
<PAGE>

                                                                EXECUTION COPY

                          AGREEMENT AND PLAN OF MERGER

                                 by and among

                                OMNICARE, INC.

                          OMNICARE ACQUISITION CORP.

                                    and

                        AMERICAN MEDSERVE CORPORATION

                                 dated as of

                                August 7, 1997


<PAGE>

                           TABLE OF CONTENTS

                                                                    Page
                                                                    ----
ARTICLE I.     THE OFFER AND MERGER. . . . . . . . . . . . . . . . . .1
 Section 1.1.  The Offer . . . . . . . . . . . . . . . . . . . . . . .1
 Section 1.2.  Company Actions . . . . . . . . . . . . . . . . . . . .2
 Section 1.3.  Directors . . . . . . . . . . . . . . . . . . . . . . .3
 Section 1.4.  The Merger. . . . . . . . . . . . . . . . . . . . . . .4
 Section 1.5.  Effective Time. . . . . . . . . . . . . . . . . . . . .4
 Section 1.6.  Closing . . . . . . . . . . . . . . . . . . . . . . . .4
 Section 1.7.  Directors and Officers of the Surviving Corporation . .4
 Section 1.8.  Shareholders' Meeting . . . . . . . . . . . . . . . . .5

ARTICLE II.    CONVERSION OF SECURITIES. . . . . . . . . . . . . . . .5
 Section 2.1.  Conversion of Capital Stock . . . . . . . . . . . . . .5
 Section 2.2.  Exchange of Certificates. . . . . . . . . . . . . . . .6
 Section 2.3.  Appraisal Rights. . . . . . . . . . . . . . . . . . . .7
 Section 2.4.  Company Plans . . . . . . . . . . . . . . . . . . . . .8

ARTICLE III.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . .8
 Section 3.1.  Organization. . . . . . . . . . . . . . . . . . . . . .8
 Section 3.2.  Capitalization. . . . . . . . . . . . . . . . . . . . .9
 Section 3.3.  Authorization; Validity of Agreement; Company Action. .10
 Section 3.4.  Consents and Approvals; No Violations . . . . . . . . .10
 Section 3.5.  SEC Reports and Financial Statements. . . . . . . . . .10
 Section 3.6.  Absence of Certain Changes. . . . . . . . . . . . . . .11
 Section 3.7.  No Undisclosed Liabilities. . . . . . . . . . . . . . .11
 Section 3.8.  Litigation. . . . . . . . . . . . . . . . . . . . . . .11
 Section 3.9.  Employee Benefit Plans. . . . . . . . . . . . . . . . .11
 Section 3.10. Tax Matters; Government Benefits. . . . . . . . . . . .13
 Section 3.11. Intellectual Property . . . . . . . . . . . . . . . . .14
 Section 3.12. Employment Matters. . . . . . . . . . . . . . . . . . .15
 Section 3.13. Compliance with Laws. . . . . . . . . . . . . . . . . .15
 Section 3.14. Vote Required . . . . . . . . . . . . . . . . . . . . .16
 Section 3.15. Environmental Laws. . . . . . . . . . . . . . . . . . .16
 Section 3.16. Schedule 14D-9: Offer Documents and Proxy Statement . .18
 Section 3.17. Opinion of Financial Advisor. . . . . . . . . . . . . .18
 Section 3.18. Brokers and Finders . . . . . . . . . . . . . . . . . .18
 Section 3.19. Certain Business Practices. . . . . . . . . . . . . . .18
 Section 3.20. Insurance . . . . . . . . . . . . . . . . . . . . . . .18
 Section 3.21. Product Warranties. . . . . . . . . . . . . . . . . . .19

ARTICLE IV.    REPRESENTATIONS AND WARRANTIES OF PARENT AND THE 
               PURCHASER . . . . . . . . . . . . . . . . . . . . . . .19
 Section 4.1.  Organization. . . . . . . . . . . . . . . . . . . . . .19
 Section 4.2.  Authorization; Validity of Agreement; Necessary Action.19
 Section 4.3.  Consents and Approvals; No Violations . . . . . . . . .19
 Section 4.4.  Offer Documents; Proxy Statement; Schedule 14D-9. . . .20
 Section 4.5.  Financing . . . . . . . . . . . . . . . . . . . . . . .20
 Section 4.6.  Litigation. . . . . . . . . . . . . . . . . . . . . . .20

ARTICLE V.     COVENANTS . . . . . . . . . . . . . . . . . . . . . . .20
 Section 5.1.  Interim Operations of the Company . . . . . . . . . . .20
 Section 5.2.  Access; Confidentiality . . . . . . . . . . . . . . . .22

                                    -i-
<PAGE>

 Section 5.3.  Proxy Statement . . . . . . . . . . . . . . . . . . . .23
 Section 5.4.  Cooperation . . . . . . . . . . . . . . . . . . . . . .23
 Section 5.5.  State Takeover Statutes . . . . . . . . . . . . . . . .24
 Section 5.6.  No Solicitation . . . . . . . . . . . . . . . . . . . .24
 Section 5.7.  Additional Agreements . . . . . . . . . . . . . . . . .25
 Section 5.8.  Publicity . . . . . . . . . . . . . . . . . . . . . . .25
 Section 5.9.  Notification of Certain Matters . . . . . . . . . . . .25
 Section 5.10. Directors, and Officers' Insurance and 
                Indemnification. . . . . . . . . . . . . . . . . . . .25

ARTICLE VI.    CONDITIONS. . . . . . . . . . . . . . . . . . . . . . .26
 Section 6.1.  Conditions to Obligations of Each Party to 
                Effect the Merger. . . . . . . . . . . . . . . . . . .26
 Section 6.2.  Conditions Precedent to the Obligations of 
                the Company. . . . . . . . . . . . . . . . . . . . . .27
 Section 6.3.  Conditions Precedent to the Obligations of Parent 
                and Purchaser. . . . . . . . . . . . . . . . . . . . .27

ARTICLE VII.   TERMINATION . . . . . . . . . . . . . . . . . . . . . .27
 Section 7.1.  Termination . . . . . . . . . . . . . . . . . . . . . .27
 Section 7.2.  Effect of Termination . . . . . . . . . . . . . . . . .29

ARTICLE VIII.  MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . .29
 Section 8.1.  Fees and Expenses . . . . . . . . . . . . . . . . . . .29
 Section 8.2.  Amendment and Modification. . . . . . . . . . . . . . .29
 Section 8.3.  Nonsurvival of Representations and Warranties . . . . .30
 Section 8.4.  Notices . . . . . . . . . . . . . . . . . . . . . . . .30
 Section 8.5.  Interpretation. . . . . . . . . . . . . . . . . . . . .31
 Section 8.6.  Counterparts. . . . . . . . . . . . . . . . . . . . . .31
 Section 8.7.  Entire Agreement; No Third Party Beneficiaries. . . . .31
 Section 8.8.  Severability. . . . . . . . . . . . . . . . . . . . . .31
 Section 8.9.  Governing Law . . . . . . . . . . . . . . . . . . . . .31
 Section 8.10. Assignment. . . . . . . . . . . . . . . . . . . . . . .31
 Section 8.11. Waivers . . . . . . . . . . . . . . . . . . . . . . . .31
 Section 8.12. Captions. . . . . . . . . . . . . . . . . . . . . . . .32

Annex A        Certain Conditions of the Offer


                                      -ii-
<PAGE>

                             INDEX OF DEFINED TERMS


Defined Term                                          Section No.
------------                                          -----------
Agreement. . . . . . . . . . . . . . . . . . . . . .   Recitals
Acquisition Proposal . . . . . . . . . . . . . . . .     5.6(a)
Appointment Date . . . . . . . . . . . . . . . . . .        5.1
Balance Sheet. . . . . . . . . . . . . . . . . . . .    3.10(a)
Beds . . . . . . . . . . . . . . . . . . . . . . . .       3.22
Break-Up Amount. . . . . . . . . . . . . . . . . . .     8.1(b)
By-Laws. . . . . . . . . . . . . . . . . . . . . . .        1.4
Certificate of Incorporation . . . . . . . . . . . .        1.4
Certificates . . . . . . . . . . . . . . . . . . . .     2.2(b)
Closing. . . . . . . . . . . . . . . . . . . . . . .        1.6
Closing Date . . . . . . . . . . . . . . . . . . . .        1.6
Code . . . . . . . . . . . . . . . . . . . . . . . .     2.2(f)
Company. . . . . . . . . . . . . . . . . . . . . . .   Recitals
Company Agreements . . . . . . . . . . . . . . . . .        3.4
Company Disclosure Schedule. . . . . . . . . . . . .        3.0
Company Material Adverse Effect. . . . . . . . . . .     3.1(a)
Company SEC Documents. . . . . . . . . . . . . . . .        3.5
Company Option . . . . . . . . . . . . . . . . . . .     2.4(a)
Computer Software. . . . . . . . . . . . . . . . . .    3.11(c)
Confidentiality Agreement. . . . . . . . . . . . . .     5.2(b)
Copyrights . . . . . . . . . . . . . . . . . . . . .    3.11(c)
DGCL . . . . . . . . . . . . . . . . . . . . . . . .        l.4
Dissenting Shareholders. . . . . . . . . . . . . . .     2.1(c)
Dissenting Shares. . . . . . . . . . . . . . . . . .        2.3
DLJ. . . . . . . . . . . . . . . . . . . . . . . . .       3.17
D&O Insurance. . . . . . . . . . . . . . . . . . . .    5.10(b)
Effective Time . . . . . . . . . . . . . . . . . . .        1.5
Encumbrances . . . . . . . . . . . . . . . . . . . .     3.2(b)
Environmental Claim. . . . . . . . . . . . . . . . .    3.15(g)
Environmental Laws . . . . . . . . . . . . . . . . .    3.15(g)
ERISA. . . . . . . . . . . . . . . . . . . . . . . .     3.9(a)
ERISA Affiliate. . . . . . . . . . . . . . . . . . .     3.9(a)
Exchange Act . . . . . . . . . . . . . . . . . . . .     1.1(a)
Expiration Date. . . . . . . . . . . . . . . . . . .     1.1(a)
Financial Statements . . . . . . . . . . . . . . . .        3.5
GAAP . . . . . . . . . . . . . . . . . . . . . . . .        3.5
Governmental Authority . . . . . . . . . . . . . . .    3.13(a)
Governmental Entity. . . . . . . . . . . . . . . . .        3.4
Hazardous Materials. . . . . . . . . . . . . . . . .    3.15(g)
Healthcare Laws. . . . . . . . . . . . . . . . . . .    3.13(a)
HSR Act. . . . . . . . . . . . . . . . . . . . . . .        3.4
Indemnified Party. . . . . . . . . . . . . . . . . .    5.10(a)
Independent Directors. . . . . . . . . . . . . . . .     1.3(c)


                               -iii-
<PAGE>

Intellectual Property. . . . . . . . . . . . . . . .    3.11(c)
Licenses . . . . . . . . . . . . . . . . . . . . . .    3.11(c)
Merger . . . . . . . . . . . . . . . . . . . . . . .        1.4
Merger Consideration . . . . . . . . . . . . . . . .     2.1(c)
Minimum Condition. . . . . . . . . . . . . . . . . .     1.1(a)
Offer. . . . . . . . . . . . . . . . . . . . . . . .     1.1(a)
Offer Documents. . . . . . . . . . . . . . . . . . .     1.1(b)
Offer Price. . . . . . . . . . . . . . . . . . . . .     1.1(a)
Offer to Purchase. . . . . . . . . . . . . . . . . .     1.1(a)
Option Plan. . . . . . . . . . . . . . . . . . . . .     2.4(a)
Parent . . . . . . . . . . . . . . . . . . . . . . .   Recitals
Parent Disclosure Schedule . . . . . . . . . . . . .        4.0
Parent Material Adverse Effect . . . . . . . . . . .        4.1
Patents. . . . . . . . . . . . . . . . . . . . . . .    3.11(c)
Paying Agent . . . . . . . . . . . . . . . . . . . .     2.2(a)
PCBs . . . . . . . . . . . . . . . . . . . . . . . .    3.15(e)
Personnel. . . . . . . . . . . . . . . . . . . . . .    3.13(a)
Plans. . . . . . . . . . . . . . . . . . . . . . . .     3.9(a)
Preferred Stock. . . . . . . . . . . . . . . . . . .     3.2(a)
Preliminary Proxy Statement. . . . . . . . . . . . .        5.3
Proxy Statement. . . . . . . . . . . . . . . . . . .     1.8(a)
Purchaser. . . . . . . . . . . . . . . . . . . . . .   Recitals
Purchaser Common Stock . . . . . . . . . . . . . . .        2.1
Schedule 14D-1 . . . . . . . . . . . . . . . . . . .     1.1(b)
Schedule 14D-9 . . . . . . . . . . . . . . . . . . .     1.2(b)
SEC. . . . . . . . . . . . . . . . . . . . . . . . .     1.1(b)
Secretary of State . . . . . . . . . . . . . . . . .        1.5
Securities Act . . . . . . . . . . . . . . . . . . .        3.5
Shares . . . . . . . . . . . . . . . . . . . . . . .     1.1(a)
Special Meeting. . . . . . . . . . . . . . . . . . .     1.8(a)
Subsidiary . . . . . . . . . . . . . . . . . . . . .     3.1(a)
Superior Proposal. . . . . . . . . . . . . . . . . .     5.6(b)
Surviving Corporation. . . . . . . . . . . . . . . .        l.4
Tax. . . . . . . . . . . . . . . . . . . . . . . . .    3.10(k)
Taxes. . . . . . . . . . . . . . . . . . . . . . . .    3.10(k)
Tax Return . . . . . . . . . . . . . . . . . . . . .    3.10(k)
Title IV Plan. . . . . . . . . . . . . . . . . . . .     3.9(a)
Trademarks . . . . . . . . . . . . . . . . . . . . .    3.11(c)
Transactions . . . . . . . . . . . . . . . . . . . .     1.2(a)
Voting Debt. . . . . . . . . . . . . . . . . . . . .     3.2(a)
1996 Premium . . . . . . . . . . . . . . . . . . . .    5.10(b)


                               -iv-
<PAGE>

                     AGREEMENT AND PLAN OF MERGER


          AGREEMENT AND PLAN OF MERGER (hereinafter referred to as this 
"Agreement"), dated as of August 7, 1997, by and among OMNICARE, INC., a 
Delaware corporation ("Parent"), OMNICARE ACQUISITION CORP., a Delaware 
corporation and a wholly-owned subsidiary of Parent (the "Purchaser"), and 
AMERICAN MEDSERVE CORPORATION, a Delaware corporation (the "Company").

          WHEREAS, the Board of Directors of each of Parent, the Purchaser 
and the Company has approved, and deems it advisable and in the best 
interests of its respective stockholders to consummate, the acquisition of 
the Company by Parent upon the terms and subject to the conditions set forth 
herein.

     NOW, THEREFORE, in consideration of the foregoing and the mutual 
representations, warranties, covenants and agreements set forth herein, the 
parties hereto agree, as follows:

                                ARTICLE I.

                           THE OFFER AND MERGER

     Section 1.1. THE OFFER.

     (a)  As promptly as practicable (but in no event later than five business 
days after the public announcement of the execution hereof), the Purchaser 
shall commence (within the meaning of Rule 14d-2 under the Securities Exchange 
Act of 1934, as amended (the "Exchange Act")) a tender offer (the "Offer") for 
all of the outstanding shares of Common Stock, par value $.01 per share (the 
"Shares"), of the Company at a price of $18.00 per Share, net to the seller in 
cash (such price, as it may be amended in accordance with the terms of this 
Agreement, being referred to herein as the "Offer Price"), subject to there 
being validly tendered and not withdrawn prior to the expiration of the Offer, 
that number of Shares which represents at least a majority of the Shares 
outstanding on a fully diluted basis (the "Minimum Condition") and to the other 
conditions set forth in Annex A hereto, and shall consummate the Offer in 
accordance with its terms.  For purposes of this Agreement, "fully diluted 
basis" means issued and outstanding Shares and Shares subject to issuance under 
employee stock options and other outstanding rights to acquire Shares.  The 
Company agrees that no Shares held by the Company or any of its Subsidiaries 
(as defined herein) will be tendered to the Purchaser pursuant to the Offer.  
The obligations of the Purchaser to accept for payment and to pay for any 
Shares validly tendered on or prior to the expiration of the Offer and not 
withdrawn shall be subject only to the Minimum Condition and the other 
conditions set forth in Annex A hereto.  The Offer shall be made by means of an 
offer to purchase (the "Offer to Purchase") containing the terms set forth in 
this Agreement, the Minimum Condition and the other conditions set forth in 
Annex A hereto. The Purchaser shall not amend or waive the Minimum Condition 
and shall not decrease the Offer Price or decrease the number of Shares sought, 
or amend any other condition of the Offer in any manner adverse to the holders 
of the Shares without the written consent of the Company, except that Purchaser 
may, in its sole discretion, waive any of the conditions to the Offer set forth 
in Annex A hereto.  The Purchaser shall, on the terms and subject to the prior 
satisfaction or waiver of the conditions of the Offer, accept for payment and 
pay for Shares validly tendered and not withdrawn as soon as practicable after 
expiration of the Offer; provided, however, that if, immediately prior to the 
expiration date of the Offer the Shares tendered and not withdrawn pursuant to 
the Offer equal less than 90% of the outstanding Shares but more than 80% of 
the outstanding Shares,


                                       
<PAGE>

the Purchaser may extend the Offer for a period not to exceed seven business 
days, notwithstanding that all conditions to the Offer are satisfied as of 
such expiration date of the Offer.

     (b)  As soon as practicable on the date the Offer is commenced, Parent and 
the Purchaser shall file or cause to be filed with the United States Securities 
and Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 
with respect to the Offer (together with all amendments and supplements thereto 
and including the exhibits thereto, the "Schedule 14D-1").  The Schedule 14D-1 
will include, as exhibits, the Offer to Purchase and a form of letter of 
transmittal and other ancillary Offer documents and instruments (collectively, 
together with any amendments and supplements thereto, the "Offer Documents").

     (c)  Parent and the Purchaser will cause the Offer Documents to be filed 
with the SEC and to be disseminated to holders of the Shares, in each case as 
and to the extent required by applicable federal securities laws.  Each of 
Parent and the Purchaser, on the one hand, and the Company, on the other hand, 
will promptly correct any information provided by it for use in the Offer 
Documents if and to the extent that it shall have become false or misleading in 
any material respect and the Purchaser will cause the Offer Documents as so 
corrected to be filed with the SEC and to be disseminated to holders of the 
Shares, in each case as and to the extent required by applicable federal 
securities laws.  The Company and its counsel shall be given a reasonable 
opportunity to review the Schedule 14D-1 (including, without limitation, all 
documents filed therewith as exhibits) before it is filed with the SEC.  In 
addition, Parent and the Purchaser will provide the Company and its counsel 
with any comments, whether written or oral, Parent, the Purchaser or their 
counsel may receive from time to time from the SEC or its staff with respect to 
the Offer Documents promptly after the receipt of such comments.

     Section 1.2.  COMPANY ACTIONS.

     (a)  The Company hereby approves of and consents to the Offer and 
represents and warrants that the Company's Board of Directors, at a meeting 
duly called and held, has (i) unanimously determined that the terms of the 
Offer and the Merger (as defined in Section 1.4) are fair to and in the best 
interests of the shareholders of the Company, (ii) approved this Agreement and 
the transactions contemplated hereby, including the Offer and Merger 
(collectively, the "Transactions"), and (iii) resolved to recommend that the 
shareholders of the Company accept the Offer, tender their Shares thereunder to 
the Purchaser and approve and adopt this Agreement and the Merger; provided, 
that such recommendation may be withdrawn, modified or amended if, in the 
opinion of the Board of Directors, only after receipt of advice from outside 
legal counsel, failure to withdraw, modify or amend such recommendation would 
reasonably be expected to result in the Board of Directors violating its 
fiduciary duties to the Company's shareholders under applicable law and the 
Company pays the fees and expenses required by Section 8.1 hereof.

     (b)  Concurrently with the commencement of the Offer, the Company shall 
file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 
(together with all amendments and supplements thereto and including the 
exhibits thereto, the "Schedule 14D-9") which shall, subject to the provisions 
of Section 5.6(b), contain the recommendation referred to in clause (iii) of 
Section 1.2(a) hereof.  The Company further agrees to take all steps necessary 
to cause the Schedule 14D-9 to be filed with the SEC and to be disseminated to 
holders of the Shares, in each case as and to the extent required by applicable 
federal securities laws.  Each of the Company, on the one hand, and Parent and 
the Purchaser, on the other hand, will promptly correct any information 
provided by it for use in the Schedule 14D-9 if and to the extent that it shall 
have become false and misleading in any material respect and the Company 
further agrees to take all steps necessary to cause the Schedule 14D-9 as so 
corrected to be filed with the SEC and to be disseminated to holders of the 
Shares, in each case as and to the extent 


                                  2
<PAGE>

required by applicable federal securities laws. Parent and its counsel shall 
be given a reasonable opportunity to review and comment upon the Schedule 
14D-9 before it is filed with the SEC.  In addition, the Company agrees to 
provide Parent, the Purchaser and their counsel with any comments, whether 
written or oral, that the Company or its counsel may receive from time to 
time from the SEC or its staff with respect to the Schedule 14D-9 promptly 
after the receipt of such comments or other communications.

     (c)  In connection with the Offer, the Company will promptly furnish or 
cause to be furnished to the Purchaser mailing labels, security position 
listings and any available listing, or computer file containing the names and 
addresses of all recordholders of the Shares as of a recent date, and shall 
furnish the Purchaser with such additional information (including, but not 
limited to, updated lists of holders of the Shares and their addresses, mailing 
labels and lists of security positions) and assistance, and cause its 
representatives and advisors to provide such assistance, as the Purchaser or 
its agents may reasonably request in communicating the Offer to the record and 
beneficial holders of the Shares.  Subject to the requirements of applicable 
law and except for such steps as are necessary to disseminate the Offer 
Documents and any other documents necessary to consummate the Offer and the 
Merger, Parent and the Purchaser shall hold in confidence the information 
contained in any of such labels and lists and the additional information 
referred to in the preceding sentence, will use such information only in 
connection with the Offer, and, if this Agreement is terminated, will upon 
request of the Company deliver or cause to be delivered to, the Company all 
copies of such information then in its possession or the possession of its 
agents or representatives.

     Section 1.3. DIRECTORS.

     (a)  Promptly upon the purchase of and payment for any Shares by Parent or 
any of its subsidiaries which represents at least a majority of the outstanding 
Shares, Parent shall be entitled to designate such number of directors, rounded 
up to the next whole number, on the Board of Directors of the Company as is 
equal to the product of the total number of directors on such Board (giving 
effect to the directors designated by Parent pursuant to this sentence) 
multiplied by the percentage that the number of Shares so accepted for payment 
bears to the total number of Shares then outstanding.  In furtherance thereof, 
the Company shall, upon request of the Purchaser, promptly increase the size of 
its Board of Directors or exercise its best efforts to secure the resignations 
of such number of directors, or both, as is necessary to enable Parent's 
designees to be so elected to the Company's Board, and shall cause Parent's 
designees to be so elected.  At such time, the Company shall, if requested by 
Parent, also cause persons designated by Parent to constitute at least the same 
percentage (rounded up to the next whole number) as is on the Company's Board 
of Directors of (i) each committee of the Company's Board of Directors, (ii) 
each board of directors (or similar body) of each Subsidiary (as defined in 
Section 3.1) of the Company and (iii) each committee (or similar body) of each 
such board.

     (b)  The Company shall promptly take all actions required pursuant to 
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in 
order to fulfill its obligations under Section 1.3(a), including mailing to 
stockholders together with Schedule 14D-9 the information required by such 
Section 14(f) and Rule 14f-1 as is necessary to enable Parent's designees to be 
elected to the Company's Board of Directors.  Parent or the Purchaser will 
supply the Company and be solely responsible for any information with respect 
to either of them and their nominees, officers, directors and affiliates 
required by such Section 14(f) and Rule 14f-1.  The provisions of this Section 
1.3 are in addition to and shall not limit any rights which the Purchaser, 
Parent or any of their affiliates may have as a holder or beneficial owner of 
Shares as a matter of law with respect to the election of directors or 
otherwise.

     (c)  In the event that Parent's designees are elected to the Company's 
Board of Directors, until the Effective Time (as defined below), the Company's 
Board shall have at least two directors who 


                                  3
<PAGE>

are directors on the date hereof (the "Independent Directors"), provided 
that, in such event, if the number of Independent Directors shall be reduced 
below two for any reason whatsoever, any remaining Independent Directors (or 
Independent Director, if there be only one remaining) shall be entitled to 
designate persons to fill such vacancies who shall be deemed to be 
Independent Directors for purposes of this Agreement or, if no Independent 
Director then remains, the other directors shall designate two persons to 
fill such vacancies who shall not be stockholders, affiliates or associates 
of Parent or the Purchaser and such persons shall be deemed to be Independent 
Directors for purposes of this Agreement. Notwithstanding anything in this 
Agreement to the contrary, in the event that Parent's designees are elected 
to the Company's Board, after the acceptance for payment of Shares pursuant 
to the Offer and prior to the Effective Time, the affirmative vote of a 
majority of the Independent Directors shall be required to (a) amend or 
terminate this Agreement by the Company or (b) exercise or waive any of the 
Company's rights, benefits or remedies hereunder.

     Section 1.4.  THE MERGER.  Subject to the terms and conditions of this 
Agreement, and in accordance with the relevant provisions of the Delaware 
General Corporation Law ("DGCL"), at the Effective Time, the Company and the 
Purchaser shall consummate a merger (the "Merger") pursuant to which (a) the 
Purchaser shall be merged with and into the Company and the separate 
corporate existence of the Purchaser shall thereupon cease, (b) the Company 
shall be the successor or surviving corporation in the Merger (sometimes 
hereinafter referred to as the "Surviving Corporation") and shall continue to 
be governed by the laws of the State of Delaware, and (c) the separate 
corporate existence of the Company with all its rights, privileges, 
immunities, powers and franchises shall continue unaffected by the Merger, 
except as set forth in this Section 1.4. Pursuant to the Merger, (x) the 
Company's Amended and Restated Certificate of Incorporation ("Certificate of 
Incorporation") shall be amended in its entirety to read as the Certificate 
of the Purchaser, in effect immediately  prior to the Effective Time, except 
that Article FIRST thereof shall promptly be amended to read as follows:  
"FIRST: The name of the corporation is American Medserve Corporation" and, as 
so amended, shall be the Certificate of the Surviving Corporation until 
thereafter amended as provided by law and such Certificate, and (y) the 
By-Laws of the Purchaser (the "By-Laws"), as in effect immediately prior to 
the Effective Time, shall be the Bylaws of the Surviving Corporation until 
thereafter amended as provided by law, by such Certificate or by such Bylaws. 
The Merger shall have the effects specified in the DGCL.

     Section 1.5.  EFFECTIVE TIME.  Parent, the Purchaser and the Company 
will cause a Certificate of Merger to be executed and filed on the Closing 
Date (as defined in Section 1.6) (or on such other date as Parent and the 
Company may agree) with the Secretary of State of Delaware (the "Secretary of 
State") as provided in the DGCL. The Merger shall become effective on the 
date on which the Certificate of Merger is duly filed with the Secretary of 
State or such time as is agreed upon by the parties and specified in the 
Certificate of Merger, and such time is hereinafter referred to as the 
"Effective Time".

     Section 1.6.  CLOSING.  The closing of the Merger (the "Closing") shall 
take place at 10:00 a.m. on a date to be specified by the parties, which 
shall be no later than the second business day after satisfaction or waiver 
of all of the conditions set forth in Article VI hereof (the "Closing Date"), 
at the offices of Dewey Ballantine, 1301 Avenue of the Americas, New York, 
New York 10019, unless another date or place is agreed to in writing by the 
parties hereto.

     Section 1.7.  DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION.  The 
directors of the Purchaser and the officers of the Company at the Effective 
Time shall, from and after the Effective Time, be the directors and officers, 
respectively, of the Surviving Corporation until their successors shall have 
been duly elected or appointed or qualified or until their earlier death, 
resignation or removal in accordance with the Certificate and the By-Laws.


                                    4
<PAGE>

      Section 1.8.  SHAREHOLDERS' MEETING.

      (a)  If required by applicable law in order to consummate the Merger, the 
Company, acting through its Board of Directors, shall, in accordance with 
applicable law:

          (i)     duly call, give notice of, convene and hold a special meeting 
      of its shareholders (the "Special Meeting") as promptly as practicable 
      following the acceptance for payment and purchase of Shares by the 
      Purchaser pursuant to the Offer for the purpose of considering and 
      taking action upon the approval of the Merger and the adoption of this 
      Agreement;

          (ii)    prepare and file with the SEC a preliminary proxy or 
      information statement relating to the Merger and this Agreement and 
      (x) obtain and furnish the information required to be included by the SEC 
      in the Proxy Statement (as hereinafter defined) and, after consultation 
      with Parent, to respond promptly to any comments made by the SEC with 
      respect to the preliminary proxy or information statement and cause a 
      definitive proxy or information statement, including any amendment or 
      supplement thereto (the "Proxy Statement") to be mailed to its 
      shareholders, provided that no amendment or supplement to the Proxy 
      Statement will be made by the Company without consultation with Parent and
      its counsel and (y) use its best efforts to obtain the necessary approvals
      of the Merger and this Agreement by its shareholders; and

            (iii) include in the Proxy Statement the recommendation of the Board
       that shareholders of the Company vote in favor of the approval of the 
       Merger and the adoption of this Agreement.

      (b)  Parent shall vote, or cause to be voted, all of the 
Shares then owned by it, the Purchaser or any of its other subsidiaries and 
affiliates in favor of the approval of the Merger and the approval and 
adoption of this Agreement.

      Section 1.9.  MERGER WITHOUT MEETING OF SHAREHOLDERS.  Notwithstanding 
Section 1.8 hereof, in the event that Parent, the Purchaser and any other 
Subsidiaries of Parent shall acquire in the aggregate at least 90% of the 
outstanding shares of each class of capital stock of the Company, pursuant to 
the Offer or otherwise, the parties hereto shall, at the request of Parent 
and subject to Article VI hereof, take all necessary and appropriate action 
to cause the Merger to become effective as soon as practicable after such 
acquisition, without a meeting of shareholders of the Company, in accordance 
with Section 253 of the DGCL.

                                  ARTICLE II.

                           CONVERSION OF SECURITIES

      Section 2.1.  CONVERSION OF CAPITAL STOCK.  As of the Effective Time, by 
virtue of the Merger and without any action on the part of the holders of any 
Shares or holders of common stock, par value $.01 per share, of the Purchaser 
(the "Purchaser Common Stock"):

      (a)  THE PURCHASER COMMON STOCK.  Each issued and outstanding share of 
the Purchaser Common Stock shall be converted into and become one fully paid 
and nonassessable share of common stock of the Surviving Corporation.


                                    5

<PAGE>

               (b)  CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK.  
All Shares that are owned by the Company as treasury stock and any Shares 
owned by Parent, the Purchaser or any other wholly owned Subsidiary of Parent 
shall be canceled and retired and shall cease to exist and no consideration 
shall be delivered in exchange therefor.

               (c)  EXCHANGE OF SHARES.  Each issued and outstanding Share 
(other than Shares to be canceled in accordance with Section 2.1(b) and any 
Shares which are held by stockholders exercising appraisal rights pursuant to 
Section 262 of the DGCL ("Dissenting Shareholders")) shall be converted into 
the right to receive the Offer Price, payable to the holder thereof, without 
interest (the "Merger Consideration"), upon surrender of the certificate 
formerly representing such Share in the manner provided in Section 2.2. All 
such Shares, when so converted, shall no longer be outstanding and shall 
automatically be canceled and retired and shall cease to exist, and each 
holder of a certificate representing any such Shares shall cease to have any 
rights with respect thereto, except the right to receive the Merger 
Consideration therefor upon the surrender of such certificate in accordance 
with Section 2.2, without interest, or the right, if any, to receive payment 
from the Surviving Corporation of the "fair value" of such Shares as 
determined in accordance with Section 262 of the DGCL.

     Section 2.2.  EXCHANGE OF CERTIFICATES.

               (a)  PAYING AGENT.  Parent shall designate a bank or trust 
company reasonably acceptable to the Company to act as agent for the holders 
of the Shares in connection with the Merger (the "Paying Agent") to receive 
in trust from time to time, as necessary, the funds to which holders of the 
Shares shall become entitled pursuant to Section 2.1(c). Such funds shall be 
invested by the Paying Agent as directed by Parent or the Surviving 
Corporation.

               (b)  EXCHANGE PROCEDURES.  As soon as reasonably practicable 
after the Effective Time, the Paying Agent shall mail to each holder of 
record, as of the Effective Time, of a certificate or certificates, which 
immediately prior to the Effective Time represented outstanding Shares (the 
"Certificates"), whose Shares were converted pursuant to Section 2.1 into the 
right to receive the Merger Consideration (i) a letter of transmittal (which 
shall specify that delivery shall be effected, and risk of loss and title to 
the Certificates shall pass, only upon delivery of the Certificates to the 
Paying Agent and shall be in such form and have such other provisions as 
Parent may reasonably specify) and (ii) instructions for use in effecting the 
surrender of the Certificates in exchange for payment of the Merger 
Consideration.  Upon surrender of a Certificate for cancellation to the 
Paying Agent or to such other agent or agents as may be appointed by Parent, 
together with such letter of transmittal, duly executed, the holder of such 
Certificate shall be entitled to receive in exchange therefor the Merger 
Consideration for each Share formerly represented by such Certificate and the 
Certificate so surrendered shall forthwith be canceled.  No interest will be 
paid or accrued on the cash payable upon the surrender of the Certificates.  
If payment of the Merger Consideration is to be made to a person other than 
the person in whose name the surrendered Certificate is registered, it shall 
be a condition of payment that the Certificate so surrendered shall be 
properly endorsed or shall be otherwise in proper form for transfer and that 
the person requesting such payment shall have paid any transfer and other 
taxes required by reason of the payment of the Merger Consideration to a 
person other than the registered holder of the Certificate surrendered or 
shall have established to the satisfaction of the Surviving Corporation that 
such tax either has been paid or is not applicable.  Until surrendered as 
contemplated by this Section 2.2, each Certificate shall be deemed at any 
time after the Effective Time to represent only the right to receive the 
Merger Consideration in cash as contemplated by this Section 2.2.

               (c)  TRANSFER BOOKS; NO FURTHER OWNERSHIP RIGHTS IN THE 
SHARES.  At the Effective Time, the stock transfer books of the Company 
shall be closed and thereafter there shall be no further registration 

                                    6
<PAGE>

of transfers of the Shares on the records of the Company.  From and after the 
Effective Time, the holders of Certificates evidencing ownership of the 
Shares outstanding immediately prior to the Effective Time shall cease to 
have any rights with respect to such Shares, except as otherwise provided for 
herein or by applicable law.  If, after the Effective Time, Certificates are 
presented to the Surviving Corporation for any reason, they shall be canceled 
and exchanged as provided in this Article II.

               (d)  TERMINATION OF FUND; NO LIABILITY.  At any time following 
six months after the Effective Time, the Surviving Corporation shall be 
entitled to require the Paying Agent to deliver to it any funds (including 
any interest received with respect thereto) which had been made available to 
the Paying Agent and which have not been disbursed to holders of 
Certificates, and thereafter such holders shall be entitled to look to the 
Surviving Corporation (subject to abandoned property, escheat or other 
similar laws) only as general creditors thereof with respect to the Merger 
Consideration payable upon due surrender of their Certificates, without any 
interest thereon.  Notwithstanding the foregoing, neither the Surviving 
Corporation nor the Paying Agent shall be liable to any holder of a 
Certificate for Merger Consideration delivered to a public official pursuant 
to any applicable abandoned property, escheat or similar law.

               (e)  LOST, STOLEN OR DESTROYED CERTIFICATES.  In the event any 
Certificate for Shares shall have been lost, stolen or destroyed, upon the 
making of an affidavit of that fact by the Person claiming such Certificate 
to be lost, stolen or destroyed and, if required by Parent, the posting by 
such Person of a bond in customary amount as indemnity against any claim that 
may be made against it with respect to such Certificate, the Paying Agent 
will issue in exchange for such lost, stolen or destroyed Certificate the 
Merger Consideration pursuant to Section 2.2(b) upon due surrender of and 
deliverable in respect of the Shares represented by such Certificate pursuant 
to this Agreement.

               (f)  WITHHOLDING TAXES.  Parent and Purchaser shall be 
entitled to deduct and withhold, or cause the Paying Agent to deduct and 
withhold, from the consideration otherwise payable to a holder of Shares 
pursuant to the Offer or the Merger any stock transfer taxes and such amounts 
as are required under the Internal Revenue Code of 1986, as amended (the 
"Code"), or any applicable provision of state, local or foreign tax law, as 
specified in the Offer Documents.  To the extent that amounts are so withheld 
by Parent or Purchaser, such withheld amounts shall be treated for all 
purposes of this Agreement as having been paid to the holder of the Shares in 
respect of which such deduction and withholding was made by Parent or 
Purchaser, in the circumstances described in the Offer Documents.

     Section 2.3.  APPRAISAL RIGHTS. Notwithstanding anything in this 
Agreement to the contrary, Shares that are issued and outstanding immediately 
prior to the Effective Time and which are held by stockholders who did not 
vote in favor of the Merger and comply with all of the relevant provisions of 
Section 262 of the DGCL (the "Dissenting Shares") shall not be converted into 
or be exchangeable for the right to receive the Merger Consideration, unless 
and until such holders shall have failed to perfect or shall have effectively 
withdrawn or lost their rights to appraisal under the DGCL.  If any 
Dissenting Stockholder shall have failed to perfect or shall have effectively 
withdrawn or lost such right, such holder's Shares shall thereupon be 
converted into and become exchangeable for the right to receive, as of the 
Effective Time, the Merger Consideration without any interest thereon.  The 
Company shall give Parent (i) prompt notice of any written demands for 
appraisal of any Shares, attempted withdrawals of such demands, and any other 
instruments served pursuant to the DGCL and received by the Company relating 
to stockholders' rights of appraisal and (ii) the opportunity to direct all 
negotiations and proceedings with respect to demands for appraisal under the 
DGCL.  Neither the Company nor the Surviving Corporation shall, except with 
the prior written consent of Parent, voluntarily make any payment with 
respect to, or settle or offer to settle, any such demand for payment.  If 
any Dissenting Shareholder shall fail to perfect or shall have effectively 
withdrawn or lost the right to dissent, the Shares 

                                    7
<PAGE>

held by such Dissenting Shareholder shall thereupon be treated as though such 
Shares had been converted into the Merger Consideration pursuant to Section 2.1.

     Section 2.4.  COMPANY PLANS.

               (a)  On the expiration date of the Offer, immediately prior to 
the acceptance for payment of Shares pursuant to the Offer, each outstanding 
employee stock option to purchase Shares (a "Company Option") granted under 
any stock option or compensation plan or arrangement of the Company or its 
Subsidiaries (collectively, the "Option Plan"), shall be surrendered to the 
Company and shall be forthwith canceled and the Company shall pay to each 
holder of a Company Option, by check, an amount equal to (i) the product of 
the number of the Shares which are issuable upon exercise of such Company 
Option, multiplied by the Offer Price, less (ii) the aggregate exercise price 
of such Company Option.  Prior to the Closing, the Company shall use its best 
efforts to take all actions (including, without limitation, soliciting any 
necessary consents from the holders of the Company Options) required to 
effect the matters set forth in this Section 2.4, including the surrender, 
cancellation and payment in consideration for the Company Options described 
in this Section 2.4(a). The Company shall withhold all income or other taxes 
as required under applicable law prior to distribution of the cash amount 
received under this Section 2.4(a) to the holders of Company Options.

               (b)  Except as may be otherwise agreed to by Parent or the 
Purchaser and the Company, the Company's Option Plan shall terminate as of 
the Effective Time and the provisions in any other plan, program or 
arrangement providing for the issuance or grant of any other interest in 
respect of the capital stock of the Company or any of its Subsidiaries shall 
be deleted as of the Effective Time and no holder of Company Options or any 
participant in the Option Plan or any other plans, programs or arrangements 
shall have any rights thereunder to acquire any equity securities of the 
Company, the Surviving Corporation or any subsidiary thereof.

                          ARTICLE III.

          REPRESENTATIONS AND WARRANTIES OF THE COMPANY



     Except as set forth in the schedule attached to this Agreement setting 
forth exceptions to the Company's representations and warranties set forth 
herein (the "Company Disclosure Schedule"), the Company represents and 
warrants to Parent and the Purchaser as set forth below.  The Company 
Disclosure Schedule will be arranged in sections corresponding to sections of 
this Agreement to be modified by such disclosure schedule.

     Section 3.1.  ORGANIZATION. (a) Each of the Company and its 
Subsidiaries, all of which are listed in Section 3.1 of the Company 
Disclosure Schedule, is a corporation, limited liability company or 
partnership duly organized, validly existing and in good standing under the 
laws of the jurisdiction of its incorporation or organization.  Complete and 
correct copies of the Certificate of Incorporation and the By-Laws and all 
amendments thereof to date, have been delivered to Parent.  Each of the 
Company and its Subsidiaries has all requisite corporate power and authority 
and all necessary governmental approvals to own, lease and operate its 
properties and to carry on its business as now being conducted, except where 
the failure to be so organized, existing and in good standing or to have such 
power, authority, and governmental approvals would not, individually or in 
the aggregate, have a Company Material Adverse Effect (as defined below).  As 
used in this Agreement, the term "Subsidiary" shall mean all corporations or 
other entities in which the Company or the Parent, as the case may be, owns, 
directly or indirectly, a majority of the issued and outstanding capital 
stock or similar interests or has the right to elect a majority of the 
members of the Board of Directors or similar governing body.  As used in this 
Agreement, (i) 

                                    8
<PAGE>

"Company Material Adverse Effect" shall mean any event, change or effect that 
has, or is reasonably likely to have, a material adverse effect (A) on the 
condition (financial or otherwise), business, assets, liabilities, results of 
operations or cash flows of the Company and its Subsidiaries, taken as a 
whole or (B) on the ability of the Company to perform its obligations under 
this Agreement or to consummate the transactions contemplated by this 
Agreement, and (ii) the phrase "to the Company's knowledge", or words of 
comparable import, shall mean facts or circumstances within the personal 
knowledge, after due inquiry, of any of Timothy L. Burfield, Charles R. 
Wallace and Michael B. Freedman.

                    (b)  The Company and each of its Subsidiaries is duly 
qualified or licensed to do business and in good standing as a foreign 
corporation in each jurisdiction in which the property owned, leased or 
operated by it or the nature of the business conducted by it makes such 
qualification or licensing necessary, except where the failure to be so duly 
qualified or licensed and in good standing would not individually or in the 
aggregate have a Company Material Adverse Effect.  Except as set forth in 
Section 3.1 of the Company Disclosure Schedule, the Company does not own (i) 
any equity interest in any corporation or other entity or (ii) marketable 
securities where the Company's equity interest in any entity exceeds five 
percent of the outstanding equity of such entity on the date hereof.

     Section 3.2.  CAPITALIZATION. (a) The authorized capital stock of the 
Company consists of 30,000,000 Shares and 1,000,000 shares of preferred 
stock, par value $.01 per share (the "Preferred Stock").  As of the date 
hereof, (i) 12,217,936 Shares are issued and outstanding, (ii) no Shares are 
issued and held in the treasury of the Company, (iii) no shares of Preferred 
Stock are issued and outstanding, and (iv) 1,310,790 Shares are reserved for 
issuance to employees pursuant to the Option Plan, of which 517,117 Shares 
are subject to outstanding, unexercised options. Section 3.2(a) of the 
Company Disclosure Schedule sets forth a true and complete list of the 
holders of Company Options, including such person's name, the number of 
options (vested, unvested and total) held by such person and the exercise 
price for each such option.  Since the date hereof, the Company has not 
issued or granted additional options under the Option Plan.  All the 
outstanding shares of the Company's capital stock are, and all Shares which 
may be issued pursuant to the exercise of outstanding Company Options will 
be, when issued in accordance with the respective terms thereof, duly 
authorized, validly issued, fully paid and non-assessable.  Except as 
disclosed in Section 3.2 of the Company Disclosure Schedule, there are no 
bonds, debentures, notes or other indebtedness having general voting rights 
(or convertible into securities having such rights) ("Voting Debt") of the 
Company or any of its Subsidiaries issued and outstanding.  Except as set 
forth above, except as described in Section 3.2 of the Company Disclosure 
Schedule and except for the transactions contemplated by this Agreement, as 
of the date hereof, (i) there are no shares of capital stock of the Company 
authorized, issued or outstanding, (ii) there are no outstanding options, 
warrants, calls, preemptive rights, subscriptions or other rights, 
agreements, arrangements or commitments of any character, relating to the 
issued or unissued capital stock of the Company or any of its Subsidiaries, 
obligating the Company or any of its Subsidiaries to issue, transfer or sell 
or cause to be issued, transferred or sold any shares of capital stock or 
Voting Debt of, or other equity interest in, the Company or any of its 
Subsidiaries or securities convertible into or exchangeable for such shares 
or equity interests, or obligating the Company or any of its Subsidiaries to 
grant, extend or enter into any such option, warrant, call, subscription or 
other right, agreement, arrangement or commitment and (iii) except as set 
forth in Section 3.2(a) of the Company Disclosure Schedule, there are no 
outstanding contractual obligations of the Company or any of its Subsidiaries 
to repurchase, redeem or otherwise acquire any Shares, or the capital stock 
of the Company, or any Subsidiary or affiliate of the Company or to provide 
funds to make any investment (in the form of a loan, capital contribution or 
otherwise) in any Subsidiary or any other entity other than loans to 
Subsidiaries in the ordinary course of business.

                    (b)  All of the outstanding shares of capital stock of 
each of the Subsidiaries are beneficially owned by the Company, directly or 
indirectly, and all such shares have been validly issued 

                                    9
<PAGE>

and are fully paid and nonassessable and are owned by either the Company or 
one of its Subsidiaries free and clear of all liens, charges, claims or 
encumbrances of whatever nature ("Encumbrances").

                    (c)  There are no voting trusts or other agreements or 
understandings to which the Company or any of its Subsidiaries is a party 
with respect to the voting of the capital stock of the Company or any of the 
Subsidiaries.

     Section 3.3.  AUTHORIZATION; VALIDITY OF AGREEMENT; COMPANY ACTION.  The 
Company has the requisite corporate power and authority to execute and 
deliver this Agreement and to consummate the Transactions.  The execution, 
delivery and performance by the Company of this Agreement, and the 
consummation by it of the Transactions, have been duly authorized by its 
Board of Directors and, except for obtaining the approval of its shareholders 
as contemplated by Section 1.8 hereof, no other corporate action on the part 
of the Company is necessary to authorize the execution and delivery by the 
Company of this Agreement and the consummation by it of the Transactions.  
This Agreement has been duly executed and delivered by the Company and, 
assuming that this Agreement constitutes the legal, valid and binding 
obligations of Parent and the Purchaser, constitutes the legal, valid and 
binding obligation of the Company enforceable against the Company in 
accordance with its terms, except as may be limited by any bankruptcy, 
insolvency, reorganization, moratorium, fraudulent conveyance or other 
similar laws affecting the enforcement of creditors' rights generally or by 
general principles of equity (regardless of whether such enforceability is 
considered in a proceeding in equity or at law).

     Section 3.4. CONSENTS AND APPROVALS; NO VIOLATIONS.  Except for the 
filings set forth in Section 3.4 of the Company Disclosure Schedule and the 
filings, permits, authorizations, consents and approvals as may be required 
under, and other applicable requirements of, the Exchange Act, the 
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR 
Act"), state securities or blue sky laws, and the DGCL, none of the 
execution, delivery or performance of this Agreement by the Company, the 
consummation by the Company of the Transactions or compliance by the Company 
with any of the provisions hereof will (i) conflict with or result in any 
breach of any provision of the Certificate, the By-Laws or similar 
organizational documents of the Company or any of its Subsidiaries, (ii) 
require any filing with, or permit, authorization, consent or approval of, 
any court, arbitrator, tribunal, administrative agency or commission or other 
governmental or other regulatory authority or agency (a "Governmental 
Entity"), (iii) result in a violation or breach of, or constitute (with or 
without due notice or lapse of time or both) a default (or give rise to any 
right of termination, amendment, cancellation or acceleration) under, any of 
the terms, conditions or provisions of any note, bond, mortgage, indenture, 
lease, license, contract, agreement or other instrument or obligation to 
which the Company or any of its Subsidiaries is a party or by which any of 
them or any of their properties or assets may be bound (the "Company 
Agreements") or (iv) violate any order, writ, injunction, decree, statute, 
rule or regulation applicable to the Company, any of its Subsidiaries or any 
of their properties or assets, excluding from the foregoing clauses (ii), 
(iii) and (iv) such violations, breaches or defaults which would not, 
individually or in the aggregate, have a Company Material Adverse Effect.  
Section 3.4 of the Company Disclosure Schedule sets forth a list of all third 
party consents and approvals required to be obtained in connection with this 
Agreement under the Company Agreements prior to the consummation of the 
transactions contemplated by this Agreement, except such third party consents 
and approvals the failure of which to obtain would not have a Company 
Material Adverse Effect.

     Section 3.5.  SEC REPORTS AND FINANCIAL STATEMENTS.  The Company has 
timely filed with the SEC, and has heretofore made available to Parent, true 
and complete copies of, all forms, reports, schedules, statements and other 
documents required to be filed by it since November 13, 1996 and prior to the 
date hereof, under the Exchange Act or the Securities Act of 1933, as amended 
(the "Securities Act"), and the SEC's rules and regulations thereunder (as 
such documents have been amended since the 

                                    10
<PAGE>

time of their filing, collectively, the "Company SEC Documents").  As of 
their respective dates or, if amended prior to the date hereof, as of the 
date of the last such amendment, the Company SEC Documents, including, 
without limitation, any financial statements or schedules included therein 
(a) did not contain any untrue statement of a material fact or omit to state 
a 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 and (b) complied in all material respects with the 
applicable requirements of the Exchange Act and the Securities Act, as the 
case may be, and the applicable rules and regulations of the SEC thereunder.  
None of the Company's Subsidiaries is required to file any forms, reports or 
other documents with the SEC.  The consolidated financial statements of the 
Company included in the Company SEC Documents (the "Financial Statements") 
have been prepared from, and are in accordance with, the books and records of 
the Company and its consolidated Subsidiaries, comply in all material 
respects with applicable accounting requirements and with the published rules 
and regulations of the SEC with respect thereto, have been prepared in 
accordance with United States generally accepted accounting principles 
("GAAP") applied on a consistent basis during the period involved (except in 
the case of unaudited statements, as permitted by Form 10-Q under the 
Exchange Act and as may be otherwise indicated in the notes thereto) and 
fairly present (subject, in the case of unaudited statements, to normal 
recurring year-end adjustments and any other adjustments described therein) 
the consolidated financial position and the consolidated results of 
operations and cash flows (and changes in financial position, if any) of the 
Company and its consolidated Subsidiaries as of the times and for the periods 
referred to therein.

     Section 3.6.  ABSENCE OF CERTAIN CHANGES.  Except as disclosed in 
Section 3.6 of the Company Disclosure Schedule or in the Company SEC 
Documents filed prior to the date hereof, since March 31, 1997, the Company 
and its Subsidiaries have conducted their respective businesses only in the 
ordinary and usual course and there has not occurred any events or changes 
(including the incurrence of any liabilities of any nature, whether or not 
accrued, contingent or otherwise) having, individually or in the aggregate, a 
Company Material Adverse Effect and the Company has not taken any action 
which would have been prohibited under Section 5.1 hereof.

     Section 3.7.  NO UNDISCLOSED LIABILITIES.  Except (a) as disclosed in 
the Financial Statements and (b) for liabilities and obligations (i) incurred 
in the ordinary course of business and consistent with past practice since 
December 31, 1996, or (ii) as otherwise disclosed in Section 3.7 of the 
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries 
has any liabilities or obligations of any nature, whether or not accrued, 
absolute, contingent or otherwise, whether due or to become due and whether 
required to be reflected on a balance sheet under GAAP that have, or would be 
reasonably likely to have, a Company Material Adverse Effect or that would be 
required by GAAP to be reflected in, reserved against or otherwise described 
in a consolidated balance sheet of the Company (including the notes thereto).

     Section 3.8. LITIGATION.  Except as set forth in Section 3.8 of the 
Company Disclosure Schedule, there are no suits, claims, actions, 
proceedings, including, without limitation, arbitration proceedings or 
alternative dispute resolution proceedings, or investigations pending or, to 
the knowledge of the Company, threatened against the Company or any of its 
Subsidiaries by or before any Governmental Entity that, either individually 
or in the aggregate, if adversely determined, would be reasonably likely to 
have a Company Material Adverse Effect.

     Section 3.9.  EMPLOYEE BENEFIT PLANS.

               (a)  For purposes of this Agreement, the term "Plans" shall 
include: each deferred compensation and each incentive compensation, stock 
purchase, stock option and other equity compensation plan, program, agreement 
or arrangement; each severance or termination pay, medical, 

                                    11
<PAGE>

surgical, hospitalization, life insurance and other "welfare" plan, fund or 
program (within the meaning of section 3(1) of the Employee Retirement Income 
Security Act of 1974, as amended ("ERISA")); each profit-sharing, stock bonus 
or other "pension" plan, fund or program (within the meaning of section 3(2) 
of ERISA); each employment, termination or severance agreement; and each 
other employee benefit plan, fund, program, agreement or arrangement, in each 
case, that is sponsored, maintained or contributed to or required to be 
contributed to by the Company or by any trade or business, whether or not 
incorporated (an "ERISA Affiliate"), that together with the Company would be 
deemed a "single employer" within the meaning of section 4001(b) of ERISA, or 
to which the Company or an ERISA Affiliate is party, whether written or oral, 
for the benefit of any employee or former employee of the Company or any 
Subsidiary (the "Plans").  Each of the Plans that is subject to section 302 
or Title IV of ERISA or section 412 of the Code is hereinafter referred to in 
this Section 3.9 as a "Title IV Plan."  Section 3.9 of the Company Disclosure 
Schedule sets forth all of the Plans.  Neither the Company, any Subsidiary 
nor any ERISA Affiliate has any commitment or formal plan, whether legally 
binding or not, to create any additional employee benefit plan or modify or 
change any existing Plan that would affect any employee or former employee of 
the Company or any Subsidiary.

               (b)  Except as disclosed in Section 3.9 of the Company 
Disclosure Schedule, no liability under Title IV or section 302 of ERISA has 
been incurred by the Company or any ERISA Affiliate that has not been 
satisfied in full, and no condition exists that presents a material risk to 
the Company or any ERISA Affiliate of incurring any such liability.  No Plan 
is a Title IV Plan.

               (c)  Except as disclosed in Section 3.9 of the Company 
Disclosure Schedule, neither the Company or any Subsidiary, any Plan, any 
trust created thereunder, nor any trustee or administrator thereof has 
engaged in a transaction in connection with which the Company or any 
Subsidiary, any Plan, any such trust, or any trustee or administrator (as 
defined in Section 3(16)(A) of ERISA) thereof, or any party in interest (as 
defined in ERISA Section 3(14)) or fiduciary with respect to any Plan or any 
such trust could be subject to either a civil penalty assessed pursuant to 
section 409 or 502(i) of ERISA or a tax imposed pursuant to section 4975 or 
4976 of the Code, which would be material in amount.

               (d)  Except as disclosed in Section 3.9 of the Company 
Disclosure Schedule, each Plan has been operated and administered in all 
material respects in accordance with its terms and applicable law, including 
but not limited to ERISA and the Code.

               (e)  Except as disclosed in Section 3.9 of the Company 
Disclosure Schedule, each Plan intended to be "qualified" within the meaning 
of section 401(a) of the Code has received a favorable determination letter 
from the Internal Revenue Service with respect to the qualified status of 
such Plan under the Code, including all amendments to the Code effected by 
the Tax Reform Act of 1986, and nothing has occurred since the issuance of 
such letter which could reasonably be expected to cause the loss of the 
tax-qualified status of such Plan and the related trust maintained 
thereunder. The Company has no Plans intended to satisfy the requirements of 
Section 501(c)(9).

               (f)  Except as disclosed in Section 3.9 of the Company 
Disclosure Schedule, no Plan provides medical, surgical, hospitalization, 
death or similar benefits (whether or not insured) for employees or former 
employees of the Company or any Subsidiary for periods extending beyond their 
retirement or other termination of service, other than (i) coverage mandated 
by applicable law, (ii) death benefits under any "pension plan," or (iii) 
benefits the full cost of which is borne by the current or former employee 
(or his beneficiary) or (iv) post-death exercise periods in effect under 
outstanding Company Options.

               (g)  Except as disclosed in Section 3.9 of the Company 
Disclosure Schedule, or as set forth in Section 5.11 of this Agreement, the 
consummation of the transactions contemplated by this Agreement 

                                    12
<PAGE>

will not, either alone or in combination with another event, (i) entitle any 
current or former employee or officer of the Company or any ERISA Affiliate 
to severance pay, unemployment compensation or any other payment, except as 
expressly provided in this Agreement, or (ii) accelerate the time of payment 
or vesting, or increase the amount of compensation due any such employee or 
officer.

               (h)  There are no pending, or to the knowledge of the Company, 
threatened or anticipated claims by or on behalf of any Plan, by any employee 
or beneficiary covered under any such Plan, or otherwise involving any such 
Plan (other than routine claims for benefits) which would have a material 
adverse effect upon the Plans or a Company Material Adverse Effect.

     Section 3.10.  TAX MATTERS; GOVERNMENT BENEFITS.

               (a)  The Company and each of its Subsidiaries have duly filed 
all Tax Returns (as hereinafter defined) that are required to be filed and 
have duly paid or caused to be duly paid in full or made adequate provision 
in accordance with GAAP (or there has been paid or provision has been made on 
their behalf) for the payment of all Taxes (as hereinafter defined) shown due 
on such Tax Returns and all other Taxes for which the Company or any of its 
Subsidiaries is or might be liable.  All such Tax Returns are correct and 
complete in all material respects and accurately reflect all liability for 
Taxes for the periods covered thereby.  All Taxes owed and due by the Company 
and each of its Subsidiaries for results of operations through December 31, 
1996 (whether or not shown on any Tax Return) have been paid or have been 
adequately reflected on the Company's balance sheet as of December 31, 1996 
included in the Financial Statements (the "Balance Sheet").  Since December 
31, 1996, the Company has not incurred liability for any Taxes other than in 
the ordinary course of business. Neither the Company nor any of its 
Subsidiaries has received notice of any claim made by an authority in a 
jurisdiction where neither the Company nor any of its Subsidiaries file Tax 
Returns that the Company is or may be subject to taxation by that 
jurisdiction.

               (b)  The federal income Tax Returns of the Company and its 
Subsidiaries have not been examined by the Internal Revenue Service (or the 
applicable statutes of limitation for the assessment of federal income Taxes 
for such periods have expired) for any period.  Neither the Company nor any 
of its Subsidiaries has waived any statute of limitations in any jurisdiction 
in respect of Taxes or Tax Returns or agreed to any extension of time with 
respect to a Tax assessment or deficiency.

               (c)  Except as set forth on Section 3.10 of the Company 
Disclosure Schedule, no federal, state, local or foreign audits, examinations 
or other administrative proceedings have been commenced or, to the Company's 
knowledge, are pending with regard to any Taxes or Tax Returns of the Company 
or of any of its Subsidiaries.  No written notification has been received by 
the Company or by any of its Subsidiaries that such an audit, examination or 
other proceeding is pending or threatened with respect to any Taxes due from 
or with respect to or attributable to the Company or any of its Subsidiaries 
or any Tax Return filed by or with respect to the Company or any of its 
Subsidiaries.  To the Company's knowledge, there is no dispute or claim 
concerning any Tax liability of the Company or any of its Subsidiaries either 
claimed or raised by any taxing authority.

               (d)  Neither the Company nor any of its Subsidiaries is a 
party to any agreement, plan, contract or arrangement that could result, 
separately or in the aggregate, in a payment of any "excess parachute 
payments" within the meaning of Section 280G of the Code.

               (e)  Neither the Company nor any of its Subsidiaries has filed 
a consent pursuant to Section 341(f) of the Code (or any predecessor 
provision) concerning collapsible corporations, or agreed to have Section 
341(f)(2) of the Code apply to any disposition of a "subsection (f) asset" 
(as such term is defined in Section 341(f)(4) of the Code) owned by the 
Company or any of its Subsidiaries.

                                    13
<PAGE>

               (f)  No taxing authority is asserting or, to the knowledge of 
the Company, threatening to assert a claim against the Company or any of its 
Subsidiaries under or as a result of Section 482 of the Code or any similar 
provision of state, local or foreign law.

               (g)  Neither the Company nor any of its Subsidiaries is a 
party to any material tax sharing, tax indemnity or other agreement or 
arrangement with any entity not included in the Company's consolidated 
financial statements most recently filed by the Company with the SEC.

               (h)  None of the Company or any of its Subsidiaries has been a 
member of any affiliated group within the meaning of Section 1504(a) of the 
Code, or any similar affiliated or consolidated group for tax purposes under 
state, local or foreign law (other than a group the common parent of which is 
the Company), or has any liability for Taxes of any person (other than the 
Company and its Subsidiaries) under Treasury Regulation Section 1.1502-E or 
any similar provision of state, local or foreign law as a transferee or 
successor, by contract or otherwise.

               (i)  No liens for Taxes exist with respect to any of the 
assets or properties of any of the Company or its Subsidiaries, except for 
statutory liens for Taxes not yet due or payable.

               (j)  Neither the Company nor any of its Subsidiaries is or has 
been a United States real property holding company within the meaning of 
Section 897(c)(2) of the Code.

               (k)  As used in this Agreement, the following terms shall have 
the following meanings:

                       (i)  "Tax" or "Taxes" shall mean all taxes, charges, 
        fees, duties, levies, penalties or other assessments imposed by any 
        federal, state, local or foreign governmental authority, including, 
        but not limited to, income, gross receipts, excise, property, 
        sales, gain, use, license, custom duty, unemployment, capital 
        stock, transfer, franchise, payroll, withholding, social security, 
        minimum estimated, and other taxes, and shall include interest, 
        penalties or additions attributable thereto; and

                       (ii) "Tax Return" shall mean any return, 
        declaration, report, claim for refund, or information return or 
        statement relating to Taxes, including any schedule or attachment 
        thereto, and including any amendment thereof.

     Section 3.11.  INTELLECTUAL PROPERTY.

               (a)  The Company and its Subsidiaries own or have valid rights 
to use all items of Intellectual Property (as defined below) utilized in the 
conduct of the business of the Company and its Subsidiaries as presently 
conducted or as currently proposed to be conducted, free and clear of all 
Encumbrances (other than Encumbrances which, individually or in the 
aggregate, are not expected to have a Company Material Adverse Effect).

               (b)  To the best knowledge of the Company, the conduct of the 
Company's and its Subsidiaries, business and the Intellectual Property owned 
or used by the Company and its Subsidiaries, do not infringe any Intellectual 
Property rights or any other proprietary right of any person other than 
infringements which, individually or in the aggregate, are not expected to 
have a Company Material Adverse 

                                    14
<PAGE>

Effect.  The Company and its Subsidiaries have received no notice of any 
allegations or threats that the Company's and its Subsidiaries, use of any of 
the Intellectual Property infringes upon or is in conflict with any 
Intellectual Property or proprietary rights of any third party other than 
infringements or conflicts which individually or in the aggregate are not 
expected to have a Company Material Adverse Effect.  To the Company's 
knowledge, no person is infringing on or violating, in any material respect, 
any of the Intellectual Property rights of others.

               (c)  As used in this Agreement, "Intellectual Property" means 
all of the following: (i) U.S. and foreign registered, unregistered and 
pending trademarks, trade dress, service marks, logos, trade names, corporate 
names, assumed names, business names and logos and all registrations and 
applications to register the same (the "Trademarks"); (ii) issued U.S. and 
foreign patents and pending patent applications, patent disclosures, and any 
and all divisions, continuations, continuations-in-part, reissues, 
reexaminations, and extension thereof, any counterparts claiming priority 
therefrom, utility models, patents of importation/confirmation, certificates 
of invention and like statutory rights (the "Patents"); (iii) U.S. and 
foreign registered and unregistered copyrights (including, but not limited 
to, those in computer software and databases) rights of publicity and all 
registrations and applications to register the same (the "Copyrights"); (iv) 
all categories of trade secrets as defined in the Uniform Trade Secrets Act 
including, but not limited to, business information; (v) all licenses and 
agreements pursuant to which the Company has acquired rights in or to any 
Trademarks, Patents, Computer Software (as defined below), rights of 
publicity or Copyrights, or licenses and agreements pursuant to which the 
Company has licensed or transferred the right to use any of the foregoing 
("Licenses"); and (vi) all computer software, data files, source and object 
codes,  user interfaces, manuals and other specifications and documentation 
and all know-how relating thereto (collectively, "Computer Software").

     Section 3.12.  EMPLOYMENT MATTERS.  Neither the Company nor any of its 
Subsidiaries has experienced any strikes, collective labor grievances, other 
collective bargaining disputes or Claims of unfair labor practices in the 
last five years.  To the Company's knowledge, there is no organizational 
effort presently being made or threatened by or on behalf of any labor union 
with respect to employees of the Company and its Subsidiaries.

     Section 3.13.  COMPLIANCE WITH LAWS.

               (a)  The Company and its Subsidiaries and, to the knowledge of 
the Company and its Subsidiaries, all of their respective officers, 
directors, employees, consultants or agents (collectively, the "Personnel") 
have complied in all respects with all applicable statutes, regulations, 
rules, orders, ordinances and other laws of the United States of America, all 
state, local and foreign governments and other governmental bodies and 
authorities, and agencies of any of the foregoing ("Governmental Authority") 
to which it is subject with respect to healthcare regulatory matters 
(including, without limitation, The Social Security Act, as amended, Sections 
1128, 1128A and 1128B, 42 U.S.C. Sections 1320a-7, 7(a) and 7(b) including 
Criminal Penalties Involving Medicare or State Health Care Programs, commonly 
referred to as the "Federal Anti-Kickback Statute" and The Social Security 
Act, as amended, Section 1877, 42 U.S.C. Section 1395nn (Prohibition Against 
Certain Referrals), commonly referred to as the "Stark Statute", and all 
statutes and regulations related to the possession, distribution, maintenance 
and documentation of controlled substances) ("Healthcare Laws")), except to 
the extent noncompliance would not have a Company Material Adverse Effect.  
The Company and its Subsidiaries have maintained all records required to be 
maintained by the FDA, DEA and State Board of Pharmacy and the Medicare and 
Medicaid programs as required by applicable Healthcare Laws, except to the 
extent that the failure to do so would not have a Company Material Adverse 
Effect.  There are no presently existing circumstances which would result or 
would be likely to result in violations of any such Healthcare Laws, except 
to the extent such violations would not have a Company Material Adverse 
Effect.

               (b)  Except with respect to Healthcare Laws, the Company and 
its Subsidiaries are and, to the knowledge of the Company and its 
Subsidiaries, all Personnel is, in compliance with all applicable statutes, 
laws, ordinances, rules, orders and regulations of any Governmental Authority 
(including

                                    15
<PAGE>

without limitation, Environmental Laws (as such term is hereinafter defined 
in Section 3.15) applicable to the business of the Company and its 
Subsidiaries), except to the extent noncompliance would not have a Company 
Material Adverse Effect.  Except as set forth in Section 3.13 of the Company 
Disclosure Schedule, neither the Company nor its Subsidiaries have received 
any notice or other communication to the effect that, or otherwise been 
advised that, they are not in compliance with any of such statutes, 
regulations and orders, ordinances, other laws or undertakings, and the 
Company and its Subsidiaries have no reason to anticipate that any presently 
existing circumstances are likely to result in violations of any such 
regulations which could, in any one case or in the aggregate, have a Company 
Material Adverse Effect.

               (c)  The Company and its Subsidiaries hold all permits 
necessary for the lawful conduct of their business under and pursuant to all 
applicable statutes, laws, ordinances, rules and regulations of all Federal, 
state, local and foreign governmental bodies, agencies and subdivisions 
having, asserting or claiming jurisdiction over it or any part of their 
operations, except to the extent that the failure to do so would not have a 
Company Material Adverse Effect.  The Company and its Subsidiaries have 
correctly maintained in all respects all records required to be maintained by 
the FDA, DEA and State Boards of Pharmacy and pursuant to the requirements of 
the Medicare and Medicaid programs, except to the extent that the failure to 
do so would not have a Company Material Adverse Effect.

               (d)  The Company and its Subsidiaries are qualified for 
participation in the Medicare and Medicaid programs.  The Company and its 
Subsidiaries have timely filed all claims or other reports required to be 
filed with respect to the purchase of services by third-party payors, and all 
such claims or reports are complete and accurate, except to the extent that 
the failure to timely file or the failure of such claims or reports to be 
complete and accurate would not have a Company Material Adverse Effect.  The 
Company and its Subsidiaries have no liability to any payor with respect 
thereto, except for liabilities incurred in the ordinary course of business. 
There are no pending appeals, overpayment determinations, adjustments, 
challenges, audit, litigation or notices of intent to open Medicare or 
Medicaid claim determinations or other reports required to be filed by the 
Company or its Subsidiaries.  To the Company's knowledge, no Personnel have 
been convicted of, or pled guilty or nolo contendere to any Medicare or 
Medicaid program related offense or committed any offense which may 
reasonably serve as the basis for suspension or exclusion from the Medicare 
and Medicaid programs.

               (e)  There are no pharmaceutical or other products now being 
sold or distributed by the Company or its Subsidiaries which, at the date 
hereof, would require any approval of any governmental or administrative 
body, whether federal, state, local or foreign, prior to commercial 
distribution of such products, for which approval has not been obtained, 
except where the failure to obtain such approval would not have a Company 
Material Adverse Effect.  All pharmaceutical or other products now being 
distributed by the Company or its Subsidiaries and all products included in 
the inventories of the Company or its Subsidiaries on the date hereof comply 
with applicable legal requirements of all jurisdictions in which such 
pharmaceutical or other products are now being distributed, except where the 
failure to so comply would not have a Company Material Adverse Effect.

     Section 3.14.  VOTE REQUIRED.  The affirmative vote of the holders of a 
majority of the outstanding Shares is the only vote of the holders of any 
class or series of the Company's capital stock which may be necessary to 
approve this Agreement or any of the Transactions.

     Section 3.15.  ENVIRONMENTAL LAWS.

               (a)  The Company and its Subsidiaries are in compliance with 
all applicable Environmental Laws (as defined below) (which compliance 
includes, without limitation, the possession by the Company and its 
Subsidiaries of all permits and other governmental authorizations required 
under applicable 

                                    16
<PAGE>

Environmental Laws, and compliance with the terms and conditions thereof), 
except where failure to be in compliance, either individually or in the 
aggregate, would not have a Company Material Adverse Effect.

               (b)  There is no Environmental Claim (as defined below) 
pending or, to the Company's knowledge, threatened against the Company or any 
of the Subsidiaries or, to the Company's knowledge, against any person or 
entity whose liability for any Environmental Claim the Company or any of its 
Subsidiaries has or may have retained or assumed either contractually or by 
operation of law except for such Environmental Claim which would not have, 
either individually or in the aggregate, a Company Material Adverse Effect.

               (c)  There are no past or present actions, activities, 
circumstances, conditions, events or incidents, including, without 
limitation, the release or presence of any Hazardous Material at any 
location, which would reasonably be expected to form the basis of any 
Environmental Claim against the Company or any of its Subsidiaries, or to the 
Company's knowledge, against any person or entity whose liability for any 
Environmental Claim the Company or any of its Subsidiaries has or may have 
retained or assumed either contractually or by operation of law, except for 
such Environmental Claim which would not have, either individually or in the 
aggregate, a Company Material Adverse Effect.

               (d)  The Company and its Subsidiaries have not, and to the 
Company's knowledge, no other person has, generated, treated, placed, stored, 
deposited, discharged, buried, dumped or disposed of Hazardous Materials at, 
on, beneath or adjacent to any property currently or formerly owned, operated 
or leased by the Company or any of its Subsidiaries, except which would not 
have, either individually or in the aggregate, a Company Material Adverse 
Effect.

               (e)  Without in any way limiting the generality of the 
foregoing, none of the properties owned, operated or leased by the Company or 
any of its Subsidiaries contain any: underground storage tanks; asbestos; 
polychlorinated biphenyls ("PCBs"); underground injection wells; radioactive 
materials; or septic tanks or waste disposal pits in which any Hazardous 
Materials have been discharged or disposed except which would not have, 
individually or in the aggregate, a Company Material Adverse Effect.

               (f)  There are no environmental reports, assessments, audits 
or studies relating to the Company or any of its Subsidiaries or to any 
property currently or formerly owned, operated or leased by the Company or 
any of its Subsidiaries (i) in the possession or control of the Company or 
any of its Subsidiaries, or (ii) of which the Company otherwise has knowledge.

               (g)  For purposes of this Agreement, (i) "Environmental Laws" 
means all federal, state, local and foreign laws, statutes, codes, 
ordinances, rules, directives, orders, common law, judgments, decrees, 
consent or settlement agreements, permits and other governmental 
authorizations, and regulations relating to pollution or protection of human 
health or the environment, including, without limitation, laws relating to 
releases or threatened releases of Hazardous Materials or otherwise relating 
to the manufacture, processing, distribution, use, treatment, storage, 
release, disposal, transport or handling of Hazardous Materials or 
recordkeeping, notification, disclosure and reporting requirements respecting 
Hazardous Materials; (ii) "Environmental Claim" means any claim, action, 
cause of action, proceeding, suit, investigation or written notice by any 
person or entity alleging potential liability (including, without limitation, 
potential liability for investigatory costs, cleanup costs, governmental 
response costs, natural resources damages, property damages, personal 
injuries, or penalties) arising under or pursuant to any Environmental Law; 
(iii) "Hazardous Materials" means all substances defined as Hazardous 
Substances, Oils, Pollutants or Contaminants in the National Oil and 
Hazardous Substances Pollution Contingency 

                                    17
<PAGE>

Plan, 40 C.F.R. Section 300.5, and any other substance (including, without 
limitation, wastes, including medical waste) regulated under any 
Environmental Law.

     Section 3.16.  SCHEDULE 14D-9:  OFFER DOCUMENTS AND PROXY STATEMENT.  
None of the Schedule 14D-9, the Proxy Statement, nor any other document filed 
or to be filed by or on behalf of the Company with the SEC or any other 
Governmental Entity in connection with the transactions contemplated by this 
Agreement, nor any information supplied by or on behalf of the Company 
specifically for inclusion in the Offer Documents will, at the respective 
times filed with the SEC or other Governmental Entity or first published, 
sent or given to stockholders, as the case may be, or, in the case of the 
Proxy Statement, at the date mailed to the Company Stockholders 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.  The Schedule 14D-9 and the Proxy 
Statement will, when filed by the Company with the SEC or other Governmental 
Entity, comply as to form in all material respects with the applicable 
provisions of the Exchange Act and the rules and regulations thereunder.  
Notwithstanding the foregoing, the Company makes no representation or 
warranty with respect to the statements made in any of the foregoing 
documents based on and in conformity with information supplied by or on 
behalf of Parent or Purchaser or any of their respective affiliates 
specifically for inclusion therein.

     Section 3.17.  OPINION OF FINANCIAL ADVISOR.  The Board of Directors of 
the Company has received the opinion of Donaldson, Lufkin & Jenrette 
Securities Corporation ("DLJ") addressed to such Board, dated the date 
hereof, to the effect that, as of such date, the $18.00 per Share to be 
received by the holders of Shares pursuant to this Agreement is fair to such 
holders, a copy of which opinion has been delivered to Parent and the 
Purchaser for information purposes only.  Each of Parent and Purchaser 
acknowledges and agrees that it may not, and is not entitled to, rely on the 
opinion of DLJ delivered to the Board of Directors of the Company.  The 
Company will obtain the consent of DLJ to include the opinion of DLJ in the 
Offering Documents.

     Section 3.18.  BROKERS AND FINDERS.  No broker, finder or investment 
bank has acted directly or indirectly for the Company, nor has the Company 
incurred any obligation to pay any brokerage, finder's or other fee or 
commission in connection with the transactions contemplated hereby, other 
than DLJ and William Blair & Company, L.L.C., the fees and expenses of which 
have been previously disclosed to Parent and which shall be borne by the 
Company.

     Section 3.19.  CERTAIN BUSINESS PRACTICES.  None of the Company or any 
of its Subsidiaries has made, or to the Company's knowledge, no Personnel or 
representative of the Company or its Subsidiaries (in their capacities as 
such) has made, directly or indirectly with respect to the business of the 
Company, any bribes, kickbacks, or other illegal payments or illegal 
political contributions, illegal payments from corporate funds to 
governmental officials in their individual capacities, or illegal payments 
from corporate funds to obtain or retain business either within the United 
States or abroad.

     Section 3.20.  INSURANCE.  True and complete copies of all material 
insurance policies maintained by the Company have been made available to the 
Parent.  Such policies provide coverage for the operations of the Company and 
its Subsidiaries in amounts and covering such risks as are adequate in 
accordance with customary industry practice to protect the assets and the 
business of the Company and its Subsidiaries. Neither the Company nor any of 
its Subsidiaries has received notice that any such policy is invalid or 
unenforceable or that substantial capital improvements or other expenditures 
will have to be made in order to continue such insurance and, so far as known 
to the Company and its Subsidiaries, no such improvements or expenditures are 
required.

                                    18
<PAGE>


     Section 3.21. PRODUCT WARRANTIES.  Except as set forth in Section 3.21 
of the Company Disclosure Schedule, neither the Company nor any of its 
Subsidiaries has made any express warranties with respect to products sold or 
distributed by the Company and its Subsidiaries (other than passing on 
warranties made by the manufacturers thereof) and, to the best of the 
Company's knowledge, no other warranties have been made by Personnel.  The 
Company has no knowledge of any presently existing circumstances that would 
constitute a valid basis for any voluntary or governmental recall of any 
pharmaceutical or other product sold or distributed by the Company.

                               ARTICLE IV.

                   REPRESENTATIONS AND WARRANTIES OF 
                       PARENT AND THE PURCHASER

     Except as set forth in the schedule attached to this Agreement setting 
forth exceptions to the Parent's and Purchaser's representations and 
warranties set forth herein (the "Parent Disclosure Schedule"), the Parent 
and Purchaser represent and warrant to the Company as set forth below.  The 
Parent Disclosure Schedule will be arranged in sections corresponding to 
sections of this Agreement to be modified by such disclosure schedule.

     Section 4.1.  ORGANIZATION.  Each of Parent and the Purchaser is a 
corporation duly organized, validly existing and in good standing under the 
laws of Delaware and has all requisite corporate or other power and authority 
and all necessary governmental approvals to own, lease and operate its 
properties and to carry on its business as now being conducted, except where 
the failure to be so organized, existing and in good standing or to have such 
power, authority, and governmental approvals would not have, individually or 
in the aggregate, a Parent Material Adverse Effect.  As used in this 
Agreement, "Parent Material Adverse Effect," shall mean any event, change or 
effect that has, or is reasonably likely to have, a material adverse effect 
(A) on the condition (financial or otherwise), business, assets, liabilities, 
results of operations or cash flows of Parent and its Subsidiaries, taken as 
a whole, or (B) on the ability of Parent or the Purchaser to perform its 
obligations under this Agreement or to consummate the transactions 
contemplated by this Agreement.

     Section 4.2.  AUTHORIZATION; VALIDITY OF AGREEMENT; NECESSARY ACTION.  
Each of Parent and the Purchaser has all requisite corporate power and 
authority to execute and deliver this Agreement and to consummate the 
Transactions.  The execution, delivery and performance by Parent and the 
Purchaser of this Agreement and of the Transactions have been duly authorized 
by the Board of Directors of Parent and the Purchaser and no other corporate 
action on the part of Parent and the Purchaser is necessary to authorize this 
Agreement or the Transactions.  This Agreement has been duly executed and 
delivered by Parent and the Purchaser, as the case may be, and, assuming that 
this Agreement constitutes the legal, valid and binding obligation of the 
Company, constitutes the legal, valid and binding obligation of each of 
Parent and the Purchaser, as the case may be, enforceable against each of 
them in accordance with its respective terms, except as may be limited by any 
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or 
other similar laws affecting the enforcement of creditors' rights generally 
or by general principles of equity (regardless of whether such enforceability 
is considered in a proceeding in equity or at law).

     Section 4.3.  CONSENTS AND APPROVALS; NO VIOLATIONS.  Except for the 
filings, permits, authorizations, consents and approvals as may be required 
under, and other applicable requirements of, the Exchange Act, the HSR Act, 
state securities or blue sky laws, and the DGCL, none of the execution, 
delivery or performance of this Agreement by Parent or the Purchaser, the 
consummation by Parent or the Purchaser of the Transactions or compliance by 
Parent or the Purchaser with any of the provisions

                                    19
<PAGE>

hereof will (i) conflict with or result in any breach of any provision of the 
respective certificate of incorporation or by-laws of Parent or Purchaser, 
(ii) require any filing with, or permit, authorization, consent or approval 
of, any Governmental Entity, (iii) result in a violation or breach of, or 
constitute (with or without due notice or lapse of time or both a default or 
give rise to any right of termination, cancellation or acceleration) under, 
any of the terms, conditions or provisions of any note, bond, mortgage, 
indenture, lease, license, contract, agreement or other instrument or 
obligation to which Parent or the Purchaser is a party or by which any of 
them or any of their respective properties or assets may be bound, or (iv) 
violate any order, writ, injunction, decree, statute, rule or regulation 
applicable to Parent, any of its Subsidiaries or any of their respective 
properties or assets, excluding from the foregoing clauses (ii), (iii) and 
(iv) such violations, breaches or defaults which would not, individually or 
in the aggregate have a Parent Material Adverse Effect.

     Section 4.4.  OFFER DOCUMENTS; PROXY STATEMENT; SCHEDULE 14D-9.  Neither 
the Offer Documents nor any other document filed or to be filed by or on 
behalf of Parent or Purchaser with the SEC or any other Governmental Entity 
in connection with the transactions contemplated by this Agreement nor any 
information supplied by or on behalf of Parent or Purchaser specifically for 
inclusion in the Schedule 14D-9 or Proxy Statement will, at the respective 
times filed with the SEC or other Governmental Entity, or at any time 
thereafter when the information included therein is required to be updated 
pursuant to applicable law, or, in the case of the Proxy Statement, at the 
date mailed to the Company's stockholders 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 made therein, in light of the circumstances under which they 
were made, not misleading.  The Offer Documents will, when filed by Parent or 
Purchaser with the SEC or other Governmental Entity, comply as to form in all 
material respects with the applicable provisions of the Exchange Act and the 
rules and regulations thereunder. Notwithstanding the foregoing, Parent and 
Purchaser make no representation or warranty with respect to the statements 
made in the foregoing documents based on and in conformity with information 
supplied by or on behalf of the Company or any of its affiliates specifically 
for inclusion therein.

     Section 4.5.  FINANCING.  At the closing of the Offer, and at the 
Effective Time, Parent and Purchaser will have sufficient cash resources 
available to finance the transactions contemplated hereby.

     Section 4.6.  LITIGATION.  Except as set forth in Parent's Annual Report 
on Form 10-K for the year ended December 31, 1996, there are no suits, 
claims, actions, proceedings, including without limitation arbitration 
proceedings or alternative dispute resolution proceedings, or investigations 
pending or, to the knowledge of Parent, threatened against Parent or any of 
its Subsidiaries before any Governmental Entity that, either individually or 
in the aggregate, would be reasonably likely to have a material adverse 
effect on the ability of Parent or the Purchaser to perform its obligations 
under this Agreement or to consummate the transactions contemplated by this 
Agreement.

                              ARTICLE V.

                              COVENANTS

     Section 5.1.  INTERIM OPERATIONS OF THE COMPANY.  The Company covenants 
and agrees that, except (i) as expressly contemplated by this Agreement, or 
(ii) as agreed in writing by Parent, after the date hereof, and prior to the 
time the directors of the Purchaser have been elected to, and shall 
constitute a majority of, the Board of Directors of the Company pursuant to 
Section 1.3 (the "Appointment Date"):

                                    20
<PAGE>

               (a)  the business of the Company and its Subsidiaries shall be 
conducted only in the ordinary and usual course of business and consistent 
with past practice and, to the extent consistent therewith, each of the 
Company and its Subsidiaries shall use its reasonable efforts to preserve its 
business organizations and business organizations of its Subsidiaries intact 
and maintain its existing relations with customers, suppliers, employees, 
creditors and business partners;

               (b)  the Company will not, directly or indirectly, (i) except 
upon exercise of employee stock options, pursuant to which up to 517,117 
Shares may be issued, outstanding on the date hereof, issue, sell, transfer 
or pledge or agree to sell, transfer or pledge any treasury stock of the 
Company or any capital stock of any of its Subsidiaries beneficially owned by 
it, (ii) amend its Certificate of Incorporation or By-Laws or similar 
organizational documents; or (iii) split, subdivide, combine or reclassify 
the outstanding Shares or Preferred Stock or any outstanding capital stock of 
any of the Subsidiaries of the Company;

               (c)  neither the Company nor any of its Subsidiaries shall: 
(i) declare, set aside or pay any dividend or other distribution payable in 
cash, stock or property with respect to its capital stock other than 
dividends paid by Subsidiaries of the Company to the Company or any of its 
wholly-owned Subsidiaries in the ordinary course of business; (ii) issue, 
sell, pledge, grant, dispose of or encumber any additional shares of, or 
securities convertible into or exchangeable for, or options, warrants, calls, 
commitments or rights of any kind to acquire, any shares of capital stock of 
any class of the Company or its Subsidiaries, other than Shares reserved for 
issuance on the date hereof pursuant to the exercise of Company Options 
outstanding on the date hereof, pursuant to which up to 517,117 Shares may be 
issued; (iii) transfer, lease, license, sell, mortgage, pledge, dispose of, 
or encumber any assets other than in the ordinary and usual course of 
business and consistent with past practice; or (iv) redeem, purchase or 
otherwise acquire directly or indirectly any of its capital stock;

               (d)  neither the Company nor any of its Subsidiaries shall: 
(i) grant any increase in the compensation payable or to become payable by 
the Company or any of its Subsidiaries to any of its executive officers or 
employees, enter into any contract or other binding commitment in respect of 
any such increase with any of its directors, officers or other employees or 
any director, officer or other employee of its Subsidiaries, and not 
establish, adopt, enter into, make any new grants or awards under or amend, 
any collective bargaining agreement; (ii)(A) adopt any new, or (B) amend or 
otherwise increase, or accelerate the payment or vesting of the amounts 
payable or to become payable under any existing, bonus, incentive 
compensation, deferred compensation, severance, profit sharing, stock option, 
stock purchase, insurance, pension, retirement or other employee benefit 
plan, agreement or arrangement; or (iii) enter into any employment or 
severance agreement with or, except in accordance with the existing written 
policies of the Company, grant any severance or termination pay to any 
officer, director or employee of the Company or any of its Subsidiaries; 
PROVIDED, HOWEVER, that (i) prior to consummation of the Offer, the Company 
may enter into severance agreements with the individuals set forth in Section 
5.1(d) of the Company Disclosure Schedule (the "Designated Employees") in the 
form as approved by the Company's Board of Directors, (ii) the aggregate cost 
of payments and benefits provided to the Designated Employees pursuant to the 
terms of such severance agreements (unless otherwise amended with the written 
consent of, or at the written direction of, Parent or Purchaser) shall not 
exceed $2,000,000 in the aggregate, and (iii) with respect to the severance 
plan described in Section 3.4 of the Company Disclosure Schedule that covers 
individuals other than the Designated Employees (the "Nondesignated 
Employees"): (a) the implementation of such plan and the entering into of 
agreements with Nondesignated Employees shall be subject to the prior written 
consent of the Purchaser, which consent shall not be unreasonably withheld 
(with reasonableness to be determined based upon Purchaser's reasonable 
business objectives and consistent with Purchaser's past practice), and (b) 
the aggregate cost of payments and benefits provided to the Nondesignated 
Employees pursuant to the terms 

                                    21
<PAGE>

of such severance agreements (unless otherwise amended with the written 
consent of, or at the written direction of, Parent or Purchaser) shall not 
exceed $1,000,000 in the aggregate;

               (e)  neither the Company nor any of its Subsidiaries shall 
permit any insurance policy naming it as a beneficiary or a loss payable 
payee to be canceled or terminated, except in the ordinary course of business 
and consistent with past practice;

               (f)  neither the Company nor any of its Subsidiaries shall 
enter into any contracts or transactions relating to the purchase of assets 
that exceed $1,000,000 in the aggregate;

               (g)  neither the Company nor any of its Subsidiaries shall 
change any of the accounting methods used by it unless required by GAAP, 
neither the Company nor any of its Subsidiaries shall make any material Tax 
election except in the ordinary course of business consistent with past 
practice, change any material Tax election already made, adopt any material 
Tax accounting method except in the ordinary course of business consistent 
with past practice, change any material Tax accounting method unless required 
by GAAP, enter into any closing agreement, settle any Tax claim or assessment 
or consent to any Tax claim or assessment or any waiver of the statute of 
limitations for any such claim or assessment;

               (h)  neither the Company nor any of its Subsidiaries shall: 
(i) incur or assume any long-term debt; (ii) except in the ordinary course of 
business and consistent with past practice and in an aggregate amount not to 
exceed $3,000,000, incur or assume any short-term indebtedness; (iii) assume, 
guarantee, endorse or otherwise become liable or responsible (whether 
directly, contingently or otherwise) for the obligations of any other person; 
(iv) make any loans, advances or capital contributions to, or investment in, 
any other person (other than to wholly-owned Subsidiaries of the Company); 
(v) enter into any material commitment or transaction (including, but not 
limited to, any borrowing, capital expenditure or purchase, sale or lease of 
assets); or (vi) modify, amend or terminate any of its material contracts or 
waive, release or assign any material rights;

               (i)  neither the Company nor any of its Subsidiaries shall 
settle or compromise any claim, lawsuit, liability or obligation, and neither 
the Company nor any of its Subsidiaries shall pay, discharge or satisfy any 
claims, liabilities or obligations (absolute, accrued, asserted or 
unasserted, contingent or otherwise), other than the-payment, discharge or 
satisfaction of any such claims, liabilities or obligation, (x) to the extent 
reflected or reserved against in, or contemplated by, the Financial 
Statements, (y) incurred in the ordinary course of business and consistent 
with past practice or (z) which are legally required to be paid, discharged 
or satisfied;

               (j)  neither the Company nor any of its Subsidiaries will 
take, or agree to commit to take, any action that would make any 
representation or warranty of the Company contained herein inaccurate in any 
respect at, or as of any time prior to, the Effective Time;

               (k)  except as otherwise permitted by Section 5.6(b) hereof, 
neither the Company nor any of its Subsidiaries will take any action with the 
intent of causing any of the conditions to the Offer set forth in Annex A not 
to be satisfied; and

               (l)  except as otherwise permitted by Section 5.6(b) hereof, 
neither the Company nor any of its Subsidiaries will enter into an agreement, 
contract, commitment or arrangement to do any of the foregoing, or to 
authorize, recommend, propose or announce an intention to do any of the 
foregoing.

     Section 5.2.  ACCESS; CONFIDENTIALITY. 

                                    22
<PAGE>

               (a)  Upon reasonable notice, the Company shall (and shall 
cause each of its Subsidiaries to) afford to the officers, employees, 
accountants, counsel, financing sources and other representatives of Parent, 
access, during normal business hours during the period prior to the 
Appointment Date, to all its properties, employees, books, contracts, 
commitments and records and, during such period, the Company shall (and shall 
cause each of its Subsidiaries to) furnish promptly to the Parent (a) a copy 
of each report, schedule, registration statement and other document filed or 
received by it during such period pursuant to the requirements of federal 
securities laws and (b) all other information concerning its business, 
properties and personnel as Parent may reasonably request.  After the 
Appointment Date, the Company shall provide Parent and such persons as Parent 
shall designate with all such information, at such time as Parent shall 
request.  The Company shall promptly, and in any event within seven business 
days following the date of this Agreement, deliver to Parent true and 
complete copies of all Plans not previously delivered to Parent and any 
amendments thereto (or if the Plan is not a written Plan, a description 
thereof), any related trust or other funding vehicle, any summary plan 
description required under ERISA or the Code and the most recent 
determination letter received from the Internal Revenue Service with respect 
to each Plan intended to qualify under Section 401 of the Code.

               (b)  Unless otherwise required by law and until the 
Appointment Date, Parent will hold any such information which is nonpublic in 
confidence in accordance with the provisions of a letter agreement dated June 
4, 1997 between the Company and the Parent (the "Confidentiality Agreement").

     Section 5.3.  PROXY STATEMENT.  Unless the Merger is consummated as 
contemplated in Section 1.9 hereof, the Company shall, as soon as reasonably 
practicable after the consummation of the Offer, prepare a preliminary form 
of the Proxy Statement (the "Preliminary Proxy Statement").  The Company 
shall (a) file the Preliminary Proxy Statement with the SEC promptly after it 
has been prepared in a form reasonably satisfactory to the Company and Parent 
and (b) use commercially reasonable efforts to promptly prepare any 
amendments to the Preliminary Proxy Statement required in response to 
comments of the SEC or its staff or that the Company with the advice of 
counsel deems necessary or advisable and to cause the Proxy Statement to be 
mailed to the Company's stockholders as soon as reasonably practicable after 
the Preliminary Proxy Statement, as so amended, is cleared by the SEC.

     Section 5.4.  COOPERATION.  Subject to the terms and conditions of this 
Agreement and applicable law, each of the parties shall act in good faith and 
use reasonable efforts to take, or cause to be taken, all actions, and to do, 
or cause to be done, all things necessary, proper or advisable to consummate 
and make effective the Transactions as soon as practicable, including such 
actions or things as any other party may reasonably request in order to cause 
any of the conditions to such other party's obligation to consummate the 
Transactions to be fully satisfied. Without limiting the foregoing, the 
parties shall (and shall cause their respective subsidiaries, and use 
reasonable efforts to cause their respective affiliates, directors, officers, 
employees, agents, attorneys, accountants and representatives, to) consult 
and fully cooperate with and provide assistance to each other in (a) the 
preparation and filing with the SEC of the Offer Documents, the Schedule 
14D-9, and the Preliminary Proxy Statement and the Proxy Statement, and any 
necessary amendments or supplements thereto; (b) seeking to have the 
Preliminary Proxy Statement cleared by the SEC as soon as reasonably 
practicable after filing; (c) obtaining all necessary consents, approvals, 
waivers, licenses, permits, authorizations, registrations, qualifications, or 
other permissions or actions by, and giving all necessary notices to and 
making all necessary filings with and applications and submissions to, any 
Governmental Entity or other entity as soon as reasonably practicable after 
filing; (d) seeking early termination of any waiting period under the HSR 
Act; (e) providing all such information concerning such party, its 
subsidiaries and its officers, directors, partners and affiliates and making 
all applications and filings as may be necessary or reasonably requested in 
connection with any of the foregoing; (f) in general, consummating and making 
effective the Transactions; and (g) in the event and to the extent required, 
amending this Agreement so that this 

                                    23
<PAGE>

Agreement and the Offer and the Merger comply with the DGCL. The parties 
shall (and shall cause their respective affiliates, directors, officers, 
employees, agents, attorneys, accountants and representatives to) use their 
reasonable efforts to cause the lifting of any preliminary injunction or 
restraining order or other similar order issued or entered by any court or 
other Governmental Entity preventing or restricting consummation of the 
transactions contemplated hereby in the manner provided for herein.  Prior to 
making any application to or filing with a Governmental Entity or other 
entity in connection with this Agreement (other than filing under the HSR 
Act), each party shall provide the other party with drafts thereof and afford 
the other party a reasonable opportunity to comment on such drafts.

     Section 5.5.  STATE TAKEOVER STATUTES.  The Company, Parent and 
Purchaser will cooperate to take reasonable steps to (a) exempt the Offer and 
the Merger from the requirements of any applicable state takeover law and (b) 
assist in any challenge by any of the parties to the validity or 
applicability to the Offer or the Merger of any state takeover law.

     Section 5.6.  NO SOLICITATION. (a) Neither the Company nor any of its 
Subsidiaries shall (and the Company shall use its best efforts to cause its 
officers, directors, employees, representatives and agents, including, but 
not limited to, investment bankers, attorneys and accountants, not to), 
directly or indirectly, encourage, solicit, participate in or initiate 
discussions or negotiations with, or provide any information to, any 
corporation, partnership, person or other entity or group (other than Parent, 
any of its affiliates or representatives) concerning any proposal or offer to 
acquire all or a substantial part of the business and properties of the 
Company or any of its Subsidiaries or any capital stock of the Company or any 
of its Subsidiaries, whether by merger, tender offer, exchange offer, sale of 
assets or similar transactions involving the Company or any Subsidiary, 
division or operating or principal business unit of the Company (an 
"Acquisition Proposal"), except that nothing contained in this Section 5.6 or 
any other provision hereof shall prohibit the Company or the Company's Board 
from (i) taking and disclosing to the Company's stockholders a position with 
respect to a tender or exchange offer by a third party pursuant to Rules 
14d-9 and 14e-2 promulgated under the Exchange Act, or (ii) making such 
disclosure to the Company's stockholders as, in the good faith judgment of 
the Board, after receiving advice from outside counsel, is required under 
applicable law, provided that the Company may not, except as permitted by 
Section 5.6(b), withdraw or modify, or propose to withdraw or modify, its 
position with respect to the Offer or the Merger or approve or recommend, or 
propose to approve or recommend any Acquisition Proposal, or enter into any 
agreement with respect to any Acquisition Proposal.  The Company will 
immediately cease any existing activities, discussions or negotiations with 
any parties conducted heretofore with respect to any of the foregoing.  The 
Company also shall promptly request each person which has heretofore executed 
a confidentiality agreement in connection with its consideration of acquiring 
the Company to return all confidential information heretofore furnished to 
such person by or on behalf of the Company.

               (b)  Notwithstanding the foregoing, prior to the acceptance of 
Shares pursuant to the Offer, the Company may furnish information concerning 
the Company and its Subsidiaries to any corporation, partnership, person or 
other entity or group pursuant to appropriate confidentiality agreements, and 
may negotiate and participate in discussions and negotiations with such 
entity or group concerning an Acquisition Proposal if (x) such entity or 
group has submitted a bona fide written proposal to the Company relating to 
any such transaction which the Board determines in good faith, after 
consulting with a nationally recognized investment banking firm, represents a 
superior transaction to the Offer and the Merger and (y) in the opinion of 
the Board of Directors of the Company, only after receipt of advice from 
outside legal counsel to the Company, the failure to provide such information 
or access or to engage in such discussions or negotiations would reasonably 
be expected to cause the Board of Directors to violate its fiduciary duties 
to the Company's shareholders under applicable law (an Acquisition Proposal 
which satisfies clauses (x) and (y) being referred to herein as a "Superior 
Proposal").  The Company will immediately notify Parent of the existence of 
any proposal or inquiry received by the Company, the 

                                    24
<PAGE>

identity of the party making such proposal or inquiry, and the terms (both 
initial and modified) of any such proposal or inquiry (and will disclose any 
written materials delivered in connection therewith) and the Company will 
keep Parent reasonably informed of the status (including amendments or 
proposed amendments) of any such proposal or inquiry.  The Company will 
promptly provide to Parent any material non-public information regarding the 
Company provided to any other party which was not previously provided to 
Parent.  At any time following notification to Parent of the Company's intent 
to do so (which notification shall include the identity of the bidder and the 
material terms and conditions of the proposal) and if the Company has 
otherwise complied with the terms of this Section 5.6(b), the Board of 
Directors may withdraw or modify its approval or recommendation of the Offer 
and may enter into an agreement with respect to a Superior Proposal, provided 
it shall (i) take no such action unless it shall notify Parent promptly of 
its intention, and in no event shall such notice be given less than two 
business days prior to the earlier of the public announcement of such 
withdrawal or modification of its recommendation or the Company's termination 
of this Agreement, and (ii) concurrently with entering into such agreement 
pay or cause to be paid to Parent the Break-Up Amount (as defined below) plus 
any amount payable at the time for reimbursement of expenses pursuant to 
Section 8.1(b). If the Company shall have notified Parent of its intent to 
enter into an agreement with respect to a Superior Proposal in compliance 
with the preceding sentence and has otherwise complied with such sentence, 
the Company may enter into an agreement with respect to such Superior 
Proposal.

     Section 5.7.  ADDITIONAL AGREEMENTS.  Subject to the terms and 
conditions herein provided, each of the parties hereto shall use all 
reasonable efforts to take, or cause to be taken, all action and to do, or 
cause to be done, all things necessary, proper or advisable under applicable 
laws and regulations, or to remove any injunctions or other impediments or 
delays, legal or otherwise, to achieve the satisfaction of the Minimum 
Condition and all conditions set forth in Annex A and Article VI, and to 
consummate and make effective the Merger and the other transactions 
contemplated by this Agreement as soon as practicable hereafter.  In case at 
any time after the Effective Time any further action is necessary or 
desirable to carry out the purposes of this Agreement, the proper officers 
and directors of the Company, Parent and Purchaser shall use all reasonable 
efforts to take, or cause to be taken, all such necessary actions.

     Section 5.8.  PUBLICITY.  The initial press release with respect to the 
execution of this Agreement shall be a joint press release acceptable to 
Parent and the Company.  Thereafter, so long as this Agreement is in effect, 
neither the Company, Parent nor any of their respective affiliates shall 
issue or cause the publication of any press release or other announcement 
with respect to the Merger, this Agreement or the other Transactions without 
the prior consultation of the other party, except as such party reasonably 
believes, after receiving the advice of outside counsel, may be required by 
law or by any listing agreement with a national securities exchange or 
trading market.

     Section 5.9.  NOTIFICATION OF CERTAIN MATTERS.  The Company shall give 
prompt notice to Parent and Parent shall give prompt notice to the Company, 
of (i) the occurrence or non-occurrence of any event the occurrence or 
non-occurrence of which would cause any representation or warranty contained 
in this Agreement to be untrue or inaccurate in any material respect at or 
prior to the Effective Time and (ii) any material failure of the Company, 
Parent or the Purchaser, as the case may be, to comply with or satisfy any 
covenant, condition or agreement to be complied with or satisfied by it 
hereunder; provided, however, that the delivery of any notice pursuant to 
this Section 5.9 shall not limit or otherwise affect the remedies available 
hereunder to the party receiving such notice.

     Section 5.10.  DIRECTORS, AND OFFICERS' INSURANCE AND INDEMNIFICATION. 
(a) For five years after the Effective Time, the Surviving Corporation (or 
any successor to the Surviving Corporation) shall indemnify, defend and hold 
harmless the present and former officers and directors of the Company and its 
Subsidiaries, determined as of the Effective Time (each an "Indemnified 
Party") against all losses,

                                    25

<PAGE>

claims, damages, liabilities, costs, fees and expenses (including reasonable 
fees and disbursements of counsel and judgments, fines, losses, claims, 
liabilities and amounts paid in settlement (provided that any such settlement 
is effected only upon receipt of the written consent of the Parent or the 
Surviving Corporation which consent shall not unreasonably be withheld)) 
arising out of actions or omissions occurring at or prior to the Effective 
Time to the full extent required under applicable Delaware law, the terms of 
the Certificate of Incorporation or the By-Laws, as in effect at the date 
hereof, and the terms of any indemnification agreement entered into with the 
Company prior to the date hereof and disclosed in Schedule 5.10 of the 
Company Disclosure Schedule; provided that, in the event any claim or claims 
are asserted or made within such five-year period, all rights to 
indemnification in respect of any such claim or claims shall continue until 
disposition of any and all such claims.

    (b)  Parent or the Surviving Corporation shall maintain the Company's 
existing officers, and directors' liability insurance ("D&O Insurance") for a 
period of not less than three years after the Effective Time; provided, that 
the Parent may substitute therefor policies of substantially equivalent 
coverage and amounts containing terms no less favorable to such former 
directors or officers; provided, further, if the existing D&O Insurance 
expires, is terminated or canceled during such period, Parent or the 
Surviving Corporation will use all reasonable efforts to obtain substantially 
similar D&O Insurance; provided, further, however, that in no event shall 
Parent, the Surviving Corporation or the Company be required to pay aggregate 
premiums for insurance under this Section 5.10(b) in excess of 150% of the 
aggregate premiums paid by the Company in 1996 on an annualized basis for 
such purpose (the "1996 Premium"); and provided, further, that if the Parent 
or the Surviving Corporation is unable to obtain the amount of insurance 
required by this Section 5.10(b) for such aggregate premium, Parent or the 
Surviving Corporation shall obtain as much insurance as can be obtained for 
an annual premium not in excess of 150% of the 1996 Premium.

    (c)  Any Indemnified Party wishing to claim indemnification under this 
Section 5.10, upon learning of any such claim, action, suit, proceeding or 
investigation, shall promptly notify the Surviving Corporation thereof, but 
the failure to so notify shall not relieve the Surviving Corporation of any 
liability or obligation it may have to such Indemnified Party except, and 
only to the extent, that such failure prejudices the Surviving Corporation.  
In the event of any such claim, action, suit, proceeding or investigation 
(whether arising before, at or after the Effective Time), the Surviving 
Corporation shall have the right to assume the defense thereof and the 
Surviving Corporation shall not be liable to such Indemnified Parties for any 
legal expenses of other counsel or any other expenses subsequently incurred 
by such Indemnified Parties in connection with the defense thereof, except 
that if the Surviving Corporation elects not to assume such defense or 
counsel reasonably satisfactory to Parent for the Indemnified Parties advises 
that there are actual conflicts of interest between the Surviving Corporation 
and the Indemnified Parties, the Indemnified Parties may retain counsel 
satisfactory to them, and the Surviving Corporation shall pay all reasonable 
fees and expenses of such counsel.

                              ARTICLE VI.

                              CONDITIONS

    Section 6.1.  CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE 
MERGER. The respective obligation of each party hereto to effect the Merger 
shall be subject to the satisfaction on or prior to the Effective Time of 
each of the following conditions, any and all of which may be waived, in 
whole or in part, by the Company, Parent or the Purchaser, as the case may 
be, to the extent permitted by applicable law:

                                    26
<PAGE>

    (a)  SHAREHOLDER APPROVAL.  This Agreement shall have been adopted and 
the Merger shall have been approved by the requisite vote of the holders of 
the Shares, if required by applicable law, in order to consummate the Merger.

    (b)  STATUTES; COURT ORDERS.  No federal or state governmental or 
regulatory body or court of competent jurisdiction shall have enacted, 
issued, promulgated or enforced any statute, rule, regulation, executive 
order, decree, judgment, preliminary or permanent injunction or other order 
that is in effect and that prohibits, enjoins or otherwise restrains the 
consummation of the Merger; provided however, that the parties shall use all 
commercially reasonable efforts to cause any such decree, judgment, 
injunction or order to be vacated or lifted.

    (c)  PURCHASE OF SHARES IN OFFER.  Parent, the Purchaser or their 
affiliates shall have purchased Shares pursuant to the Offer, except that 
this condition shall not apply if Parent, the Purchaser or their affiliates 
shall have failed to purchase Shares pursuant to the Offer in breach of their 
obligations under this Agreement.

    (d)  HSR APPROVAL.  The waiting period (and any extension thereof) 
applicable to the Merger under the HSR Act shall have been terminated or 
shall have expired.

    Section 6.2.  CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY.  
The obligation of the Company to effect the Merger is also subject to the 
satisfaction at or prior to the Effective Time of the following condition, 
unless waived by the Company:

    (a)  ACCURACY OF REPRESENTATIONS AND WARRANTIES.  All representations and 
warranties made by Parent and Purchaser herein shall be true and correct, 
unless the inaccuracies (without giving effect to any materiality or material 
adverse effect qualifications or materiality exceptions contained therein) 
under such representations and warranties taking all the inaccuracies under 
all such representations and warranties together in their entirety, do not, 
individually or in the aggregate, result in a Parent Material Adverse Effect.

    Section 6.3.  CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARENT AND 
PURCHASER. The obligation of the Parent and Purchaser to effect the Merger is 
also subject to the satisfaction at or prior to the Effective Time of the 
following additional condition, unless waived by either of Parent or 
Purchaser.

    (a)  ACCURACY OF REPRESENTATIONS AND WARRANTIES..  All representations 
and warranties made by the Company herein shall be true and correct, unless 
the inaccuracies (without giving effect to any materiality or material 
adverse effect qualifications or materiality exceptions contained therein) 
under such representations and warranties taking all the inaccuracies under 
all such representations and warranties together in their entirety, do not, 
individually or in the aggregate, result in a Company Material Adverse Effect.

                          ARTICLE VII.

                          TERMINATION

    Section 7.1.  TERMINATION.  This Agreement may be terminated and the 
Transactions contemplated herein may be abandoned at any time prior to the 
Effective Time, whether before or after shareholder approval thereof:

    (a)  By the mutual written consent of Parent and the Company.


                                    27
<PAGE>

    (b)  By either of the Company or Parent:

         (i) if the Offer shall have expired without any 
    Shares being purchased therein; provided, however, that the right 
    to terminate this Agreement under this Section 7.1(b)(i) shall not 
    be available to any party whose failure to fulfill any obligation 
    under this Agreement has been the cause of, or resulted in, the 
    failure of Parent or the Purchaser, as the case may be, to purchase 
    the Shares pursuant to the Offer on or prior to such date;

         (ii) if any Governmental Entity shall have issued an 
    order, decree or ruling or taken any other action (which order, 
    decree, ruling or other action the parties hereto shall use their 
    reasonable efforts to lift), which permanently restrains, enjoins 
    or otherwise prohibits the consummation of the Offer or the Merger 
    and such order, decree, ruling or other action shall have become 
    final and non-appealable; or

         (iii) if the Offer has not been consummated 
    prior to October 5, 1997; provided, that the right to terminate 
    this Agreement under this Section 7.1(b)(iii) shall not be 
    available to any party whose misrepresentation in this Agreement or 
    whose failure to perform any of its covenants and agreements or to 
    satisfy any obligation under this Agreement has been the cause of, 
    or resulted in, the failure of Parent or the Purchaser, as the case 
    may be, to purchase Shares pursuant to the Offer on or prior to 
    such date.

    (c)  By the Company:

         (i)  if Parent, the Purchaser or any of their 
    affiliates shall have failed to commence the Offer on or prior to 
    five business days following the date of the initial public 
    announcement of the Offer; provided, that the Company may not 
    terminate this Agreement pursuant to this Section 7.1(c)(i) if the 
    Company is at such time in breach of its obligations under this 
    Agreement such as to cause a Company Material Adverse Effect;

         (ii) in connection with entering into an agreement 
    with respect to a Superior Proposal in accordance with Section 
    5.6(b), provided it has complied with all provisions thereof, 
    including the notice provisions therein, and that it makes 
    simultaneous payment of the Break-Up Amount as provided in Section 
    8.1(b); or

         (iii) if Parent or the Purchaser shall have 
    breached in any material respect any of their respective 
    representations, warranties, covenants or other agreements 
    contained in this Agreement, which is not cured, in all material 
    respects, within 30 days after the giving of written notice by the 
    Company to Parent or the Purchaser, as applicable.

    (d)  By Parent:

         (i)  if either Parent or the Purchaser is entitled 
    to terminate the Offer as a result of the occurrence of any event 
    set forth in paragraph (d) of Annex A hereto;

         (ii) if the Offer is not commenced as provided in 
    Section 1.1 as a result of actions or inaction by the Company that 
    result in the failure of a condition specified in Annex A hereto, 
    or the Offer is terminated or expires as a result of the failure of 
    a condition specified in Annex A hereto, unless such termination or 
    expiration has been caused by or resulted from the failure of 
    Parent or Purchaser to perform any covenants and agreements of 
    Parent or Purchaser contained in this Agreement; or

                                    28
<PAGE>

         (iii)  if (A) the Company shall have breached in any 
    respect any of its representations or warranties contained in this 
    Agreement, unless the inaccuracies (without giving effect to any 
    materiality or material adverse effect qualifications or 
    materiality exceptions contained therein) under such 
    representations and warranties taking all the inaccuracies under 
    all such representations and warranties together in their entirety, 
    do not, individually or in the aggregate, result in a Company 
    Material Adverse Effect or (B) the Company shall have breached or 
    failed to perform any obligation or to comply with any agreement or 
    covenant to be performed or complied with by it under the 
    Agreement, other than, any breach or failure which would not have, 
    either individually or in the aggregate, a Company Material Adverse 
    Effect (in each of cases (A) and (B), which breach or failure has 
    not been cured within thirty (30) days following receipt of written 
    notice thereof by Parent specifying in reasonable detail the basis 
    of such alleged breach or failure).

    Section 7.2.  EFFECT OF TERMINATION.  In the event of the termination of 
this Agreement pursuant to Section 7.1, written notice thereof shall 
forthwith be given to the other party or parties specifying the provision 
hereof pursuant to which such termination is made, and this Agreement shall 
forthwith become null and void and of no further force or effect, and no 
party hereto (or any of its affiliates, directors, officers, agents or 
representatives) shall have any liability or obligation hereunder, except in 
any such case (a) as provided in Sections 5.2(b) (Confidentiality), 5.8 
(Publicity), 7.2 (Effect of Termination) and 8.1 (Fees and Expenses), which 
shall survive any such termination and (b) to the extent such termination 
results from the breach by such party of any of its representations, 
warranties, covenants or agreements contained in this Agreement, provided, 
however, that a party's damages for any such breach shall be limited to such 
party's actual damages and neither party shall be entitled to seek 
consequential or special damages for any such breach.

                               ARTICLEV III.   

                               MISCELLANEOUS

    Section 8.1.  FEES AND EXPENSES. (a) Except as contemplated by this 
Agreement, including Section 8.1(b) hereof, all costs and expenses incurred 
in connection with this Agreement and the consummation of the Transactions 
shall be paid by the party incurring such expenses.

    (b)  If (x) the Company shall terminate this Agreement pursuant to 
Section 7.1(c)(ii), (y) Parent shall terminate this Agreement pursuant to 
Section 7.1(d)(i) hereof, or (z) either the Company or Parent terminates this 
Agreement pursuant to Section 7.1(b)(i) and (1) prior thereto there shall 
have been publicly announced another Acquisition Proposal, or (2) (i) the 
Company shall have entered into a definitive agreement relating to an 
Acquisition Proposal, or (ii) a business combination or other transaction 
contemplated by an Acquisition Proposal shall have been consummated, in each 
of cases (i) and (ii) prior to or within six months following such 
termination, then the Company agrees that it will immediately thereafter pay 
to Parent, in same day funds, an amount (the "Break-Up Amount") equal to 
$6,700,000.

    Section 8.2.  AMENDMENT AND MODIFICATION.  Subject to applicable law, 
this Agreement may be amended, modified and supplemented in any and all 
respects, whether before or after any vote of the shareholders of the Company 
contemplated hereby, by written agreement of the parties hereto, by action 
taken by their respective Boards of Directors (which in the case of the 
Company shall include approvals as contemplated in Section 1.3(b)), at any 
time prior to the Closing Date with respect to any of the terms contained 
herein; provided, however, that after the approval of this Agreement by the 
stockholders of the Company, no such amendment, modification or supplement 
shall reduce the amount or change the form of the Merger Consideration.

                                    29
<PAGE>

    Section 8.3.  NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.  None of the 
representations and warranties contained in this Agreement or in any 
schedule, instrument or other document delivered pursuant to this Agreement 
shall survive the Effective Time.

    Section 8.4.  NOTICES.  All notices and other communications hereunder 
shall be in writing and shall be deemed to have been duly given or made as of 
the date delivered, mailed or transmitted, and shall be effective upon 
receipt, if delivered personally, telecopied (which is confirmed) or sent by 
an overnight courier service, such as Federal Express, to the parties at the 
following addresses (or at such other address for a party as shall be 
specified by like notice):

    (a)  if to Parent or the Purchaser, to:


         Omnicare, Inc.
         2800 Chemed Center
         255 East Fifth Street
         Cincinnati, Ohio   45203
         Attention:   Mr. Joel F. Gemunder
                      President
         Telephone Number:   (513) 762-6666
         Telecopy Number:    (513) 762-6678

         with a copy to:
     
         Dewey Ballantine
         1301 Avenue of the Americas
         New York, New York 10019
         Attention:  Morton A. Pierce
         Telephone Number:   (212) 259-8000
         Telecopy Number:    (212) 259-6333

    (b)  if to the Company, to:

         American Medserve Corporation
         184 Shuman Blvd.
         Naperville, Illinois  60563
         Attention:    Mr. Timothy L. Burfield
                       President
         Telephone Number:   (630) 717-2904
         Telecopy Number:    (630) 717-4196
     
         with a copy to:
     
         Gardner, Carton & Douglas
         Quaker Tower
         321 North Clark Street
         Chicago, Illinois 60610
         Attention:  Glenn W. Reed, Esq.
         Telephone Number:   (312) 245-8446
         Telecopy Number:    (312) 644-3381


                                    30
<PAGE>


    Section 8.5.  INTERPRETATION.  When a reference is made in this Agreement 
to Sections, such reference shall be to a Section of this Agreement unless 
otherwise indicated.  Whenever the words "include", "includes" or "including" 
are used in this Agreement they shall be deemed to be followed by the words 
"without limitation".  As used in this Agreement, the term "affiliates" shall 
have the meaning set forth in Rule 12b-2 of the Exchange Act..

    Section 8.6.  COUNTERPARTS.  This Agreement may be executed in one or 
more counterparts, each of which shall be. considered one and the same 
agreement and shall become effective when two or more counterparts have been 
signed by each of the parties and delivered to the other parties.

    Section 8.7.  ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES.  This 
Agreement and the Confidentiality Agreement (including the documents and the 
instruments referred to herein and therein): (a) constitute the entire 
agreement and supersedes all prior agreements and understandings, both 
written and oral, among the parties with respect to the subject matter 
hereof, and (b) except as provided in Section 5.10 is not intended to confer 
upon any person other than the parties hereto any rights or remedies 
hereunder.

    Section 8.8.  SEVERABILITY.  Any term or provision of this Agreement that 
is held by a court of competent jurisdiction or other authority to be 
invalid, void or unenforceable in any situation in any jurisdiction shall not 
affect the validity or enforceability of the remaining terms and provisions 
hereof or the validity or enforceability of the offending term or provision 
in any other situation or in any other jurisdiction.

    Section 8.9.  GOVERNING LAW.  This Agreement shall be governed by and 
construed in accordance with the laws of the State of Delaware without giving 
effect to the principles of conflicts of law thereof.

    Section 8.10.  ASSIGNMENT.  Neither this Agreement nor any of the rights, 
interests or obligations hereunder shall be assigned by any of the parties 
hereto (whether by operation of law or otherwise) without the prior written 
content of the other parties, except that the Purchaser may assign, in its 
sole discretion, any or all of its rights, interests and obligations 
hereunder to Parent or to any direct or indirect wholly owned Subsidiary of 
Parent.  Subject to the preceding sentence, this Agreement will be binding 
upon, inure to the benefit of and be enforceable by the parties and their 
respective successors and assigns.

    Section 8.11.  WAIVERS.  At any time prior to the Effective Time, Parent 
(for Parent and Purchaser), on the one hand, or the Company, on the other 
hand, may, to the extent legally allowed, extend the time specified herein 
for the performance of any of the obligations or other acts of the other, 
waive any inaccuracies in the representations and warranties of the other 
contained herein or in any document delivered pursuant hereto, or waive 
compliance by the other with any of the agreements or covenants of such other 
party or parties (as the case may be) contained herein.  Any such extension 
or waiver shall be valid only if set forth in a written instrument signed on 
behalf of the other party or parties to be bound thereby.  No such extension 
or waiver shall constitute a waiver of or estoppel with respect to, any 
subsequent or other breach or failure to strictly comply with the provisions 
of this Agreement.  The failure of any party to insist on strict compliance 
with this Agreement or to assert any of its rights or remedies hereunder or 
with respect hereto shall not constitute a waiver of such rights or remedies.

                                    31
<PAGE>

    Section 8.12.  CAPTIONS.  The Table of Contents and headings contained in 
this Agreement are for reference purposes only and shall not affect in any 
way the meaning or interpretation of this Agreement. 

                                    32
<PAGE>


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

                                       OMNICARE, INC.

                                       By  /s/ Joel F. Gemunder
                                         ---------------------------------
                                         Name:   Joel F. Gemunder
                                         Title:  President


                                       OMNICARE ACQUISITION CORP.

                                       By  /s/ Joel F. Gemunder
                                         ---------------------------------
                                         Name:
                                         Title:  

                                       AMERICAN MEDSERVE CORPORATION

                                       By  /s/ Timothy L. Burfield
                                         ---------------------------------
                                         Name:   Timothy L. Burfield
                                         Title:  President



                                    33
<PAGE>
                                                                    ANNEX A
                      CERTAIN CONDITIONS OF THE OFFER

                    Notwithstanding any other provisions of the offer, and in 
addition to (and not in limitation of) the Purchaser's rights to extend and 
amend the Offer at any time in its sole discretion (subject to the provisions 
of the Merger Agreement), the Purchaser shall not be required to accept for 
payment or, subject to any applicable rules and regulations of the SEC, 
including Rule 14e-l(c) under the Exchange Act (relating to the Purchaser's 
obligation to pay for or return tendered Shares promptly after termination or 
withdrawal of the Offer), pay for, and may delay the acceptance for payment 
of or, subject to the restriction referred to above, the payment for, any 
tendered Shares, and may terminate or amend the Offer as to any Shares not 
then paid for, if (i) the Minimum Condition has not been satisfied, (ii) if 
any applicable waiting period for the Offer under the HSR Act has not 
expired, or (iii) at any time on or after the date of the Merger Agreement 
and before the time of acceptance for payment for any such Shares, any of the 
following events shall have occurred:

                    (a)  there shall be threatened, instituted or pending any 
suit, action or proceeding by or before any Governmental Entity against the 
Purchaser, Parent, the Company or any Subsidiary of the Company (i) seeking 
to prohibit or impose any material limitations on Parent's or the Purchaser's 
ownership or operation (or that of any of their respective Subsidiaries or 
affiliates) of all or a material portion of their or the Company's businesses 
or assets, or to compel Parent or the Purchaser or their respective 
Subsidiaries and affiliates to dispose of or hold separate any material 
portion of the business or assets of the Company or Parent and their 
respective Subsidiaries, in each case taken as a whole, (ii) challenging the 
acquisition by Parent or the Purchaser of any Shares under the Offer, seeking 
to restrain or prohibit the making or consummation of the Offer or the Merger 
or the performance of any of the other transactions contemplated by the 
Agreement, or seeking to obtain from the Company, Parent or the Purchaser any 
material damages, (iii) seeking to impose material limitations on the ability 
of the Purchaser, or render the Purchaser unable, to accept for payment, pay 
for or purchase some or all of the Shares pursuant to the Offer and the 
merger, (iv) seeking to impose material limitations on the ability of 
Purchaser or Parent effectively to exercise full rights of ownership of the 
Shares, including, without limitation, the right to vote the Shares purchased 
by them on all matters properly presented to the Company's stockholders, or 
(v) which otherwise is reasonably likely to have a Company Material Adverse 
Effect;

                    (b)  there shall be any action taken by a Governmental 
Entity or any statute, rule, regulation, judgment, administrative 
interpretation, order or injunction enacted, entered, enforced, promulgated, 
or deemed applicable, to the Company, Parent, Purchaser, the Offer or the 
Merger, or any other action shall be taken by any Governmental Entity that is 
reasonably expected to result, directly or indirectly, in any of the 
consequences referred to in clauses (i) through (v) of paragraph (a) above;

                    (c)  there shall have occurred any other event, change or 
effect after the date of the Agreement which, either individually or in the 
aggregate, would have, or be reasonably likely to have, a Company Material 
Adverse Effect;

                    (d)(i)    the Board of Directors of the Company or any 
committee thereof shall have modified in a manner adverse to Parent or the 
Purchaser or withdrawn its approval or recommendation of the Offer, the 
Merger or the Agreement, or approved or recommended any Acquisition Proposal; 
(ii) the Company shall have entered into any agreement with respect to any 
Superior Proposal in accordance with Section 5.6(b) of the Agreement; or 
(iii) the Board of Directors of the Company resolves to do any of the 
foregoing;

                    (e)  the representations and warranties of the Company 
set forth in the Agreement shall not be true and correct, in each case (i)  
as of the date referred to in any representation or warranty which 

                                    A-1
<PAGE>

addresses matters as of a particular date, or (ii) as to all other 
representations and warranties, as of the date of the Agreement and as of the 
scheduled expiration of the Offer, unless the inaccuracies (without giving 
effect to any materiality or material adverse effect qualifications or 
materiality exceptions contained therein) under such representations and 
warranties, taking all the inaccuracies under all such representations and 
warranties together in their entirety, do not, individually or in the 
aggregate, result in a Company Material Adverse Effect;

                    (f)  the Company shall have breached or failed to perform 
any obligation or to comply with any agreement or covenant to be performed or 
complied with by it under the Agreement other than any breach or failure 
which would not have, either individually or in the aggregate, a Company 
Material Adverse Effect (which breach or failure has not been cured within 
thirty (30) days following receipt of written notice thereof by Parent 
specifying in reasonable detail the basis of such alleged breach or failure);

                    (g)  any person, entity or "group" (as such term is used 
in Section 13(d)(3) of the Exchange Act) other than Parent or any of its 
affiliates acquires beneficial ownership (as defined in Rule 13d-3 
promulgated under the Exchange Act), of at least 30% of the outstanding 
Shares of the Company;

                    (h)  the Agreement shall have been terminated in 
accordance with its terms; which, in the sole judgment of Parent or the 
Purchaser, in any such case, and regardless of the circumstances (including 
any action or inaction by Parent or the Purchaser) giving rise to such 
condition makes it inadvisable to proceed with the Offer and/or with such 
acceptance for payment of or payment for Shares; or

                    (i)  there shall have occurred (i) any general suspension 
of, or limitation on prices for, trading in securities on any national 
securities exchange or in the over-the-counter market in the United States, 
(ii) the declaration of any banking moratorium or any suspension of payments 
in respect of banks or any limitation (whether or not mandatory) on the 
extension of credit by lending institutions in the United States, (iii) the 
commencement of a war, material armed hostilities or any other material 
international or national calamity involving the United States, (iv) in the 
case of any of the foregoing existing at the time of the commencement of the 
Offer, a material acceleration or worsening thereof, or (v) any decline, 
measured from the date hereof, in the Standard & Poor's 500 Index by an 
amount in excess of 25%.

                    The foregoing conditions are for the sole benefit of 
Parent and the Purchaser, may be asserted or waived by Parent or the 
Purchaser regardless of the circumstances giving rise to such condition 
(including any action or inaction by Parent or the Purchaser not in violation 
of the Agreement) and may be asserted or waived by Parent or the Purchaser in 
whole or in part at any time and from time to time in the sole discretion of 
Parent or the Purchaser, subject in each case to the terms of the Merger 
Agreement.  The failure by Parent or the Purchaser at any time to exercise 
any of the foregoing rights shall not be deemed a waiver of any such right 
and each such right shall be deemed an ongoing right which may be asserted at 
any time and from time to time.


                                    A-2

