article 5069-1.04, as amended, Texas Revised Civil Statutes,
the Maximum Interest Rate shall be the highest permitted rate based upon the
"indicated rate ceiling", but to the extent now or hereafter permitted by Texas
law, Landlord may from time to time implement, withdraw and reinstate any
ceiling as an alternative to the indicated rate ceiling, including the right
to reinstate the indicated rate ceiling. In determining the Maximum Interest
Rate, due regard shall be given to any and all payments, fees, charges,
deposits, balances and agreements which may constitute interest.

2.09 Permitted Use. Office use associated with Tenant's medical services office
use business and no other use or purpose without Landlord's prior written
consent.

2.10 Property. The tract of land described in Exhibit "B" together with
improvements on or under the Property, including but not limited to the
Building, the plazas, the parking area for the Building, driveways and
sidewalks.

2.11 Net Rentable Area. As used herein, Net Rentable Area shall refer to (i) in
the case of a single tenancy floor (if applicable in the future), all floor area
measured from the outside surface of the outer glass or exterior wall of the
Building to the outside surface of the opposite exterior wall, plus the areas
within the outside walls of the Building used for Building stairs, fire towers,
elevator shafts, flues, vents, stacks, vertical pipe shafts, vertical ducts,
vertical

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penetrations and other similar spaces plus Tenant's Pro Rata Share of the
Common Areas, and (ii) in the case of a multiple tenancy floor, all floor areas
within the outside surface of the outer glass or exterior wall enclosing the
portion of the Leased Premises on such floor and measured to the midpoint of
the walls separating areas leased by or held for lease to other tenants or to
the outside surface of the walls separating the Leased Premises from Common
Areas. No deductions from Net Rentable Area are made for columns or projections
within the Building.

2.12 Work Letter Improvements. Those improvements to the Leased Premises, if
any, which Landlord shall agree to provide at Landlord's cost according to the
Work Letter Agreement attached hereto as Exhibit "D" and incorporated herein by
this reference for all purposes.

2.13 Building Rules and Regulations. Those rules and regulations set forth
in Exhibit "E" attached hereto and incorporated herein by this reference for
all purposes, as amended or modified by Landlord from time to time. These will
be uniformly enforced.

ARTICLE 3. LEASEHOLD GRANT

Landlord, in consideration of the covenants and agreements to be
performed by Tenant and upon the terms and conditions hereinafter set forth,
does hereby lease, demise and let to Tenant and Tenant does hereby lease,
demise and let from Landlord the Leased Premises.

ARTICLE 4. LEASE TERM

4.01 Lease Term; Modification of Commencement Date. Subject to and upon the
terms and conditions set forth in this Lease, this Lease shall continue in
force for the Lease Term. In the event the Leased Premises are not
substantially completed in accordance with the Work Letter Agreement on the
Commencement Date solely as a result of the default of Landlord hereunder, the
Commencement Date shall be deemed automatically and unconditionally modified,
and thereafter the Commencement Date shall be that date which the Leased
Premises are substantially completed in accordance with the Work Letter
Agreement.

4.02 Acceptance of Leased Premises Memorandum. On or about the Commencement
Date, Landlord and Tenant will execute the "Acceptance of Leased Premises
Memorandum" attached hereto and incorporated herein by this reference for all
purposes as Exhibit "F" stipulating, among other things as Landlord shall
require, the Commencement Date, the date for termination of the Lease Term and
the Tenant's Net Rentable Area and any outstanding punch list items. In no
event shall Tenant take possession of Leased Premises prior to execution of the
Acceptance of Premises Memorandum and appropriate punch lists (if required).

4.03 Acceptance of Leased Premises and Building by Tenant. The taking of
possession of the Leased Premises by Tenant shall be conclusive evidence
against Tenant that (i) the Leased Premises are suitable for the purpose for
which the same are leased, (ii) the Property and the Building and each and
every part and appurtenance thereof are in good and satisfactory condition, and
that Tenant accepts same in their "AS IS, WHERE IS" condition without any
warranty or representation, whether express or implied, and (iii) Tenant waives
any defects and in all other parts of the Building, the Property and the
appurtenances thereto.

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ARTICLE 5. RENTALS

5.01 Payment of Base Rental and Additional Rental. Tenant agrees and
promises to pay to Landlord at the address provided in Article 1.01 hereof (or
at such other place as Landlord may designate from time to time) in lawful
money of the United States of America (a) the Base Rental to be payable in
monthly installments in the amounts set forth in Exhibit "A" and (b) Additional
Rental in advance and without notice, invoice or demand on the first day of
each calendar month during and throughout the Lease Term and any extensions or
renewals of this Lease, without any reduction, set-off, deduction or
counterclaim whatsoever (except as otherwise provided in the lease); provided,
however, that if the first day of the month shall occur on a Saturday, Sunday
or holiday, said monthly installment of Base Rental and Additional Rental
(sometimes hereinafter referred to as the "Rentals") shall be due and payable
without notice, invoice or demand on the next following day which is not a
Saturday, Sunday or holiday. Should the Commencement Date be on a day other
than the first day of a calendar month, the monthly installment of Base Rental
for such partial month shall be prorated based on the number of days in such
month. The monthly installment of Base Rental for the first partial month, if
any, shall be payable on the Commencement Date and the Prepaid Rental shall be
applied toward the first full month of the Lease Term. All payments of Base
Rental and Additional Rental shall be by a good and sufficient check (subject
to collect) drawn on a financial institution located in Dallas County, Texas.
No payment by Tenant or receipt or acceptance by Landlord of a lesser amount
than the installment of Base Rental, including all Additional Rental then due
and payable, shall be deemed to be other than a payment on account, nor shall
any endorsement or statement or any check or any letter accompanying any check
or payment be deemed an accord and satisfaction, and Landlord may accept such
check or payment without prejudice to Landlord's right to recover the balance
or pursue any other remedy provided by this Lease or applicable law. The
acceptance by Landlord of an installment of Base Rental, including
any Additional Rental then due and payable, on a date after the due date of such
payment shall not be construed to be a waiver of Landlord's right to declare a
default for a subsequent later payment. If Tenant fails to timely pay any two
(2) installments of Rentals during any consecutive twelve (12) month period,
Landlord may thereafter require Tenant to pay Rentals (as estimated by
Landlord, if necessary) made on or before the due date in cash or by cashier's
check or money order, and the delivery of Tenant's collectible personal or
corporate check shall no longer constitute payment thereof. Any acceptance of
Tenant's collectible personal or corporate check thereafter by Landlord shall
not be construed as a waiver of the requirement that such payments be made in
cash or by cashier's check or money order. All amounts received by Landlord
from Tenant hereunder shall be applied first to the earliest accrued and unpaid
Rentals then outstanding.

5.02 Past Due Rentals.

(a) Late Charge. Other remedies for nonpayment of Rentals
notwithstanding, if any Rentals or installments thereof are not received by
Landlord within five (5) days as and when such are due, which absent contrary
notice by Landlord to Tenant shall be the first day of each month, Tenant shall
pay to Landlord a late charge in an amount equal to five percent (5%) of such
Rentals or installment thereof then due, to defray a portion of the additional
costs to Landlord associated with tenant's failure to timely pay such amounts.

(b) Interest. In addition, all past due Rentals or
installments thereof shall bear interest at the lesser of (i) eighteen percent
(18%) per annum or (ii) the Maximum Interest Rate from the date such payment is
due to the date of receipt of payment by Landlord.

5.03 Tenant's Pro Rata Share of Operating Expenses.

(a) The term "Pro Rata Share" as used herein shall mean the
percentage set forth in Article 1.08 hereof; provided, however, that in the
event the Tenant's Rentable Area or the Rentable Area in the Buildings located
on the Property should increase or

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decrease subsequent to the date of this Lease, Tenant's Pro Rata Share
shall be adjusted by Landlord.

(b) The term "Operating Expenses" as used herein shall mean
any and all costs, expenses and disbursements of every kind and
character which Landlord shall incur, pay or become obligated to pay in
connection with the ownership of the Buildings and the Property and any
estate or interest therein, or the operation, maintenance, repair,
replacement, or control of access to the Buildings and the Property,
including but not limited to the following:

(i) Labor costs for Landlord's employees performing
services required or utilized in connection with the operation,
repair, replacement, maintenance and control of access to the
Buildings or the Property, including but not limited to amounts
incurred for wages, salaries and other compensation for
services, payroll, social security, unemployment and other
similar taxes, workmen's compensation insurance, disability
benefits, pensions, hospitalization, and retirement plans and
group insurance;

(ii) Rental and/or purchase costs of materials,
supplies, hand tools and equipment used in the operation,
repair, replacement, maintenance or the control of access to
the Buildings and the Property;

(iii) Management fees, the cost of maintaining a
management office for the Buildings, and fees for legal and
accounting services relating to the Buildings and the Property;

(iv) Amounts charged to Landlord by contractors
and/or suppliers for services, materials, equipment and supplies
furnished in connection with the operation, repair, maintenance,
replacement, maintenance or control of access to any part of
the Buildings and the Property generally, and the plumbing,
elevator, heating, air conditioning, ventilating, any part of
electrical and other systems of the Buildings and the Property
including without limitation, services, materials and labor
necessary to remove or hazardous substances;

(v) Premiums paid by Landlord for fire and extended
coverage insurance, earthquake and extended coverage insurance,
liability and extended coverage insurance and other insurance
carried from time to time by Landlord;

(vi) Charges for all utilities including but not
limited to water, sewer, but excluding electricity.

(vii) Taxes, including (A) real estate taxes and
assessments on the Property or the Buildings, and taxes and
assessments levied in substitution or supplementation in whole
or in part of such taxes, (B) personal property taxes (for the
Buildings' personal property, including license expenses), (C)
franchise fees, (D) taxes imposed on services of Landlord's
agents and employees, and (E) all other taxes, fees or
assessments now or hereafter levied by any governmental
authority on the Property, the Buildings or its contents or on
the operation and use thereof (except as relate to specific
lessees);

(vii) Landscape expenses and cost of repairing,
resurfacing and striping of the parking areas of the Buildings;

(ix) Cost of all maintenance service agreements for
equipment, security alarm service, window cleaning, drapery or
venetian blind cleaning, janitorial services, pest control,
uniform supply, landscaping, and parking equipment;

(x) Cost of all other repairs, replacements and
general maintenance of the Property and the Buildings neither
specified above nor directly billed to tenants;

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(xi) Capital improvements or repairs, replacement or
maintenance made to the Buildings, the Property or garage
subsequent to the Commencement Date, including, without
limitation, repairs, replacement or maintenance required by
applicable laws, regulations or ordinances such as, but not
limited to, the Americans with Disabilities Act of 1990, Public
Law 101-336, as amplified by rules and regulations or any
modifications to such Act or any environmental laws.

(c) Tenant shall pay to Landlord, as Additional Rental, the
first day of each month, an amount equal to one-twelfth (1/12) of the
amount estimated by Landlord to be Tenant's Pro Rata Share of Operating
Expenses in excess of $ Base Year 1996 grossed up to 95% occupancy per
square foot of Tenant's Net Rentable Area. Such monthly payments shall
be due and payable concurrently with the payments of base rental without
notice, invoice or demand without any reduction, set-off, deduction or
counterclaim whatsoever. Landlord may adjust such estimates at any time
and from time to time based upon Landlord's absolute discretion. Such
adjustment shall be effective as of the next installment of base rental
due and payable hereunder. Within 150 days or as soon thereafter as
possible after the end of each calendar year of the Lease Term, Landlord
shall give written notice to Tenant of any deficiency or excess which
has been paid by Tenant to Landlord in accordance with the foregoing. If
the amount, if any, collected by Landlord from Tenant is less than the
amount actually due for Operating Expenses, Tenant shall pay the
difference to Landlord, as Additional Rental, within ten days after
written notice of the amount due. If the amount so collected exceeds the
amount actually due, the excess shall be credited by Landlord against
the next payment of such Operating Expenses coming due from Tenant. If
for any reason this Lease shall terminate on a day other than the last
day of a calendar year, Tenant's Pro Rata Share of the Operating
Expenses applicable to said calendar year shall be prorated based upon
the number of days from the commencement of such calendar year to and
including such termination date based upon a 365 or 366 day year as may
be applicable. If such prorated amount exceeds the amount actually
collected by Landlord from Tenant for such partial calendar year, then
Tenant shall pay such excess upon demand by Landlord. If the prorated
amount is less than the amount actually collected, then Landlord shall
repay the overpayment to Tenant along with Tenant's Security Deposit
within sixty (60) days of the termination of this Lease. This provision
shall survive the termination of this Lease.

5.04 Tenant's Pro Rata Share of Electrical Expenses.

(a) The term "Electrical Expenses" as used herein shall
mean any and all costs, expenses and disbursements of every kind and character
which Landlord shall incur, pay or become obligated to pay in connection with
electrical charge relative to the heating, air conditioning, lighting, and or
other electrical charges to the Leased Premises. THE LEASED PREMISES SHALL BE
SEPARATELY METERED FOR ELECTRICAL USAGE.

(b) Tenant shall pay to Landlord, as Additional Rental the
first day of each month, an amount equal to one-twelfth (1/12) of the amount
estimated by Landlord to be Tenant's Pro Rata Share of Electrical Expenses in
excess of $1.50 per square foot of Tenant's Net Rentable Area. Such monthly
payments shall be due and payable concurrently with the payments of base rental
without notice, invoice or demand without any reduction, set-off, deduction or
counterclaim whatsoever. Landlord may adjust such estimates at any time and
form time to time based upon Landlord's absolute discretion. Such adjustment
shall be effective as of the next installment of base rental due and payable
hereunder. Within 150 days or as soon thereafter as possible, after the end of
each calendar year of the Lease Term, landlord shall give written notice to
Tenant of any deficiency or excess which has been paid by Tenant to Landlord in
accordance with the foregoing. If the amount, if any, collected by Landlord
from Tenant is less than the amount actually due for Electrical Expenses,
Tenant shall pay the difference to Landlord, as Additional Rental, within ten
days after written notice of the amount due. If the amount so collected exceeds
the amount actually due, the excess shall be credited by Landlord against the
next payment of such Electrical Expenses coming due from Tenant. If for any
reason this Lease shall terminate on a day other than the last day of a
calendar year, Tenant's Pro Rata Share of the Electrical Expenses applicable to
said calendar year shall be prorated based upon the number of days from the

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commencement of such calendar year to and including such termination dated based
upon a 365 or 366 day year as may be applicable. If such prorated amounts
exceed the amount actually collected by Landlord from Tenant for such partial
calendar year, then Tenant shall pay such excess upon demand by Landlord. If
the prorated amount is less than the amount actually collected, then Landlord
shall repay the overpayment to Tenant along with Tenant's Security Deposit
within sixty (60) days of the termination of this Lease. This provision shall
survive the termination of this Lease.

5.05 Independent Covenant. The obligation of Tenant to pay Base Rental and
Additional Rental and the obligations of Tenant to perform other covenants and
duties hereunder constitute independent and unconditional obligations to be
performed at all times as provided for herein. All obligations of Landlord
hereunder are covenants and not conditions to Tenant's performance of
obligations hereunder; Tenant waives and relinquishes all rights which Tenant
might have to claim any nature of lien against, withhold, deduct or off-set
against, any Rentals and other sums provided hereunder to be paid to Landlord
by Tenant.

ARTICLE 6. SECURITY DEPOSIT

The Security Deposit shall be held by Landlord without liability for
interest and shall not be considered an advance payment of Rentals or a measure
of Landlord's damages in case of default by Tenant. Landlord shall have the
right to commingle the Security Deposit with other funds of Landlord. In the
event Tenant defaults in the performance of any of Tenant's covenants and
obligations hereunder, including but not limited to the payment of Rentals,
Landlord may, from time to time, without prejudice to any other remedy, use the
Security Deposit to the extent necessary to make good any arrearage in Rentals
or other sums to which Tenant is in default and any other damages, injury,
expense or liability caused to Landlord by Tenant's default, including any
damages or deficiency resulting from the reletting of the Leased Premises.
Following any such application of the Security Deposit, Tenant shall immediately
and unconditionally pay to Landlord on demand the amount so applied in order to
restore the Security Deposit to its original amount. If, upon termination of
this Lease, Tenant is not then in default, and provided that Tenant has
delivered possessions of the Leased Premises to Landlord in accordance with this
Lease, any remaining balance of the Security Deposit shall be returned by
Landlord to Tenant within thirty (30) days of the termination of this Lease. If
Landlord transfers or assigns its interest in the Building and/or the Property
during the Lease Term, Landlord will assign the Security Deposit to the
transferee or assignee and thereafter Landlord shall have no further liability
for the return of such Security Deposit, and Tenant agrees to look solely to
such transferee or assignee or successor thereof for the return of the Security
Deposit. Landlord and its successors and assigns shall not be bound by any
actual or attempted assignment or encumbrance of the Security Deposit by Tenant
and any such assignment or encumbrance shall be null and void and of no force or
effect.

ARTICLE 7. USE AND OCCUPANCY

7.01 Purpose. The Leased Premises shall be used and occupied by Tenant
solely for the Permitted Use and for no other business or purpose.

7.02 Legal Use, Extrahazardous Use, Nuisance. Tenant covenants and agrees
not to (i) use or to allow or permit the Leased Premises to be used for any
purpose prohibited by any applicable law, including, but not limited to any law
of the United States or of the State of Texas or by any ordinance of the City
of Dallas, Texas including, without limitation any environmental laws or
regulations; (ii) commit waste or suffer or permit waste to be committed or to
allow or permit any nuisance on or in the Leased Premises, the Building or the
Property; (iii) use the Leased Premises or allow or permit the same to be used
in any way or for any purpose that Landlord may deem to be extrahazardous
because of the possibility of fire or other casualty or which will increase the
rate of fire or other insurance for the Building or the Building's contents
and/or the Property or in respect to the operation of the Building, or which
may render the Building uninsurable at normal rates by responsible insurance
carriers authorized to do business in the State of Texas or which may render
void and voidable any insurance on the Building, the Building's contents and/or
the Property; or (iv) violate, or permit the violation of, any condition
imposed by any insurance

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policy then issued in respect of the Building, the contents of the Building
and/or the Property and shall not do, or permit anything to be done, or keep or
permit anything to be kept in the Leased Premises, the Building and/or the
Property which would subject Landlord to any liability or responsibility for
any personal injury or death or property damage, or which would result in the
cancellation of, or limit the assertion of any defense by the insured, in whole
or in part, to claims under any policy of insurance in respect of the Building,
the contents of the Building and/or the Property, or (v) use or allow or permit
the Leased Premises to be used for a purpose that would cause the presence of
hazardous or toxic substances. In the event that by reason of Tenant's acts or
conduct of business there shall be an increase in the rate of insurance on the
Building, the Building's contents and/or the Property, then Tenant hereby
agrees to pay such increase. Tenant further covenants and agrees that it will
conduct Tenant's business and occupy the Leased Premises and will control
Tenant's agents, employees and invitees in such a manner so as not to create a
nuisance or interfere with, annoy or disturb any of the other tenants in the
Building, or Landlord in its management of the Building and the Property.

7.03 Care of the Leased Premises. Tenant covenants and agrees at the
termination of this Lease, by lapse of time or otherwise, to deliver up said
Leased Premises to Landlord in the same condition as at the date of possession
by Tenant, ordinary wear and tear and damage by casualty or condemnation
excepted; and upon such termination of this Lease, Landlord shall have the
right to reenter and resume possession of the Leased Premises.

ARTICLE 8. PEACEFUL ENJOYMENT

Landlord agrees that Tenant shall, and may peacefully have, hold and
enjoy the Leased Premises, subject to the terms hereof, and subject to all
liens and other encumbrances affecting the Property, provided that Tenant pays
the Rentals herein recited and performs all of Tenant's covenants and
agreements herein contained. It is understood and agreed that this covenant and
any and all other covenants of Landlord contained in this Lease shall be binding
upon Landlord and its successors only with respect to breaches occurring during
its or their respective ownerships of Landlord's interest hereunder.

ARTICLE 9. SERVICES TO BE FURNISHED BY LANDLORD

So long as Tenant is occupying the Leased Premises and is not in
default hereunder and no condition exists which with the lapse of time or the
giving of notice, or both, would constitute default hereunder, Landlord shall,
as a part of Operating Expenses under Section 5.03 and Electrical Expenses
under Section 5.04 as applicable, furnish the following services in connection
with Tenant's use of the Leased Premises to a standard of similar buildings in
the area:

(a) Hot and cold water at those points of supply provided
for general use of other tenants in the Building;

(b) Central heat and air conditioning in season at such
times and at such temperatures and in such amounts as are considered by
Landlord to be standard. Tenant shall be obligated to maintain the
temperature within the Leased Premises at a sufficient level to prevent
any pipes from freezing and to prevent any other adverse effect on the
Leased Premises and the Building.

(c) Landlord will furnish janitor service to the Leased
Premises on a five (5) day week basis (excluding Saturdays, Sundays and
holidays); provided, however, if Tenant's floor and/or wall coverings or
other improvement to the Leased Premises are other than Building
Standard, Tenant shall pay upon demand the additional cleaning cost
attributable thereto; provided, further, Landlord shall have no
responsibility for any damage to the Leased Premises, including such
special flooring or wall coverings, losses due to theft or burglary or
for any other similar damages, as a result of such janitorial services;

(d) Electricity in an amount deemed by Landlord to be
standard;

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(e) Electrical facilities as they currently exist in the
Building;

(f) Tenant will be provided free of charge one (1) key for
every 1,000 square feet of leased space. If Tenant chooses to rekey the Leased
Premises it shall provide Landlord and Landlord's appropriate subcontractors
with keys.

Failure, in whole or in part, by Landlord to furnish or cause to be
furnished the above-referenced services, or any cessation thereof, from any
cause whatsoever, shall not render Landlord liable in any respect for damages
to either person or property, nor be construed as an actual or constructive
eviction of Tenant, nor work, cause or permit an abatement of Rentals, nor
relieve Tenant from fulfillment of any covenant or agreement hereof, all of the
above to be construed as covenants and not conditions to this Lease. Should any
of the equipment or machinery break down, or for any case cease to function
properly, Landlord shall use reasonable diligence to repair same, but Tenant
shall have no claim against Rentals due hereunder or damages on account of any
interruptions in service occasioned thereby or resulting therefrom. All of the
above-referenced services shall be subject to all laws, regulations and
administrative orders, the adherence to which may in no case be grounds for
claim, deduction or setoff by Tenant nor act of breach by Landlord, Landlord
and Tenant hereby acknowledging, agreeing, covenanting, representing and
warranting one to the other that Tenant's payment of Base Rental, Additional
Rental and all other amounts hereunder to be an independent covenant.

ARTICLE 10. REPAIRS AND MAINTENANCE

10.01 By Tenant. Tenant covenants and agrees, at its sole cost and expense,
without contribution or reimbursement by Landlord, to keep the Leased Premises
and every part thereof in good condition and repair; provided, however, Tenant
shall not be responsible for repair of damage for which Landlord is
specifically responsible pursuant to Article 10.2 hereof. Tenant shall also be
responsible for the repair and replacement (to the condition existing prior to
the occurrence of such damage) of any damage or injury done to the Property or
the Buildings or any part thereof caused by Tenant, or Tenant's agents,
employees, invitees or visitors. Repairs and maintenance for which Tenant is
responsible shall be performed at Tenant's sole cost and expense only by
Landlord or contractors which Landlord has approved in writing prior to
commencement of such repairs and maintenance and Tenant shall pay Landlord an
administrative fee in the amount equal to ten percent (10%) of the cost of such
repairs and maintenance to reimburse Landlord for its attention to such work.
Landlord's approval shall include the approval of insurance coverage required
by Landlord, which shall include, but not be limited to Workmen's Compensation
Coverage. Failure of Tenant to pay Landlord for the cost of such repairs
performed by or on behalf of Tenant, plus the ten percent (10%) administrative
fee on demand shall constitute a default hereunder. In the event that Landlord
approves a contractor selected by Tenant for the repair of such damage for
which Tenant is responsible, Tenant's failure to cause such repairs to be
commenced within ten (10) days following Landlord's approval of Tenant's
contractor shall constitute a default under this Lease. Tenant shall submit
lien waivers to Landlord, Landlord's title company or Landlord's lenders from
all contractors and suppliers of labor and/or materials immediately upon the
completion of any repairs made on behalf of Tenant other than those made by
Landlord or Landlord's agents. Failure of Tenant to supply such waivers within
ten (10) days of the completion of such repairs

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<PAGE> 11
shall constitute an event of default under this Lease. Tenant's contractors
which are approved by Landlord shall not be deemed to be an agent of Landlord
for purposes hereof. Landlord shall allow Tenant to perform its own telephone
and computer wiring/rewiring with no administrative charge to Tenant.

10.02 By Landlord. Landlord agrees to repair and maintain the structural
portions of the Buildings and the Property, including the basic plumbing, air
conditioning, heating and electrical systems installed or furnished by
Landlord, and the Common Areas (collectively referred to herein as "Building
Repairs"), the cost of which shall be an Operating Expense, unless such
maintenance and repairs are caused in whole or in part by the act, neglect or
fault of the Tenant, its agents, servants, employees or invitees, in which case
Tenant shall pay on demand the actual cost of such maintenance or repairs.
Landlord assumes no other obligations of maintenance or repair; provided,
however, Landlord may undertake or cause to be undertaken, in its sole
discretion without assuming any obligation or responsibility therefor, repairs
to any damage within the Leased Premises, or damage to the Building for which
Tenant is responsible pursuant hereto, at Tenant's sole cost and expense, in
case of an emergency or at any time if Tenant shall fail to timely perform or
cause to be performed its obligations as set forth in Article 10.01 hereof.
Landlord shall not be liable for any failure to make any Building Repairs or to
perform any maintenance unless Landlord shall fail to commence such repair or
maintenance within thirty (30) days after written notice of the need of such
repairs or maintenance is given by Tenant to Landlord. Tenant waives the right
to make Building Repairs at Landlord's expense.

ARTICLE 11. ALTERATIONS, ADDITIONS, IMPROVEMENTS

11.01 By Landlord. Except as otherwise provided in the Work Letter Agreement
attached hereto as Exhibit "D", all installations and improvements now or
hereafter placed on the Leased Premises shall be for Tenant's account and at
Tenant's sole cost and expense (and Tenant shall pay any and all costs and
expenses associated therewith, including but not limited to ad valorem taxes
and increased insurance thereon or attributable thereto), which cost together
with a ten percent (10%) administrative fee shall be payable by Tenant to
Landlord upon demand, and failure to pay such additional amounts in full within
ten (10) days of demand shall constitute a default hereunder.

11.02 By Tenant. Tenant shall not make or allow to be made any alterations or
additions, whether structural or nonstructural, in or to the Leased Premises
without the prior written consent of Landlord. Tenant shall reimburse Landlord
for any and all costs and expenses incurred by Landlord as a result of such
alterations or additions and shall pay Landlord an administrative fee in the
amount of ten percent (10%) of the cost of such alterations or additions in
connection with Tenant's installation of such approved alternations or
additions. Tenant's installation of such approved alterations or additions
shall not interfere with Landlord's operation of the Building, and Landlord may
require as a condition to its approval of such alterations and additions, among
other things, that such work be performed other than during normal business
hours of the Building. Upon installation, all alterations, additions,
improvements and attached furniture and fixtures erected or installed by Tenant
shall become the property of Landlord and shall not be removed by Tenant unless
Landlord requires Tenant to do so, whereupon Tenant shall remove same at its
sole cost and expense and shall repair the Leased Premises or any damages
caused by such removal as of Commencement Date, ordinary wear and tear
excepted. Provided that Tenant is not then in default under this Lease, all
unattached and movable furniture and trade fixtures located in the Leased
Premises may be removed by Tenant at the end of the Lease Term and shall be so
removed if required by Landlord, whereupon Tenant shall remove same at its sole
cost and expense and shall at its sole cost and expense restore the Leased
Premises to its original condition as of the Commencement Date, ordinary wear
and tear excepted. All such removals and restoration shall be accomplished in a
good workmanlike manner so as not to damage the Leased Premises, the Building
or the Property, and Tenant agrees to reimburse Landlord for the cost of all
damage done to the Leased Premises, the Building and the Property by the
installation and/or removal of such additions, alterations, improvements,
personal property, furniture and trade fixtures. Any items of Tenant's personal
property or unattached and removable trade fixtures which shall remain in the
Leased Premises after the expiration of the Lease Term may, at the option of
Landlord, if

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<PAGE> 12
Landlord has not otherwise enforced its landlord's lien and/or security
interest in same, be deemed to have been abandoned, and in such case, such
items may be retained by Landlord as Landlord's property without such retention
being deemed to be in satisfaction of Rentals and other amounts owed by Tenant
to Landlord or disposed of by Landlord without accountability, but at Tenant's
expense, in such manner as Landlord shall determine.

ARTICLE 12. ASSIGNMENT OR SUBLEASE

12.01 Tenant shall have no right to assign, sublet, transfer or
encumber this Lease, or any right, title or interest herein or its leasehold
estate in the Leased Premises, or permit the use or occupancy of the Leased
Premises or any portion thereof (collectively referred to herein as a "Lease
Transfer"), without the prior written consent of Landlord, which consent may be
withheld in the sole and absolute discretion of Landlord. In the event Tenant
should desire to request Landlord's consent to a Lease Transfer, Tenant shall
give Landlord written notice of such desire no later than sixty (60) days prior
to Tenant's desired effective date for Lease Transfer. The Lease Transfer
notice shall contain the name of the proposed transferee, the nature and
character of the business of the proposed transferee, a true and correct
original of the proposed instrument evidencing the Lease Transfer, a statement
of any and all sums to be paid in connection with the Lease Transfer certified
by an authorized officer of Tenant as true and correct, other particulars of
the proposed Lease Transfer, and financial statements of all parties to the
Lease Transfer for the last two (2) years. Landlord shall notify Tenant in
writing no later than thirty (30) days of the actual receipt of Tenant's Lease
Transfer Notice that Landlord elects (i) to terminate the portion of this Lease
so affected by the Lease Transfer as of the date so specified by Tenant, in
which event Tenant will be relieved of all further obligation hereunder as to
such space as of the specified date; (ii) to permit the Lease Transfer, subject,
however to any terms and conditions Landlord may stipulate, or (iii) to deny the
Lease Transfer. If Landlord should fail to notify Tenant in writing of such
election within said thirty (30) day period, Landlord shall be deemed to have
elected option (iii) above. Consent of Landlord to any Lease Transfer may not be
implied, but must be specifically expressed in writing to be effective. No Lease
Transfer shall relieve Tenant or any guarantor or surety of this Lease of any
obligation under this Lease, including but not limited to payment of Rentals and
other amounts hereunder.

12.02 Notwithstanding that the prior written consent to a Lease Transfer
having been obtained, the following shall apply:

(a) In the event of a Lease Transfer contemporaneously with
the granting of Landlord's consent, Tenant shall cause the transferee to
assume in writing and agree to perform all of the covenants, duties and
obligations of Tenant hereunder, and the transferee shall be jointly and
severally liable to Landlord therefor along with Tenant for all
obligations of Tenant hereunder; Tenant shall further cause the
transferee to grant Landlord in writing a first and prior contractual
lien and security interest in form and substance equivalent to the lien
and security interest required herein to be granted by Tenant, which
lien and security interest shall be in addition to that conferred by
statute. Landlord may enforce the provisions of this Lease against
Tenant or the transferee, or both, at Landlord's option, without making
demand upon or proceeding in any way against any other person or party
and without relieving such other person or party from liability
hereunder.

(b) A signed counterpart of all instruments relative to a
Lease Transfer (executed by all parties to such transactions with the
exception of Landlord) shall be submitted by Tenant to Landlord prior to
or contemporaneously with the request for Landlord's prior written
consent thereto (it being understood that no such instrument shall be
effective without the prior written consent of Landlord);

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<PAGE> 13
(c) No usage of the Leased Premises by any transferee shall
be permitted other than the usage herein permitted to Tenant; and

(d) In the event that the Rentals due and payable by a
sublessee, assignee or other transferee under any permitted Lease
Transfer (or a combination of the Rental payable under such sublease
plus any bonus or other consideration therefor or incidental thereto)
exceeds the Rentals payable under this Lease, then Tenant shall be bound
and obligated to pay Landlord all such excess rental and other excess
consideration within ten (10) days following receipt thereof by Tenant
or Landlord may require, at its option, that all such rentals and
consideration to be paid directly to Landlord.

12.03 If Tenant is a corporation, or if any general partner of Tenant is a
corporation, then any merger, consolidation or dissolution of such corporation
or any change in legal or beneficial ownership or power to vote a majority of
the voting stock in such corporation which was outstanding at the time of the
execution of this Lease shall constitute a Lease Transfer; provided, however,
that a Lease Transfer shall not occur in the event of a change in ownership or
power to vote a majority of the voting stock in a corporation whose voting
common stock is traded on a nationally recognized securities exchange. If
Tenant, or if any general partner of Tenant, is a general partnership, limited
partnership, joint venture or other entity, the transfer of legal or beneficial
ownership of any such entity resulting in a change in control of such entity
from that existing at the time of the execution of this Lease shall constitute
a Lease Transfer.

12.04 Consent by Landlord which shall not be unreasonably withheld or delayed
to a Lease Transfer shall not be deemed a consent to any other or subsequent
Lease Transfer or transaction. In the event a Lease Transfer is made without
the prior written consent of Landlord, or if Landlord's consent is given and
default by Tenant occurs subsequent thereto, Landlord may nevertheless collect
Rentals and other charges from the transferee and apply the net amount
collected to the Rentals and other charges payable hereunder, but no such
collection of Rentals and other charges or application thereof by Landlord
shall be deemed a waiver of these provisions or a novation or release of Tenant
or any guarantor or surety from the further performance by Tenant of Tenant's
covenants, duties and obligations hereunder. Landlord is authorized and
empowered, on behalf of Tenant, to endorse the name of Tenant upon any check,
draft of other instrument payable to Tenant evidencing payment of Rental or any
part thereof, and to receive and apply the proceeds therefrom in accordance
with the terms hereof.

ARTICLE 13. CONDEMNATION

If there shall be taken by exercise of the power of eminent domain
during the Lease Term any part of the Leased Premises, the Building or the
Property, Landlord may elect to terminate this Lease or to continue this Lease
in effect. If Landlord elects to continue this Lease, there will be no
abatement of Rentals, but the Base Rental shall be reduced in proportion to the
Net Rentable Area so taken. Landlord shall within ninety (90) days after the
date of receipt of all condemnation awards commence to repair any damage to the
Leased Premises, the Building or the Property resulting from such taking, and
shall proceed with reasonable diligence (except that Landlord shall not be
responsible for delays not within the control of Landlord) to repair the same,
except that Landlord shall not be required to rebuild, repair or replace any
part of Tenant's furniture, furnishings, fixtures or equipment or restoration
of the improvements within the Leased Premises in excess of those provided by
Landlord, at Landlord's cost and expense, pursuant to Exhibit "D" hereof.
Landlord shall not be liable for any inconvenience or annoyance to Tenant or
injury to the business of Tenant resulting in any way from such damage or the
repair thereof. All sums awarded or agreed upon between Landlord and the
condemning authority for such taking, whether as damages or as compensation,
will be the sole and exclusive property of Landlord and Tenant does hereby
irrevocably waive and release any right, title, interest or claim

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<PAGE> 14
thereto. If this Lease should be terminated under this Article 13, Rentals and
all other amounts shall be due up to the date that possession is taken by the
condemning authority, and Landlord will refund to Tenant any prepaid unaccrued
Rentals less any sum then owing by Tenant to Landlord.

ARTICLE 14. FIRE OR OTHER CASUALTY

In the event that the Leased Premises, the Building, or any part
thereof shall be damaged by fire or other casualty, Tenant shall give prompt
written notice thereof to Landlord. In case the Building shall be so damaged by
fire or other casualty that substantial alteration or reconstruction of the
Building shall, in Landlord's sole opinion, be required (whether or not the
Leased Premises shall have been damaged by such fire or other casualty) or in
the event any mortgagee under a mortgage or deed of trust covering the Building
should require that the insurance proceeds payable as a result of any fire or
other casualty be applied toward the mortgage debt, Landlord may, at its
option, terminate this Lease (and the term and estate hereby granted) by
written notice to Tenant of such termination within thirty (30) days of
Landlord's receipt of the terms of settlement from Landlord's insurance company,
but in no event to exceed one hundred twenty (120) days of such damage or
casualty. If the Building is not substantially damaged by fire or other
casualty or the mortgagee does not require such application of the insurance
proceeds or if the Building is substantially damaged or the mortgagee does not
require such application but Landlord does not elect to terminate this Lease,
Landlord shall within one hundred twenty (120) days after the date any
insurance claim is fully and unconditionally adjusted and settled, commence to
repaid and restore the Building and shall proceed with reasonable diligence to
restore the Building (except that Landlord shall not be responsible for delays
not within the control of Landlord) to substantially the same condition in
which it was immediately prior to the happening of the casualty, but only to
the extent of available insurance proceeds, except that Landlord shall not be
required to rebuild, repair or replace any part of Tenant's furniture,
furnishings, fixtures or equipment or restoration of Tenant's improvements
within the Leased Premises. In the event Landlord elects to repair and
restore the Building, the Base Rental shall be equitably abated for the
period of time and to the extent that Landlord determines in its absolute
discretion during such repair and restoration that the Leased Premises or a
portion thereof are untenantable for purposes of carrying on the business for
which the Lease Premises were leased. Landlord shall not be liable for any
inconvenience or annoyance to Tenant or injury to the business of Tenant
resulting in any way from such damage or the repair thereof. If the damages are
caused by the gross negligence or wilful misconduct of Tenant, its agents,
servants, employees, contractors, patrons, guests, licensees, or invitees,
Tenant will be liable to Landlord for any damage not covered or paid by
insurance proceeds received by Landlord. Any insurance which may be carried by
Landlord against loss or damage to the Building, the Property or to the Leased
Premises shall be payable solely to Landlord, and Tenant does hereby forever
waive any right, title, interest or claim to any such insurance. Any insurance
carried by Tenant shall be payable to Landlord and Tenant as their interests
shall appear, and it is understood that Landlord shall in no event be obligated
to carry insurance covering Tenant's property.

ARTICLE 15. DEFAULT AND REMEDIES

15.01 Default. The following shall be events of default by Tenant under
this Lease:

(a) Tenant shall fail to pay when due any Rentals or any
other sum of money payable by Tenant hereunder within five (5) days of
the due date;

(b) Tenant shall fail to comply with any non-monetary term,
provision or covenant of this Lease within thirty (30) days of written
notice;

(c) Tenant or any guarantor or surety (herein collectively
referred to as "Guarantor") of Tenant's obligations hereunder shall
become insolvent, or shall make a transfer in fraud of creditors, or
shall commit any act of bankruptcy or shall make an assignment for the
benefit of creditors, or Tenant or any Guarantor shall admit in writing
its inability to pay its debts as they become due;

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<PAGE> 15
(d) Tenant or any Guarantor shall file a petition under any
section or chapter of the United States Bankruptcy Code, as amended,
pertaining to bankruptcy, or under any similar law or statute of the
United States or any State thereof, or Tenant or any Guarantor shall be
adjudged bankrupt or insolvent in proceedings filed against Tenant or
any Guarantor thereunder; or a petition or answer proposing the
adjudication of Tenant or any Guarantor as a bankrupt or its
reorganization under any present or future federal or state bankruptcy
or similar law shall be filed in any court and such petition or answer
shall not be discharged or denied within fifteen (15) days after the
filing thereof;

(e) A receiver or trustee shall be appointed for all or
substantially all of the assets of Tenant or any Guarantor of the Leased
Premises or of any of Tenant's property located thereon in any
proceeding brought by Tenant or any Guarantor, or any such receiver or
trustee shall be appointed in any proceeding brought against Tenant or
such Guarantor shall consent to or acquiesce in such appointment;

(f) The leasehold estate hereunder shall be taken on
execution or other process of law in any action against Tenant;

(g) Tenant shall abandon or vacate any portion of the
Leased Premises unless Tenant is not in default, provides prior written
notification to Landlord and pays the equivalent of three (3) additional
months rent as additional security deposit;

(h) Tenant shall fail to continuously operate in the Leased
Premises the business and purpose for which the Leased Premises were
leased to Tenant while Tenant is in occupancy in the Leased Properties;

(i) The liquidation, termination, dissolution, forfeiture
of right to do business or death of Tenant or Guarantor.

15.02 Remedies. If an event of default shall have occurred, Landlord shall
have the right as its election, then or any time thereafter while such event of
default shall continue, to pursue any one or more of the following remedies
without any notice or demand whatsoever:

(a) Terminate this Lease in which event Tenant shall
immediately surrender the Leased Premises to Landlord and if Tenant
fails to do so, Landlord may without prejudice to any other remedy which
it may have for possession or arrearage in Rentals or other amounts
hereunder, enter upon and take possession of the Leased Premises and
expel or remove Tenant and any other person or persons who may be
occupying said Leased Premises, or any part thereof, by force, if
necessary, without being liable for prosecution or any claim of damages
therefor and Tenant hereby agrees to pay to Landlord on demand the
amount of all loss and damage which Landlord may suffer by reason of
such termination, whether through inability to relet the Leased
Premises on satisfactory terms or otherwise, specifically including,
but not limited to, all Costs of Reletting (hereinafter defined) and any
deficiency that may arise by reason of any reletting;

(b) Enter upon and take possession of the Leased Premises
without terminating this Lease and expel or remove Tenant and any other
person or persons who may be occupying said Leased Premises, or any part
thereof, by force, if necessary, including, but not limited to, changing
the door locks on the Leased Premises without the necessity of providing
written notice to Tenant on the front door of the Leased Premises or
otherwise, and without providing Tenant with the new key to the Leased
Premises, all without being liable for prosecution or any claim for
damages therefor. Landlord may, but shall be under no obligation to,
relet the Leased Premises or any part thereof for the account of Tenant,
in the name of Tenant or Landlord or otherwise, without notice to Tenant
for such term or terms and on such conditions and for such uses as
Landlord in its absolute discretion may determine and Landlord shall be
entitled to collect and receive any rents payable by reason of such
reletting. Tenant agrees to pay Landlord on demand all Costs of
Reletting and any deficiency that may arise by reason

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<PAGE> 16
of such reletting. Landlord shall not be responsible or liable for any
failure to relet the Leased Premises or any part thereof or for any
failure to collect any rent due upon any such reletting. No such
re-entry or taking of possession of the Leased Premises by Landlord
shall be construed as an election on Landlord's part to terminate this
Lease unless a written notice of such termination is executed by
Landlord and delivered to Tenant;

(c) Enter upon the Leased Premises by force if necessary,
including, but not limited to, changing the door locks on the Leased
Premises without the necessity of providing written notice to Tenant on
the front door of the Leased Premises or otherwise, and without
providing Tenant with the new key to Leased Premises, all without being
liable for prosecution or any claim for damages therefor, and do
whatever Tenant is obligated to do under the terms of this Lease and
Tenant agrees to reimburse Landlord on demand for any expense which
Landlord may incur in thus affecting compliance with Tenant's
obligations under this Lease together with interest at the lesser of (i)
the Maximum Interest Rate or (ii) eighteen percent (18%) per annum, and
Tenant further agrees that Landlord shall not be liable for damages
resulting to Tenant from such action, whether caused by the negligence
of Landlord or otherwise;

(d) Landlord may change the locks on doors permitting entry
into the Premises and deny Tenant's access thereto until all Events of
Default have been cured. Landlord has no obligation to advise Tenant of
the change of locks other than to provide written notice at Premises of
the person whom Tenant may contact, during the normal business hours for
the Premises of which Tenant has advised Landlord in writing, to acquire
additional information. Tenant waives all rights under Section 92.008 of
the Texas Property Code to which it is otherwise entitled.

15.03 For purposes of this Article, the term "Costs of Reletting" shall mean
all costs and expenses of whatsoever kind or nature incurred by Landlord in
connection with the reletting of the Leased Premises, including, but not
limited to, the reasonable cost of renovation, repairs, decoration and
alteration of the Leased Premises for a new tenant or tenants, advertisement
and marketing and brokerage fees, any increase in insurance premiums caused by
the vacancy of the Leased Premises and any other costs or expenses incurred or
suffered by Landlord.

15.04 No repossession or reentering on the Leased Premises or any part
thereof pursuant to this Article 15 or otherwise shall relieve Tenant or
Guarantor of its liabilities and obligations hereunder, all of which shall
survive such repossession or reentering. Notwithstanding any such repossession
or reentering on the Leased Premises or any part thereof by reason of the
occurrence of any default, Tenant will pay to Landlord the Rentals and other
amounts required to be paid by Tenant pursuant to this Lease.

15.05 No right or remedy herein conferred upon or reserved to Landlord is
intended to be exclusive of any other right or remedy permitted by law or in
equity, and each and every right and remedy shall be cumulative and in addition
to any other right or remedy given hereunder or now or hereafter existing by
agreement or at law or in equity or by statute. In addition to other remedies
provided in this Lease, Landlord shall be entitled, to the extent permitted by
applicable law, to injunctive relief in case of the violation, or attempted or
threatened violation, of any of the covenants, agreements, conditions or
provisions of this Lease, or to a decree compelling performance of any of the
other covenants, agreements, conditions, or provisions of this Lease, or to any
other remedy allowed to Landlord at law or in equity. Further, nothing in this
Article shall be construed as in any way denying Landlord the right (and
Landlord specifically reserves and Tenant agrees that Landlord shall have the
right) in the event of abandonment of said Leased Premises upon the occurrence
of any other event of default by Tenant, at Landlord's option, to declare all
Rentals and other sums due or to become due under the Lease immediately due and
payable in full without notice of any kind, including notice of intention to
accelerate or demand, all of which are waived by Tenant, and to immediately sue
for the entire breach of this Lease and any and all damages which Landlord
suffers thereby.

<PAGE> 17
15.06 In no event shall Tenant have the right to terminate or rescind this
Lease as a result of Landlord's default as to any covenant or agreement
contained in this Lease or as a result of the breach of any promise or
inducement hereof, whether in this Lease or elsewhere unless Tenant delivers
written notice and Landlord fails to reasonably commence to cure within thirty
(30) days. Tenant hereby waives such remedies of termination and rescission and
hereby agrees that Tenant's sole remedy for default hereunder and for breach of
any promise or inducement shall be limited to a suit for direct and proximate
damages and Landlord's liability therefor shall be limited as described in
Article 26 hereof. In addition, Tenant hereby covenants that, prior to the
exercise of such remedy, it shall give Landlord and all mortgagees whom Tenant
has been notified hold mortgages or deed of trust liens on the Property,
Building or Leased Premises, notice and reasonable time to cure any alleged
default by Landlord.

15.07 Notwithstanding anything to the contrary herein contained, this Lease
shall supersede Section 92.008 of the Texas Property Code such that Landlord's
rights and remedies under this Lease shall not be diminished whatsoever. Tenant
waives and relinquishes any of said rights granted under the Texas Property
Code to the extent that same are waiveable as permitted by law.

ARTICLE 16. NO WAIVER

Failure of Landlord to declare any default immediately upon its
occurrence, or delay in taking any action in connection with an event of
default, shall not constitute a waiver of such default, nor shall it constitute
an estoppel against Landlord, but Landlord shall have the right to declare a
default at any time and take such action as is lawful or authorized under this
Lease. Failure by Landlord to enforce any of its rights and remedies shall not
constitute a waiver by Landlord or an estoppel against Landlord of its right to
declare a default with respect to any subsequent default. Receipt by Landlord
of Tenant's keys to the Leased Premises shall not constitute an acceptance of
surrender of the Leased Premises, which acceptance may only be by written
agreement of Landlord delivered to Tenant.

ARTICLE 17. BANKRUPTCY OF TENANT

In the event Tenant has become the subject of any insolvency
proceedings, including but not limited to an assignment for the benefit of
creditors pursuant to Texas Business and Commerce Code Section 23.01, the
provisions of Sections 361, 363 and 365 of the United States Bankruptcy Code,
11 U.S.C. Section 101 et seq. (such Bankruptcy Code as amended from time to
time being herein referred to as the "Bankruptcy Code"), and any successor
statute, as modified herein, shall govern the mutual rights and obligations of
Landlord and Tenant. Landlord shall be entitled to a preferred distribution
under any such proceedings, consistent with the requirements of Bankruptcy Code
Sections 363(e), 365(d)(3), and 507(b); provided, however, that the limitations
of Bankruptcy Code Section 502(b)(6) shall expressly not apply to any such
proceedings. Unless and until Landlord receives all amounts to which it is
entitled hereunder, the discharge provisions of Texas Business and Commerce
Code Section 23.10, Bankruptcy Code Sections 524, 1141, 1228 or 1328, or any
similar discharge provisions in any other insolvency proceeding, shall not
become operative with respect to the claim of Landlord as against Tenant. Tenant
expressly covenants and agrees to provide Landlord with ten (10) days prior
written notice of any assignment for the benefit of creditors or any other
insolvency proceeding, including but not limited to the commencement of a
bankruptcy case, and any costs or damages incurred by Landlord as a result of
the failure of Tenant to provide such advance notification shall survive and be
excepted from the discharge provisions of Texas Business and Commerce
Code Section 23.10, Bankruptcy Code Sections 524, 1141(d), 1228 or 1328, and any
other comparable provision governing any other insolvency proceeding.

In addition to, and in no way limiting the remedies set forth in
Article 15 hereof, Landlord and Tenant agree that if Tenant ever becomes the
subject of a voluntary or involuntary bankruptcy, reorganization, composition
or other similar type proceeding under the Bankruptcy Code, as now enacted or
hereinafter amended, then:

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<PAGE> 18

(a) "Adequate protection" of Landlord's interest in the
Leased Premises pursuant to the provisions of Sections 361 and 363 of
the Bankruptcy Code, prior to assumption and/or assignment of the Lease
by Tenant shall include, but not be limited to all (or any part) of the
following:

(i) The continued payment by Tenant of the Rentals
and all other sums due and owing hereunder and the performance
of all other covenants and obligations hereunder by Tenant
pursuant to Bankruptcy Code Section 365(d)(3) from the date of
the petition until the earlier of (A) confirmation of a plan of
reorganization or (B) expiration of fifteen (15) days from the
entry of a final order authorizing the assumption or rejection
of this Lease;

(ii) The hiring of security guards and the taking of
all other steps which Landlord in its sole discretion determines
to be reasonable and necessary to protect the Leased Premises;
such obligation of Tenant to continue until such time as
Landlord assumes actual possession and control of the Leased
Premises;

(iii) The furnishing of an additional security
deposit by Tenant in the amount of three (3) times the
then-current monthly Base Rental and Additional Rental payable
hereunder, such deposit to be furnished within thirty (30) days
of the commencement of the bankruptcy case. Funds thus deposited
shall in no event be considered property of the estate of Tenant
and shall be payable to Landlord pursuant to the provisions of
Bankruptcy Code Section 541(d);

(iv) The filing by Tenant of a motion to assume or
reject this Lease within thirty (30) days of the commencement of
the case, notwithstanding the maximum time period set forth in
Bankruptcy Code Section 365(d)(4). In this regard, Tenant
specifically covenants and agrees that it will not seek an
extension of the time period herein provided, and further that
it will not seek an extension of the time period established by
Bankruptcy Code Section 365(d)(4). Tenant further covenants and
agrees that any effort to seek such an extension without the
express prior written consent of Landlord shall constitute a
failure of adequate protection, and Tenant shall immediately
cease all operations in and use of the Leased Premises pursuant
to Bankruptcy Code Section 363(e);

(v) Tenant specifically covenants and agrees that,
should it fail in any respect to comply with any of the
provisions hereof, Landlord shall be entitled, and Tenant shall
not object, to an administrative priority claim pursuant to
Bankruptcy Code Section 507(b) in the amount necessary, in the
Landlord's sole discretion, to compensate for Tenant's default
hereunder.

(b) "Adequate assurance of future performance" by Tenant
and/or any assignee of Tenant pursuant to Bankruptcy Code Section 365
(or its successor section) will include but not be limited to payment of
an additional security deposit in the amount of three (3) times the
then-current monthly Base Rental and Additional Rental payable
hereunder.

(c) Any person or entity to which Tenant or its successor
in interest seeks to assign this Lease pursuant to the provisions of the
Bankruptcy Code, shall be deemed without further act or deed to have
assumed all of the obligations of Tenant arising under this Lease on and
after the effective date of such assignment. Any such assignee shall,
upon demand by Landlord, execute and deliver to Landlord an instrument
confirming such assumption of liability.

(d) Failure of Tenant or any assignee to pay all amounts
payable by Tenant to Landlord hereunder, whether denominated Rentals or
otherwise, shall be deemed a violation of the provisions of Bankruptcy
Code Sections 361, 363(e) and 365(d)(3), and Landlord shall be entitled
to an administrative priority claim pursuant to Section 507(b) in such
amount, together with all costs incurred by Landlord in connection with
the

<PAGE> 19
enforcement, assumption or rejection hereof, including but not limited
to attorneys fees incurred by Landlord.

(e) Notwithstanding anything in this Lease to the contrary,
all amounts payable by Tenant to or on behalf of the Landlord under this
Lease, whether or not expressly denominated as Rentals, including but
not limited to attorneys fees incurred by Landlord in connection with
the enforcement hereof, shall constitute "rent" for the purposes of
Section 502(b)(6) of the Bankruptcy Code.

(f) If this Lease is assigned to any person or entity
pursuant to the provisions of the Bankruptcy Code, any and all monies or
other considerations payable or otherwise to be delivered to Landlord,
shall be and remain the exclusive property of Landlord and shall not
constitute property of Tenant or of the estate of Tenant within the
meaning of the Bankruptcy Code. Any and all monies or other
considerations constituting Landlord's property under the preceding
sentence not paid or delivered to Landlord shall be held in trust by
Tenant for the benefit of Landlord and shall be promptly paid to or
turned over to Landlord pursuant to the provisions of Bankruptcy Code
Section 541(d).

(g) If Tenant assumes this Lease and proposes to assign the
same pursuant to the provisions of the Bankruptcy Code to any person or
entity who shall have made a bona fide offer to accept an assignment of
this Lease on terms acceptable to the Tenant, then notice of such
proposed offer of assignment, setting forth (i) the name and address of
such person or entity; (ii) all of the terms and conditions of such
offer, and (iii) the adequate assurance to be provided Landlord to
assure each person's or entity's future performance under the Lease,
including, without limitation, the assurance referred to in Section
365(b)(3) of the Bankruptcy Code, shall be given to Landlord by Tenant
no later than twenty (20) days after receipt by Tenant, but in any event
no later than ten (10) days prior to the date that Tenant shall make
application to a court of competent jurisdiction for authority and
approval to enter into such assumption and assignment, and Landlord
shall thereupon have the prior right and option, to be exercised by
notice to Tenant given at any time prior to the effective date of such
proposed assignment, to accept an assignment of this Lease upon the same
terms and conditions and for the same consideration, if any, as the bona
fide offer made by such persons or entity, less any brokerage commission
which may be payable out of the consideration to be paid by such person
for the assignment of this Lease.

(h) To the extent permitted by law, Landlord and Tenant
agree that this Lease is a contract under which applicable law excuses
Landlord from accepting performance from (or rendering performance to)
any person or entity other than Tenant within the meaning of Sections
365(c) and 365(e)(2) of the Bankruptcy Code.

ARTICLE 18. HOLDING OVER

In the event of holding over by Tenant after the termination of this
Lease, whether the termination occurs by lapse of time or otherwise, without the
written consent of Landlord delivered to Tenant, Tenant shall pay to Landlord as
Rental for each day of such holding over 150% the amount of the per day Rentals
which were accruing immediately prior to termination of the Lease and which
shall be due and payable on the earlier of demand by Landlord or in advance on
the first day of each calendar month of holding over by Tenant. During such time
as Tenant shall continue to hold the Leased Premises after the termination
hereof, such holding over shall be as a tenant at sufferance, subject to all of
the terms, provisions, covenants and agreements on the part of Tenant hereunder.
No payments of money by Tenant to Landlord after the termination of this Lease
or after the giving of any notice of termination by Landlord to Tenant shall
reinstate, continue or extend the term of this Lease or affect any such notice
given by Landlord to Tenant, and no extension of this Lease shall be valid
unless and until the same shall be reduced to writing and signed by both
Landlord and Tenant. Tenant shall, in addition to payment of one and one-half
the Rentals as above provided, indemnify Landlord

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against all claims for damages by any party to whom Landlord may have leased
all or any part of the Leased Premises upon the termination of this Lease and
shall also be liable to Landlord for any damages, including consequential
damages, suffered by Landlord as a result of Tenant's holding over.

ARTICLE 19. MECHANIC'S AND MATERIALMEN'S LIENS

Tenant covenants that it will not cause, affirmatively or otherwise,
any mechanic's or materialmen's lien, mortgages, security interests or
encumbrances to attach to or obtain against the Property, the Building or the
Leased Premises. Should such liens, mortgages, security interests or
encumbrances attach contrary to this provision or any other provision of this
Lease, then the existence thereof shall constitute an event of default
hereunder. If failure to pay for any goods or services which can give rise to
any of the aforementioned liens, security interests or other encumbrances shall
continue for ten (10) days after written notice thereof from Landlord to Tenant
(unless such claim is bonded in a manner provided by law or payment of such
claim is otherwise secured in a manner satisfactory to Landlord), Landlord
shall have the right and privilege at Landlord's option, but without incurring
any obligation to do so, of paying the same or any portion thereof without
inquiry as to the validity thereof and any amount so paid, including expenses
and interest, shall be paid to Landlord by Tenant immediately upon demand.
Tenant agrees to indemnify Landlord and hold Landlord harmless as to claims for
liens, mortgages, security interests and/or encumbrances and as to any action
taken by Landlord to prevent such claims from attaching to the Property, the
Building or the Leased Premises, including without limitation, reimbursement
for attorney's fees which Landlord may incur in connection therewith.

ARTICLE 20. WAIVER OF SUBROGATION RIGHTS

Anything in this Lease to the contrary notwithstanding, Landlord and
Tenant each hereby waive any and all rights to recovery, claim, action or cause
of action, against the other, its agents, officers or employees for any loss or
damage that may occur to the Leased Premises, or any improvements thereto, or
the Building or Property of which the Leased Premises are a part, or any
improvements thereto, or any personal property, including but not limited to
furniture, fixtures and equipment, of such party therein, by reason of fire,
the elements, or any other cause which loss or damage is covered by valid and
collectible fire and extended coverage insurance policies, to the extent that
such loss is recoverable under said insurance policies, and covenants that no
insurer shall hold any right of subrogation against such other party.

ARTICLE 21. INSURANCE

21.1 Landlord's Insurance. Landlord shall, at all times during the Lease
Term, maintain a policy or policies of insurance insuring the Building shell
against loss or damage by fire, explosion or other hazards and contingencies in
such amount as Landlord's mortgagee(s) may require; provided that Landlord
shall not be obligated to insure any furniture, equipment, machinery, goods or
supplies which Tenant may bring or obtain upon the Leased Premises, the
Building, the Property or any improvements constructed thereon by Tenant.

21.2 Tenant's Insurance. Tenant shall maintain, at its sole cost and
expense, fire and extended coverage insurance in an amount not less than
the full replacement cost of all of its personal property, including removable
trade fixtures, located in the Leased Premises and on all improvements
constructed thereon. Tenant shall also maintain, at its sole cost and expense,
a policy or policies of comprehensive public liability insurance and
contractual liability insurance, issued by insurers duly licensed to do
business in the State of Texas insuring Tenant and Landlord against any and all
liability for injury to or death of a person or persons, occasioned by or
arising out of or in connection with the use or occupancy of the Leased
Premises, the limits of such policy or policies to be in an amount of not less
than $1,000,000.00 combined single limit with respect to any one (1) occurrence
and $100,000.00 per person per occurrence. Such insurance shall specifically
make reference to the indemnity provision of Article 25 of this Lease and shall
name Landlord as an additional named insured. Tenant shall furnish evidence
satisfactory to Landlord of the maintenance of such insurance, and Tenant shall
obtain a written obligation on

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the part of each insurer to notify Landlord at least thirty (30) days prior to
any modification or cancellation of such insurance. In the event Tenant shall
not have delivered to Landlord a policy or certificate evidencing such
insurance at least thirty (30) days prior to the expiration date of each
expiring policy, Landlord may obtain such insurance as Landlord may require to
protect Landlord's interest and the obtaining of said insurance shall not be
deemed to be a waiver of Tenant's default hereunder. The cost of such policies
obtained by Landlord, if any, plus an administrative fee in the amount of
fifteen percent (15%) of the cost of such policies shall be paid by Tenant to
Landlord upon demand.

ARTICLE 22. TAXES ON TENANT'S PROPERTY.

Tenant shall be liable for all taxes levied or assessed against the
personal property, furniture, improvements, additions or fixtures placed or
caused to be placed by Tenant in the Leased Premises, the Building or the
Property. If any such taxes for which Tenant is liable are levied or assessed
against Landlord or Landlord's property and if Landlord elects to pay the same
or if the assessed value of Landlord's property is increased by inclusion of
personal property, furniture or fixtures placed or caused to be placed by
Tenant in the Leased Premises, the Building or the Property, and Landlord
elects to pay the taxes based on such increase, Tenant shall pay to Landlord
upon demand that part of such taxes for which Tenant is liable hereunder.

ARTICLE 23. SUBORDINATION AND ATTORNMENT

Tenant hereby irrevocably and unconditionally subordinates this Lease
and all rights of Tenant hereunder to any ground lease, lien, mortgage or deed
of trust which may now or hereafter encumber the Property, the Leased Premises
or the Building and to all renewals, modifications, consolidations,
replacements, extensions and increases thereof. This clause shall be
self-operative and no further instrument of subordination shall be required. In
confirmation of such subordination, however, Tenant agrees to, at Landlord's
request, promptly execute such certificates or instruments that Landlord may
request to further evidence and effect the subordination of this Lease to each
such mortgage, ground lease, deed of trust, lien or instrument or in
confirmation of Tenant's attornment in the event of foreclosure of a mortgage or
deed of trust lien, a deed in lieu of such foreclosure, or other transfer of the
Property or any part thereof pursuant to a mortgage or deed of trust, or the
termination or assignment of a ground lease as herein provided. Tenant hereby
constitutes and appoints Landlord the Tenant's agent and attorney-in-fact to
execute any such certificates or instruments for and on behalf of Tenant, it
being acknowledged and agreed by Landlord and Tenant that such agency is coupled
with an interest in Landlord and is accordingly irrevocable. In the event of the
enforcement by the trustee or the beneficiary under any such mortgage or deed of
trust of the remedies provided for by law or by such mortgage or deed of trust,
Tenant will, upon request of any person or party succeeding to the interest of
Landlord as a result of such enforcement, automatically become the tenant of
such successor-in-interest on the same terms and conditions as contained in this
Lease; provided, however, that such successor-in-interest shall not (i) be bound
by any payment of Rentals for more than one (1) month in advance; (ii) be bound
by any amendment or modification of the Lease made without the written consent
of such trustee or such beneficiary or such successor-in-interest; (iii) be
liable for any previous act or omission by Landlord under the Lease; (iv) be
subject to any right or remedy which shall have theretofore accrued to Tenant
against Landlord; and (v) have any obligation with respect to any security
deposited under the Lease unless such security has been physically delivered to
the party succeeding to the interest of Landlord.

ARTICLE 24. ESTOPPEL CERTIFICATES AND THREE-PARTY AGREEMENTS

Tenant agrees that from time to time, upon written request from
Landlord, Tenant will execute either an estoppel certificate addressed to
Landlord's mortgagee or a three-party agreement among Landlord, Tenant and said
mortgagee certifying the following, if true, or if not true, specifying the
specific facts which make the statement untrue, and agreeing to such notice
provisions and other matters as such mortgagee may require in connection with
Landlord's financing:

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(a) That Tenant has accepted possession of the Leased
Premises pursuant to the terms of this Lease;

(b) That Landlord has completed all of the improvements to
the Leased Premises required to be made by Landlord pursuant to the
terms of this Lease;

(c) That Landlord has fulfilled all agreements which induced
Tenant to enter into this Lease, including, without limitation, the Work
Letter Agreement;

(d) That this Lease is unmodified and in full force and
effect (or if there have been modifications, that this Lease as modified
is in full force and effect and stating the modifications) and that
there are no offsets or credits against Rentals nor have any Rentals
been prepaid for more than one (1) month;

(e) The date of commencement and expiration of this Lease;

(f) That Landlord is not in default under any term or
provision of this Lease or if in default, the nature thereof;

(g) That Tenant will not pay base Rental, Additional Rental
or other amounts hereunder for more than one (1) month in advance and
that this Lease will not be amended without the prior written notice of
such mortgagee and that the same will not be terminated without notice
being furnished to Landlord also being furnished to Landlord's mortgagee
with reasonable opportunity to cure same not to be less than sixth (60)
days;

(h) That Tenant is not aware of any prior assignment or
pledge by Landlord of this Lease or the Rentals hereunder;

(i) The date to which Rentals have been paid.

Any such statement may be relied upon by any prospective transferee or
encumbrancer of all or any portion of the Leased Premises, the Building or the
Property, or any assignee of any such persons. If Tenant fails to deliver such
statement within five (5) days of any request therefor, Tenant hereby appoints
Landlord the Tenant's agent and attorney-in-fact to execute any such statement
for and on behalf of Tenant, it being acknowledged and agreed by Landlord and
Tenant that such agency is coupled with an interest in Landlord and is
accordingly irrevocable. Landlord, with written request by Tenant, agrees to
make a reasonable effort to provide Tenant with an Estoppel Certificate.

ARTICLE 25. INDEMNITY

Neither Landlord nor any of its officers, directors, employees or
agents shall be liable for any damage to person or property caused by any
actual or alleged act, omission or negligence of, or breach of this Lease by,
Tenant, its agents, servants, employees, licensees or invitees, and Tenant
agrees to indemnify and hold Landlord and its officers, directors, employees
and agents harmless from all liability, claims, fines, suits, demands, losses
and actions (including attorneys' fees) for any such damage. Neither Landlord
nor any of its officers, directors, employees or agents shall be liable or
responsible for any loss or damages to any property or death or injury to any
person occasioned by theft, fire, criminal conduct of third parties, injunction,
court order, acts of other tenants of the Building, force majeure causes (as
defined in Article 34.15), or for any injury or damage or inconvenience which
may arise due to the Building, the Property or any part or appurtenance thereof
becoming out of repair or arising from the leaking of gas, water, sewer, steam
pipes or electricity or through repair or alternation of any part of the
Building, regardless of whether such injuries, death or damages are caused in
whole or in part from the negligence of Landlord. Furthermore, such indemnity
shall apply where the claims, losses, damages, causes of action, suits or
liability arise in whole or in part from the negligence of Landlord.

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ARTICLE 26. NO PERSONAL LIABILITY

Notwithstanding anything contained in this Lease to the contrary,
Tenant agrees that Tenant shall look solely to the estate of Landlord in the
Building for the collection of any judgment (or other judicial process)
requiring the payment of money by Landlord in the event of any default or
breach by Landlord of the terms and provisions of this Lease to be observed or
performed by Landlord, subject, however, to the rights of any holder of any
mortgage or other lien and the rights of any tenant pursuant to any ground
lease covering the Building or the Property. Neither Landlord, nor any party
comprising Landlord, shall be personally liable for the breach of any covenant
of this Lease. No other assets of Landlord shall be subject to levy, execution
or other judicial process for the satisfaction of Tenant's claim and Landlord
shall no be liable for any such default or breach except to the extent of
Landlord's estate in the Building.

ARTICLE 27. RIGHTS RESERVED TO LANDLORD

27.01 Landlord Access. Landlord reserves the right to use all of the
Building, including, without limitation, the Leased Premises, the exterior
Building walls, core corridor walls and doors and any core corridor entrance,
any terraces or roofs adjacent to the Leased Premises, and any space in or
adjacent to the Leased Premises used for shafts, stack, pipes, conduits, fan
rooms, ducts, electric or other utilities, sinks or other Building facilities,
as well as access thereto through the Leased Premises for the purposes of
operation, maintenance, decoration and repair. Landlord further reserves the
right, and Tenant shall permit Landlord, to install, erect, use and maintain
pipes, ducts and conduits in and through the Leased Premises. Tenant covenants
and agrees to permit Landlord or its agents or representatives to enter into
and upon any part of the Leased Premises at all reasonable times, and during
emergencies at all times, for the aforementioned purposes, to inspect the
Leased Premises, clean or make repairs, alterations or additions thereto, as
Landlord may deem necessary or desirable, to show the Leased Premises to
prospective purchasers, tenants or mortgage holders, and for any other purpose
deemed reasonable by Landlord, and Tenant shall not be entitled to any
abatement or reduction of rent, nor shall it have any right of action in tort
or contract against Landlord, by reason thereof. Landlord agrees to make a
reasonable effort to not interfere with Tenant's normal business operations.

27.02 Further Rights. Landlord shall have the following rights, exercisable
without prior written notice and without liability whatsoever to Tenant for
damage or injury to any person, property or business (all such claims being
hereby forever released or discharged) and without effecting an eviction or
disturbance of Tenant's use or possession or giving rise to any claim against
Landlord:

(a) To establish or change the name, designation or street
address of the Building;

(b) To install and maintain signs in or on any part of the
Property or Building outside of the Leased Premises;

(d) To decorate, remodel, repair, alter or otherwise prepare
the Leased Premises for reoccupancy at any time after Tenant vacates or
abandons the Leased Premises; provided that reasonable access to the
Leased Premises shall be maintained during normal business hours;

(e) To make inspections, repairs, decorations, alterations,
additions, or improvements in or to the Leased Premises, the common
areas, the Building or the Property, including installations, repairs,
replacements, additions or alternations within the Leased Premises or to
wiring, conduit, pipes, ducts or other mechanical, electrical or other
facilities or systems serving the Leased Premises or the Building;

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(f) To make repairs, alterations or additions to the
Building which may change the common areas;

(g) To convert Common Areas into leasable areas or change
the use thereof other than conversions which would impact Tenant's
access, visibility or parking, unless Tenant consents to such
conversion;

(h) To perform any acts related to the safety, protection,
preservation, reletting, sale or improvement of the Leased Premises, the
Building or the Property;

(i) For any of the foregoing purposes may enter the Leased
Premises with such material as Landlord may deem necessary;

(j) Erect scaffolding and other structures in or adjacent to
the Leased Premises and close or temporarily suspend operations of
entrances, doors, corridors, elevators, escalators or other facilities;
and Tenant waives any claims for damages, including the loss of business
resulting therefrom;

(k) To approve the weight, size of safes, computers and
other heavy articles in or about the Leased Premises, and to require all
such items or other furniture and equipment to be moved in and out of
the Leased Premises and the Building only at such times as will not deny
or obstruct the rights, or use of, or access to, any part of the
Building or the Property of other tenants and their employees and
customers, or threaten their safety, in all events at Tenant's sole risk
and responsibility;

(l) To do or permit to be done any work on or about the
exterior of the Building or any adjacent or nearby building, land,
street or alley;

(m) To grant any person or entity the exclusive right to
conduct any business or render any service in the Building or on the
Property.

ARTICLE 28. RELOCATION

28.01

28.02 At any time after Tenant's occupancy of the Leased Premises, Landlord
reserves the right to relocate Tenant (only if needed to accommodate a tenant
who will be leasing the entire Building located at 2445 Gateway Drive) in
substitute premises of equivalent square footage and approximate configuration
within the Buildings upon one hundred twenty (120) days written notice to the
Tenant. If this right is exercised, Landlord shall, at its own expense,
finish-out the new location in a manner comparable to that undertaken in the
Leased Premises, utilizing equivalent quantities and quality of materials, and
move Tenant's office furnishings to the new location. If the then current Base
Rental at the new premises is less than at the original Leased Premises,
Tenant's Base Rental shall be reduced accordingly, but if the then current Base
Rental rate at the new premises is higher than at the original Leased Premises,
Tenant's Base Rental shall not be increased for the remainder of the Lease
Term. Tenant shall have thirty (30) days from the date of the Relocation Notice
to provide written notice of its intention to terminate this lease within ninety
(90) days if Tenant does not choose to be relocated. Tenant and Landlord shall
be reasonable in their negotiations regarding relocation.

28.03 A relocation of Tenant within the Building pursuant to either Article
28.01 or Article 28.02 hereof shall not terminate or otherwise affect or modify
this Lease except that from and after the date of such relocation "Leased
Premises" shall refer to the relocation premises into which Tenant has moved,
rather than the original Leased Premises as herein defined.

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ARTICLE 29. TRANSFER OF LANDLORD'S RIGHTS

Landlord shall have the right to sell, convey, transfer or assign, in
whole or in part, all and every feature of Landlord's rights and obligations
hereunder and in the Building and the Property referred to herein. Upon the
occurrence of such sale, conveyance, transfer or assignment, Landlord shall be
immediately and unconditionally released from all obligations hereunder. Upon
any such sale or conveyance, the purchaser or transferee of the Building or the
Property shall be substituted as to all rights and obligations of Landlord.

ARTICLE 30. SIGNAGE AND GRAPHICS

Tenant shall not paint, display, inscribe, place or affix any sign,
picture, advertisement, notice, lettering, or direction on any part of the
outside of the Building or the Property visible from the outside of the
Building or the Property or in any corridor, hallway, entrance or other public
part of the Buildings or the Property; provided that Landlord shall prescribe a
uniform pattern for identification signs for tenants to be placed on the
Property or the Buildings, which signs shall be subject to the approval of the
Architectural Control Committee for Las Colinas. Landlord shall, at Tenant's
sole cost and expense, be responsible for the construction of Tenant's signage
as set forth in this Article 30, and Tenant agrees to promptly reimburse
Landlord for any and all expenses incurred by Landlord in the construction of
Tenant's signage. Failure by Tenant to promptly reimburse Landlord for such
expenses shall be considered an event of default hereunder. Upon vacating the
Leased Premises Tenant shall, at Tenant's sole cost and expense, be responsible
for removing such sign and repairing any damages to the facsia.

ARTICLE 31. LIEN FOR RENT

ARTICLE 32. RULES AND REGULATIONS

Tenant will comply fully with all requirements of the Rules and
Regulations of the Building and related facilities which are contained in
attached "Exhibit E". Landlord shall at all times have the right to change
such Rules and Regulations or to promulgate other Rules and Regulations in such
manner as may be deemed advisable for the safety, care or cleanliness of the
Property, Building and related facilities, and for the preservation of good
order therein. All Rules and Regulations, changes and amendments will be
forwarded to Tenant in writing and shall be carried out and observed by
Tenant. Tenant shall further be responsible for the compliance with such Rules
and Regulations be the agents, employees and invitees of Tenant. Nothing
contained in this Lease shall be construed to impose upon Landlord any duty or
obligation to enforce the Rules and Regulations against any other tenant or any
employees or agents of any other tenant,

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and Landlord shall not be liable to Tenant for violation of the Rules and
Regulations by any other tenant or such other tenant's employees, agents,
invitees or licensees.

ARTICLE 33. NOTICES

Each provision of this Lease or of any applicable governmental laws,
ordinances, regulations and other requirements with reference to the sending,
receiving mailing or delivery of any notice, or the making of any payment by
Tenant to Landlord or Landlord to Tenant, shall be deemed to be complied with
when and if the following steps are taken:

(a) All rent and other payments required to be made by
Tenant to Landlord hereunder shall be payable to Landlord at the address
set forth in Article 1 or at such other address as Landlord may specify
from time to time by written notice delivered in accordance herewith.
Tenant's obligation to pay Rentals and any other amounts to Landlord
under the terms of this Lease shall not be deemed satisfied until such
Rentals and other amounts have been actually received and collected by
Landlord.

(b) Any notice or document required or permitted to be
delivered hereunder shall be deemed to be delivered whether actually
received or not (except in the event actual receipt of Landlord is
specifically required in this Lease) when deposited in the United States
mail, postage prepaid, certified or registered mail, addressed to the
parties hereto at the respective addresses set out in Article 1 or at
such other address as they have theretofore specified by written notice
delivered in accordance herewith.

ARTICLE 34. GENERAL PROVISIONS

34.1 Headings. The table of contents and article and section headings
contained in this Lease are for convenience only and shall in no way enlarge or
limit the scope or meaning of the various and several articles and sections
hereof. The words "herein", "hereof", "hereunder" and other similar compounds
of the word "here" when used in this Lease shall refer to the entire Lease and
not to any particular article or section.

34.2 Drafting. Tenant represents and warrants that it has been represented
by or has had the opportunity to be represented by legal counsel in the
negotiation, review and drafting of this Lease, and because the terms of this
Lease were duly negotiated at arms length and each party is of equivalent
sophistication in lease matters, Tenant agrees that the general rule of
construction of written instruments that doubts as to the meaning of language
in this Lease are to be resolved against Landlord and in favor of Tenant as a
result of Landlord having drafted or having caused to be drafted this Lease is
hereby expressly negated and shall not be applicable.

34.3 Gender and Number. Words of any gender used in this Lease shall be held
and construed to include any other gender, and words in the singular number
shall be held to include the plural, unless the context otherwise requires.

34.4 Recordation. Tenant agrees not to record this Leases or any memorandum
hereof. In the event that Tenant shall record this Lease or any memorandum
thereof during the term of this Lease, same shall constitute an event of
default hereunder. Tenant shall execute a release of such memorandum upon
demand by Landlord, and in the event of Tenant's failure to execute such
release, Landlord may execute same, Tenant hereby appointing Landlord its agent
and attorney-in-fact to execute such release, which shall be coupled with an
interest and thereby irrevocable.

34.5 Brokerage Fees and Commissions. Landlord and Tenant acknowledge that
Landlord has agreed to pay a commission relative to this Lease to the real
estate broker(s), if any, listed in Article 1 hereof, pursuant to a separate
commission agreement between Landlord and said broker(s). Except for the
commissions described in the preceding sentence, both Landlord and Tenant
warrant and represent that the other party will have no liability for any real
estate brokers', agent's or finders' fees or commissions arising from the
execution of this Lease and Landlord and Tenant hereby agree to indemnify and
hold the other party harmless from any such claims or

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liability arising or resulting from anyone claiming such a commission by,
through or under the indemnifying party.

34.6 Attorney's Fees. In the event Tenant defaults in the performance of any
of the terms, covenants, agreements or conditions contained in this Lease and
Landlord consults with an attorney regarding any default or threatened default
of Tenant, or places the enforcement of this Lease, or any part hereof, or the
collection of any Rentals due, or to become due hereunder or recovery of the
possession of the Leased Premises in the hands of an attorney, or files suit
upon the same, Tenant agrees to pay the reasonable attorneys' fees, expenses and
court costs incurred by Landlord.

34.7 Severability Clause. If any clause or provision of this Lease is
illegal, invalid or unenforceable under present or future laws effective during
the Lease Term, then and in that event, it is the intention of the parties
hereto that the remainder of this Lease shall not be affected thereby, and it is
also the intention of the parties to this Lease that in lieu of each clause or
provision that is illegal, invalid or unenforceable, there be added as a part
of this Lease a clause or provision similar in terms to such illegal, invalid
or unenforceable clause or provision as may be possible and be legal, valid and
enforceable.

34.8 Binding Effect. The terms, provisions, covenants and conditions
contained in this Lease shall apply to, inure to the benefit of, and be binding
upon the parties hereto, and upon their respective heirs,
successors-in-interest, legal representatives, and permitted assigns.

34.9 Joint and Several Liability. If more than one person or entity is
defined as Tenant in this Lease, all of the duties, obligations, promises,
covenants and agreements contained in this Lease to be paid and performed by
Tenant shall be the joint and several obligation of all persons or entities
defined as Tenant. Each person or entity defined as Tenant agrees that Landlord
in Landlord's sole discretion may (i) institute or bring suit against such
persons or entities, jointly and severally, or against any one or more of such
persons or entities, (ii) compromise or settle with any one or more of such
persons or entities for such consideration as Landlord may deem proper, and
(iii) release one or more of such persons or entities from liability hereunder,
and that no such action by Landlord shall impair or affect Landlord's rights to
collect costs, expenses, losses or damages incurred or suffered by Landlord
from the other persons or entities defined as Tenant, or any of such persons or
entities not so sued, compromised, settled with or released. Further, the
obligations hereunder imposed upon Tenant shall be the joint and several
obligations of Tenant and any and all Guarantors of Tenant, and Landlord need
not first proceed against Tenant before proceeding against any Guarantor nor
shall any Guarantor be released from its guarantee of this Lease for any reason
whatsoever, including, without limitation, any amendments hereto.

34.10 Exhibits. All exhibits, attachments, annexed or referenced instruments
and addenda referred to herein shall be considered a part hereof for all
purposes with the same force and effect as if copied verbatim herein.

34.11 Entire Agreement. This Lease Agreement including the following
Exhibits:

Exhibit "A" - Base Rental
Exhibit "B" - The Property
Exhibit "B-1" - Site Plan
Exhibit "C" - Floor Plan of the Leased Premises
Exhibit "D" - Work Letter Agreement
Exhibit "E" - Rules and Regulations
Exhibit "F" - Acceptance of Leased Premises Memorandum
Exhibit "G" - Parking
Exhibit "G-1" - Parking Site Plan

constitute the entire agreement between the parties hereto with respect to the
subject matter of this Lease. In addition to the above-referenced exhibits, any
riders attached hereto are incorporated herein by this reference for all
purposes. Tenant expressly acknowledges and agrees that

26
<PAGE> 28
Landlord has not made and is not making, and Tenant, in executing and
delivering this lease, is not relying upon, any warranties, representations,
promises or statements, except to the extent that the same are expressly set
forth in this Lease. All understandings and agreements heretofore had between
the parties are merged in this Lease which alone fully and completely expresses
the agreement of the parties, neither party relying upon any statement or
representation not embodied in this Lease.

34.12 Counterparts. This Lease may be executed in several counterparts, each
of which shall be deemed an original, and all of which shall constitute but one
and the same instrument.

34.13 Building Name. Landlord shall have the exclusive right at all times
during the term of this Lease to change, modify, add to or otherwise alter the
name of the Building, and Landlord shall not be liable for claims or damages of
any kind which may be attributed thereto or which may result therefrom.

34.14 Governing Law; Venue. The laws of the State of Texas shall govern the
validity, enforcement, construction and interpretation of this Lease. The
obligations of the parties hereto are performable and venue for any legal action
arising out of this Lease shall be in Dallas County, Texas.

34.15 Force Majeure. Whenever a period of time is herein prescribed for action
to be taken by Landlord, Landlord shall not be liable or responsible for, and
there shall be excluded from the computation of any such period of time, any
delays due to force majeure causes. For purposes hereof, "force majeure causes"
means the occurrences of circumstances beyond the reasonable control of
Landlord, including but not limited to strikes, riots, acts of God, shortages of
labor or materials, war, insurrection, governmental laws, regulations,
restrictions or requisitions.

34.16 Further Assurances. Tenant and Guarantor, if any, shall, from time to
time upon written request of Landlord, promptly furnish to Landlord audited
financial statements of Tenant and/or Guarantor prepared in accordance with
generally accepted accounting principals consistently applied relating to the
then current financial status of Tenant and shall execute and/or furnish to
Landlord such other financial information concerning Tenant and/or Guarantor as
Landlord shall request.

34.17 Survival. All covenants and obligations of Tenant and rights of
Landlord which are not satisfied prior to the termination of this Lease,
including but not limited to reconciliation of Tenant's Additional Rentals, are
intended to and shall survive the termination of this Lease regardless of the
manner in which such termination is brought about.

34.18 Laws and Regulations. Tenant covenants and agrees to comply with all
laws, ordinances, orders, rules and regulations (state, federal, municipal and
other agencies or bodies having any jurisdiction thereof) relating to the use,
condition or occupancy of the Leased Premises.

34.19 Consent. Any provision in this Agreement which requires the consent or
approval of Landlord shall allow Landlord to withhold such consent or approval
in its sole and absolute discretion.

34.20 Execution of Lease by Landlord. The submission of this document does not
constitute an offer to lease, or a reservation of, or option for, the Leased
Premises and this document becomes effective and binding only upon the execution
and delivery hereof by both the Landlord and Tenant. All negotiations,
considerations, representations and understandings between Landlord and Tenant
are incorporated herein and may be modified or altered only by agreement in
writing signed by both Landlord and Tenant, and no act or omission of any
employee or agent of Landlord or of Landlord's broker, if any, shall alter,
change or modify any of the provisions hereof.

27
<PAGE> 29
EXECUTED BY LANDLORD, this _______ day of ___________, 19__.

LANDLORD:

GRAYMONT PARTNERS, LTD.
a Texas Limited Partnership
By: Graywood Developments, Inc.
As Manager (Without Personal Liability)

By: [ILLEGIBLE]
--------------------------
Name:
--------------------
Title:
--------------------

EXECUTED BY TENANT, this _____ day of ________, 19__.

TENANT:

MEDICAL ALLIANCE, INC. A TEXAS CORP.

BY: /s/ MIKE WALLACE
-------------------------
Name: Mike Wallace
-------------------
Title: Sr. Vice President
------------------

STATE OF ______________ )
) SS.:
COUNTY OF _____________ )

BEFORE ME, the undersigned authority, on this day personally appeared
_____________________, a ____________________, of Graymont Partners, Ltd., a
Texas limited partnership, known to me to be the person whose name is
subscribed to the foregoing document, and acknowledged to me that he executed
the same for the purposes and consideration therein expressed, and as the act
and deed of said limited partnership and in the capacity therein stated.

GIVEN UNDER MY HAND and seal of office, this ______ day of ________,
19__.

-----------------------------
(SEAL) Notary Public in and for
the State of __________

My Commission Expires:

______________________

<PAGE> 30
STATE OF ______________ )
) SS.:
COUNTY OF _____________ )

BEFORE ME, the undersigned authority, on this day personally appeared
_____________________, a ____________________, of _________________________, a
__________________________, known to me to be the person whose name is
subscribed to the foregoing document, and acknowledged to me that he executed
the same for the purposes and consideration therein expressed, and as the act
and deed of said _________________________ and in the capacity therein stated.

GIVEN UNDER MY HAND and seal of office, this ____ day of _______, 19__.

(SEAL)
--------------------------------------
Notary Public in and for
the State of __________

My Commission Expires:

______________________

29
<PAGE> 31
EXHIBIT "A"

I. BASE RENTAL

The Base Rental for each Lease Year during the Term shall be as
follows:

<TABLE>
<CAPTION>
Monthly Annual Rental Per Square
Rental Rental Foot Per Annum
------- ------ -----------------
<S> <C> <C> <C>
Lease Year 1 $10,377.08 $124,524.96 $12.50
Lease Year 2 $10,792.17 $129,506.04 $13.00
Lease Year 3 $10,792.17 $129,506.04 $13.00
Lease Year 4 $10,792.17 $129,506.04 $13.00
Lease Year 5 $11,207.25 $134,487.00 $13.50
Lease Year 6 $11,207.25 $134,487.00 $13.50
</TABLE>

II. OPTION To EXTEND

Provided Tenant is not then in default under the terms and provisions
of this Lease, Tenant shall have the right and option to extend this
Lease for one (1) period of five (5) years (such period of five (5)
years being herein referred to as the "Extended Term"). The Extended
Term shall be at the option of Tenant, and Tenant may exercise the
option by giving written notice of Tenant's exercise of the option to
Landlord, not earlier than twelve (12) months prior and not later than
six (6) months prior to the expiration of the Lease Term. If Tenant
shall not send said written notice, Tenant shall be deemed to have
waived Tenant's option to extend the Lease Term and this Lease shall
expire, if not sooner terminated, on the termination date of the Lease
Term. The option to extend the Term is expressly non-assignable and
non-transferable by Tenant, regardless of an approved assignment or
sublet, unless otherwise agreed to in writing by Landlord.

The Base Rental during the Extended Term shall be the "Market Rent", as
herein defined.

(a) The term ""Market Rent" shall mean the Base
Rental for the Lease Premises at the time in question which
Landlord sets forth in a notice (hereinafter referred to as the
"Market Rent Notice") to Tenant. No later than thirty (30) days
after Tenant may exercise Tenant's option to extend this Lease
for the Extended Term, Landlord shall send the Market Rent
Notice to Tenant for said Extended Term and shall specify in the
Market Rent Notice for each of the five (5) years contained in
the Extended Term as applicable. In the event that Tenant shall,
in good faith, disagree with the Market Rent set forth in the
Market Rent Notice established by Landlord for the Leased
Premises, Tenant shall, within ten (10) days after receipt of
the Market Rent Notice, furnish Landlord with a written
explanation in reasonable detail of the basis for Tenant's good
faith disagreement, the amount which, in Tenant's good faith
opinion, is the Market Rent for each of the five (5) years
contained in the First Extended Term (hereinafter referred to as
the "Tenant's Notice"). If Tenant's Notice is not received by
Lessor within said ten (10) day period, the Market Rent shall
be the Market Rent set forth in the Market Rent Notice to
Tenant. If Tenant's notice is received by Landlord within said
ten (10) day period, the Market Rent for the Leased Premises
shall be established as follows:

(i) No later than twenty (20) days
following the receipt of the Market Rent Notice from
Landlord, Tenant shall select an individual as an
appraiser of its choice and give Landlord written notice
of such appraiser's name, address and telephone number.

LANDLORD'S TENANT'S
INITIALS: INITIALS:
----------------------- -----------------------
<PAGE> 32
(ii) Within ten (10) days after receipt of
notice by Landlord, Landlord shall select an appraiser
of its choice and give Tenant written notice of such
appraiser's name, address and telephone number.

(iii) The two appraisers so selected by
Landlord and Tenant shall then select an individual as a
third appraiser within fifteen (15) days after receipt
by Tenant of Landlord's notification as to its selection
of an appraiser, and furnish Landlord and Tenant written
notice of such appraiser's name, address and telephone
number.

(iv) All appraisers selected pursuant to this
Exhibit "A" shall be M.A.I. appraisers, unless Landlord
and Tenant shall otherwise agree in writing, each having
at lease ten (10) years experience with commercial
property in Dallas County, Texas. Each of the three (3)
selected appraisers shall then determine the fair rental
value of the Leased Premises for each of the five (5)
years of the Extended Term, as applicable and the Market
Rent hereunder for each of such five (5) years contained
in the Extended Term, as applicable, shall be determined
to be the average of the three (3) appraisals for each
such years; provided, in no event shall Market Rent for
the first year of the Extended Term be deemed to be less
than the Base Rental for the last year of the Lease
Term, and in no event shall the Market Rent for any
successive year of the Extended Term be less than the
Base Rental for the prior year.

(b) If the procedure set forth in II(a)(i) through
and including II(a)(iv) is implemented, and if for any reason
whatsoever (including, without limitation, the institution of
any judicial or other legal proceedings), the Market Rent for
any extended term has not been finally determined prior to the
first day of said Extended Term, then the amount of the Market
Rent set forth by Landlord in good faith in the Market Rent
Notice shall be the Market Rent for all purposes under the Lease
until such time as the Market Rent is finally determined as set
forth above, and Landlord and Tenant shall, by appropriate
payments to the other, correct any overpayment or underpayment
which may have been made prior to such final determination.

(c) If Tenant fails to select its appraiser in the
manner and within the time specified in II(a)(i), then the
Market Rent for the extended term in question shall be the
Market Rent set forth in the Market Rent Notice.

(d) If the appraisers selected by Landlord and
Tenant fail to appoint the third appraiser within the time and
in the manner prescribed in II(a)(iii), then Landlord and/or
Tenant shall promptly apply to the local office of the American
Arbitration Association for the appointment of the third
appraiser.

(e) All fees, costs and expenses incurred in
connection with obtaining the appraisals and the arbitration
procedure set forth in this Exhibit "A" shall be shared equally
by Landlord and Tenant; however, Landlord and Tenant shall each
bear their own attorneys' fees incurred with respect to this
procedure.

III. SECOND RIGHT OF REFUSAL

PROVIDED TENANT IS NOT THEN IN DEFAULT UNDER THE TERMS AND PROVISIONS OF THIS
LEASE, TENANT SHALL HAVE THE RIGHT OF SECOND REFUSAL (THE "SECOND RIGHTS OF
REFUSAL"), TO LEASE SPACE WHICH IS CONTIGUOUS TO THE LEASED PREMISES IN THE
BUILDING, WHICH REFUSAL SHALL BE IN ALL THINGS SUBORDINATE AND INFERIOR TO THE
FIRST RIGHT OF REFUSAL PREVIOUSLY GRANTED TO MARKETING SPECIALISTS, ITS
SUCCESSORS AND ASSIGNS, AS SET FORTH IN ITS LEASE WITH LANDLORD. LANDLORD SHALL
NOTIFY TENANT IN WRITING WHEN SUCH CONTIGUOUS SPACE IS AVAILABLE FOR LEASE
WHICH NOTICE SHALL PROVIDE TENANT FIVE (5) DAYS IN WHICH TO EXERCISE SUCH
SECOND RIGHT OF REFUSAL. IN CONNECTION THEREWITH, IF TENANT ELECTS TO LEASE
SAID CONTIGUOUS SPACE, THEN WITHIN SAID FIVE (5) DAY PERIOD, THIS LEASE SHALL
BE MODIFIED TO INCLUDE SUCH ADDITIONAL CONTIGUOUS SPACE AS PART

LANDLORD'S TENANT'S
INITIALS: _________ INITIALS: __________

<PAGE> 33
OF THE LEASED PREMISES, AND THE RENTAL OBLIGATIONS OF TENANT SHALL BE
APPROPRIATELY INCREASED TO REFLECT THE ADDITIONAL CONTIGUOUS LEASED SPACE. THE
LANDLORD'S OBLIGATIONS TO MAKE IMPROVEMENTS, PROVIDE MOVING ALLOWANCE, OR ANY
OTHER INCENTIVES SHALL NOT BE APPLICABLE TO SAID CONTIGUOUS LEASE SPACE. THIS
SECOND RIGHT OF REFUSAL TO LEASE ADDITIONAL CONTIGUOUS SPACE IS EXPRESSLY
NON-ASSIGNABLE AND NON-TRANSFERABLE BY TENANT. IN THE EVENT THAT TENANT SHOULD
FAIL TO EXERCISE ITS SECOND RIGHT OF REFUSAL WITHIN SAID FIVE (5) DAY PERIOD,
THEN TENANT'S RIGHT IN SAID CONTIGUOUS LEASE SPACE SHALL IN ALL THINGS EXPIRE
AND FOREVER TERMINATE WITH RESPECT TO SAID SPACE.

LANDLORD'S TENANT'S
INITIALS:__________ EXHIBIT A - PAGE 3 INITIALS:__________

<PAGE> 34
EXHIBIT "B"

THE PROPERTY

LEGAL DESCRIPTION

All of that certain real property described as follows:

Lot A, Block 1 of the 25th Installment, Las Colinas Business
Park, City of Irving, County of Dallas, State of Texas.

LANDLORD'S TENANT'S
INITIALS:__________ INITIALS:__________
<PAGE> 35
EXHIBIT "B"
SITE PLAN

IMPERIAL SQUARE
MASTER SITE PLAN

LANDLORD'S TENANT'S
INITIALS:__________ INITIALS:__________
<PAGE> 36
EXHIBIT "C"

FLOOR PLAN OF THE LEASED PREMISES

To be approved by both parties and attached hereto.

____________________, Suite __________

LANDLORD'S TENANT'S
INITIALS:__________ INITIALS:__________
<PAGE> 37
EXHIBIT "D"

WORK LETTER AGREEMENT

It is agreed that Landlord will complete the execution of the tenant
improvements to the Leased Premises in accordance with the following terms and
provisions:

2. Five sets of the plans and specifications shall be signed and
dated by both parties, with four sets retained by Landlord and one set retained
by Tenant. Changes in said plans and specifications shall be made only by
written addendum signed by both parties. The aforesaid plans and specifications
shall indicate the specific requirements of Tenant's space, clearly outlining
the types of materials and colors, reflecting the ceiling plan, the fixtures and
the electrical plans prepared by a licensed electrical engineer setting forth
all electrical requirements of Tenant. All such plans shall conform to the
hereinafter set forth "description of Landlord's work" and "description of
Tenant's work."

3. Following the approval in writing by Landlord and Tenant of the
Plans, Landlord shall construct the tenant improvements contemplated herein
(collectively the "Improvements"), in accordance with the Plans. The cost of
the Improvements for the purpose of billing shall equal the cost to Landlord of
designing and constructing such Improvements plus a five (5%) percent
construction fee due to the Landlord for his supervision and coordination.

4. Construction of the following tenant improvements (collectively
the "Improvements") to the Premises shall be at Landlord's sole cost and
expense:
a. Turnkey per pricing plan dated 04/11/96 (see allowance
Paragraph 6).

5. In the event that Landlord approves that the "Improvements"
works be undertaken by the Tenant's contractor, the followings should apply:

a. Tenant's contractor will be given access to the premises in
order to start the "Improvements" works only after presentation of proof of
liability insurance and Workmen Compensation

LANDLORD'S TENANT'S
INITIALS: INITIALS:
------------ ------------
<PAGE> 38
insurance. Such policies will name the Landlord as "additional insured" and
shall be in a form acceptable to Landlord.

b. Said premises shall be constructed in accordance with said
approved plans and specifications and Tenant's contractor must agree to pursue
the construction of said work diligently to completion, complying with all
city, county and state ordinances, rules and regulations relating thereto.
Tenant's contractor undertakes also to use only approved materials which meet
the buildings standard.

c. Landlord retains the right to supervise the construction of
Tenant's improvements utilizing persons of its own selection. For such
supervision Landlord shall earn and be paid a fee in a sum equal to five (5%)
percent of the estimated construction cost of Tenant's improvements.

d. No workman or work by Tenant's contractor shall interfere with
the business of any other Tenant in the project. All work and work schedules
shall be coordinated with and approved by Landlord. Tenant and Tenant's
contractor will be liable for any work stoppages or damages which are caused to
any other Tenant in the project.

e. Tenant may not require any exterior design, finish or
construction that has not been approved by the Landlord. The Tenant shall not
be permitted to maintain or place on the building or upon the premises any
drawings or signage, without the written consent of the Landlord.

f. After the completion of construction any subsequent changes,
modifications, or alterations requested by Tenant shall be undertaken by the
Landlord and any additional charges, expenses or costs, including Landlord's
design fees, shall be at the sole cost and expense of the Tenant. Landlord
shall have the right to demand payment for such charges, modifications or
alterations prior to the performance of any work in the premises.

g. Tenant agrees that upon the substantial completion of the work
on the premises in accordance with the plans and specifications therefor and
upon the delivery of possession to Tenant, the Tenant shall accept the premises
in the condition which it may then be and Tenant shall waive any right to make
claim against the Landlord for any cause directly or indirectly arising out of
the condition of the premises, appurtenances thereto, the improvements thereon,
and the equipment thereof; and Tenant shall thereafter save and hold harmless
the Landlord from liability as provided in Section 31 of this Lease. Landlord
shall not be liable for any latent nor patent defects therein.

h. If Tenant has not commenced construction within thirty (30)
days of the final execution of this Lease, Landlord shall have the option to
declare this Lease null and void. If Tenant has not completed construction of
all Tenant improvements within forty-five (45) days after the date upon which
Tenant's plans and specifications have been approved by Landlord, then Landlord
shall have the option to declare this lease null and void and in such event
Tenant shall forfeit all deposits made under this lease. It will also be the
Tenant's responsibility to settle all costs of work done to that point in time
directly with the vendors involved in the Improvements.

LANDLORD'S TENANT'S
INITIALS: _______ INITIALS: ________
<PAGE> 39
6.

7. If Tenant requests any changes in the Plans and
Specifications, Tenant shall present Landlord with revised drawings and
specifications for Landlord's approval, which approval will not be unreasonably
withheld. If Landlord approves such changes, Landlord shall incorporate such
changes in the Improvements following Landlord's receipt of a change order
therefor executed by Tenant. Landlord, however, may require, prior to
proceeding with any changes, additional cash advances to cover the cost of such
additional improvements.

8. Should Landlord be delayed in substantially completing the work
to be performed hereunder as a result of (i) Tenant's failure to submit the
Plans to Landlord as provided in Paragraph 1 hereof or (ii) Tenant's requests
for changes in the Plans which delay said work or (iii) the performance of any
work contemplated herein by a contractor or agent employed by Tenant (any such
contractor or agent being subject to the prior written approval of Landlord) or
(iv) any other delay caused by Tenant, its agents or employees, then Tenant's
obligation to pay rent under the Lease shall nevertheless commence on the date
specified in Paragraph 2(a) of this Lease and the commencement date under this
Lease shall not be delayed pursuant to Paragraph 2(b) of this Lease, unless such
delays for which Tenant is responsible are in addition to delays for which
Landlord is responsible, in which case the commencement date and rental
commencement date under this Lease shall be extended for the period of delays
for which Landlord was

LANDLORD'S TENANT'S
INITIALS:_______ INITIALS:_____

<PAGE> 40
responsible. In the event Landlord fails to substantially complete the
Improvements within one hundred twenty (120) days of the mutually approved last
change orders by Tenant (or from the date of lease execution if there are no
mutually approved change orders by Tenant) Tenant at its option may termination
this lease.

9. Landlord hereby agrees that, to the extent it acts as contractor
hereunder, Landlord will commence or cause the commencement of the construction
of the Improvements as promptly as is reasonably possible and will proceed with
due diligence to perform or cause such work to be performed in a good and
workmanlike manner. Landlord warrants to Tenant that all materials and equipment
utilized in constructing the portion of the Improvements constructed by Landlord
will be of good quality and free from faults and defects; provided, however,
Tenant's sole remedy for any breach of the above warranty shall be that
Landlord, for a period of twelve (12) months after substantial completion of
such work, at its sole cost and expense, will make all necessary repairs,
replacements and corrections of any nature or description as may become
necessary by reason of faulty construction, labor or materials in the portion of
the Improvements constructed by Landlord. Landlord shall allow Tenant to pursue
any warranty repairs directly from vendors after expiration of such twelve (12)
month period.

10. All improvements to the premises made by Tenant, including but
not limited to light fixtures, floor covering, partitions, heating and air
conditioning, but excluding trade fixtures and signs, shall become the
property of the Landlord upon expiration of earlier termination of this Lease
unless Landlord notifies Tenant to remove such items as Landlord may direct.

11. For the purpose of this Work Letter, the term "Substantial
Completion" of the Improvements or of the work of constructing such
Improvements shall mean one of the followings: (i) completion of such
Improvements in all material respects expecting only minor finish and touch-up
work which does not interfere with the occupancy of the Premises by Tenant for
its intended purpose in accordance with professional standards, as determined
by the Designer, whose determination shall be binding upon Landlord and Tenant,
(ii) the issuance by the City of a temporary or permanent "Certificate of
Occupancy" or (iii) the physical occupancy of the premises by the Tenant.

12. In all cases of item 11 above, the Tenant will acknowledge the
taking over of the premises by signing a "Certificate of Acceptance" prior to
receiving the keys to the Premises.

LANDLORD'S TENANT'S
INITIALS:_____ INITIALS:_____
<PAGE> 41
EXHIBIT "E"

RULES AND REGULATIONS

The following standards shall be observed by Tenant for the mutual safety,
cleanliness and convenience of all occupants of the Building, and shall apply,
where applicable to the Property generally, including, but not limited to, the
Leased Premises, the Building and the parking garage, the land situated beneath
and around the Building and appurtenances thereto:

1. Tenant shall not conduct any auction in the Leased Premises nor
store goods, wares or merchandise in the Leased Premises
except for Tenant's own personal use.

2. Sidewalks, halls, doorways, vestibules, passageways, stairwells
and other similar areas shall not be obstructed or used by
Tenant for a purpose other than ingress and egress to and from
the Leased Premises and the Building. In no event shall Tenant
or his agents dispose of, or store for any period of time, any
items in the public areas of the Building or elsewhere on the
Property.

3. Tenant shall not make any alterations or improvements to the
Leased Premises without the prior written consent of the
Landlord. All improvements and the methods of installing and
constructing such improvements must be approved in writing by
the Landlord prior to commencement of installation and/or
construction. Should Tenant require telegraphic, telephonic,
annunciator, or communication service, Landlord will direct the
electrician where and how wires are to be introduced and placed,
and none shall be introduced or placed except as Landlord shall
direct. All contractors and technicians performing work for
Tenant within the Building shall be referred to Landlord for
approval before performing such work and shall be subject to
monitoring by Landlord's agents during the performance of their
work. This provision shall apply to all work including, but not
limited to, installing or changing communication equipment,
electrical devices and attachments, decorating, remodeling, or
any other cosmetic changes to the Leased Premises.

4. Movement into or out of the Building or freight, furniture,
office equipment, or other material for dispatch or receipt by
Tenant which requires movement through public areas of the
Building shall be limited to the use of service elevators only
and shall be done at hours and in a manner approved by Landlord
for such purposes from time to time. Only licensed commercial
movers approved by Landlord shall be used for the purpose of
moving freight, furniture or office equipment to and from the
Leased Premises and Building. A service elevator is located at
all garage levels in the Building and no passenger use thereof
is permitted. No deliveries are allowed through or around the
first floor lobby area. Dollies and freight are not allowed on
the passenger elevators. Hand trucks, flatbeds, or dollies,
except for those equipped with rubber tires and rubber side
guards, and in good repair, are not permitted to be used in the
Building. The movement of heavy equipment will be required to be
moved on steel, plywood, or hardboard of sufficient thickness to
prevent any damage to the Building or Property.

5. Requests by Tenant for building services, maintenance or repairs
shall be made in writing to the office of Building Manager
located at the Building. Tenant shall not ask building personnel
to perform such functions as furniture moving, deliveries,
picture hanging, or other similar tasks not related to the
general operation of the Building when such personnel are on
duty.

6. Landlord shall furnish Tenant, free of charge, with two (2) keys
for each corridor door entering the Leased Premises and
additional keys will be furnished upon written request to
Landlord at a cost to Tenant equal to Landlord's cost plus a ten
percent (10%) administrative fee. All such keys shall

LANDLORD'S TENANT'S
INITIALS: INITIALS:
-------------- --------------
<PAGE> 42
remain the property of Landlord, and Tenant will supply
Landlord with the names, addresses and telephone numbers of all
persons who possess such keys and/or access cards. Tenant shall
not change locks or install additional locks on doors without
prior written consent of Landlord. Tenant shall not make or
cause to be made duplicates of keys procured from Landlord
without prior approval of Landlord. All keys to the Leased
Premises shall be surrendered to Landlord upon termination of
Tenant's tenancy, whereupon Tenant shall also give to Landlord
the written explanation of the combination of all locks for
sales, safe cabinets and vault doors, if any, in the Leased
Premises. Landlord may at all times keep a passkey to the Leased
Premises.

7. Tenant shall give prompt notice to the office of the Building
Manager of any damage to or defects in plumbing, electrical
fixtures, heating and cooling equipment, elevator, or any other
part of the Building or Leased Premises. Liquids, or other
materials or substances which may cause injury to the plumbing,
shall not be put into the lavatories, water closets or other
plumbing fixtures by Tenant, its agents, employees or invitees,
and damages resulting to such fixture or appliances from misuse
by Tenant or Tenant's agents, employees or invitees shall be
paid by Tenant, and Landlord shall not in any case be liable
therefor.

8. No food shall be distributed from Tenant's Leased Premises
without prior written approval of the Building Manager. Vending
machines for Tenant's own use only may be placed in the Leased
Premises by Tenant.

9. Landlord shall have the power to prescribe the weight and
position of safes, filing cabinets, or other heavy equipment
which may overstress any portion of the floor. Any damage done
to the Building by the improper placing of heavy items which
overstress the floor will be repaired at the sole expense of
Tenant. Tenant shall notify the Building Manager when safes or
other heavy equipment are taken in or out of the Building and
the moving shall be done under the supervision of the Building
Manager, after written permission from Landlord. Persons
employed to move such property must be acceptable to and
approved by Landlord.

10. Tenant shall cooperate with Building employees in keeping the
Building and Leased Premises neat and clean. Nothing shall be
swept or thrown into the corridors, halls, elevators shafts or
stairways.

12. Electrical space heaters and fans are not allowed in the
Building. Tenant shall comply with all emergency and safety
procedures established by Landlord, the local Fire Department,
and/or any other governmental agency having jurisdiction over
the Building, including, without limitation, participation in
periodic drills, familiarization with emergency procedures and
the designation of individuals who shall be responsible for the
implementation of emergency action. Landlord has the right to
evacuate the Building in the event of an emergency or
catastrophe.

13. Tenant shall not make or permit any improper, objectionable or
unpleasant noises or odors in the Leased Premises, Building or
the Property, nor shall Tenant permit

LANDLORD'S TENANT'S
INITIALS: EXHIBIT E - PAGE 2 INITIALS:
--------------- ---------------
<PAGE> 43
the operation of any machinery or equipment in the Leased
Premises that could in any way annoy any other tenant in the
Building, nor shall Tenant otherwise interfere in any way with
other tenants or persons having business with them.

14. Corridor doors, when not in use, shall be kept closed.

15. No portion of the Leased Premises, the Building or the Property
shall at any time be used or occupied as sleeping or lodging
quarters; nor shall they be used for immoral or illegal
purposes, including, but not limited to, the manufacture or sale
of liquor, narcotics, or drugs in any form.

16.

17. Tenant agrees to cooperate and assist Landlord in the
prevention of canvassing, soliciting, and peddling within the
Building. Said activities are prohibited in the Building and in
the Property at all times.

18. Animals or birds shall not be kept in or about the Leased
Premises, the Building, or the Property.

19. Tenant shall comply with parking rules and regulations as may
be posted and distributed from time to time.

20. No nails, hooks or screws shall be driven into or inserted in
any part of the Building except as approved by Building
maintenance personnel.

21. Tenant shall, before leaving the Leased Premises unattended,
close and lock outside doors, turn off lights, coffee pots, and
other office equipment. Damage resulting from failure to do so
shall be the sole responsibility of and shall be paid for by
Tenant. Landlord will not be responsible for lost or stolen
personal property, equipment, money or any article taken from
the Leased Premises, regardless of how or when loss occurs.

22. Landlord reserves the right to install, maintain, or change any
signs on the interior or exterior of the Leased Premises and the
Building and on the Property.

23. Upon termination of the Lease, Tenant shall surrender and
return promptly, to the Landlord, the Leased Premises, all keys,
equipment, and fixtures in as good condition as when Tenant
originally took possession, only ordinary wear and tear and such
damage or casualty for which Landlord is responsible pursuant to
the Lease excepted.

24. Landlord reserves the right to rescind any of these rules and
regulations and to make such other further rules and regulations
as in its judgment shall from time to time be needed for the
safety, protection, care and cleanliness of the Property and the
Building, the operation thereof, the preservation of good order
therein and the protection and comfort of the tenants and their
agents, employees and invitees, which rules and regulations,
when made and written notice thereof is given to a tenant, shall
be binding upon it in like manner as if originally herein
prescribed.

LANDLORD'S TENANT'S
INITIALS: __________ EXHIBIT E - PAGE 3 INITIALS: _________
<PAGE> 44
EXHIBIT "F"

ACCEPTANCE OF LEASED PREMISES MEMORANDUM

This Acceptance of Leased Premises Memorandum is an amendment to the
Lease Agreement, dated _______________, 19__, between Graymont Partners, Ltd.,
as Landlord, and Medical Alliance, Inc., as Tenant, covering those certain
Leased Premises (as defined in the Lease Agreement) commonly known as Suite
150, 2445 Gateway Drive, Irving, Texas.

Tenant hereby stipulates, agrees and acknowledges that:

1. Landlord has fully completed the construction and finish-out
work required to be performed or caused to be performed by
Landlord under the terms of the Lease and the Work Letter
Agreement incorporated by reference in the Lease as Exhibit "D"
thereto.

2. The Leased Premises and Building are tenantable, the Landlord
has no further obligation for construction and finish-out with
respect to the Leased Premises, and both the Building and the
Leased Premises are satisfactory to Tenant in all respects.

3. The Leased Premises are suitable for the purpose for which they
were leased by Tenant.

4. The Commencement Date of the Lease is _______________, 19__.

5. The date of expiration of the Lease Term is the last day of
______________________, 19__.

Except as modified by this Acceptance of Leased Premises Memorandum,
the Lease Agreement and all terms, provisions and covenants thereof are and
remain in full force and effect and are ratified and affirmed by Tenant and
Landlord.

TENANT:

MEDICAL ALLIANCE, INC.

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

LANDLORD:

GRAYMONT PARTNERS, LTD.

By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
<PAGE> 45
EXHIBIT "G"

PARKING

During the term of this Lease, Tenant and its officers, agents,
employees, guests, invitees and customers (for purposes of this Exhibit "G"
collectively referred to as "Tenant") shall have the non-exclusive use on a
"first come, first served" basis in common with Landlord, other tenants of the
Building, their officers, agents, employees, guests, invitees and customers, of
three (3) parking spaces per 1,000 square feet of Net Rentable Area in the
non-reserved automobile parking areas located in the non-covered parking (the
"non-covered parking") located in the vicinity of the Building subject to the
rules and regulations for the use thereof as prescribed from time to time by
Landlord. Tenant shall not park in any spaces designated for visitor or short
term parking, and Tenant agrees that Landlord may, at Tenant's sole cost and
expense, tow any of Tenant's vehicles parked in such spaces marked for visitor
or short term parking. Tenant shall reimburse Landlord on demand for any and
all towing charges incurred by Landlord as a result of Tenant's refusal to
comply with the terms set forth herein, and Tenant's failure to pay on demand
such towing charges shall be considered an Event of Default under the Lease.
Landlord shall have no liability whatsoever for any property damage and/or
personal injury which might occur as a result of, or in connection with, the
use of the non-covered parking by Tenant, including, but not limited to any
damage or injuries occurring as a result of Landlord causing Tenant's vehicles
to be towed, and Tenant hereby agrees to indemnify and hold Landlord harmless
from and against any and all costs, claims, expenses and/or causes of action
which Landlord may incur in connection with or arising out of Tenant's use of
the non-covered parking. Tenant expressly disclaims the creation of a
bailee-bailor relationship with Landlord arising from this Lease Agreement or
otherwise; Tenant agrees that Landlord shall have no duty to provide security
for Tenant or Tenant's property, nor shall Landlord have a duty to warn Tenant
of any dangers which exist or may exist in the future which may arise in
connection with Tenant's use of the non-covered parking.

Landlord and Tenant acknowledge that the parking spaces on the Exhibit "G-1" -
Parking Site Plan - marked by an "X" are for Tenant and Tenant shall have its
employees park in those spaces, and Landlord shall use its best efforts to
prevent other tenants from parking in those spaces. If Tenant's parking spaces
are used by other tenants and continue to be used by other tenants after
written notification to Landlord, and Landlord is still unable to stop the use
of tenant's parking spaces, Landlord agrees to mark the parking spaces on
Exhibit "G-1" as reserved spaces for Tenant's use.

LANDLORD'S TENANT'S
INITIALS:__________ INITIALS:__________

<PAGE> 1

EXHIBIT 11.1

MEDICAL ALLIANCE, INC.

STATEMENT RE COMPUTATION OF PER SHARE EARNINGS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PERIOD ENDED JUNE 30,
-------------------------------------- ------------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net income (loss)...................................... $ (150,481) $ 192,179 $ 578,149 $ 285,356 $ 369,451
Series A Preferred dividends........................... 75,000 75,000 87,000 87,000 87,000
Less charge for cancelation of put feature............. (180,000) (180,000)
---------- ---------- ---------- ---------- ----------
Net income (loss) applicable to common stock........... $ (225,481) $ 117,179 $ 311,149 $ 18,356 $ 282,451
========== ========== ========== ========== ==========
Weighted average common shares outstanding before SAB
Topic 4-D shares(1).................................. 1,777,698 1,832,333 2,106,132 1,941,967 2,321,302
SAB Topic 4-D computation:(2)
Incremental common shares outstanding applicable to
options issued within one year of the
Offering(3)........................................
Incremental common shares outstanding applicable to
the Series B Preferred Stock issued within one year
of the Offering(4).................................
---------- ---------- ---------- ---------- ----------
Common Stock outstanding including all SAB Topic 4-D
Shares...............................................
========== ========== ========== ========== ==========
Computation of primary shares outstanding:
Incremental common shares outstanding applicable to
"in the money" options and warrants based on the
estimated average fair market value of the stock
during the year(3)(5)..............................
Options and warrants excluded based on anti-dilutive
effect.............................................
---------- ---------- ---------- ---------- ----------
Primary shares outstanding.............................
========== ========== ========== ========== ==========
Computation of fully diluted shares outstanding:
Incremental common shares outstanding applicable to
Series A Preferred stock(4)........................
Preferred stock excluded based on anti-dilutive
effect.............................................
Fully diluted shares outstanding.......................
========== ========== ========== ========== ==========
Computation of earning per common share:
Primary earnings per common share(6)................. $ $ $ $ $
========== ========== ========== ========== ==========
Fully diluted earnings per common share(7)........... $ $ $ $ $
========== ========== ========== ========== ==========
</TABLE>

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

(1) Includes shares of common stock issued within one year of the Offering
and assumed outstanding for all periods shown per SAB Topic 4-D. The
shares were determined using the Treasury Stock Method as prescribed by SAB
Topic 4-D. Actual shares issued were 9,178. Shares assumed repurchased were
.

(2) SAB Topic 4-D requires Registrants to report common stock, convertible
preferred, options, warrants and other common stock equivalents issued
within one year of an offering as issued and outstanding for all periods
reported.

(3) Determined using the Treasury Stock Method.

(4) Determined using the "If Converted" Method.

(5) The estimated average fair market value during the year and the estimated
fair market value at the end of the year were determined to be equal.

(6) Computed as net income (loss) applicable to common shares divided by primary
shares outstanding.

(7) Computed as the more dilutive of either primary earning per share or net
income (loss) divided by fully diluted share outstanding.

<PAGE> 1
EXHIBIT 21.1

SUBSIDIARIES OF MEDICAL ALLIANCE, INC.

1. MAI Safety Compliance Services, Inc.
Texas Corporation

2. Physicians Marketing Services, Inc.
d/b/a Laserway USA
Texas Corporation

3. Medical Alliance Canada, Ltd.
Ontario Corporation

<PAGE> 1

EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement on Form S-1 (No.
333- ) and the related prospectus of our report dated July 17, 1996 except
for Note 16, as to which the date is August 2, 1996, and on our
audits of the consolidated financial statements and financial statement schedule
of Medical Alliance, Inc. and Subsidiaries. We also consent to the reference to
our firm under the caption "Experts."

Dallas, Texas
, 1996

As discussed in Note 16 to the consolidated financial statements, the
Company's Board of Directors approved a 1.561 to 1 stock split effected through
a stock dividend to occur prior to the effective date of this registration
statement. The accompanying consolidated financial statements have been
retroactively adjusted to reflect the stock split effected through a stock
dividend as if it had occurred. Additionally, as discussed in Note 2 (Earnings
Per Share) to the consolidated financial statements, the company has outstanding
common stock and other potentially dilutive instruments for which the earnings
per share calculation is subject to Securities and Exchange Commission Staff
Accounting Bulletin ("SAB") Topic 4-D. As neither the initial public offering
price nor the number of the securities to be offered by this registration
statement has been determined, the Company is unable to calculate earnings per
share with respect to those instruments subject to SAB Topic 4-D and, therefore,
no disclosure of earnings per share has been made. We will issue the above
consent after (1) the stock split effected through a stock dividend occurs; (2)
the range of maximum offering price and maximum number of shares to be offered
is included in the preliminary prospectus; and (3) the Company completes the
calculation and presentation of earnings per share in the consolidated financial
statements in accordance with generally accepted accounting principles and SAB
Topic 4-D:

COOPERS & LYBRAND L.L.P.

Dallas, Texas
August 9, 1996

<ARTICLE> 5

<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<CASH> 1,408,508 1,431,885
<SECURITIES> 0 0
<RECEIVABLES> 3,682,000 4,913,955
<ALLOWANCES> 1,113,314 1,514,926
<INVENTORY> 0 0
<CURRENT-ASSETS> 4,207,516 5,271,426
<PP&E> 3,892,721 5,807,015
<DEPRECIATION> 1,699,930 2,332,360
<TOTAL-ASSETS> 6,443,363 8,930,617
<CURRENT-LIABILITIES> 2,294,175 2,926,322
<BONDS> 2,353,415 3,812,603
<COMMON> 4,678 4,774
0 0
1,595 1,595
<OTHER-SE> 2,424,253 2,751,844
<TOTAL-LIABILITY-AND-EQUITY> 6,443,363 8,930,617
<SALES> 0 0
<TOTAL-REVENUES> 11,177,138 8,395,480
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 1,884,709 1,422,737
<INTEREST-EXPENSE> 246,655 150,658
<INCOME-PRETAX> 973,491 631,837
<INCOME-TAX> 395,342 262,692
<INCOME-CONTINUING> 578,149 369,145
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 578,149 369,145
<EPS-PRIMARY> .10 .08
<EPS-DILUTED> .10 .08

</TABLE>

<PAGE> 1
EXHIBIT 99.1

We consent to the use of the our name and the information attributed
to us herein.

/s/ PATRICK DRISCOLL
--------------------------------------
Patrick Driscoll, Director
Medical Data International, Inc.

Irvine, California
July 29, 1996