
<PAGE>   1
                                                                     Exhibit 2.1


                                                                  CONFORMED COPY


________________________________________________________________________________


                  _________________________________________


                           STOCK PURCHASE AGREEMENT

                  _________________________________________


                          dated as of August 9, 1994

                                   between

                                SYNETIC, INC.

                                     and

                       PHARMACY CORPORATION OF AMERICA


________________________________________________________________________________

<PAGE>   2
                                  ARTICLE I

                                 DEFINITIONS

1.01.  Certain Defined Terms ...............................................  1
1.02.  Other Defined Terms .................................................  7

                                  ARTICLE II

                              PURCHASE AND SALE

2.01.  Purchase and Sale ...................................................  8
2.02.  Purchase Price ......................................................  8
2.03.  Closing .............................................................  9
2.04.  Assumption of Certain Liabilities of the Seller and Medco ...........  9
2.05.  Allocation of Purchase Price ........................................ 10
2.06.  Purchase Price Adjustment ........................................... 10
2.07.  Intercompany Amounts ................................................ 13
2.08.  Escrow Account ...................................................... 13

                                 ARTICLE III

                 REPRESENTATIONS AND WARRANTIES OF THE SELLER

3.01.  Incorporation and Authority of the Seller ........................... 15
3.02.  Incorporation and Qualification of the Companies and the 
       Subsidiaries ........................................................ 15
3.03.  Capital Stock of the Companies ...................................... 16
3.04.  Subsidiaries ........................................................ 16
3.05.  No Conflict ......................................................... 17
3.06.  Financial Statements ................................................ 17
3.07.  Labor Matters ....................................................... 17
3.08.  Absence of Certain Changes or Events ................................ 18
3.09.  Absence of Litigation ............................................... 20
3.10.  Compliance with Laws ................................................ 20
3.11.  Consents, Approvals, Licenses, Etc. ................................. 20
3.12.  Personal Property ................................................... 21
3.13.  Intangible Property ................................................. 21
3.14.  Real Property ....................................................... 22
3.15.  Employee Benefit Matters ............................................ 24
3.16.  Taxes ............................................................... 25
3.17.  Stockholder Vote and Special Committee Approval ..................... 26
3.18.  Material Contracts .................................................. 27
3.19.  Customers ........................................................... 28
3.20.  Brokers ............................................................. 28
3.21.  Receivables ......................................................... 28
 

<PAGE>   3

Section                                                                     Page
- -------                                                                     ----

3.22.  Insurance ............................................................ 29
3.23.  Transactions with Affiliates ......................................... 29
3.24.  No Undisclosed Liabilities ........................................... 29
3.25.  Environmental Compliance ............................................. 29

                                  ARTICLE IV

               REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

4.01.  Incorporation and Authority of the Purchaser ......................... 30
4.02.  No Conflict .......................................................... 31
4.03.  Consents and Approvals ............................................... 31
4.04.  Absence of Litigation ................................................ 31
4.05.  Investment Purpose ................................................... 31
4.06.  Financing ............................................................ 32
4.07.  Brokers .............................................................. 32

                                  ARTICLE V

                            ADDITIONAL AGREEMENTS

5.01.  Conduct of Business Prior to the Closing ............................. 32
5.02.  Access to Information ................................................ 35
5.03.  Confidentiality ...................................................... 36
5.04.  Regulatory and Other Authorizations; Consents ........................ 36
5.05.  Use of the Seller's Name ............................................. 37
5.06.  Investigation ........................................................ 38
5.07.  Stockholders' Meeting ................................................ 39
5.08.  Non-Competition ...................................................... 39
5.09.  SPMS ................................................................. 41
5.10.  Further Action ....................................................... 42
5.11.  Maintenance of Assets ................................................ 43
5.12.  Non-Solicitation ..................................................... 43
5.13.  Intercompany Debt .................................................... 43
5.14.  Other Information .................................................... 44




                                     (ii)
<PAGE>   4
Section                                                                  Page
- -------                                                                  ----

                                  ARTICLE VI
                                      
                               EMPLOYEE MATTERS

6.01.   Employees .....................................................   44
6.02.   Certain Dunnington Agreements .................................   45
6.03.   Survival ......................................................   45  

                                 ARTICLE VII

                                 TAX MATTERS


7.01.   Tax Indemnities ...............................................   45
7.02.   Refunds and Tax Benefits ......................................   46
7.03.   Contests ......................................................   47
7.04.   Preparation of Tax Returns ....................................   48
7.05.   Section 338(h)(10) Election ...................................   48
7.06.   Cooperation and Exchange of Information .......................   49
7.07.   Conveyance Taxes ..............................................   50 
7.08.   Miscellaneous .................................................   50

                                 ARTICLE VIII

                            CONDITIONS TO CLOSING


8.01.   Conditions to Obligations of the Seller .......................   50
8.02.   Conditions to Obligations of the Purchaser ....................   51

                                  ARTICLE IX

                               INDEMNIFICATION

9.01.   Survival ......................................................   52
9.02.   Indemnification by the Purchaser ..............................   52
9.03.   Indemnification by the Seller .................................   55




                                    (iii)
<PAGE>   5



Section                                                          Page
- -------                                                          ----

                                  ARTICLE X

                      TERMINATION, AMENDMENT AND WAIVER

 10.01.  Termination ............................................. 59
 10.02.  Effect of Termination ................................... 59
 10.03.  Waiver .................................................. 60


                                  ARTICLE XI

                              GENERAL PROVISIONS

 11.01.  Expenses ................................................ 60
 11.02.  Notices ................................................. 60
 11.03.  Public Announcements .................................... 61
 11.04.  Headings ................................................ 62
 11.05.  Severability ............................................ 62
 11.06.  Entire Agreement ........................................ 62
 11.07.  Assignment .............................................. 62
 11.08.  No Third-Party Beneficiaries ............................ 62
 11.09.  Waivers and Amendments .................................. 62
 11.10.  Specific Performance .................................... 63
 11.11.  Governing Law ........................................... 63
 11.12.  Counterparts ............................................ 63
 11.13.  Parent Company .......................................... 63


EXHIBITS

  2.05   Allocation of the Purchase Price
 11.13   Form of Parent Guaranty


                                     (iv)



















<PAGE>   6
                 STOCK PURCHASE AGREEMENT, dated as of August 9, 1994, between
SYNETIC, INC., a Delaware corporation (the "Seller" or "Synetic"), and PHARMACY
CORPORATION OF AMERICA, a California corporation (the "Purchaser").

                                  WITNESSETH:

                 WHEREAS, the Seller owns (i) all the issued and outstanding
shares of common stock, par value $.01 per share (the "Dunnington Shares"), of
Dunnington Drug, Inc., a Delaware corporation ("Dunnington"), (ii) all the
issued and outstanding shares of common stock, without par value (the "HPS
Shares"), of Healthcare Prescription Services, Inc., an Indiana corporation
("HPS"), and (iii) all the issued and outstanding shares of common stock, par
value $.01 per share (the "Alliance Shares" and, together with the HPS Shares
and the Dunnington Shares, the "Shares"), of Alliance Health Services, Inc., a
Delaware corporation ("Alliance"; Alliance, Dunnington and HPS each being
referred to herein as a "Company" and collectively as the "Companies"); and

                 WHEREAS, the Seller wishes to sell to the Purchaser, and the
Purchaser wishes to purchase from the Seller, the Shares, upon the terms and
subject to the conditions set forth herein;

                 NOW, THEREFORE, in consideration of the premises and of the
mutual agreements and covenants hereinafter set forth, the Purchaser and the
Seller hereby agree as follows:


                                   ARTICLE I

                                  DEFINITIONS

                 SECTION 1.01.    Certain Defined Terms. As used in this
Agreement, the following terms have the following meanings:

                 "Action" means any judicial, administrative or arbitrable
claim, action, suit, arbitration or proceeding (public or private) by or before
any Governmental Authority.

                 "Acquisition Agreements" means the Allcare Agreement, the
Dunnington Agreement and the Reliance Agreement.

                 "Affiliate" means, when used with respect to a specified
Person, another Person that, either directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with
the Person specified; provided, however, that when used in any part of this
Agreement except Articles VI, VII and IX regarding Synetic or any of its
subsidiaries, the term "Affiliate" shall not include Merck or any of its
subsidiaries other than Synetic and its subsidiaries.
<PAGE>   7
                                       2

                 "Agreement" means this Stock Purchase Agreement, dated as of
August 9, 1994, between the Seller and the Purchaser (including the Exhibits
hereto and the Disclosure Schedule) and all amendments hereto made in
accordance with Section 11.09.

                 "Allcare Agreement" means the Asset Purchase Agreement, dated
as of February 21, 1992, by and among Allcare Medication Services, Inc.,
William Green and Elliott Tertes and Synetic, as amended, a copy of which has
been made available to the Purchaser.

                 "Alliance Subsidiaries" means the following wholly owned
subsidiaries of Alliance: Brownstone Pharmacy, Inc., a Connecticut corporation,
Omni Med B, Inc., a Connecticut corporation, and Alliance Home Health Care,
Inc., a Connecticut corporation (each of which corporations is individually
referred to as an "Alliance Subsidiary").

                 "Books and Records" means all books of account and other
financial records pertaining to the Companies and the Subsidiaries.

                 "Business" means the business of providing prescription vending
services and consultant pharmacist services to nursing homes and other similar
long-term care facilities in the States of Connecticut, Indiana, Massachusetts
and Rhode Island, as conducted as of the date of this Agreement by the
Companies and the Subsidiaries.

                 "Business Day" means any day that is not a Saturday, a Sunday
or other day on which banks are required or authorized by law to be closed in
the City of New York.

                 "CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et seq.).

                 "Closing Date Combined Net Worth" means the total assets minus
the total liabilities of the Companies and the Subsidiaries, on a combined
basis, in each case as shown on the Closing Balance Sheet, plus the Closing
Date Intercompany Amount.

                 "Closing Date Intercompany Amount" means the Intercompany
Amount at the Closing Date, as shown on the Closing Date Balance Sheet.

                 The word "combined" when used in this document to describe
financial statements refers to the combining of accounts in accordance with
GAAP.

                 "Confidentiality Agreement" means the letter agreement dated
as of June 9, 1994 between the Seller and the Parent.

                 "Contract" means any contract, agreement, indenture, note,
bond, loan, instrument, lease, conditional sales contract, mortgage, license,
franchise agreement, insurance policy, binding commitment or other agreement,
whether written or oral.
<PAGE>   8
                                       3

                 "DGCL" means the General Corporation Law of the State of 
Delaware.

                 "Disclosure Schedule" means the Disclosure Schedule dated as
of the date of this Agreement delivered to the Purchaser by the Seller.

                 "Dunnington Agreement" means the Asset Purchase Agreement,
dated as of July 19, 1991, by and among Rix Dunnington Inc., Dunnington Super
Drug, Inc., Richard L. Weinberg, Gerald Weiner, Lester Weiner, Stanley D.
Siskind and Martis S. Karas and Synetic and Medco, a copy of which has been
made available to the Purchaser.

                 "Dunnington Subsidiaries" means the following subsidiaries of
Dunnington: Dunnington Rx Services of Rhode Island, Inc., a Rhode Island
corporation and a wholly owned subsidiary of Dunnington, Dunnington Rx Services
of Massachusetts, Inc., a Massachusetts corporation and a wholly owned
subsidiary of Dunnington, and DD Wholesale, Inc., a Massachusetts corporation
and a wholly owned subsidiary of Dunnington Rx Services of Massachusetts, Inc.
(each of which corporations is individually referred to as a "Dunnington
Subsidiary").

                 "Earn-Outs" means the obligations of Synetic to pay amounts
contingent upon the performance of certain parts of the Business pursuant to
the terms of the Acquisition Agreements.

                 "Encumbrance" means any security interest, pledge, mortgage,
lien, charge, adverse claim of ownership or use, or other encumbrance of any
kind.

                 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.

                 "Exchange Act" means the Securities Exchange Act of 1934, as 
amended.

                 "GAAP" means United States generally accepted accounting
principles in effect from time to time applied consistently throughout the
period involved.

                 "Governmental Authority" or "Governmental Authorities" means
any government, any governmental entity, department, commission, board, agency
or instrumentality, and any court, tribunal, or judicial or arbitral body,
whether federal, state or local.

                 "Governmental Order" means any order, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.

                 "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 as amended, and the rules and regulations thereunder.
<PAGE>   9
                                       4

                 "Incremental Intercompany Amount" means the Closing Date
Intercompany Amount minus the Year-End Intercompany Amount.

                 "Intercompany Amount" means, as of any date, the amount of
"income taxes payable to parent" plus amounts "due to parent" minus amounts
"due from parent", as set forth on a combined balance sheet of the Companies
and the Subsidiaries.

                 "Internal Revenue Code" or "IRC" means the Internal Revenue
Code of 1986, as amended.

                 "IRS" means the United States Internal Revenue Service.

                 "knowledge" or "known" means, with respect to any matter in
question, if any of the Specified Officers of the Seller or the Purchaser, as
the case may be, has actual knowledge of such matter, after inquiry to all
persons that report directly to the respective Specified Officers regarding the
business of the Companies and the Subsidiaries.  For purposes of this
definition, the term "Specified Officers" means: (a) with respect to the
Seller, (i) the persons listed in paragraph A of Section 1.01 of the Disclosure
Schedule; (ii) solely with respect to any matter relating to HPS, the person
listed in paragraph B of Section 1.01 of the Disclosure Schedule; (iii) solely
with respect to any matter relating to Dunnington or any Dunnington Subsidiary,
the person listed in paragraph C of Section 1.01 of the Disclosure Schedule;
and (iv) solely with respect to Alliance or any Alliance Subsidiary, the
persons listed in paragraph D of Section 1.01 of the Disclosure Schedule and
(b) with respect to the Purchaser, the persons listed in paragraph E of Section
1.01 of the Disclosure Schedule.

                 "Law" means any federal, state or local statute, law,
ordinance, regulation, rule, code, order or rule of common law (including,
without limitation, the Prescription Drug Marketing Act of 1987, the Federal
Controlled Substances Act of 1970, the Food, Drug and Cosmetic Act and any
state Pharmacy Practices Acts, Controlled Substances Acts, Dangerous Drug Acts,
Food, Drug and Cosmetic Acts, all as amended to date).

                 "Leased Real Property" means the real property leased by the
Companies or the Subsidiaries as tenant, or for which the Companies or the
Subsidiaries have an option to enter into a lease as tenant, together with, to
the extent leased by the Companies or the Subsidiaries, all buildings and other
structures, facilities or improvements currently or hereafter located thereon,
all fixtures, systems, equipment and items of personal property of the
Companies or the Subsidiaries attached or appurtenant thereto, and all
easements, licenses, rights and appurtenances relating to the foregoing.

                 "Leases" means the leases for the Leased Real Property, copies
of which have been made available by the Seller to the Purchaser.
<PAGE>   10

                                       5

                 "Liabilities" means any and all debts, liabilities and
obligations, whether accrued or fixed, absolute or contingent, matured or
unmatured or determined or determinable.

                 "Licenses" means all of the licenses, permits and other
authorizations (including, but not limited to, pharmacy licenses, permits and
authorizations) required by a Governmental Authority for the operation of the
Business as conducted as of the date of this Agreement.

                 "Losses" of a Person means any and all losses, liabilities,
damages, claims, awards, judgments, costs and expenses (including, without
limitation, reasonable attorneys' fees) actually suffered or incurred by such
Person.

                 "Material Adverse Change" or "Material Adverse Effect" means
any change or effect that is materially adverse to the operations, business,
financial condition or results of operations of the Companies and the
Subsidiaries, taken as a whole, except for any such changes or effects
resulting from (i) changes in general economic, regulatory or political
conditions or changes that affect the institutional pharmacy business in
general and (ii) this Agreement or the transactions contemplated hereby or the
announcement hereof.

                 "Medco" means Medco Containment Services, Inc., a Delaware 
corporation.

                 "Merck" means Merck & Co., Inc., a New Jersey corporation.

                 "1994 Audited Balance Sheet" means the audited combined
balance sheet of the Companies and the Subsidiaries as of the 1994 Balance
Sheet Date, together with the notes thereon.

                 "1994 Audited Financial Statements" means the 1994 Audited
Balance Sheet and the audited combined statements of income, retained earnings
and cash flow of the Companies and the Subsidiaries for the fiscal year ended
June 30, 1994, together with the notes thereon and accompanying report of the
Seller's Accountants.

                 "1994 Balance Sheet Date" means June 30, 1994.

                 "Parent" means Beverly Enterprises, Inc., a Delaware 
corporation.

                 "Permitted Encumbrances" means (i) Encumbrances for inchoate
mechanics' and materialmen's liens for construction in progress and workmen's,
repairmen's, warehousemen's and carriers' liens arising in the ordinary course
of the Business which in the aggregate have a value of less than $100,000, (ii)
Encumbrances for Taxes not yet payable or for Taxes being contested in good
faith, (iii) Encumbrances arising out of, under or in connection with this
Agreement and (iv) Encumbrances and imperfections of title the
<PAGE>   11
                                       6

existence of which would not materially affect the use of the property subject
thereto, consistent with past practice.

                 "Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as any
syndicate or group that would be deemed to be a person under Section 13(d)(3)
of the Exchange Act.

                 "Proxy Statement" means the proxy statement to be furnished to
the stockholders of Synetic in connection with the solicitation of proxies by
the Board of Directors of Synetic for use at the Special Meeting.

                 "Purchase and Sale Agreement" means the agreement, dated as of
May 24, 1994, as the same may be amended from time to time, between Synetic and
Merck, a copy of which has been made available by Synetic to the Purchaser.

                 "Reliance Agreement" means the Stock Purchase Agreement, dated
as of February 3, 1993, by and among Louis S. Scianna, Peter P. Scianna, the
Louis S. Scianna Charitable Remainder Unitrust and the Peter P. Scianna
Charitable Remainder Unitrust and Synetic, a copy of which has been made
available to the Purchaser.

                 "Seller's Accountants" means Arthur Andersen & Co.,
independent accountants of the Seller,

                 "Special Committee" means the specially constituted committee
of the Board of Directors of the Seller established to review the Purchase and
Sale Agreement and the transactions contemplated thereby.

                 "Subsidiaries" means the Dunnington Subsidiaries and the
Alliance Subsidiaries (each of which corporations is individually referred to
as a "Subsidiary")

                 "Synetic Common Stock" means the common stock of the Seller,
par value $.01 per share

                 "Tax" or "Taxes" means all income, gross receipts, sales, use,
employment, franchise, profits, property or other taxes, fees, stamp taxes and
duties, assessments or charges of any kind whatsoever (whether payable directly
or by withholding), together with any interest and any penalties, additions to
tax or additional amounts imposed by any taxing authority with respect thereto.

                 "Year-End Combined Net Worth" means the total assets minus the
total liabilities of the Companies and the Subsidiaries, on a combined basis,
in each case as shown on the 1994 Audited Balance Sheet, plus the Year-End
Intercompany Amount.

                 "Year-End Intercompany Amount" means $2,686,000.
<PAGE>   12
                                       7

                 SECTION 1.02.    Other Defined Terms. The following terms have
the meanings defined for such terms in the Sections set forth below:

<TABLE>
<CAPTION>
Term                                                           Section
- ----                                                           -------
<S>                                                            <C>
Acquired Competing Business                                    5.08(a)
Acquisition Transaction                                        5.12
adjusted grossed-up basis                                      7 05(c)
Adjusting Amount                                               2.06(c)
Alliance Shares                                                Preamble
Alliance                                                       Preamble
Allocation                                                     7.05(c)
Benefit Plans                                                  3.15(a)
Closing                                                        2.03(a)
Closing Balance Sheet                                          2.06(b)
Closing Date                                                   2.03(a)
Companies                                                      Preamble
Company                                                        Preamble
Compete                                                        5.08(a)
Contest                                                        7.03(b)
Cowen                                                          3.20
deemed selling price                                           7.05(c)
Delivery Date                                                  2.08(b)
Designated Amount                                              2.06(c)
Dunnington                                                     Preamble
Dunnington Shares                                              Preamble
Escrow                                                         2.08(a)
Escrow Agent                                                   2.08(a)
Escrow Agreement                                               2.08(a)
Escrowed Amount                                                2.08(a)
Forms                                                          7.05(b)
Government Antitrust Authority                                 5.04(b)
HPS                                                            Preamble
HPS Shams                                                      Preamble
Indemnified Losses                                             2.08(a)
Independent Accounting Firm                                    2.06(d)
Intangible Property                                            3.13(a)
J. P. Morgan                                                   4.07
Material Contracts                                             3.18(a)
Nasdaq                                                         3.11
Non-Competition Period                                         5.08(a)
Other Entity                                                   7.01(f)
</TABLE>                                                       
<PAGE>   13
                                       8                       
                                                               
<TABLE>                                                        
<CAPTION>                                                      
Term                                                           Section
- ----                                                           -------
<S>                                                            <C>
Parent Guaranty                                                1113
Purchase Price                                                 2.02
Purchaser                                                      Preamble
Purchaser's Accountants                                        2.06(d)
Purchaser's Threshold Amount                                   9.02(b)
Retained Names and Marks                                       5.05
Section 338 Election                                           7.05(a)
Seller                                                         Preamble
Seller's Notice                                                5.04(c)
Seller's Threshold Amount                                      9.03(b)
Shares                                                         Preamble
significant Subsidiary                                         5.08(a)
Source Code and Documentation                                  5.09(a)
Special Meeting                                                3.17(a)
SPMS                                                           5.09(a)
SPMS Program                                                   5.09(a)
SPMS Transferee                                                5.09(a)
Subsidiary Shares                                              3.04(b)
Synetic                                                        Preamble
tax exempt use property                                        3.16
Territory                                                      5.8(a)
Threshold Amount                                               7.01(e)
Transferred Employees                                          6.01(a)
</TABLE>                                                       


                                   ARTICLE 11

                               PURCHASE AND SALE

                 SECTION 2.01.    Purchase and Sale. Upon the terms and subject
to the conditions set forth in this Agreement, the Seller agrees to sell to the
Purchaser, and the Purchaser agrees to purchase from the Seller, the Shares.

                 SECTION 2.02.    Purchase Price. The aggregate purchase price
(the "Purchase Price") for the Shares shall be $107,314,000 in cash or other
immediately available funds, subject to adjustment as provided in Sections 2.06
and 2.07. The Purchase Price shall be payable as provided in Section 2.03(c)
and, if applicable, Section 2.06 and Section 2.07.
<PAGE>   14
                 SECTION 2.03.    Closing.

                 (a)      Subject to the terms and conditions of this
Agreement, the sale and purchase of the Shares contemplated hereby shall take
place at a closing (the "Closing") to be held at 10:00 a.m., local time, on the
third Business Day following the later to occur of (i) the expiration or
termination of the applicable waiting periods under the HSR Act and (ii) the
satisfaction or waiver of all other conditions to the obligations of the
parties set forth in Article VIII, at the offices of Shearman & Sterling, 599
Lexington Avenue, New York. New York, or at such other time or on such other
date or at such other place as the Seller and the Purchaser may mutually agree
upon in writing (the day on which the Closing takes place being the "Closing
Date").

                 (b)      At the Closing, the Seller shall deliver or cause to
be delivered to the Purchaser: (i) stock certificates (in definitive form)
evidencing the Shares duly endorsed in blank or accompanied by stock powers
duly executed in blank and otherwise in proper form for transfer; (ii) the
certificate required to be delivered pursuant to Section 8.02; and (iii) all
other previously undelivered documents, instruments and writings required to be
delivered to the Purchaser by the Seller at or prior to the Closing pursuant to
this Agreement.

                 (c)      At the Closing, the Purchaser shall deliver to the
Seller: (i) the Purchase Price, less the Escrowed Amount (as defined in Section
2.08), by wire transfer in immediately available funds, to an account or
accounts designated at least two Business Days prior to the Closing Date by the
Seller in a written notice to the Purchaser, (ii) the certificate required to
be delivered pursuant to Section 8.01; and (iii) all other previously
undelivered documents, instruments and writings required to be delivered to the
Seller by the Purchaser at or prior to the Closing pursuant to this Agreement.

                 (d)      At the Closing, the Purchaser shall deliver to the
Escrow Agent the Escrowed Amount, by wire transfer in immediately available
funds, to an account designated at least two Business Days prior to the Closing
Date by the Escrow Agent in a written notice to the Purchaser.

                 (e)      Upon the Closing, the Seller will cause the existing
directors of the Companies and the Subsidiaries to resign from their respective
positions with such Companies and such Subsidiaries and the vacancies resulting
therefrom shall be filled by the Purchaser's designees immediately following
the Closing.

                 SECTION 2.04.    Assumption of Certain Liabilities of the
Seller and Medco. On the terms and subject to the conditions of this Agreement,
the Purchaser shall, on the Closing Date, assume all obligations of the Seller
and Medco under the Acquisition Agreements and shall pay, perform and discharge
when due all Liabilities of the Seller and Medco under the Acquisition
Agreements, including the Earn-Outs. Without limiting the generality of the
foregoing, the Purchaser shall, and shall cause the Companies and the
Subsidiaries, (i) to fulfill their respective obligations with respect to the
calculation of any
<PAGE>   15
                                       10

Earn-Out, (ii) to keep all books and records required to be kept pursuant to the
Acquisition Agreements in the manner required thereby, and (iii) to observe any
applicable covenants contained in the Acquisition Agreements. The Seller shall
indemnify and hold the Purchaser fully and promptly harmless in respect of any
amounts paid in accordance with the respective Acquisition Agreements in
satisfaction of such Earn-Outs, including but not limited to the Purchaser's
cost of defense (including the Purchaser's reasonable attorneys' fees and
expenses) in defending against any claims made by any party under the
Acquisition Agreements; provided, however, that the Seller shall have no
obligation to indemnify the Purchaser against any such amounts payable to the
extent resulting from (x) the Purchaser's breach of any provision of an
Acquisition Agreement or breach of the Purchaser's covenants contained in this
Section 2.04 and (y) any increase in the amount payable in respect of any
Earn-Out based on any fact or circumstance relating to the Purchaser and that
would not have been payable if the Purchaser had not acquired the Business. The
Purchaser and the Seller shall cooperate with and assist each other in the
calculation of the amount of any such Earn-Out and the Seller shall be given
reasonable access to the relevant books and records of the Companies and the
Subsidiaries for such purpose. The Purchaser and the Seller shall jointly
determine the amount of any such Earn-Out in accordance with the provisions of
the relevant Acquisition Agreement, with approval of the amount so calculated
not to be unreasonably withheld by either party .

                 SECTION 2.05.    Allocation of Purchase Price. The Purchaser
and the Seller shall allocate the Purchase Price to the Shares of the
respective Companies and to the Seller's noncompetition covenants on IRS Form
8594, in accordance with Internal Revenue Code Section 1060 and the regulations
thereunder; provided, however, that the Purchaser and the Seller hereby agree
that as of the date of this Agreement the fair market value of the Seller's
noncompetition covenants is $500,000, and that the allocation on said Form 8594
shall reflect such fair market value and hereby agree to allocate the remainder
of the Purchase Price among the Shares of the respective Companies in
accordance with Exhibit 2.05 hereto. Any adjustment to the Purchase Price or
other consideration paid pursuant to this Agreement shall result in an
appropriate adjustment to such allocation.

                 SECTION 2.06.    Purchase Price Adjustment.

                 (a)      The Purchase Price shall be subject to adjustment, if
any, after the Closing Date as specified in this Section 2.06 and in Section
2.07.

                 (b)      As soon as practicable (but in no event later than 60
calendar days following the Closing Date), the Seller shall prepare and deliver
to the Purchaser, at the Seller's expense, an audited combined balance sheet
for the Companies and the Subsidiaries (the "Closing Balance Sheet"), as of the
Closing Date. The Closing Balance Sheet shall be accompanied by the report
thereon of the Seller's Accountants, to the effect that, in their unqualified
opinion, the Closing Balance Sheet fairly presents the combined financial
position of the Companies and the Subsidiaries in accordance with GAAP applied
on a basis consistent with the preparation of the 1994 Audited Balance Sheet.
During the preparation of
<PAGE>   16

                                       11

the Closing Balance Sheet by the Seller and the period of any dispute provided
for in Section 2.06(d), the Purchaser shall provide the Seller and the Seller's
Accountants reasonable access to the books, records, facilities and employees
of the Companies and the Subsidiaries, and the Purchaser shall cooperate fully
with the Seller's Accountants, in each case to the extent required by the
Seller and the Seller's Accountants in order to prepare the Closing Balance
Sheet and to investigate the basis for any such dispute.  The Purchaser and its
representatives shall be given reasonable access to the books, records,
facilities and employees of the Seller, including copies of all supporting
documents and auditor's work papers used in the preparation of the Closing
Balance Sheet including, but not limited to, combining balance sheets and other
combining work papers, as necessary for them to review the Closing Balance
Sheet.

                 (c)      Subject to the limitations set forth in Section
2.06(d), within 30 Business Days after the date of receipt by the Purchaser of
the Closing Balance Sheet:

                 (i)      If the amount of the Closing Date Combined Net Worth
         is less than an amount equal to the sum of (A) the Year-End Combined
         Net Worth plus (B) the product of $100,000 multiplied by the number of
         months, including fractional months expressed as a percentage, based
         on a 30-day month, which shall have elapsed between the date of
         execution of this Agreement and the Closing Date (the sum of (A) and
         (B) calculated as provided above being hereinafter referred to as the
         "Adjusting Amount"), by more than $500,000 (the "Designated Amount"),
         the Seller shall immediately pay to the Purchaser, as an adjustment to
         the Purchase Price, in immediately available funds, an amount equal to
         (x) the Adjusting Amount minus (y) the sum of the amount of the
         Closing Date Combined Net Worth and the Designated Amount; and

                 (ii)     If the amount of the Closing Date Combined Net Worth
         is greater than the Adjusting Amount by more than the Designated
         Amount, the Purchaser shall immediately pay to the Seller, as an
         adjustment to the Purchase Price, in immediately available funds, an
         amount equal to (x) the amount of the Closing Date Combined Net Worth
         minus (y) the sum of the Adjusting Amount and the Designated Amount.

                 (d)      If not disputed by the Purchaser in accordance with
this Section 2.06(d), the Closing Balance Sheet delivered by the Seller to the
Purchaser shall be final, binding and conclusive on the parties hereto. The
Purchaser may dispute any amounts reflected on the Closing Balance Sheet to the
extent that the net effect of such disputed amounts in the aggregate would be
to change the Closing Date Combined Net Worth by more than the Designated
Amount, but only on the basis that the amounts reflected on the Closing Balance
Sheet were not arrived at in accordance with GAAP applied on a basis consistent
with the preparation of the 1994 Audited Balance Sheet; provided, however,
that the Purchaser shall notify the Seller and the Seller's Accountants in
writing of each disputed item, specifying the amount thereof in dispute and
setting forth, in detail, the basis for such dispute, within 30 Business Days
of the Purchaser's receipt of the Closing Balance Sheet. In
<PAGE>   17
                                       12

the event of such a dispute, each of the Seller and the Purchaser shall
negotiate in good faith to reconcile their differences. If such dispute has not
been resolved within 10 Business Days after the notice referred to in the
preceding sentence has been given, Ernst & Young LLP (the "Purchaser's
Accountants") and the Seller's Accountants shall attempt to reconcile their
differences, and any resolution by them as to any disputed amounts shall be
final, binding and conclusive on the parties hereto. If any such resolution by
the Purchaser's Accountants and the Seller's Accountants leaves in dispute
amounts the net effect of which in the aggregate would not be to change the
Closing Date Combined Net Worth by at least the Designated Amount, all the
amounts remaining in dispute shall then be deemed to have been resolved in
favor of the Closing Balance Sheet, and such resolution shall be final, binding
and conclusive on the parties hereto. If the Purchaser's Accountants and the
Seller's Accountants are unable to reach a resolution, leaving in dispute
amounts the net effect of which in the aggregate would change the Closing Date
Combined Net Worth by at least the Designated Amount, the Purchaser's
Accountants and the Seller's Accountants shall submit the items remaining in
dispute that the Purchaser shall be entitled to dispute by the terms of this
Section 2.06(d) for resolution to Deloitte & Touche or such other independent
accounting firm as may be mutually acceptable to the Seller and the Purchaser
(the "Independent Accounting Firm"), which shall, within 30 Business Days of
such submission, determine and report to the Seller and the Purchaser upon such
remaining disputed items, and such report shall have the legal effect of an
arbitration award and shall be final, binding and conclusive on the Seller and
the Purchaser provided, however, that no such report shall impair any remedies
available to either party under Article IX of this Agreement. The fees and
disbursements of the Independent Accounting Firm shall be allocated between the
Seller and the Purchaser in the same proportion that the aggregate amount of
such remaining disputed items so submitted to the Independent Accounting Firm
which is unsuccessfully disputed by each such party (as finally determined by
the Independent Accounting Firm) bears to the total amount of such remaining
disputed items so submitted. No adjustment to any amount payable by the Seller
or the Purchaser pursuant to Section 2.06(c) shall be made with respect to
amounts disputed by the Purchaser pursuant to this Section 2.06(d), unless the
net effect of the amounts successfully disputed by the Purchaser in the
aggregate is to change the Closing Date Combined Net Worth by at least the
Designated Amount, in which case such adjustment shall only be made in an
amount equal to any excess over the Designated Amount. Any amount that is
payable under Section 2.06(c), including, without limitation, any portion
thereof that is subject to dispute under this Section 2.06(d) shall be paid by
the Seller or the Purchaser, as the case may be, in immediately available
funds, within five Business Days following the resolution of such dispute and
in an amount in accordance with such resolution.

                 (e)      In acting to resolve any dispute pursuant to the
provisions of Section 2.06(d), the Purchaser's Accountants, the
Seller's Accountants and the Independent Accounting Firm shall be entitled to
the privileges and immunities of arbitrators.

                 (f)      Any payment required to be made by the Seller or the
Purchaser pursuant to Section 2.06(c) shall bear interest from the Closing Date
through the date of payment on the basis of the average of the daily rate of
interest publicly announced by
<PAGE>   18
                                       13

Citibank, N.A. in New York, New York from time to time as its base rate from
the Closing Date to the date of such payment.

                 SECTION 2.07. Intercompany Amounts.

                 (a)      If the Incremental Intercompany Amount is greater
than zero, the Seller shall pay to the Purchaser, as an adjustment to the
Purchase Price, an amount equal to the Incremental Intercompany Amount.

                 (b)      If the Incremental Intercompany Amount is less than
zero, the Purchaser shall pay to the Seller, as an adjustment to the Purchase
Price, an amount equal to the amount by which zero exceeds the Incremental
Intercompany Amount.

                 (c)      Any amount that is payable pursuant to the provisions
of this Section 2.07 shall be payable in immediately available funds within
five Business Days after delivery of the Closing Balance Sheet by the Seller to
the Purchaser.

                 SECTION 2.08. Escrow Account.

                 (a)      Within 15 Business Days after the date hereof, the
Seller and the Purchaser will agree on a form of Escrow Agreement (the "Escrow
Agreement") with Bank of New York or any other commercial bank having total
assets in excess of $1,000,000,000 chosen by the Purchaser and reasonably
acceptable to the Seller (the "Escrow Agent"). The Escrow Agreement shall
contain (i) the terms set forth in this Section 2.08, mutatis mutandis, (ii)
usual and customary provisions for the reasonable protection of the Escrow
Agent, as may be requested by the Escrow Agent and (iii) such other terms as
the parties thereto may mutually agree. Prior to the Closing, the Seller and
the Purchaser shall enter into the Escrow Agreement with the Escrow Agent. At
the Closing, a portion of the Purchase Price equal to $5,000,000 (the "Escrowed
Amount") is to be withheld and deposited into an escrow account (the "Escrow")
with the Escrow Agent, to be held as security for and, as applicable,
distributed pursuant to the terms of the Escrow Agreement to offset amounts
payable by the Seller pursuant to its obligation to indemnify the Purchaser
contained in Section 2.04, Article VII and Article IX of this Agreement (the
"Indemnified Losses").

                 (b)      If, during the term of the Escrow, the Purchaser
contends that it is entitled to receive, all or a part of the Escrowed Amount
still held by the Escrow Agent in accordance herewith, the Purchaser shall (i)
give the Escrow Agent written notice that the Purchaser contends in good faith
that all or a specified portion of the Escrowed Amount is required to offset
the Indemnified Losses, (ii) request such amount to be delivered to the
Purchaser on a specified date (the "Delivery Date"), not sooner than twenty
(20) Business Days after the later of delivery of a copy of such notice to the
Seller and to the Escrow Agent, and (iii) specify in reasonable detail the
grounds on which the claimed Indemnified Losses are based. The Purchaser shall
also certify to the Escrow Agent that a copy of the notice has been delivered
to the Seller accompanied by signed U.S. Postal Service return
<PAGE>   19
                                       14

receipts evidencing delivery of the notice by registered or certified mail to
the Seller or alternate proof of actual delivery acceptable to the Escrow
Agent. The Escrow Agent shall be entitled to rely upon such certification as
conclusive evidence that proper notice has been given to the Seller.

                 (c)      If, prior to the Delivery Date, the Escrow Agent has
not received written objection from the Seller in the form and manner specified
in paragraph (d) below, to the payment to the Purchaser of the amount requested
by the Purchaser, the Escrow Agent shall deliver to the Purchaser on the
Delivery Date the requested amount up to the amount of the Escrowed Amount held
by the Escrow Agent.

                 (d)      If, prior to the Delivery Date, the Escrow Agent
receives a written objection from the Seller to payment of the requested amount
to the Purchaser, accompanied by a certification to the Escrow Agent with a
copy delivered to the Purchaser in the same manner as specified for written
notice to be delivered by the Purchaser under paragraph (b) above, that the
Seller in good faith has reasonable grounds for disputing the amount or reasons
for such claim, (i) the Escrow Agent shall so advise the Purchaser and (ii) the
Escrow Agent shall continue to hold such amount in Escrow until receipt of
written instructions executed by each of the Purchaser and the Seller as to the
disposition of such amount. If, however, the Purchaser and the Seller are
unable to agree as to the disposition of such amount within twenty (20)
Business Days after the Delivery Date, the Escrow Agent shall be authorized to
interplead the requested amount (up to the Escrowed Amount held by the Escrow
Agent) into the registry of a court of competent jurisdiction in the Southern
District of New York, and stand fully discharged from further responsibilities
with respect to such amount.

                 (e)      All amounts received by the Escrow Agent to be held
in the Escrow shall be held by the Escrow Agent in an interest bearing account
or similar type of account or certificate of deposit with a bank reasonably
satisfactory to the Escrow Agent, the Purchaser and the Seller (which may be
the Escrow Agent) until delivery of the entire amount is required under the
terms of this Section 2.08. The Escrow Agent shall receive any increase and
shall hold the same in the Escrow in accordance herewith.

                 (f)      The term of the Escrow shall continue from the
Closing Date until the earlier of the date which is 120 days after the Closing
Date or until all Escrowed Amounts shall have been delivered by the Escrow
Agent under the Escrow Agreement. If and to the extent there are any funds
remaining as part of the Escrowed Amount on the date which is 120 days after
the Closing Date, such remaining portion shall be delivered forthwith to the
Seller, and the Escrow Agent shall have no further liabilities or
responsibilities under the Escrow Agreement to any Person.

                 (g)      The Seller and the Purchaser hereby agree to (i)
share equally in the payment of the Escrow Agent's reasonable compensation for
the services to be rendered under the Escrow Agreement; (ii) share equally in
the payment or reimbursement of the
<PAGE>   20
                                       15

Escrow Agent upon request for all expenses, disbursements and advances,
including reasonable attorneys' fees, incurred or made by it in connection with
carrying out its duties under the Escrow Agreement; and (iii) jointly and
severally indemnify the Escrow Agent for, and to hold it harmless against any
loss, liability or expense incurred without gross negligence or willful
misconduct on the part of the Escrow Agent, arising out of or in connection
with its performance of the Escrow provided for under the Escrow Agreement and
carrying out its duties under the Escrow Agreement, including the costs and
expenses of defending itself against any claim of liability.


                                  ARTICLE III

                  REPRESENTATIONS AND WARRANTIES OF THE SELLER

                 Except as set forth in the Disclosure Schedule, the Seller
represents and warrants to the Purchaser as follows:

                 SECTION 3.01.    Incorporation and Authority of the Seller.
The Seller is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has all necessary
corporate power and authority to enter into this Agreement, to carry out its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Seller, the performance by
the Seller of its obligations hereunder and the consummation by the Seller of
the transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of the Seller (other than the requisite approval
of the stockholders of the Seller under the DGCL). This Agreement has been duly
executed and delivered by the Seller, and (assuming due authorization,
execution and delivery by the Purchaser) this Agreement constitutes a legal,
valid and binding obligation of the Seller enforceable against the Seller in
accordance with its terms, subject to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors'
rights generally and subject, as to enforceability, to the effect of general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).

                 SECTION 3.02.    Incorporation and Qualification of the
Companies and Subsidiaries. Each Company and each Subsidiary is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has the requisite power and authority to own,
operate or lease the properties and assets now owned, operated or leased by it
and to carry on its business in all material respects as currently conducted by
such Company or Subsidiary, except for such failures which, when taken together
with all such failures, would not have a Material Adverse Effect. Section 3.02
of the Disclosure Schedule lists each jurisdiction where each Company and each
Subsidiary is qualified to do business as a foreign corporation. Each Company
and each Subsidiary is duly qualified as a foreign corporation to do business,
and is in good standing, in each jurisdiction listed in Section 3.02 of the
Disclosure Schedule, which are the only jurisdictions where the
<PAGE>   21
                                       16

character of its properties owned, operated or leased or the nature of its
activities makes such qualification necessary, except for such failures which,
when taken together with all other such failures, would not have a Material
Adverse Effect, True and complete copies of the certificate of incorporation
and bylaws (or equivalent organization documents) of each Company and each
Subsidiary, each of the foregoing as amended to the date of this Agreement,
have been made available for review by the Purchaser. Complete and accurate
copies of the minute books of the Companies and the Subsidiaries have been
provided by the Seller to the Purchaser. To the knowledge of the Seller, the
minutes contained therein accurately reflect all material corporate actions
voted upon by the stockholders and the board of directors of the respective
Companies and Subsidiaries during the period in which the Seller was the direct
or indirect owner of the outstanding common stock of the respective Companies
and Subsidiaries.

                 SECTION 3.03.    Capital Stock of the Companies. The Shares
constitute all the issued and outstanding shares of capital stock of the
Companies. The Shares have been duly authorized and validly issued and are
fully paid and nonassessable and were not issued in violation of any preemptive
rights. There are no options, warrants or rights of conversion or other rights,
agreements, arrangements or commitments relating to the capital stock of any
Company obligating any Company to issue or sell any of its shares of capital
stock. The Seller owns the Shares free and clear of all Encumbrances, except
for: (i) the Earn-Outs; (ii) any Encumbrances set forth in Section 3.03 of the
Disclosure Schedule and (iii) any Encumbrances arising out of, under or in
connection with this Agreement. There are no voting trusts, stockholder
agreements, proxies or other agreements in effect with respect to the voting or
transfer of the Shares.

                 SECTION 3.04.    Subsidiaries.

                 (a)      Other than the Subsidiaries, there are no other
corporations, partnerships, joint ventures, associations or other entities in
which any Company or Subsidiary owns, of record or beneficially, any direct or
indirect equity or other interest or any right (contingent or otherwise) to
acquire the same. No Company or Subsidiary is a member of (nor is any part of
the Business conducted through) any partnership, nor is any Company or
Subsidiary a participant in any joint venture or similar arrangement (other
than the Earn-Outs).

                 (b)      Section 3.04(b) of the Disclosure Schedule sets forth
the jurisdiction of incorporation of each Subsidiary, its authorized capital
stock, the number and type of its issued and outstanding shares of capital
stock, and the current ownership by the Companies and their respective
Subsidiaries of such shares (collectively, the "Subsidiary Shares"). The
Subsidiary Shares constitute all the issued and outstanding shares of capital
stock of the respective Subsidiaries. The Subsidiary Shares have been duly
authorized and validly issued and are fully paid and nonassessable and were not
issued in violation of any preemptive rights.  There are no options, warrants
or rights of conversion or other rights, agreements, arrangements or
commitments relating to the capital stock of any Subsidiary obligating any
<PAGE>   22
                                       17

Subsidiary to issue or sell any of its shares of capital stock. Either a
Company or another Subsidiary owns the Subsidiary Shares issued by the
respective Subsidiaries, free and clear of all Encumbrances, except (i) as set
forth in Section 3.04 of the Disclosure Schedule; (ii) the Earn-Outs; and (iii)
Encumbrances arising out of or in connection with this Agreement. There are no
voting trusts, stockholder agreements, proxies or other agreements in effect
with respect to the voting or transfer of the Subsidiary Shares.

                 SECTION 3.05.    No Conflict. Assuming all consents,
approvals, authorizations and other actions described in Section 3.11 have
been obtained and all filings and notifications listed in Section 3.11 of the
Disclosure Schedule have been made, and except as may result from any facts or
circumstances relating solely to the Purchaser, the execution, delivery and
performance of this Agreement by the Seller do not and will not (a) violate or
conflict with the Certificate of Incorporation or By-laws of the Seller, any
Company or any Subsidiary, (b) conflict with or violate any Law or Governmental
Order applicable to the Seller, any Company or any Subsidiary, except as would
not, individually or in the aggregate, have a Material Adverse Effect or (c)
result in any breach of, or constitute a default (or event which with the
giving of notice or lapse of time, or both, would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of any Encumbrance on the Shares or
on any of the assets or properties of any Company or any Subsidiary pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument relating to such assets or properties to
which the Seller, any Company or any Subsidiary is a party or by which any of
such assets or properties is bound or affected, except as would not,
individually or in the aggregate, have a Material Adverse Effect.

                 SECTION 3.06.    Financial Statements. The Seller has
delivered to the Purchaser the 1994 Audited Financial Statements (a copy of
which is included in Section 3.06 of the Disclosure Schedule). The 1994 Audited
Financial Statements have been prepared in accordance with GAAP in a manner
consistent with prior periods and present fairly, in all material respects, the
financial position, results of operations and cash flows of the Companies and
the Subsidiaries as at the date and for the period indicated.

                 SECTION 3.07.    Labor Matters. No Company or Subsidiary is a
party to any labor agreement with respect to its employees with any labor
organization, group or association. As of the date of this Agreement, there are
no representation proceedings pending with or, to the knowledge of the Seller,
threatened in writing by any labor organization or group of employees of any
Company or Subsidiary, nor are there, to the knowledge of the Seller, any
organizing activities involving any Company or Subsidiary pending with or
threatened in writing by any such organization or group. Except where the
failure to comply would not have a Material Adverse Effect, each Company and
each Subsidiary is in material compliance with all applicable Laws respecting
employment practices, terms and conditions of employment, discrimination,
safety and health, workers' compensation, wages, hours of work and the
collection and payment of withholding and/or social security taxes and similar
taxes. Except as would not have a Material Adverse Effect,
<PAGE>   23
                                       18

as of the date of this Agreement, (a) there is no unfair labor practice charge
or complaint against any Company or Subsidiary pending or, to the knowledge of
the Seller, threatened in writing before the National Labor Relations Board or
any comparable state agency, (b) there is no complaint, charge or claim pending
or, to the knowledge of the Seller, threatened in writing against any Company
or Subsidiary with any Governmental Authority, arising out of, in connection
with, or otherwise relating to the employment by any Company or Subsidiary of
any individual, and (c) there is no labor strike, labor disturbance or work
stoppage pending against any Company or Subsidiary. Except as set forth in
Section 3.07 of the Disclosure Schedule, as of the date of this Agreement there
are no claims for workers' compensation.

                 SECTION 3.08.    Absence of Certain Changes or Events. Since
the 1994 Balance Sheet Date and except as set forth in Section 3.08 of the
Disclosure Schedule or as contemplated by this Agreement, there has not been:

                 (a)      to the date of this Agreement, any damage,
         destruction or loss to any of the assets or properties of any Company
         or any Subsidiary involving a loss or diminution in value of an
         aggregate of more than $100,000;

                 (b)      to the date of this Agreement, any Encumbrance of any
         kind created on any properties or assets (whether tangible or
         intangible) of any Company or any Subsidiary, other than (i) Permitted
         Encumbrances, (ii) Encumbrances that will be released at or prior to
         the Closing and (iii) Encumbrances on assets having a value not
         exceeding $100,000 in the aggregate;

                 (c)      to the date of this Agreement, any sale, assignment,
         transfer, lease or other disposition or agreement to sell, assign,
         transfer, lease or otherwise dispose of any of the fixed assets of any
         Company or any Subsidiary, having an aggregate value exceeding
         $100,000;

                 (d)      to the date of this Agreement, any acquisition (by
         merger, consolidation, or acquisition of stock or assets) by any
         Company or Subsidiary of any corporation, partnership or other
         business organization or division thereof for consideration in excess
         of $100,000 in the aggregate;

                 (e)      to the date of this Agreement, (i) any incurrence by
         any Company or Subsidiary of any indebtedness for borrowed money
         (other than intercompany loans in the ordinary course of business,
         (ii) any issuance by any Company or Subsidiary of any debt securities
         or (iii) except in the ordinary course of business, any assumption,
         granting, guarantee or endorsement, or other accommodation arrangement
         making any Company or any Subsidiary responsible for, the Liabilities
         of any Person (other than another Company or Subsidiary), in the case
         of (i), (ii) and (iii) above, having an aggregate value exceeding
         $100,000;
<PAGE>   24
                                       19

                 (f)      any change in any method of accounting or accounting
         practice used by any Company or any Subsidiary, other than such
         changes required by GAAP;

                 (g)      any Material Adverse Change or, to the date of this
         Agreement, any change or effect that is materially adverse to the
         operations, business, financial condition, results of operations or
         business prospects of the Companies and the Subsidiaries, taken as a
         whole;

                 (h)      to the date of this Agreement, (i) any employment,    
         deferred compensation, severance or similar agreement entered
         into or amended by any Company or Subsidiary, except any employment
         agreement providing for compensation of less than $75,000 per annum
         entered into in the ordinary course of business, (ii) any increase in
         the compensation payable or to become payable by it to any of its
         directors, officers, employees, agents or representatives, (iii) any
         increase in the coverage or benefits available under any severance
         pay, termination pay, vacation pay, company awards, salary
         continuation or disability, sick leave, deferred compensation, bonus
         or other incentive compensation, insurance, pension or other employee
         benefit plan, payment or arrangement made to, for or with such
         directors, officers, employees, agents or representatives, other than,
         in the case of (ii) and (iii) above, normal increases in the ordinary
         course of business consistent with past practice and that in the
         aggregate have not resulted in a material increase in the benefits or
         compensation expense of the Companies or the Subsidiaries;

                 (i)      to the date of this Agreement, any transaction or
         Contract entered into by the Companies or the Subsidiaries requiring
         aggregate payments by the Companies and the Subsidiaries in excess of
         $100,000 per annum, other than Contracts to purchase inventory and
         supplies in the ordinary course consistent with past practice of the
         Companies and the Subsidiaries;

                 (j)      any failure by any Company or Subsidiary to pay and
         discharge trade payables within 90 days, except where disputed in good
         faith and except for any such payables subject to "special" dating
         terms provided by vendors;

                 (k)      to the date of this Agreement, any loans, advances or
         capital contributions by any Company or any Subsidiary to, or
         investments in, any Person, other than loans or advances (i) to
         employees which do not exceed $25,000 in the aggregate, (ii) made to a
         Company or a Subsidiary or (iii) made to Synetic or any other
         Affiliate of Synetic (including Merck and its Affiliates) and included
         in the Intercompany Amount;

                 (l)      to the date of this Agreement, any amendment,
         cancellation, termination, relinquishment, waiver or release by any
         Company or any Subsidiary of any Material Contract, except in the
         ordinary course of business consistent with past
<PAGE>   25
                                       20

         practice of the Companies or the Subsidiaries and as would not,
         individually or in the aggregate, have a Material Adverse Effect;

                 (m)      to the date of this Agreement, any Extraordinary Loss
         or Extraordinary Losses (as defined in Opinion No. 30 of the
         Accounting Principles Board of the American Institute of Certified
         Public Accountants and any amendments thereto) suffered by any Company
         or Subsidiary which would be required to be classified separately in
         the combined income statement of the Companies and the Subsidiaries
         under Paragraph 11 or Paragraph 24 of such Opinion No. 30;

                 (n)      to the date of this Agreement, any capital
         expenditures or capital additions or betterments made or committed to
         be made by any Company or Subsidiary in excess of $50,000 individually
         or $250,000 in the aggregate; or

                 (o)      any agreement to take any actions specified in this
         Section 3.08, except for this Agreement.

                 SECTION 3.09.    Absence of Litigation. Except as set forth in
Section 3.09 of the Disclosure Schedule, as of the date of this Agreement, (a)
there are no Actions pending or, to the knowledge of the Seller, threatened
against the Seller, any Company or any Subsidiary that question the validity of
this Agreement, any documents being delivered by the Seller in connection
herewith, or any action taken or to be taken by the Seller in connection with
the transactions contemplated hereby; (b) there are no Actions pending against
the Seller, any Company or any Subsidiary, or any of the assets or properties
of any Company or any Subsidiary that would, individually or in the aggregate,
have a Material Adverse Effect; and (c) there is no outstanding or, to the
knowledge of the Seller, threatened in writing Action of a Governmental
Authority against, affecting or naming the Companies, the Subsidiaries and
their respective assets and properties that would, individually or in the
aggregate, have a Material Adverse Effect.

                 SECTION 3.10.    Compliance with Laws. The Companies, the
Subsidiaries and the conduct of the Business are in compliance with all
applicable Laws, except (a) as set forth in Section 3.10 of the Disclosure
Schedule or (b) where the failure to comply would not have a Material Adverse
Effect. Neither the Seller nor any Company nor any Subsidiary has received any
written notice to the effect that the Seller or any Company or any Subsidiary
is not in compliance with any applicable Laws except (x) as set forth in
Section 3.10 of the Disclosure Schedule or (y) where the failure to comply
would not have a Material Adverse Effect.

                 SECTION 3.11.    Consents, Approvals, Licenses, Etc. No
consent, approval, authorization, license, order or permit of, or declaration,
filing or registration with, or notification to, any Governmental Authority, or
any other person or entity, is required to be made or obtained by the Seller,
the Companies, the Subsidiaries or any of their respective Affiliates in
connection with the execution, delivery and performance of this
<PAGE>   26
                                       21

Agreement and the consummation of the transactions contemplated hereby, except:
(a) as set forth in Section 3.11 of the Disclosure Schedule; (b) applicable
requirements, if any, of the DGCL, the Exchange Act, state securities or blue
sky laws, The Nasdaq Stock Market Inc. ("Nasdaq") and the HSR Act; (c) where
the failure to obtain such consents, approvals, authorizations, licenses,
orders or permits of, or to make such declarations, filings or registrations or
notifications would not, either individually or in the aggregate, prevent the
Seller from performing its obligations under this Agreement and would not have
a Material Adverse Effect; and (d) as may be necessary as a result of any facts
or circumstances relating solely to the Purchaser. As of the date of this
Agreement, all of the Licenses of each Company and each Subsidiary are in full
force and effect and the respective Company or Subsidiary is in compliance with
each such License, except as would not have a Material Adverse Effect.

                 SECTION 3.12.    Personal Property. Except as would not have a
Material Adverse Effect, the Companies and the Subsidiaries collectively own,
have a valid leasehold interest in or have legal right to use all of the
tangible personal property necessary to carry on the Business, free and clear
of all Encumbrances, except Permitted Encumbrances and Encumbrances reflected
on the 1994 Audited Financial Statements.

                 SECTION 3.13.    Intangible Property.

                 (a)      The term "Intangible Property" shall mean each
trademark, trade name, service mark, brand mark, brand name, computer program,
database, industrial design and copyright used by a Company or a Subsidiary in
connection with the Business.

                 (b)      Section 3.13(b) of the Disclosure Schedule lists all
Intangible Property necessary to the conduct of the Business and sets forth,
for any such Intangible Property that is not owned by a Company or a
Subsidiary, the name of the owner and the Contract(s) or other arrangements
under which any Company or Subsidiary uses such Intangible Property.

                 (c)      All of the Intangible Property listed in Section
3.13(b) of the Disclosure Schedule is owned by or licensed to a Company or a
Subsidiary. No person or entity has a right to receive a royalty or similar
payment in respect of any such Intangible Property pursuant to any contractual
arrangements entered into by a Company or a Subsidiary, and (iii) as of the
date of this Agreement, no Action is pending against any Company or Subsidiary
either (A) challenging or seeking to deny or restrict the use by any Company 
or Subsidiary of any of such Intangible Property or (B) alleging that any
service provided or products sold, or Intangible Properly used, are being
provided, sold or used in violation of any intangible property of any third
Person. There are no uses of Intangible Property in the ordinary course of the
Business that, to the knowledge of the Seller, violate or infringe upon any
intangible property owned by a third Person and, as of the date of this
Agreement, the Seller does not have knowledge of any infringement or violation
of the right of any Company or Subsidiary in or to the Intangible Property by
any third party.
<PAGE>   27
                                       22

                 SECTION 3.14.    Real Property.

                 (a)      No Company or Subsidiary owns any real property.

                 (b)      The Seller has delivered to the Purchaser true,
correct and complete copies of the Leases, including all material amendments,
modifications, supplements, side letters and consents affecting the obligations
of any party thereunder. Section 3.14(b) of the Disclosure Schedule lists each
parcel of Leased Real Property and identifies with respect to each such Lease,
the parties thereto, the address of such property subject to the Lease and a
summary of certain terms of such Lease. Except as disclosed in Section 3.14(b)
of the Disclosure Schedule or as would not have a Material Adverse Effect, the
Subsidiary or Company party to the respective Leases, as of the date of this
Agreement (i) has a valid and subsisting leasehold interest in each such Lease,
and (ii) is in undisturbed, actual and exclusive possession of all space that
it is currently entitled to possess under each such Lease and no rights adverse
to the rights of such Company or Subsidiary have, to the knowledge of the
Seller, been asserted by any third Persons.  With respect to those Leases that
were assigned or subleased to the Companies or the Subsidiaries by a third
party, all necessary consents to such assignments or subleases have been
obtained and delivered to the Purchaser. Except as set forth in Section
3.14(b) of the Disclosure Schedule or as would not have a Material Adverse
Effect: (i) none of the Leased Real Property is subject to any lease, sublease,
license or other agreement granting to any other Person any right to the use,
occupancy or enjoyment of the Leased Real Property or any part thereof. There
does not exist any actual or, to the knowledge of the Seller, threatened in
writing condemnation or eminent domain proceedings that affect any Leased Real
Property or any part thereof, and the Company and its Subsidiaries have not
received any written notice of the intention of any Governmental Authority or
other Person to take or use all or any part thereof. No Company nor any
Subsidiary is obligated under or a party to, any option, right of first refusal
or other contractual right to sell, assign or dispose of any Leased Real
Property or any portion thereof or interest therein.

                 (c)      Except as would not have a Material Adverse Effect:
(i) none of the Leased Real Property is subject to any lease, sublease, license
or other agreement granting to any other Person any right to the use, occupancy
or enjoyment of the Leased Real Property or any part thereof; (ii) each of the
Leases is in full force and effect and is valid and enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity), and
there is no defaUlt under any Lease either by the Company or the Subsidiary
party thereto or, to the knowledge of the Seller, by any other party thereto,
and no event has, to the knowledge of the Seller, occurred that with the lapse
of time or the giving of notice or both would constitute a default thereunder;
(iii) each of the Leases covers the entire estate it purports to cover; (iv)
no previous or current party to any such Lease has given notice of or made a
claim with respect to any breach or default thereunder; (v) the Leased Real
Property complies in all material
<PAGE>   28
                                       23

respects with all applicable Laws and no notice of violation of any Law has
been received by the Companies or the Subsidiaries or, to the best knowledge of
the Seller, has been issued by any Governmental Authority with respect to the
Leased Real Property; (vi) the Companies and the Subsidiaries have all material
certificates of occupancy and other Licenses of any Governmental Authority
necessary for the current use and operation by the Companies or the
Subsidiaries of the Leased Real Property; such Licenses have been validly
issued by the appropriate Governmental Authorities in compliance with all
applicable Laws, and the Companies and the Subsidiaries have complied with all
material conditions of such Licenses applicable to them; no default or
violation, or event that with the lapse of time or giving of notice or both
would become a default or violation, has occurred in the due observance of any
such License; all such Licenses are in full force and effect without further
consent or approval of any Person; the Seller does not have any knowledge of,
nor has any Company or any Subsidiary received, any written notice from any
Governmental Authority to the effect that there is lacking any such License
required in connection with the Company's or Subsidiary's current use or
operation of any Leased Real Property; (vii) no part of any Leased Real
Property is subject to any building or use restrictions that would restrict or
prevent the present use and operation of the Leased Real Property and the
Leased Real Property is properly and duly zoned for its current use by the
Companies or the Subsidiaries and such current use is in all respects a
conforming use by the Companies and the Subsidiaries; (viii) no Governmental
Authority having jurisdiction over any Leased Real Property has issued or, to
the best knowledge of the Seller, threatened in writing to issue any notice or
Governmental Order that materially and adversely affects the use or operation
of any Leased Real Property, or requires, as of the date hereof or a specified
date in the future, any material repairs or alterations or additions or
improvements thereto, or the payment or deduction of any money, fee, exaction
or property; (ix) the Seller does not know of any actual or pending imposition
of any assessments for public improvements with respect to any Leased Real
Property and, to the best knowledge of the Seller, no such improvements have
been constructed or planned that would be paid for by means of assessments
upon any Leased Real Property; (x) no labor has been performed or material
furnished for any portion of any Leased Real Property for which any Lien in
excess of $100,000 in value in the aggregate can be claimed; (xi) no
improvements constituting a part of any Leased Real Property encroach on real
property not leased by the Companies or the Subsidiaries, to the extent that
removal of such encroachment would materially impair the manner and extent of
the current use, occupancy and operation of such improvements or cost in excess
of $100,000 in the aggregate; (xii) all components of all improvements included
within the Leased Real Property, including, without limitation, the roofs and
structural elements thereof and the heating, ventilation, air conditioning,
plumbing, electrical, mechanical, sewer waste water, storm water, paving and
parking equipment, systems and facilities included therein, are in good
condition, working order and repair; (xiii) all water, gas, electrical, steam,
compressed air, telecommunication, sanitary and storm sewage lines and systems
and other similar systems Serving the Leased Real Property are installed and
operating and are sufficient to enable the Leased Real Properly to continue to
be used and operated in the manner currently being used and operated; (xiv)
neither the Leased Real Property nor portion thereof has suffered any material
damage by fire or other casualty that has not heretofore
<PAGE>   29
                                       24

been completely restored to its original condition; (xv) no portion of the
Leased Real Property is located in a special flood hazard area as designated by
any Governmental Authority; (xvi) no Company nor any Subsidiary has received
any written notice from any insurance company that has issued a policy with
respect to any Leased Real Property requesting performance of any structural or
other repairs or alterations to the Leased Real Property: (xvii) no Leased Real
Property is dependent for its access, operation or utility on any land,
building or other improvement not part of the Leased Real Property; (xviii) the
Leased Real Property abuts a publicly dedicated right of way and is otherwise
not dependent for ingress or egress on third party interests; and (xix) all
utility systems required in connection with use, occupancy and operation of the
Leased Real Property are supplied directly to the Leased Real Property by
facilities of public utilities, are sufficient for their present purposes, are
fully operational and in good working order, and are benefitted by customary
utility easements providing for the continued use and maintenance of such
systems.

                 SECTION 3.15.    Employee. Benefit Matters.

                 (a)      With respect to each employee benefit plan
(including, without limitation, any "employee benefit plan" as defined in
Section 3(3) of ERISA), program, arrangement and contract maintained or
contributed to by any Company or any Subsidiary (the "Benefit Plans"), the
Seller has made available to the Purchaser a copy of (i) the most recent annual
report (Form 5500) filed with the IRS if required, (ii) such Benefit Plan
document, if any, (iii) if applicable, each trust agreement relating to such
Benefit Plan, (iv) the most recent summary plan description for each Benefit
Plan for which a summary plan description is required and (v) the most recent
determination letter, if any, issued by the IRS with respect to any Benefit
Plan qualified under Section 401(a) of the Internal Revenue Code. Section
3.15(a) of the Disclosure Schedule sets forth a complete and accurate list of
all Benefit Plans as of the date of this Agreement.

                 (b)      With respect to the Benefit Plans, except as set
forth in Section 3.15(b) of the Disclosure Schedule, no event has occurred and,
to the knowledge of the Seller, there exists no condition or set of
circumstances, in connection with which any Company or Subsidiary could be
subject to any liability under the terms of such Benefit Plans, ERISA, the
Internal Revenue Code or any other applicable Law which would have a Material
Adverse Effect. No Benefit Plan is subject to Title IV of ERISA.

                 (C)      The Seller has made available to the Purchaser (i)
copies of all employment agreements in effect as of the date of this Agreement
with officers of the Companies and the Subsidiaries, (ii) copies of all
severance agreements, material programs and material policies of the Companies
and the Subsidiaries with or relating to their employees, and, (iii) copies of
all material plans, programs, agreements and other arrangements of the
Companies and the Subsidiaries with or relating to its employees which contain
change in control provisions.
<PAGE>   30
                                       25

                 (d)      Except as described in Section 3.15(d) of the
Disclosure Schedule or as otherwise required by Law, no Benefit Plan of any
Company or Subsidiary provides retiree medical or retiree life insurance
benefits to any person.

                 (e)      Except as described in Section 3.15(e) of the
Disclosure Schedule, all annual reports (Forms 5500) which, to the knowledge of
the Seller, are required to be filed with respect to Benefit Plans have been
promptly and properly filed or if such reports are not currently due will be
filed when due, or if such documents are currently due, timely extension of
such due date has been requested. Except as disclosed in Section 3.15(e) of the
Disclosure Schedule each Benefit Plan intended to qualify under Section 401 of
the Code has been determined by the Internal Revenue Service to so qualify as
of the date of such determination, and the Seller is not aware of any
circumstances which could affect such qualification.

                 (f)      As of the date of this Agreement, there are no
pending Actions relating to the Benefit Plans against the Company or any
Subsidiary (other than claims for benefits in the ordinary course), except as
disclosed in Section 3.15(f) of the Disclosure Schedule.

                 SECTION 3.16.    Taxes.  Except as set forth in Section 3.16 of
the Disclosure Schedule, all federal, state, local and foreign tax returns,
reports and statements required to be filed by each Company and Subsidiary have
been filed with the appropriate governmental agencies, and all taxes and other
impositions shown thereon to be due and payable have been paid prior to the
date on which any fine, penalty, interest or late charge may be added thereto
or for nonpayment thereon, or any such fine, penalty, interest or late charge
has been paid. All such returns, reports and statements are true, complete and
correct, and there are no material deficiencies in respect thereof. Each
Company and Subsidiary has paid when due and payable all taxes required to be
paid by it. Prior, proper and accurate amounts have been withheld by each
Company and Subsidiary from their respective employees for all periods in full
and complete compliance with the tax, Social Security and unemployment
withholding provisions of applicable federal, state, local and foreign law, and
such withholdings have been paid in a timely fashion to the respective
governmental agencies. Each Company and Subsidiary has mailed to the recipients
of payments made in the ordinary course of business and filed with the IRS or
appropriate Governmental Authority substantially all information returns
required to be filed in respect of such payments and no Company or Subsidiary
is liable for any material penalties for failure to file such information
returns nor are they liable for any material backup withholding in respect of
any such payments. The federal income tax returns of the consolidated group of
which each Company and Subsidiary is a member are currently being audited for
the taxable years ended June 1991 through June 1993; prior to becoming members
of such consolidated group Dunnington and HPS were acquired pursuant to asset
acquisitions and Alliance was an S corporation within the meaning of IRC
Section 1361. Section 3.16 of the Disclosure Schedule sets forth, for each
Company and Subsidiary, those taxable years for which its tax returns are
currently being audited by the IRS or any other applicable Governmental
Authority. Except as set forth in Section 3.16 of the Disclosure Schedule, no
consent extending the period of
<PAGE>   31
                                       26

limitations for assessment of any tax has been executed. Section 3.16 of the
Disclosure Schedule hereto sets forth each election made by each Company or
Subsidiary which has the effect of (i) deferring any item of gross income for
federal income tax purposes to a period later than the corresponding period for
which such item of income is reportable on the financial statements of the
Company or Subsidiary or (ii) accelerating any item of expense, loss or
deduction to a taxable period which is earlier than the corresponding period
for which such item of expense, loss or deduction is reportable on the
financial statements of the Company or Subsidiary. Section 3.16 of the
Disclosure Schedule sets forth every item, not otherwise included in the
preceding sentence, capitalized for financial statement purposes but deducted
on the tax return filed on or prior to the Closing Date. None of the Companies
nor any of their Subsidiaries has made an election to reduce basis in lieu of
recognizing any income pursuant to IRC Sections 108 and 1017. Except as set
forth in Section 3.16 of the Disclosure Schedule or as a result of the
transactions contemplated by this Agreement, no net operating loss or other tax
attribute is limited by IRC Section 382 or 383. None of the Companies nor any
of their Subsidiaries has filed a consent pursuant to IRC Section 341(f) or
agreed to have IRC Section 341(f)(2) apply to any dispositions of subsection
(f) assets (as such term defined in IRC Section 341(f(4)). None of the property
owned by the Companies or any of their Subsidiaries is property which such
Company is required to treat as being owned by any other person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended, and in effect immediately prior to the enactment of the Tax Reform Act
of 1986 or is "tax exempt use property" within the meaning of IRC Section
168(h). Except as set forth in Section 3.16 of the Disclosure Schedule, none of
the Companies nor any of their Subsidiaries have agreed or have been requested
to make any adjustment under IRC Section 481(a) by reason of a change in
accounting method or otherwise. Except as set forth in Section 3.16 of the
Disclosure Schedule, none of the Companies nor any of their Subsidiaries have
any obligation under any written tax sharing agreement.

                 SECTION 3.17.    Stockholder Vote and Special Committee
Approval.

                 (a)      Pursuant to the Purchase and Sale Agreement and
subject to the terms thereof, Synetic has agreed to take all action necessary
to call a Special Meeting of the stockholders of Synetic (including any
postponements or adjournments thereof, the "Special Meeting") in order to
consider and vote upon, among other things, a proposal to approve, in
accordance with the requirements of the DGCL, the sale of the Business by the
Seller.

                 (b)      The Special Committee has approved this Agreement and
the transactions contemplated hereby.



<PAGE>   32
                                       27

                 SECTION 3.18.    Material Contracts.

                 (a)      Section 3.18(a) of the Disclosure Schedule lists the
following Contracts (collectively, with the Leases listed in Section 3.14(b) of
the Disclosure Schedule, the "Material Contracts") in effect as of the date of
this Agreement to which any Company or Subsidiary is a party:

                 (i)      any Contract (other than the Leases listed in Section
         3.14(b) of the Disclosure Schedule) that the Seller reasonably
         anticipates will, in accordance with its terms, involve aggregate
         payments by any Company or Subsidiary of more than $100,000 within the
         12 month period following the date of this Agreement and that is not
         cancelable within 60 days without liability;

                 (ii)     any lease or leases of personal property involving
         any annual expense in excess of $50,000 per annum per lease or
         $250,000 per annum in the aggregate for any related group of leases
         and not cancelable within 60 days without liability;

                 (iii)    any Contracts containing covenants limiting the
         freedom of any Company or Subsidiary to engage in any line of business
         or compete with any Person after the Closing;

                 (iv)     any employment agreements or other agreements with
         any director, officer or key employee the term of which will not
         expire until more than three years after the date of this Agreement
         or that involve annual payments by any Company or Subsidiary in excess
         of $75,000 that are not terminable within 60 days without liability or
         penalty;

                 (v)      any joint venture agreement, shareholder agreement or
         similar arrangement;

                 (vi)     any Contract relating to indebtedness for borrowed
         money or capitalized leases, or other Contract in respect of which the
         Companies or the Subsidiaries are obligated in any way to provide
         funds in respect of, or to guarantee or assume, any debt, obligation
         or dividend of any person or entity, in each case, in excess of
         $50,000, other than Intercompany Amounts; and

                 (vii)    any indemnity arrangement arising in connection with
         any sale or disposition of assets (other than sales of assets in the
         ordinary course of business).

                 (b) Except as set forth on Section 3.18(b) of the Disclosure
Schedule, no Company or Subsidiary is (and, to the knowledge of the Seller, no
other party is), as of the date of this Agreement, in breach or violation of,
or default under, any of the Material Contracts, where such breach or violation
or default would have a Material Adverse Effect. Except as set forth on Section
3,18(b) of the Disclosure Schedule, each Material Contract is,
<PAGE>   33
                                       28

as of the date of this Agreement, a valid agreement, arrangement or commitment
of the Company or Subsidiary which is a party thereto, enforceable against such
Company or Subsidiary in accordance with its terms and, to the knowledge of the
Seller, is a valid agreement, arrangement or commitment of each other party
thereto, enforceable against such party in accordance with its terms, except in
each case where enforceability may be limited by bankruptcy, insolvency or
other similar laws affecting creditors' rights generally and, except where
enforceability is subject to the application of equitable principles or
remedies or as would not have a Material Adverse Effect.

                 SECTION 3.19.    Customers. Section 3.19 of the Disclosure
Schedule contains a complete and accurate list, as of the date of this
Agreement, of the 10 largest customers of the Companies and the Subsidiaries
taken as a whole in terms of revenues, or annualized revenues, during the
fiscal year ended on the 1994 Balance Sheet Date, showing the approximate total
sales by the Companies and the Subsidiaries to each such customer during such
period. Except as set forth in Section 3.19 of the Disclosure Schedule, from
the 1994 Balance Sheet Date through the date of this Agreement, (a) there has
not, to the knowledge of the Seller, been any change in the business
relationships of any Company or Subsidiary with any customers named in Section
3.19 of the Disclosure Schedule that would, in the aggregate, have a Material
Adverse Effect and (b) no Company or Subsidiary has received any written notice
from any one or more of such customers that said customer or customers intends
to terminate their business relationships with any Company or Subsidiary, which
termination would have a Material Adverse Effect.

                 SECTION 3.20.    Brokers. Except for Cowen & Co. ("Cowen"), no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Seller. The
Seller is solely responsible for the fees and expenses of Cowen.

                 SECTION 3.21.    Receivables.

                 (a)      Except as set forth in Section 3.21(a) of the
Disclosure Schedule, there are no employee advances and loans in excess of
$20,000 in the aggregate made by the Companies and the Subsidiaries as of the
date of this Agreement.

                 (b)      All accounts receivable of the Companies and the
Subsidiaries have arisen in the ordinary course of business consistent with past
practice. The accounts receivable of the Companies and the Subsidiaries are
reported on the 1994 Audited Financial Statements at their estimated aggregate
net realizable amounts. Provided that the past practice of the Companies and
the Subsidiaries is followed in connection with the collection of such accounts
receivable (as described in Section 3.21(b) of the Disclosure Schedule), such
accounts receivable are realizable at the aggregate value thereof reflected in
the Books and Records of the Companies and the Subsidiaries, net of reserves
therefor established in accordance with past practice.
<PAGE>   34
                                       29

                 SECTION 3.22.    Insurance.

                 (a)      Section 3.22(a) of the Disclosure Schedule sets forth
a list of all policies of insurance of any kind or nature covering the
Companies and the Subsidiaries or any of the employees of the Companies and the
Subsidiaries or their respective assets, including, without limitation,
policies of life, disability, fire, theft, workers compensation, employee
fidelity and other casualty and liability insurance. Section 3.22(a) of the
Disclosure Schedule sets forth for each such policy of insurance, (i) the name
of the provider thereof, (ii) the type of coverage, (iii) the policy number,
(iv) the term of the policy and (v) the amount of coverage provided thereby.
All such policies are in full force and effect and, with respect to such
policies which are occurrence based policies, will continue to provide coverage
following the Closing Date to the same extent provided prior to the Closing
Date for claims arising in connection with the operation of the business on or
prior to the Closing Date. The Seller has delivered or otherwise made available
to the Purchaser true, correct and complete copies of each such policy,
including all amendments, modifications, supplements or side letters relating
thereto.

                 (b)      At all times since the date of acquisition thereof by
the Seller, the Companies and the Subsidiaries have maintained insurance
covering the Companies and the Subsidiaries, the employees of and assets
comprising the Companies and the Subsidiaries comparable in terms of the type
of coverage to that maintained by the Companies and the Subsidiaries as of the
date hereof.

                 SECTION 3.23.    Transactions with Affiliates. Except as set
forth in Section 3.23 of the Disclosure Schedule, from the 1994 Balance Sheet
Date to the date of this Agreement, there have been no material transactions,
agreements or arrangements between the Companies and the Subsidiaries, on the
one hand, and (i) the Seller or any of its Affiliates, (ii) any director or
officer of the Seller or any of its Affiliates or (iii) any member of the
immediate family of any individual described in (i) or (ii) on the other.

                 SECTION 3.24.    No Undisclosed Liabilities. The Companies and
the Subsidiaries do not have any Liabilities, other than: (a) as reflected or
reserved against on the 1994 Audited Balance Sheet; (b) Liabilities with
respect to matters expressly disclosed pursuant to this Article III or covered
by a representation or warranty (other than this Section 3.24) and not required
to be disclosed by the terms of such representation or warranty; (c)
Liabilities incurred after the date of this Agreement and permitted under
Section 5.01 hereof; (d) Liabilities incurred from the 1994 Balance Sheet Date
to the date of this Agreement in the ordinary course of business consistent
with past practice; and (e) such additional Liabilities which individually or
in the aggregate would not have a Material Adverse Effect.

                 SECTION 3.25.    Environmental Compliance. As of the date of
this Agreement: (a) no toxic wastes or other toxic or hazardous substances or
materials have been released or disposed by the Companies and the Subsidiaries
on any of the Leased Real
<PAGE>   35
                                       30

Property in any manner or quantity that could reasonably be expected to give
rise to any material Liabilities of the Companies and the Subsidiaries; (b)
the Companies and the Subsidiaries have operated in accordance with all Laws
relating to pollution or protection of the environment, except for such
non-compliance which, singly or in the aggregate, would not have a Material
Adverse Effect; (c) to the Seller's knowledge, neither the Companies nor the
Subsidiaries have disposed or arranged (by contract, agreement or otherwise),
within the meaning of Section 107(a)(3) of CERCLA, for the disposal of any
hazardous substance that was generated or used by any of them at any off-site
location that at the time of such disposal was listed or proposed for inclusion
on the National Priority List promulgated pursuant to CERCLA or any list
promulgated by any Governmental Authority for the purpose of identifying sites
which pose an imminent danger to public health and safety; (d) except where the
failure to do so would not have a Material Adverse Effect, each of the
Companies and the Subsidiaries has all required federal, state and local
permits, licenses, certificates and approvals, with respect to their respective
operations relating to (i) air emissions, (ii) discharges to surface water or
groundwater, (iii) noise emissions, (iv) solid or liquid waste disposal, and
(v) the use, generation, storage, transportation or disposal of toxic hazardous
substances or wastes; and (e) the Seller has no knowledge that any Governmental
Authority has determined that there has been a hazardous discharge at or from
the Leased Real Property. The provisions of this Section 3.25 shall survive the
Closing and remain in full force and effect for a period of five years after
the Closing Date.

                                   ARTICLE IV

                REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

        The Purchaser represents and warrants to the Seller as follows:

                 SECTION 4.01.    Incorporation and Authority of the Purchaser.
The Purchaser is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of California and has all necessary
corporate power and authority to enter into this Agreement, to carry out its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Purchaser, the performance
by the Purchaser of its obligations hereunder and the consummation by the
Purchaser of the transactions contemplated hereby have been duly authorized
by all requisite corporate action on the part of the Purchaser. This Agreement
has been duly executed and delivered by the Purchaser, and (assuming due
authorization, execution and delivery by the Seller) constitutes a legal,
valid and binding obligation of the Purchaser enforceable against the
Purchaser in accordance with its terms, subject to the effect of any
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and subject, as to enforceability, to the
effect of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
<PAGE>   36
                                       31

                 SECTION 4.02.    No Conflict. Except as may remit from any
facts or circumstances relating solely to the Seller, the execution, delivery
and performance of this Agreement by the Purchaser does not and will not: (a)
violate or conflict with the Articles of Incorporation or By-laws (or other
similar applicable documents) of the Purchaser; (b) conflict with or violate
any Law or Governmental Order applicable to the Purchaser, except as would not,
individually or in the aggregate, have a material adverse effect on the
business or financial condition of the Purchaser or on the ability of the
Purchaser to consummate the transactions contemplated by this Agreement; or (c)
result in any breach of, or constitute a default (or event which with the
giving of notice or lapse of time, or both, would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of any Encumbrance on any of the
assets or properties of the Purchaser pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument relating to such assets or properties to which the Purchaser or any
of its subsidiaries is a party or by which any of such assets or properties is
bound or affected, except as would not, individually or in the aggregate, have
a material adverse effect on the business or financial condition of the
Purchaser or the ability of the Purchaser to consummate the transactions
contemplated by this Agreement.

                 SECTION 4.03.    Consents and Approvals. The execution and
delivery of this Agreement by the Purchaser does not, and the performance of
this Agreement by the Purchaser will not, require any consent, approval,
authorization or other action by, or filing with or notification to, any
governmental or regulatory authority, except (a) as described in a writing
delivered to the Seller by the Purchaser on the date of this Agreement, (b) the
notification and waiting period requirements of the HSR Act, (c) where failure
to obtain such consent, approval, authorization or action, or to make such
filing or notification, would not prevent or delay the Purchaser from
performing any of its material obligations under this Agreement and (d) as may
be necessary as a result of any facts or circumstances relating solely to the
Seller. The Purchaser is not aware of any fact or circumstances relating to the
Purchaser that would preclude the Purchaser from receiving any of the Licenses
or any other consent, approval or authorization listed in the writing described
in clause (a) of the previous sentence.

                 SECTION 4.04.    Absence of Litigation. No Action is pending
or, to the knowledge of the Purchaser, threatened in writing against the
Purchaser which seeks to delay or prevent the consummation of the transactions
contemplated hereby or which would be reasonably likely to materially and
adversely affect or restrict the Purchaser's ability to consummate the
transactions contemplated hereby.

                 SECTION 4.05.    Investment Purpose. The Purchaser is
acquiring the Shares solely for the purpose of investment and not with a view
to, or for offer or sale in connection with, any distribution thereof.
<PAGE>   37
                                       32

                 SECTION 4.06.    Financing. The Purchaser has all funds
necessary to consummate the transactions contemplated by this Agreement.

                 SECTION 4.07.    Brokers. Except for J. P. Morgan Securities,
Inc.  no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Purchaser. The Purchaser is solely responsible for the fees and expenses of
J. P. Morgan.

                                   ARTICLE V

                             ADDITIONAL AGREEMENTS

                 SECTION 5.01.    Conduct of Business prior to the Closing.

                 (a)      Unless the Purchaser otherwise agrees in writing
(such agreement not to be unreasonably withheld) and except as otherwise set
forth herein or in Section 5.01 of the Disclosure Schedule, between the date of
this Agreement and the Closing Date, the Seller will cause each Company and
each Subsidiary to:

                 (i)      operate only in the usual, regular and ordinary
         manner consistent with past practice, and use reasonable efforts to
         (A) preserve its present business operations, organization and
         goodwill, (B) keep available the services of its present i employees,
         (C) preserve its present relationships with persons having business
         dealings with it and (D) comply in all material respects with all
         contractual obligations under Material Contracts;

                 (ii)     use reasonable efforts to (A) maintain all of its
         assets and properties in their current condition, normal wear and tear
         excepted, and (B) maintain insurance upon all of such properties in
         such amounts and of such kinds comparable to that in effect on the date
         hereof (with insurers of substantially the same or better financial
         condition);

                 (iii)    maintain its books, accounts and records in the
         usual, regular and ordinary manner, on a basis consistent with past
         practice;

                 (iv)     maintain inventory of the Companies and the
         Subsidiaries of similar kind, amount and quality as that maintained in
         accordance with past practice and collect accounts receivable in
         accordance with past practice (as described in Section 3.21(b) of the
         Disclosure Schedule);

                 (v)      use reasonable efforts to maintain or cause to be
         maintained the Intangible Property listed on Schedule 3.13(b) in full
         force and effect through the
<PAGE>   38
                                       33

         Closing Date and to renew, to the extent permitted under applicable
         Law, any such Intangible Property subject to expiration on or prior to
         the Closing Date; 

                 (vi)     promptly notify the Purchaser of any (A) casualty
         losses or damages suffered by any Company or Subsidiary with respect
         to property and assets having an aggregate replacement cost of more
         than $100,000 or which could cause a Material Adverse Effect, whether
         or not such losses or damages are covered by insurance, and (B)
         material legal proceedings commenced by or against any Company or
         Subsidiaries or any legal proceeding commenced or threatened against
         the Seller, any Company or any Subsidiary relating to the transactions
         contemplated by this Agreement;

                 (vii)    promptly and accurately record in the corporate
         minute books of the Companies and the Subsidiaries all material
         corporate action taken on or after the date hereof by the
         stockholders or the board of directors (including committees thereof)
         of the Companies and the Subsidiaries, and promptly following such
         recordation deliver true, correct and complete copies thereof to the
         Purchaser;

                 (b) Except as expressly provided in this Agreement or in
Section 5.01 of the Disclosure Schedule, between the date of this Agreement and
the Closing Date, the Seller will not permit the Companies and the Subsidiaries
to do any of the following without the prior written consent of the Purchaser
(which consent shall not be unreasonably withheld):

                 (i)      enter into any merger or consolidation with any 
         corporation or other entity;

                 (ii)     make a loan, advance or capital contribution to, any
         other Person, except (A) to any Company or Subsidiary, (B) loans and
         advances in the ordinary course of business in accordance with past
         practice and (C) loans, advances and capital contributions of less
         than $50,000 individually and $200,000 in the aggregate;

                 (iii)    enter into or modify any Contract with any Person,
         other than (A) in the ordinary course of business consistent with past
         practice and (B) Contracts having requiring payments by the Companies
         and the Subsidiaries of less than $50,000 individually and $200,000 in
         the aggregate.

                 (iv)     make any renovation of the Leased Real Property
         involving an obligation of more than $100,000 in the aggregate on the
         part of the Company or the Subsidiaries;

                 (v)      (A) increase the rate of compensation payable or to
         become payable to any of its employees or agents, other than normal
         increases in the ordinary course of business consistent with past
         practice to Persons receiving cash compensation of less than $75,000
         per annum; (B) pay or provide for any bonus, stock option, stock
         purchase, profit-sharing, deferred compensation, pension, retirement
         or other similar
<PAGE>   39
                                      34

         payment or arrangement to or in respect of any such employee or agent
         except to the extent the Companies or the Subsidiaries are, on the
         date hereof, contractually obligated to do so or required to do so by
         Law and except as would not materially increase the benefits or
         compensation expense of the Companies and the Subsidiaries; and (C)
         enter into any new, or amend in any material respect any existing
         employment, severance, or consulting agreement, sales agency or other
         Contract with respect to the performance of personal services, except
         any such agreement providing for cash compensation of less than
         $75,000 per annum entered into or amended in the ordinary course of
         business;

                 (vi)     (A) voluntarily incur any obligation or liability
         other than (1) normal trade or business obligations incurred in the
         ordinary course of business in accordance with past practice and (2)
         obligations and liabilities to the Seller incurred in accordance with
         past practice; (B) sell, assign, transfer, convey, lease or otherwise
         dispose of any material assets of the Companies and the Subsidiaries,
         other than inventory of the Companies and the Subsidiaries in the
         ordinary course of business; (C) cancel or compromise any material
         debt or claim or waive or release any material right of the Companies
         or the Subsidiaries, except for adjustments or settlements made in the
         ordinary course of business consistent with past practice; (D) make
         any capital expenditure in excess of $100,000 individually or $250,000
         in the aggregate; or (E) enter into any collective bargaining
         agreement or enter into negotiations (the status of which will be
         regularly communicated to the Purchaser) with any labor organization
         relating to any of the employees of the Companies or the Subsidiaries;

                 (vii)    (A) create any Encumbrance on the Shares, and (B)
         create any Encumbrance of any kind on any properties or assets
         (whether tangible or intangible) of any Company or any Subsidiary,
         other than (1) Permitted Encumbrances, (2) Encumbrances that will be
         released at or prior to the Closing and (3) Encumbrances on assets 
         having a value not exceeding $100,000 in the aggregate;

                 (viii)   acquire (by merger, consolidation, or acquisition of
         stock or assets) any corporation, partnership or other business
         organization or division thereof;

                 (ix)     except where the aggregate value does not exceed
         $100,000 (net of any reduction in outstanding amounts under existing
         obligations), (A) incur any indebtedness for borrowed money (other
         than intercompany loans in the ordinary course of business, (B) issue
         any debt securities or (C) except in the ordinary course of business,
         assume, grant, guarantee or endorse, or make any other accommodation
         arrangement making any Company or any Subsidiary responsible for, the
         Liabilities of any Person (other than another Company or Subsidiary);

                 (x)      Change any method of accounting or accounting
         practice used by any Company or any Subsidiary, except as required by
         GAAP;
<PAGE>   40
                                       35

                 (xi)     issue or sell any additional shares of the capital
         stock of, or other equity interests in, any Company or any Subsidiary,
         or securities convertible into or exchangeable for such shares or
         equity interests, or issue or grant of any options, warrants, calls,
         subscription rights or other rights of any kind to acquire additional
         shares of such capital stock, such other equity interests, or such
         securities;

                 (xii)    declare, set aside or pay any dividend;

                 (xiii)   amend any Company's or Subsidiary's Certificate of
         Incorporation or By-laws or equivalent organization documents; or

                 (xiv)    agree to take any of the actions specified in this 
         Section 5.01(b).

                 SECTION 5.02.    Access to Information.

                 (a)      From the date of this Agreement until the Closing,
upon reasonable notice, the Seller shall, and shall cause the officers,
employees, auditors and agents of the Seller, the Companies and the
Subsidiaries to, (i) afford the officers, employees and authorized agents and
representatives of the Purchaser reasonable access, during normal business
hours, to the offices, properties, books and records of the Companies and the
Subsidiaries (including copies, as required) and (ii) furnish to the officers,
employees and authorized agents and representatives of the Purchaser such
additional financial and operating data and other information (including
combined financial statements and auditor's work papers, if any, relating
thereto) regarding the assets, properties, goodwill and business of the
Companies and the Subsidiaries as the Purchaser may from time to time
reasonably request in order to assist the Purchaser in fulfilling its
obligations under this Agreement and to facilitate the consummation of the
transfers contemplated hereby; provided, however, that the Purchaser shall not
unreasonably interfere with any of the businesses or operations of the Seller,
the Companies, the Subsidiaries or any Affiliate of the Seller or any Affiliate
of Merck.

                 (b)      The Purchaser agrees that it shall preserve and keep
all Books and Records in the Purchaser's possession for a period of at least
eight years from the Closing Date. After such eight-year period, before the
Purchaser shall dispose of any of such Books and Records, at least 90 calendar
days' prior written notice to such effect shall be given by the Purchaser to
the Seller, and the Seller shall be given an opportunity, at its cost and
expense, to remove and retain all or any part of such Books and Records as the
Seller may select.

                 (c)      Each party agrees that it will cooperate with and
make available to the other party, during normal business hours, all Books and
Records, information and employees (without substantial disruption of
employment) retained and remaining in existence after the Closing Date which
are necessary or useful in connection with any Tax inquiry, audit,
investigation or dispute, any litigation or investigation or any other matter
requiring
<PAGE>   41

                                       36



any such Books and Records, information or employees for any reasonable
business purpose. The party requesting any such Books and Records, information
or employees shall bear all of the out-of-pocket costs and expenses (including,
without limitation, attorneys' fees, but excluding reimbursement for salaries
and employee benefits) reasonably incurred in connection with providing such
Books and Records, information or employees.  The Seller may require certain
financial information relating to the Business for periods prior to the
Closing Date for the purpose of filing federal, state, local and foreign tax
returns and other governmental reports, and the Purchaser agrees to furnish
such information to the Seller at the Seller's request and expense.

                 SECTION 5.03.    Confidentiality.  The terms of the
Confidentiality Agreement are hereby incorporated herein by reference and shall
continue in full force and effect until the Closing, at which time such
Confidentiality Agreement and the obligations of the Purchaser under this
Section 5.03 shall terminate; provided, however, that the Confidentiality
Agreement shall terminate only in respect of that portion of the Proprietary
Information (as defined in the Confidentiality Agreement) exclusively relating
to the transactions contemplated by this Agreement.  If this Agreement is, for
any reason, terminated prior to the Closing, the Confidentiality Agreement
shall continue in full force and effect.

                 SECTION 5.04.    Regulatory and Other Authorizations;
Consents.

                 (a)      Each party hereto shall use all reasonable efforts to
obtain all authorizations, consents, orders and approvals of, and to give all
notices to and make all filings with, all Governmental Authorities and other
third parties that may be or become necessary for its execution and delivery
of, and the performance of its obligations pursuant to, this Agreement and will
cooperate fully with the other party in promptly seeking to obtain all such
authorizations, consents, orders and approvals, giving such notices, and making
such filings.  The Purchaser acknowledges that it shall be solely responsible
for obtaining the Licenses and all other consents, approvals and authorizations
referred to in the writing described in Section 4.03(a) and the Seller agrees
to assist the Purchaser in its efforts with respect thereto.  Each party
hereto agrees to make an appropriate filing of a Notification and Report Form
pursuant to the HSR Act with respect to the transactions contemplated hereby
within five Business Days of the date hereof and to supply promptly any
additional information and documentary material that may be requested pursuant
to the HSR Act.  The parties hereto acknowledge that time shall be of the
essence in this Agreement and agree not to take any action that will have the
effect of unreasonably delaying, impairing or impeding the receipt of any 
required authorizations, consents, orders or approvals.

                 (b)      The Purchaser shall take promptly all reasonable
actions deemed by the Purchaser in its good faith discretion to be necessary to
avoid or eliminate each and every impediment under any antitrust law that may
be asserted by any Governmental Authority with jurisdiction over the
enforcement of any applicable antitrust laws ("Government
<PAGE>   42
                                       37



Antitrust Authority") or any other party to the consummation of the acquisition
of the Shares by the Purchaser in accordance with the terms of this Agreement.

                 (c)      The Purchaser agrees that if, prior to the Closing,
the Purchaser or any of its Affiliates enters into any other agreement with
respect to any acquisition, merger, joint venture or similar transaction which
causes any Government Antitrust Authority to assert an impediment under any
antitrust law to the Purchaser's acquisition of the Shares, the Purchaser will
take all reasonable action as may be required with respect to such other
transaction in order to eliminate each and every impediment asserted by such
Government Antitrust Authority in a timely manner so as not to cause any
material delay in the Closing Date.  For purposes of this Section 5.04(c),
there shall be deemed to be a "material delay" if the Purchaser has not taken
all such reasonable action required to eliminate each and every such impediment
by the 30th day (but, in any event, not later than three Business Days prior to
February 15, 1994) after receipt by the Purchaser of a Seller's Notice.  A
"Seller's Notice" is a written notice in accordance with this Agreement from a
duly authorized officer of the Seller stating that the Seller is ready, willing
and able (but for the existence of any impediment to Closing asserted by any
Government Antitrust Authority) to consummate the Closing pursuant to the
terms of this Agreement.  In the event that there shall occur a "material
delay" within the meaning of this Section 5.04(c), in addition to any other
rights or remedies that may be available to the Seller, the closing condition
set forth in Section 8.02(a)(i) shall be deemed satisfied in the event that the
certificate delivered at Closing pursuant to Section 8.02(a)(iii) states that
the condition contained in Section 8.02(a)(i) was satisfied on the date of the
Seller's Notice.

                 (d)      The Purchaser will cooperate with the Seller in
obtaining any consents of landlords necessary or advisable in connection with
the transactions contemplated by this Agreement, including, without limitation,
providing to such landlords (i) guarantees by the Purchaser of the obligations
of any Company or any Subsidiary under the Leases and (ii) furnishing such
financial statements and other financial information with respect to the
Purchaser and the Parent as such landlords may reasonably request; provided,
however, that no material adjustments shall be made to any Lease without the
Purchaser's prior written consent, which consent shall not be unreasonably
withheld.

                 SECTION 5.05.         Use of the Seller's Name.  No interest
in or right to use the name "Synetic" or any derivation thereof or any logo,
trademark or trade name of the Seller (collectively, the "Retained Names and
Marks") is being transferred to the Purchaser pursuant to the transactions
contemplated hereby and such rights of the Companies and the Subsidiaries shall
terminate as of the Closing Date.  The Purchaser will, immediately following the
Closing Date, cause each Company and each Subsidiary to remove or obliterate
all the Retained Names and Marks from its signs, purchase orders, invoices,
sales orders, labels, letterheads, shipping documents, and other items and
materials, and not to put into use after the Closing Date any such items and
materials not in existence on the Closing Date that bear any Retained Name or
Mark or any name, mark or logo similar thereto.  Notwithstanding the foregoing,
the Companies and the Subsidiaries may, for a period of 60
<PAGE>   43
                                       38



calendar days following the Closing Date, use any purchase orders, invoices,
sales orders, labels, letterheads, or shipping documents existing on the
Closing Date that bear any Retained Name or Mark or any name, mark or logo
similar thereto, where the removal of any Retained Name or Mark or any such
similar name, mark or logo would be impractical; provided, that the Purchaser
shall place, or cause to be placed, a stamp, mark or other notation on any such
item that identifies the relevant Companies and Subsidiaries as Affiliates or
businesses of the Purchaser (and not of the Seller). The Purchaser agrees that
the Seller shall have no responsibility for claims by third parties arising out
of, or relating to, the use by the Purchaser, the Companies, the Subsidiaries
or any Affiliate thereof of any Retained Name or Mark after the Closing Date,
and the Purchaser agrees to indemnify and hold harmless the Seller from any and
all claims that may arise out of the use thereof by the Purchaser, the
Companies, the Subsidiaries or any Affiliate thereof.

                 SECTION 5.06.          Investigation.

                 (a)      The Purchaser acknowledges and agrees that it (i) has
made its own inquiry and investigation into, and, based thereon, has formed an
independent judgment concerning, the Companies, the Subsidiaries and the
Business, (ii) has been furnished with or given adequate access to such
information about the Companies, the Subsidiaries and the Business as it has
requested, and (iii) will not assert any claim against the Seller or any of its
directors, officers, employees, agents, stockholders, Affiliates, consultants,
counsel, accountants, investment bankers or representatives, or hold the Seller
or any such Persons liable, for any inaccuracies, misstatements or omissions
with respect to information (other than, with respect to the Companies, the
Subsidiaries and the Business, the representations and warranties contained in
this Agreement) furnished by the Seller or any such Persons concerning the
Seller, its Affiliates, the Companies, the Subsidiaries and the Business.

                 (b)      In connection with the Purchaser's investigation of
the Companies, the Subsidiaries and the Business, the Purchaser has received
from the Seller certain projections and other forecasts for the Companies and
the Subsidiaries and certain plan and budget, information.  The Purchaser
acknowledges that there are uncertainties inherent in attempting to make such
projections, forecasts, plans and budgets, that the Purchaser is familiar with
such uncertainties, that the Purchaser is taking full responsibility for making
its own evaluation of the adequacy and accuracy of all estimates, projections,
forecasts, plans and budgets so furnished to it, and that the Purchaser will
not assert any claim against the Seller or any of its directors, officers,
employees, agents, stockholders, affiliates, consultants, counsel, accountants,
investment bankers or representatives, or hold the Seller or any such persons
liable, with respect thereto.  Accordingly, the Seller makes no representation
or warranty with respect to any estimates, projections, forecasts, plans or
budgets referred to in this Section 5.06(b).
<PAGE>   44
                                       39



                 SECTION 5.07.          Stockholders' Meeting.

                 (a)      The Seller shall take all action necessary in
accordance with applicable Laws and its Certificate of Incorporation and
By-Laws to convene the Special Meeting. Subject to its fiduciary duties, the
Board of Directors of the Seller shall recommend approval of the proposals
contained in the Proxy Statement and the Seller shall take all lawful action to
solicit, and use all reasonable efforts to obtain, such approval.  None of the
information contained in the Proxy Statement will, at the time of the mailing
of such Proxy Statement and at the time of the Special Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.  If at
any time prior to the Special Meeting any event or circumstance relating to the
Seller or any of its subsidiaries, or its or their respective officers or
directors, should be discovered by the Seller which should be set forth in the
Proxy Statement to be used in connection with the Stockholders' Meeting, the
Seller shall promptly supplement the Proxy Statement.  The Seller represents
that all documents that the Seller is responsible for filing with the
Securities and Exchange Commission in connection with the transactions
contemplated by this Agreement and the Purchase and Sale Agreement will comply
as to form and substance in all material respects with the applicable
requirements of the Exchange Act, and the rules and regulations thereunder.

                 (b)      The Purchaser will supply such information about the
Purchaser and its Affiliates as may be required for inclusion or incorporation
by reference in the Proxy Statement and any supplement thereto.  None of such
information will, at the time of the mailing of such Proxy Statement and at the
time of the Stockholders' Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.

                 SECTION 5.08.          Non-Competition.

                 (a)      The Seller  acknowledges and agrees that the Business
is conducted in the States of Connecticut, Indiana, Massachusetts and Rhode
Island and that the reputation and goodwill of the Companies and the
Subsidiaries are an integral part of its business success throughout the
respective areas where they conduct their respective businesses.  As an
inducement for the Purchaser to enter into this Agreement, the Seller agrees
that for a period commencing on the Closing Date and ending on the fifth
anniversary of the Closing Date (the "Non-Competion Period"), except with the
Purchaser's prior written consent, the Seller shall not, directly or
indirectly, or through one or more Affiliates, own, manage, operate, join,
control or participate in the ownership, management, operation or control of,
any profit or non-profit business or organization in any part of the Territory
(as hereinafter defined) which,  directly or indirectly, Competes (as
hereinafter defined) with the Purchaser.  For purposes of this Section 5.08, a
profit or non-profit business or organization shall be deemed to "compete" with
the Purchaser if such business or organization engages in the          
<PAGE>   45
                                       40



business as engaged by any Company or any Subsidiary as of the Closing Date,
including but not limited to providing infusion therapy, distributing
urological, enternal and other health care products and supplies, providing
medical record keeping services, or providing prescription vending services and
consultant pharmacist services, in each case to nursing homes and other similar
long-term care facilities.  In addition, during the Non-Competition Period,
none of the Seller or any of its Affiliates shall (i) provide or assist any
other Person in the development or provision of an institutional pharmacy
management system using any material component or know-how involved in the
development of the SPMS for use by any Person engaged in the business of any
Company or Subsidiary (as described in the immediately preceding sentence) in
the United States, (ii) solicit, raid, entice or induce any person that
currently is, or at the Closing Date shall be (or, in the case of termination,
is at the time of termination), an employee of any Company or Subsidiary to
become employed by any Person (other than the Purchaser), or (iii) approach any
such employee for such purpose or authorize or participate with the taking of
such actions by any other Person, or assist or participate with any such Person
in taking such action; provided, however, the provisions of this sentence shall
not prohibit the Seller or its Affiliates from advertising generally,
including advertisements designed to attract new employees.  For purposes of
this Section 5.08, the term "Territory" means an area comprising the States of
Connecticut, Indiana, Massachusetts and Rhode Island.  Nothing contained in
this Section 5.08 shall prevent the Seller from acquiring any business that
competes with the Purchaser (the "Acquired Competing Business"), through
merger, stock purchase, acquisition of assets or otherwise, provided that (A)
such Acquired Competing Business constitutes a subsidiary or division (other
than a "significant Subsidiary" as such term is defned in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange Commission) of a
larger business acquired at the same time as the Acquired Competing Business,
which larger business does not compete with the Purchaser, and (B) such
Acquired Competing Business is sold to a Person who is not an Affiliate of the
Seller within one year from the date of acquisition thereof.

         (b) The Seller acknowledges that a breach of its covenants contained in
Section 5.08(a) may cause irreparable damage to the Purchaser, the exact amount
of which will be difficult to ascertain, and that the remedies at law for any 
such breach will be inadequate.  Accordingly, Seller agrees that if it breaches
any of the covenants contained in Section 5.08(a), in addition to any other 
remedy which may be available at law or in equity, the Purchaser shall be 
entitled to specific performance and injunctive relief against the Seller.

                 (c)      The parties further acknowledge that the time, scope,
geographic area and other provisions of Section 5.08(a) have been specifically
negotiated by sophisticated commercial parties and agree that all such
provisions are reasonable under the circumstances of the transactions
contemplated by this Agreement.  In the event that the agreements in Section
5.08(a) shall be determined by any court of competent jurisdiction to be
unenforceable by reason of their extending for too great a period of time or
over too great a geographical area or by reason of their being too extensive
in any other respect, they shall be interpreted to extend only over the maximum
period of time for which they may be

<PAGE>   46
                                       41





enforceable and/or over the maximum geographical area as to which they may be
enforceable and/or to the maximum extent in all other respects as to which they
may be enforceable, all as determined by such court in such action.

                 (d)      The existence of any claim or cause of action which
any party may have against another party shall not constitute a defense or bar
to the enforcement of any of the provisions of this Section 5.08, but such
claim or cause of action may be pursued through separate court action by such
party.

                 SECTION 5.09.         SPMS.

                 (a)  On or immediately prior to the Closing Date, the Seller
will transfer and assign to Dunnington or another Company designated by the
Purchaser (the "SPMS Transferee") all right, title and interest of the Seller
in and to the computer systems described and identified in Section 5.09 of the
Disclosure Schedule, and known as the Synetic Pharmacy Management System (the
"SPMS"), including (i) each and every computer program related thereto, and
each copy thereof, all conversions, derivative works, improvements,
modifications, translations and updates of all or part of the SPMS programs in
any form or medium (the "SPMS Programs") and (ii) all human-readable
programming lists, flow charts, input and output charts, instruction materials,
logic charts, technical manuals and other materials intended to assist either
users or programmers working with the SPMS Programs to use it (collectively, the
"Source Code and Documentation").  Section 5.09 of the Disclosure Schedule
includes a list of all license fees or similar charges payable to any third
party in connection with any software, computer program or similar product
required for use of the SPMS or otherwise included in the SPMS.  Upon transfer
of the SPMS as contemplated by this Section 5.09, all proprietary rights in the
SPMS shall become the sole and exclusive property of the SPMS Transferee, the
Seller shall retain no rights therein, copies thereof or documentation relating
thereto, in whatever form or medium in which such rights and documentation
exist, and the Seller and its Affiliates will purge all copies of the SPMS from
their computer systems and storage media and shall certify to the Purchaser in
writing promptly following the Closing that such copies have been purged.
This assignment and transfer includes the full and exclusive rights comprised
in the copyright of the work and all revisions thereof, including but not
limited to, the right, by itself or with others throughout the world, to
publish, republish and distribute the work and to prepare, publish and
distribute derivative works based thereon, in all languages and in all formats
and media of expression now known or later developed and to license or permit
others to do so.  The Seller recognizes and agrees that the SPMS is considered
to be a valuable asset and trade secret of the Seller and contains proprietary
and confidential information of the Seller, for which the purchase thereof, and
sole and exclusive rights of use pertaining thereto, has been bargained for and
agreed to be paid by the Purchaser as part of the Purchase Price.  The Seller
warrants that the SPMS has been developed, implemented and installed in a
proper and workmanlike manner and that, on the Closing Date, the Source Code
and Documentation, together with normal maintenance, updating and modifications
in the ordinary course of business consistent with past practice, will permit
the Purchaser to run the SPMS Programs
<PAGE>   47
                                       42



described in Section 5.09 of the Disclosure Schedule; provided that the Seller
does not warrant that the SPMS is error-free or that its use will be
uninterrupted. To the extent that the Companies and the Subsidiaries do not
have adequate personnel to accomplish the transition, the Seller agrees to,
and to use its reasonable efforts to cause Medco, as necessary, to cooperate
with and assist the Purchaser as reasonably required during a transition
period, not to exceed 90 days following the Closing Date without compensation
(but including reimbursement of the individuals involved for out of pocket
travel and related expenses, if any) and thereafter for an additional period of
90 days at agreed upon rates of compensation for the time and out of pocket
travel and related expenses of the individuals involved, to continue the use of
the SPMS under the management and control of the Purchaser in the Business at
the locations where it is currently in use, including, but not limited to, 
updating the Source Code and Documentation, so that such Source Code and
Documentation, together with normal maintenance, updating and modifications in
the ordinary course of business consistent with past practice, will permit the
Purchaser to run the SPMS Programs approval described in Section 5.09 of the
Disclosure Schedule.

                 (b)      From the date of this Agreement until the Closing
Date, (i) the Seller agrees to hold the SPMS in confidence to the same extent
that it protects other confidential and proprietary information and to take all
reasonable precautions consistent with its past practices to safeguard the
confidentiality of the SPMS, (ii) no portion of the SPMS may be disclosed,
furnished, transferred, displayed or otherwise made available by the Seller to
any Person other than the Purchaser or the Companies and the Subsidiaries. The
Seller agrees to take appropriate action by instruction, agreement and
otherwise with its Affiliates and its and their employees to inform them of the
trade secret proprietary and confidential nature of the SPMS and to obtain
their compliance with the provisions of this Section 5.09.

                 (c)      THE PURCHASER ACKNOWLEDGES THAT THE SELLER IS NOT A
MERCHANT WITH RESPECT TO THE SPMS.  EXCEPT AS PROVIDED IN SECTION 5.09(a), THE
SELLER MAKES AND THE PURCHASER RECEIVES NO WARRANTY, EXPRESS OR IMPLIED,
REGARDING THE SPMS AND THERE ARE EXRESSLY EXCLUDED ALL WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

                 (d)      In no event shall the Seller be liable for any
special, indirect, incidental or consequential damages, or any damages arising
out of or in connection with the use or performance of the SPMS, whether in
an action based on warranty, contract or tort, including negligence or strict
liability.

                 SECTION 5. 10.         Further Action.  Subject to the terms
and conditions herein provided, each of the parties hereto covenants and agrees
to use its best efforts to deliver or cause to be delivered such documents and
other papers and to take or cause to be taken such further actions as may be
necessary, proper or advisable under applicable Laws to consummate and make
effective the transactions contemplated hereby and to carry out the intent of
this Agreement.
<PAGE>   48
                                       43



                 SECTION 5.11.       Maintenance of Assets.  From and after
the date hereof and until the Closing, the Seller shall and shall cause the
Companies and the Subsidiaries to use reasonable efforts to maintain all of the
assets of the Companies and the Subsidiaries consisting of tangible property,
and all replacements thereof and improvements thereon, in their existing
condition, normal wear and tear excepted, and use, operate and maintain all of
such assets in a reasonable manner in conformity with past practice.  In the
event of material damage to or destruction of any of such assets prior to the
Closing Date, the Seller shall repair or replace such assets as soon as
reasonably practicable after such loss or damage.

                 SECTION 5.12.         Non-Solicitation.  The Seller covenants
that, unless this Agreement is terminated in accordance with its terms, from
the date hereof through the Closing Date it will not, and will not permit any
of its representatives to, (i) knowingly solicit, assist, initiate, facilitate
or encourage any inquiries, proposals, offers or bids from any other party
relating to an Acquisition Transaction (as defined below), or (ii) furnish or
cause to be furnished to any Person any non-public information relating to the
Companies, the Subsidiaries or any of the assets or the business of the
Companies or the Subsidiaries, other than in the ordinary course of business
consistent with past practice.  The Seller covenants that from and after the
date hereof until this Agreement is terminated in accordance with its terms, it
will not, directly or indirectly, enter into, or permit any of its
representatives or Affiliates to enter into, any agreement with any third party
for the acquisition of any of the Shares or any material portion of the assets
of the Companies or the Subsidiaries (an "Acquisition Transaction").  The
Seller covenants and agrees to inform the Purchaser in writing by facsimile
within twenty-four (24) hours following the receipt by it or any of its
Affiliates or representatives of any proposal, solicitation or bid (including
the terms thereof and the Person making such proposal, solicitation or bid) in
respect of any Acquisition Transaction.

                 SECTION 5.13.         Intercompany Debt.

                 (a)      The Purchaser shall cause the Companies and the
Subsidiaries to pay, immediately after the Closing, to the Seller in
immediately available funds, $2,686,000, representing an estimate of the
Intercompany Amount on the Closing Date.

                 (b)      If the Incremental Intercompany Amount is greater
than zero, the Purchaser shall cause the Companies and the Subsidiaries
to pay such amounts in accordance with such obligations within five Business
Days after delivery of the Closing Balance Sheet by the Seller to the
Purchaser.

                 (c)      If the Incremental Intercompany Amount is less than
zero, the Seller, shall pay to the Companies and the Subsidiaries an amount
equal to the amount by which zero exceeds the Incremental Intercompany Amount
within five Business Days after delivery of the Closing Balance Sheet by the
Seller to the Purchaser.
<PAGE>   49
                                       44



                 SECTION 5.14.        Other Information.  The Seller shall
provide to the Purchaser monthly income statements and balance sheets relating
to the Companies and the Subsidiaries as the Seller customarily prepares for
its own use, in the form customarily prepared on a regular basis.


                                   ARITCLE VI

                                EMPLOYEE MATTERS

                 SECTION 6.01.        Employees.

                 (a)      The Purchaser will treat employees of the Companies
and the Subsidiaries as of the Closing Date ("Transferred Employees") no less
favorably with respect to employee benefits than its own similarly situated
employees (excluding the Transferred Employees), as reasonably determined by
the Purchaser in good faith, and will cause the Companies and the Subsidiaries
to adopt on or promptly after the Closing Date employee benefit plans no less
favorable than the employee benefit plans generally available to such similarly
situated employees.

                 (b)      To the extent that service is relevant for purposes
of eligibility, participation, vesting or benefit accrual under any employee
benefit plan, program or arrangement established or maintained by the
Purchaser, the Companies or the Subsidiaries, the Purchaser shall cause such
Transferred Employees to be credited for service on or prior to the Closing
with any Company, any Subsidiary, the Seller or any of their respective
Affiliates (including Medco or any of its subsidiaries).  The Purchaser shall
not apply any preexisting condition provisions to deny or limit coverage for,
or participation by, any Transferred Employee under any health care coverage
benefit plan maintained by the Purchaser or any of its Affiliates to the extent
that such Transferred Employee is covered as of the Closing Date under a health
care coverage benefit plan of any Company or any Subsidiary providing health
care coverage benefits, provided that, if there is a dispute with respect to
the coverage of any such Transferred Employee based on a preexisting condition
provision under the health care coverage benefit plans of any Company or
Subsidiary, the health care coverage benefits plans of the Purchaser and its
Affiliates shall not be required to provide coverage with respect to such
preexisting condition unless and until it has been determined under the terms
of the health care coverage benefits plans of such Company or Subsidiary that
such employee's disputed pre-existing condition was covered under such health
care coverage benefits plans of the Companies and the Subsidiaries.

                 (c)      Seller agrees to reimburse Purchaser upon request for
the cost of salary and other employee benefits (excluding travel and
entertainment expenses) incurred by Purchaser with respect to Peter Scianna,
Louis Scianna and Elliott Tertes under (and for the initial term of) their
respective employment agreements as in effect on the Closing Date.
<PAGE>   50
                                       45



                 SECTION 6.02.         Certain Dunnington Agreements. The Seller
shall indemnify and hold harmless the Purchaser, the Companies and Subsidiaries
from and against any and all claims, liabilities, losses and expenses arising
out of or in connection with Section 9.5(c) of the Dunnington Agreement.  The
Purchaser shall reasonably cooperate (and shall cause the Companies and
Subsidiaries after the Closing Date to reasonably cooperate) in good faith with
the Seller to take any actions, without material cost to the Purchaser, the
Companies and Subsidiaries, necessary or desirable to extinguish or limit the
Seller's liability under this Section.

                 SECTION 6.03.         Survival.  The covenants and agreements
of the parties hereto contained in this Article VI shall survive the Closing
and shall remain in full force and effect until the expiration of all statutes
of limitations with respect to the respective matters set forth herein.

                                  ARTICLE VII

                                  TAX MATTERS

                 SECTION 7.01.         Tax Indemnities.

                 (a)      From and after the Closing Date, the Seller agrees to
indemnify, without any gross-up for Taxes, the Purchaser and each Company
against all Taxes (i) imposed on the Seller or any member of an affiliated
group with which the Seller files a consolidated or combined income tax return
(other than the Companies and the Subsidiaries) with respect to any taxable
period that ends on or before the Closing Date or includes the Closing Date, or
(ii) imposed on any Company or any Subsidiary with respect to any taxable
period or portion thereof that ends on or before the Closing Date; provided,
however, that no indemnity shall be provided under this Agreement for any Taxes
resulting from (x) a reduction in any net operating loss, capital loss or Tax
credit carryover allocable to any Company or any Subsidiary or (y) any
transaction of any Company or any Subsidiary occurring on or after the Closing
Date that is not in the ordinary course of business.  Any indemnity payment
made hereunder by the Seller to the Purchaser shall, in accordance with Section
7.08(a), be treated as an adjustment to the Purchase Price for tax purposes.

                 (b)      From and after the Closing Date, the Purchaser and
the respective Companies shall indemnify, without any gross-up for Taxes, the
Seller and its affiliates against all Taxes imposed on or with respect to such
Companies and their respective Subsidiaries that are not subject to
indemnification pursuant to paragraph (a) of this Section 7.01, including, but
not limited to, Taxes resulting from any transaction of any such Company and
its Subsidiaries occurring on or after the Closing Date that is not in the
ordinary course of business.  Any indemnity payment made hereunder by the 
Purchaser to the Seller shall, in accordance with Section 7.08(a), be treated as
an adjustment to the Purchase Price for tax purposes.
<PAGE>   51
                                       46



                 (c)      Payment by the indemnitor of any amount due under
this Section 7.01 shall be made within ten days following written notice by the
indemnitee that payment of such amounts to the appropriate Tax authority is
due, provided that the indemnitor shall not be required to make any payment
earlier than two days before it is due to the appropriate Tax authority.  In
the case of a Tax that is contested in accordance with the provisions of
Section 7.03, payment of the Tax to the appropriate Tax authority will not be
considered to be due earlier than the date a final determination to such effect
is made by the appropriate Taxing authority or a court.

                 (d)      For purposes of this Agreement, in the case of any
Tax that is imposed on a periodic basis and is payable for a period that begins
before the Closing Date and ends after the Closing Date, the portion of such
Taxes payable for the period ending on the Closing Date shall be (i) in the
case of any Tax other than a Tax based upon or measured by income, the amount
of such Tax for the entire period multiplied by a fraction, the numerator of
which is the number of days in the period ending on the Closing Date and the
denominator of which is the number of days in the entire period and (ii) in
the case of any Tax based upon or measured by income, the amount which would be
payable if the taxable year ended on the Closing Date.  Any credit shall be
prorated based upon the fraction employed in clause (i) of the next preceding
sentence.  In the case of any Tax based upon or measured by capital (including
net worth or long-term debt) or intangibles, any amount thereof required to be
allocated under this Section 7.01(d) shall be computed by reference to the
level of such items on the Closing Date.

                 (e)      The respective indemnification obligations of the
Purchaser and the Seller pursuant to this Section 7.01 shall not be effective
until the aggregate dollar amount of all Taxes which would otherwise be
indemnifiable pursuant to this Section 7.01 by such party exceeds $50,000
(the "Threshold Amount"), and then only to the extent such aggregate amount
exceeds the Threshold Amount.

                 (f)      Notwithstanding anything in this Section 7.01 to the
contrary, if any Company or any Subsidiary is included in a consolidated,
combined or unitary return or report, then (i) neither Purchaser nor Seller nor
any of their affiliates shall be responsible to the other in respect of any Tax
imposed on or measured by the income, property or business activities of any
entity other than any Company or any Subsidiary ("Other Entity"), and (ii)
there shall be no Threshold Amount applicable in respect of any such Other
Entity for purposes of Section 7.01(e).

                 SECTION 7.02.         Refunds and Tax Benefits.

                 (a)      The Purchaser shall promptly pay to the Seller any
refund or credit (including any interest paid or credited with respect thereto)
received by the Purchaser, any Company or any Subsidiary of Taxes (i) relating
to taxable periods or portions thereof ending on or before the Closing Date or
(ii) attributable to an amount paid by the Seller under Section 7.01 hereof.
The Purchaser shall, if the Seller so requests and at the Seller's
<PAGE>   52
                                       47



expense, cause the relevant entity to file for and obtain any refund to which
the Seller is entitled under this Section 7.02. The Purchaser shall permit the
Seller to control (at the Seller's expense) the prosecution of any such refund
claim, and shall cause the relevant entity to authorize by appropriate power of
attorney such persons as the Seller shall designate to represent such entity
with respect to such refund claim.

                 (b)      If the Purchaser and each Company shall not make an
election under Section 172(b)(3) of the Internal Revenue Code to relinquish the
entire carryback period with respect to any net operating loss, capital loss
or tax credit attributable to such Company or any of its Subsidiaries in any
taxable period beginning after the Closing Date that could be carried back to a
taxable year of such Company or any such Subsidiary ending on or before the
Closing Date, then the Purchaser or each Company or Subsidiary may carry back
such net operating loss, capital loss or tax credit, as the case may be, to
such prior taxable year, provided, however, that neither the Seller nor any
affiliate thereof shall be required to pay to the Purchaser, any Company, any
Subsidiary or any of their affiliates any refund or credit of Taxes that
results from such carryback or to otherwise indemnify the Purchaser, any
Company, any Subsidiary or any of their affiliates for such refund or credit of
Taxes.

                 SECTION 7.03.         Contests.

                 (a)      After the Closing Date, the Purchaser shall promptly
notify the Seller in writing of the commencement of any Tax audit or
administrative or judicial proceeding or of any demand or claim on the
Purchaser or any Company or Subsidiary which, if determined adversely to the
taxpayer or after the lapse of time would be grounds for indemnification under
Section 7.01. Such notice shall contain factual information (to the extent
known to the Purchaser or any Company or Subsidiary) describing the asserted
Tax liability in reasonable detail and shall include copies of any notice or
other document received from any taxing authority in respect of any such
asserted Tax liability.  If the Purchaser fails to give the Seller prompt
notice of an asserted Tax liability as required by this Section 7.03, then, if
the Seller is precluded by the failure to give prompt notice from contesting
the asserted Tax liability in both the administrative and judicial forums, then
the Seller shall not have any obligation to indemnify for any loss arising out
of such asserted Tax liability.

                 (b)      The Seller may elect to direct, through counsel of
its own choosing and at its own expense, any audit, claim for refund and
administrative or judicial proceeding involving any asserted liability with
respect to which indemnity may be sought under Section 7.01 (any such audit,
claim for refund or proceeding relating to an asserted Tax liability is
referred to herein as a "Contest").  If the Seller elects to direct a Contest,
it shall within 30 calendar days of receipt of the notice of asserted Tax
liability notify the Purchaser of its intent to do so, and the Purchaser shall
cooperate and shall cause each Company and/or Subsidiary or its respective
successor or successors to cooperate, at the Seller's expense, in each phase of
such Contest.  If the Seller elects not to direct the Contest, fails to notify
the Purchaser of its election as herein provided or contests its obligation to
indemnify under
<PAGE>   53
                                       48



Section 7.01, the Purchaser or any Company and/or Subsidiary may pay,
compromise or contest, at its own expense, such asserted Tax liability.  In any
event, the Seller may participate, at its own expense, in the Contest.  If
the Seller chooses to direct the Contest, the Purchaser shall promptly empower
and shall cause the Companies or their respective successors promptly to
empower (by power of attorney and such other documentation as may be necessary
and appropriate) such representatives of the Seller as it may designate to
represent the Purchaser or the Companies and/or the Subsidiaries or their
respective successors in the Contest insofar as the Contest involves an
asserted Tax liability for which the Seller would be liable under Section 7.01.

                 SECTION 7.04.          Preparation of Tax Returns.  The
Seller shall prepare and file any tax returns and schedules relating to the
Company and the Subsidiaries for the period ending on or before the Closing
Date.  Such returns and schedules shall be prepared on a basis consistent with
those prepared for prior tax years unless a different treatment of any item is
required by an intervening change in law.  The Purchaser shall prepare or cause
each Company to prepare any tax return relating to such Company or any of its
Subsidiaries for any period ending after the Closing Date.

                 SECTION 7.05.          Section 3.38(h)(10) Election.

                 (a)      The parties agree that in connection with the sale of
the Shares contemplated hereby, the parties shall cause an express election
pursuant to Section 338(h)(10) of the Internal Revenue Code (a "Section 338
Election") to be made in respect of the Companies and the Subsidiaries, and
shall comply with the rules and regulations applicable to such Section 338
Election.

                 (b)      For purposes of executing a Section 338 Election, on
or prior to the Closing Date, the Purchaser and the Seller (and/or other
entities as necessary) jointly shall execute four copies (three for the
Purchaser and one for the Seller) of Internal Revenue Service Form 8023 (or any
successor form) and all attachments required to be filed therewith pursuant to
applicable Treasury regulations.  The forms relating to the Section 338
Election for federal, state and local Tax purposes hereinafter shall be
referred to as the "Forms".  The Purchaser and the Seller agree that the Forms
shall be filed with the appropriate tax authorities not earlier than 60 days
before the latest date for the filing thereof.  At least 120 days prior to the
latest date for the filing of each Form, the Purchaser shall prepare and submit
to the Seller any necessary corrections, amendments or supplements to such Form
and the attachments thereto, as executed by the Purchaser and the Seller
(and/or other entities as necessary) on or before the Closing Date.  The
Purchaser shall not file any Form or the attachments thereto as corrected,
amended or supplemented unless it shall have obtained the Seller's consent
thereto, which consent shall not be unreasonably withheld.  On or prior to the
30th day after the Seller's receipt of such corrections, amendments or
supplements from the Purchaser, the Seller shall deliver to the Purchaser
either (A) its consent to such filing or (B) a written notice specifying in
reasonable detail all disputed items and the basis therefor.  If, within 30
days after the Purchaser's receipt of the written notice described in clause
(B)
<PAGE>   54
                                       49



above, the Purchaser and the Seller have been unable to resolve their
differences, any remaining disputed issues shall be submitted to a nationally
recognized independent public accounting firm in the United States (other than
a firm which then serves, has been selected to serve in the future or has
served within the past three years as the independent auditor for the Purchaser
or any of its affiliates) selected by the Purchaser, and reasonably acceptable
to the Seller, to resolve in a final binding manner after hearing the views of
both parties. In that event, the Purchaser and the Seller shall execute and
consent to the filing of the corrected, amended or supplemented Form in the
manner determined by such accounting firm.  In no event, however, shall the
Forms be filed later than 15 days before they are due. The fees and expenses
of the accounting firm shall be shared equally.

                 (c)      For purposes of making a Section 338 Election, the
Purchaser and the Seller shall agree upon an allocation of the Purchaser's
"adjusted grossed-up basis" in the Shares (within the meaning of the
Treasury Regulations under section 338 of the Internal Revenue Code) to the
tangible and intangible assets of the Companies and the Subsidiaries as of the
Closing Date (the "Allocation").  The Allocation shall be binding upon the
Purchaser and the Seller for purposes of allocating the "deemed selling price"
(within the meaning of the Treasury Regulations) among the assets of the
Companies and the Subsidiaries.  Neither party shall file any tax return, or
take a position with a Tax authority, that is inconsistent with the Allocation.
If the Purchaser and Seller shall not be able to agree to the Allocation, they
shall submit any dispute to Deloitte & Touche or such other independent
accounting firm as may be mutually acceptable to the Seller and the Purchaser
to resolve all disputed matters related to the Allocation, and such resolution
shall be binding on both parties.

                 SECTION 7.06.         Cooperation and Exchange of Informa-
tion. The Seller and the Purchaser will provide each other with such
cooperation and information as either of them reasonably may request of the
other in filing any tax return, amended return or claim for refund, determining
a liability for Taxes or a right to a refund of Taxes or participating in or
conducting any audit or other proceeding in respect of Taxes.  Such cooperation
and information shall include providing copies of relevant tax returns or
portions thereof, together with accompanying schedules and related work papers
and documents relating to rulings or other determinations by taxing
authorities. Each party shall make its employees available on a mutually
convenient basis to provide explanations of any documents or information
provided hereunder.  Each party will retain all returns, schedules and work
papers and all material records or other documents relating to Tax matters of
the Companies for the taxable period first ending after the Closing Date and
for all prior taxable periods until the later of (i) the expiration of the
statute of limitations of the taxable periods to which such returns and other
documents relate, without regard to extensions except to the extent notified by
the other party in writing of such extensions for the respective Tax periods,
or (ii) eight years following the due date (without extension) for such
returns.  Any information obtained under this Section 7.06 shall be kept
confidential, except as may be otherwise necessary in connection with the
filing of returns or claims for refund or in conducting an audit or other
proceeding.
<PAGE>   55
                                       50



                 SECTION 7.07.          Conveyance Taxes.  The Purchaser 
agrees to assume liability for and to pay all sales, transfer, stamp, stock 
transfer, real property transfer or gains and similar Taxes incurred as a 
result of the sale of the Shares contemplated hereby.

                 SECTION 7.08.          Miscellaneous.

                 (a)      The parties agree to treat all payments made under
this Article VII, under any other indemnity provision contained in this 
Agreement, and for any misrepresentations or breach of warranties or covenants 
as adjustments to the Purchase Price for Tax purposes.

                 (b)      Except as expressly provided otherwise and except for
the representations contained in Section 3.16 of this Agreement, this Article 
VII shall be the sole provision governing Tax matters and indemnities therefor
under this Agreement.

                 (c)      For purposes of this Article VII, all references to
the Purchaser, the Seller, the Companies and the Subsidiaries include 
successors.

                 (d)      The covenants and agreements of the parties hereto
contained in this Article VII shall survive the Closing and shall remain in 
full force and effect until the expiration of all statutes of limitations 
with respect to any Taxes that would be indemnifiable by the Seller under 
Section 7.01(a) of this Agreement or by the Purchaser under Section 7.01(b) of 
this Agreement.


                                  ARTICLE VIII

                             CONDITIONS TO CLOSING

               SECTION 8.01.          Conditions to Obligations of the Seller.
The obligations of the Seller to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment or waiver, at or prior to
the Closing, of each of the following conditions:

              (a)         Representations and Warranties; Covenants. (i) The
         representations and warranties of the Purchaser contained in this
         Agreement shall be true and correct in all material respects as of the
         Closing, with the same force and effect as if made as of the Closing
         (or, in the case of representations and warranties of the Purchaser
         which address matters only as of a particular date, as of such date)
         except where the failure to be so true and correct would not have a
         material adverse effect on the ability of the Purchaser to consummate
         the transactions contemplated by this Agreement; (ii) the covenants
         and agreements contained in this Agreement to be complied with by the
         Purchaser at or prior to the Closing shall have been complied with in
         all material respects except where the failure to so comply would not
         have a material adverse effect on the ability of the Purchaser to
         consummate the transactions
<PAGE>   56

                                       51



         contemplated by this Agreement; and (iii) the Seller shall have
         received a certificate of the Purchaser as to the matters set forth in
         clauses (i) and (ii) above signed by a duly authorized officer of the
         Purchaser;

              (b)         HSR Act.  Any waiting period (and any extension
         thereof) under the HSR Act applicable to the purchase of the Shares
         contemplated hereby shall have expired or shall have been terminated;

              (c)         No Order.  No Governmental Authority shall have
         enacted, issued, promulgated, enforced or entered any statute, rule,
         regulation or other Governmental Order which is in effect and has the
         effect of making the transactions contemplated by this Agreement
         illegal or otherwise prohibiting consummation of such transactions
         and no Governmental Authority has threatened in writing to bring an
         Action seeking any such Governmental Order, which threat has not been
         rescinded; provided, however, that the provisions of this Section
         8.01(c) shall not apply if the Seller has directly or indirectly
         solicited or encouraged any such action;

              (d)         Stockholder Votes.  The sale of the Business by the
         Seller and the Purchase and Sale Agreement and the transactions
         contemplated thereby shall have been approved by the votes of the
         stockholders of the Seller required pursuant to the DGCL; and

              (e)         Opinion of the Purchaser's Counsel.  The Seller shall
         have received an opinion or opinions of Weil, Gotshal & Manges,
         counsel for the Purchaser, and the respective General Counsels of the
         Purchaser and the Parent, dated the Closing Date, in the forms
         previously agreed to by the Seller and the Purchaser.

              SECTION 8.02.         Conditions to Obligations of the Purchaser.
The obligations of the Purchaser to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment or waiver, at or prior to
the Closing, of each of the following conditions:

              (a)         Representations and Warranties: Covenants. (i) The
         representations and warranties of the Seller contained in this
         Agreement shall be true and correct in all material respects as of the
         Closing, with the same force and effect as if made as of the Closing
         (or, in the case of representations and warranties of the Seller which
         address matters only as of a particular date, as of such date)
         except where the failure to be so true and correct would not have a
         Material Adverse Effect; (ii) the covenants and agreements contained
         in this Agreement to be complied with by Seller at or prior to the
         Closing shall have been complied with in all material respects, except
         where the failure to so comply would not have a Material Adverse
         Effect; and (iii) the Purchaser shall have received a certificate of
         the Seller as to the matters set forth in clauses (i) and (ii) above
         signed by a duly authorized officer of the Seller;
<PAGE>   57
                                       52



              (b)         HSR Act.  Any waiting period (and any extension
         thereof) under the HSR Act applicable to the purchase of the Shares
         contemplated hereby shall have expired or shall have been terminated;

              (c)         No Order.  No Governmental Authority shall have
         enacted, issued, promulgated, enforced or entered any statute, rule,
         regulation, injunction or other Governmental Order which is in effect
         and has the effect of making the transactions contemplated by this
         Agreement illegal or otherwise prohibiting consummation of such
         transactions and no Governmental Authority has threatened in writing
         to bring an Action seeking any such Governmental Order, which threat
         has not been rescinded; provided, however, that the provisions of this
         Section 8.02(c) shall not apply if the Purchaser has directly or
         indirectly solicited or encouraged any such action;

              (d)         Stockholder Votes.  The sale of the Business by the
         Seller and the Purchase and Sale Agreement and the transactions
         contemplated thereby shall have been approved by the votes of the
         stockholders of the Seller required pursuant to the DGCL; and

              (e)         Opinion of Seller's Counsel.  The Purchaser shall
         have received an opinion or opinions of Shearman & Sterling, counsel
         for the Seller, dated the Closing Date, in the form previously agreed
         to by the Seller and the Purchaser.


                                   ARTICLE IX

                                INDEMNIFICATION

          SECTION 9.01.          Survival.  Subject to the limitations and
other provisions of this Agreement, the representations, warranties, covenants
and agreements of the parties hereto contained herein shall survive the
Closing and shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Seller or the Purchaser, for a period
of 18 months after the Closing Date; provided, however, that the
representations, warranties, covenants and agreements set forth in Sections
2.04, 2.05, 2.06, 2.08, 3.16, 3.25, 5.02(b), 5.03, 5.05, 5.06, 5.08, 5.09 and
5.10, and Articles VI, VII, and IX shall remain in full force and effect for
the applicable periods specified in the respective Sections or Articles or, if
no such period is specified, indefinitely; and provided further that the
representations and warranties and covenants set forth in Sections 3.07, 3.15
and 5.02(c) shall remain in full force and effect until the termination of all
liabilities arising from the subject matter thereof pursuant to all applicable
statutes of limitations and the provisions of Article XI shall survive until
the last to survive of the other provisions of this Agreement.

          SECTION 9.02.          Indemnification by the Purchaser.

          (a)    The Purchaser agrees, subject to the other terms and
conditions of this Agreement and without gross-up for Taxes, to indemnify the
Seller against and hold the Seller harmless from all Losses to the Seller
arising out of (i) the breach of or any inaccuracy in any representation,
warranty, covenant or agreement of the Purchaser herein (other than Article
VII, it being understood that the sole remedy for breach thereof shall be
pursuant to Article VII).  Anything in Section 9.01 to the contrary
notwithstanding no claim
<PAGE>   58
                                       53



may be asserted nor may any action be commenced against the Purchaser for
breach of any representation, warranty, covenant or a reement contained herein,
unless written notice of such claim or action is received by the Purchaser
describing in detail the facts and circumstances with respect to the subject
matter of such claim or action on or prior to the date on which the
representation, warranty, covenant or agreement on which such claim or action
is based ceases to survive as set forth in Section 9.01, irrespective of
whether the subject matter of such claim or action shall have occurred before
or after such date.

          (b)    The indemnification obligations of the Purchaser pursuant to
Section 9.02(a) shall not be effective until the aggregate dollar amount of all
Losses which would otherwise be indemnifiable pursuant to Section 9.02(a)
exceeds $500,000 (the "Purchaser's Threshold Amount"), and then only to the
extent such aggregate amount exceeds the Purchaser's Threshold Amount.  In
addition, no claim may be made against the Purchaser for indemnification
pursuant to Section 9.02(a) with respect to any individual item of Loss, unless
such item exceeds $15,000 or any related group of items, unless such related
group of items exceeds $50,000, nor shall any such item or related group of
items be applied to or considered part of the Purchaser's Threshold Amount. 
The indemnification obligations of the Purchaser pursuant to this Section 9.02
shall be effective only until the dollar amount paid in respect of the Losses
indemnified against under this Section 9.02 aggregates to an amount equal to 
$110,000,000.  For the purposes of this Section 9.02(b), in computing such
individual or aggregate amounts of claims, the amount of each claim shall be
deemed to be an amount (i) net of any Tax benefit to the Seller or any
Affiliate thereof, (ii) net of any insurance proceeds and any indemnity,
contribution or other similar payment recoverable by the Seller or any
Affiliate from any third party with respect thereto and (iii) net of any
adjustments to the Purchase Price pursuant to Section 2.06 with respect to the
subject matter in dispute.

          (c)    Payments by the Purchaser pursuant to Section 9.02(a) shall be
limited to the amount of any Losses that remains after deducting therefrom (i)
any Tax benefit to the Seller or any Affiliate thereof, (ii) any insurance
proceeds and any indemnity, contribution or other similar payment recoverable
by the Seller from any third party with respect thereto and (iii) any
adjustments to the Purchase Price pursuant to Section 2.06 with respect to the
subject matter in dispute.  If a payment is made by the Purchaser in accordance
with this Section 9.02, and if in a subsequent taxable year a Tax benefit is
realized by the Seller or any Affiliate of the Seller with which the Seller
files a consolidated, combined or unitary tax return (that was not previously
taken into account to reduce an amount otherwise payable by the Purchaser under
Section 9.02), the Seller shall pay to the Purchaser at the time of such
realization the amount of such Tax benefit to the extent that the Tax benefit
would have resulted in a reduction in the amount paid by the Purchaser under
Section 9.02 if the Tax benefit had been obtained in the year of such payment.
A Tax benefit will be considered to be realized for purposes of this Section
9.02 at the time that it is reflected on a tax return of the Seller or any
Affiliate of the Seller with which the Seller files a consolidated, combined or
unitary tax return.
<PAGE>   59
                                       54



          (d)    The Seller agrees to give the Purchaser written notice of any
claim, assertion, event or proceeding by or in respect of a third party as to
which it may request indemnification hereunder or as to which the Purchaser's
Threshold Amount may be applied as soon as is practicable and in any event
within 30 days of the time that the Seller learns of such claim, assertion,
event or proceeding; provided, however, that the failure to so notify the
Purchaser shall not affect rights to indemnification hereunder except to the
extent that the Purchaser is actually prejudiced by such failure.  The
Purchaser shall have the right to direct, through counsel of its own choosing,
the defense or settlement of any such claim or proceeding at its own expense.
If the Purchaser elects to assume the defense of any such claim or proceeding,
the Seller may participate in such defense, but in such case the expenses of
the Seller shall be paid by the Seller, provided that such defense or
settlement may be at the Purchaser's expense if: (i) the Purchaser shall have
agreed to the retention of separate counsel; (ii) the defendants or target of
such claim, assertion, event or proceeding involve more than one indemnified
party or both the Purchaser and the Seller have concluded that such
representation by the same counsel would be inappropriate due to actual or
potentially differing interests between them in the conduct in respect of such
claim, assertion, event or proceeding as if there were legal defenses available
to the Seller that are different from or additional to those available to the
Purchaser, or (iii) the Purchaser shall have failed to employ legal counsel
reasonably acceptable to the Seller within a reasonable amount of time. The
Seller shall provide the Purchaser with access to its records and personnel
relating to any such claim, assertion, event or proceeding during normal
business hours and shall otherwise cooperate with the Purchaser in the defense
or settlement thereof, and the Purchaser shall reimburse the Seller for all its
reasonable out-of-pocket expenses in connection therewith.  Except as provided
above, if the Purchaser elects to direct the defense of any such claim or
proceeding, the Seller shall not pay, or permit to be paid, any part of any
claim or demand arising from such asserted liability, unless the Purchaser
consents in writing to such payment or unless the Purchaser, subject to the
last sentence of this Section 9.02(d), withdraws from the defense of such
asserted liability, or unless a final judgment from which no appeal may be taken
by or on behalf of the Purchaser is entered against the Seller for such
liability. If the Purchaser shall fail to defend, or if, after commencing or
undertaking any such defense, the Purchaser fails to prosecute or withdraws
from such defense, the Seller shall have the right to undertake the defense or
settlement thereof, at the Purchaser's expense.  If the Seller assumes the
defense of any such claim or proceeding pursuant to this Section 9.02(d) and
proposes to settle such claim or proceeding prior to a final judgment thereon
or to forego. appeal with respect thereto, then the Seller shall give the
Purchaser prompt written notice thereof and the Purchaser shall have the right
to participate in the settlement or assume or reassume the defense of such 
claim or proceeding.

          (e)    The Seller hereby acknowledges and agrees that, from and after
the Closing, its sole and exclusive remedy with respect to any and all claims
relating to the subject matter of this Agreement shall be pursuant to the
indemnification provisions set forth in this Article IX and in Article VII.  In
furtherance of the foregoing, the Seller hereby waives, to the fullest extent
permitted under applicable law, any and all other rights, claims and causes of
action it may have, from and after the Closing, against the Purchaser or its
<PAGE>   60
                                       55



officers, directors, employees, agents, representatives and Affiliates relating
to the subject matter of this Agreement.

          (f)    Except as set forth in this Agreement, the Purchaser is not
making any representation, warranty, covenant or agreement with respect to the
matters contained herein.  Notwithstanding anything to the contrary contained
in this Agreement, no breach of any representation, warranty, covenant or
agreement contained herein shall give rise to any right on the part of the
Seller, after the consummation of the purchase and sale of the Shares
contemplated by this Agreement, to rescind this Agreement or any of the
transactions contemplated hereby.

          (g)    Notwithstanding anything to the contrary contained in this
Agreement, the Purchaser shall have no liability under any provision of this
Agreement for and in no event shall the Purchaser's Threshold Amount be applied
to any consequential damages.  The Seller shall take all reasonable steps to
mitigate its Losses upon and after becoming aware of any event which could
reasonably be expected to give rise to any Losses.

          (h)    For purposes of this Section 9.02, in determining whether
there has been a breach of any representation or warranty contained in Article
IV, such representations and warranties shall not be qualified by the terms
"Material Adverse Effect" or "Material Adverse Change" or by any phrase using
such terms.

          SECTION 9.03.         Indemnification by the Seller.

          (a)    The Seller agrees, subject to the other terms and conditions
of this Agreement and without gross-up for Taxes, to indemnify the Purchaser
against and hold it harmless from all Losses to the Purchaser arising out of
(i) any Action set forth on Section 3.09 of the Disclosure Schedule and any
other Action arising on or after the date of this Agreement and before the
Closing which would, if it had arisen prior to the date of this Agreement, have
been required to be disclosed on the Disclosure Schedule pursuant to Section
3.09 (but this clause (i) shall not include any Action between the Purchaser
and the Parent, on the one hand, and the Seller on the other hand, or any
Action with respect to the validity of this Agreement), (ii) a breach of
Sections 6.01(c) or 6.02, (iii) the breach of or any inaccuracy in any
representation, warranty, covenant or agreement of the Seller herein (other
that Section 2.04, Section 3.16 and Article VII, it being understood that the
sole remedy for breach of such provisions shall be pursuant to Section 2.04 and
Article VII, respectively), and (iv) Liabilities to the extent arising from any
failure to maintain insurance by the Companies or the Subsidiaries or their
respective predecessors, for the period from January 1, 1989 through the date
of acquisition by the Seller, comparable in terms of the type of coverage to
that maintained by the Companies and the Subsidiaries on the date hereof.
Anything in Section 9.01 to the contrary notwithstanding, no claim may be
asserted nor any action commenced against the Seller for breach of any
representation, warranty, covenant or agreement contained herein, unless
written notice of such claim or action is received by the Seller describing in
detail the facts and circumstances with respect to the
<PAGE>   61
                                       56



subject matter of such claim or action on or prior to the date on which the
representation, warranty, covenant or agreement on which such claim or action
is based ceases to survive as set forth in Section 9.01, irrespective of
whether the subject matter of such claim or action shall have occurred before
or after such date.

          (b)    The indemnification obligations of the Seller pursuant to
Section 9.03(a)(iii) shall not be effective until the aggregate dollar amount
of all Losses which would otherwise be indemnifiable pursuant to Section
9.03(a)(iii) exceeds $500,000 (the "Seller's Threshold Amount"), and then only
to the extent such aggregate amount exceeds the Seller's Threshold Amount.  In
addition, no claim may be made against the Seller for indemnification pursuant
to Section 9.03(a)(iii) with respect to any individual item of Loss, unless
such item exceeds $15,000 or any related group of items, unless such related
group of items exceeds $50,000, nor shall any such item or related group of
items be applied to or considered part of the Seller's Threshold Amount.  The
indemnification obligations of the Seller pursuant to this Section 9.03 shall
be effective only until the dollar amount paid in respect of the Losses
indemnified against under this Section 9.03 aggregates to an amount equal to 
$110,000,000.  For the purposes of this Section 9.03(b), in computing such
individual or aggregate amounts of claims, the amount of each claim shall be
deemed to be an amount (i) net of any Tax benefit, (ii) net of any insurance
proceeds and any indemnity, contribution or other similar payment recoverable
by the Purchaser or any Affiliate from any third party with respect thereto and
(iii) net of any adjustments to the Purchase Price pursuant to Section 2.06
with respect to the subject matter in dispute.

          (c)    Payments by the Seller pursuant to Section 9.03(a) shall be
limited to the amount of any Losses that remains after deducting therefrom (i)
any Tax benefit, (ii) any insurance proceeds and any indemnity, contribution or
other similar payment recoverable by the Purchaser or any Affiliate from any
third party with respect thereto and (iii) any adjustments to the Purchase
Price pursuant to Section 2.06 with respect to the subject matter in dispute.
If a payment is made by the Seller in accordance with this Section 9.03, and if
in a subsequent taxable year a Tax benefit is realized by the Purchaser, any
Company, or Subsidiary or any Affiliate of the Purchaser, any Company or any
Subsidiary with which any Company or any Subsidiary files a consolidated,
combined or unitary tax return (that was not previously taken into account to
reduce an amount otherwise payable by the Seller under Section 9.03), the
Purchaser, any such Company, any such Subsidiary or any Affiliate of the
Purchaser, any Company or any Subsidiary with which any Company or any
Subsidiary files a consolidated, combined, or unitary tax return shall pay to
the Seller at the time of such realization the amount of such Tax benefit to
the extent that the Tax benefit would have resulted in a reduction in the
amount paid by the Seller under this Section 9.03 if the Tax benefit had been
obtained in the year of such payment.  A Tax benefit will be considered to be
realized for purposes of this Section 9.03 at the time that it is reflected on
a tax return of the Purchaser, any Company, any Subsidiary or any Affiliate of
the Purchaser, any Company or any Subsidiary with which the Purchaser, any
Company or any Subsidiary files a consolidated, combined or unitary tax return.
<PAGE>   62
                                       57



          (d)    The Purchaser agrees to give the Seller written notice of any 
claim, assertion, event or proceeding by or in respect of a third party as to
which it may request indemnification hereunder or as to which the Seller's
Threshold Amount may be applied as soon as is practicable and in any event 
within 30 days of the time that the Purchaser learns of such claim, assertion,
event or proceeding; provided, however, that the failure to so notify the 
Seller shall not affect rights to indemnification hereunder except to the 
extent that the Seller is actually prejudiced by such failure.  The Seller
shall have the right to direct, through counsel of its own choosing, the 
defense or settlement of any such claim or proceeding at its own expense.  If
the Seller elects to assume the defense of any such claim or proceeding, the
Purchaser may participate in such defense, but in such case the expenses of the
Purchaser shall be paid by the Purchaser, provided that such defense or 
settlement may be at the Seller's expense if: (i) the Seller shall have agreed 
to the retention of separate counsel; (ii) the Defendants or target of such
claim, assertion, event or proceeding involve more than one indemnified party 
or both the Seller and the Purchaser have concluded that such representation by
the same counsel would be inappropriate due to actual or potentially differing 
interests between them in the conduct in respect of such claim, assertion,
event or proceeding as if there were legal defenses available to the purchaser
that are different from or additional to those available to the seller, or
(iii) the seller shall have failed to employ legal counsel reasonably
acceptable to the purchaser within a reasonable amount of time. The purchaser
shall provide the seller with access to its records and personnel relating to
any such claim, assertion, event or proceeding during normal business hours and
shall otherwise cooperate with the seller in the defense or settlement thereof,
and the seller shall reimburse the Purchaser for all its reasonable
out-of-pocket expenses in connection therewith.  If the seller elects to direct
the defense of any such claim or proceeding, the Purchaser shall not pay, or
permit to be paid, any part of any claim or demand arising from such asserted
liability unless the Seller consents in writing to such payment or unless the
Seller, subject to the last sentence of this section 9.03(d), withdraws from
the defense of such asserted liability or unless a final judgment from which no
appeal may be taken by or on behalf of the seller is entered against the
purchaser for such liability.  If the seller shall fail to defend, or if after
commencing or undertaking any such defense, fail to prosecute or withdraws from
such defense, the Purchaser shall have the right to undertake the defense or
settlement thereof, at the Seller's expense.  If the Purchaser assumes the
defense of any such claim or proceeding pursuant to this Section 9.03(d) and
proposes to settle such claim or proceeding prior to a final judgment thereon
or to forego any appeal with respect thereto, then the Purchaser shall give the
Seller prompt written notice thereof and the Seller shall have the right to
participate in the settlement or assume or reassume the defense of such claim
or proceeding.

          (e)    The Purchaser hereby acknowledges and agrees that, from and
after the Closing, except as provided in Section 2.06, its sole and exclusive
remedy with respect to any and all claims relating to the subject matter of
this Agreement shall be pursuant to the indemnification provisions set forth in
this Article IX, in Section 2.04, and in Article VII.  In furtherance of the
foregoing, the Purchaser hereby waives, from and after the Closing, to the
fullest extent permitted under applicable law, any and all other rights, claims
and causes of action it (or, after the Closing, any Company or Subsidiary) may
have against the Seller or
<PAGE>   63
                                       58



its officers, directors, employees, agents, representatives and Affiliates
relating to the subject matter of this Agreement.

          (f)    Except as set forth in this Agreement, the Seller is not
making any representation, warranty, covenant or agreement with respect to the
matters contained herein.  Anything herein to the contrary notwithstanding, no
breach of any representation, warranty, covenant or agreement contained herein
shall give rise to any right on the part of the Purchaser, after the
consummation of the purchase and sale of the Shares contemplated hereby, to
rescind this Agreement or any of the transactions contemplated hereby.

          (g)    Notwithstanding anything to the contrary contained in this
Agreement, except for and subject to the express provisions of Section 2.04,
the Seller shall have no liability under any provision of this Agreement for
and in no event shall the Seller's Threshold Amount be applied to: (i) any
Losses to the extent that such Losses result from or arise out of actions taken
by the Purchaser, any Company, any Subsidiary, or their respective Affiliates
after the Closing Date and (ii) any consequential damages.  The Purchaser shall
take and shall cause the Companies and the Subsidiaries to take all reasonable
steps to mitigate their Losses upon and after becoming aware of any event which
could reasonably be expected to give rise to any Losses.

          (h)    For purposes of this Section 9.03, in determining whether
there has been a breach of any representation or warranty contained in Article
III, such representations and warranties shall not be qualified by the terms
"Material Adverse Effect" or "Material Adverse Change" or by any phrase using
such terms, except any representations and warranties so qualified in Sections
3.08(g) and 3.14(c).

          (i)    Notwithstanding anything to the contrary in this Article IX,
the Seller shall control (and the Purchaser shall reasonably cooperate at the
Seller's expense in connection therewith) the disposition of the Actions
identified in Section 9.03(a)(i); provided, however, that without the prior
consent of the Purchaser (such consent not to be unreasonably withheld) the
Seller shall not enter into any agreement with any Governmental Authority to
settle any such Action if the terms of such settlement require the Purchaser or
any of its Affiliates to agree to take any action relating to their respective
businesses, other than the making of cash payments and related ministerial
acts, or to agree to refrain from taking any such action.
<PAGE>   64
                                       59





                                   ARTICLE X

                       TERMINATION, AMENDMENT AND WAIVER

                 SECTION 10.01. Termination.  This Agreement may be terminated 
at any time prior to the Closing:

                 (a)      by the mutual written consent of the Seller and the
         Purchaser;

                 (b)      by either the Seller or the Purchaser, if any
         Governmental Authority with jurisdiction over such matters shall have
         issued a Governmental Order restraining, enjoining or otherwise
         prohibiting the sale of the Shares hereunder and such order, decree,
         ruling or other action shall have become final and unappealable, other
         than any Governmental Order that would not have been issued, or would
         cease to prevent the sale of the Shares, if the Purchaser had complied
         with its obligations under Section 5.04(b); provided, however, that the
         provisions of this Section 10.01(b) shall not be available to any
         party unless such party shall have used its best efforts to oppose any
         such Governmental Order or to have such Governmental Order vacated or
         made inapplicable to the transactions contemplated by this Agreement;

                 (c)      by either the Seller or the Purchaser, if the Closing
         shall not have occurred prior to February 15, 1995; provided, however,
         that the right to terminate this Agreement under this Section 10.01(c)
         shall not be available to any party whose failure to fufill any
         obligation under this Agreement shall have been the cause of, or shall
         have resulted in, the failure of the Closing to occur prior to such
         date; or

                 (d)      by the Seller, if the Closing shall not have occurred
         within 60 days after satisfaction of the last to be satisfied of the
         conditions specified in Sections 8.01(b) and 8.01(d); provided,
         however, that the right to so terminate shall not be available to the
         Seller: (i) if the Seller shall have willfully breached this Agreement
         or (ii) at any time when the Seller would be unable to deliver a
         certificate as to the matters set forth in Section 8.02(a)(i).

                 Time shall be of the essence in this Agreement.

                 SECTION 10.02.        Effect of Termination.  In the event of
termination of this Agreement as provided in Section 10.01, this Agreement
shall forthwith become void and there shall be no liability on the part of any
party hereto to the other party except (a) as set forth in Section 5.03, (b)
that nothing herein shall relieve either party from liability for any willful
breach hereof and (c) if the Purchaser terminates this Agreement pursuant to
Section 10.01(c) and, prior to such termination the Seller shall have had
contacts or entered into negotiations relating to in Acquisition Transaction
with any other Person (other than any contacts or negotiations which occurred
prior to the date of this Agreement), at any time after execution of this
Agreement and within six months after termination hereof the Seller
<PAGE>   65
                                       60



shall enter into a definitive agreement with such Person or its Affiliate
relating to an Acquisition Transaction, then the Seller, upon execution of the
definitive agreement for such Acquisition Transaction, shall pay to the
Purchaser a termination fee of $2,200,000.

                 SECTION 10.03.    Waiver.  At any time prior to the Closing,
either party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto or (c) waive compliance with any of the agreements or
conditions contained herein.  Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party to be bound
thereby.


                                   ARTICLE XI

                               GENERAL PROVISIONS

                 SECTION 11.01.    Expenses.  Except as otherwise specifically
provided herein, all costs and expenses, including, without limitation, fees
and disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs and expenses, whether or not the
Closing shall have occurred.

                 SECTION 11.02.    Notices.  All notices requests, claims,
demands and other communications hereunder shall be in writing and shall be
given or made (and shall be deemed to have been duly given or made upon
receipt) by delivery in person, by courier service, by cable, by telecopy, by
telegram, by telex or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties at the following addresses (or at
such other address for a party as shall be specified in a notice given in
accordance with this Section 11.02):

                 (a)    if to the Seller:

                        Synetic, Inc.
                        100 Summit Avenue
                        Montvale, NJ 07645
                        Attention: Victor L. Marrero, Vice President - Treasurer
                        Telecopier: (201) 358-5773
<PAGE>   66
                                       61



                        with copies to:

                        Shearman & Sterling
                        599 Lexington Avenue
                        New York, New York 10022
                        Attention: Creighton O'M.  Condon, Esq.
                        Telecopier: (212) 848-7179

                 (b)    if to the Purchaser:

                        Pharmacy Corporation of America
                        1871 Lefthand Circle
                        Longmont, Colorado 80501
                        Attention: Ron Kane
                        Telecopier: (303) 651-1702

                        with copies to:

                        Beverly Enterprises, Inc.
                        5111 Rogers Avenue, Suite 40-A 
                        Fort Smith, Arkansas 72919-1000
                        Attention: Robert W. Pommerville,
                                   General Counsel, Senior
                                   Vice President and Secretary
                        Telecopier: (501) 452-3760

                        and

                        Giroir & Gregory, Professional Association
                        111 Center Street, Suite 1900
                        Little Rock, Arkansas 72201
                        Attention: H. Watt Gregory, Esq.
                        Tele,copier: (501) 374-2380

                        and

                        Weil, Gotshal & Manges
                        767 Fifth Avenue
                        New York, New York 10153
                        Attention: Warren T. Buhle, Esq.
                        Telecopier: (212) 310-8007

                 SECTION 11.03. Public Announcements.  Unless otherwise 
required by applicable Law or stock exchange requirements or requirements of 
Nasdaq, no party to this
<PAGE>   67
                                       62





Agreement shall make any public announcements in respect of this Agreement or
the transactions contemplated hereby or otherwise communicate with any news
media without prior notification to the other party, and the parties shall
cooperate as to the timing and contents of any such announcement.


                 SECTION 11.04.    Headings.  The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.

                 SECTION 11.05.    Severability.  If any term or other 
provision of this Agreement is invalid, iilegai or incapable of being enforced 
by any rule of law or public policy, all other conditions and provisions of 
this Agreement shall nevertheless remain in full force and effect so long as 
the economic or legal substance of the transactions contemplated hereby is not 
affected in any manner adverse to any party.  Upon such determination that any 
term or other provision is invalid, illegal or incapable of being enforced, 
the parties hereto shall negotiate in good faith to modify this Agreement so 
as to effect the original intent of the parties as closely as possible in a 
mutually acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the greatest extent possible.

                 SECTION 11.06.    Entire Agreement.  This Agreement
(including the Disclosure Schedule and the Exhibits hereto) constitutes the 
entire agreement of the parties hereto with respect to the subject matter 
hereof and supersedes all prior agreements and undertakings, both written and 
oral, other than the Confidentiality Agreement, between the Seller and the 
Purchaser with respect to the subject matter hereof and except as otherwise 
expressly provided herein.

                 SECTION 11.07.    Assignment.  This Agreement shall not be
assigned, by operation of Law or otherwise, to any Person except that the
Purchaser may assign all of its rights and obligations under this Agreement to
an Affiliate of the Purchaser, provided that no such assignment shall release
the Purchaser from its obligations under this Agreement.

                 SECTION 11.08.    No Third-Party Beneficiaries. This Agreement
shall be binding upon, shall inure to the benefit of, and shall be enforceable
by the parties hereto and their successors and permitted assigns.  Except as
specifically provided to the contrary in Articles VI, VII and IX, this Agreement
is for the sole benefit of the parties hereto and their successors and
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other person or entity any legal or equitable right,
benefit or remedy of any nature whatsoever under or by reason of this
Agreement.

                 SECTION 11.09.    Waivers and Amendments. This Agreement may be
amended or modified, and the terms and conditions hereof may be waived, only by
written instrument signed by the parties hereto or, in the case of a waiver, by
the party waiving compliance.  No delay on the part of any party in exercising
any right, power or privilege
<PAGE>   68
                                       63



hereunder shall operate as a waiver thereof, nor shall any waiver on the part
of any party of any right, power or privilege hereunder, nor any single or
partial exercise of any other right, power or privilege hereunder, preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege hereunder.  The rights and remedies herein provided are cumulative
and are not exclusive of any rights or remedies which any party may otherwise
have at Law or in equity.

                 SECTION 11.10.   Specific Performance.  The parties hereto 
agree that irreparable damage would occur in the event any provision of this
Agreement required to be performed prior to the Closing was not performed in
accordance with the terms hereof and that, prior to the Closing, the parties
shall be entitled to specific performance of the term s hereof, in addition to
any other remedy at Law or in equity.

                 SECTION 11.11.   Governing Law.  This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York applicable to contracts executed in and to be performed in that State.
All actions and proceedings arising out of or relating to this Agreement shall
be heard and determined in a New York state or federal court sitting in the
City of New York, and the parties hereto hereby irrevocably submit to the
exclusive jurisdiction of such courts in any such action or proceeding and
irrevocably waive the defense of an inconvenient forum to the maintenance of
any such action or proceeding.

                 SECTION 11.12.   Countearts.  This Agreement may be executed 
in one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.

                 SECTION 11.13.   Parent Guaranty.  Concurrently with the 
execution of this Agreement by the parties hereto, the Parent shall execute and 
deliver to the Seller a guarantee substantially in the form of Exhibit 11. 13 
hereto (the "Parent Guaranty").  The Purchaser acknowledges that the Seller is 
relying on the Parent Guaranty and the covenants, agreements, representations 
and warranties contained therein in entering into this Agreement.
<PAGE>   69
                                       64



                 IN WITNESS WHEREOF, the Seller and the Purchaser have caused 
this Agreement to be executed as of the date first written above by their 
respective officers thereunto duly authorized.

                                        SYNETIC, INC.




                                        By: /s/ Charles A. Mele 
                                            Name: Charles A. Mele 
                                            Title: Executive Vice President


                                        PHARMACY CORPORATION OF AMERICA



                                        By:  /s/ Robert D. Woltil 
                                             Name: Robert D. Woltil
                                             Title: Executive Vice President,
                                                      Finance and Chief 
                                                      Financial Officer
<PAGE>   70



                                  Exhibit 2.05


                        Allocation of the Purchase Price




Alliance Shares                         $30,000,000
Dunnington Shares                       $55,814,000
HPS Shares                              $21,000,000
<PAGE>   71

                                 Exhibit 11.13

                            Form of Parent Guaranty



                                    GUARANTY

         Reference is made to the Stock Purchase Agreement, dated as of August 
9, 1994 (the "Stock Purchase Agreement"), by and between Synetic, Inc., a
Delaware corporation (the "Seller") and Pharmacy Corporation of America, a 
California corporation (the "Purchaser") and a wholly owned subsidiary of 
Beverly Enterprises, Inc., a Delaware corporation (the "Guarantor").  Terms 
used in the Purchase Agreement and not defined herein are used herein as 
therein defined.

         1.   Guaranty

               In consideration of the Seller entering into the Purchase
Agreement with the Purchaser, the Guarantor hereby unconditionally guarantees
to the Seller that the Purchaser (for purposes of this Guaranty, Purchaser
shall be deemed to include any permitted assignee or successor of Purchaser
under the Stock Purchase Agreement) will fully and punctually perform all of
its obligations under the Purchase Agreement to be performed prior to or at the
Closing, including but not limited to the full and punctual payment and
discharge when due of all of the Purchaser's monetary obligations to the
Seller under the Purchase Agreement due at or prior to the Closing and any
instruments and documents executed and delivered pursuant thereto at or prior
to the Closing, including without limitation, all monetary obligations which
the Purchaser may incur to the Seller pursuant to the Purchase Agreement due at
or prior to the Closing, and with respect of any breach prior to the Closing of
any representation, warranty, covenant or agreement of the Purchaser set forth
in the Purchase Agreement (collectively, the "Obligations").  This Guaranty is
an absolute, unconditional and continuing guaranty of the full and punctual
payment and performance by the Purchaser of the Obligations and not of their
collectibility only and is in no way conditioned upon any requirement that the
Seller first attempt to collect any of the Obligations from the Purchaser or
resort to any security or other means of obtaining payment of any of the
Obligations which the Seller now has or may acquire after the date hereof, or
upon any other contingency whatsoever.

         2.   The Inducement.

               In order to induce the Seller to enter into the Purchase
Agreement, the Guarantor warrants and represents as follows: (i) the Guarantor
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, and has all necessary power and authority to
enter into this Guaranty, to carry out its obligations hereunder and to
consummate the transactions contemplated hereby; (ii) the Guarantor has
<PAGE>   72
                                      2


taken all necessary corporate action to authorize the execution, delivery and
performance of this Guaranty; (iii) the Guaranty has been duly executed and
delivered by the Guarantor and is a legal, valid and binding obligation of the
Guarantor, enforceable against the Guarantor in accordance with its terms; (iv)
the Purchaser is a wholly owned subsidiary of the Guarantor; (v) the Guarantor
provides financing and financial, accounting, management and other services for
the Purchaser; and (vi) the financial success of the Purchaser will directly
and substantially benefit the Guarantor and the transactions contemplated by
the Purchase Agreement will be to the mutual benefit of the Purchaser and the
Guarantor.  The Guarantor acknowledges that the Seller is relying on the
foregoing representations in entering into the Purchase Agreement.

         3.    Guarantor's Further Agreements to Pay.

               The Guarantor further agrees, as the principal obligor and not
as a guarantor only, to pay to the Seller, all costs and expenses (including
court costs and legal expenses) incurred or expended by the Seller in
connection with the enforcement hereof.

         4.    Liability of Guarantor and Defenses.

               The liability of the Guarantor hereunder in connection with
payment or performance of the Obligations shall be limited to that of the
Purchaser under the Purchase Agreement.  If for any reason the Purchaser has a
defense to a claim by the Seller that it failed to discharge any of the
Obligations or has any claim against the Seller which would constitute a
counterclaim, then the Guarantor's obligations shall be subject to and have
the benefit of such defenses or counterclaims; provided, however, that anything
contained in this paragraph 4 to the contrary notwithstanding, the liability of
the Guarantor shall not be discharged, impaired or otherwise affected by any
creditors' rights, bankruptcy, receivership or other insolvency proceedings by
or against the Purchaser or any reorganization, dissolution, liquidation or
winding up of the Purchaser, none of which shall constitute a defense or claim
of Purchaser to the benefit of which the Guarantor would be entitled.  The
Guarantor further agrees that this Guaranty shall continue to be effective or
be reinstated, if at any time, payment of any Obligations, or any part thereof,
is rescinded or must otherwise be restored by Seller upon the bankruptcy or
reorganization of Purchaser or otherwise.

         5.    The Seller's Freedom to Deal with the Purchaser and Other 
Parties.

               The Seller shall be at liberty, without giving notice to or
obtaining the assent of the Guarantor and without relieving the Guarantor of
any liability hereunder, to deal with the Purchaser, and with each other party
who is now or after the date hereof becomes liable in any manner for any of
the Obligations, in such manner as the Seller in its sole discretion deems fit
and to this end the Guarantor gives to the Seller full authority in its sole
discretion to do any or all of the following things: (a) vary the terms and
grant extensions or renewals
<PAGE>   73
                                      3





of any present or future indebtedness or obligations to the Seller of the
Purchaser or any such other party, (b) grant time, waivers and other
indulgences in respect thereto, (c) vary, release, exchange or discharge,
wholly or partially, or delay in or abstain from perfecting and enforcing any
security or guaranty or other means of obtaining payment of any of the
Obligations which the Seller now has or acquires after the date hereof, (d)
accept partial payments from the Pumhaser or any such other party, (e) release
or discharge wholly or partially, any endorser or guarantor, and (f) compromise
or make settlement or other arrangement with the Purchaser of any such other
party.

       6.      Waivers by Guarantor.

               The Guarantor waives notice of acceptance hereof, notice of any
action taken or admitted by the Seller in reliance hereon, and any requirement
that the Seller be diligent or prompt in making demands hereunder or asserting
any other rights of the Seller hereunder.

       7.      Demands and Notices.

               It is further agreed that the undersigned waives any demand for
payment and notice of nonpayment or nonperformance under the Purchase Agreement
and that without notice to the undersigned or without affecting the liability
hereunder, the Seller may enforce rights against the Purhaser and/or may take
or release security and or surrender documents, grant extensions, renewals and
indulgences.

       8.      Amendments, Waivers, etc.

               No provision of this Guaranty can be changed, waived,
discharged, or terminated except by an instrument in writing signed by the
Seller and the Guarantor expressly referring to the provision of this Guaranty
to which such instrument relates; and no such waiver shall extend to, affect or
impair any right with respect to any Obligation which is not expressly dealt
with therein.  No course of dealing or delay or omissions on the part of the
Seller in exercising any right shall operate as a waiver thereof or otherwise
be prejudicial thereto.

       9.      Miscelaneous Provisions.

               This Guaranty is intended to be governed by and construed in
accordance with the laws of the State of New York and shall inure to the
benefit of the Seller and its successors in title, assigns, and legal
representatives and shall be binding on the Guarantor and on Guarantor's 
successors and assigns. The Guarantor hereby submits to the nonexclusive 
jurisdiction of the courts of the State of New York and the federal courts of 
the United States of America located in such State in respect of any dispute 
or other matter
<PAGE>   74
                                       4





arising out of or relating to this Guaranty or the transactions contemplated
hereby, and hereby waives, and agrees not to assert, as defense in any action,
suit or proceeding arising out of or relating to this Guaranty, that it is not
subject thereto, or that the suit, action or proceeding is brought in an
inconvenient forum, or that the venue of the suit, action or proceeding is
improper.  The Guarantor agrees that final judgment (with all right of appeal
having expired or been waived) against such party in any such action, suit or
proceeding shall be conclusive and may be enforced in any jurisdiction by suit
on the judgment, a certified copy of which shall be conclusive evidence of the
fact and amount of the recovery arising from such judgment.

     10.       Termination.  This Guaranty and the obligations of the
Guarantor hereunder shall terminate upon consummation of the transactions at
the Closing.

               In the event of any inconsistencies between the provisions of
this Guaranty and the provisions of the Purchase Agreement, the provisions of
the Purchase Agreement shall prevail.

     IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed
on its behalf by its officer thereunto duly authorized on the 9th day of
August, 1994.

                                      BEVERLY ENTERPRISES, INC.



                                      By: _____________________________
                                      Its: ____________________________
