ASSET PURCHASE AGREEMENT

Asset Purchase Agreement

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REHABCARE GROUP INC

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Title: ASSET PURCHASE AGREEMENT
Governing Law: Missouri Date: 3/16/2005
Industry: Healthcare Facilities

Execution Copy

ASSET PURCHASE AGREEMENT

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THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of this

3rd day of May, 2004, by and among REHABCARE GROUP, INC., a Delaware corporation

("Parent"), PHASE 2 CONSULTING, INC., a Delaware corporation and wholly-owned

subsidiary of Parent ("Buyer"), PHASE 2 CONSULTING, INC., a Utah corporation

("Seller") and each of JOHN H. SHORT, PETER F. SINGER and HOWARD W. SALMON

("Shareholders").

RECITALS

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WHEREAS, Shareholders own 100% of the issued and outstanding capital stock

of Seller; and

WHEREAS, Seller is in the business of providing healthcare management and

economic consulting to healthcare organizations, physician practices and long

term care and behavioral health providers and specializes in strategic planning,

clinical operations and productivity improvement, business planning, market and

financial feasibility studies and market research and analysis (the "Business");

and

WHEREAS, Seller and Shareholders desire to sell, assign, convey and

transfer to Buyer, and Buyer desires to acquire from Seller and Shareholders,

certain of Seller's assets associated with the Business pursuant to the terms

and conditions of this Agreement; and

WHEREAS, each of the parties hereto desires to set forth certain

representations, warranties, covenants and indemnity obligations, and to

establish certain closing conditions, made to induce the other to execute and

deliver this Agreement and to consummate the transactions contemplated hereby.

NOW, THEREFORE, in consideration of the premises, the covenants and

agreements herein contained, and other good and valuable consideration, the

receipt and sufficiency of which hereby are acknowledged, the parties hereto

agree as follows:

ARTICLE 1

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SALE AND PURCHASE OF ASSETS

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1.1 Description of Purchased Assets; Closing.

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(a) At the Closing on the Closing Date (each term as defined in Section 3.1

hereof), subject to the terms and conditions set forth in this Agreement,

Seller shall sell to Buyer, and Buyer shall purchase from Seller, only

those assets of Seller, tangible or intangible, wherever located, used in

the conduct of the Business, which are set forth in this Section 1.1(a),

free and clear of all liens, mortgages, security interests and encumbrances

(collectively, the "Purchased Assets"):

(i) All right, title and interest of Seller in and to all client accounts

and client contracts existing in connection with the Business which

are set forth on Schedule 1.1(a)(i), including, but not limited to,

all claims and rights under such client contracts, written and oral,

all claims and rights relating to such clients served by Seller in the

Business but not under written contracts, all client lists, records,

computer records and other similar data relating to such client

accounts (collectively the "Client Contracts" and the Business clients

the "Client Accounts");

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(ii) Subject to any required consents, all right, title and interest in and

to all Leases (as defined in Section 4.4(b)) of real and personal

property set forth on Schedule 1.1(a)(ii) attached hereto, together

with all deposits relating thereto;

(iii)All property and equipment and other tangible personal property used

or usable by Seller in the Business which are set forth on Schedule

1.1(a)(iii), including, without limitation, leasehold improvements,

furniture, furnishings, machinery, equipment, vehicles, office

supplies, together with all manuals, records, written warranties,

licenses and similar documents and rights relating thereto;

(iv) All right, title and interest in and to all written bids, sales

orders, purchase orders, sales contracts, supply contracts and other

contract rights, oral or written, of Seller related to the Business

which are set forth on Schedule 1.1(a)(iv) attached hereto

(collectively, the "Assumed Contracts");

(v) All accounts receivable, net of reserves for bad debt, with current

active clients arising from transactions of Seller in the Business

outstanding as of the Closing Date and those billed after the Closing

Date for services rendered by Seller prior to the Closing Date whether

such accounts receivable have been fully reserved for as uncollected

accounts receivable or written off as uncollectible accounts (the

"Accounts Receivable");

(vi) All right, title and interest of Seller in and to the following

intellectual property used in the Business: (i) all patents,

trademarks, service marks, artwork designs, trade dress, logos, trade

names, including the trade name "Phase 2 Consulting," and corporate

names, together with all translations, adaptations, derivations and

combinations thereof and including all goodwill associated therewith

and all applications, registrations and renewals in connection

therewith, (ii) all copyrightable works, all copyrights and all

applications, registrations and renewals in connection therewith, and

(iii) all trade secrets and confidential business information

(including technical data, know-how, mailing lists, customer files and

account histories, customer and supply lists, pricing and cost

information and business and marketing plans and proposals) which are

set forth on Schedule 1.1(a)(vi) attached hereto (collectively, the

"Intellectual Property");

(vii)All files, books and records (including computer records) of Seller

relating to the foregoing items; and

(viii) The Business as a going concern, including all goodwill thereof.

(b) Excluded Assets. Notwithstanding the provisions of Section 1.1(a), Buyer

shall not be entitled to purchase, nor shall Seller be required to sell,

whether or not relating to the Business, any other asset of Seller,

including without limitation, the following assets (collectively, the

"Excluded Assets"):

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(i) Income and franchise tax returns, information returns, reports,

elections and work papers of Seller (it being understood that upon

request, Buyer shall have reasonable access to copies of any such

documents relating to the Business subject to any applicable

confidentiality obligations of Seller with respect to such documents

imposed by applicable law), and any rights to income tax refunds and

prepaid income taxes;

(ii) Any right and interest of Seller in this Agreement and any other

agreements and instruments to be executed by Seller in connection with

the sale of the Purchased Assets and other transactions contemplated

by this Agreement;

(iii)Except as otherwise provided herein, any and all of Seller's

insurance policies, including all rights to coverage, all proceeds and

all prepaid insurance under such policies;

(iv) The cash, cash equivalents, investments and securities of Seller and

accounts receivables of Seller not related to the Business (it being

understood that Buyer is purchasing the Accounts Receivable as set

forth in Section 1.1(a)(v));

(v) All real property owned or leased by Seller and whether or not

relating to the Business, except as specifically set forth in Section

1.1(a);

(vi) All of Seller's rights and liabilities under the Verus stock purchase

agreement, which shall include any subsequent investment in Verus by

Seller;

(vii)All contracts and agreements of Seller, whether or not relating to

the Business, other than the Client Contracts and the Assumed

Contracts set forth in Section 1.1(a);

(viii) Seller's corporate seal, charter and minutes and stock record books;

(ix) All motor vehicles owned or leased by Seller whether or not relating

to the Business; and

(x) All assets and rights of Seller, whether used in the Business or not,

not set forth in Section 1.1(a).

1.2 Purchase Price.

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

The aggregate consideration to be paid by Buyer to Seller for the Purchased

Assets shall be cash in the aggregate amount of Five Million and 00/100 Dollars

($5,000,000.00) (the "Purchase Price"), subject to adjustment as set forth in

Section 1.3, payable as follows:

(a) by delivery to Seller on the Closing Date the amount of $4,709,277.33 by

wire transfer of immediately available funds pursuant to written wire

transfer instructions provided to Buyer by Seller at least two (2) business

days prior to the Closing Date; and

(b) by delivery to U.S Bank on the Closing Date the amount of $290,722.67 by

wire transfer of immediately available funds pursuant to written wire

transfer instructions provided to Buyer by U.S. Bank.

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<PAGE>

1.3 Purchase Price Adjustment for Closing Working Capital.

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(a) Subject to the adjustments set forth below in this Section 1.3(a), Seller

shall use its reasonable best efforts to have on the Closing Date, Working

Capital (as defined in this Section 1.3(a)) in an amount equal to Eight

Hundred Seventy-Four Thousand Dollars ($874,000.00) (the "Agreed Working

Capital"). For purposes of this Section 1.3(a), the term Working Capital

shall mean the amount by which the aggregate book value of Seller's current

assets exceeds the aggregate book value of Seller's current liabilities,

all as determined in accordance with United States generally accepted

accounting principles as in effect on the date of this Agreement ("GAAP")

applied on a consistent basis throughout the periods covered by such

statements, except for the exclusion of deferred bonus and deferred

partnership distribution liabilities, and consistent with the presentation

in the balance sheet as of March 31, 2004 as attached hereto on Schedule

1.3(a) (the "Reference Balance Sheet"), but notwithstanding any provision

of GAAP to the contrary, specifically including in Seller's current assets

all work-in-process as of the Closing Date and specifically including in

Seller's current liabilities the aggregate amount of all obligations of

Seller under any long-term capital leases and specifically including in

Seller's current assets any deposits associated with the management

retreat. For purposes of determining Seller's current liabilities, in the

event that the Closing shall occur on a date not the end of the month the

amount of each expense historically accrued by Seller on a monthly or other

non-daily basis, including any expense for Taxes, shall, notwithstanding

any provision of GAAP to the contrary, be calculated by (i) dividing the

aggregate amount of such historical monthly accrual by 30, and (ii)

multiplying such per diem amount by the number of days expired in the month

up to and including the Closing Date. To the extent, if any, that the

Actual Working Capital (as defined in Section 1.3(b) below) is less than

the Agreed Working Capital, Seller and/or Shareholders shall, within the

earlier to occur of ninety (90) calendar days after the Closing or the

final determination (as set forth in Section 1.3(c) below) of the Actual

Working Capital, deliver to Buyer a check in the amount required to bring

the Actual Working Capital up to the Agreed Working Capital level. In the

event the Actual Working Capital exceeds the Agreed Working Capital, Buyer

shall deliver a check to Seller in an amount equal to the Actual Working

Capital in excess of the Agreed Working Capital within the same timeframe.

(b) Not more than 60 days after the Closing Date, Buyer shall prepare and

deliver to Shareholders a balance sheet of Seller as of the Closing Date

(the "Closing Balance Sheet") indicating, among other things, the Working

Capital of Seller as of the Closing Date (the "Actual Working Capital").

Such Closing Balance Sheet shall be prepared consistent with the

presentation in the Reference Balance Sheet and in accordance with GAAP,

applied on a consistent basis throughout the periods covered by such

statement, subject to the exceptions specifically set forth in Section

1.3(a). Seller and/or Shareholders shall have thirty (30) days after

receipt of the Closing Balance Sheet to independently verify that the

information contained thereon is both accurate and complete and to give

written notice to Buyer of any discrepancies. Buyer shall cooperate with

Seller and Shareholders during the verification period by providing

documentation and other information which Seller or Shareholders may

reasonably request to assist in verifying the information contained on the

Closing Balance Sheet. The costs and expenses related to the preparation

and verification of the Closing Balance Sheet as contemplated in this

Section 1.3(b) shall be borne by the party incurring such costs or

expenses.

any, in the Closing Balance Sheet. Should the parties be unable to agree

within five (5) days after the end of the verification period, then such

dispute shall be submitted for resolution to the St. Louis office of a

nationally recognized public accounting firm acceptable to the parties and

the determination of such firm shall be binding upon the parties. Buyer and

Shareholders shall direct such firm to render a determination on any

submitted dispute within thirty (30) days after its retention. Buyer, on

the one hand, and Shareholders, on the other, shall each pay one-half of

such firm's fees and expenses in connection with such services.

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<PAGE>

1.4 Purchase Price Allocation.

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

Following the Closing, Buyer and Seller agree to use their best efforts to

allocate the Purchase Price between and among the Purchased Assets. Neither

Buyer nor Seller shall take a position in any Return (as defined in Section

4.3), examination or other administrative or judicial proceeding relating to any

Return, that is inconsistent with such allocation.

1.5 Further Assurances.

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At any time and from time to time before and after the Closing, at the request

of any party and without further consideration, each party promptly shall

execute and deliver such instruments of sale, transfer, conveyance, assignment

assumption and confirmation, and take such other action, as may be reasonably

requested to more effectively carry out the intent of this Agreement.

ARTICLE 2

ASSUMPTION OF CERTAIN LIABILITIES

2.1 Assumed Liabilities.

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At the Closing, Seller shall assign, and Buyer shall assume and agree to pay,

discharge or perform, as applicable, pre-closing liabilities to the extent that

such liabilities are included in the Closing Balance Sheet as current

liabilities, and those obligations and liabilities accruing after the Closing

Date under the Client Contracts and Assumed Contracts transferred and validly

assigned to Buyer in accordance with Section 1.1(a) hereof (collectively, the

"Assumed Liabilities").

2.2 Excluded Liabilities.

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Notwithstanding the provisions of Section 2.1, Buyer shall not assume, and

Seller shall remain liable for, any and all liabilities, obligations, claims and

commitments of or against Seller which are not specifically set forth herein as

being expressly assumed by Buyer (and regardless of whether set forth on any

Schedule hereto), whether the same are known or unknown, existing, contingent

upon future events or circumstances, accrued, funded, unfunded or otherwise (the

"Excluded Liabilities"), including, without limitation:

(a) any Taxes (as defined in Section 4.3) imposed on Seller (including with

respect to the Excluded Assets at any time) or relating to the Business

(including the Purchased Assets) for any period (or portion thereof) ending

on or prior to the Closing Date;

(b) any liability or obligation resulting from any formal or informal, written

or unwritten, agreement with respect to employee compensation, severance

pay, bonus, partner distributions, pension, retirement, profit sharing,

health or medical benefit, welfare plan, or any other employee benefit or

fringe benefit plan and any stock option arrangements, warrants or

employment agreements for services for periods on or prior to the Closing

Date;

arising out of any event or occurrence or a claim arising prior to the

Closing Date;

(d) any liabilities or obligations of Seller relating to the Excluded Assets;

(e) any liability or obligation of Seller arising or incurred in connection

with the negotiation, preparation and execution of this Agreement and the

consummation of the transactions contemplated hereby, including without

limitation, fees and expenses of its counsel, accountants and other

advisors;

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<PAGE>

(f) any liabilities of Seller for commissions or fees owed to any finder or

broker retained by Seller or Shareholders in connection with the

transactions contemplated hereby;

(g) any obligation, liability, injury or damage arising, accruing or existing

prior to the Closing Date with respect to Seller's employees, including

without limitation any matters arising under laws governing wages and

hours, employment discrimination, sexual harassment, occupational safety

and health, workers' compensation, the payment and withholding of

employment taxes and any alleged violations of law;

(h) any liability of Seller or with respect to the Business for any violations

of any law, regulation or rule to the extent arising from acts or omissions

prior to the Closing Date, including, without limitation, applicable health

care laws, rules and regulations, including those relating to the payment

or receipt of illegal remuneration, including 42 U.S.C. ss.1395nn (the

Stark Statute), 42 U.S.C. ss.1320a-7a, 42 U.S.C. ss.1320a-7b(a), 42 U.S.C.

ss.1320a-7b(c) and any applicable state laws governing kickbacks and

matters similar to such federal statutes (collectively, the "Fraud and

Abuse Laws"); and

(i) any liability that represents amounts owed by Seller that are past due or

contractually due on or prior to the Closing Date, including any amounts

owing by Seller under any of the Client Contracts on or prior to Closing.

ARTICLE 3

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CLOSING AND CLOSING DATE

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3.1 Closing.

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The closing ("Closing") of the sale of the Purchased Assets and other

transactions contemplated by this Agreement shall take place at the offices of

Thompson Coburn LLP, One US Bank Plaza, St. Louis, Missouri 63101 commencing at

9:00 a.m., local time, on May 3, 2004 or on such other date ("Closing Date"),

not later than June 30, 2004, or at such other place as Buyer and Seller

mutually shall agree.

3.2 Simultaneous Closing.

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All actions taken at the Closing shall be deemed to be performed simultaneously

and the Closing shall not be deemed to have occurred until all required actions

of the parties pursuant to this Agreement have been performed. The parties shall

deliver such additional documents and take such additional actions as may

reasonably be deemed necessary to complete the transactions contemplated by this

Agreement.

ARTICLE 4

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REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS

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Seller and Shareholders hereby jointly and severally represent and warrant

to Buyer on the date of this Agreement, and again on and as of the Closing Date,

as follows:

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<PAGE>

4.1 Status of Seller.

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(a) Existence and Status. Seller is a corporation duly organized, entitled to

conduct business and validly existing in good standing under the laws of

the State of Utah.

(b) Articles of Incorporation and Bylaws of Seller. Attached to this Agreement

as Exhibit A and Exhibit B, respectively, are copies of: (i) the original

Articles of Incorporation of Seller and all amendments, restatements,

articles of merger, or other filings with respect thereto, and (ii) the

currently effective Bylaws of Seller. All amendments to, and articles of

merger and other filings with respect to, the Articles of Incorporation of

Seller were made in accordance with the Articles of Incorporation (as in

effect before the amendment of the articles or filings with respect

thereto), and the Bylaws and applicable law of Seller without violation of

any preemptive rights, and Seller has otherwise complied with its Articles

of Incorporation and Bylaws as in effect at the applicable time.

Purchased Assets and otherwise to conduct the Business as currently

conducted.

(d) Ownership Interests. Seller has no subsidiaries or any equity securities

of, investment in or loans or advances to any business enterprise or person

or any agreements or commitments for such (other than trade terms extended

to customers in the ordinary course of business), or is subject to any

arrangement that could be treated as a partnership for federal income tax

purposes.

(e) Foreign Qualification. Schedule 4.1(e) lists the jurisdictions in which

Seller is qualified to do business as a foreign corporation, and nothing

(including the nature of or the manner in which Seller conducts its

business, the character or location of the properties which Seller owns,

leases or uses or the actions or location of employees or agents) either

requires Seller to be qualified in any other jurisdiction or subjects

Seller to any cost, restriction or penalty for failing to qualify.

(f) Authorization.

(i) Seller and each Shareholder has the right, power and authority to

enter into this Agreement and each other agreement, instrument or

other document contemplated hereunder (collectively, the "Other

Agreements") to which they are a party, and to consummate the

transactions contemplated by, and otherwise to comply with and perform

their respective obligations under, this Agreement and each of the

Other Agreements referred to herein;

(ii) The execution and delivery by Seller of this Agreement and the Other

Agreements to which it is a party, and the consummation by Seller of

the transactions contemplated by, and other compliance with and

performance of its obligations under, this Agreement and each of the

Other Agreements, have been duly authorized by all necessary corporate

action on the part of Seller in compliance with the Articles of

Incorporation and Bylaws (each as amended) of Seller and applicable

law; and

(iii)This Agreement and each of the Other Agreements to which Seller and

each Shareholder are parties, constitute the valid and binding

agreement of Seller and each Shareholder, as the case may be, that are

enforceable against Seller and each Shareholder, as the case may be,

in accordance with its terms.

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<PAGE>

(g) Absence of Violations or Conflicts. Except as disclosed in Schedule 4.1(g),

the execution and delivery of this Agreement and the Other Agreements by

Seller and Shareholders and the consummation of the transactions

contemplated by, or other compliance with or performance under, this

Agreement and the Other Agreements do not and will not with the passage of

time or giving of notice or both:

(i) constitute a violation of, be in conflict with, constitute a default

or require any payment under, permit a termination of, require any

consent or approval under, or result in the creation or imposition of

any lien, encumbrance or other adverse claim or interest upon any of

the Purchased Assets under (A) any contract, agreement, commitment,

undertaking or understanding to which any of the Purchased Assets are

subject or bound, (B) any judgment, decree or order of any

governmental authority to which Seller, any of Shareholders or any of

the Purchased Assets are subject or bound, (C) any applicable law, or

(D) any governing or applicable agreements, instruments or other

documents to which Seller (including its Articles of Incorporation and

Bylaws (each as amended)) is a party; or

(ii) create, result in a Material Adverse Change (as defined in Section

4.2(c)(i)) to or cause the acceleration of the maturity of, any

Assumed Liabilities.

(h) No Governmental Consents Required. No consent, approval, order or

authorization of, or registration, declaration or filing with, any

governmental authority on the part of Seller is required in connection with

the execution or delivery of this Agreement, the Other Agreements or the

consummation of the transactions contemplated by, or other compliance with

or performance under, this Agreement or the Other Agreements.

4.2 Financial Matters.

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(a) Seller Financial Statements. Copies of the unaudited financial statements

of Seller as of and for the fiscal years ended December 31, 2003 and 2002

and the three months ended March 31, 2004 (all of which, including the

notes thereto, are collectively referred to in this Agreement as the

"Seller Financial Statements," with the balance sheet of Seller as of March

31, 2004 referred to separately as the "Seller Balance Sheet") are attached

hereto as Schedule 4.2. Seller Financial Statements were prepared in

accordance with the books and records of Seller and are complete and

accurate in all material respects, fairly present the financial condition

of Seller as of their respective dates and the results of operations of

Seller for the respective periods then ended and have been prepared in

accordance with GAAP applied on a consistent basis throughout the periods

covered by such statements, except for the exclusion of deferred bonus and

deferred partnership distribution liabilities.

(b) Absence of Undisclosed Liabilities. Except as and to the extent expressly

reflected in Seller Financial Statements or reserved against in Seller

Balance Sheet, there are no other liabilities of any nature relating to the

Purchased Assets, whether accrued, direct, indirect, absolute, contingent,

changing, known, unknown, determinable, indeterminable, liquidated,

unliquidated or otherwise and whether due or to become due, relating to any

existing or prior act, omission, condition or state of facts.

activity with respect to Seller other than in the ordinary course of

business and, without limiting the foregoing, there has not been:

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<PAGE>

(i) any material adverse change in or loss to the Purchased Assets or the

operations, liabilities, earnings, relationships with existing

clients, business or condition (financial or otherwise) of the

Business which have been or could reasonably be expected to be,

individually or in the aggregate with other changes, materially

adverse to the Business or the Purchased Assets (a "Material Adverse

Change");

(ii) any increase in the compensation payable by Seller to any officer of

Seller or Retained Employee (as defined herein) other than routine

increases made in the ordinary course of business consistent with past

practice and not in excess of five percent (5%) of such Retained

Employee's annual salary, or any bonus, incentive compensation,

service award or other like benefit, granted, made or accrued,

contingently or otherwise, to or for the credit of any of such officer

or Retained Employee, or any employee welfare, pension, retirement or

similar payment or arrangement made or agreed to by Seller in which

any such officer or Retained Employee participates;

(iii)any capital expenditure or commitment to make a capital expenditure

with respect to the Purchased Assets (exclusive of expenditures for

repair or maintenance in the ordinary course of business);

(iv) any incurrence of any extraordinary loss or knowing waiver of any

rights of value by Seller in connection with any aspect of the

Business, whether or not in the ordinary course of business;

(v) any cancellation, termination or amendment by Seller of any contract

or agreement included in the Purchased Assets and to which Seller is a

party or by which Seller is bound;

(vi) any failure on the part of Seller to operate the Business in the

ordinary course so as to preserve its business organization intact,

including the services of Seller's present officers, professional

staff and employees and the goodwill of Seller's suppliers, customers

and others having business relations with Seller;

(vii)any sale, assignment or transfer (including, without limitation, any

collateral assignment or the granting or permitting of any lien,

encumbrance or other claim) of any of the Purchased Assets other than

in the ordinary course of business and consistent with past practices;

(viii) any amendment, modification, waiver or cancellation of any debt owed

to, or claim of, Seller, or settlement by Seller of any dispute

involving any payment or other obligation due to or owed by Seller to

be made or performed after the Closing Date which constitutes an Asset

or an Assumed Liability; or

(ix) any agreement by or commitment of Seller to do or permit any of the

foregoing.

4.3 Taxes.

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Notwithstanding anything in this Agreement to the contrary, this Section 4.3

shall not apply with respect to any Tax or Taxes (as such terms are defined in

this Section 4.3) to the extent that from and after Closing, the Purchased

Assets are not subject to a lien for such Tax or Taxes, and Buyer or its

affiliates are not liable for such Tax or Taxes.

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<PAGE>

(a) Definitions. For purposes of this Agreement:

(i) the term "Code" shall mean the Internal Revenue Code of 1986, as

amended. All citations to the Code or to the regulations promulgated

thereunder shall include any amendments or any substitute or successor

provisions thereto;

(ii) the term "Returns" shall mean, collectively, all reports,

declarations, estimates, returns, information statements, and similar

documents relating to, or required to be filed in respect of, any

Taxes; and

(iii)the term "Taxes" shall mean (A) all income, net income, gross income,

gross receipts, sales, use, ad valorem, franchise, profits, license,

lease, service, service use, withholding, employment, payroll, excise,

severance, transfer, documentary, mortgage, registration, stamp,

occupation, environmental, premium, property, windfall, profits,

customs, duties, and other taxes, fees, assessments or charges of any

kind whatever, together with any interest, penalties and other

additions with respect thereto, imposed by any federal, territorial,

state, local or foreign government; and (B) any penalties, interest,

or other additions to tax for the failure to collect, withhold, or pay

over any of the foregoing, or to accurately file any Return; and the

term "Tax" shall mean any one of the foregoing Taxes. When used with

reference to specified persons (for example and without limitation,

"Taxes of Seller"), the terms "Taxes" and "Tax" shall include only

amounts of, or in respect of, Taxes for which such person is, or could

become, liable in whole or part (including, without limitation, any

obligation in connection with a duty to collect, withhold, or pay over

any Taxes, any obligation to contribute to the payment of any Taxes

determined on a consolidated, combined, or unitary basis, any

liability as a transferee, or any liability as a result of any express

or implied obligation to indemnify or pay the Tax obligations of

another person).

(b) Returns Filed and Taxes Paid. Except as set forth on Schedule 4.3(b),

Seller duly filed or caused to be filed, on or before the due date thereof

(as appropriately extended) with the appropriate taxing authorities, all

Returns that it is required to file, and each such Return (including any

amendment thereto) is true, correct, and complete in all material respects.

All Taxes of Seller due with respect to, or shown to be due on, each such

Return (or amendment) or subsequent assessment with regard thereto, have

been timely paid. There is no valid basis for the assessment of any

deficiency with regard to any such Return and except as set forth on

Schedule 4.3(b), there are no extensions of time to file which are pending.

No other Taxes of Seller are due with respect to any taxable periods or

portions of periods ending on or before the Closing Date. There are no

liens, attachments, or similar encumbrances on any of the Purchased Assets

of Seller with respect to any Taxes, other than liens for Taxes that are

not yet due and payable. Seller has collected or withheld all Taxes that it

is required to collect or withhold.

Knowledge (as defined in Section 4.15(b)) of Seller and Shareholders,

threatened (either in writing or verbally, formally or informally) audits,

investigations, claims, suits or other proceedings for or relating to any

material liability in respect of Taxes of Seller. No material deficiencies

for Taxes of Seller have been claimed, proposed or assessed by any taxing

or other governmental authority and there are no matters under discussion

with any governmental authorities with respect to Taxes, that could result

in any additional amount of Taxes of Seller and that could reasonably be

expected to affect the Business or the Purchased Assets. No extension of a

statute of limitations (whether arising by reason of a waiver, claim for

refund, or otherwise) in respect of such Taxes is in effect and there are

no requests for rulings or determinations in respect of Taxes of Seller

pending with any governmental authority.

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<PAGE>

4.4 Title to and Condition of Purchased Assets.

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

(a) Title to Purchased Assets. Except as set forth on Schedule 4.4(a): (i)

Seller has good and marketable title to all of the Purchased Assets; and

(ii) none of the Purchased Assets is subject to any lien, claim or other

encumbrance whatsoever, except (A) liens for taxes not yet due and payable,

(B) liens shown and described in Seller Balance Sheet, (C) liens imposed by

law and incurred in the ordinary course of business for obligations not yet

due and payable to landlords, carriers, warehousemen, laborers, materialmen

and the like, and (D) liens to secure repayment of the indebtedness of

Seller under any of the Debt Instruments (as defined in Section 4.6(a) and

more fully described on Schedule 4.6(a) hereto) (collectively, the

"Permitted Liens").

(b) Leases; Subleases. For purposes of this Agreement, "Lease" means any

written or oral lease, sublease or rental agreement (and any related

contract and agreement) included as part of the Purchased Assets, and all

amendments, modifications and supplements thereof and waivers and consents

thereunder pursuant to which Seller leases, subleases or rents any real or

personal property included in the Purchased Assets, either as lessor,

lessee, landlord or tenant. Schedule 1.1(a)(ii) lists all Leases included

in the Purchased Assets, except those which (i) can be canceled by Seller

upon 30 or fewer days' notice without penalty or the acceleration of

rentals, (ii) do not grant an option to purchase the leased property, and

(iii) involve an annual rental of $15,000 or less. Schedule 1.1(a)(ii)

describes all oral Leases required to be disclosed in Schedule 1.1(a)(ii),

and true and complete copies of all written Leases required to be disclosed

have been heretofore delivered to Buyer. With respect to each of the

Leases: (A) neither Seller nor, to the best of Seller's and Shareholders'

Knowledge, any other party is in default in connection with such Lease; (B)

no act or event has occurred which, with notice or lapse of time or both,

would constitute a default under such Lease with respect to Seller or, to

the best of Seller's and Shareholders' Knowledge, any other party; (C)

there is no basis for any claim of default under such Lease with respect to

Seller or, to the best of Seller's and Shareholders' Knowledge, any other

party; (D) Seller has not given or received any notice of cancellation or

termination in connection with such Lease; (E) such Lease is the valid and

binding agreement of Seller, and, to the best of Seller's and Shareholders'

Knowledge, the other party thereto which is in full force and effect and is

enforceable in accordance with its terms, except, with respect to such

other party, to the extent that such enforceability may be limited by, or

subject to: (i) the effect of any applicable bankruptcy, insolvency,

reorganization, fraudulent conveyance, moratorium or other similar laws

affecting the enforcement of creditors' rights generally; (ii) the

availability of the remedies of specific performance or injunctive relief,

which may be subject to the discretion of the court before which any

proceeding for such remedies may be brought; and (iii) the exercise by any

court of equitable judicial discretion before which any proceeding may be

brought; (F) except as disclosed on Schedule 4.4(b), such Lease will not be

affected by, or require the consent of or payment to any other party to

avoid an event of default, an event of termination or other adverse effect

with respect to such by reason of the transactions contemplated by this

Agreement; and (G) such Lease is a "true" lease for federal income tax

purposes.

Purchased Assets are fit for use in the business of Seller as presently

conducted; (ii) the Purchased Assets are in good repair and operating

condition, normal wear and tear excepted, and structurally and mechanically

sound, as applicable; (iii) Seller is in material compliance with all

applicable building, zoning, land use or other similar statutes, laws,

ordinances, regulations, permits, health and safety codes or other

requirements in respect of any of the Purchased Assets subject to a Lease

(and Seller's current use of such properties does not constitute a

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<PAGE>

nonconforming use) and Seller has not received any notice alleging such a

violation; (iv) to the Knowledge of Seller and Shareholders, none of the

Purchased Assets subject to a Lease has ever been used as a landfill or

otherwise been used for the disposal, storage or treatment of any waste,

trash, garbage, industrial by-product, chemical or hazardous substance of

any nature; (v) Seller has not caused the installation of any of such

property with asbestos insulation or any electrical equipment containing

polychlorinated biphenyls and, to Seller's and Shareholders' Knowledge,

none of the Purchased Assets subject to a Lease contains asbestos

insulation or electrical equipment containing polychlorinated biphenyls;

and (vi) to Seller's and Shareholders' Knowledge, there are no outstanding

requirements or recommendations by fire underwriters or rating boards, any

insurance companies or holders of mortgages or other security interests

requiring or recommending any repairs or work to be done with reference to

any of the Purchased Assets subject to a Lease.

(d) All Necessary Properties. The Purchased Assets (together with the

intangible properties disclosed, or not required to be disclosed, pursuant

to Sections 4.5 and 4.6 of this Agreement) constitute all of the properties

which Seller uses in connection with the operation of the Business as

presently conducted and the consummation of the transactions contemplated

by this Agreement (provided that all consents relating to the Purchased

Assets have been obtained) will not alter the rights or impair the ability

of Seller to use such Purchased Assets in the conduct of the Business as it

is now being conducted. 4.5 Intellectual Property; Patents; Trademarks,

Trade Names. All Intellectual Property and all contracts, agreements,

commitments, arrangements, undertakings and understandings relating to the

use or license of technology, know-how or processes by Seller that are part

of the Purchased Assets (the "Intellectual Property Licenses") are listed

in Schedule 1.1(a)(vi). Except as disclosed in Schedule 4.5 with respect to

all Intellectual Property that is included in the Purchased Assets; (a)

Seller owns, or has the sole and exclusive right to use, all Intellectual

Property, whether under Intellectual Property Licenses or otherwise, used

in or necessary for the ordinary conduct of its business; (b) the

consummation of the transactions contemplated by this Agreement will not

alter or impair any such rights; and (c) no Intellectual Property owned,

licensed or used by Seller, or Intellectual Property License of Seller is

the subject of a lawsuit or any other proceeding, nor has any party

challenged or, to Seller's and Shareholders' Knowledge, threatened to

challenge Seller's respective right to use such Intellectual Property or

Intellectual Property License or application for any of the foregoing; and,

to Seller's and Shareholders' Knowledge, there is no basis for any such

challenge.

4.6 Loans and Contracts.

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

(a) Indebtedness. Schedule 4.6(a) sets forth (i) a complete and accurate list

or description of all instruments or other documents ("Debt Instruments")

relating to any direct or indirect indebtedness for borrowed money of

Seller, as well as indebtedness by way of capital leases, lease-purchase

arrangements, guarantees, undertakings on which others rely in extending

credit and all conditional sales contracts, chattel mortgages and other

security arrangements with respect to personal property used or owned by

Seller and (ii) a list of all loans of money to the respective officers,

affiliates employees of Seller or Shareholders (specifically excluding

travel and similar advances in the ordinary course of business).

(b) Client Contracts; Client Accounts.

(i) Seller has delivered to Buyer true, complete and accurate copies of

all of the Client Contracts and Assumed Contracts. All Client

Contracts and Assumed Contracts are legal, valid, binding, in full

force and effect and enforceable against Seller, and, to the Knowledge

of Seller and Shareholders, against each other party thereto. There

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<PAGE>

does not exist under any Client Contract or Assumed Contract any

violation, breach or event of default, or event or condition that,

after notice or lapse of time or both, would constitute a violation,

breach or event of default thereunder, on the part of Seller or, to

the Knowledge of Seller and Shareholders, any other person. The

enforceability of all Client Contracts and Assumed Contracts will not

be affected in any manner by the execution, delivery or performance of

this Agreement (except that any Client Contract and Assumed Contract

assumed by Buyer may be enforceable by Buyer and not Seller), and no

Client Contract or Assumed Contract contains any assignment or change

in control or similar terms or conditions that will become applicable

as a result of the consummation of the transactions contemplated by

this Agreement; provided, however, it is understood that certain of

the Client Contracts and/or Assumed Contracts may

require the consent of the other parties thereto to assign the same,

which consents Seller shall obtain prior to the Closing.

(ii) Except as set forth on Schedule 4.6(b), no Client Account has

materially delayed or decreased or terminated, or to Seller's or

Shareholders' Knowledge, threatened to materially delay or decrease or

terminate, or given notice of its intention to materially delay or

decrease or terminate its usage of Seller's services.

(iii)All consents (if they are required) from Seller's present customers

needed to enable Buyer to assume the Client Contracts and the Assumed

Contracts and continue the Business without interruption shall be

received prior to the Closing. Only those Client Accounts listed on

Schedule 4.6(b) hereto require consent before the assignment of their

Client Contract.

comprehensive general liability, personal and professional liability,

comprehensive general casualty and extended coverage, automobile, boiler

and machinery, fire and light

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