ASSET PURCHASE AGREEMENT

         THIS ASSET  PURCHASE  AGREEMENT (the  "Agreement")  is made and entered
into this 8th day of January, 2001 by and among CARD GUARD TECHNOLOGIES, INC., a
Delaware  corporation (the  "Purchaser"),  MATRIA  HEALTHCARE,  INC., a Delaware
corporation  ("Matria"),  and  QUALITY  DIAGNOSTIC  SERVICES,  INC.,  a Delaware
corporation ("QDS" or the "Seller").

                                   BACKGROUND:

     A. The Seller is engaged in the  business of providing  telemedicine  heart
monitoring and recording and related services (the "Business").

         B. Subject to the terms and conditions  contained  herein, as set forth
in this Agreement,  the Seller sells to Purchaser,  and Purchaser purchases from
the Seller,  as of the Closing Date (as defined in Section 2.1), the Business as
a going concern  together with  substantially  all of the Seller's assets (other
than cash and accounts receivable).

     C. It is the intent of the parties that this Agreement reflect and document
the terms of the above  transfer of the  Business and the assets of the Business
from the Seller to the Purchaser as of the Closing Date.

         NOW,  THEREFORE,  FOR AND IN CONSIDERATION of the premises,  the mutual
promises, covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:

         1.       PURCHASE AND SALE OF ASSETS.
                  ---------------------------

         1.1  Transfer of Assets.  Upon the terms and subject to the  conditions
contained  herein,  QDS hereby  sells,  conveys and delivers to  Purchaser,  and
Purchaser  hereby  purchases  from QDS, as of the Closing Date, all the "Assets"
(as  defined  in  Section  1.2  hereof),  free and  clear of any and all  liens,
charges,  security  interests,  mortgages,  claims and  encumbrances of any kind
(each a  "Lien"),  other  than the Liens  listed on  Schedule  1.1  hereto  (the
"Permitted  Liens") and subject  only to specified  liabilities  as described in
Section 1.4 herein.

         1.2 Assets. For purposes of this Agreement,  "Assets" means all assets,
properties  and rights of QDS,  other than the "Excluded  Assets" (as defined in
Section 1.3 hereof).  Without  limiting the generality of the foregoing,  Assets
includes the following  assets of QDS, except to the extent that such assets are
Excluded Assets:

     (a) the Business as a going concern and the goodwill pertaining thereto;

     (b) all machinery,  equipment, supplies,  inventories,  computer equipment,
office equipment, furniture, vehicles and other personal property;

     (c) all copyrightable works, copyrights,  trademarks, service marks, logos,
trade dress, trade names, patents, patent applications,  processes, inventories,
computer programs,  trade secrets,  confidential business information,  goodwill
and other  intellectual  property  (and any  applications  for any of the above)
owned,  used or held  for use by QDS and all of QDS's  rights  in and to any QDS
intellectual  property  licensed  to QDS by third  parties,  including,  without
limitation,  the  names  "Quality  Diagnostic  Services"  and  "QDS"  and all of
Seller's  rights  under  confidentiality,  assignment  of  inventions  and other
similar rights,  agreements and undertakings of any person,  including,  without
limitation, under Seller's policies (collectively, "Intellectual Property");

     (d) all notes  receivable and all documents,  records and other  agreements
relating thereto, including, without limitation, (i) that Note, dated August 23,
2000,  in the  principal  amount of  $108,000,  issued by  Telemed  Technologies
International in favor of Quality Diagnostic Services,  Inc. and (ii) that Note,
dated November 15, 2000, in the principal amount of $100,000,  issued by Telemed
Technologies International in favor of Quality Diagnostic Services, Inc.

     (e) to the extent assignable, all licenses, franchises, approvals, permits,
registrations  and other similar rights obtained from  governmental  agencies or
authorities  (and all  applications  therefor),  other than Medicare or Medicaid
provider numbers;

     (f) all of QDS's rights under all  contracts,  open purchase  orders (i.e.,
any purchase  orders  listed or described  therein (or any  additional  purchase
orders  issued  after  December  31, 2000 and prior to the  Closing  Date for an
aggregate  amount not to exceed $40,000) for which the ordered supplies were not
delivered  or with  respect to which  invoices  were not  received for as of the
Closing Date),  agreements,  covenants,  options,  leases,  guaranties and other
similar arrangements (whether oral or written) listed on Schedule 1.2(f) hereof;

     (g) all prepaid  property and expenses and ad valorem  taxes,  interest and
other expenses;

     (h) all medical equipment and monitors;

     (i) all telephone and facsimile numbers, to the extent assignable,  and all
domain names owned by or to which Seller has any rights;

     (j) all catalogs,  brochures,  customer lists,  files,  training materials,
marketing materials, and other books and records;

     (k) all non-compete,  non-solicitation and confidentiality  agreements with
any person to the extent assignable;

     (m) all  claims,  refunds,  causes of action,  choses in action,  rights of
recovery, rights of set off and rights of recoupment against any other person or
entity, including, without limitation, Purchaser or any of its affiliates (other
than those arising under this Agreement or any agreement ancillary hereto); and

     (n) all Assets  purchased or received by QDS in the ordinary  course of the
Business,  during the period from the date hereof  through the Closing Date (the
"Interim Period").

         1.3  Excluded  Assets.  Only the assets of QDS as set forth on Schedule
1.3A,  including,  without limitation,  all cash and accounts receivable and all
documents,   records  and  other  agreements  relating  thereto  (the  "Excluded
Assets"),  are  retained  by QDS and  not  sold to  Purchaser  pursuant  to this
Agreement.

         1.4 Assumed  Liabilities.  Upon the terms and subject to the conditions
contained  herein, at the "Closing" (as defined in Section 2.1 hereof) Purchaser
shall execute and deliver to the Seller the  "Assumption  Agreement" (as defined
in Section 2.3(b)  hereof),  pursuant to which  Purchaser  assumes and agrees to
perform and discharge the following debts, liabilities and obligations of Seller
(collectively, the "Assumed Liabilities"), as of the Closing:

                  (a) all debts,  liabilities and obligations  arising after the
Closing Date under the contracts and open  purchase  orders (i.e.,  any purchase
orders listed or described  therein (or any  additional  purchase  orders issued
after  December 31, 2000 and prior to the Closing  Date for an aggregate  amount
not to exceed $40,000) for which the ordered supplies were not delivered or with
respect to which  invoices  were not  received  for as of the Closing  Date) for
which the ordered  supplies were not delivered or with respect to which invoices
were not received for as of the Closing Date) assigned to Purchaser  pursuant to
Section  1.2(f) and listed and described on Schedule  1.2(f) (but  excluding any
liabilities  or  obligations  under  such  contracts  arising  from  any acts or
omissions  occurring  prior  to or on  the  Closing  Date),  including,  without
limitation,  the  Seller's  obligations  to provide  heart  monitoring  services
thereunder; and

                  (b) trade  payables  and accrued  vacation  pay and sick leave
payable by Seller to only the employees  hired by Purchaser  pursuant to Section
5.2 hereof,  all as described in the unaudited  balance sheet of QDS dated as of
November 30, 2000 (the  "November  30 Balance  Sheet";  and the  "Balance  Sheet
Date") and as such may be incurred in the ordinary  course of the Business  from
the Balance Sheet Date and until the Closing Date but specifically excluding any
liabilities  listed as Excluded  Liabilities  in Sections  1.5(a) through 1.5(s)
hereof.

         1.5  Excluded  Liabilities.  Notwithstanding  anything  else  contained
herein to the contrary,  all liabilities and obligations of Matria or the Seller
(whether  known or unknown,  liquidated  or  unliquidated,  contingent or fixed)
other than the Assumed Liabilities  (collectively,  the "Excluded  Liabilities")
shall remain the liabilities and obligations of Matria and Seller, respectively,
and are not assumed by Purchaser pursuant hereto (regardless of whether any such
liabilities  or  obligations  are  disclosed in this  Agreement).  Seller hereby
agrees  that it shall fully and timely pay,  perform  and  discharge  all of its
Excluded Liabilities in accordance with their respective terms. Without limiting
the generality of the  foregoing,  Excluded  Liabilities  include the following,
whether or not reflected on the November 30 Balance Sheet:

     (a) any  liability or  obligation  arising under any contract not listed on
Schedule 1.2(f) hereof;

     (b) any liability or obligation related to the Excluded Assets;

     (c) any liability or obligation to any employee or  independent  contractor
sales  representative  (or  former  employee  or  independent  contractor  sales
representative)  of  Matria  or  Seller  (including,   without  limitation,  any
liability or obligation  arising out of any person's  employment/contracting  or
termination  of employment or contract)  except as described in Sections 1.4 and
5.3(a)  (including,   without  limitation,  any  commission  or  other  payments
concerning any revenues  received or to be received by Seller or booked prior to
the  Closing)  and any  liability  or  obligation  of Matria or Seller under any
Benefit Plan or with respect to any worker's  compensation claims arising out of
any injury  sustained or occupational  disease  contracted  prior to the Closing
Date;

     (e)  any  liability  or  obligation  under  any  litigation,   arbitration,
investigation  or other  proceeding  brought  against Seller with respect to any
matter  occurring prior to the Closing Date (regardless of whether it is pending
as of or has been threatened or asserted prior to the Closing Date),  including,
without limitation, the lawsuits entitled Health Monitoring Services of America,
Inc. vs. Matria Healthcare,  Inc., Quality Diagnostic  Services,  Inc., Endeavor
Technology, Inc. and Kim Erickson (No. 2000-29751); and the EEOC claims entitled
Mrs. Drema K. Hutson vs. Matria Healthcare,  Inc. (No. 110A03589);  and Michelle
L. Klinger vs. Matria Healthcare, Inc. (No. 110A03618) and the matters described
in Schedule 3.13 herein (collectively, the "Lawsuits");

     (f) any  liability  or  obligation  for any income  taxes owed by Matria or
Seller (including,  without limitation,  for any revenues of the Business during
the Interim Period) and any liability or obligation for any sales,  use or other
taxes  arising  in  connection  with  the   consummation  of  the   transactions
contemplated by this Agreement;

     (g) any tax liability that may be imposed,  with respect to the Assets,  by
any federal, state or local government on the ownership,  sale, operation or use
of the Assets, relating to any period ending on or before the Closing Date;

     (h) any  liability  or  obligation  of  Seller  relating  to any  breach of
contract, breach of warranty, tort, infringement or violation of law;

     (i) any liability or obligation payable to Matria or any other affiliate of
Seller  (including,  without  limitation,  the  amount  of  $3,152,000  which is
reflected as the "Intercompany" line item on the November 30 Balance Sheet);

          (j) any  liability or  obligation of Matria or Seller to indemnify any
     person by reason of the fact that such  person  was an  employee,  officer,
     director  or agent of Matria or Seller (or such  person  was  serving as an
     employee,  officer, director or agent of any other entity at the request of
     Matria or Seller) prior to the Closing Date;

          (k) any  liability  or  obligation  of Matria or Seller  for costs and
     expenses  incurred in connection  with this Agreement and the  transactions
     contemplated hereby;

          (l) any liability,  obligation,  guarantee or undertaking of Matria or
     Seller relating to any debt of Matria or Seller;

          (m) any liability or  obligation  of Matria or Seller  relating to (i)
     that certain Lease by and between  Parkway 75 Office  Associates,  Ltd. and
     Healthdyne, Inc. dated May 2, 1986, as amended, for the premises located at
     1850 Parkway Place, Marietta,  Cobb County,  Georgia; and (ii) that certain
     Lease by and between Matria  Healthcare,  Inc. and David L. Kuniansky,  Amy
     Kuniansky and Clark and Douglas S.  Kuniansky  dated April 5, 1996, for the
     premises located at number 1210-A Kennestone Circle, Cobb County, Georgia;

          (n) any  liability  or  obligation  of Matria or Seller to  Cardiocomm
     Solutions, Inc. pursuant to the Software License and Modification Agreement
     dated April 12, 2000, or otherwise;

          (o) any liability covered by insurance  maintained by Matria or Seller
     immediately prior to the Closing Date, to the extent of such coverage;

          (p)  any  amounts  due by  Seller  to  Card  Guard  USA,  Inc.  or the
     Instromedix  Division  of  Card  Guard  Technologies,  Inc.  (such  amounts
     hereinafter referred to as the "Purchaser Payables");

          (q) any  liability  or  obligation  to  provide  any loan or any other
     funding  to  Telemed  Technologies  International  or any of its  divisions
     ("Telemed")  and any  liability  or  obligation  arising out of Matria's or
     Seller's  relationship with Telemed or out of any events occurring prior to
     the  Closing  pursuant  to or in  connection  with  the  Joint  Development
     Marketing and Program Administration  Agreement between Seller and Telemed,
     dated  February  4,  2000 (the  "Telemed  Agreement"),  including,  without
     limitation,  the  non-performance of Seller's  obligations  thereunder (all
     such   liabilities   and/or   obligations,   collectively,   the   "Telemed
     Liabilities"),  except  that if  Matria or  Seller  shall  make any loan to
     Telemed  between  the date  hereof and the Closing  Date,  Purchaser  shall
     assume Matria's or Seller's  position as creditor under such loan and shall
     reimburse  Matria or Seller for any such amount loaned,  up to an aggregate
     maximum of $150,000;

          (r) any  liability  or  obligation  payable  to  Matria  or any  other
     affiliate of Seller; and

          (s) any other liability or obligation of Seller not  specifically  set
     forth in Section 1.4 hereof.

         1.6 Procedures for Assets Not Transferable. Seller and Matria shall use
all reasonable  business efforts to obtain at the earliest  practicable date, by
instruments  in form and substance  reasonably  satisfactory  to Purchaser,  all
approvals and consents without any conditions materially adverse to Purchaser or
material  obligations  imposed on Purchaser  not  specified in the agreement for
which consent is being  obtained,  required for the transfer to Purchaser of the
Assets set forth on Schedule  3.2. Such efforts  shall  include  contacting  and
facilitating  the  communications  between  any  parties to such  contracts  and
Purchaser (except if the relationship with such party is managed by any employee
of QDS hired by Purchaser) and preparing and sending the relevant  documentation
required  for such  approvals  and  consents.  If any of the  contracts or other
property or rights  included in the Assets are not  assignable  or  transferable
either by virtue of the provisions  thereof or under  applicable law without the
consent of some other  person or entity and such  consents  are not  obtained by
Seller by the Closing Date, Seller shall notify Purchaser thereof at the Closing
or by indicating  such fact on a Schedule to the Agreement.  With respect to any
such required consent not obtained prior to the Closing,  this Agreement and the
related  instruments  of transfer shall not constitute an assignment or transfer
thereof,  and Purchaser shall not assume such Seller's  obligations  thereunder.
Instead,  Seller and Matria shall use all reasonable  efforts to obtain any such
required consents not previously  obtained as soon as reasonably  possible after
the Closing.

         1.7  Purchase  Price.  Subject  to the terms and  conditions  contained
herein, at the Closing Purchaser shall pay to Seller an aggregate purchase price
for the  Assets in the  amount  of  $18,000,000  less the Net Book  Value of the
assets listed on Schedule 1.3A (20) attached  herein as of the Closing Date (the
"Purchase  Price"),  subject to any  adjustments  as  described  in Section  1.8
herein,  all in accordance with Section 2.3(a) hereof.  The Purchase Price shall
be paid by (i) cancellation of any outstanding  Purchaser  Payables,  whether or
not payments are due at such time; and (ii) cash.

         1.8      Closing Date Adjustments.
                  ------------------------

                  (a) Within 30 days  following the Closing Date,  (i) Purchaser
shall  inform  Seller  in  writing  ("Purchaser's  Adjustment  Letter")  of  the
aggregate  amount  (the  "Purchaser's   Adjustment")  that  Purchaser   believes
represents  the value of (x) Assets not assigned to  Purchaser  at Closing,  not
retained in the  Business  or not used in the  ordinary  course of the  Business
(other than  contracts  and  agreements  that were not  assigned to Purchaser at
Closing due to the absence of third party consent to such  assignment);  and (y)
Assets transferred by Seller,  during the Interim Period,  otherwise than in the
ordinary course of the Business.

                  (b)  Within  5  days   following  the  receipt  by  Seller  of
Purchaser's  Adjustment Letter,  Seller shall pay to Purchaser the amount of all
undisputed  Purchaser's  Adjustment  (or transfer to Purchaser any such disputed
assets) and shall  object in writing as to any items  thereon  with which Seller
disagrees.

                  (c)  In  the  event  of  a  dispute  or  disagreement  between
Purchaser  and Seller as to any  portion  of the  Purchaser's  Adjustment  which
Purchaser and Seller are unable to resolve either  Purchaser or Matria may elect
that the items  remaining in dispute be submitted  for  resolution to Deloitte &
Touche LLP or such other national  independent  certified public accounting firm
selected by mutual  agreement of  Purchaser  and Matria (the member of which who
will  be  primarily  responsible  for  resolving  such  dispute  will  have  had
substantial audit experience and substantial  experience in arbitration or other
dispute   resolution    proceedings    concerning    accounting   issues)   (the
"Accountants").   The  Accountants   will,  within  30  days  after  submission,
determine,  based solely on  presentations  by  Purchaser  and Matria and not by
independent  review,  and  render a  written  report  to the  parties  upon such
remaining  disputed  items  and the  resultant  calculation  of the  Purchaser's
Adjustment in accordance with the provisions hereof, and such determination will
be final,  binding  and  conclusive  on the parties  hereto.  In  resolving  any
disputed item, the  Accountants may not assign a value to such item greater than
the  greatest  value for such  item  claimed  by  either  party or less than the
smallest value for such item claimed by either party. The fees and disbursements
of the Accountants  will be paid equally by the Purchaser and Matria.  Purchaser
and Matria hereby agree to cooperate and work in good faith and as expeditiously
as reasonably possible to resolve any and all disputes and disagreements.

                  (d) Upon  resolution  of any  disagreements  with  respect  to
Purchaser's Adjustment, Seller shall pay to Purchaser the amount of any disputed
Purchaser's  Adjustment  determined  to be correct  pursuant  to Section  1.8(c)
above.

         2.       THE EXECUTION.
                  -------------

         2.1 Place of Closing. Subject to the satisfaction of the conditions set
forth in Section 6 hereof, the closing of the transactions  contemplated  hereby
(the "Closing")  shall occur on February 1, 2001 or at such other time, place or
date agreed upon by the parties  herein (the  "Closing  Date") at the offices of
Proskauer  Rose LLP, 1585 Broadway,  New York,  New York,  10036 but in no event
later than  February 15, 2001.  If the Closing shall not occur prior to February
15, 2001 either party may terminate this Agreement.

       2.2 Deliveries by Seller and Matria. At the Closing,  Seller shall
deliver to Purchaser the following:

                  (a) a Bill  of Sale  and  Assignment  (the  "Bill  of  Sale"),
substantially  in the  form  attached  hereto  as  Exhibit  A,  and  such  other
assignments  and other  instruments  of transfer  and  conveyance  necessary  or
appropriate  to transfer  and assign the  Assets,  free and clear of any and all
liens,  charges,  security interests,  mortgages,  claims and encumbrances other
than the Permitted Liens to Purchaser, on the Closing Date;

                  (b) an opinion of Troutman,  Sanders,  LLP,  counsel to Seller
and Matria,  dated as of the Closing Date,  addressed to Purchaser,  in form and
substance reasonably  satisfactory to Purchaser,  addressing such matters as the
Purchaser may reasonably request;

                  (c) a copy of  resolutions of the board of directors of Seller
and Matria authorizing the execution, delivery and performance of this Agreement
and any  ancillary  agreements by Seller and Matria,  and a  certificate  of the
secretary  or an  assistant  secretary  of Seller and Matria,  dated the Closing
Date, that such resolutions were duly adopted and are in full force and effect;

                  (d)      the certificates referred to in Section 6.1(e);

                  (e)  a  Noncompetition  and  Nonsolicitation   Agreement  (the
"Noncompetition  and  Nonsolicitation  Agreement"),  substantially  in the  form
attached hereto as Exhibit B, executed by each of Seller and Matria;

                  (f) a Transition Services Agreement (the "Transition  Services
Agreement"), substantially in the form attached hereto as Exhibit C, executed by
each of Seller and Matria;

                  (g) each of the SubLease and the  SubLease  (Warehouse  Space)
agreements   between   Matria  and   Purchaser   (collectively,   the  "SubLease
Agreements"),  substantially  in the form attached hereto as Exhibits D1 and D2,
executed by Matria;

                (h) the Financial Statements (as defined in Section 3.3 herein);

                    (i)  the  "Disclosure  Letter"  (as  defined  in  Section  3
               hereof); and

                    (j)  such  other   certificates   or  documents   reasonably
               requested by Purchaser.

         2.3 Deliveries of Purchaser. At the Closing, Purchaser shall deliver to
Matria  and the  Seller  the  following  (each  of  which  shall  be in form and
substance reasonably satisfactory to Seller):

                  (a) an amount  equal to the  Purchase  Price less the Net Book
Value of the assets  listed on Schedule  1.3A (20) as of the  Closing  Date (the
amount of which  shall be  delivered  to  Purchaser  by Seller at least two days
prior to the  Closing)  less  the  Purchaser  Payables,  via  wire  transfer  of
immediately  available  funds to such bank  accounts  as Seller  has  instructed
Purchaser in writing at least two days prior to the Closing;

                    (b) an Assumption  Agreement (the  "Assumption  Agreement"),
               substantially   in  the   form   attached   hereto   as   Exhibit
               E, executed by Purchaser;

                  (c) a  copy  of  resolutions  of the  board  of  directors  of
Purchaser authorizing the execution,  delivery and performance of this Agreement
and any ancillary agreements by Purchaser, and a certificate of the secretary or
an  assistant  secretary  of  Purchaser,  dated  the  Closing  Date,  that  such
resolutions were duly adopted and are in full force and effect;

                  (d)      the certificate referred to in Section 6.2(d);

                  (e)  the Transition Services Agreement executed by Purchaser;

                  (f)      the SubLease Agreements executed by Purchaser;

                  (g) an opinion of Proskauer  Rose LLP,  counsel to  Purchaser,
dated  as of the  Closing  Date  addressed  to  Seller,  in form  and  substance
reasonably  satisfactory  to Seller,  addressing  such matters as the Seller may
reasonably request; and

                    (h)  such  other   certificates   or  documents   reasonably
               requested by Matria and the Seller.

         3.  REPRESENTATIONS  AND  WARRANTIES  OF  MATRIA  AND QDS.  Each of the
following  representations and warranties is qualified by the disclosure letter,
dated as of the date hereof, as such may be updated prior to the Closing for any
changes  occurring  from the  date  hereof  and  until  the  Closing  Date  (the
"Disclosure  Letter"),  delivered to Purchaser by Seller at the Closing.  Matria
and Seller hereby, jointly and severally,  represent and warrant, as of the date
hereof and as of the Closing Date, to Purchaser as follows:

         3.1 Organization and Qualification.  Matria and Seller are corporations
duly  organized,  validly  existing and in good  standing  under the laws of the
State of Delaware and have the full corporate  power and authority to own, lease
and operate their  properties as they now do and to carry on their businesses as
they are presently being  conducted.  Seller's failure to be duly qualified as a
foreign  corporation  to do  business,  and  to be in  good  standing,  in  each
jurisdiction where the character of its properties owned or leased or the nature
of its activities  makes such  qualification  necessary,  will not and could not
have a "Material Adverse Effect." As used in this Agreement,  the term "Material
Adverse Effect" shall mean a material adverse effect on the Business,  financial
condition,  results of  operations,  properties,  assets or  liabilities  of the
Seller  taken as a whole,  or on the  ability  of the  Seller to enter into this
Agreement and perform its obligations hereunder.

         3.2 Authority Relative to this Agreement. Each of Matria and the Seller
has the requisite  corporate  power and authority to enter into this  Agreement,
the  Noncompetition  and  Nonsolicitation  Agreement,  the  Transition  Services
Agreement  and the SubLease  Agreements  (collectively,  and  together  with any
certificates,  exhibits  and  schedules  herein and  therein,  the  "Transaction
Documents")  and to  perform  its  obligations  hereunder  and  thereunder.  The
execution and delivery of this Agreement and the other Transaction Documents and
the consummation of the transactions  contemplated  hereby and thereby have been
duly  authorized by all  necessary  action on the part of each of Matria and the
Seller,  and no other corporate  proceedings on the part of Matria or Seller are
necessary to authorize this Agreement,  the other Transaction  Documents and the
transactions  contemplated  hereby and  thereby.  This  Agreement  and the other
Transaction  Documents  have been duly  executed and delivered by each of Matria
and the Seller and constitute the legal, valid and binding obligation of each of
such entities,  enforceable in accordance with their terms.  Except as set forth
in the  Disclosure  Letter,  neither  Matria  nor the  Seller is  subject  to or
obligated   under  any  provision  of  (a)  its   respective   Certificates   of
Incorporation or Bylaws,  (b) any contract to which it is a party or by which it
is bound,  (c) any  license,  franchise or permit,  or (d) any law,  regulation,
order, judgment or decree, which would be breached,  violated or defaulted (with
or  without  due notice or lapse of time or both) or in respect of which a right
of termination or acceleration  or a loss of a material  benefit or agreement or
any  encumbrance  on any of its  assets  would be  created  or  suffered  by its
execution and performance of this Agreement or the other Transaction  Documents,
except (as to clauses (b), (c) or (d) above) where such breach, violation, right
of  termination  or  acceleration,  or  encumbrance,   individually  or  in  the
aggregate,  would not have a Material Adverse Effect. Except as set forth in the
Disclosure  Letter,  neither the execution of the Transaction  Documents nor the
consummation of the  transactions  contemplated  herein and therein will require
the consent or approval of or registration or filing with any federal,  state or
local government or any court, administrative or regulatory agency or commission
or other governmental authority or agency, domestic or foreign, other than where
the  failure  to  obtain  such  consents  or  approvals  or  to  make  any  such
registration  or  filing  would  not have  individually  or in the  aggregate  a
Material  Adverse Effect on or prevent or materially delay Matria or Seller from
performing its obligations  under this  Agreement.  Schedule 3.2 attached hereto
and made a part  hereof,  lists  all of the  contracts,  agreements,  covenants,
options,  leases,  guaranties  and other similar  arrangements  (whether oral or
written)  which  require  the  consent of any party  thereto or any other  third
party,  to assign  such  contracts  to  Purchaser  pursuant to the terms of this
Agreement.

         3.3 Financial  Statements.  The (i) unaudited  balance sheet,  earnings
statement  and statement of cash flows of QDS as of and for the six months ended
December 31, 1998,  and the years ended  December 31, 1999 and December 31, 2000
(such financial  statements,  together with the November 30 Balance Sheet, being
hereinafter  referred to, collectively,  as the "Seller Financial  Statements");
(ii) audited consolidated financial statements of Matria as of and for the years
ended December 31, 1998 and December 31, 1999; and (iii) the November 30 Balance
Sheet (collectively, the "Financial Statements") (a) were or will be prepared in
accordance with GAAP applied on a consistent  basis (except as noted therein and
except  that the Seller  Financial  Statements  do not and will not  contain any
notes, do not and will not include  allocations of assets and services  provided
by Matria and do not and will not include  accruals of  vacation,  sick leave or
group  health  costs and the  November 30 Balance  Sheet does not reflect  usual
quarterly  and year-end  adjustments.);  (b) fairly  present or will present the
assets,  liabilities and financial position of the Seller as of their respective
dates,  and the results of the Seller's  operations  and the sources and uses of
funds for the periods then ended,  except as shown in the Disclosure Letter with
regard  to  subsequently  discovered  liabilities  and  except  that the  Seller
Financial  Statements do not and will not contain any notes, do not and will not
include  allocations  of assets and  services  provided by Matria and do not and
will not include accruals of vacation,  sick leave or group health costs and the
November  30  Balance  Sheet  does not  reflect  usual  quarterly  and  year-end
adjustments.  The Disclosure  Letter contains a complete and correct copy of the
Financial  Statements  other than the  balance  sheet,  earnings  statement  and
statement  of cash flows of QDS as of and for the year ended  December  31, 2000
which shall be delivered to Purchaser on or prior to Closing. During the Interim
Period,  each of Matria  and the Seller  shall  maintain  its books and  records
related  to the  Business  in the  usual,  regular  and  ordinary  course of the
Business on a basis consistent with past practices.

                    3.4  Absence of Certain  Events.  Except as set forth in the
               Disclosure  Letter,  there has not been since  November 30, 2000:

                  (a) any adverse  change in the  Business  or in the  financial
condition,  assets,  liabilities,  earnings  or  results  of  operations  of the
Business or the Seller that constitutes a Material Adverse Effect;

                    (b) any damage, destruction or casualty loss (whether or not
               covered by insurance) that constitutes a Material Adverse Effect;

                    (c)  any  material  change  in  the  accounting  methods  or
               business practices followed by the Seller or Matria (with respect
               to the Seller);

                    (d) any direct or indirect  redemption  or purchase or other
               acquisition  by the Seller of any shares of its capital  stock or
               any  acquisition  or  proposed  acquisition  of real  property by
               Seller;

                    (e)  any  declaration,  setting  aside  or  payment  of  any
               dividend or distribution (other than cash) by Seller with respect
               to its capital stock;

                  (f) any  increase  in any  manner  of the  benefits  or  other
compensation of any of Seller's  employees except normal increases in accordance
with  established  prior practice;  any payment or agreement to pay any pension,
retirement or severance allowance not required by any existing plan or agreement
to any current or former officer or employee of Seller;  or any amendment to any
employment  agreement  or any  incentive  compensation,  profit  sharing,  stock
purchase, stock option, stock appreciation rights, savings, consulting, deferred
compensation,  retirement, pension or other "fringe benefit" plan or arrangement
with or for the benefit of any current or former officer or employee of Seller;

                  (g) any sale, transfer, lease, assignment or other disposition
by Seller of any of its property,  or any tangible or  intangible  asset used in
the  operation of the  Business,  to any other  person or entity,  except in the
ordinary course of the Business;

                    (h) any  amendment or  termination  of any material  oral or
               written contract, agreement or license to which Seller is a party
               or by which it is bound;

                  (i)      any revaluation by Seller of any of its Assets;

(j)      any mortgage, pledge, or other encumbrance of any of the Assets

                    (k) any  incurrence of any material  liability or obligation
               not in the ordinary course of business; or

                    (l) any  agreement  (oral or written) by Seller to do any of
               the things described in this Section 3.4.

3.5      Accounts Receivable; Accounts Payable.
----------------------------------------------

                  (a) The accounts  receivable and accounts payable shown on the
November  30 Balance  Sheet (as the same have  changed  since the date  thereof)
represent sales made or services  provided and expenses incurred in the ordinary
course the Business  consistent with past practices.  Except as set forth in the
Disclosure Letter,  none of such accounts  receivable is the subject of a pledge
or assignment  to secure debt,  is subject to any Liens,  or has been placed for
collection with any attorney or collection agency or similar individual or firm.
Except as set forth in the Disclosure  Letter, to the "Knowledge" (as defined in
Section  8.13  hereof)  of Matria or the  Seller,  no  referral  source or payor
accounting  for more than 2.5% of the Seller's total  revenues  during  calendar
year 2000 (i) has  expressed  dissatisfaction  with the  services of the Seller,
other than those  types and  immaterial  amounts of  complaints  incurred in the
ordinary  course  of the  Business  or (ii) has  expressed  an  intent to reduce
materially  its  business  with the Seller or that any such  referral  source or
payor will be unable to pay for its purchases.

                  (b) Schedule 3.5  includes a break-down  of Seller's  revenues
during the period  between  January 1, 2000 and  November  30, 2000  between (i)
Medicare;  (ii)  Medicaid;  (iii)  revenues  received from persons with which an
agreement (listed on Schedule 1.2(f)) exists; and (iv) all other persons.

         3.6 No Undisclosed  Liabilities.  Except as set forth in the Disclosure
Letter or as may have been or may be incurred in the ordinary course of business
between  the Balance  Sheet Date and the Closing  Date,  or as  reflected  in or
provided for in the Financial  Statements  (in each case, as of the date of each
Financial  Statement),  the Seller  has no debts,  liabilities  or  obligations,
whether accrued, absolute, contingent or otherwise, and whether due or to become
due,  which  individually  or in the  aggregate  are  material to the  financial
condition,  assets,  liabilities,  earnings,  or  results of  operations  of the
Business.

         3.7 Litigation. Except as set forth in the Disclosure Letter, there are
no actions, suits, claims,  investigations or proceedings (legal, administrative
or arbitrative) pending or, to the Knowledge of Matria or Seller,  threatened by
or against (i) Seller or against (ii) any of Seller's  affiliates,  employees or
consultants  relating to the Business or the transactions  contemplated  hereby,
whether at law or in equity and whether  civil or criminal in nature,  before or
by any  federal,  state,  municipal  or other  court,  arbitrator,  governmental
department, commission, agency or instrumentality,  domestic or foreign, nor are
there  any  judgments,   decrees  or  orders  of  any  such  court,  arbitrator,
governmental  department,  commission,  agency  or  instrumentality  outstanding
against Seller.

         3.8 Title to Properties and Sufficiency of Assets.  Except as set forth
in the Disclosure  Letter,  Seller has good and  marketable  title to all of the
Assets,  free and clear of all Liens other than Permitted  Liens.  Except as set
forth on the Disclosure Letter,  the Assets,  together with the Excluded Assets,
constitute all of the assets  necessary to conduct the Business as such Business
was  conducted  prior to and is conducted  as of the date  hereof,  and only the
Assets and Excluded  Assets are reflected on the November 30 Balance Sheet.  The
Disclosure Letter sets forth all capital  expenditures that, to the Knowledge of
Matria or Seller,  are  necessary  in the next 12 months in order to operate the
Business as currently conducted and as currently proposed to be conducted.

3.9  Condition  of  Tangible  Property.  Except as set  forth in the  Disclosure
Letter,  all real and personal  property,  equipment and other tangible property
included in the Assets is in good repair and  operating  condition  (normal wear
and tear excepted).

3.10 Information  Technology  System.  The Seller is currently using the PaceArt
and AS-400 Information Technology Systems. Except as set forth on the Disclosure
Letter,  such  information  technology  systems are in good repair and operating
condition and provide the Seller with all  Information  Technology  services and
functions  necessary to operate the Business as such Business is conducted as of
the date hereof and as currently proposed to be conducted.

         3.11 Lease of Real and Personal Property. Seller does not lease from or
to any person, any real property. The Disclosure Letter sets forth a list of all
leases pursuant to which Seller leases, as lessee,  personal property for use in
its  Business  and  which  either  (i) are or  should  have  been  reflected  as
liabilities  on the November 30 Balance  Sheet or (ii) provide for annual rental
payments  in excess of $1,000 per annum.  Except as set forth in the  Disclosure
Letter,  as to all leases listed in the  Disclosure  Letter,  the Seller (A) has
performed all material  obligations  required to be performed by it prior to the
date  hereof and (B) is not in default  or, to its  Knowledge,  alleged to be in
default.  To the  Knowledge  of Matria and the Seller,  there exists no material
default,  or any event  which upon the giving of notice or passage of time would
give rise to any material  default,  in the  performance of any obligation to be
performed by any other party to any of such leases.

         3.12  Intellectual  Property.  All  patents,  copyrights,   trademarks,
service marks,  trade names or other  registrable  intellectual  property owned,
used or held  for use by QDS or any of its  affiliates  in  connection  with the
Business  are  listed  in the  Disclosure  Letter.  Except  as set  forth in the
Disclosure Letter, Seller owns or has the right to use the Intellectual Property
in the manner used or contemplated  to be used by it in the Business;  there are
no  pending  or,  to  Matria's  or  Seller's  Knowledge,  threatened  claims  or
proceedings  against  Matria  or  Seller  asserting  that  Seller's  use  of any
Intellectual Property infringes the rights of any other person or entity; Seller
has no Knowledge of any use by it that may, with notice or passage of time, give
rise to such a claim;  and Seller has not  licensed or  otherwise  assigned  any
rights in or to the  Intellectual  Property  used in the  Business  to any other
person or entity. The Intellectual  Property comprises all intellectual property
rights needed to operate the Business as such Business was operated prior to and
is operated as of the date  hereof.  Each of Matria and the Seller has taken all
reasonable precautions to protect all confidential information and trade secrets
of the Business.

         3.13  Governmental  Authorization  and Compliance With Laws. The Seller
has complied in a timely manner with all laws and  governmental  regulations and
orders relating to any of the Assets, or applicable to the Business,  including,
but  not  limited  to,  the  healthcare,   insurance,  labor,  equal  employment
opportunity, occupational safety and health, environmental, hazardous or medical
waste disposal and antitrust  laws,  except where the failure to so comply would
not,  individually or in the aggregate,  have a Material Adverse Effect.  Seller
has not been  charged  or  received  any  inquiries,  except as set forth in the
Disclosure  Letter,  in or  relating to any  violations  of any state or federal
statute or regulation  involving fraudulent or abusive practices relating to its
reimbursement from third party payors or its participation in state or federally
sponsored  reimbursement  programs,  including  but not  limited  to  fraudulent
billing  practices,  nor, to the Knowledge of Matria or Seller,  has Seller been
investigated  for such  violations.  Except as set forth on  Schedule  3.13,  no
significant  amount of funds are now or are  expected by Matria or the Seller to
be withheld by any  Medicare or Medicaid  carrier,  state  agency or third party
payor, other than pursuant to practices or policies of applicability to multiple
parties within the industry.

         3.14     Licenses and Permits.
                  --------------------

                  (a) QDS has obtained  all  licenses  and permits  necessary to
conduct the  Business  and to own and operate its assets and such  licenses  and
permits  are valid and in full  force and  effect  except  where the  failure to
obtain such licenses and permits would not individually or in the aggregate have
a Material  Adverse  Effect.  QDS has all  supplier  numbers and  authorizations
necessary to receive  payment for its services from and covered by Part B of the
Medicare Program ("Medicare Authorizations"). No defaults or violations exist or
have been  recorded  in  respect  of any  license  or  permit of QDS other  than
defaults or violations which would not reasonably be expected individually or in
the aggregate to have a Material Adverse Effect. No proceeding is pending or, to
the best  Knowledge  of Matria and the Seller,  threatened,  looking  toward the
revocation,  limitation or non-renewal or otherwise in connection  with any such
license,  permit or Medicare  Authorizations,  except for pending or  threatened
proceedings  that would not, in the aggregate,  reasonably be expected to have a
Material Adverse Effect.

                  (b) The Seller has delivered or made  available for inspection
to Purchaser a true and complete list of each such license and permit,  and each
pending application for any license or permit,  relating to the Business. All of
such pending  applications  are in good  standing  and, to the  Knowledge of the
Seller, without challenge of any kind, and each statement, application and other
document submitted or filed by Matria, on behalf of Seller, or Seller to or with
any federal, state or other governmental agency or authority,  or to or with any
other  person or entity,  for  purposes of  obtaining a new or renewed  license,
permit or Medicare  Authorization  of any type described in this Section 3.14 in
connection with the transactions  contemplated hereby is true and complete,  and
except as set forth in the Disclosure Letter, none of the rights of Seller under
any  license,   permit  or  Medicare  Authorization  will  be  impaired  by  the
consummation  of  the  transactions  contemplated  hereby,  except,  as  to  the
foregoing  matters,  for  such  challenges,  incompletenesses  or  inaccuracies,
nondisclosures or impairments which do not relate to the Business or which would
not, individually or in the aggregate, have a Material Adverse Effect.

                  (c)  Neither  Seller  nor  Matria,  as  with  respect  to  the
Business,  has received any written notice from and has not been made a party to
any proceeding brought by any governmental authority alleging that (i) it is, or
may be in violation of, any such law, governmental  regulation or order, (ii) it
must change any of its business practices to remain in compliance with such law,
governmental  regulation  or order,  (iii) it has failed to obtain any  license,
permit or Medicare  Authorization  required for the conduct of its business,  or
(iv) it is in default  under or  violation  of any  license,  permit or Medicare
Authorization.

         3.15 Benefit Plans. The Disclosure  Letter contains a true and complete
list  of  each  pension,   retirement,   savings,   profit   sharing,   deferred
compensation,   incentive  compensation,   bonus,  stock  option,  severance  or
termination pay, medical,  dental,  life or other insurance,  disability plan or
other employee  benefit plan or program,  agreement or  arrangement  maintained,
sponsored  or  contributed  to by Seller (or by Matria)  covering  employees  of
Seller,  former employees of Seller,  or directors or former directors of Seller
(including,  but not  limited to, any  "employee  benefit  plan",  as defined in
Section 3(3) of the Employee  Retirement Income Security Act of 1974, as amended
("ERISA")),  all of the  foregoing  being herein  called  "Benefit  Plans." With
respect to the Benefit Plans, individually and in the aggregate, Seller has made
available to Purchaser a true and correct copy or  description  of: (a) the most
recent  annual  report  (Form 5500) filed with the IRS, if any, (b) such Benefit
Plan, (c) any summary plan  description  relating to such Benefit Plan, (d) each
trust  agreement and group annuity  contract,  if any,  relating to such Benefit
Plan,  and (e) the most recent  actuarial  report or valuation  relating to each
Benefit Plan subject to Title IV of ERISA (if any).

         With respect to the Benefit Plans,  individually  and in the aggregate,
no event has  occurred  and, to the  Knowledge  of Matria or the  Seller,  there
currently exists no condition or set of circumstances,  in connection with which
Seller could be subject to any  liability  under ERISA,  the Code,  or any other
applicable statute, order or governmental rule or regulation.

                  (a) Except as noted in the Disclosure Letter,  Seller does not
sponsor or  maintain  any Benefit  Plan or related  trust that is intended to be
qualified, respectively, under Section 401(a) and Section 501(a) of the Code.

                  (b) With respect to the Benefit Plans, individually and in the
aggregate,  all required reports and descriptions have been appropriately  filed
and distributed.

                  (c) With respect to the Benefit Plans, individually and in the
aggregate,  there has been no  prohibited  transaction  within  the  meaning  of
Section  406 of ERISA or Section  4975 of the Code and there has been no action,
suit,  grievance,  arbitration or other claim with respect to the administration
or  investment  of assets of the Benefit  Plans (other than  routine  claims for
benefits made in the ordinary course of plan  administration  pending or, to the
Knowledge of Matria and the Seller, threatened, and none of Matria or the Seller
has any Knowledge of any facts which are  reasonably  likely to give rise to any
such action, suit grievance, arbitration or other claim), except in any case for
those which would not have a Material Adverse Effect.

                  (d) Seller has never  sponsored or maintained any Benefit Plan
subject to the  provisions of Title IV of ERISA or been subject to any potential
liability under such Title as a result of the sponsorship of any such plan by an
"affiliate" as defined in Section  407(d)(7) of ERISA, and Seller has never been
obligated to make any  contributions to any  "multiemployer  plan" as defined in
Section 3(37) of ERISA.

                  (e) None of the Benefit Plans includes  provisions  that would
require  Purchaser to assume or would impose upon  Purchaser  any  obligation to
provide benefits thereunder.

         3.16     Taxes.
                  -----

                  (a) Except as set forth in the Disclosure Letter, with respect
to the Assets,  Seller has duly and timely filed all tax returns  required to be
filed by it, and all taxes shown to be due on such tax returns have been paid in
full by it.  There are no liens for taxes (other than for taxes not yet assessed
or due and  payable)  on any of the  Assets  and there are no  rulings  or other
agreements  executed with any tax authority  relating to the Assets that will be
binding  upon the  Purchaser  after  the  Closing.  The  Seller  has  previously
delivered  or made  available to  Purchaser  complete and correct  copies of its
federal  income tax returns for each of the years 1997,  1998 and 1999.  For the
purpose of this Agreement, the term "tax" (including,  with correlative meaning,
the terms "taxes" and  "taxable")  shall include all federal,  state,  local and
foreign income, profits,  franchise, gross receipts, payroll, sales, employment,
use, property, withholding, excise and other taxes, duties or assessments of any
nature whatsoever,  together with all interest,  penalties and additions imposed
with respect to such amounts.

                  (b) All tax  returns  filed by the  Seller  are  complete  and
accurate in all material respects. Except as set forth in the Disclosure Letter,
Seller is not currently the  beneficiary  of any extension of time with which to
file any tax return.

                  (c) To the  Knowledge  of Matria and the Seller,  no claim has
ever been made by an authority in a jurisdiction  where Seller does not file tax
returns that Seller is or may be subject to taxation by that jurisdiction.

                  (d) Seller has  withheld  and paid all taxes  required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent  contractor,  creditor,  shareholder  or other  third  party who has
performed services in connection with the Business.

                  (e)  Seller  has not waived  any  statute  of  limitations  in
respect  of taxes or  agreed to any  extension  of time  with  respect  to a tax
assessment or deficiency.

                  (f) Except as set forth in the Disclosure Letter,  there is no
notice of deficiency,  assessment,  audit,  examination,  claim or other dispute
concerning any tax liability of the Seller either (i) raised by any governmental
entity in writing or (ii) as to which Matria or Seller has any  Knowledge  based
upon any contact with any agent of any governmental entity.

         3.17  Environmental   Matters.  The  operations  of  the  Business  are
currently  in  compliance  with  federal and state and local  laws,  ordinances,
regulations and orders relating to the protection of the environment  applicable
to its operations and business at such facility,  except for such non-compliance
as would not  reasonably  be  expected  to have a Material  Adverse  Effect.  To
Seller's and Matria's Knowledge,  Seller has received no written notice from any
governmental   authority  of  any  material   non-compliance   with  such  laws,
ordinances, regulations or orders by Seller.

         3.18     Labor Relations.  Except as set forth in the Disclosure
Letter:

                  (a)  Seller  has paid or made  provision  for  payment  of all
salaries,  wages,  and  vacation  pay accrued  through the Closing  Date,  is in
compliance in all material  respects with all federal and state laws  respecting
employment and employment practices,  terms and conditions of employment,  wages
and hours and non-discrimination in employment, and is not engaged in any unfair
employment practice;

                  (b) There is no charge  pending  or, to the  Knowledge  of the
Seller,  threatened before any court or agency alleging unlawful  discrimination
in  employment  practices  or any unfair  labor  practice  by Seller nor, to the
Knowledge of the Seller, is there a basis for any such claim;

                    (c) There is no labor strike, dispute,  slowdown or stoppage
               actually  pending or, to the  Knowledge  of Matria or the Seller,
               threatened against or involving Seller;

                    (d) There are no collective bargaining agreements binding on
               Seller;

                    (e) No collective bargaining agreement has been requested by
               any employee representative or labor organization or is currently
               being negotiated by Seller;

                    (f) Seller has not  experienced  work  stoppage or any other
               material labor difficulty since its inception; and

                  (g) No  employees  of Seller are  represented  by any labor or
trade union and to the Knowledge of Seller and Matria,  no movement to designate
a collective  bargaining unit to represent any of the employees of Seller exists
or is threatened.

         3.19  Insurance.  The Disclosure  Letter sets forth a true and complete
list,  showing company,  type and amount of coverage,  of all insurance policies
for the benefit of the Seller,  its employees or third parties which are carried
by or cover the  Seller.  Each such policy is in full force and effect and shall
continue to provide  coverage to the Business and the Assets through the Closing
Date.  Seller is not in material default with respect to any provision of any of
its insurance policies nor has it failed to give any notice or present any claim
thereunder  in due or timely  fashion or as  required  by any of such  insurance
policies  which would result in failure to recover under such  policies.  Seller
has materially  complied with the insurance  requirements of all leases to which
it is a party.  None of Matria or the Seller has received  any actual  notice of
cancellation or indication of intention not to renew any insurance policy.

         3.20     Certain Contracts.  Except as listed in the Disclosure Letter:
                  -----------------

                  (a) Neither Seller nor Matria has any employment  agreement or
incentive compensation, profit sharing, stock option, stock appreciation rights,
stock purchase, savings, consultant, deferred compensation,  retirement, pension
or other  plans or  other  benefit  arrangements  or  practices  with or for the
benefit of any officer,  employee or any other  person who performs  services in
connection with the Business,  or any consulting  agreement or arrangement  with
any officer,  employee,  former officer or former employee who performs services
in connection with the Business;

                  (b) Other than any  agreement  listed on Schedule  1.2(f),  no
officer or director of Seller or any other affiliate of Seller or Matria has any
agreement  (oral or  written)  with  Seller or any  interest in any of the real,
personal or Intellectual Property used in or pertaining to the Business;

                  (c)  Seller  is not a  party  to or  bound  by  any  contract,
purchase order or sales order, other than those listed or described in Schedules
1.2(f) or 1.3A hereof,  pursuant to which any party thereto is obligated to make
payments (not yet made) aggregating more than $10,000 in any 12 month period;

                  (d) All agreements listed on Schedule 1.2(f) and all mortgages
and  liens to  which  Seller  is a  party,  or by  which  any of its  assets  or
properties  are bound or  affected,  are in full force and  effect  and  binding
obligations  of the parties  thereto,  and no event or condition has occurred or
exists,  or to the Knowledge of Matria and the Seller,  is alleged by any of the
other parties thereto to have occurred or existed,  which  constitutes,  or with
the  lapse of time or giving of notice  or both  might  constitute,  a  material
default  or a basis  for  acceleration  of any  obligation,  or  other  claim of
non-performance thereunder or in respect thereof on the part of Seller;

                  (e) Seller is not a party to any  agreement and has no policy,
program or arrangement  (whether or not in writing),  providing for severance or
termination  payments,  or payments by Seller in  connection  with any change in
control of Seller; and

                  (f) Seller is not a party or  subject  to any  non-competition
agreement,  obligation  or  commitment,  or any other  agreement,  obligation or
commitment restricting its ability to do business.

         3.21 Names and  Addresses;  Compensation.  Set forth in the  Disclosure
Letter is a complete and accurate list of the names and annual  compensation  of
all employees and independent contractor sales representatives of Seller and who
are paid $30,000 or more in base salary per annum and/or other cash compensation
(the  "Key  Employees").  Also set forth in the  Disclosure  Letter is a list of
names  of  employees   of  QDS  and  all  QDS   independent   contractor   sales
representatives.  The location of employment  records, if any, pertaining to the
Key Employees is set forth in the Disclosure  Letter. The Disclosure Letter also
contains a list of all written  agreements  and  summaries of all existing  oral
agreements with any consultants and agents of the Seller.

                    3.22 Warranties.  Seller does not make, and has not made any
               warranties  to  any  person  with  respect  to  its  services  or
               otherwise.

         3.24 Operation of the Business.  During the Interim Period,  Matria, as
with respect to only the Business,  and the Seller have operated the Business in
the usual,  regular and ordinary  course in accordance  with past  practices and
operations,  have preserved intact the present organization of the Business, and
have used all commercially  reasonable efforts to keep available the services of
the present officers and employees of the Business and to preserve the Business'
goodwill and the  Business'  relationships  with its,  customers,  suppliers and
others having business dealings with it.

         3.25 Full Disclosure. No statement contained in (a) this Agreement, (b)
the Disclosure Letter, or (c) any of the Transaction  Documents or other writing
delivered to Purchaser  pursuant to the  provisions  of any of them,  taken as a
whole,  upon  execution  and as of the Closing Date contains or will contain any
untrue  statement  of a  material  fact or  omits  to state  any  material  fact
necessary,  in the light of the  circumstances  under which it was made, to make
the statements therein not misleading.

                         4.   REPRESENTATIONS   AND   WARRANTIES  OF  PURCHASER.
                    Purchaser  hereby  represents  and warrants,  as of the date
                    hereof  and as of the  Closing  Date,  to Matria  and QDS as
                    follows:

                         4.1  Organization  and  Qualification.  Purchaser  is a
                    corporation  duly  organized,  validly  existing and in good
                    standing under the laws of the State of Delaware.

         4.2 Authority  Relative to this Agreement.  Purchaser has the requisite
corporate power and authority to enter into this Agreement and each of the other
Transaction  Documents and to perform its obligations  hereunder and thereunder.
The execution and delivery of this Agreement and the other Transaction Documents
and the  consummation of the transactions  contemplated  hereby and thereby have
been duly  authorized by all necessary  action on the part of Purchaser,  and no
other corporate  proceedings on the part of Purchaser are necessary to authorize
this  Agreement,   the  other   Transaction   Documents  and  the   transactions
contemplated  hereby  and  thereby.  This  Agreement  and the other  Transaction
Documents  have been duly executed and delivered by Purchaser and constitute the
legal, valid and binding obligation of Purchaser, enforceable in accordance with
their terms. Purchaser is not subject to or obligated under any provision of (a)
its Certificate of  Incorporation  or Bylaws,  (b) any contract to which it is a
party or by which it is bound, (c) any license,  franchise or permit, or (d) any
law, regulation, order, judgment or decree, which would be breached, violated or
defaulted (with or without due notice or lapse of time or both) or in respect of
which a right of termination or acceleration or a loss of a material  benefit or
agreement or any  encumbrance  on any of its assets would be created or suffered
by its  execution and  performance  of this  Agreement or the other  Transaction
Documents,  except (as to clauses  (b),  (c) or (d)  above)  where such  breach,
violation or right which would not individually, or in the aggregate, prevent or
materially delay Purchaser from performing its obligations under this Agreement.
Neither the execution of the Transaction  Documents nor the  consummation of the
transactions  contemplated  herein  and  therein  will  require  the  consent or
approval  of or  registration  or  filing  with  any  federal,  state  or  local
government or any court,  administrative  or regulatory  agency or commission or
other governmental  authority or agency,  domestic or foreign,  other than where
the  failure  to  obtain  such  consents  or  approvals  or  to  make  any  such
registration  or  filing  would  not have  individually  or in the  aggregate  a
Material  Adverse  Effect on or  prevent  or  materially  delay  Purchaser  from
performing its obligations under this Agreement.

         5.       ADDITIONAL AGREEMENTS.
                  ---------------------

         5.1 Expenses.  All fees and expenses  incurred in connection  with this
Agreement and the  transactions  contemplated  hereby shall be paid by the party
incurring such fees or expenses.

                         5.2  Operation of the  Business.  From the date of this
                    Agreement  through the Closing  Date,  except with the prior
                    written consent of Purchaser:

                  (a)  Seller and  Matria  shall  operate  the  Business  in the
ordinary course and consistent with past practice and in substantial  conformity
with all  laws,  ordinances,  regulations,  rules  or  orders,  and all  leases,
commitments  and  other  agreements,  and  all  licenses,   permits,  and  other
instruments;

                  (b)  Seller  and Matria  shall use all  reasonable  commercial
efforts to preserve the goodwill and business of the  customers,  suppliers  and
others having significant business relations with the Business;

                         (c) Seller and Matria shall not, except in the ordinary
                    course of business and consistent with past practice:

                         (i) enter into any  transaction for or which results in
                    the sale or transfer of control of the  Business or any part
                    of it and Seller shall not,  directly or  indirectly,  make,
                    solicit or encourage  proposals from, hold  discussions with
                    or furnish information to any person concerning the above;

                         (ii) enter into any material  agreement with respect to
                    the Intellectual Property;

                         (iii) sell or transfer  any of the Assets,  except that
                    items may be sold  provided  such  items are  replaced  with
                    items of equal or greater value;

                         (iv) except to the extent required by applicable law or
                    as  required  by  the  terms  of  any  currently   effective
                    employment  agreement,  grant or agree to grant any  general
                    increases  in the  rates  of  salaries  or  compensation  or
                    bonuses payable to its employees;

                         (v) except to the extent  required by  applicable  law,
                    required by the terms of any currently effective  employment
                    agreement,  or as otherwise  contemplated by this Agreement,
                    hire or terminate the employment of any Key Employee; or

                         (vi) except to the extent required by applicable law or
                    as  required  by  the  terms  of  any  currently   effective
                    employment   agreement,   provide   for  any  new   pension,
                    retirement  or  other  employment  benefits  for  any of the
                    employees  of the  Seller or any  increase  in any  existing
                    benefits;

                  (d) Seller and Matria shall not, except in the ordinary course
of business consistent with past practice:  (i) enter into or renew any material
lease,  agreement or commitment  relating to the Business  that, if entered into
prior to the date of this  Agreement,  would have been listed on Schedule 1.2(f)
herein or (ii)  cause or take any action to allow any  agreement  listed on such
schedule to be assumed by Purchaser  pursuant to this  Agreement to lapse (other
than in accordance  with its terms) or to be modified in any materially  adverse
respect; and

                  (e) Seller shall  maintain  all of its assets  relating to the
Business in customary repair, maintenance and condition, except to the extent of
normal wear and tear,  replace all items of equipment at time intervals,  in the
ordinary course  consistent with past practice,  and repair or replace any asset
that may be materially  damaged or destroyed in the ordinary  course  consistent
with past practice.

         5.3      Employees and Employee Benefits.
                  -------------------------------

                  (a)  Matria  and  Seller  shall  use all  reasonable  business
efforts to retain the services of the Key Employees through the Closing Date and
to assist  and  support  Purchaser  in hiring  all Key  Employees  and all other
employees  of the Seller  that  Purchaser  shall seek to hire as of the  Closing
Date. Prior to or at the Closing,  Purchaser may offer employment to some or all
employees of the Seller other than the employees listed on Schedule 5.3 attached
hereto,  in the Purchaser's sole  discretion,  upon such terms and conditions as
shall be determined by Purchaser in its sole discretion.  The Seller will retain
all of the Benefit  Plans  currently  maintained by the Seller as of the date of
this  Agreement,  and Purchaser will not assume any  obligations  under any such
plans. Matria and Seller will indemnify, defend and hold harmless Purchaser (and
its directors,  officers, employees and affiliates) with respect to such Benefit
Plans for and against any and all claims, actions, judgments or causes of action
based  upon or arising  out of or  otherwise  in  respect of any such plan.  All
employees of the Seller  hired by  Purchaser  shall be given full credit for all
time worked for the Seller for purposes of determining  their  participation and
vesting under the employee benefit plans and programs of Purchaser applicable to
such employees.  Unless prohibited by law, the Seller shall provide to Purchaser
all  personnel  records  for the  employees  of the Seller  hired by  Purchaser,
including,  without limitation,  names, social security numbers,  dates of hire,
dates of birth, number of hours worked each year, and salary history. Matria and
Seller hereby agrees not to employ,  directly or indirectly,  for a period of 12
months  after the Closing  Date,  any employee of Seller to whom  Purchaser  has
offered employment prior to or on the Closing Date and who decides not to accept
employment with Purchaser.

                  (b) Without limiting any of the provisions  herein,  Purchaser
will not assume any of the Benefit Plans, or any rights, duties,  obligations or
liabilities  thereunder,  nor  shall  it  become  a  successor  employer  or  be
responsible in any way for Seller's or a common  control  entity's (as such term
is defined under section 4.14(a) or (b) of the Internal Revenue Code of 1986, as
such term may be amended from time to time)  participation  in or obligations or
responsibilities  with respect to any Benefit Plan, nor shall it be obligated by
this Agreement to make any provision with respect to employee benefits after the
Closing Date,  except as required by this Section 5.3 and by Section 1.4(b).  No
assets of any Benefit Plan shall be  transferred  to Purchaser or to any plan of
Purchaser.  Seller shall,  after the Closing Date,  comply with the continuation
coverage  requirements  of Section 601 through 609 of ERISA and Section 4980B of
the  Code  with  respect  to the  employees;  provided,  however,  that any such
continuing  coverage  obligations  resulting from a qualifying event that occurs
after such  employees  are  enrolled  in  Purchaser's  health  plan shall be the
responsibility of Purchaser.

                  (c)  To  the  extent  permitted  by  law,  Purchaser  will  be
permitted  reasonable  access to records of employees of Seller and Matria prior
to Closing  for the  purpose of setting up  Purchaser's  benefit  plans for such
employees.

                  (d) With  respect to any persons who received  "equity  based"
incentives  calculated based upon the fair market value of shares of WebMD, Inc.
(f/k/a Endeavor Technologies,  Inc.) (the "WebMD benefits") and who are hired by
Purchaser  pursuant to Section 5.3 herein,  Matria shall provide that solely for
the purposes of determining  eligibility and the exercise rights of such persons
with respect to any such WebMD  Benefits,  the  employment  of such persons with
Purchaser (or any of its assigns) shall be deemed to be continued  employment by
Seller. .

         5.4 Further  Assurances.  Upon the  reasonable  request of any party to
this  Agreement,  each  party  agrees  to take any and all  actions,  including,
without  limitation,  the execution of certificates,  documents,  or instruments
necessary or appropriate to give effect to the terms and conditions set forth in
this Agreement.

         5.5 Bulk Sales Law. As an inducement  to Purchaser to waive  compliance
with the provisions of any applicable bulk sales or transfer laws, Seller hereby
agrees  that  all of its  debts,  obligations  and  liabilities  which  are  not
expressly  assumed by Purchaser under this Agreement will be paid and discharged
by Seller as and when they become due and payable in the ordinary  course of the
Business.  Matria  and the  Seller,  jointly  and  severally,  further  agree to
indemnify and hold Purchaser  harmless from any and all liabilities  incurred by
Purchaser by reason of or arising out of claims made by  creditors  with respect
to any non-compliance with any applicable bulk sales or transfer laws (except to
the extent such claims constitute Assumed Liabilities).

         5.6 Corporate Name Changes. On the Closing Date,  immediately after the
Closing  hereof,  QDS shall change its corporate name, at Matria's  expense,  to
another name which is not confusingly similar to "Quality  Diagnostic  Services,
Inc.," "QDS" or any similar name. Matria and Seller further agree that after the
Closing  Date  they  shall no longer  use any of such  names  without  the prior
written  consent of Purchaser in each  instance,  except in connection  with the
collection of accounts receivable and payment of Excluded Liabilities.

         5.7 Operations of QDS. After the Closing, QDS agrees to discontinue any
or  all  businesses  or  operations,  except  for  (i)  the  performance  of any
obligations  QDS may have to Purchaser  pursuant to and in  accordance  with the
terms  of  this  Agreement  or  the  Transition  Services  Agreement,  including
obligations  with respect to Excluded  Liabilities;  and (ii) the  collection of
accounts receivable of QDS as of the date of the Closing.

         5.8  Notice of  Employee's  Termination.  After the  transition  of the
payroll  from Matria and Seller to  Purchaser,  if Matria so requests in writing
and identifies  therein the employees of the Seller hired by Purchaser  pursuant
to this  Agreement  which have balances in their 401(k)  accounts  maintained by
Seller or Matria as of the Closing  Date,  Purchaser  shall inform Matria of any
termination of any such employee's employment with Purchaser within a reasonable
period  of time  after  such  termination.  In  addition,  with  respect  to the
employees  listed  on  Schedule  5.8  attached  hereto,  if at any time from the
Closing and until December 31, 2001 Matria inquires, Purchaser shall disclose to
Matria whether or not such  employees are still employed by Purchaser,  provided
that Matria shall not make such inquiry other than in connection  with the WebMD
Benefits.

5.9  Further  Action.  Upon the  terms and  subject  to the  conditions  of this
Agreement,  each of Matria and the Seller shall use all commercially  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 under applicable laws and regulations
to  consummate  and  make  effective  the  transactions   contemplated  by  this
Agreement.  Without derogating from the above, Matria shall cause Seller to take
all actions and meet all obligations under this Agreement.

5.10 Additional Financial  Information.  Matria and QDS shall provide Purchaser,
as soon as possible but no later than the Closing Date,  the  unaudited  balance
sheet,  cash flow and income  statement  of QDS for the  period  ending or as of
December 31, 2000. In addition,  if and to the extent  Purchaser shall decide to
create audited  financials  for QDS for any period prior to the Closing,  Seller
and Matria shall provide any relevant  information and, at Purchaser's  expense,
assist Purchaser in creating such financials.

5.11 Access to  Information  Prior to Closing.  Prior to the Closing Date and to
the extent permitted by applicable law,  Purchaser and its  representatives  may
make such  reasonable  investigation  of the Assets and the  Business  as it may
reasonably  request  and Seller and Matria  shall give to  Purchaser  and to its
counsel,  accountants and other representatives  reasonable access during normal
business hours  throughout the period prior to the Closing to all of the Assets,
books, commitments,  agreements,  records, employees,  customers,  suppliers and
files of Seller relating solely to the Business and the Assets.

5.12     Records.
----------------

                  (a) After the Closing Purchaser's management shall have access
(to the same extent  Seller's  management  had such access  prior to the Closing
Date) to all  files  and  records  retained  by  Matria  or  Seller,  in  paper,
electronic or any other form,  concerning  the Assets or the Business,  that are
necessary  to operate the  Business  after the Closing  Date as the Business was
operated  prior to the Closing Date  provided  that,  such right of access shall
terminate upon fulfillment of Seller's obligations under Section 5.12(b) below.

(b) On or prior to Closing,  Purchaser  shall deliver to Seller a description of
all  information  retained by Seller or Matria and that is required by Purchaser
in order to operate the  Business  after the Closing  Date as the  Business  was
operated prior to the Closing Date, and the format in which  Purchaser  requests
to receive such information. Within 30 days of the Closing, Seller shall deliver
to Purchaser such requested information in the requested format.

5.13     Access to Information After Closing.
--------------------------------------------

(a) At any time after the Closing Date Seller and Matria shall give to Purchaser
and to its counsel,  accountants  and other  representatives  reasonable  access
during  normal  business  hours  and  upon  reasonable   notice  to  all  books,
commitments,  agreements,  records and files of Seller retained by Seller and/or
Matria relating to the Business and the Assets.

(b) At any time after the Closing Date Purchaser shall give to Matria and Seller
and to its counsel,  accountants  and other  representatives  reasonable  access
during  normal  business  hours  and  upon  reasonable   notice  to  all  books,
commitments,  agreements,  records and files of QDS assigned or  transferred  to
Purchaser  and relating to the  operation of Seller before the Closing and after
the Closing as described in Section 5.7 herein.

5.14 Supplemental Notices.  Matria and Seller shall promptly notify Purchaser in
writing of, and furnish any  information  that Purchaser may reasonably  request
with respect to any claim, litigation,  proceeding or governmental investigation
threatened  or asserted  by or against  Seller  relating to the  Business or the
Assets or any material  development with respect to any such claim,  litigation,
proceeding or  investigation or any other material event affecting the Business.
Each party  shall  notify the other  party in writing of any event or  condition
that would cause any of the conditions to such party's  obligation to consummate
the  transaction  not to be fulfilled  or that would have been  required to have
been  disclosed  to the  other  party  under  this  Agreement  if such  event or
situation  would  have  occurred  or  existed  prior  to the  execution  of this
Agreement.

5.15 Sales and Transfer  Taxes.  Seller shall be responsible  for paying any and
all state and local sales and use taxes payable in  connection  with the sale of
the Assets and any stamp or transfer taxes in connection  with the  transactions
contemplated herein.

5.16  Collection of  Receivables.  From and after the Closing  Date,  each party
shall  inform of and  transfer to the other  party any amounts  received by such
party and that such party believes represent payments due to the other party for
services provided by the other party.

5.17 Referrals;  Communications.  From the date of the Closing, Matria or Seller
will promptly refer to Purchaser any clients,  suppliers or any other person who
may contact  Seller with  respect to the Business by person,  telephone,  faxes,
e-mails,  Seller's  Web site or  otherwise  and send to  Purchaser  any  assets,
enrollment  forms  or  any  other  materials  or  communications  received  from
customers  or users of any of the Assets or  otherwise  in  connection  with the
Business   (other  than  with  respect  to  any  Excluded   Assets  or  Excluded
Liabilities).  In  addition,  to the extent  Seller's  telephone  and  facsimile
numbers are not assignable to Purchaser, Matria and Seller shall allow Purchaser
exclusive  use of such  telephone  and facsimile  numbers (and  Purchaser  shall
reimburse Seller for such use) for as long as Purchaser  remains in the premises
in which Seller has operated the Business prior to Closing.

5.18 Telemed Technologies International.  Notwithstanding any other provision of
this  Agreement but subject to Section 7 and the last sentence of 7.4(c) herein,
neither  Matria nor Seller shall have any  liability  to Purchaser  based on any
repudiation or  termination by Telemed of the Telemed  Agreement or by Telemed's
non-performance  thereunder;  nor shall  any such  repudiation,  termination  or
non-performance, or any actual or threatened litigation with Telemed, constitute
a failure of a condition to Purchaser's obligation to consummate the purchase of
the Assets or provide a basis for any adjustment to the Purchase Price.

         6.       Conditions Precedent to Closing.
                  -------------------------------

         6.1 Conditions  Precedent to the Obligations of Purchaser.  Purchaser's
obligation  to  consummate  the purchase of the Assets  under this  Agreement is
subject to the fulfillment, at or prior to the Closing, of each of the following
conditions (any of which may be waived in writing by Purchaser):

                  (a) each  representation  and  warranty  of Seller  and Matria
contained  in this  Agreement,  the  breach  of  which,  individually  or in the
aggregate, would reasonably be expected to have a Material Adverse Effect, shall
be true at and as of the time of the Closing with the same effect as though such
representation  and  warranty had been made again at and as of that time (except
for changes  contemplated by this Agreement,  and except for any  representation
and warranty made as of a specific date, which shall be true as of such date);

                  (b) Seller and Matria shall have performed and complied in all
material respects with each obligation,  covenant and condition required by this
Agreement to be  performed  or complied  with by each of them prior to or at the
Closing;

                  (c) there shall not be in effect any injunction or restraining
order issued by a court of competent  jurisdiction  prohibiting the consummation
of the transactions  contemplated by this Agreement,  and there shall not be any
judicial,  administrative or arbitral  actions,  claims,  suits  investigations,
proceedings  or  governmental   proceeding  pending  or,  to  the  Knowledge  of
Purchaser,  threatened  against  Purchaser,  preventing the  consummation of the
transactions contemplated by this Agreement;

                  (d)  there  shall  have  been  no  change  in  the   condition
(financial or otherwise) or results of operations of the Business since the date
of this Agreement that would  reasonably be expected to have a Material  Adverse
Effect;

                  (e) Purchaser  shall have been furnished with  certificates of
executive officers of each of Seller and Matria, dated the Closing Date, in form
and  substance  reasonably  satisfactory  to  Purchaser,  certifying  as to  the
fulfillment of the conditions set forth in clauses (a) and (b); and

                         (f)  Purchaser   shall  have  received  all  government
                    approvals    required   to   consummate   the   transactions
                    contemplated by this Agreement; and

                  (g) Seller  and  Matria  shall  have  received  all  necessary
approvals,  waivers and consents under the Credit Agreement, dated as of January
19, 1999 among Matria Healthcare,  Inc., certain lenders named therein and First
Union National Bank, as administrative agent (the "Credit Agreement"),  in order
for Seller to consummate the  transactions  contemplated by this Agreement,  and
the lenders thereunder shall have released their lien on the Assets and executed
such UCC-3 termination  statements or other documents necessary to evidence such
release.

         6.2  Conditions  Precedent  to  the  Obligations  of  Seller.  Seller's
obligation to consummate  the sale of the Assets under this Agreement is subject
to the  fulfillment,  at or  prior  to the  Closing,  of each  of the  following
conditions (any of which may be waived in writing by Seller):

                  (a) each representation and warranty of Purchaser contained in
this Agreement shall be true at and as of the time of the Closing, with the same
effect as though such  representation and warranty had been made again at and as
of that time (except for changes contemplated by this Agreement,  and except for
any  representation and warranty made as of a specific date, which shall be true
as of such date);

                  (b)  Purchaser  shall  have  performed  and  complied  in  all
material respects with each obligation,  covenant and condition required by this
Agreement  to be  performed  or complied  with by  Purchaser  prior to or at the
Closing;

                  (c) there shall not be in effect any injunction or restraining
order issued by a court of competent  jurisdiction  prohibiting the consummation
of the transactions  contemplated by this Agreement,  and there shall not be any
judicial,  administrative or arbitral  actions,  claims,  suits  investigations,
proceedings or governmental proceeding pending or, to the Knowledge of Seller or
Matria,  threatened against Seller or Matria, preventing the consummation of the
transactions contemplated by this Agreement;

                  (d) Seller shall have been  furnished with a certificate of an
executive  officer of  Purchaser,  dated the Closing Date, in form and substance
reasonably  satisfactory  to  Seller,  certifying  to  the  fulfillment  of  the
conditions set forth in clauses (a) and (b);

                  (e)  Seller  shall  have  received  all  necessary  approvals,
waivers  and  consents  under  the  Credit  Agreement  in order  for  Seller  to
consummate the  transactions  contemplated  by this  Agreement,  and the lenders
thereunder  shall have released their lien on the Assets and executed such UCC-3
termination  statements or other  documents  necessary to evidence such release;
and

                         (f)  Seller  shall  have   received  all   governmental
                    approvals    required   to   consummate   the   transactions
                    contemplated by this Agreement.

         7.       INDEMNIFICATION.

         7.1 Survival of Representations and Warranties. The representations and
warranties  contained in Articles 3 and 4 of this  Agreement  shall  survive the
Closing for a period of 18 months;  provided,  however, that the representations
and warranties  contained in Sections 3.1, 3.2, 3.12, 3.13 and 3.16 hereto shall
survive  the  Closing  until  the  expiration  of  the  applicable   statute  of
limitations therefor.

         7.2 Indemnification by Matria and the Seller. Subject to the provisions
of this  Article 7,  Matria and the  Seller,  jointly  and  severally,  agree to
indemnify  and  hold  harmless  Purchaser  and  its  parents,  subsidiaries  and
affiliates and their respective stockholders,  officers,  directors,  agents and
employees from and against any and all claims, damages, losses and expenses made
against,  sustained or incurred by any such party  (whether as a result of third
party claims,  demands,  suits, causes of action,  proceedings,  investigations,
judgments, liabilities, or other otherwise) including, without limitation, costs
of investigation and defense,  court costs and reasonable attorneys fees (all of
the foregoing being  hereinafter  referred to  collectively  as "Losses"),  with
respect to or arising out of (a) any breach of any representation or warranty of
Matria  or  Seller  contained  herein  or in any of the  Transaction  Documents,
including,  without  limitation  the  representation  and  warranty  included in
Section 8.1 herein;  (b) any breach of any  covenant or  agreement  of Matria or
Seller contained herein or in any of the Transaction Documents; (c) any Excluded
Liabilities (including,  without limitation, any liability that Purchaser incurs
under any applicable bulk sales or transfer law, any doctrine of de facto merger
or successor  liability,  or otherwise by operation of law); and (d) the failure
to obtain any required  consents in connection with the SubLease  Agreements and
the sublease of the relevant premises therein.

         7.3 Indemnification by Purchaser. Purchaser hereby agrees to indemnify,
defend  and  hold  harmless  each  of  Matria  and  QDS  and  their   respective
stockholders,  officers,  directors,  affiliates,  agents and employees from and
against any and all Losses  incurred or sustained by any of them with respect to
or arising out of (a) any breach of any  representation,  warranty,  covenant or
agreement of Purchaser contained herein or in any of the Transaction  Documents,
including,  without  limitation  the  representation  and  warranty  included in
Section 8.1 herein; and (b) any Assumed Liability.

         7.4      Limitation on Liability.
                  -----------------------

                  (a)  Notwithstanding  anything  else  contained  herein to the
contrary,  but  subject to  Section  7.4(c)  hereof,  no party  hereto  shall be
entitled to  indemnification  under the provisions of this Article 7, unless and
until the  aggregate  amount of all Losses for which such party is  entitled  to
indemnification under this Article 7 exceeds $200,000, in which event all Losses
shall be recoverable (the "Indemnity Threshold").

                  (b) Notwithstanding anything contained herein to the contrary,
the  maximum  aggregate  liability  of the Seller and Matria on the one hand and
Purchaser on the other hand  pursuant to this Article 7 shall be an amount equal
to $12,000,000 (the "Indemnity Cap").

                  (c) Notwithstanding anything contained herein to the contrary,
the  following  items  shall not be subject to the  Indemnity  Threshold  or the
Indemnity Cap and the  indemnity  provided in Section 7.2 or Section 7.3, as the
case may be, with respect to such items shall not be limited in any way: (i) the
Lawsuits;  (ii) any Excluded  Liabilities  (including,  without limitation,  any
liability that Purchaser incurs under any applicable bulk sales or transfer law,
any  doctrine  of de facto  merger  or  successor  liability,  or  otherwise  by
operation of law) or Assumed Liabilities;  (iii) any Purchaser's Adjustment,  as
provided for in Section 1.8 hereof;  and (iv) the failure to obtain any required
consents in  connection  with the  SubLease  Agreements  and the sublease of the
relevant premises therein.  In addition and  notwithstanding  anything herein to
the  contrary   (including,   without   limitation  Section  5.18)  the  Telemed
Liabilities  shall  not be  subject  to  the  Indemnity  Cap  or  the  Indemnity
Threshold.

         7.5      Administration of Third Party Claims.
                  ------------------------------------

                  (a) Whenever any claim shall arise for  indemnification  under
this Article 7, the party entitled to indemnification  (the "Indemnified Party")
shall  promptly  notify  the  other  party  or  parties   obligated  to  provide
indemnification under this Agreement (each an "Indemnifying Party") of the claim
and, when known,  the facts  constituting the basis for such claim. In the event
of any claim for indemnification  hereunder resulting from or in connection with
any claim or legal  proceeding by a person who is not a party to this  Agreement
(a "Third Party Claim"), such notice shall also specify, if known, the amount or
a good faith  estimate of the amount of the Losses  arising  therefrom and shall
identify with reasonable  specificity  the basis for the Third Party Claim,  the
facts  giving rise to the Third Party  Claim,  and the amount of the Third Party
Claim (or, if such amount is not yet known, a reasonable  estimate of the amount
of the Third Party Claim).  The  Indemnified  Party shall make  available to the
Indemnifying  Party  copies  of  all  relevant  documents  and  records  in  its
possession.  Failure to give  prompt or  accurate  notice  shall not relieve the
Indemnifying  Party of its obligation to indemnify except to the extent that the
Indemnifying Party is actually prejudiced by the delay in giving notice.

                  (b) The  Indemnified  Party shall not settle or  compromise or
voluntarily enter into any binding agreement to settle or compromise, or consent
to entry of any judgment  arising from,  any such claim or proceeding  except in
accordance  with this Section 7.5. With respect to any Third Party Claim, if the
Indemnifying  Party  acknowledges  in writing its  obligation  to indemnify  the
Indemnified  Party  against  any Losses  that may result  from such Third  Party
Claim,   the   Indemnifying   Party  shall  undertake  the  defense  thereof  by
representatives of its own choosing  reasonably  satisfactory to the Indemnified
Party.  The  Indemnified  Party or any  other  Party  shall  have  the  right to
participate in any such defense of a Third Party Claim with advisory  counsel of
its own  choosing at its own expense.  Assuming  they have  received  reasonably
adequate advance notice of a covered claim, in the event the Indemnifying Party,
within 15 days of receiving notice of any Third Party Claim, fails to assume the
defense as described in Section 7.5(a) above,  the  Indemnified  Party will have
the right to undertake the defense, compromise or settlement of such Third Party
Claim on behalf  of, and for the  account  of, the  Indemnifying  Party,  at the
expense and risk of the Indemnifying Party.

         8.       GENERAL PROVISIONS.
                  ------------------

         8.1 Brokers.  Each of Matria and the Seller  represents and warrants to
Purchaser,  and Purchaser represents and warrants to Matria and the Seller, that
no broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement.

         8.2      Notices.
                  -------

         All notices and other communications required or permitted hereunder to
be  given  to a party  to this  Agreement  shall  be in  writing  and  shall  be
telecopied or mailed,  postage prepaid,  or otherwise  delivered by hand or by a
nationally  recognized  overnight courier,  addressed to such party's address as
set forth below or at such other  address as the party shall have  furnished  to
each other party in writing in accordance with this provision:

         If to Matria or Seller:        Matria Healthcare, Inc.
                                        1850 Parkway Place
                                        12th Floor
                                        Marietta, Georgia 30067
                                        Attention: General Counsel
                                        Facsimile: 770.767.7769

         with a copy to:                Troutman Sanders LLP
         (which shall not               600 Peachtree Street, N.E.
         constitute notice)             Suite 5200
                                        Atlanta, Georgia 30308-2216
                                        Attention: James L. Smith, III, Esq.
                                        Facsimile: 404.962.6566

         If to Purchaser:               Card Guard Technologies, Inc.
                                        10221 Wateridge Circle
                                        San Diego, CA 92121-1579
                                        Attention: President
                                        Facsimile: 858.458.6266

         with a copy to:                Proskauer Rose LLP
         (which shall not               1585 Broadway
         constitute notice)             New York, NY 10036-8299
                                        Attention:  Jeffrey A. Horwitz, Esq.
                                        Facsimile: 212.969.2900

         All such notices and  communications  shall be effective when delivered
by hand, or, in the case of mail,  upon receipt of such mail, or, in the case of
facsimile transmission, upon receipt of confirmation of delivery at the sender's
fax machine.

         8.3  Entire  Agreement.  This  Agreement,   including  the  Transaction
Documents and all Exhibits and Schedules  hereto and thereto and the  Disclosure
Letter (all of which are  incorporated  herein by this  reference)  contains the
entire agreement and understanding  concerning the subject matter hereof between
the parties hereto and supersedes  any previous or  contemporaneous  agreements,
schedules, understandings, documents, negotiations and discussions, whether oral
or written relating to that subject matter.

         8.4 Waiver;  Amendment.  No waiver,  termination  or  discharge of this
Agreement,  or any of the terms or provisions hereof,  shall be binding upon any
party hereto unless  confirmed in writing.  No waiver by any party hereto of any
term or provision of this  Agreement  or of any default  hereunder  shall affect
such party's rights  thereafter to enforce such term or provision or to exercise
any right or remedy in the event of any other  default,  whether or not similar.
This  Agreement may not be modified or amended  except by a writing  executed by
all parties hereto.

         8.5  Severability.  If any  provision of this  Agreement  shall be held
void,  voidable,  invalid or  inoperative,  no other provision of this Agreement
shall  be  affected  as  a  result  thereof,  and,  accordingly,  the  remaining
provisions  of this  Agreement  shall  remain in full force and effect as though
such void,  voidable,  invalid or  inoperative  provision had not been contained
herein.

         8.6  Governing  Law;  Venue.  This  Agreement  shall be governed by and
construed in accordance  with the laws of the State of New York,  without regard
to the  principles  of  conflicts  of law. The parties  hereto  irrevocably  and
exclusively  submit to the  jurisdiction  of the courts of the state of Delaware
and the  federal  courts of the  United  States  located  in  Delaware,  and any
appellate court from any thereof, with respect to any suit, action or proceeding
pertaining to this Agreement.

         8.7 Assignment.  No party hereto may assign this Agreement, in whole or
in part,  without the prior written consent of the other parties hereto, and any
attempted assignment not in accordance herewith shall be null and void and of no
force or effect. Provided, however, that Purchaser may assign this Agreement, in
whole or in part, to an affiliate of Purchaser, without the consent of the other
parties hereto, in which case Purchaser shall nonetheless  remain liable for the
performance of all of its obligations hereunder.

          8.8 Binding  Effect.  This  Agreement  shall be binding upon and shall
          inure to the  benefit  of the  parties  hereto  and  their  respective
          successors and permitted assigns.

         8.9 Cumulative  Remedies.  All rights and remedies of each party hereto
are  cumulative  of each other and of every other right or remedy such party may
otherwise  have at law or in equity,  and the  exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent  exercise of
other rights or remedies.

         8.10  Headings.  The titles,  captions and  headings  contained in this
Agreement are inserted for convenience of reference only and are not intended to
be a part of or to  affect  in any way the  meaning  or  interpretation  of this
Agreement.

         8.11 Reference with Agreement. Numbered or lettered articles, sections,
paragraphs,  subsections,  Schedules  and  Exhibits  herein  contained  refer to
articles,  sections,  paragraphs,  subsections,  Schedules  and Exhibits of this
Agreement  unless  otherwise  expressly  stated.  The words "herein,"  "hereof,"
"hereunder,"  "hereby," "this  Agreement" and other similar  references shall be
construed to mean and include this  Agreement and all Exhibits and Schedules and
all  amendments  to any of them unless the  context  shall  clearly  indicate or
require otherwise.

         8.12  Interpretation.  This  Agreement  shall  not  be  construed  more
strictly  against any party hereto  regardless of which party is responsible for
its preparation, it being agreed that this Agreement was fully negotiated by all
parties hereto.

         8.13 Definition of Knowledge. Any reference in this Agreement or in any
certificate  delivered pursuant hereto to a party's "Knowledge" (whether to "the
best of" such party's  knowledge or other  similar  expressions  relating to the
knowledge or awareness of any party) shall include all matters which any of such
party's officers or directors actually knew or should have known acting in their
capacity as an officer or director of such party.

         8.14  No  Third   Party   Beneficiaries.   There  are  no  third  party
beneficiaries  of this Agreement and nothing else in this Agreement,  express or
implied,  is intended to or shall  confer upon any person other than the parties
hereto and their  respective  successors  and  permitted  assigns,  any  rights,
remedies, obligations or liabilities.

8.15 Counterparts; Fax Signatures. This Agreement may be executed in one or more
counterparts,  each of which shall be deemed to be an original, but all of which
together  shall  constitute the same  Agreement.  Any signature page of any such
counterpart, or any electronic facsimile thereof, may be attached or appended to
any  other  counterpart  to  complete  a  fully  executed  counterpart  of  this
Agreement,  and any telecopy or other  facsimile  transmission  of any signature
shall be deemed an original and shall bind such party

8.16 Publicity. No party shall issue any press release or other public statement
regarding the  transactions  contemplated  by this  agreement  without the prior
written consent of the other,  except that each party may make such  disclosures
to the public or to governmental  agencies as are required by applicable Federal
or state laws or by the rules of any self  regulated body to which such party is
subject.  The parties shall  cooperate as to the timing and contents of any such
press release or public announcement.



         IN  WITNESS  WHEREOF,   the  parties  hereto  have  caused  their  duly
authorized  representatives  to  execute  this  Agreement  under  seal as of the
Closing Date, to be effective as of the Closing Date.

                             MATRIA HEALTHCARE, INC.


                             By:-----------------------------------------------
                             Title:--------------------------------------------


                             QUALITY DIAGNOSTIC SERVICES, INC.


                             By:-----------------------------------------------
                             Title:--------------------------------------------


                             CARD GUARD TECHNOLOGIES, INC.

                              By:----------------------------------------------
                              Title:-------------------------------------------