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                                    FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

              TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) of
                       the SECURITIES EXCHANGE ACT OF 1934

For the transition period from March 1, 1996 to December 31, 1996

Commission file number 0-19294

                              RehabCare Group, Inc.
             (Exact name of Registrant as specified in its charter)

          Delaware                                   51-0265872
    (State or other jurisdiction of    (I.R.S. Employer Identification No.)
      incorporation or organization)

          7733 Forsyth Boulevard, 17th Floor, St. Louis, Missouri 63105
              (Address of principal executive offices and zip code)

Registrant's telephone number, including area code (314) 863-7422

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share          Preferred Stock Purchase Rights

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                                    Yes x No

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  Registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. (x)

         The aggregate  market value of voting stock held by  non-affiliates  of
Registrant at March 12, 1997, was $88,880,985. At March 12, 1997, the Registrant
had 3,768,172 shares of Common Stock outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Part III of this Annual Report on Form 10-K  incorporates  by reference
information contained in the Registrant's Proxy Statement for its annual meeting
of stockholders to be held April 30, 1997.







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                                     PART I

ITEM 1.      BUSINESS

      RehabCare Group, Inc. (the "Company" or the "Registrant") was incorporated
under the laws of Delaware in 1982.  The Company  develops,  markets and manages
comprehensive  medical  rehabilitation  programs,   subacute  (skilled  nursing)
programs and therapy services in acute-care hospitals, skilled nursing units and
outpatient facilities.  The Company also is a contract provider of therapists to
hospitals and long-term care and  rehabilitation  facilities.  Since opening its
first  contract unit in 1984,  the Company has expanded its business to become a
national  provider  with  programs in 26 states and,  as of December  31,  1996,
managed  1,979 beds on a contract  basis in 86  dedicated  acute  rehabilitation
units and 16 dedicated subacute units within acute-care hospitals,  and operated
19  dedicated   outpatient   programs  within  facilities  owned  by  acute-care
hospitals.

      On March 1, 1996,  the Company  acquired  Healthcare  Staffing  Solutions,
Inc.,  and HCH,  Inc.,  d/b/a  Health  Tour  ("HSSI"),  a contract  provider  of
therapists on a temporary basis to hospitals,  long-term care and rehabilitation
facilities.  On January 28, 1997, the Company acquired TeamRehab, Inc. and Moore
Rehabilitation Services, Inc. ("Team and Moore"),  providers of contract therapy
services to long-term care facilities and outpatient clinics.

      Program  Management   Contracts.   The  Company's  physical  medicine  and
rehabilitation programs are directed toward individuals who have severe physical
impairments that prevent them from engaging in normal daily activities,  but who
have the potential for functional improvement. Patients treated in the Company's
acute  rehabilitation  programs have diagnoses that include  stroke,  orthopedic
conditions,  arthritis,  amputation,  spinal cord and traumatic  brain injuries,
and/or disease disorders such as cerebral palsy,  multiple  sclerosis,  muscular
dystrophy and Parkinson's  disease.  The Company's  subacute units offer skilled
nursing care and  moderate  rehabilitation  therapies  and have  diagnoses  that
include  stroke,  orthopedic  conditions,  post-surgical  conditions,  pulmonary
disease,  congestive heart failure,  cancer, and patients requiring  intravenous
antibiotic  therapy or nutritional  support.  Patients  treated in the Company's
outpatient programs include patients continuing  rehabilitation  after discharge
from the  hospital,  plus  rehabilitation  services for patients  with sports or
workrelated injuries that do not require hospitalization.

      The  Company  administers  all of its acute and  subacute  programs on the
premises of host facilities under management contracts.  Outpatient programs are
operated  primarily on the  hospital's  premises or at separate  sites leased or
owned by the  hospital.  Under  the  inpatient  management  contracts,  the host
facilities   typically   furnish  all  services   necessary  for  the  patients'
generalized medical care, including nursing,  dietary and housekeeping services,
while the Company  typically  markets and administers  the program  services and
provides the clinical teams. The Company operates inpatient units on a fee basis
that is computed in most cases on patient days at the unit. Since fixed costs of
unoccupied  beds  in a unit  are  the  responsibility  of the  client  hospital,
occupancy  rates are not  necessarily  indicative  of the  Company's  results of
operations. The most relevant statistics to gauge the expansion of the Company's
inpatient  and  subacute  contract  management  business are number of units and
average  occupied beds per unit. The relevant  statistics to gauge the Company's
outpatient business are number of locations and patient visits.

      At  its  inpatient  units,  the  Company  furnishes   personnel  generally
consisting  of a program  director  and a  physician  (who serves as the medical
director for the program),  plus additional  staff tailored to meet the needs of
the program and  hospital,  which may  include:  a  psychologist,  physical  and
occupational therapists, a speech pathologist, a social worker, a nurse manager,
a case manager and other  appropriate  supporting  personnel.  At its outpatient
locations,  the Company furnishes  primarily  therapy,  program  development and
administrative   personnel.   In   addition,   the  Company   provides   program
implementation  and  management,  treatment  team  training,  staff  recruiting,
continuing  education,  insurance,  community education,  referral  development,
therapy equipment, public relations, ongoing quality assurance, consultation and
case management.

      Upon approval by the medical director or other physician, patients are
admitted to the Company's inpatient

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units under the host facility's  standard  admission policies and procedures and
in adherence to Medicare guidelines.  Following treatment,  the host facility is
responsible  for  submitting a bill for services and obtaining  payment from the
patient,  commercial payors, Medicare or Medicaid.  Generally, the host facility
pays the Company a negotiated fee for each patient day of service provided in an
inpatient unit without reference to the hospital's source of payment.  Fees paid
to the Company are subject to annual  adjustment to reflect increases in various
indices  of  inflation.  The  Company  and the host  facility  share the risk of
nonpayment  by patients and other payors based on  collection  experience at the
facility.  The Company  participates  in this risk by  allowing a  predetermined
contractual discount to the facility, which generally ranges from two percent to
five percent.  The Company is typically  compensated at its outpatient locations
based upon a fee for service,  or a percentage  of charges or net  contribution.
The Company may also participate with a host facility in charity care.

      Generally, the Company's management contracts provide for initial terms of
three to five  years  and are  renewable  for  successive  terms of one to three
years.  Typically,  these contracts are  automatically  renewed unless notice of
termination is given at least 90 days prior to the end of the initial or renewal
term.  Contracts are also  terminable  for material  defaults or, in some cases,
upon the occurrence of certain other designated events,  including shortfalls in
census,  changes in reimbursement  practices or union  organization  activities.
Many of the  current  contracts  limit the  opening of a  competing  unit by the
Company within a defined geographic area.

      Therapy  Staffing  Contracts.  HSSI provides  physical,  occupational  and
speech therapy  professionals to hospitals and long-term care and rehabilitation
facilities nationally on assignments lasting initially 13 weeks as well as daily
assignments  in  several  major  metropolitan  areas  and  fee  based  permanent
placement  services.  HSSI  charges a fee for each  placement  plus  charges the
contracting  facility  with the cost of  housing,  licensure  and travel for the
placed  therapist.  The  therapist  is  compensated  by either  the  contracting
facility or by HSSI. In the latter case, the  compensation  cost is also charged
to the contracting facility.  For daily assignments,  HSSI charges fees based on
hours  worked  or units of  service  delivered.  Historically,  HSSI has  placed
therapists  in all 50  states.  Team  and  Moore  provide  outpatient  physical,
occupational  and speech  therapy  services on a  continuing  contract  basis at
approximately 30 facilities in the St. Louis,  Missouri  metropolitan area. Team
and Moore  receive  reimbursement  from their client  facilities  based on hours
worked or units of service delivered, as well as directly from Medicare based on
actual costs.

Business Expansion Strategy

      The  Company's  expertise is in  delivering  quality  acute,  subacute and
outpatient  rehabilitation  and  therapy  programs,  services  and  professional
personnel.  Drawing on this expertise, the thrust of its expansion strategy will
be to  develop  and  expand  contract  relationships  with  host  facilities  to
establish  and manage  acute,  subacute  and  outpatient  physical  medicine and
rehabilitation  programs  as well as  provide  therapy  staffing  services.  The
following is a more detailed description of these and other expansion strategies
of the Company:

      Acute-Care  Hospital  Contracts.  The  Company  believes  that  there will
continue  to be a strong  demand for the  development  and  management  of acute
rehabilitation,  subacute  and  outpatient  services in  hospitals in the United
States.  Acute-care  hospitals have  traditionally been the focus of health care
delivery in the community,  and as such, have controlled a substantial amount of
the  expenditures for health care services.  As health care reform evolves,  the
Company  believes  that  hospitals  will  continue to play a central role in the
delivery  of  health  care  services   providing  that  they  can  achieve  cost
efficiencies  and provide a complete  range of services  required  within  their
communities.  To this end, the Company has positioned itself to assist hospitals
in providing the full continuum of physical medicine and rehabilitation services
within acute,  subacute and outpatient settings controlled by the hospital.  The
economies  of scale  offered by the  hospital's  existing  plant and  equipment,
coupled with the Company's  expertise in delivering  these services,  offers the
opportunity for a community  hospital to be a full service  provider in the area
of  physical  medicine  and  rehabilitation  on a  cost-effective  basis  in the
following settings:

             Acute Rehabilitation Units.  Patients treated in acute
 rehabilitation units typically have diagnoses


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within one or more of ten diagnostic categories. Further, these patients must be
strong enough to endure and be reasonably  expected to benefit from a minimum of
three hours of therapy per day. Historically,  approximately 75% of the patients
treated  in acute  units  managed  by the  Company  have  been  admitted  with a
diagnosis of either stroke or orthopedic impairment.

             Subacute Units. Patients treated in subacute units typically are at
the low end of need for medical or  rehabilitative  care,  with greater need for
nursing care.  Patients in subacute  units have a much wider range of diagnostic
conditions than those in acute rehabilitation units, with a lesser concentration
of stroke and  orthopedic  and  greater  concentration  of  pulmonary,  cardiac,
post-surgical,  cancer, and patients requiring intravenous antibiotic therapy or
nutritional support.

             Outpatient Programs. Pressure from payors to move inpatients to the
lower cost  settings  has helped  fuel the growth in  outpatient  services.  The
outpatient therapy market is dominated by sports and workrelated  injuries.  The
Company's  diversification  into this  product line allows it access to patients
who, in general,  have not been admitted to a hospital.  In addition,  it allows
diversification  away from the  Medicare  dominant  payor  mix of the  inpatient
setting.

      The Company believes that a substantial  number of its relationships  with
acute-care hospitals present  opportunities to manage more than one of the above
services,  and has pursued  development of these opportunities as a primary part
of its growth strategy. As of December 31, 1996, the Company managed two or more
of the above services at 21 of its client hospitals.

      Therapy  Staffing.  Critical  shortages  of  licensed  therapists  in many
communities across the country have made it difficult for facility-based therapy
providers  to  maintain  continuity  of therapy  services  due to a high rate of
turnover and periodic  extended  absences  related to  vacations  and  maternity
leave.  Further,  since 1989,  when the  implementation  of the  Omnibus  Budget
Reconciliation Act of 1987 mandated the delivery of therapy services in extended
care  facilities,  these  facilities  have found it  increasingly  difficult  to
recruit and retain an appropriate  complement of qualified therapists to deliver
these  services.  HSSI  specializes  in recruiting  and placing  therapists on a
temporary basis in such facilities,  and, with  approximately  650 therapists on
assignment at any time, is believed to be the leading provider of such services.
Projected  growth in demand for  therapists  is  expected to continue to outpace
projected growth in supply for at least the next ten years,  creating additional
opportunities  for HSSI. Team and Moore specialize in providing  therapists on a
continuing contract basis primarily to nursing facilities.  The Company believes
the  fragmentation  of  providers   provides   opportunity  for  growth  through
consolidation.

      Acquisitions.  The Company  believes that the acquisition of therapy based
contract  management  companies,  established  outpatient  operations  and other
therapy providers within the rehabilitation  industry is an appropriate strategy
for  growth.  In fiscal  1994,  the  Company  acquired  Advanced  Rehabilitation
Resources,  Inc., thereby increasing the number of managed acute units by nearly
50% and the number of managed  outpatient  programs by 10%. In fiscal 1995,  the
Company  acquired  Physical  Therapy  Resources,  Inc.,  changing  the  name  to
RehabCare Outpatient Services,  Inc. ("ROSI"),  thereby increasing the number of
outpatient  programs initially by 39%. In March 1996, the Company acquired HSSI,
thereby expanding the scope of its business  geographically to all 50 states and
adding a new line of business  for the  Company.  In January  1997,  the Company
acquired  Team and Moore.  Additional  acquisition  opportunities  are regularly
reviewed by the Company.

Patient Referral Strategy

      Historically, the physician maintained total control over patient referral
decisions.  At  present,  however,  insurance,  health  maintenance,   preferred
provider and case management  organizations and employers  participate in making
such  referral  decisions.  These  organizations  are sensitive to both cost and
quality of care issues.  Accordingly,  health care  providers  must  continually
develop and offer cost-effective  alternatives to traditional care. In response,
the  Company is  directing  its  marketing  to managed  care case  managers  and
industry as well

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as to physicians. The Company continues to approach national and regional payors
to develop  contractual  relationships that may be advantageous for the Company,
the host facility and the payor.

      The Company's presence in the host facilities encourages patient referrals
into its programs. Additionally, the Company encourages the referral of patients
from outside the host facilities.

Competition

      The Company competes with other contract  management and therapy companies
for  agreements  with acute- care  hospitals and extended care  facilities.  The
Company's  programs in acute care  hospitals  also compete for patients with the
programs of other  acute-care  hospitals  and  freestanding  rehabilitation  and
outpatient facilities.  The continued success of the Company is dependent on its
ability to establish and maintain relationships with hospitals and extended care
facilities and with sources of patient referrals.  The Company believes that the
principal  competitive  factors in each case are  reputation  for quality,  cost
effectiveness,  program support services, innovation and price. Although many of
the Company's  competitors have greater  financial and personnel  resources than
the Company, the Company believes that it competes, and can continue to compete,
successfully  based on its  ability to develop new  programs  for  existing  and
potential host facilities and cost-effective programs for commercial payors.

      The  Company  also  competes  with  hospitals,   nursing  homes,  clinics,
physicians' offices and contract therapy companies for the services of physical,
occupational and speech  therapists.  These  specialists are in short supply and
there can be no assurance  that the Company will be able to attract a sufficient
number of therapists for its growing needs.  The Company has an active therapist
recruitment operation based at its corporate  headquarters and at HSSI's offices
and is developing other means of recruiting and retaining these specialists.

Regulation

      The  health  care  industry  is  regulated  by  Federal,  state  and local
governmental agencies. These regulations attempt to control the growth of health
care facilities through certificate of need laws,  licensure or certification of
health care facilities and the reimbursement for health care services.

      In  many  states,   acute-care  hospitals  contracting  with  the  Company
generally are not required to obtain a  certificate  of need prior to opening an
inpatient  unit.  If a  certificate  of need is  required,  it may take up to 18
months  to  obtain,  and in some  instances  longer,  depending  upon the  state
involved and whether the  application  is contested by a competitor or the state
agency.  Certificates  of  need  are  usually  issued  for a  specified  maximum
expenditure  and require  implementation  of the proposed  improvement  within a
specified period of time.

      Licensure is a state or local requirement, while Medicare certification is
a Federal requirement.  Generally,  licensure and Medicare  certification follow
specific  standards and requirements.  Compliance is monitored by annual on-site
inspections  by  representatives  of  relevant  government  agencies.   Loss  of
licensure or Medicare  certification  by a hospital with which the Company has a
management contract would likely result in the termination of that contract.

      Prior to 1983,  Medicare  provided for  reimbursement of reasonable direct
and  indirect  costs of the services  furnished  by hospitals to patients.  As a
result of the Social  Security  Amendments  Act of 1983,  Congress  adopted  the
Prospective  Payment System ("PPS") as a means to control costs of most Medicare
inpatient hospital services.  Under this system, the Secretary of the Department
of Health and Human  Services  established  fixed payment  amounts per discharge
based on Diagnosis-Related  Groups ("DRG"). In general, a hospital's payment for
Medicare  inpatients  is  limited to the DRG rate,  regardless  of the amount of
services  provided to the patient or the length of the patient's  hospital stay.
Under PPS, a hospital  may keep any  difference  between its DRG payment and its
operating costs incurred in furnishing  inpatient  services,  but is at risk for
any operating costs that exceed its payment rate. As a result, hospitals have an
incentive to discharge Medicare patients as soon as is clinically appropriate.

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      Freestanding   inpatient   rehabilitation   facilities,   skilled  nursing
facilities and units and outpatient rehabilitation services are exempt from PPS.
Acute rehabilitation units within acute-care hospitals are eligible to obtain an
exemption  from  PPS,  generally  after  the  first  year  of  operation,   upon
satisfaction of specified Federal criteria.  Such criteria include the operation
for a full 12  months  under  PPS and the  completion  of an  initial  exemption
survey.   The  exemption  survey  measures   compliance  with  certain  criteria
applicable to exempt units  generally,  including  approval to  participate as a
Medicare provider,  admission standards,  record keeping,  compliance with state
licensure laws,  segregation of beds,  accounting standards and certain specific
standards applicable to rehabilitation units,  including staffing,  medical care
and patient mix.  Skilled nursing units may be surveyed  shortly after admitting
their first patient. Upon successful completion of the survey, Medicare payments
for  rehabilitation and skilled nursing services provided in inpatient units are
made under a cost-based reimbursement system. As of December 31, 1996, 91 of the
Company's hospital-based units were exempt from PPS. The remaining 11 units will
apply for exemption as soon as they are eligible.

      Various Federal and state laws regulate the relationship between providers
of health care services and physicians. These laws include the "fraud and abuse"
provisions of the Social Security Act, under which civil and criminal  penalties
can be  imposed  upon  persons  who pay or  receive  remuneration  in return for
referrals of patients who are eligible for  reimbursement  under the Medicare or
Medicaid programs.  The Company does not believe its business  arrangements with
physicians who admit patients to the Company's  units are out of compliance with
these  provisions.  The  provisions  are broadly  written and the full extent of
their  application  is  not  currently  known.  The  Inspector  General  of  the
Department  of Health and Human  Services has issued "safe  harbor"  regulations
specifying  certain forms of relationships that will not be deemed violations of
these provisions.  The Company believes that its business  arrangements with its
medical directors are in compliance with any definitive regulations.

      In 1987,  Congress  enacted nursing home reform  provisions in response to
widespread  concern that nursing homes were not providing patients with adequate
care.  These  provisions  were  implemented in 1990 and included the requirement
that the status of every  resident  be  evaluated  and  appropriate  services be
provided,  including  rehabilitative  services.  As a  result,  the  demand  for
physical,  occupational and speech therapy services and professionals in nursing
homes has risen sharply since 1990.

      Any legislative or regulatory  changes in the future will almost certainly
favor low-cost,  efficient providers.  The Company believes that its strategy of
administering  programs on the premises of host facilities  positions it well to
adapt to any changes in the health care industry.

Employees

      As of December 31, 1996, the Company had  approximately  1,770  employees.
The  physicians  who are the medical  directors  of the  contract  units and the
psychologists serving on program treatment teams are independent contractors and
not employees of the Company.  None of the Company's  employees are subject to a
collective bargaining agreement.  Management considers the relationship with its
employees to be good.


ITEM 2.      PROPERTIES

      The  Company  leases  15,000  square  feet of  executive  office  space in
Clayton,  Missouri,  under a lease that  expires in the year 2003,  assuming all
options to renew are  exercised.  In addition to the monthly  rental  cost,  the
Company is also  responsible for specified  increases in operating  costs.  HSSI
leases  31,000 square feet of executive  office space in Lowell,  Massachusetts,
under a lease that  expires in the year 2005,  assuming all options to renew are
exercised,  plus  leases  various  properties  throughout  the  country  used as
temporary  housing for  therapists.  Team and Moore  leases 3,000 square feet of
executive office space in Clayton,  Missouri under a lease that expires in March
1997.



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ITEM 3.      LEGAL PROCEEDINGS

      The Company has  undergone a Federal  payroll tax audit for the years 1989
through 1993.  The Internal  Revenue  Service  ("IRS") has asserted that certain
medical professionals and others engaged as independent  contractors should have
been treated as employees for payroll tax purposes. The IRS, in May 1996, issued
a proposed  assessment  against the Company of $1,935,455 for years 1989 through
1993. The Company  subsequently  received from the IRS separate proposed Closing
Agreements  for  these  same  independent   contractors   under  the  IRS's  new
"Classification  Settlement Program" with an alternate  aggregate  assessment of
$253,426  covering  the  1989  through  1993  audit,  including  any  additional
potential  liability  through  December 31, 1996. In October  1996,  the Company
accepted a  settlement  offer for one of the  classes of medical  professionals,
paying $11,613 as settlement,  and agreed to  prospectively  treat this class of
professionals  as employees.  The Company is currently  continuing to defend its
classification  of the  remaining  classes  which  represent  a  total  proposed
assessment  of  $1,364,000.  The Company  will  continue to evaluate  whether to
accept any of the  additional  settlement  offers and,  as a result,  change its
classification  policy as required by the Closing Agreements.  While the Company
believes  it has  arguments  to support its  current  position,  there can be no
assurance  that the Company will prevail in whole or in part. In December  1996,
the Company and  Comprehensive  Care  Corporation  ("CompCare"),  the  Company's
former parent,  entered into an agreement and release whereby  CompCare paid the
Company $154,000 resulting in discharge of CompCare's obligations for employment
taxes and costs under  Section 4 of the Tax Sharing  Agreement  entered  into in
conjunction with the Company's initial public offering in 1991.

      On October 30, 1992, CompCare filed an action against the Company with the
Federal  District Court for the Eastern  District of Missouri  alleging fraud by
the  Company  under  the  common  law and  the  Federal  securities  laws in the
negotiation of the Stock  Redemption  Agreement  dated September 1, 1992, by and
between  CompCare  and the Company.  The action  sought both actual and punitive
monetary  damages  from the  Company.  On March 8,  1995,  a Federal  court jury
returned  a  verdict  against  the  Company  on three of the six  counts  of the
lawsuit.  The Company  appealed  the adverse  judgment and on October 22, 1996 a
three  judge  panel on the  Federal  Court of  Appeals  for the  Eighth  Circuit
reversed  all  such  judgments  against  the  Company.  On  November  21,  1996,
CompCare's  motion for  rehearing  was denied.  The Company has  terminated  the
$3,000,000  supersedeas bond purchased to obtain a stay of execution pending the
conclusion of its appeal, and has cancelled the $3,000,000 bank letter of credit
that had been  issued to secure  the bond.  The  Company  is  seeking to recover
$120,083 in court related costs from CompCare pursuant to the favorable appeal.

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      Not applicable.


                                     PART II

ITEM 5.      MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
             SHAREHOLDER MATTERS

      Information  concerning  the Common Stock of the Registrant is included on
page 44 in this Annual Report of the Registrant.


ITEM 6.      SELECTED FINANCIAL DATA

      Six-Year Financial Summary is included on page 44 in this Annual Report of
the Registrant for the ten months ended December 31, 1996.



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ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS

      OVERVIEW

      The  Company  changed its fiscal year end from the last day of February to
December 31,  effective as of December 31, 1996. The change  resulted in a short
period of ten months  that began March 1, 1996,  and ended  December  31,  1996.
Information  for calendar 1996 refers to the ten months ended December 31, 1996,
and fiscal 1996 and fiscal 1995 refers to the twelve  months  ended the last day
of February for the respective years.

      The growth in the  Company's  operating  revenues and net earnings  during
calendar 1996 was the result of an increase in the number of subacute  units and
results from HSSI.  Calendar 1996 reflects an increase in the average  number of
subacute  units  managed by the  Company  from 4.1 to 11.5.  Outpatient  revenue
decreased 8.1% in calendar 1996, reflecting the closure of three locations.  The
growth for fiscal 1996 was primarily  attributable to the increase in the number
of  subacute  units,  increased  outpatient  locations  and an  increase  in the
percentage of acute  rehabilitation  units exempt from PPS.  Outpatient  revenue
increased  56.2% in fiscal 1996,  reflecting the acquisition on October 12, 1994
of ROSI, which initially added seven outpatient locations.

      In the normal  course of business,  new units are opened and some existing
units are closed  each year.  During  the first year of  operation,  a new acute
rehabilitation  unit will typically be subject to  limitations in  reimbursement
from  Medicare   considerably   below  the  hospital's   operating  cost.  As  a
consequence,  during this period the Company agrees with the client  hospital to
bear certain  start-up costs on the hospital's  behalf and to waive a portion of
its fees until the unit  qualifies for an exemption  from Medicare  limitations.
The Company assists the hospital in qualifying the unit for the exemption and in
minimizing the unreimbursed  costs during this non-exempt  period. The Company's
average  operating  losses during the qualifying  period can range to as high as
$150,000 to $200,000 per unit.  If the Company does not obtain an exemption  for
the unit,  the  contract  may be  terminated  and, in the event of  termination,
start-up  losses would  generally  not be  recoverable.  Upon  completion of the
qualifying year and obtaining the exemption, the hospital is eligible to recover
all of its costs related to the  operation of the unit,  including the Company's
fees  under  the  management  contract.  Once a unit  becomes  exempt,  the unit
experiences  accelerated  growth in operating  revenues and profitability as the
patient  population is expanded in response to the more favorable  reimbursement
terms.

      In addition to growing its acute rehabilitation units, the Company expects
significant  future  growth to take place  through  opening  subacute  units and
outpatient programs under contracts with acute-care  hospitals.  These units and
programs are not subject to the same limitations in reimbursement  from Medicare
as acute  rehabilitation  units and,  therefore,  should result in significantly
reduced start-up losses per unit.

      In the third  quarter of fiscal  1995,  the  Company  issued a  $3,200,000
three-year  subordinated promissory note and $3,000,000 in cash to acquire ROSI.
On March 1, 1996 the Company  acquired  HSSI.  The aggregate  purchase  price of
$21,450,000 paid at closing included  $13,258,000 in cash, a $6,000,000 ten-year
convertible  subordinated  promissory  note and 123,530  shares of the Company's
common stock.  Additional  consideration  will be paid to the HSSI  stockholders
contingent  upon the attainment of certain  target  cumulative  earnings  before
interest  and  income  taxes  up  to  a  maximum  of  $8,650,000  in  additional
consideration  over six years. The transactions  were accounted for as purchases
and,  as such,  the  Company's  consolidated  financial  statements  reflect the
results of operations of ROSI and HSSI commencing with the consummation  date of
each acquisition.

      On January 28, 1997, the Company  acquired Team and Moore. The transaction
was  accounted  for as a  purchase  and,  as such,  the  Company's  consolidated
financial  statements  as of and for the ten months ended  December 31, 1996, do
not reflect the financial condition and results of operations of Team and Moore.
The  Company's  future  consolidated  financial  statements  will reflect  their
financial  condition as of such reporting  dates,  and the results of operations
commencing on the consummation date of the acquisition.

      On January 31,  1997,  the Company  made a tender  offer to purchase up to
925,000 shares of its common

                                        8

<PAGE> 9



stock at a single purchase  price,  not less than $20.00 nor in excess of $22.50
per share,  the  purchase  price to be selected  by the Company  based on prices
specified  by  tendering  stockholders  at  the  lowest  single  purchase  price
sufficient  to purchase  925,000  shares.  As of February 28, 1997,  the closing
date,  shares  totaling  greater than 925,000  were  tendered,  resulting in the
Company's  repurchase on March 12, 1997 of a total of 1,000,000 shares at single
per share price of $22.50 per share.  To finance the repurchase and  restructure
its current debt, the Company  obtained  financing from a syndicate of financial
institutions  totaling  $45 million in senior  secured  debt,  comprising  a $25
million term loan and $20 million revolving credit facility.

      As of  December  31,  1996,  a change  in  method  of  recording  accounts
receivable  and accrued  expenses at HSSI was  implemented  which  resulted in a
decrease in the related  balance  sheet  accounts.  Operating  results  were not
materially affected.

RESULTS OF OPERATIONS

      The following  table sets forth for calendar 1996,  fiscal 1996 and fiscal
1995,  the  percentage  that certain  items in the  consolidated  statements  of
earnings bear to operating revenues:
<TABLE>
<CAPTION>

                                               Ten Months Ended                              Year Ended
                                                   December 31,                   February 29,          February 28,
                                                        1996                        1996                   1995
--------------------------------------- ------------------------ -----------------------------------------------
<S>                                                       <C>                      <C>                     <C>            
Operating revenues                                        100.0%                   100.0%                  100.0%
Cost and expenses:
    Operating expenses                                     71.1                     73.3                    75.6
    General and administrative                             16.1                     12.5                    11.6
    Depreciation and amortization                           2.6                      2.7                     2.6
Operating earnings                                         10.2                     11.5                    10.2
Other expense, net                                         (1.0)                    (0.4)                   (0.7)
Earnings before income taxes                                9.2                     11.1                     9.5
Income taxes                                                3.7                      4.5                     3.8
Net earnings                                                5.5%                     6.6%                    5.7%
======================================= ======================== ======================== =======================
</TABLE>

     Management  believes that a comparison of the ten months ended December 31,
1996 to the twelve months ended February 29, 1996 is not  meaningful  because of
the difference in length of reporting  periods.  Therefore,  this discussion and
analysis of results of operations  compares the audited  ten-month  period ended
December 31, 1996, to the unaudited ten-month period ended December 31, 1995.

Ten Months Ended December 31, 1996 Compared to Ten Months Ended December 
31, 1995

      Operating revenues during the ten months ended December 31, 1996 increased
by  $30,476,000,  or 41.1%,  to  $104,611,000  as compared to the same period in
1995. The  acquisition  of HSSI accounted for 94.7% of the net increase.  A 9.6%
increase  in the  average  number of  inpatient  units from 83.7 to 91.7  units,
offset by a decrease in the average daily billable  census per inpatient unit of
3.8% from 13.3 to 12.8,  generated a 5.5%  increase in billable  patient days to
357,780.  The  decrease  in  billable  census  per unit for  inpatient  units is
primarily attributable to a 9.7% decline in average billable length of stay on a
6.6%  increase in  admissions  per unit.  The decline in average  length of stay
reflects both the continued trend of reduced  rehabilitation lengths of stay and
the increase in subacute units operational for the ten months ended December 31,
1996, which carry a shorter length of stay than acute rehabilitation  units. The
increase in billable  patient  days was offset by a .9%  decrease in average per
diem billing rates, reflecting a greater mix of subacute units which carry lower
average per diem rates than acute units.  The  $2,960,000  increase in inpatient
unit revenue was offset by a 8.1% decrease in outpatient  revenue to $8,495,000,
reflecting the loss of one unit each in February, March and April 1996.

                                        9

<PAGE> 10



      Operating  expenses  for  the  ten-month  periods  compared  increased  by
$19,933,000,  or 36.6%,  to  $74,326,000.  The acquisition of HSSI accounted for
substantially all of this increase.

      The excess of operating expenses over operating  revenues  associated with
non-exempt  units  increased  from  $193,000 to  $749,000,  attributable  to the
increase  in the average  number of  non-exempt  units from 1.5 to 5.5.  Average
start-up  losses for units during their  non-exempt year can range to as high as
$150,000 to $200,000.

      General and  administrative  expenses increased  $7,369,000,  or 77.8%, to
$16,844,000,   reflecting   increases   in   professional   services,   business
development,  general  office,  outpatient  services,  and legal compared to the
previous year, plus the addition of HSSI's corporate staff.

      Depreciation   and   amortization   increased   $737,000   reflecting  the
amortization  of goodwill  from the  purchase of HSSI and  depreciation  of HSSI
fixed assets.

      Interest income decreased  $71,000 as a result of reductions in investment
balances,  as cash was used to acquire HSSI and make  payments on the  Company's
debt.  Interest  expense  increased  $560,000  reflecting new debt issued in the
acquisition of HSSI.

      Earnings  before  income  taxes  increased  by  $1,802,000,  or 23.0%,  to
$9,654,000.  The provision  for income taxes for the ten month periods  compared
was $3,886,000 compared to $3,197,000,  reflecting effective income tax rates of
40.3%  and  40.7%  for  the  respective  periods.   Net  earnings  increased  by
$1,113,000, or 23.9%, to $5,768,000. Earnings per share increased 15.8% to $1.17
from $1.01 on a 6.9% increase in the weighted  average shares  outstanding.  The
increase in shares outstanding is attributable primarily to the shares issued in
the  acquisition of HSSI and an increase in common stock  equivalents  resulting
from an  increase in the market  price of the  Company's  stock  relative to the
underlying exercise prices of outstanding stock options.

Fiscal Year Ended February 29, 1996 Compared to Fiscal Year Ended
   February 28, 1995

      Operating  revenues  increased by  $6,167,000,  or 7.4%, in fiscal 1996 to
$89,377,000.  An increase in operating revenue per billable patient day of 1.7%,
an increase in billable patient days of 1.1%, and an increase of $4,030,000,  or
56.2%, in outpatient revenue to $11,197,000,  accounted for substantially all of
the increase in operating revenues. The acquisition of ROSI accounted for all of
the increase in outpatient  revenue.  A 6.7%  increase in  admissions  per unit,
offset by a 6.0% decrease in average  billable length of stay,  generated a 1.1%
increase in billable patient days to 408,385 on  approximately  the same average
number of inpatient units in both years.  The increase in billable  patient days
coupled  with a 1.7%  increase  in revenue  per  billable  day  generated a 2.8%
increase in revenue from inpatient  units. The decline in average length of stay
reflects both the continued trend of reduced  rehabilitation lengths of stay and
an increase in subacute  units,  which carry a shorter length of stay than acute
rehabilitation units.

      Operating expenses increased by $2,575,000, or 4.1%, to $65,487,000,  with
the acquisition of ROSI accounting for substantially all of this increase.

      The excess of operating expenses over operating  revenues  associated with
non-exempt  units  decreased from  $1,662,000 to $356,000,  attributable  to the
decrease  in the average  number of  non-exempt  units from 9.6 to 2.0.  Average
start-up  losses for units during their  non-exempt year can range to as high as
$150,000 to $200,000.

      General and  administrative  expenses increased  $1,601,000,  or 16.7%, to
$11,202,000,  with the acquisition of ROSI accounting for $977,000, or 61.0%, of
the  increase.   The  remainder  was   attributable  to  increases  in  business
development, subacute operations, and recruiting compared to the previous year.

      Interest  income  increased  $232,000  as a result  of  higher  investment
balances  during  fiscal 1996.  During fiscal 1995 cash was used to acquire ROSI
and make payments on the Company's  debt.  Interest  expense  increased  $60,000
reflecting a full year of interest expense on the debt issued in the acquisition
of ROSI.

                                       10

<PAGE> 11



      Earnings  before  income  taxes  increased  by  $1,968,000,  or 24.9%,  to
$9,887,000.   The  provision  for  income  taxes  was  $4,009,000   compared  to
$3,184,000,  reflecting  effective  income  tax rates of 40.5% and 40.2% for the
respective  years.  The  increase  in the  effective  tax rate was  attributable
primarily to the  nondeductibility  for income tax purposes of  amortization  of
goodwill from the purchase of ROSI.  Net earnings  increased by  $1,143,000,  or
24.1%, to $5,878,000.  Earnings per share increased 20.0% to $1.26 from $1.05 on
a 4.2%  increase in the weighted  average  shares  outstanding.  The increase in
shares  outstanding  is  attributable  primary to an  increase  in common  stock
equivalents  resulting  from an  increase in the market  price of the  Company's
stock relative to the underlying exercise prices of outstanding stock options.

LIQUIDITY AND CAPITAL RESOURCES

      As of December 31, 1996,  the Company had  $7,438,000  in cash and current
marketable  securities  and a current  ratio of  1.6:1.  Working  capital  as of
December 31, 1996,  decreased  from February 29, 1996, by $2,564,000 as a result
of cash paid and the  current  portion of debt  incurred in the  acquisition  of
HSSI.

      Net accounts  receivable were $15,546,000 at December 31, 1996 compared to
$10,847,000 at February 29, 1996. The number of days average net revenues in net
receivable  was 45.5 days and 43.9 days as of December 31, 1996 and February 29,
1996,  respectively.  As of December  31,  1996, a change in method of recording
accounts  receivable and accrued  expenses at HSSI was implemented that resulted
in a downward adjustment in net accounts receivable and days average net revenue
in net receivable.

      During the ten months  ended  December  31,  1996,  the  Company  incurred
capital  expenditures  of $732,000  as compared to $476,000  for the fiscal year
ended  February 29, 1996,  for  additions  to equipment in  connection  with the
opening of new contract units. At December 31, 1996, the Company had no material
commitments for capital expenditures.

      In connection with the development and implementation of additional units,
the Company may incur capital  expenditures  for  equipment  and deferred  costs
arising from payments  made to hospitals  for a portion of capital  improvements
needed to begin a unit's operation.  For the ten months ended December 31, 1996,
the Company  made  deferred  cost  payments to four  client  hospitals  totaling
$300,000 for capital  improvements,  while in fiscal 1996  payments were made to
six client hospitals  totaling  $265,000.  At December 31, 1996, the Company had
one commitment totaling $125,000 to make additional capital improvement payments
to client hospitals.

      The  Company's  operating  cash flows  constitute  its  primary  source of
liquidity and  historically  have been  sufficient  to fund its working  capital
requirements.  The Company expects to meet its future working  capital,  capital
expenditure, business expansion and debt service requirements from a combination
of internal sources and outside financing.  As of December 31, 1996, the Company
had $12,000,000 of unused available bank line of credit.

      On January 10, 1997,  the Company sold 165,000 shares of its investment in
Intensiva HealthCare Corporation in a market transaction for $1,485,000.

      On January 31,  1997,  the Company  made a tender  offer to purchase up to
925,000 shares of its common stock.  To finance the  repurchase and  restructure
its current debt, the Company issued $45 million in senior secured debt.

INFLATION

      Although  inflation has abated during the last several years,  the rate of
inflation  in  health  care  related  services  continues  to  exceed  the  rate
experienced  by the  economy  as a whole.  The  Company's  management  contracts
typically  provide for an annual increase in the fees paid to the Company by its
client  hospitals  based upon  increases  in various  inflation  indices.  These
increases generally offset increases in costs incurred by the Company.

                                       11

<PAGE> 12






ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA











                          Independent Auditors' Report

To the Board of Directors
RehabCare Group, Inc.:

We have audited the accompanying consolidated balance sheets of RehabCare Group,
Inc.  and  subsidiaries  (the  Company) as of December 31, 1996 and February 29,
1996, and the related consolidated statements of earnings, stockholders' equity,
and cash flows for the ten months  ended  December  31, 1996 and for each of the
years in the  two-year  period  ended  February  29,  1996.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of RehabCare Group,
Inc. and  subsidiaries  as of December  31, 1996 and February 29, 1996,  and the
results  of their  operations  and their  cash  flows for the ten  months  ended
December  31,  1996  and for  each of the  years in the  two-year  period  ended
February 29, 1996, in conformity with generally accepted accounting principles.







St. Louis, Missouri
February 5, 1997



                                       12

<PAGE> 13

<TABLE>




                                                   REHABCARE GROUP, INC.

                                                Consolidated Balance Sheets
                                                   (dollars in thousands)
<CAPTION>

                                                                                         December 31,      February 29,
                                                Assets                                        1996             1996
<S>                                                                                        <C>                   <C>              
Current assets:
     Cash and cash equivalents                                                             $        772           6,174
     Marketable securities                                                                        6,666           4,495
     Accounts receivable, net of allowance for doubtful accounts
         of $1,386 and $822, respectively                                                        15,546          10,847
     Deferred tax assets                                                                            921           1,596
     Prepaid expenses and other current assets                                                      525             473
                            Total current assets                                                 24,430          23,585
Marketable securities, noncurrent                                                                 1,310             497
Equipment and leasehold improvements, net                                                         2,935           1,601
Other assets:
     Excess of cost over net assets acquired, net                                                47,119          27,085
     Deferred contract costs, net                                                                 1,302           1,661
     Pre-opening costs, net                                                                       2,295           1,765
     Deferred tax assets                                                                            424             577
     Other                                                                                          987             295
                            Total other assets                                                   52,127          31,383
                                                                                           $     80,802          57,066
                                 Liabilities and Stockholders' Equity
Current liabilities:
     Revolving credit facility                                                             $        500            --
     Current portion of long-term debt                                                            2,967           2,093
     Accounts payable                                                                             1,083           1,788
     Accrued salaries and wages                                                                   6,969           5,326
     Accrued expenses                                                                             2,026           1,123
     Income taxes payable                                                                         1,631           1,437
                            Total current liabilities                                            15,176          11,767
Deferred compensation                                                                             1,956           1,370
Long-term debt, less current portion                                                              8,000           5,032
Notes payable, related parties                                                                    6,000           --
Stockholders' equity:
     Preferred stock, $.10 par value; authorized 10,000,000 shares, none
         issued and outstanding                                                                   --              --
     Common stock, $.01 par value; authorized 20,000,000 shares, issued
         4,693,362 shares as of December 31, 1996 (4,517,816 shares as of
         February 29, 1996)                                                                          47              45
     Additional paid-in capital                                                                  22,816          20,043
     Retained earnings                                                                           24,577          18,809
     Unrealized gain on marketable securities, net of tax                                         2,230           --
                            Total stockholders' equity                                           49,670          38,897
                                                                                          $      80,802          57,066

See accompanying notes to consolidated financial statements.

                                       13
</TABLE>

<PAGE> 14

<TABLE>




                                                   REHABCARE GROUP, INC.

                                              Consolidated Statements of Earnings

                                         (dollars in thousands, except per share data)
<CAPTION>

                                                                                Ten Months Ended          Year Ended
                                                                                   December 31,   February 29,     February 28,
                                                                                      1996            1996             1995
<S>                                                                                  <C>                 <C>             <C>  
Operating revenue                                                                    $  104,611          89,377          83,210
Cost and expenses:
    Operating expenses                                                                   74,326          65,487          62,912
    General and administrative                                                           16,844          11,202           9,601
    Depreciation and amortization                                                         2,743           2,412           2,166
               Total costs and expenses                                                  93,913          79,101          74,679
               Operating earnings                                                        10,698          10,276           8,531
Interest income                                                                             152             344             112
Interest expense                                                                         (1,211)           (759)           (699)
Other income (expense), net                                                                  15              26             (25)
               Earnings before income taxes                                               9,654           9,887           7,919
Income taxes                                                                              3,886           4,009           3,184
               Net earnings                                                               5,768           5,878           4,735

Net earnings per common and common equivalent share:
    Primary                                                                         $      1.17            1.26            1.05
    Assuming full dilution                                                          $      1.11            1.23            1.05

See accompanying notes to consolidated financial statements.


















                                       14
</TABLE>

<PAGE> 15


<TABLE>




                                                   REHABCARE GROUP, INC.

                                        Consolidated Statements of Stockholders' Equity

                                                      (amounts in thousands)
<CAPTION>

                                                                            Additional                             Total
                                                      Common Stock            paid-in    Retained  Unrealized    stockholders'
                                                     Shares    Amount         capital    earnings      gain        equity
<S>                                                   <C>        <C>             <C>           <C>         <C>          <C>        
Balance, February 28, 1994                            4,037      $   40          15,843        8,249          --       24,132

Net earnings                                            --          --              --         4,735          --        4,735
Dividends on redeemable preferred stock                 --          --              --           (42)         --          (42)
Redeemable preferred stock accretion                    --          --              --           (11)         --          (11)
Conversion of preferred stock                           425           4           3,576          --           --        3,580
Exercise of stock options                                 8           1              36          --           --           37
Balance, February 28, 1995                            4,470          45          19,455       12,931          --       32,431

Net earnings                                            --          --              --         5,878          --        5,878
Exercise of stock options (including
          tax benefit)                                   48         --              588          --           --          588
Balance, February 29, 1996                            4,518          45          20,043       18,809          --       38,897

Net earnings                                            --          --              --         5,768          --        5,768
Issuance of common stock
          in connection with acquisition                124           1           2,191          --           --        2,192
Exercise of stock options (including
          tax benefit)                                   51           1             582          --           --          583
Unrealized gain on marketable securities,
          net of tax                                    --          --              --           --         2,230       2,230
Balance, December 31, 1996                            4,693     $    47          22,816       24,577        2,230      49,670




See accompanying notes to consolidated financial statements.










                                       15
</TABLE>

<PAGE> 16

<TABLE>




                                                   REHABCARE GROUP, INC.

                                              Consolidated Statements of Cash Flows

                                                     (dollars in thousands)

<CAPTION>

                                                                              Ten Months Ended          Year ended
                                                                               December 31,      February 29,  February 28,
                                                                                    1996              1996           1995
<S>                                                                             <C>                 <C>             <C>   
Cash flows from operating activities:
     Net earnings                                                               $    5,768           5,878          4,735
     Adjustments to reconcile net earnings to net cash provided by
         operating activities:
              Depreciation and amortization                                          2,743           2,412          2,166
              Provision for losses on accounts receivable                              549             348            384
              Equity in losses of affiliates                                           --              --              56
              Deferred compensation                                                    586             560            544
              Decrease (increase) in accounts receivable, net                       (4,586)          1,721         (2,699)
              Decrease in prepaid expenses and other current assets                    259              31            276
              Decrease (increase) in other assets                                      122             236            (92)
              Increase (decrease) in accounts payable and accrued expenses          (1,915)            111            282
              Increase (decrease) in accrued salaries and wages                      1,390             485           (353)
              Increase (decrease) in income taxes payable and deferred                (498)            (99)           836
                                                                                    (1,350)          5,805          1,400
                      Net cash provided by operating activities                      4,418          11,683          6,135
Cash flows from investing activities:
     Additions to equipment and leasehold improvements, net                           (732)           (402)          (494)
     Purchase of investments                                                        (1,128)         (5,245)          (258)
     Proceeds from sale/maturities of investments                                    1,815             510          2,925
     Acquisition of businesses, net of cash received                               (19,258)           (195)        (2,969)
     Deferred contract costs, net                                                     (160)           (265)           (35)
     Pre-opening costs, net                                                         (1,047)           (651)          (598)
     Other, net                                                                       (235)           --             (395)
                      Net cash used in investing activities                        (20,745)         (6,248)        (1,824)
Cash flows from financing activities:
     Proceeds from (payments on) revolving credit facility                           2,000          (1,000)         1,000
     Payments on long-term debt                                                     (2,408)         (2,075)        (3,595)
     Proceeds on issuance long-term debt                                             4,750            --              --
     Proceeds on issuance of notes payable                                           6,000            --              --
     Dividends paid on redeemable preferred stock                                     --              --              (93)
     Exercise of stock options (including tax benefit)                                 583             588             37
                      Net cash provided by (used in) financing activities           10,925         ( 2,487)        (2,651)
                      Net increase (decrease) in cash and cash
                               equivalents                                          (5,402)          2,948          1,660
Cash and cash equivalents at beginning of year                                       6,174           3,226          1,566
Cash and cash equivalents at end of year                                        $      772           6,174          3,226

See accompanying notes to consolidated financial statements.


                                       16
</TABLE>

<PAGE> 17


                              REHABCARE GROUP, INC.

                   Notes to Consolidated Financial Statements
   
(1)Summary of Significant Accounting Policies

      (a)    Business and Principles of Consolidation
             RehabCare Group,  Inc. and  subsidiaries  (the "Company")  develop,
                market,  and manage  programs for the delivery of  comprehensive
                medical   rehabilitation  and  therapy  services  in  acute-care
                hospitals, skilled nursing units, and outpatient facilities. The
                Company also is a contract  provider of  therapists to hospitals
                and   long-term   care  and   rehabilitation   facilities.   The
                consolidated  financial  statements  include the accounts of the
                parent   company  and  its  wholly   owned   subsidiaries.   All
                significant  intercompany  balances and  transactions  have been
                eliminated  in  consolidation.  On March 1,  1996,  the  Company
                acquired Healthcare Staffing Solutions,  Inc. ("HSSI"). See note
                2.

      (b)    Change in Fiscal Year
             The Company changed  its  fiscal  year  end  from  the  last day of
                February to December 31,  effective as of December 31, 1996. The
                change resulted in a short period of ten months that began March
                1, 1996,  and ended December 31, 1996.  Information  included in
                the  footnotes to the  financial  statements  for calendar  1996
                refers to the ten months ended  December  31,  1996,  and fiscal
                1996 and fiscal 1995 refers to the twelve  months ended the last
                day of  February  for the  respective  year.  For the ten months
                ended December 31, 1995,  operating  revenues,  earnings  before
                income taxes,  income taxes and net earnings  were  $74,135,000,
                $7,852,000, $3,197,000 and $4,655,000, respectively.

      (c)    Cash Equivalents and Marketable Securities
             Cash in excess of daily  requirements  is  invested  in  short-term
                investments  with  original  maturities of three months or less.
                Such  investments are deemed to be cash equivalents for purposes
                of the consolidated statements of cash flows.

                The Company  classifies its debt and equity  securities into one
                of   three    categories:    held-to-maturity,    trading,    or
                available-for-sale.   Management   determines  the   appropriate
                classification  of its  investments  at the time of purchase and
                reevaluates  such  determination  at each  balance  sheet  date.
                Investments  at December 31, 1996 consist of  marketable  equity
                securities,  variable  rate  municipal  bonds,  and money market
                securities.   All   marketable   securities  are  classified  as
                available-for-sale  and as such the difference  between cost and
                market  , net of  estimated  taxes,  at  December  31,  1996  is
                recorded as an  adjustment  to  stockholders'  equity.  Gain (or
                loss) is not  recognized in the Statement of Earnings  until the
                securities are sold.  The difference  between cost and market at
                February 29, 1996 was not material.

      (d)    Credit Risk
             The Company primarily provides services to a geographically diverse
                clientele of health care providers throughout the United States.
                The Company performs ongoing credit evaluations of its clientele
                and does not  require  collateral.  An  allowance  for  doubtful
                accounts is maintained at a level which  management  believes is
                sufficient to cover potential credit losses. The Company invests
                its  excess  cash  in   short-term   investments   and  has  not
                experienced any losses on those investments.








                                       17

<PAGE> 18


                              REHABCARE GROUP, INC.

                   Notes to Consolidated Financial Statements


      (e)    Equipment and Leasehold Improvements
             Depreciation   and   amortization   of  equipment   and   leasehold
                improvements are computed on the  straight-line  method over the
                estimated  useful  lives  of the  related  assets,  principally:
                equipment - five to seven years;  leasehold  improvements - life
                of lease or life of asset, whichever is less.

      (f)    Intangible Assets
             Substantially  all the  excess  of cost  over net  assets  acquired
                (goodwill)  relates  to  acquisitions  and  is  amortized  on  a
                straight-line basis over 40 years.  Accumulated  amortization of
                goodwill was  $4,284,000  and $3,264,000 as of December 31, 1996
                and February 29, 1996,  respectively.  The Company evaluates the
                realizability   of   goodwill   based   upon   expectations   of
                nondiscounted  cash flows and operating  income.  Based upon its
                most recent analysis, the Company believes that no impairment of
                goodwill exists at December 31, 1996.

      (g)    Deferred Contract Costs and Pre-Opening Costs
             Deferred costs  represent  payments made to hospitals for a portion
                of capital  improvements  needed to begin a unit's operation and
                certain  pre-opening costs. In substantially all contracts,  the
                Company is entitled  to a pro rata  refund of  deferred  capital
                improvement costs in the event that the hospital  terminates the
                contract  before its  scheduled  termination  date.  Pre-opening
                costs include payments made primarily for architectural,  legal,
                and consulting  services expended to begin a unit's  operations.
                These costs are  capitalized  until the unit begins  operations.
                Deferred  contract  costs and  pre-opening  costs are charged to
                expense  over the  initial  term of the  contracts.  Accumulated
                amortization  of  deferred  contract  costs was  $1,336,000  and
                $1,300,000  as of  December  31,  1996 and  February  29,  1996,
                respectively.  Accumulated amortization of pre-opening costs was
                $1,183,000 and $996,000 as of December 31, 1996 and February 29,
                1996, respectively.

      (h)    Impairment of Long-Lived Assets and for Long-Lived Assets to Be
               Disposed Of
             The Company  adopted  the  provisions  of  Statement  of  Financial
                Accounting  Standards  ("SFAS")  No.  121,  Accounting  for  the
                Impairment of Long-Lived  Assets and for Long-Lived Assets to Be
                Disposed  Of, on March 1, 1996.  This  Statement  requires  that
                long-lived  assets  and  certain  identifiable   intangibles  be
                reviewed   for   impairment   whenever   events  or  changes  in
                circumstances  indicate that the carrying amount of an asset may
                not be recoverable. Recoverability of assets to be held and used
                is measured by a comparison  of the carrying  amount of an asset
                to future net cash flows  expected to be generated by the asset.
                If such assets are considered to be impaired,  the impairment to
                be  recognized  is measured by the amount by which the  carrying
                amount of the assets exceed the fair value of the assets. Assets
                to be  disposed  of are  reported  at the lower of the  carrying
                amount  or fair  value  less  costs  to sell.  Adoption  of this
                Statement  did  not  have a  material  impact  on the  Company's
                financial position, results of operations, or liquidity.

      (i)    Disclosure About Fair Value of Financial Instruments
             The estimated fair-market  value of the revolving  credit  facility
                and  long-term  debt  (including   current  portions   thereof),
                approximates carrying value due to the variable rate features of
                the  instruments.  The Company  believes it is not  practical to
                estimate a fair value  different  from the carrying value of the
                note payable to related  parties as the  instrument has numerous
                features  unique to the security  including  but not limited to,
                the convertible feature discussed in note 7.




                                       18

<PAGE> 19


                              REHABCARE GROUP, INC.

                   Notes to Consolidated Financial Statements


      (j)    Revenues and Costs
             The Company recognizes revenue as services are provided or when the
                revenue is earned.  The Company has adopted the  accounting  and
                reporting   methods  approved  by  the  American   Institute  of
                Certified  Public  Accountants in its healthcare  industry audit
                guide.   Accordingly,   the  Company's  provision  for  doubtful
                accounts is recorded as an expense of operations for all periods
                presented.  Costs  related to marketing and  development  of new
                contracts at the corporate level are expensed as incurred.

      (k)    Income Taxes
             Deferred tax assets and  liabilities  are  recognized for temporary
                differences  between the financial statement carrying amounts of
                existing assets and  liabilities and their  respective tax bases
                and operating  loss and tax credit  carryforwards.  Deferred tax
                assets and  liabilities  are measured using enacted tax rates in
                effect for the year in which those  differences  are expected to
                be recovered or settled.

      (l)    Earnings Per Share
             Net earnings per  common  and  common  equivalent  share  have been
                computed  based on the weighted  average  number of  outstanding
                common  shares  during the  period  plus,  when their  effect is
                dilutive,  common stock equivalents consisting of certain shares
                subject to stock options and shares related to convertible debt.
                Net earnings  used in the  computation  of primary  earnings per
                share are  reduced by  preferred  stock  dividends  ($42,000  in
                fiscal 1995) and accretion of preferred stock ($11,000 in fiscal
                1995).  The primary weighted average number of common and common
                equivalent shares outstanding  totaled 4,926,000,  4,650,000 and
                4,464,000  in  calender  1996,  fiscal  1996  and  fiscal  1995,
                respectively.  The  fully  diluted  weighted  average  number of
                common  and  common   equivalent  shares   outstanding   totaled
                5,343,000, 4,775,000 and 4,521,000 in calendar 1996, fiscal 1996
                and  fiscal  1995,  respectively.   Net  earnings  used  in  the
                computation of fully diluted  earnings per share is increased by
                the after tax  interest  charge of  $184,000  in  calendar  1996
                related to subordinated convertible debt.

      (m)    Stock Option Plan
             Prior to March 1996,  the Company  accounted  for its stock  option
                plan in accordance with the provisions of Accounting  Principles
                Board  ("APB")  Opinion No. 25,  Accounting  for Stock Issued to
                Employees,  and related  interpretations.  As such, compensation
                expense  would be  recorded  on the  date of  grant  only if the
                current  market  price  of the  underlying  stock  exceeded  the
                exercise  price.  On March 1, 1996, the Company adopted SFAS No.
                123,  Accounting  for  Stock-Based  Compensation,  which permits
                entities to  recognize  as expense  over the vesting  period the
                fair  value of all  stock-based  awards  on the  date of  grant.
                Alternatively,  SFAS No. 123 also allows entities to continue to
                apply the provisions of APB Opinion No. 25 and provide pro forma
                net  income and pro forma  earnings  per share  disclosures  for
                employee stock option grants made in 1995 and future years as if
                the  fair-value-based  method  defined  in SFAS No. 123 had been
                applied.  The  Company  has  elected  to  continue  to apply the
                provisions  of APB  Opinion  No 25 and  provide  the  pro  forma
                disclosure provisions of SFAS No. 123. See note 9.

      (n)    Use of Estimates
             The preparation  of  financial   statements  in   conformity   with
                generally accepted accounting  principles requires management to
                make estimates and assumptions  that affect the reported amounts
                of assets and  liabilities  and disclosure of contingent  assets
                and  liabilities  at  the  date  of  the  financial  statements.
                Estimates  also  affect the  reported  amounts of  revenues  and
                expenses during the period. Actual results may differ from those
                estimates.



                                       19

<PAGE>  20


                              REHABCARE GROUP, INC.

                   Notes to Consolidated Financial Statements


(2)   Acquisitions
      On March 1, 1996, the Company purchased 100% of the capital stock of HSSI.
         The aggregate  purchase price of $21,450,000  paid at closing  included
         $13,258,000  in cash, a $6,000,000  ten-year  convertible  subordinated
         promissory  note, and 123,530 shares of the Company's  common stock. Of
         the  $13,258,000  of cash  paid,  $8,750,000  was  borrowed  under  the
         Company's  term  loan  and  revolving   credit   facility.   Additional
         consideration  will be paid to the former HSSI stockholders  contingent
         upon the  attainment  of  certain  target  cumulative  earnings  before
         interest and income taxes up to a maximum of  $8,650,000  in additional
         consideration  over six years.  The purchase  cost was allocated to the
         net assets acquired as follows:
<TABLE>
<CAPTION>
                           <S>                                                    <C>                                
                           Accounts receivable, net                               $ 3,003,000
                           Prepaid expenses and other current assets                  576,000
                           Equipment and leasehold improvements                     1,295,000
                           Other assets                                               388,000
                           Excess of cost over net assets acquired                 21,250,000
                                                                                   26,512,000

                           Accounts payable                                         1,992,000
                           Accrued salaries and wages                               1,423,000
                           Accrued expenses                                         1,647,000
                                                                                    5,062,000
                           Net purchase cost                                      $21,450,000

</TABLE>

       The following  unaudited  pro forma  financial  information  assumes  the
           acquisition  of HSSI  occurred  at the  beginning  of the fiscal year
           ended  February  29,  1996.  This   information  is  not  necessarily
           indicative of results of operations  that would have occurred had the
           purchase been made at the beginning of the fiscal year.
<TABLE>
<CAPTION>

                                                                                Year Ended
                                                                                February 29,
                                                                                  1996
                           <S>                                                <C>                  
                           Operating revenues                                 $   115,401,000
                           Net earnings                                             6,443,000
                           Net earnings per common  and
                                common equivalent share:
                                 Primary                                      $          1.35
                                 Assuming full dilution                       $          1.27

</TABLE>

       On  October 12, 1994, the Company  purchased 100% of the capital stock of
           RehabCare  Outpatient  Services,  Inc.  ("ROSI"),  formerly  known as
           Physical  Therapy  Resources,  Inc. The aggregate  purchase  price of
           $6,200,000  included  $3,000,000 in cash and a $3,200,000  three-year
           subordinated promissory note.

       The above  acquisitions have been accounted for by the purchase method of
           accounting,  whereby  the  operating  results  of HSSI  and  ROSI are
           included in the  Company's  results of  operations  commencing on the
           respective dates of acquisition.


                                       20

<PAGE> 21


                              REHABCARE GROUP, INC.

                   Notes to Consolidated Financial Statements


(3)    Marketable Securities
       Current marketable  securities at December 31, 1996 consist of $2,995,000
           in  variable  rate  municipal  bonds  and  an  equity  investment  of
           $3,671,000  representing  326,297 shares of common stock of Intensiva
           HealthCare  Corporation,  which  completed an initial public offering
           ("IPO") of stock in September  1996.  Effective  with the date of the
           IPO, the Company  classified the investment as  "available-for-sale,"
           and as such has  recorded  the  investment  at  market  value  with a
           corresponding credit net of taxes to stockholders' equity. The market
           value of this investment at December 31, 1996 of $3,671,000  exceeded
           the cost basis by $3,597,000.  On January 10, 1997,  165,000 of these
           shares  were  sold.  See note 15.  Noncurrent  marketable  securities
           consist of marketable equity  securities  ($1,121,000 and $422,000 at
           December  31, 1996 and February  29,  1996,  respectively)  and money
           market  securities  ($189,000  and $75,000 at  December  31, 1996 and
           February 29, 1996,  respectively)  held in trust under the  Company's
           deferred compensation plan.

(4)    Allowance for Doubtful Accounts
       Activity in the allowance for doubtful accounts is as follows:
<TABLE>
<CAPTION>

                                                                        Ten Months Ended               Year Ended
                                                                           December 31,     February 29,      February 28,
                                                                              1996             1996            1995

               <S>                                                      <C>                        <C>              <C>   
               Balance at beginning of period                           $         822,000          1,043,000         727,000
               Provisions for doubtful accounts                                   549,000            348,000         384,000
               Allowance related to HSSI acquisition                              387,000               --              --
               Accounts written off                                              (375,000)          (569,000)        (68,000)
               Recoveries                                                           3,000               --              --
               Balance at end of period                                 $       1,386,000            822,000       1,043,000

</TABLE>

(5)    Equipment and Leasehold Improvements
       Equipment and leasehold improvements, at cost, consist of the following:

<TABLE>
<CAPTION>
                                                                          December 31,     February 29,
                                                                              1996            1996
           <S>                                                        <C>                    <C>                  
           Equipment                                                  $    4,615,000         3,276,000
           Leasehold improvements                                            126,000            27,000
                                                                           4,741,000         3,303,000
           Less accumulated depreciation and amortization                  1,806,000         1,702,000
           Equipment and leasehold improvements, net                  $    2,935,000         1,601,000
</TABLE>

(6)    Revolving Credit Facility
       The Company  maintains a revolving line of credit agreement which expires
           in April 1998 and  allows  the  Company to borrow up to the lesser of
           $14,000,000 or 85% of eligible accounts  receivable as defined by the
           agreement,  reduced by amounts  outstanding  under any bank letter of
           credit.  On April 15,  1995,  the  Company  obtained a bank letter of
           credit totaling $3,000,000 which reduced the amount the Company could
           borrow under the revolving  credit  facility.  In December  1996, the
           bank letter of credit was canceled.  See note 13.  Advances under the
           agreement bear interest at the Company's  option of either the London
           Interbank Offered

                                       21

<PAGE> 22


                              REHABCARE GROUP, INC.

                   Notes to Consolidated Financial Statements



           Rates ("LIBOR") plus 1.125% to 1.625%,  or the bank's  Corporate Base
           Rate  ("CBR")  as of the  date of  advance,  with  such  rates  being
           dependent  on the  ratio of the  Company's  available  credit to cash
           flow.  The Company pays a fee on the unused portion of the commitment
           from .25% to .45% per annum,  with such rate being  dependent  on the
           ratio of the Company's  available credit to cash flow. As of December
           31, 1996,  the Company's  short-term  borrowings  under the revolving
           line of credit  facility  totaled  $2,000,000 of which  $1,500,000 is
           classified as long term.  Interest  rates under the revolving line of
           credit  ranged  from 7% to 8% per annum at  December  31,  1996.  The
           average outstanding borrowings for calendar 1996 and fiscal 1996 were
           $3,000,000 and $301,000,  at a weighted average interest rate of 7.5%
           and 7.2% per annum,  respectively.  There were no monies  advanced or
           repaid on the  revolving  line of  credit  agreement  in fiscal  1996
           except for the  repayment  of the  February 28, 1995 advance in March
           1995.

       On March 5, 1997, the Company restructured its revolving credit facility.
           See note 15.

(7)    Long-Term Debt
       On September 30, 1992, the Company  entered into a $12,000,000  bank term
          loan which was restructured and refinanced in fiscal 1995 and calendar
          1996.  Under the terms of the restated loan agreement as amended,  the
          Company  entered  into a five-year,  $10,000,000  bank term loan which
          bears interest, at the Company's option, at the LIBOR plus from 1.375%
          to 1.875%,  or at the bank's CBR , or a  combination  of the two, such
          rates being dependent on the ratio of the Company's  available  credit
          to cash flow. The balance outstanding was $8,500,000 and $5,250,000 at
          December 31, 1996 and February 29, 1996,  respectively.  The effective
          rates of  interest  on the bank term loan were  approximately  7.1% in
          calendar 1996 and 8.2% in fiscal 1996. The principal is payable at the
          rate of  $500,000  per quarter  with the  balance due April 30,  2001.
          Borrowings under the agreement including the revolving credit facility
          are secured primarily by the Company's accounts receivable,  equipment
          and leasehold  improvements,  and future income and profits.  The loan
          agreement  requires  the Company to meet certain  financial  covenants
          including  maintaining  minimum net worth and fixed  charges  coverage
          ratios. The loan agreement also restricts the Company's ability to pay
          dividends to its stockholders.

        In March 1996, the Company signed $6,000,000 in ten-year  convertible
           subordinated  promissory  notes  payable to the former owners of HSSI
           which bear  interest at 6.25% and are payable at maturity on March 1,
           2006. At any time after March 1, 2000, the Company may redeem some or
           all of the notes at from 100% to 104% of the principal  balance.  The
           notes are convertible  into the Company's common stock prior to March
           1, 2006, subject to earlier redemption by the Company,  at the option
           of the  former  shareholders,  at a  conversion  price of $21.25  per
           share.  Of the  $6,000,000  balance  outstanding  on the  convertible
           subordinated promissory notes, $4,500,000 is payable to a director of
           the Company who is president of HSSI, and $1,500,000 is payable to an
           officer of HSSI.

       In October 1994, the Company signed a $3,200,000 three-year  subordinated
          promissory  note  payable to the former owner of ROSI which is payable
          in monthly  installments  of principal  and interest of  approximately
          $100,000  through  October 1997 and bears  interest at 8.0% per annum.
          The  balances  outstanding  at December 31, 1996 and February 29, 1996
          were $967,000 and $1,875,000, respectively.

       Annual  maturities  of  long-term  debt  for  the  next  five  years  and
          thereafter  are  as  follows:  $2,967,000,   $2,000,000,   $2,000,000,
          $2,000,000,  $500,000 and $6,000,000 in years 1997,  1998, 1999, 2000,
          2001, and thereafter,  respectively.  Interest paid for calendar 1996,
          fiscal 1996 and fiscal 1995 was  $1,053,000,  $763,000,  and $693,000,
          respectively.

                                       22

<PAGE> 23


                              REHABCARE GROUP, INC.

                   Notes to Consolidated Financial Statements


       On March 5, 1997, the Company  restructured  its long-term debt. See note
           15.

(8)    Redeemable Preferred Stock
       In  fiscal 1993, the Company issued 425,000 shares of Series B Cumulative
           Convertible  Redeemable  Preferred Stock ("Series B preferred stock")
           at $9 per share.  The Series B preferred  stock  carried an 8% annual
           dividend and was  convertible at any time at the option of the holder
           thereof into the Company's common stock at a rate of one-for-one.  In
           March 1994,  the Company  exercised its right to call for  redemption
           all of the  Series B  preferred  stock at a price of $9 plus  accrued
           dividends. Holders of 425,000 shares exercised their right to convert
           into 425,000 shares of the Company's common stock in April 1994.

(9)    Stockholders' Equity
       On  April 23, 1996 the Company  adopted  the 1996  Long-Term  Performance
           Plan pursuant to which stock appreciation  rights,  restricted stock,
           performance  awards,  incentive stock options or  nonqualified  stock
           options, may be granted to employees.  Under the plan, 700,000 shares
           may be granted  within 10 years of the date of  adoption of the plan.
           The Company  also has a 1987  Incentive  Stock  Option  Plan,  a 1987
           Nonstatutory  Stock Option Plan,  and a Directors'  Stock Option Plan
           (together  with the 1996  Long-Term  Performance  Plan,  the "Plans")
           pursuant to which incentive stock options may be granted to employees
           and  nonstatutory  stock  options  may be  granted  to  employees  or
           directors.  Under the Incentive Stock Option and  Nonstatutory  Stock
           Option Plans, options to purchase 1,000,000 shares may be granted, of
           which  550,000  shares  may be  incentive  stock  options.  Under the
           Directors'  Stock  Option Plan (the  "Directors'  Plan"),  options to
           purchase 350,000 shares of stock may be granted. Stock options may be
           granted for a term not to exceed 10 years (five years with respect to
           a person  receiving an incentive  stock option who owns more than 10%
           of the capital  stock of the Company)  and must be granted  within 10
           years from the date of adoption of the Plans.  The exercise  price of
           all stock  options  must be at least equal to the fair  market  value
           (110% of fair market value for a person  receiving an incentive stock
           option who owns more than 10% of the capital stock of the Company) of
           the  shares on the date  granted.  Under the  Directors'  Plan,  each
           director who is not  otherwise an officer or employee of the Company,
           shall receive an option to acquire  10,000  shares of stock,  or such
           lesser amount as provided in the Directors'  Plan, at the fair market
           value on the  respective  option grant date. All stock options become
           fully  exercisable  after four  years from date of grant,  except for
           options   granted  under  the  Directors   Plan  which  become  fully
           exercisable after six months.

       The per share weighted-average fair value of stock options granted during
           calendar  1996 and  fiscal  1996 was  $6.78 and $6.83 on the dates of
           grant using the Black Scholes option-pricing model with the following
           weighted-average assumptions: calendar 1996 - expected dividend yield
           0%,  volatility  of 30%,  risk-free  interest  rate of 6.25%,  and an
           expected life of 4 to 7 years;  fiscal 1996 - expected dividend yield
           0%,  volatility  of 30%,  risk-free  interest  rate of 6.25%,  and an
           expected life of 5 to 7 years.

       The Company  applies APB Opinion  No. 25 and related  Interpretations  in
           accounting for its Plans. Accordingly,  no compensation cost has been
           recognized for its long-term  performance and stock option plans. Had
           compensation cost for the Company's  stock-based  compensation  plans
           been determined based on the fair value at the grant dates for awards
           under those  plans  consistent  with the method of SFAS No. 123,  the
           Company's  net income and  earnings per share would have been reduced
           to the pro forma amounts indicated below:





                                       23

<PAGE> 24


                              REHABCARE GROUP, INC.

                   Notes to Consolidated Financial Statements

<TABLE>
<CAPTION>

                                                                  Ten Months Ended          Year Ended
                                                                  December 31, 1996     February 29, 1996
          <S>                                                      <C>                  <C>   
          Net Income                            As reported        $ 5,768,000          $ 5,878,000
                                                Pro forma            5,350,000            5,747,000

          Primary earnings per share            As reported               1.17                 1.26
                                                Pro forma                 1.09                 1.24

          Fully diluted earnings per share      As reported               1.11                 1.23
                                                Pro forma                 1.04                 1.20

</TABLE>

       In accordance  with SFAS No. 123, the pro forma net income  reflects only
          options granted in calendar 1996 and fiscal 1996. Therefore,  the full
          impact of calculating  compensation  cost for stock options under SFAS
          No. 123 is not reflected in the pro forma net income amounts presented
          above because compensation cost does not reflect options granted prior
          to March 1995, that vested in calendar 1996 and fiscal 1996.

       A  summary  of the  status  of the  Company's  stock  option  plans as of
          December  31, 1996 , February 29,  1996,  and  February 28, 1995,  and
          changes during the periods ending on those dates is presented below:

<TABLE>
<CAPTION>

                                        Ten Months Ended                    Year Ended                   Year Ended
                                        December 31, 1996             February 29, 1996                February 28, 1995
                                                 Weighted-Average             Weighted-Average                Weighted-Average
                                      Shares    Exercise Price       Shares     Exercise Price       Shares     Exercise Price
          <S>                       <C>            <C>                <C>          <C>                 <C>          <C> 
          Outstanding at
               beginning of year    1,083,825      $  12.96           994,500      $  12.47            774,400      $  12.32
            Granted                   304,266         16.17           170,000         14.98            356,050         13.12
            Exercised                 (52,019)         9.97           (47,500)        10.29             (8,460)         4.61
            Forfeited                 (93,625)        15.64           (33,175)        12.46           (127,490)        13.87
            Outstanding at
               end of year          1,242,447         13.67         1,083,825         12.96            994,500         12.47

          Options exercisable
                at year-end           773,306                         698,340                          522,400


</TABLE>









                                       24

<PAGE> 25


                              REHABCARE GROUP, INC.

                   Notes to Consolidated Financial Statements


       The  following   table   summarizes   information   about  stock  options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>

                                       Options Outstanding                                   Options Exercisable
 
                          Number       Weighted-Average                                Number
       Range of         Outstanding         Remaining      Weighted-Average           Exercisable     Weighted-Average
     Exercise Prices  at Dec. 31, 1996  Contractual Life       Exercise Price      at Dec. 31, 1996      Exercise Price
   <S>                    <C>                  <C>              <C>                      <C>             <C>                    
   $  7.250-10.375           63,181            5.2              $   8.69                  62,556         $   8.67
     11.562-13.750          843,700            6.2                 13.02                 660,750            13.03
     16.000-18.875          335,566            9.4                 16.23                  50,000            16.63
   $  7.250-18.875        1,242,447            7.0                 13.67                 773,306            12.91

</TABLE>

       On  September 21, 1992, the Board of Directors of the Company  declared a
           dividend  distribution  of one preferred  stock  purchase  right (the
           Rights)  for each share of the  Company's  common  stock  owned as of
           October 1, 1992,  and for each share of the  Company's  common  stock
           issued  until  the  Rights  become  exercisable.   Each  Right,  when
           exercisable,  will entitle the registered holder to purchase from the
           Company one one-hundredth of a share of the Company's Series A junior
           participating preferred stock, $.10 par value (the Series A preferred
           stock),  at a price  of $35 per one  one-hundredth  of a  share.  The
           Rights  are  not  exercisable  and are  transferable  only  with  the
           Company's  common  stock  until the  earlier of 10 days  following  a
           public  announcement  that a person has acquired  ownership of 15% or
           more of the Company's  outstanding  common stock, or the commencement
           or announcement of a tender offer or exchange offer, the consummation
           of which would result in the  ownership by a person of 15% or more of
           the Company's  outstanding common stock. The Series A preferred stock
           will be  nonredeemable  and junior to any other  series of  preferred
           stock that the Company may issue in the future.  Each share of Series
           A preferred stock, upon issuance,  will have a preferential  dividend
           in an amount equal to the greater of $1.00 per share or 100 times the
           dividend  declared per share of the Company's  common  stock.  In the
           event of the liquidation of the Company, the Series A preferred stock
           will receive a preferred  liquidation payment equal to the greater of
           $100 or 100 times the  payment  made on each  share of the  Company's
           common stock. Each one one-hundredth of a share of Series A preferred
           stock  outstanding will have one vote on all matters submitted to the
           stockholders  of the Company and will vote together as one class with
           the holders of the Company's common stock.

       In the event that a person acquires  beneficial  ownership of 15% or more
          of the  Company's  common  stock,  holders of Rights  (other  than the
          acquiring  person or group) may purchase,  at the Rights' then current
          purchase price, shares of the Company's common stock having a value at
          that time equal to twice such  exercise  price.  In the event that the
          Company  merges into or otherwise  transfers 50% or more of its assets
          or earnings  power to any person after the Rights become  exercisable,
          holders  of Rights  (other  than the  acquiring  person or group)  may
          purchase,  at the then  current  exercise  price,  common stock of the
          acquiring  entity  having a value  at that  time  equal to twice  such
          exercise price.

(10)  Employee Benefits
      The  Company has an Employee Savings Plan, which is a defined contribution
           plan qualified under Section 401(k) of the Internal Revenue Code, for
           the benefit of its eligible  employees.  Employees who attain the age
           of 21 and complete  twelve  consecutive  months of employment  with a
           minimum of 1,000  hours  worked are  eligible to  participate  in the
           plan.  Each  participant  may contribute from 2% to 15% of his or her
           compensation  to the  plan  subject  to  limitations  on  the  highly
           compensated employees to ensure the

                                       25

<PAGE> 26


                              REHABCARE GROUP, INC.

                   Notes to Consolidated Financial Statements

           plan is  nondiscriminatory.  Contributions made by the Company to the
           Employee  Savings  Plan were at rates of up to 50% of the first 4% of
           employee  contributions.  Expense  in  connection  with the  Employee
           Savings Plan for calendar  1996,  fiscal 1996 and fiscal 1995 totaled
           $329,000, $313,000 and $228,000, respectively.

      In   October  1992,  the Company  entered into a  supplemental  bonus plan
           which,   as  of  December  31,  1996  included  six  key  members  of
           management. Participants began vesting in the supplemental bonus on a
           pro rata basis  beginning  March 1, 1993 and became  fully  vested on
           February 1, 1997.  The total cost of the  supplemental  bonus plan is
           being charged to earnings as deferred  compensation  over the service
           period  of the  participants.  Compensation  expense  related  to the
           supplemental  bonus plan for  calendar  1996,  fiscal 1996 and fiscal
           1995  totaled  $309,000,  $321,000  and  $282,000,  respectively.  In
           November  1996,  the  supplemented  bonus plan was  amended  allowing
           participants  to invest  up to 50% of their  vested  balances  in the
           Company's common stock as part of the Company's nonqualified deferred
           compensation  plan.  As of December  31, 1996,  32,173  shares of the
           Company's stock are held in trust under the plan.

       Effective May 1, 1994, the Company  established a  nonqualified  deferred
          compensation plan for certain employees.  Under the plan, participants
          may  defer  up to 100%  of  their  yearly  compensation.  The  amounts
          deferred are held in trust but remain the property of the Company.  At
          December  31, 1996 and  February  29,  1996,  $778,000  and  $501,000,
          respectively, was payable under the plan and approximated the value of
          the trust assets owned by the Company. See note 3.

(11)   Lease Commitments
       The Company leases  office  space  and  certain  office  equipment  under
          noncancellable  operating leases.  Future minimum lease payments under
          noncancellable  operating  leases,  as of December 31, 1996, that have
          initial  or  remaining  lease  terms  in  excess  of  one  year  total
          approximately $666,000 for 1997, $577,000 for 1998, $326,000 for 1999,
          $291,000  for 2000 and $31,000  for 2001.  Rent  expense for  calendar
          1996, fiscal 1996 and fiscal 1995 was approximately $605,000, $393,000
          and $335,000, respectively.

(12)   Income Taxes
       Income taxes consist of the following:
<TABLE>
<CAPTION>
                                                           Ten Months Ended               Year Ended
                                                              December 31,       February 29,   February 28,
                                                                    1996            1996             1995
                <S>                                         <C>                   <C>
                Federal - current                            $ 3,787,000          3,156,000           2,661,000
                Federal - deferred                              (539,000)           213,000              20,000
                State                                            638,000            640,000             503,000
                Income taxes                                 $ 3,886,000          4,009,000           3,184,000

                Deferred tax liability recorded
                       in stockholders' equity                $1,367,000           --                  --


</TABLE>





                                       26

<PAGE> 27


                              REHABCARE GROUP, INC.

                   Notes to Consolidated Financial Statements


       A   reconciliation  between  expected income taxes,  computed by applying
           the  statutory  Federal  income tax rates of 34% to  earnings  before
           income taxes, and actual income tax is as follows:
<TABLE>
<CAPTION>

                                                          Ten Months Ended                Year Ended
                                                              December 31,     February 29,         February 28,
                                                                 1996               1996                1995
                <S>                                         <C>                   <C>                 <C>
                Expected income taxes                       $ 3,282,000           3,362,000           2,692,000
                Tax effect of interest income from
                    municipal bond obligations exempt
                    from Federal taxation                       (43,000)            (74,000)            (34,000)
                State income taxes, net of Federal
                    income tax benefit                          386,000             422,000             332,000
                Tax effect of amortization expense
                    not deductible for tax purposes             211,000             254,000             213,000
                Other, net                                       50,000              45,000             (19,000)
                Income taxes                                $ 3,886,000           4,009,000           3,184,000
</TABLE>

       The tax effects of temporary  differences  that give rise to the deferred
          tax assets and liabilities are as follows:
<TABLE>
<CAPTION>

                                                                         December 31,          February 29,
                                                                             1996                  1996       
                   <S>                                                 <C>                       <C>                           
                   Deferred tax assets:
                        Net operating loss carryforwards               $      889,000            1,227,000
                        Provision for doubtful accounts                       397,000              312,000
                        Accrued insurance, bonus and
                           vacation expense                                 2,036,000            1,303,000
                        Other                                                 289,000              167,000
                                                                            3,611,000            3,009,000
                   Deferred tax liabilities:
                        Prepaid expenses                                       96,000               70,000
                        Unrealized gain                                     1,367,000                 --
                        Goodwill amortization                                 253,000                 --
                        Depreciation                                          157,000              130,000
                        Pre-opening costs                                     393,000              636,000
                                                                            2,266,000              836,000
                        Net deferred tax asset                          $   1,345,000            2,173,000
</TABLE>

       The Company is required to  establish a valuation  allowance for deferred
          tax assets if, based on the weight of available  evidence,  it is more
          likely than not that some  portion or all of the  deferred  tax assets
          will not be realized.  The ultimate realization of deferred tax assets
          is dependent  upon the  generation of future taxable income during the
          periods  in  which  those  temporary  differences  become  deductible.
          Management   considers   the   scheduled   reversal  of  deferred  tax
          liabilities,   projected  future  taxable  income,  and  tax  planning
          strategies  in  making  this  assessment.  Based  upon  the  level  of
          historical taxable income and projections for future taxable income of
          the periods which the deferred tax assets are  deductible,  management
          believes  that a  valuation  allowance  is not  required as it is more
          likely than not that the results of future  operations  will  generate
          sufficient taxable income to realize the deferred tax assets.

                                       27

<PAGE> 28


                              REHABCARE GROUP, INC.

                   Notes to Consolidated Financial Statements


       As a result of the acquisition of Advanced Rehabilitation Resources, Inc.
          in 1993,  the  Company,  as of December 31,  1996,  has  approximately
          $2,615,000  of  net  operating  loss   carryforwards  for  income  tax
          purposes, which will expire in years 2005 through 2008. The Tax Reform
          Act  of  1986  imposes  an  annual  limitation  on the  amount  of any
          preacquisition  loss  carryforwards that can be used to offset Company
          Federal  taxable  income   generated   after  the  acquisition   date.
          Generally, this annual limitation will approximate $1,200,000.

       Income taxes paid by the  Company  for  calendar  1996,  fiscal  1996 and
          fiscal 1995 were $4,234,000, $4,010,000 and $2,356,000, respectively.

 (13)  Contingencies  The Company has undergone a Federal  payroll
          tax  audit for the years  1989  through  1993.  The  Internal  Revenue
          Service  ("IRS") has asserted that certain medical  professionals  and
          others engaged as independent  contractors should have been treated as
          employees  for payroll tax  purposes.  The IRS, in May 1996,  issued a
          proposed  assessment  against the Company of $1,935,455 for years 1989
          through 1993. The Company subsequently  received from the IRS separate
          proposed  Closing  Agreements for these same  independent  contractors
          under  the  IRS's  new  "Classification  Settlement  Program"  with an
          alternate  aggregate  assessment of $253,426 covering the 1989 through
          1993 audit,  including  any  additional  potential  liability  through
          December 31, 1996. In October 1996, the Company  accepted a settlement
          offer for one of the classes of medical professionals, paid $11,613 as
          settlement   and   agreed  to   prospectively   treat  this  class  of
          professionals  as  employees.  The Company is currently  continuing to
          defend its  classification  of the remaining classes which represent a
          total   proposed   assessment  of  $1,364,000   ($242,000   under  the
          classification  settlement  program.)  The  Company  will  continue to
          evaluate  whether to accept any of the  additional  settlement  offers
          and, as a result,  change its classification policy as required by the
          Closing  Agreements.  While the Company  believes it has  arguments to
          support  its  current  position,  there can be no  assurance  that the
          Company  will  prevail  in whole or in part.  In  December  1996,  the
          Company and Comprehensive Care Corporation ("CompCare"), the Company's
          former parent,  entered into an agreement and release whereby CompCare
          paid  the  Company  $154,000  resulting  in  discharge  of  CompCare's
          obligations for employment  taxes and costs under section 4 of the Tax
          Sharing  Agreement  entered  into in  conjunction  with the  Company's
          initial  public  offering in 1991. In the opinion of  management,  the
          ultimate  disposition of this matter will not have a material  adverse
          effect on the Company's  consolidated  financial position,  results of
          operations or liquidity.

       On  October 30, 1992,  CompCare  filed an action against the Company with
           the  Federal  District  Court for the  Eastern  District  of Missouri
           alleging  fraud by the  Company  under the common law and the Federal
           securities laws in the negotiation of the Stock Redemption  Agreement
           dated September 1, 1992, by and between CompCare and the Company. The
           action  sought both actual and  punitive  monetary  damages  from the
           Company.  On March 8, 1995, a Federal  court jury  returned a verdict
           against  the Company on three of the six counts of the  lawsuit.  The
           Company appealed the judgements and on October 22, 1996 a three-judge
           panel of the Federal Court of Appeals for the Eighth Circuit reversed
           all such  judgements  against  the  Company.  On November  21,  1996,
           CompCare's   motion  for  rehearing  was  denied.   The  Company  has
           terminated the $3,000,000 supersedeas bond purchased to obtain a stay
           of execution pending the conclusion of its appeal,  and has cancelled
           the  $3,000,000  bank letter of credit that had been issued to secure
           the bond. The Company is seeking to recover $120,083 in court related
           costs from CompCare pursuant to the favorable appeal.





                                       28

<PAGE> 29


                              REHABCARE GROUP, INC.

                   Notes to Consolidated Financial Statements


(14)     Quarterly Financial Information (Unaudited)
                   (In thousands, except per share data)

<TABLE>
<CAPTION>

                                                     One Month Ended               Quarter Ended
                   Calendar 1996                           Dec. 31        Nov. 30      Aug. 31     May 31
               <S>                                         <C>            <C>           <C>         <C>    
               Operating revenues                          $ 11,204       31,519        30,888      31,000
               Operating earnings                             1,244        3,422         3,096       2,936
               Earnings before income taxes                   1,153        3,108         2,770       2,623
               Net earnings                                     689        1,864         1,653       1,562
               Net earnings per common and
                   common equivalent share:
                        Primary                            $    .14          .37           .34         .32
                        Assuming full dilution             $    .13          .36           .33         .31

</TABLE>
<TABLE>
<CAPTION>

                                                                                   Quarter Ended
                   Fiscal 1996                              Feb. 29       Nov. 30      Aug. 31     May 31
               <S>                                         <C>            <C>           <C>         <C> 
               Operating revenues                          $ 22,494       22,430        22,470      21,983
               Operating earnings                             2,886        2,480         2,456       2,454
               Earnings before income taxes                   2,883        2,375         2,322       2,307
               Net earnings                                   1,731        1,414         1,374       1,359
               Net earnings per common and
                   common equivalent share:
                        Primary                            $    .36          .31           .30         .30
                        Assuming full dilution             $    .36          .30           .30         .30
</TABLE>


                  The  sum of the  quarterly  earnings  per  common  and  common
                  equivalent  share may not equal  the full  year  earnings  per
                  common  and  common  equivalent  share  due  to  rounding  and
                  computational differences.

(15)   Events Subsequent to Balance Sheet Date
       On January 10, 1997, the Company sold 165,000 shares of its investment in
          Intensiva   HealthCare   Corporation  in  a  market   transaction  for
          $1,485,000.

       On January 28, 1997,  the Company  purchased 100% of the capital stock of
          TeamRehab,  Inc. and Moore  Rehabilitation  Services,  Inc. ("Team and
          Moore").  The aggregate  purchase price of $5,600,000  paid at closing
          included  $3,600,000  in cash,  a $1,500,000  subordinated  promissory
          note,  and 25,365  shares of the Company's  common  stock.  Additional
          consideration  will be paid to the former Team and Moore  stockholders
          contingent upon the attainment of certain target  cumulative  earnings
          before  interest  and income  taxes up to a maximum of  $2,400,000  in
          additional  consideration  over four years.  The  acquisition has been
          accounted  for by the  purchase  method  of  accounting,  whereby  the
          operating  results of Team and Moore will be included in the Company's
          results of operations commencing on the date of acquisition.  Goodwill
          related to the acquisition totaling $5,600,000 is being amortized over
          40 years.

       The following unaudited  pro  forma  financial  information  assumes  the
          acquisition  of  Team  and  Moore  occurred  at the  beginning  of the
          ten-month  period ended  December 31, 1996.  This  information  is not
          necessarily

                                       29

<PAGE> 30



          indicative of results of  operations  that would have occurred had the
          purchase been made at the beginning of such periods presented.
<TABLE>
<CAPTION>

                                                              Ten Months Ended
                                                              December 31, 1996
          <S>                                             <C>                                        
          Operating revenues                              $         109,291,000
          Net earnings                                                5,986,000
          Net earnings per common and
              common equivalent share:
                  Primary                                 $                1.21
                  Assuming full dilution                  $                1.15

</TABLE>

       On January  31, 1997 the  Company  made a tender  offer to purchase up to
          925,000  shares of its common stock at a single  purchase  price,  not
          less than $20.00 nor in excess of $22.50 per share, the purchase price
          to be selected by the Company  based on prices  specified by tendering
          stockholders  at  the  lowest  single  purchase  price  sufficient  to
          purchase  925,000  shares.  As of February 28, 1997, the closing date,
          shares totaling  greater than 925,000 were tendered,  resulting in the
          Company's  repurchase on March 12, 1997 of a total of 1,000,000 shares
          at the  single  purchase  price of $22.50 per  share.  To finance  the
          repurchase,  on  March  5,  1997  the  Company's  bank  term  loan and
          revolving  credit facility were  restructured.  Under the terms of the
          restructured  loan  agreement,  the Company  entered into a five-year,
          $25,000,000  bank  term  loan  and  a  $20,000,000   revolving  credit
          facility.  The amount that may be borrowed under the revolving  credit
          facility was increased to the lesser of $20,000,000 or 85% of eligible
          accounts receivable.  Amounts borrowed under the revised term loan and
          revolving credit facility will bear interest at the Company's  option,
          at the banks CBR, or LIBOR plus from 1.25% to 2.00%,  or a combination
          of the two,  such rates being  dependent on the ratio of the Company's
          indebtedness,  net of cash and marketable securities, to cash flow. As
          of the date of the stock  repurchase,  the Company's  borrowings under
          the revolving credit facility totaled $10,500,000



ITEM 9.        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
               ON ACCOUNTING AND FINANCIAL DISCLOSURE

      Not applicable.




                                    PART III

ITEM 10.        DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      Certain  information  regarding  directors  and  executive  offices of the
Company is  contained  under the caption  "Election of  Directors"  and "Section
16(a)  Compliance  with Section  16(a) of the  Securities  Exchange Act of 1934"
included in the Proxy  Statement  for the 1997 Annual  Meeting of  Stockholders,
which information is incorporated herein by reference.






                                       30

<PAGE> 31



      The following is a list as of March 12, 1997, of the names and ages of the
executive officers of the Company and positions with the Company. The employment
history of each of the  executive  officers for the past five years  follows the
list. There is no family relationship between any of the named persons.

     Name                Age                Position
   James M. Usdan         47   President and Chief Executive Officer
   Keith L. Goding        46   Executive Vice President and Chief Development
                               Officer 
   Alan C. Henderson      51   Executive Vice President, Chief Financial Officer
                               and Secretary
   Hickley M. Waguespack  53   Executive Vice President and Chief Operating
                               Officer

      JAMES M. USDAN has been President of the Company since April 1990 and
Chief Executive Officer since June 1991.

      KEITH L. GODING has been Executive  Vice  President and Chief  Development
Officer of the Company since  February 1995.  Prior to joining the Company,  Mr.
Goding was Vice  President for Corporate  Alliances and Vice President of Sales,
Marketing and Product Development for Spectrum Healthcare  Services,  a division
of ARAMARK, where he was employed since 1974.

      ALAN C. HENDERSON has been Executive Vice President and Chief Financial
Officer of the Company since March 1991 and was Treasurer of the Company from
March 1990 through June 1991.  In June 1991, Mr. Henderson was elected Secretary
of the Company.

      HICKLEY  M.  WAGUESPACK  has  been  Executive  Vice  President  and  Chief
Operating Officer of the Company since March 1995, was a Senior Vice President -
Operations  from June 1991 until February 1995 and held other positions with the
Company since 1985.

ITEM 11.        EXECUTIVE COMPENSATION

      Information  regarding  executive  compensation  is  contained  under  the
caption  "Compensation of Executive  Officers,"  included in the Proxy Statement
for the 1997 Annual Meeting of  Stockholders,  which is  incorporated  herein by
reference.

ITEM 12.        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                MANAGEMENT

      Information  regarding security ownership of certain beneficial owners and
management  is contained  under the captions  "Voting  Securities  and Principal
Holders Thereof" and "Security  Ownership by Management,"  included in the Proxy
Statement for the 1997 Annual  Meeting of  Stockholders,  which is  incorporated
herein by reference.


ITEM 13.        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Not applicable.


                                     PART IV

ITEM 14.        EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
                FORM 8-K

      (a)   The following documents are filed as part of this report:


                                       31

<PAGE> 32



            (1) Financial Statements
                    Independent Auditors' Report
                    Consolidated   Balance  Sheets  as  of  December  31,  1996,
                         February  29,  1996  and  February  28,  1995   
                    Consolidated Statements of Earnings for the ten months ended
                         December 31, 1996 and for each of the years in the two-
                         year period ended February 29, 1996
                    Consolidated Statements of Stockholders'  Equity for the ten
                          months  ended  December  31,  1996 and for each of the
                          years in the two-year period ended February 29, 1996
                    Consolidated  Statements  of Cash  Flows for the ten  months
                          ended  December  31, 1996 and for each of the years in
                          the two-year period ended February 29, 1996
                    Notes to Consolidated Financial Statements

            (2)  Financial Statement Schedules:
                      None

            (3)  Exhibits:

                  3.1   Restated Certificate of Incorporation (filed as Exhibit
                        3.1 to the Registrant's Registration Statement on Form
                        S-1, dated May 9, 1991 [Registration No. 33-40467] and
                        incorporated herein by reference)

                  3.2   Certificate of Amendment of Certificate of Incorporation
                        (filed as Exhibit 3.1 to the Registrant's Report on Form
                        10-Q for the quarter ended May 31, 1995 and incorporated
                        herein by reference)

                  3.3   Bylaws (filed as Exhibit 3.2 to the Registrant's
                        Registration Statement on Form S-1, dated May 9, 1991
                        [Registration No. 33-40467] and incorporated herein by
                        reference)

                  4.1   Rights  Agreement,  dated  September  21,  1992,  by and
                        between the Company and Boatmen's  Trust Company  (filed
                        as Exhibit 1 to the Company's  Registration Statement on
                        Form 8-A  filed  September  24,  1992  and  incorporated
                        herein by reference)

                 10.1   1987 Incentive Stock Option and 1987 Nonstatutory Stock
                        Option Plans (filed as Exhibit 10.1 to the Registrant's 
                        Registration Statement on Form S-1, dated May 9, 1991
                        [Registration No. 33-40467] and incorporated herein by
                        reference)

                 10.2   Form of Stock Option Agreement (filed as Exhibit 10.2 to
                        the Registrant's Registration Statement on Form S-1,
                        dated May 9, 1991 [Registration No. 33-40467] and
                        incorporated herein by reference)

                 10.3   Employment Agreement with James M. Usdan, dated May 1, 
                        1991 (filed as Exhibit 10.3 to Amendment No. 1 to the
                        Registrant's Registration Statement on Form S-1, dated 
                        June 19, 1991 [Registration No. 33-40467] and
                        incorporated herein by reference)

                 10.4   Employment Agreement with Alan C. Henderson, dated 
                        May 1, 1991 (filed as Exhibit 10.4 to Amendment No. 1 to
                        the Registrant's Registration Statement on Form S-1,
                        dated June 19, 1991 [Registration No. 33-40467] and 
                        incorporated herein by reference)

                 10.5   Employment Agreement with Richard C. Stoddard, dated 
                        March 1, 1996 by and between Registrant, Healthcare 
                        Staffing Solutions, Inc. d/b/a Health Tour, and Richard
                        C.Stoddard (filed as Exhibit 10.1 to the Registrant's 
                        Current Report on Form 8-K, dated March 1, 1996 and
                        incorporated herein by reference)


                                       32

<PAGE> 33



                 10.6   Form of Termination Compensation Agreement for James M.
                        Usdan and Alan C.Henderson (filed as Exhibit 10.6 to the
                        Registrant's Registration Statement on Form S-1,dated
                        February 18, 1993 [Registration No. 33-58490] and 
                        incorporated herein by reference)

                 10.7   Form of  Termination  Compensation  Agreement  for other
                        executive   officers  (filed  as  Exhibit  10.7  to  the
                        Registrant's  Registration  Statement on Form S-1, dated
                        February  18,  1993   [Registration  No.  33-58490]  and
                        incorporated herein by reference)

                 10.8   Supplemental Bonus Plan (filed as Exhibit 10.8 to the 
                        Registrant's Registration Statement on Form S-1, dated
                        February 18, 1993 [Registration No. 33-58490] and
                        incorporated herein by reference)

                 10.9   Settlement Memorandum with CompCare,  dated February 16,
                        1996 regarding the Tax Sharing  Agreement with CompCare,
                        dated  May  8,   1991(filed   as  Exhibit  10.9  to  the
                        Registrant's  Report on Form 10-K, dated May 3, 1996 and
                        incorporated herein by reference)

                 10.10  Settlement Agreement and Release dated December 1996 and
                        Settlement  Agreement and Mutual Release dated September
                        17,  1996  with  CompCare   regarding  the  Tax  Sharing
                        Agreement  with  CompCare  dated  May 8,  1991(filed  as
                        Exhibit  10.1 to the  Registrant's  Report  on Form 10-Q
                        dated  January  14,  1997  and  incorporated  herein  by
                        reference)

                 10.11  Deferred Profit Sharing Plan (filed as Exhibit 10.15 to 
                        the Registrant's Registration Statement on Form S-1,
                        dated February 18, 1993 [Registration No. 33-58490] and
                        incorporated herein by reference)

                 10.12  RehabCare Executive Deferred Compensation Plan (filed as
                        Exhibit 10.12 to the  Registrant's  Report on Form 10-K,
                        dated May 27, 1994 and incorporated herein by reference)

                 10.13  RehabCare   Directors'   Stock  Option  Plan  (filed  as
                        Appendix A to Registrant's  Proxy Statement for the 1994
                        Annual Meeting of Stockholders and  incorporated  herein
                        by reference)

                 10.14  RehabCare Group, Inc. 1996 Long-Term Performance Plan 
                        (filed as Appendix A to the Registrant's Proxy Statement
                        for the 1996 Annual Meeting of Stockholders and
                        incorporated herein by reference)

                 10.15  Stock Purchase Agreement, dated February 8, 1996, by and
                        between  Registrant and the  Stockholders  of Healthcare
                        Staffing Solutions, Inc. d/b/a Health Tour and joined in
                        by Healthcare Staffing Solutions, Inc. d/b/a Health Tour
                        (filed as Exhibit 2.1 to the Registrant's Current Report
                        on Form 8-K, dated March 1, 1996 and incorporated herein
                        by reference)

                 10.16  Agreement and Plan of Merger dated February 8, 1996, by 
                        and between Registrant, Healthcare Staffing Solutions,
                        Inc. d/b/a Health Tour, HCH, Inc. and the stockholders
                        of HCH, Inc. (filed as Exhibit 2.2 to the Registrant's
                        Current Report on Form 8-K, dated March 1, 1996 and 
                        incorporated herein by reference)




                                       33

<PAGE> 34



                 10.17  Registration  Rights Agreement,  dated March 1, 1996, by
                        and  between  the  Registrant  and the  stockholders  of
                        Healthcare  Staffing  Solutions,  Inc. (filed as Exhibit
                        2.3 to the  Registrant's  Current  Report  on Form  8-K,
                        dated   March  1,  1996  and   incorporated   herein  by
                        reference)

                 10.18  Form  of  Subordinated  Convertible  Promissory  Note of
                        Registrant issued to stockholders of Healthcare Staffing
                        Solutions,  Inc. d/b/a Health Tour (filed as Exhibit 2.4
                        to the  Registrant's  Current  Report on Form 8-K, dated
                        March 1, 1996 and incorporated herein by reference)

                 10.19  Stock Purchase Agreement,  dated January 27, 1997 by and
                        among  Registrant  and the  stockholders  of  TeamRehab,
                        Inc., Moore  Rehabilitation  Services,  Incorporated and
                        Moore Rehabilitation Services, PC.

                 10.20  Form of Subordinated Promissory Note of Registrant 
                        issued to the stockholders of TeamRehab, Inc., Moore 
                        Rehabilitation Services, Incorporated and Moore 
                        Rehabilitation Services, PC.

                 11.1   Computation of Per Share Earnings

                 13.1   Those  portions of the Annual  Report for the ten months
                        ended  December 31, 1996 of the  Registrant  included in
                        response to Items 5 and 6 of Form 10-K

                 21.1   Subsidiaries of the Registrant

                 24.1   Consent of KPMG Peat Marwick LLP

                 27     Financial Data Schedule

      (b)  Reports on Form 8-K

No  reports  on Form 8-K were filed by the  Registrant  during the fiscal  month
      ended December 31, 1996.





















                                       34

<PAGE> 35


SIGNATURES

      Pursuant to the requirements of Section 13 of the Securities  Exchange Act
of 1934,  the  Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

Dated: March 12, 1997
                                                   REHABCARE GROUP, INC.
                                                         (Registrant)


                                           By: /s/ JAMES M. USDAN
                                                  (James M. Usdan)
                                           President and Chief Executive Officer

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the date indicated.

Signature                        Title                               Dated


/s/  JAMES M. USDAN           President, Chief Executive          March 12, 1997
(James M. Usdan)              Officer and Director
Principal Executive Officer

/s/  ALAN C. HENDERSON        Executive Vice President            March 12, 1997
(Alan C. Henderson)            and Chief Financial Officer
Principal Financial Officer

/s/  JOHN R. FINKENKELLER     Senior Vice President               March 12, 1997
(John R. Finkenkeller)         and Treasurer
Principal Accounting Officer

/s/  WILLIAM G. ANDERSON      Director                            March 12, 1997
(William G. Anderson)

/s/  RICHARD E. RAGSDALE      Director                            March 12, 1997
(Richard E. Ragsdale)

/s/ JOHN H. SHORT             Director                            March 12, 1997
(John H. Short)

/s/ RICHARD C. STODDARD       Director                            March 12, 1997
(Richard C. Stoddard)

/s/  H. EDWIN TRUSHEIM        Director                            March 12, 1997
(H. Edwin Trusheim)

/s/ THEODORE M. WIGHT         Director                            March 12, 1997
(Theodore M. Wight)


                                       35

<PAGE> 36



                                         EXHIBIT INDEX

       Exhibit                                                              Page
       Number                               Description                   Number

      3.1     Restated Certificate of Incorporation (filed as Exhibit 3.1 to the
              Registrant's Registration Statement on Form S-1, dated May 9, 1991
              [Registration No. 33-40467] and incorporated herein by reference)

      3.2     Certificate of Amendment of Certificate of  Incorporation  (filed
              as Exhibit  3.1 to the  Registrant's  Report on Form 10-Q for the
              quarter ended May 31, 1995 and incorporated herein by reference)

      3.3     Bylaws (filed as Exhibit 3.2 to the Registrant's Registration 
              Statement on Form S-1, dated May 9, 1991 [Registration No.
              33-40467] and incorporated herein by reference)

      4.1     Rights  Agreement,  dated  September 21, 1992, by and between the
              Company and Boatmen's  Trust  Company  (filed as Exhibit 1 to the
              Company's  Registration Statement on Form 8-A filed September 24,
              1992 and incorporated herein by reference)

      10.1    1987 Incentive Stock Option and 1987 Nonstatutory Stock Option 
              Plans (filed as Exhibit 10.1 to the Registrant's Registration 
              Statement on Form S-1, dated May 9, 1991[Registration No. 
              33-40467] and incorporated herein by reference)

      10.2    Form of Stock Option Agreement (filed as Exhibit 10.2 to the 
              Registrant's Registration Statement on Form S-1, dated May 9,
              1991 [Registration No. 33-40467] and incorporated herein by
              reference)

      10.3    Employment Agreement with James M. Usdan, dated May 1, 1991 
              (filed as Exhibit 10.3 to Amendment No. 1 to the Registrant's 
              Registration Statement on Form S-1, dated June 19, 1991 
              [Registration No. 33-40467] and incorporated herein by reference)

      10.4    Employment Agreement with Alan C. Henderson, dated May 1, 1991 
              (filed as Exhibit 10.4 to Amendment No. 1 to the Registrant's 
              Registration Statement on Form S-1, dated June 19, 1991 
              [Registration No. 33-40467] and incorporated herein by reference)

      10.5    Employment Agreement with Richard C. Stoddard, dated March 1, 1996
              by and between Registrant, Healthcare Staffing Solutions, Inc.
              d/b/a Health Tour, and Richard C. Stoddard (filed as Exhibit 10.1 
              to the Registrant's Current Report on Form 8-K, dated March 1,1996
              and incorporated herein by reference)

      10.6    Form of Termination Compensation Agreement for James M. Usdan and 
              Alan C. Henderson (filed as Exhibit 10.6 to the Registrant's 
              Registration Statement on Form S-1, dated February 18, 1993 
              [Registration No. 33-58490] and incorporated herein by reference)

      10.7    Form of  Termination  Compensation  Agreement for other  executive
              officers (filed as Exhibit 10.7 to the  Registrant's  Registration
              Statement on Form S-1, dated February 18, 1993  [Registration  No.
              33-58490] and incorporated herein by reference)

      10.8    Supplemental Bonus Plan (filed as Exhibit 10.8 to the Registrant's
              Registration Statement on Form S-1, dated February 18, 1993 
              [Registration No. 33-58490] and incorporated herein by reference)





<PAGE> 37



      10.9    Settlement  Memorandum  with  CompCare,  dated  February  16, 1996
              regarding the Tax Sharing  Agreement with  CompCare,  dated May 8,
              1991(filed  as  Exhibit  10.9 to the  Registrant's  Report on Form
              10-K, dated May 3, 1996 and incorporated herein by reference)

      10.10   Settlement   Agreement  and  Release   dated   December  1996  and
              Settlement  Agreement and Mutual Release dated  September 17, 1996
              with CompCare  regarding the Tax Sharing  Agreement  with CompCare
              dated May 8, 1991(filed as Exhibit 10.1 to the Registrant's Report
              on Form 10-Q dated  January  14, 1997 and  incorporated  herein by
              reference)

      10.11   Deferred Profit Sharing Plan (filed as Exhibit 10.15 to the 
              Registrant's Registration Statement on Form S-1, dated February 
              18, 1993 [Registration No. 33-58490] and incorporated herein by
              reference)

      10.12   RehabCare  Executive Deferred  Compensation Plan (filed as Exhibit
              10.12 to the Registrant's  Report on Form 10-K, dated May 27, 1994
              and incorporated herein by reference)

      10.13   RehabCare  Directors'  Stock  Option  Plan (filed as Appendix A to
              Registrant's  Proxy  Statement  for the  1994  Annual  Meeting  of
              Stockholders and incorporated herein by reference)

      10.14   RehabCare Group, Inc. 1996 Long-Term Performance Plan (filed as 
              Appendix A to the Registrant's Proxy Statement for the 1996 Annual
              Meeting of Stockholders and incorporated herein by reference)

      10.15   Stock Purchase  Agreement,  dated February 8, 1996, by and between
              Registrant and the Stockholders of Healthcare  Staffing Solutions,
              Inc.  d/b/a  Health  Tour and  joined  in by  Healthcare  Staffing
              Solutions,  Inc.  d/b/a  Health  Tour (filed as Exhibit 2.1 to the
              Registrant's  Current  Report on Form 8-K, dated March 1, 1996 and
              incorporated herein by reference)

      10.16   Agreement and Plan of Merger dated February 8, 1996, by and 
              between Registrant, Healthcare Staffing Solutions, Inc. d/b/a 
              Health Tour, HCH, Inc. and the stockholders of HCH, Inc. (filed as
              Exhibit 2.2 to the Registrant's Current Report on Form 8-K, dated
              March 1, 1996 and incorporated herein by reference)

      10.17   Registration Rights Agreement, dated March 1, 1996, by and between
              the  Registrant  and  the  stockholders  of  Healthcare   Staffing
              Solutions,  Inc. (filed as Exhibit 2.3 to the Registrant's Current
              Report on Form 8-K, dated March 1, 1996 and incorporated herein by
              reference)

      10.18   Form of  Subordinated  Convertible  Promissory  Note of Registrant
              issued to  stockholders  of Healthcare  Staffing  Solutions,  Inc.
              d/b/a  Health  Tour  (filed  as  Exhibit  2.4 to the  Registrant's
              Current Report on Form 8-K,  dated March 1, 1996 and  incorporated
              herein by reference)

      10.19   Stock  Purchase  Agreement,  dated  January  27, 1997 by and among
              Registrant  and  the   stockholders  of  TeamRehab,   Inc.,  Moore
              Rehabilitation  Services,  Incorporated  and Moore  Rehabilitation
              Services, PC.                                              Page 39

      10.20   Form of Subordinated Promissory Note of Registrant issued to the 
              stockholders of Team Rehab, Inc., Moore Rehabilitation Services,
              Incorporated and Moore Rehabilitation Services, PC.       Page 87

      11.1    Computation of Per Share Earnings                         Page 92 


<PAGE> 38



      13.1    Those  portions  of the Annual  Report  for the ten  months  ended
              December 31, 1996 of the Registrant  included in response to Items
              5 and 6 of Form 10-K                                      Page 93


      21.1    Subsidiaries of the Registrant                             Page 97

      24.1    Consent of KPMG Peat Marwick LLP                          Page 98 

      27      Financial Data Schedule








<PAGE> 39

                                                                  Exhibit 10.19

                            STOCK PURCHASE AGREEMENT


              THIS STOCK PURCHASE  AGREEMENT (this  "Agreement") is entered into
this 27th day of January,  1997, by and among REHABCARE GROUP,  INC., a Delaware
corporation (the "Acquiror"),  TEAMREHAB, INC., a Missouri corporation ("Team"),
MOORE  REHABILITATION  SERVICES,  INCORPORATED,  a Missouri  corporation ("Moore
Co."), MOORE REHABILITATION SERVICES, P.C., an Illinois professional corporation
("Moore P.C."),  and the holders of all of the outstanding  capital stock of the
Companies,   as  identified  in  Exhibit  A  to  this  Agreement  (the  "Selling
Shareholders").  Team and Moore Co. are  collectively  referred to herein as the
"Companies."

                                    RECITALS

              WHEREAS,  the Selling  Shareholders  are the owners of one hundred
percent (100%) of the issued and outstanding  shares of common stock,  $1.00 par
value, of Team (the "Team Shares"), one hundred percent (100%) of the issued and
outstanding  shares of common stock,  $1.00 par value,  of Moore Co. (the "Moore
Co. Shares") (the Team Shares and the Moore Co. Shares are collectively referred
to herein as the  "Shares"),  such  Shares  being the only shares of the capital
stock of the Companies that are issued and outstanding; and

              WHEREAS,   the   Companies  and  Moore  P.C.   provide   physical,
occupational  and speech  therapy  staffing and  management  services to nursing
home, long-term care and outpatient facilities; and

              WHEREAS, prior to the Closing Date (as defined herein), Moore P.C.
intends to assign all of its assets to Moore Co. (the "Moore P.C. Asset 
Assignment"); and

              WHEREAS, the Selling  Shareholders desire to sell, assign,  convey
and  transfer to the  Acquiror,  and the  Acquiror  desires to acquire  from the
Selling Shareholders, all of the Shares; and

              WHEREAS,  each of the parties  hereto desires to set forth certain
representations,   warranties,  covenants  and  indemnity  obligations,  and  to
establish certain closing  conditions,  made to induce the others to execute and
deliver this Agreement and to consummate the transactions contemplated hereby;

              NOW,  THEREFORE,  in consideration of the premises,  the covenants
and agreements herein contained, and other good and valuable consideration,  the
receipt and  sufficiency  of which hereby are  acknowledged,  the parties hereto
agree as follows:

                                    ARTICLE 1

                           SALE AND PURCHASE OF SHARES

              1.1  Method of Effecting the Purchase and Sale of Shares; Closing.
The purchase and sale of the Shares shall be effected as follows:

              (a)      At the Closing (as defined in Section 1.1(b) hereof), the
Selling Shareholders shall sell to the Acquiror, and the Acquiror shall purchase
from the Selling Shareholders, the Shares, as described above, such Shares being
all of the  shares  of  capital  stock  of the  Companies  that are  issued  and
outstanding, in consideration of the Purchase Price (as


                                        1

<PAGE> 40



defined in Section 1.2 hereof).

           (b)      The closing (the "Closing") of the transactions contemplated
hereby shall take place at the offices of the Acquiror,  7733 Forsyth Boulevard,
Suite 1700, St. Louis,  Missouri  63101,  commencing at 3:30 p.m. on a date (the
"Closing Date") agreed upon by the Acquiror and the Selling  Shareholders  which
is not  earlier  than  January  28,  1997,  or such other date or time as may be
mutually agreed upon by the parties.

              1.2 Purchase Price for the Shares. The aggregate  consideration to
be paid by the Acquiror to the Selling  Shareholders in connection with the sale
of the Shares (the  "Purchase  Price")  shall be the amount of Five  Million Six
Hundred  Thousand  Dollars  ($5,600,000.00)  (the  "Base  Price"),  as  adjusted
pursuant  to  Section  1.4 of this  Agreement,  plus any  additional  Contingent
Consideration  and Tail  Contingent  Consideration  (as  defined in Section  1.5
herein).

              1.3 Payment of Base Price. At the Closing,  the Acquiror shall pay
to each of the  Selling  Shareholders  a pro rata  portion  of the  Base  Price,
determined  in  accordance  with  each  such  Selling  Shareholder's  percentage
ownership of the Shares as set forth beside each such Selling Shareholder's name
on Exhibit A to this Agreement, as follows:

              (a)      The Acquiror shall deliver to the Selling Shareholders an
amount in cash (the "Closing Cash  Payment")  equal to Three Million Six Hundred
Thousand  Dollars  ($3,600,000.00),  such Closing Cash Payment  being subject to
adjustment as set forth in Section 1.4 hereof and to be paid as follows:  (i) at
least three  business days prior to the Closing Date,  the Selling  Shareholders
shall designate an account or accounts  (each, a "Designated  Account") to which
the Closing Cash Payment shall be delivered;  and (ii) on the Closing Date,  the
Acquiror  shall  deliver  by wire  transfer  the  Closing  Cash  Payment  to the
Designated Account(s);

              (b)      The Acquiror shall deliver to the Selling Shareholders a
subordinated  promissory note of the Acquiror substantially in the form attached
hereto as Exhibit B (the "Note"), in the original principal amount (the "Closing
Principal Amount") of One Million Five Hundred Thousand Dollars ($1,500,000.00),
such  Closing  Principal  Amount  being  subject to  adjustment  as set forth in
Section  1.4  hereof and being  subject  to offset as set forth in Section  10.4
hereof; and

          (c)      The Acquiror shall deliver to the Selling Shareholders 25,365
shares of the  Acquiror's  common stock,  $.01 par value (the  "Acquiror  Common
Stock") (the "Closing Stock Payment").

              1.4                   Purchase Price Adjustment.

          (a)       At the Closing Date, the Companies shall have Combined
Earnings (as defined in this Section  1.4(a)) for the fiscal year ended December
31,  1996  of  $1,270,000.00  (the  "Agreed  1996  Combined  Earnings").  If the
Companies  are  unable  to  convert  any or all of the  contracts  set  forth in
Schedule  1.4(P)  within 45 days after the Closing Date,  the Combined  Earnings
shall be  recalculated  within ten  business  days after the end of such  45-day
period to deduct from the calculation of Combined  Earnings the dollar amount of
the  adjustment  set forth in  Schedule  1.4(P)  for each such  contract  not so
converted.  The Combined Earnings,  as recalculated  pursuant to the immediately
preceding  sentence,  shall be  referred  to  herein as the  "Recalculated  1996
Combined  Earnings." For purposes of this Section  1.4(a),  "Combined  Earnings"
shall mean the net income of the  Companies  for the fiscal year ended  December
31, 1996  determined  on a combined  basis in accordance  with GAAP,  subject to
certain adjustments

                                        2

<PAGE> 41



as more fully set forth on Schedule 1.4 to this Agreement.

             (b)      In the event that the Agreed 1996 Combined Earnings exceed
the Recalculated  1996 Combined  Earnings by a factor of more than 10%, the Base
Price  shall be  decreased  by an amount  equal to the  product  of 4.41 and the
difference  between  the Agreed  1996  Combined  Earnings  and the  Actual  1996
Combined Earnings (the "Base Price Decrease").  The Selling  Shareholders  shall
pay any such Base  Price  Decrease  to the  Acquiror  as  follows:  Within  five
business days after receipt of the Recalculated 1996 Combined Earnings,  each of
the Selling  Shareholders shall (A) deliver to the Acquiror a check in an amount
equal to such Selling Shareholder's pro rata portion of an amount equal to fifty
percent (50%) of the Base Price  Decrease,  determined  in accordance  with each
such  Selling  Shareholder's  percentage  ownership  in the  Shares as set forth
beside such Selling  Shareholder's name on Exhibit A to this Agreement,  and (B)
surrender  to the  Acquiror  the Note  received by the Selling  Shareholders  at
Closing in exchange for the delivery by the Acquiror to the Selling Shareholders
of a Note in the original  principal amount the Closing Principal Amount less an
amount equal to fifty percent (50%) of the Base Price Decrease.  Such Note shall
be payable ratably commencing May 1, 1997 in sixteen (16) consecutive  quarterly
installments.

            1.5 Payment and Form of Contingent Consideration and Tail Contingent
Consideration.

           (a)      In addition to the payment of the Base Price at Closing, the
Acquiror has agreed to pay the Selling Shareholders on a contingent, "as-earned"
basis,  additional amounts of consideration as set forth in Schedule 1.5 to this
Agreement (collectively,  such additional amounts are hereinafter referred to as
the "Contingent  Consideration")  upon the attainment of certain "Target Minimum
Cumulative EBIT" (as defined in Schedule 1.5) during certain designated periods.
The Contingent Consideration,  as and if earned, will be payable within the time
periods  and in  accordance  with the  procedures  set forth in Section  1.5(b).
Schedule  1.5 to this  Agreement  sets  forth the  definitions  of "Base  EBIT,"
"Cumulative  EBIT," "Excess EBIT  Multiplier,"  "Maximum  Cumulative  Contingent
Consideration"  and "Target Minimum  Cumulative EBIT," which defined terms shall
be utilized in determining  whether a payment of Contingent  Consideration for a
given fiscal year is required to be made, and, if such payment is required,  the
amount of the required payment for such fiscal year.

           (b)      If the Cumulative EBIT for any of the fiscal years ending on
December  31,  1997,  1998,  1999 or 2000 is  greater  than the  Target  Minimum
Cumulative  EBIT shown for such fiscal year in Schedule 1.5, the Acquiror  shall
deliver  to each of the  Selling  Shareholders  a check  in the  amount  of such
Selling Shareholder's pro rata portion,  determined in accordance with each such
Selling Shareholder's  percentage ownership interest in each of Team's and Moore
Co.'s  Shares as set forth beside each such  Selling  Shareholder's  name as set
forth in Exhibit A to this Agreement, of the Contingent Consideration applicable
to such fiscal year, determined in the manner set forth in Schedule 1.5, as soon
as  practicable  after the completion of such fiscal year (but not later than 30
days after the receipt of audited  financial  statements  of the Acquiror or, in
the event of a dispute as described in Section 1.5(g) of this Agreement,  within
five business days after the  resolution of such dispute).  Notwithstanding  the
immediately  preceding sentence,  at the Acquiror's sole election,  the Acquiror
may pay any  portion of the  Contingent  Consideration  payable  to the  Selling
Shareholders with respect to any fiscal year in shares of Acquiror Common Stock,
the number of shares of such Acquiror  Common Stock to be determined by dividing
the  value  of  such  Contingent  Consideration  by  the  average  of  the  last
transaction  prices as reported by the Nasdaq  National  Market and published in
The Wall Street Journal (the "Average  Market  Price") of Acquiror  Common Stock
for the twenty consecutive  trading days ending on the fourth business day prior
to the date of such payment.  Shares of Acquiror Common Stock issued pursuant to
this Section 1.5 shall be subject to

                                        3

<PAGE> 42



registration  rights as set forth in the Registration Rights Agreement described
in Section 9.2(f) of this Agreement.

          (c)      The Contingent Consideration for any given fiscal year shall
be an amount equal to the  Cumulative  EBIT for such fiscal year less the Target
Minimum  Cumulative  EBIT for such fiscal  year,  multiplied  by the Excess EBIT
Multiplier for such fiscal year; provided,  however,  that in no event shall the
Contingent  Consideration  payable for any fiscal year exceed an amount equal to
(i) the Maximum  Cumulative  Contingent  Consideration for such fiscal year less
(ii) the sum of all Contingent Consideration payments for all prior fiscal years
(all as shown on Schedule 1.5 to this Agreement).

          (d)      Notwithstanding anything contained in this Agreement to the
contrary,  in no event will the Selling  Shareholders  be obligated to refund to
the Acquiror in a  subsequent  fiscal year any of the  Contingent  Consideration
paid or  distributed  to the Selling  Shareholders  for a prior fiscal year.  In
addition,  the failure by the Companies to achieve the Target Minimum Cumulative
EBIT  for  a  given   fiscal  year  shall  not   constitute   a  breach  of  any
representation,  warranty  or  covenant  of  the  Selling  Shareholders  or  the
Companies  under  this  Agreement  or  entitle  the  Acquiror  to any  rights of
indemnification or offset pursuant to this Agreement.

          (e)      In addition to the payment of the Base Price at Closing and
the  Contingent  Consideration  described  in this Section 1.5, the Acquiror has
agreed to pay the Selling  Shareholders  upon the attainment of certain goals an
additional  amount  of  consideration  (the  "Tail  Contingent   Consideration")
following  the  fiscal  year  ended  December  31,  2000.  The  Tail  Contingent
Consideration shall be equal to twice an amount equal to (A) the Cumulative EBIT
for the  fiscal  year  ended  December  31,  2000 less (B) the sum of the Target
Minimum  Cumulative  EBIT for the fiscal  year ended  December  31, 2000 and the
quotient obtained by dividing the Maximum  Cumulative  Contingent  Consideration
for the fiscal year ended  December 31, 2000 by the Excess EBIT  Multiplier  for
such fiscal year (the "Excess Cumulative  Contingent  Consideration").  The Tail
Contingent  Consideration,  if any, shall be payable by the Acquiror by delivery
to each of the  Selling  Shareholders  of a check in the amount of such  Selling
Shareholder's pro rata portion of the Tail Contingent Consideration,  determined
in accordance with each such Selling Shareholder's percentage ownership interest
in each of Team's and Moore Co.'s  Shares as set forth  beside each such Selling
Shareholder's  name as set  forth in  Exhibit  A to this  Agreement,  as soon as
practicable after the completion of the fiscal year ended December 31, 2000 (but
not later than 30 days after the receipt of audited financial  statements of the
Acquiror  for the fiscal year ended  December  31,  2000,  or, in the event of a
dispute described in Section 1.5(g) of this Agreement, within five business days
after the resolution of such dispute). Notwithstanding the immediately preceding
sentence,  at the Acquiror's sole election,  the Acquiror may pay any portion of
the Tail Contingent  Consideration payable to the Selling Shareholders in shares
of Acquiror Common Stock,  the number of shares of such Acquiror Common Stock to
be  determined  in the same  manner  and such  shares to be  subject to the same
registration  rights as the  payment of  Contingent  Consideration  in  Acquiror
Common Stock described in Section 1.5(b).

         (f)      The right to receive the Contingent Consideration and the Tail
Contingent  Consideration  shall  be a  personal  right  of each of the  Selling
Shareholders and shall not be extinguished  upon the death of one or more of the
Selling  Shareholders.  Such  right  shall not be  transferable  by the  Selling
Shareholders  other than pursuant to the laws of descent and distribution.  Such
right  shall  terminate  for all future  fiscal  years  upon the  failure of the
Companies to attain at least 80% of the Target  Cumulative EBIT as of the end of
the fiscal year ending December 31, 1998 and thereafter  through the fiscal year
ending December 31, 2000.



                                        4

<PAGE> 43



             (g)      The Acquiror shall provide to the Selling Shareholders the
Companies'  financial  statements within five business days after such financial
statements are finalized,  accompanied  by the Acquiror's  determination  of the
Contingent Consideration or the Tail Contingent  Consideration,  as the case may
be,  including  the  calculations  utilized by the  Acquiror  in  reaching  such
determination.  The Selling  Shareholders  and their  auditors,  accountants and
other authorized  representatives  shall,  upon prior agreement of the Acquiror,
which  agreement  shall not be  unreasonably  withheld,  be given  free and full
access during the Companies'  normal business hours to the financial  records of
the Companies in order for the Selling  Shareholders to have a full  opportunity
to  make  such  investigation  as  the  Selling   Shareholders  may  require  to
independently  calculate the Cumulative EBIT, the Contingent  Consideration,  if
any, payable for a given year or the Tail Contingent Consideration,  as the case
may be. If there is a discrepancy  between the parties as to the  calculation of
the  Cumulative  EBIT,  the  Contingent  Consideration  or the  Tail  Contingent
Consideration payable by the Acquiror, the parties shall, in good faith, attempt
to resolve such  discrepancies.  Should the parties be unable to agree within 60
days  after  receipt  by  the  Selling  Shareholders  of the  audited  financial
statements of the Acquiror,  then such dispute shall be submitted for resolution
to the St.  Louis  office of a  nationally  recognized  public  accounting  firm
mutually acceptable to the parties,  and the determination of such firm shall be
binding upon the parties.  The Acquiror and the Selling  Shareholders shall each
pay one-half of such firm's fees and expenses in connection with such services.

              1.6 Fractional Shares. Notwithstanding any other provision of this
Agreement,  neither certificates nor scrip for fractional shares of the Acquiror
Common  Stock  shall be issued  either in the  Closing  Stock  Payment or in the
payment of the Contingent  Consideration or Tail Contingent  Consideration  with
shares of Acquiror  Common  Stock.  If the Selling  Shareholders  are  otherwise
entitled  to a  fraction  of a share  of  Acquiror  Common  Stock,  the  Selling
Shareholders  shall receive in lieu thereof cash (without interest) in an amount
determined by  multiplying  the  fractional  interest to which such holder would
otherwise  have been  entitled by the Average  Market  Price of Acquiror  Common
Stock for the 20  consecutive  trading  days ending on the fourth  business  day
prior  to  the  Closing  Date  or the  date  of the  payment  of the  Contingent
Consideration or Tail Contingent Consideration, as the case may be, to which the
fractional  share  relates.  The Selling  Shareholders  shall not be entitled to
dividends,  voting  rights or any  other  rights in  respect  of any  fractional
shares.

              1.7 Closing of Stock Transfer  Books.  The stock transfer books of
each of Team  and  Moore  Co.  shall be  closed  at the end of  business  on the
business day immediately  preceding the Closing Date. In the event of a transfer
of ownership of the Shares which is not registered in the transfer records prior
to the  closing  of such  record  books,  the  payment of the Base Price and the
Contingent  Consideration  and Tail  Contingent  Consideration,  if any,  may be
delivered to the  transferee of the Shares if the  certificate  or  certificates
evidencing  such Shares is presented to the Acquiror at the Closing  accompanied
by all  documents  required  to  evidence  and  effect  such  transfer  and  all
applicable stock transfer taxes have been paid.

              1.8  Anti-Dilution  Adjustments.  If,  during any  period  used to
determine the Average Market Price of Acquiror Common Stock,  the Acquiror shall
declare a stock  dividend,  or make a distribution  in stock upon, or subdivide,
split up,  reclassify or combine the Acquiror Common Stock or declare a dividend
or make a distribution on the Acquiror Common Stock in any security  convertible
into Acquiror Common Stock (each,  an  "Extraordinary  Corporate  Transaction"),
appropriate  and  proportional  adjustment  or  adjustments  will be made to the
Average  Market  Price for the trading days prior to the  effective  date of the
Extraordinary  Corporate  Transaction  to  equitably  reflect  such  dividend or
distribution.  If the Extraordinary  Corporate Transaction is effected after the
period used to determine the Average  Market Price of Acquiror  Common Stock but
prior to the Closing Date or the payment date of the Contingent


                                        5

<PAGE> 44



Consideration or Tail Contingent Consideration,  as the case may be, appropriate
and  proportional  adjustment or  adjustments  will be made to the Closing Stock
Payment,  Contingent  Consideration  payment  or Tail  Contingent  Consideration
payment, as the case may be, such that such payment shall result in the issuance
of that  number of  shares  of  Acquiror  Common  Stock as if the  Extraordinary
Corporate  Transaction had a record or payment date therefor  immediately  after
the Closing Date or the payment  date of the  Contingent  Consideration  or Tail
Contingent  Consideration,  as the case may be.  Except as  provided  above,  no
adjustment  shall be made to the Closing Cash  Payment or the Closing  Principal
Amount or to any future  Contingent  Consideration  payments  as a result of any
such Extraordinary Corporate Transaction.

                                    ARTICLE 2

                      REPRESENTATIONS AND WARRANTIES OF THE
               COMPANIES, MOORE P.C. AND THE SELLING SHAREHOLDERS

              Each of Team, Moore Co., Moore P.C. and the Selling Shareholders 
hereby represent and warrant to the Acquiror on the date of this Agreement, and
again on and as of the Closing Date, as follows:

              2.1                   Status of the Companies.

            (a)      Corporate Existence and Status.  Each of Team and Moore
Co. is duly incorporated, organized, entitled to conduct business and validly 
existing in good standing under the laws of the State of Missouri.  Moore P.C.
is duly incorporated, organized, entitled to conduct business and validly
existing in good standing under the laws of the State of Illinois.

            (b)      Charter and By-laws.  Attached to this Agreement as Exhibit
C and  Exhibit D,  respectively,  are copies of: (i) the  original  articles  of
incorporation  of each of Team,  Moore Co.  and Moore P.C.  and all  amendments,
restatements,  articles of merger,  articles of designation respecting preferred
stock, or other filings with respect thereto,  and (ii) the currently  effective
By-laws  of each of Team,  Moore Co.  and Moore  P.C.  All  amendments  to,  and
articles of merger,  certificates  of designation and other filings with respect
to, the articles of incorporation of each of Team, Moore Co. and Moore P.C. were
made in accordance with the articles of  incorporation  (as in effect before the
amendment of the articles or filings with respect thereto),  and the By-laws and
applicable  law  (including  the giving of proper notice of  dissenter's  and/or
appraisal  rights  in  connection  with any  such  amendment  or  other  actions
requiring such notice) of each of Team, Moore Co. and Moore P.C.,  respectively,
without  violation of any  preemptive  rights,  and each of Team,  Moore Co. and
Moore P.C. has otherwise complied with its articles of incorporation and By-laws
as in effect at the applicable time.

            (c)      Corporate Power.  Each of Team, Moore Co. and Moore P.C.
has the corporate power to own and lease its properties and otherwise to conduct
its business.

            (d)      Capitalization; Shareholders.  The authorized and issued
Shares of the Companies are as set forth in Schedule  2.1(d).  All of the issued
and  outstanding  Shares of the  Companies  are  owned of record by the  Selling
Shareholders.  Except as set forth in Schedule 2.1(d): (i) none of the Shares of
Team or Moore are held in  treasury;  (ii) all of the Shares  were  legally  and
validly  issued,  fully  paid  and  nonassessable,   without  violation  of  any
preemptive  or  dissenters'  or  similar  rights  (and no  preemptive  or  other
subscriptive  rights have ever  existed  with respect to the Shares) and in full
compliance with all applicable  securities laws; (iii) the Selling  Shareholders
are the only  record  owners of the  Shares or other  securities  of any kind or
class of Team or Moore Co.; (iv) no option, warrant, subscription,  put, call or
other right,

                                        6

<PAGE> 45



commitment,  undertaking or understanding  to acquire,  or restrict the transfer
(other than those imposed by applicable  securities  regulation laws) of, any of
the Shares or other securities of any kind or class of Team or Moore Co. rights,
obligations or undertakings  convertible into securities of any kind or class of
Team or Moore Co. are  authorized  or  outstanding;  and (v) since  December 31,
1996, no dividends or other distributions of any kind have been declared or paid
on or in  respect  of the  Shares of Team or Moore  Co.,  except as set forth in
Schedule 2.1(d).

       (e)      Qualification.  Schedule 2.1(e) lists the jurisdictions in which
each of Team, Moore Co. and Moore P.C. is qualified to do business as a foreign
corporation, and nothing (including the nature of or the manner in which each of
Team, Moore Co. and Moore P.C.conducts its respective business, the character or
location of the respective properties which each of Team, Moore Co. and Moore 
P.C. own, lease or use or the actions or location of Team's Moore Co.'s or Moore
P.C.'s respective employees or agents) either requires Team, Moore Co.or Moore
P.C. to be qualified in any other jurisdiction or subjects Team, Moore Co. or
Moore P.C.to any cost, restriction or penalty for failing to qualify (including
assessment of taxes, fees or penalties for prior periods).

       (f)      Combinations.  All mergers, consolidations, liquidations,
purchases or other  transactions by which each of Team, Moore Co. and Moore P.C.
acquired its business and property  were  conducted in  accordance  with each of
Team's and Moore's  respective  articles of  incorporation,  By-laws,  any other
applicable  agreements,  instruments  or documents  (in each case as amended) to
which Team, Moore Co. or Moore P.C. is a party and applicable law (including the
giving  of  proper  notice  of  dissenter's  and/or  appraisal  rights)  without
violation of any preemptive rights.

     (g) Ownership  Interests.  Except as reflected in Schedule 2.1(g),  none of
Team, Moore Co. or Moore P.C. has any subsidiaries or any equity securities
of, investment in or loans or advances to any business enterprise or person
or any agreements or commitments for such (other than trade terms extended
to customers in the ordinary course of business), and none of Team, Moore
Co. or Moore P.C. is subject to any arrangement that could be treated as a
partnership for federal income tax purposes.

      (h) Corporate Records. The corporate record books (including the stock
records) of each of Team and Moore Co. are complete, accurate and up
to date in all material respects with all necessary signatures and set
forth all meetings and actions taken by the respective shareholders
and directors of each of Team and Moore Co. as required by law or the
respective By-laws of each of Team and Moore Co. and all transactions
involving the Shares of each of Team and Moore Co.

            (i)     Authorization.

                     (i)        Each of Team, Moore Co. and Moore P.C. and the
                  Selling  Shareholders  have the right,  power and authority to
                  enter into this Agreement and the related agreements  referred
                  to  herein  to  which  they are a  party,  including,  without
                  limitation, the Registration Rights Agreement (as described in
                  Section 9.2 of this  Agreement) and the  Employment  Agreement
                  (as  described  in  Section  7.6 of  this  Agreement),  and to
                  consummate the transactions  contemplated by, and otherwise to
                  comply with and perform their  respective  obligations  under,
                  this Agreement and the related agreements  referred to herein,
                  including,   without   limitation,   the  Registration  Rights
                  Agreement and the Employment Agreement;

                    (ii)       The execution and delivery by each of Team, Moore
                  Co. and Moore P.C. of this Agreement and the related
                  agreements referred to


                                        7

<PAGE> 46



                    herein to which Team,  Moore Co. and Moore P.C. are parties,
               and the consummation by each of Team, Moore Co. and Moore P.C. of
               the  transactions  contemplated by, and other compliance with and
               performance  of its  obligations  under,  this  Agreement and the
               related  agreements  referred  to  herein,   including,   without
               limitation,  the Registration Rights Agreement and the Employment
               Agreement,  have been duly authorized by all necessary  corporate
               action (subject only to shareholder approval) on the part of each
               of Team, Moore Co. and Moore P.C. in compliance with governing or
               applicable agreements,  instruments or other documents (including
               its  articles of  incorporation  and By-laws  (as  amended))  and
               applicable law;

                    (iii) This Agreement and the related agreements  referred to
               herein to which each of Team,  Moore Co.  and Moore P.C.  and the
               Selling Shareholders are parties, including,  without limitation,
               the Registration  Rights Agreement and the Employment  Agreement,
               constitute the valid and binding agreement of each of Team, Moore
               and  the  Selling  Shareholders,  as the  case  may  be,  that is
               enforceable  against  each of Team,  Moore Co. and Moore P.C. and
               the Selling Shareholders,  as the case may be, in accordance with
               its terms; and

                    (iv) The Selling Shareholders have good and marketable title
               to the Shares, free and clear of all liens, encumbrances, charges
               or other restrictions on title,  either contractual or otherwise,
               except those restrictions imposed by applicable securities laws.

          (j)     Absence of Violations or Conflicts.  Except as disclosed in
Schedule  2.1(j),  the execution and delivery of this Agreement by each of Team,
Moore Co. and Moore P.C. and the Selling  Shareholders  and the  consummation of
the transactions contemplated by, or other compliance with or performance under,
this Agreement and the related agreements referred to herein, including, without
limitation,  the Registration Rights Agreement and the Employment Agreement,  do
not and will not with the passage of time or giving of notice or both:

                    (i)   constitute  a  violation  of,  be  in  conflict  with,
               constitute  a default  or require  any  payment  under,  permit a
               termination  of,  require  any  consent  under,  or result in the
               creation or imposition of any lien,  encumbrance or other adverse
               claim or interest upon any of the respective properties of any of
               Team, Moore Co. or Moore P.C. under (A) any contract,  agreement,
               commitment,  undertaking or  understanding  to which any of Team,
               Moore Co. or Moore P.C. is a party or to which any of Team, Moore
               Co. or Moore P.C. or any of their respective assets or properties
               are subject or bound,  (B) any  judgment,  decree or order of any
               governmental  authority to which any of Team,  Moore Co. or Moore
               P.C. or any of their respective  properties are subject or bound,
               (c) any  applicable  law,  or (D)  any  governing  or  applicable
               agreements,  instruments or other documents to which any of Team,
               Moore  Co.  or  Moore  P.C.  is a party  (including  articles  of
               incorporation and By-laws (as amended)); or

                    (ii) create,  or cause the  acceleration of the maturity of,
               any debt,  obligation  or liability of any of Team,  Moore Co. or
               Moore P.C.

          (k)     No Governmental Consents Required.  Except as set forth in
Schedule  2.1(k) and in reliance  upon  Section  3.4 with  respect to the filing
requirements of the Hart-Scott  Rodino  Antitrust  Improvements  Act of 1976, as
amended (the "HSR Act"), no consent,  approval,  order or  authorization  of, or
registration, declaration or filing with, any governmental authority on the part
of any of Team, Moore Co. or Moore P.C. or the Selling


                                        8

<PAGE> 47



Shareholders  is required in  connection  with the execution or delivery of this
Agreement or the  consummation  of the  transactions  contemplated  by, or other
compliance with or performance  under,  this Agreement by Team, Moore Co., Moore
P.C. or the Selling Shareholders.

             2.2      Financial Matters.

     (a) Team, Moore Co. and Moore P.C. Financial Statements.  Copies of (i) the
unaudited  financial  statements of each of Team and Moore Co. and Moore P.C. as
of and for the fiscal year ended  December  31,  1995 and the audited  financial
statements  of Team and Moore Co. as of and for the fiscal  year ended  December
31, 1996,  audited by Baird,  Kurtz & Dobson (all of which,  including the notes
thereto,  the Schedule 1.4  adjustments  and a standard  audit opinion of Baird,
Kurtz & Dobson,  are  collectively  referred to in this  Agreement as the "Team,
Moore Co. and Moore P.C. Financial  Statements," with the balance sheets of each
of Team,  Moore Co. and Moore P.C.  relating  to December  31, 1996  referred to
separately as the "Team, Moore Co. and Moore P.C. Balance Sheets"), are attached
hereto in draft form and shall be  delivered to the Acquiror in final form on or
prior to the  Closing  Date.  The Team,  Moore  Co.  and  Moore  P.C.  Financial
Statements are prepared in accordance with the books and records of Team,  Moore
Co. and Moore P.C. and,  except for the matters set forth on Schedule  2.2(a) to
be  delivered  by Team,  Moore Co. and Moore P.C.  with the Team,  Moore Co. and
Moore P.C.  Financial  Statements,  are  complete  and  accurate in all material
respects,  fairly present the financial  condition of Team,  Moore Co. and Moore
P.C. as of their  respective  dates and the results of operations of Team, Moore
Co. and Moore P.C. for the respective  periods then ended and have been prepared
in accordance  with GAAP applied on a consistent  basis  throughout  the periods
covered  by such  statements;  provided,  however,  that in no  event  will  the
representations  and  warranties  contained in this Section  2.2(a) be deemed to
relate to the Recalculated 1996 Combined Earnings.

          (b)     Absence of Undisclosed Liabilities.  Except (i) as and to the
extent expressly  reflected or specifically  reserved against in the Team, Moore
Co. and Moore P.C. Balance Sheets (which reserves are adequate,  appropriate and
reasonable and are disclosed in Schedule 2.2(b)),  (ii) as disclosed in Schedule
2.2(b)  and  (iii)  for  trade  payables  and  similar  ordinary  and  necessary
liabilities  (it  being  agreed  without  limitation  that the  phrase  "similar
liabilities"  does not  include  liabilities  or  obligations  arising  from the
borrowing of money or secured indebtedness, litigation or similar claims, breach
of contract or negligent or unlawful  actions of any of Team, Moore Co. or Moore
P.C. or their respective  officers,  directors,  agents or employees) arising in
the ordinary course of business since December 31, 1996, none of Team, Moore Co.
or  Moore  P.C.  has any  other  liabilities  of any  nature,  whether  accrued,
absolute, contingent,  changing, known, unknown,  determinable,  indeterminable,
liquidated, unliquidated or otherwise and whether due or to become due, relating
to any existing or prior act, omission, condition or state of facts.

     (c)  Capital  Leases.  Schedule  2.2(c)  lists (and  designates)  all lease
agreements  regarding the leasing of assets to each of Team, Moore Co. and Moore
P.C.  which are (or should be)  recorded  on the Team,  Moore Co. and Moore P.C.
Financial Statements as capital leases.

     (d)     Absence of Certain Changes.  Except as set forth in
Schedule 2.2(d) except for the Moore P.C. Asset  Assignment,  since December 31,
1996,  there has not been any activity with respect to any of Team, Moore Co. or
Moore P.C. other than in the ordinary course of business and,  without  limiting
the foregoing, there has not been:

                    (i)  any  change  in the  assets,  operations,  liabilities,
               earnings,   relationships  with  existing  clients,  business  or
               condition (financial or


                                        9

<PAGE> 48



                    otherwise) of any of Team, Moore Co. or Moore P.C. which has
               been or will be,  individually  or in the  aggregate  with  other
               changes, materially adverse;

                    (ii) any damage,  destruction or casualty loss to the assets
               of any of Team,  Moore Co. or Moore P.C. or other  equipment used
               by any of Team,  Moore  Co. or Moore  P.C.  in  performing  their
               respective  obligations  under their  respective  major contracts
               (whether or not owned by Team, Moore Co. or Moore P.C. or covered
               by  insurance)  which  has  been or will  be  materially  adverse
               (individually  or in the  aggregate)  to the  respective  assets,
               operations,   liabilities,   earnings,   business  or   condition
               (financial or otherwise) of any of Team, Moore Co. or Moore P.C.;

                    (iii) any  increase  in the  compensation  payable by any of
               Team, Moore Co. or Moore P.C. to any director,  officer, employee
               or agent of Team,  Moore Co. or Moore P.C.  (other  than  routine
               increases made in the ordinary course of business consistent with
               past  practice  and as  permitted  under  Section  4.1(e) of this
               Agreement) or any bonus, incentive compensation, service award or
               other like benefit,  granted,  made or accrued,  contingently  or
               otherwise, to or to the credit of any of such director,  officer,
               employee or agent or any employee welfare, pension, retirement or
               similar payment or arrangement  made or agreed to by any of Team,
               Moore  Co.  or Moore  P.C.  with  respect  to any such  director,
               officer, employee or agent;

                    (iv) any sale,  assignment  or transfer  (including  without
               limitation   any   collateral   assignment  or  the  granting  or
               permitting of any lien, encumbrance or other claim) of any asset,
               property or right of any of Team,  Moore Co. or Moore P.C.  other
               than in the ordinary course of business;

                    (v) any amendment,  modification,  waiver or cancellation of
               any debt owed to, or claim of,  either Team,  Moore Co. and Moore
               P.C., or  settlement  by any of Team,  Moore Co. or Moore P.C. of
               any dispute  involving any payment or other  obligation due to or
               owed by any of Team,  Moore  Co.  or  Moore  P.C.,  in an  amount
               greater  than $5,000,  to be made or performed  after the Closing
               Date;

                    (vi) any  borrowing  of money by any of Team,  Moore  Co. or
               Moore P.C.,  or the  incurrence  of any  obligation  or liability
               (whether absolute or contingent),  other than current liabilities
               incurred in the  ordinary  course of each of Team,  Moore Co. and
               Moore P.C.'s respective businesses;

                    (vii) any payment of any  obligation  or liability  (whether
               absolute or contingent),  other than current liabilities incurred
               in the ordinary course of business;

                    (viii)  any  capital  expenditure  or  commitment  to make a
               capital  expenditure  (exclusive  of  expenditures  for repair or
               maintenance of equipment in the ordinary course of business;

                    (ix) any  incurrence  of any  extraordinary  loss or knowing
               waiver of any rights of substantial  value by any of Team,  Moore
               Co. or Moore P.C. in connection  with an aspect of its respective
               business, whether or not in the


                                       10

<PAGE> 49



                  ordinary course of business;

                    (x) any  cancellation,  termination  or  amendment by any of
               Team, Moore Co. or Moore P.C. of any contract, agreement, license
               or other instrument to which any of Team, Moore Co. or Moore P.C.
               is a party or by which any of Team,  Moore Co. or Moore  P.C.  is
               bound;

                    (xi) any merger or  consolidation  of any of Team, Moore Co.
               or Moore P.C. into or with any other  corporation  or enterprise,
               or any corporate  action by any of Team,  Moore Co. or Moore P.C.
               toward or effecting such a merger or  consolidation or a complete
               or partial  liquidation or dissolution of any of Team,  Moore Co.
               or Moore P.C. or any material portion of their respective  assets
               (other than as contemplated by this Agreement);

                    (xii) any  failure on the part of any of Team,  Moore Co. or
               Moore P.C. to operate their respective businesses in the ordinary
               course so as to preserve their respective business  organizations
               intact,  including  the  services  of  their  respective  present
               officers  and  professional  staff  and  the  goodwill  of  their
               respective  suppliers,   customers  and  others  having  business
               relations with any of Team, Moore Co. or Moore P.C.; or

                    (xiii) any agreement by or commitment of any of Team,  Moore
               Co. or Moore P.C. to do or permit any of the foregoing.

                    2.3      Taxes.

                           (a)    Definitions.   For purposes of this Agreement:

                    (i) the term "Code" shall mean the Internal  Revenue Code of
               1986, as amended. All citations to the Code or to the regulations
               promulgated  thereunder  shall  include  any  amendments  or  any
               substitute or successor provisions thereto;

                    (ii) the term  "Acquired  Assets"  shall  mean the assets of
               each of Team,  Moore Co. and Moore P.C.  and the stock of each of
               Team, Moore Co. and Moore P.C.;

                    (iii) the term "Returns" shall mean,  collectively,  (A) all
               reports,    declarations,    estimates,    returns,   information
               statements,  and similar documents relating to, or required to be
               filed in respect of, any Taxes; and (B) any statements,  returns,
               reports,  or similar  documents  required to be filed pursuant to
               Part III of Subchapter A of Chapter 61 of the Code or pursuant to
               any similar  income,  excise,  or other tax provision of federal,
               territorial,  state, local, or foreign law; and the term "Return"
               means any one of the foregoing Returns;

                    (iv) the term "Tax Asset" shall mean any net operating loss,
               net capital  loss,  investment  Tax  credit,  foreign Tax credit,
               charitable  deduction  or  any  other  credit  or  Tax  attribute
               (determined  without regard to the Tax period in which such loss,
               credit or other attribute arose) which could reduce 


                                       11

<PAGE> 50



               Taxes; and

                    (v) the term  "Taxes"  shall mean (A) all net income,  gross
               income,  gross  receipts,  sales,  use,  ad  valorem,  franchise,
               profits,  license,  lease,  service,  service  use,  withholding,
               employment,  payroll, excise, severance,  transfer,  documentary,
               mortgage,   registration,   stamp,   occupation,   environmental,
               premium, property,  windfall, profits, customs, duties, and other
               taxes,  fees,  assessments  or  charges  of  any  kind  whatever,
               together with any interest,  penalties and other  additions  with
               respect  thereto,  imposed by any  federal,  territorial,  state,
               local or foreign government; and (B) any penalties,  interest, or
               other additions to tax for the failure to collect,  withhold,  or
               pay over any of the foregoing,  or to accurately file any Return;
               and the term  "Tax"  shall mean any one of the  foregoing  Taxes.
               When used with  reference to  specified  persons (for example and
               without  limitation,  "Taxes of the Selling  Shareholders"),  the
               terms  "Taxes" and "Tax"  shall  include  only  amounts of, or in
               respect  of,  Taxes for which such  person  is, or could  become,
               liable  in  whole or part  (including,  without  limitation,  any
               obligation in connection with a duty to collect, withhold, or pay
               over any Tax, any  obligation to contribute to the payment of any
               Taxes determined on a consolidated,  combined,  or unitary basis,
               any  liability as a  transferee,  or any liability as a result of
               any express or implied  obligation  to  indemnify  or pay the Tax
               obligations of another person).

          (b)    Returns Filed and Taxes Paid.  Except as set forth in Schedule
2.3(b),  (i) each of Team, Moore Co. and Moore P.C. have duly filed or caused to
be filed, on or before the due date thereof (as appropriately extended) with the
appropriate taxing authorities, all Returns that they are required to file; (ii)
each such  Return  (including  any  amendment  thereto)  is true,  correct,  and
complete in all material  respects;  (iii) all Taxes of each of Team,  Moore Co.
and Moore P.C.  due with respect to, or shown to be due on, each such Return (or
amendment) or subsequent  assessment with regard thereto, have been timely paid;
(iv) there is no valid basis for the assessment of any deficiency with regard to
any such  Return;  and (v) there  are no  extensions  of time to file  which are
pending.  No other  Taxes of any of Team,  Moore Co. or Moore P.C.  are due with
respect to any taxable  periods or  portions of periods  ending on or before the
Closing Date. There are no liens, attachments, or similar encumbrances on any of
the Acquired Assets,  or any of the respective  assets of any of Team, Moore Co.
or Moore P.C.,  with  respect to any Taxes,  other than liens for Taxes that are
not yet due and payable.

           (c)    Miscellaneous.     An election under Code section 1362(a)
has been in effect  with  respect  to each of Team and Moore  P.C.  since  their
respective  inceptions  and,  with respect to Moore Co., an election  under Code
section  1362(a)  was  filed on or prior to  December  31,  1988 and has been in
effect  since  January 1, 1989,  and such  elections  will remain in effect with
regard to the  portion of the 1997  taxable  year  deemed to end on the  Closing
Date.  For  purposes  of  Subchapter  S of the Code,  the  Selling  Shareholders
constitute the only  shareholders of each of Team,  Moore Co. and Moore P.C. The
Selling  Shareholders  and each of Team, Moore Co. and Moore P.C. have collected
or withheld  all Taxes that they are  required to collect or  withhold.  None of
Team,  Moore Co. or Moore P.C. is a party to or bound by any tax indemnity,  tax
sharing or tax allocation agreement,  or any other contractual obligation to pay
the Tax  obligations  of another  person or to pay Tax  obligations  relating to
transactions  of  another  person,  except as  otherwise  set forth in  Schedule
2.3(c).  None of the  Acquired  Assets (i) is  property  which is required to be
treated as being  owned by any other  person  pursuant  to the  so-called  "safe
harbor lease"  provisions of former section 168(f)(8) of the Code; (ii) directly
or indirectly secures any debt the interest on which is tax exempt under section
103(a) of the Code;  (iii) is  "tax-exempt  use property"  within the meaning of
section  168(h)  of the  Code,  or  (iv)  is  stock  of a  domestic  or  foreign
corporation  (including any entity that properly may be treated as a corporation
for Federal  income tax  purposes)  meeting  the  requirements  of Code  section
1504(a)(2).  The transactions  contemplated by this Agreement are not subject to
the tax  withholding  provisions  of Code section  3406,  or of  subchapter A of
Chapter 3 of the Code, or of any other comparable provision of law.

           (d)    Audit History and Other Proceedings.  Except as otherwise set
forth in Schedule 2.3(d),  (i) there are no pending or, to the best knowledge of
each of Team, Moore Co. and Moore P.C. and the Selling Shareholders,  threatened
(either in writing or verbally, formally or informally) audits,  investigations,
claims,  suits or other proceedings for or relating to any material liability in
respect  of  Taxes of any of Team,  Moore  Co.  or  Moore  P.C.  or the  Selling
Shareholders;  (ii) no material deficiencies for Taxes of any of Team, Moore Co.
or Moore  P.C.  or the  Selling  Shareholders  have been  claimed,  proposed  or
assessed  by any  taxing or other  governmental  authority;  (iii)  there are no
matters under discussion with any governmental authorities with respect to Taxes
that could result in any additional amount of Taxes of any of Team, Moore Co. or
Moore  P.C.  or the  Selling  Shareholders;  (iv) no  extension  of a statute of
limitations  (whether  arising  by  reason of a waiver,  claim  for  refund,  or
otherwise)  relating  to Taxes of Team,  Moore Co. and Moore P.C. or the Selling
Shareholders  in  respect  of such  Taxes is in  effect;  and (v)  there  are no
requests for rulings or  determinations  in respect of Taxes of Team, Moore Co.,
Moore P.C. or the Selling Shareholders pending with any governmental  authority.
There  have been no audits of any of Team,  Moore Co. or Moore  P.C.'s  Federal,
state or local Returns.

             2.4      Real and Personal Property.

           (a)    Real and Personal Property.  For purposes of this Agreement,
"Property" or  "Properties"  means those real and personal  properties  owned or
used by any of Team, Moore Co. or Moore P.C. or any  partnership,  joint venture
or similar entity in which any of Team, Moore Co. or Moore P.C. has an ownership
interest. Schedule 2.4(a) lists all of the real and personal properties to which
any of Team,  Moore Co. or Moore P.C. holds legal or equitable title (whether or
not of  record),  as to which it is taking  depreciation,  or as to which any of
Team,  Moore Co. or Moore P.C. has rights as a conditional  sales vendor under a
conditional  sales  contract  or other  title  retention  agreement,  other than
inventory  and other  property  properly  expensed  for income tax  purposes  or
properly disclosed pursuant to Sections 2.5 and 2.6 of this Agreement. Except as
set forth on Schedule  2.4(a):  (i) each of Team,  Moore Co. and Moore P.C.  has
good and marketable  title to all of the Properties  owned by it as indicated on
Schedule  2.4(a);  and (ii) none of the Properties is subject to any lien, claim
or other  encumbrance  whatsoever,  except  (A)  liens for taxes not yet due and
payable,  (B) liens shown and  described  in the Team,  Moore Co. and Moore P.C.
Balance Sheets, and (c) liens imposed by law and incurred in the ordinary course
of business  for  obligations  not yet due and payable to  landlords,  carriers,
warehousemen,  laborers,  materialmen and the like. No part of the Properties is
"tax-exempt use property" under Section 168(h) of the Code.

            (b)    Leases; Subleases.  For purposes of this Agreement, "Lease"
means any written or oral lease,  sublease or rental  agreement (and any related
contract, agreement, commitment, arrangement,  undertaking or understanding) and
all amendments,


                                       12

<PAGE> 51



modifications  and  supplements  thereof  and waivers  and  consents  thereunder
pursuant  to which any of Team,  Moore Co. or Moore P.C.  leases,  subleases  or
rents any real or  personal  property,  either as lessor,  lessee,  landlord  or
tenant.  Schedule  2.4(b)  lists  all  Leases,  except  those  which  (i) can be
cancelled by any of Team,  Moore Co. or Moore P.C. upon 30 or fewer days' notice
without penalty or the  acceleration of rentals,  (ii) do not grant an option to
purchase the leased  property,  and (iii) involve an annual rental of $10,000 or
less.  Schedule  2.4(b)  describes  all oral Leases  required to be disclosed in
Schedule 2.4(b),  and true and complete copies of all written Leases required to
be disclosed  have been  heretofore  delivered to the Acquiror.  With respect to
each of the Leases:  (A) none of Team,  Moore Co. or Moore P.C. nor, to the best
of Team's,  Moore Co.'s, Moore P.C.'s and the Selling  Shareholders'  knowledge,
any other party is in default in connection with such Lease; (B) no act or event
has occurred  which,  with notice or lapse of time or both,  would  constitute a
default  under such Lease with  respect to Team,  Moore Co. or Moore P.C. or, to
the best of Team's,  Moore  Co.'s,  Moore  P.C.'s and the Selling  Shareholders'
knowledge, any other party; (c) there is no basis for any claim of default under
such Lease  with  respect  to Team,  Moore Co. or Moore P.C.  or, to the best of
Team's, Moore Co.'s, Moore P.C.'s and the Selling Shareholders'  knowledge,  any
other party; (D) none of Team, Moore Co. or Moore P.C. has given or received any
notice of cancellation  or termination in connection  with such Lease;  (E) such
Lease is the valid and binding  agreement of Team, Moore Co. or Moore P.C., and,
to the best of Team's,  Moore Co.'s, Moore P.C.'s and the Selling  Shareholders'
knowledge,  the other  party  thereto  which is in full  force and effect and is
enforceable  in accordance  with its terms,  except,  with respect to such other
party, to the extent that such  enforceability may be limited by, or subject to:
(i)  the  effect  of  any  applicable  bankruptcy,  insolvency,  reorganization,
fraudulent   conveyance,   moratorium  or  other  similar  laws   affecting  the
enforcement  of  creditors'  rights  generally;  (ii)  the  availability  of the
remedies of specific  performance or injunctive relief,  which may be subject to
the discretion of the court before which any proceeding for such remedies may be
brought;  and (iii) the exercise by any court of equitable  judicial  discretion
before which any proceeding may be brought;  (F) such Lease will not be affected
by, or require the consent of or payment to any other party to avoid an event of
default, an event of termination or other adverse effect with respect to such by
reason of the transactions contemplated by this Agreement; and (G) such Lease is
a "true" lease for federal income tax purposes.

            (c)    Adequacy; Condition.  Except as set forth in Schedule 2.4(c):
(i)  to  the  best  of  Team's,  Moore  Co.'s,  Moore  P.C.'s  and  the  Selling
Shareholders'  knowledge,  the Properties and the properties  subject to a Lease
are fit for use in the  respective  businesses  of each of Team,  Moore Co.  and
Moore P.C. as  presently  conducted;  (ii) to the best of Team's,  Moore  Co.'s,
Moore P.C.'s and the Selling Shareholders'  knowledge, the Properties and all of
the  properties  subject  to a  Lease  are  each in good  repair  and  operating
condition,  normal wear and tear excepted,  and  structurally  and  mechanically
sound, as applicable; (iii) to the best of Team's, Moore Co.'s, Moore P.C.'s and
the Selling Shareholders'  knowledge,  each of Team, Moore Co. and Moore P.C. is
in compliance with all applicable  building,  zoning,  land use or other similar
statutes,  laws, ordinances,  regulations,  permits,  health and safety codes or
other  requirements in respect of any of the Properties or any of the properties
subject to a Lease (and any of Team,  Moore Co. or Moore  P.C.'s  current use of
such properties does not constitute a nonconforming use) and none of Team, Moore
Co. or Moore P.C. has received any notice alleging such a violation; (iv) to the
best  of  Team's,  Moore  Co.'s,  Moore  P.C.'s  and the  Selling  Shareholders'
knowledge,  none of the  properties  subject  to a Lease has ever been used as a
landfill or otherwise  been used for the  disposal,  storage or treatment of any
waste, trash, garbage, industrial byproduct,  chemical or hazardous substance of
any  nature;  (v) none of Team,  Moore  Co. or Moore  P.C.  has not  caused  the
installation of any of such property with asbestos insulation or any


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<PAGE> 52



electrical  equipment containing  polychlorinated  biphenyls and, to the best of
Team's, Moore Co.'s, Moore P.C.'s and the Selling Shareholders' knowledge,  none
of the properties subject to a Lease contains asbestos  insulation or electrical
equipment containing  polychlorinated biphenyls; and (vi) to the best of Team's,
Moore Co.'s, Moore P.C.'s and the Selling Shareholders' knowledge,  there are no
outstanding  requirements  or  recommendations  by fire  underwriters  or rating
boards,  any  insurance  companies  or holders of  mortgages  or other  security
interests  requiring  or  recommending  any  repairs  or work  to be  done  with
reference to any of the properties subject to a Lease.

     (d) All Necessary Properties.  The Properties and the Leases (together with
the intangible properties disclosed,  or not required to be disclosed,  pursuant
to Sections  2.5 and 2.6 of this  Agreement)  constitute  all of the  properties
which any of Team,  Moore Co. or Moore P.C. use in connection with the operation
of their  respective  businesses as presently  conducted and the consummation of
the  transactions  contemplated  by this  Agreement  (provided that all consents
relating to the Properties and the Leases have been obtained) will not alter the
rights or impair  the  ability  of Team,  Moore  Co. or Moore  P.C.  to use such
properties in the conduct of the  respective  businesses of Team,  Moore Co. and
Moore P.C. as they are now being conducted.

     (e) Accounts Receivable. The accounts receivable of each of Team, Moore Co.
and Moore P.C. as reflected  and on the Team,  Moore Co. and Moore P.C.  Balance
Sheets and the accounts receivable reflected on the books of each of Team, Moore
Co. and Moore P.C.:  (i) are valid,  existing  and,  to the extent  uncollected,
fully  collectible  without resort to legal proceedings or the use of collection
agencies,  except to the extent of the allowance for doubtful accounts contained
in the Team, Moore Co. and Moore P.C. Balance Sheets;  (ii) represent monies due
for goods sold and  delivered  or  services  rendered;  and (iii) to the best of
Team's, Moore Co.'s, Moore P.C.'s and the Selling Shareholders'  knowledge,  are
subject  to no  refunds  or other  adjustments  or to any  defenses,  rights  of
set-off,  assignments,   restrictions,   security  interests,   encumbrances  or
conditions enforceable by third parties on or affecting any thereof.

     (f)  Inventories.  Substantially  all of the  inventories  reflected on the
Team, Moore Co. and Moore P.C. Balance Sheets,  and those reflected on the books
of each of Team,  Moore Co. and Moore P.C.,  have been  determined and valued in
accordance with generally accepted accounting principles applied on a consistent
basis as reflected in the Team, Moore Co. and Moore P.C.  Financial  Statements.
The inventories of each of Team, Moore Co. and Moore P.C. consist of items which
are good and  merchantable,  are of a quality and quantity  presently  usable or
saleable in the ordinary  course of business,  and are of a quantity  sufficient
for the  conduct of the  respective  businesses  of each of Team,  Moore Co. and
Moore P.C. in the ordinary course.

     2.5 Intellectual Property; Patents;  Trademarks,  Trade Names. All patents,
trademarks,  service  marks,  trade  names  or  copyrights  owned  by or used or
proposed  to be  used  by each  of  Team,  Moore  Co.  and  Moore  P.C.  and all
applications  or  registrations  therefor  ("Intellectual   Property")  and  all
contracts,  agreements,  commitments and  understandings  relating to the use or
license of  technology,  know-how or  processes  by each of Team,  Moore Co. and
Moore P.C. (the  "Intellectual  Property  Licenses") are listed in Schedule 2.5.
Except as disclosed in Schedule 2.5; (a) each of Team,  Moore Co. and Moore P.C.
owns, or has the sole and  exclusive  right to use, all  Intellectual  Property,
whether under Intellectual Property Licenses or

                                       14

<PAGE> 53



otherwise,  used in or  necessary  for the  ordinary  conduct of its  respective
business;  (b)  the  consummation  of  the  transactions  contemplated  by  this
Agreement  will not alter or impair  any such  rights;  and (C) no  Intellectual
Property  owned,  licensed or used by any of Team,  Moore Co. or Moore P.C.,  or
Intellectual Property License of Team, Moore Co. or Moore P.C. is the subject of
a lawsuit or any other proceeding,  nor has any party challenged or, to the best
of Team's,  Moore Co.'s, Moore P.C.'s and the Selling  Shareholders'  knowledge,
threatened  to  challenge  Team's  or  Moore's  respective  right  to  use  such
Intellectual Property or Intellectual Property License or application for any of
the  foregoing;  and, to the best of Team's,  Moore Co.'s,  Moore P.C.'s and the
Selling Shareholders' knowledge, there is no basis for any such challenge.

        2.6      Loans and Contracts.

            (a)    Indebtedness.  Schedule 2.6(a) sets forth (i) a complete and
accurate  list or  description  of all  instruments  or other  documents  ("Debt
Instruments") relating to any direct or indirect indebtedness for borrowed money
of each of Team,  Moore Co. and Moore P.C.,  as well as  indebtedness  by way of
capital leases, lease-purchase arrangements,  guarantees,  undertakings on which
others rely in extending  credit and all conditional  sales  contracts,  chattel
mortgages and other security arrangements with respect to personal property used
or owned by each of Team,  Moore Co. and Moore P.C. and (ii) a list of all loans
of money to the respective officers,  employees or shareholders of each of Team,
Moore Co. and Moore P.C. (specifically  excluding travel and similar advances in
the ordinary course of business).  THE SELLING  SHAREHOLDERS SHALL ELIMINATE ALL
INDEBTEDNESS FOR BORROWED MONEY ON OR PRIOR TO THE CLOSING DATE.

                (b)    Other Contracts.  Schedule 2.6(b) lists each contract,
agreement,  commitment,  arrangement,  undertaking or  understanding of the type
listed below  (except where the same does not call for the payment or receipt by
any of Team,  Moore Co. or Moore  P.C.  of cash or other  property  or  services
having a value in excess of  $10,000)  to which any of Team,  Moore Co. or Moore
P.C.  is a party or bound or to which any of Team,  Moore Co. or Moore  P.C.  or
their respective  properties are subject,  whether written or oral  ("Contract,"
but such list and the term  "Contract"  shall not include  Leases,  Intellectual
Property Licenses,  Debt Instruments,  Insurance  Policies and  employee-related
matters disclosed elsewhere in this Agreement):

                    (i) for the purchase or rental of  materials,  inventory and
               supplies by any of Team,  Moore Co. or Moore P.C. entered into in
               the ordinary course of business which individually exceed $10,000
               and  which  are not  reasonably  expected  to be fully  performed
               within 45 days of their respective dates;

                    (ii) for the purchase of services by any of Team,  Moore Co.
               or Moore P.C.  entered  into in the  ordinary  course of business
               which are not reasonably expected to be fully performed within 45
               days of their respective dates;

                    (iii)  that  were  entered  into in the  ordinary  course of
               business and involve,  or are reasonably  expected to involve, an
               amount in excess of $10,000 and which are not reasonably expected
               to be fully performed within 45 days of their respective dates;

                    (iv) for matters not in the ordinary course of Team's,


                                       15

<PAGE> 54



               Moore Co.'s or Moore P.C.'s respective businesses;

                    (v)  making  Team,  Moore  Co.  or  Moore  P.C.  liable,  by
               guaranty,   suretyship  agreement,   indemnification   agreement,
               contribution agreement or otherwise,  upon or with respect to, or
               obligating  Team,  Moore Co. or Moore P.C.  in any way to provide
               funds in respect of, or obligating  Team, Moore Co. or Moore P.C.
               to guarantee,  serve as surety for or assume, any debt,  dividend
               or other  liability  or  obligation  of any person,  corporation,
               association,  partnership  or other entity  (except  endorsements
               made in the ordinary  course of business in  connection  with the
               deposit  of  items  for  collection  and  except  for  immaterial
               obligations  or  liabilities  incurred in the ordinary  course of
               business);

                    (vi) granting a power of attorney;

                    (vii)   relating   to   participation   in  a   cooperative,
               partnership or joint venture;

                    (viii)  imposing  confidentiality  requirements  (other than
               agreements relating to confidentiality  requirements  between the
               Acquiror and the Selling  Shareholders  and/or Team, Moore Co. or
               Moore P.C. and other than any  confidentiality  agreement between
               Team,  Moore Co. and Moore P.C.  and Richard  Kelly,  the Selling
               Shareholders' financial advisor; and

                    (ix)  restricting or limiting the freedom of Team, Moore Co.
               or Moore P.C. to compete in any line of business.

Except for the contracts Set forth on Schedule  2.6(b) (which  contracts will be
transferred  to Moore Co.  pursuant to the Moore P.C. Asset  Assignment),  Moore
P.C. does not have any other contracts or other assets of any nature whatsoever.
Schedule  2.6(b)  describes  all oral  Contracts  required  to be  disclosed  in
Schedule  2.6(b),  and true and  complete  copies of all written  Contracts  (as
amended)  required to be disclosed  in Schedule  2.6(b) will be delivered to the
Acquiror not less than 10 business  days after the  execution  hereof.  Schedule
2.(b) shall also disclose any and all contracts for physical,  occupational  and
speech  therapy  staffing and  management  services to which Team,  Moore Co. or
Moore P.C. was part of and which were cancelled or otherwise  terminated  during
the period of January 1, 1997 through the date hereof.

            (c)    Insurance.  All insurance policies of each of Team, Moore Co.
and Moore P.C. now in force (including comprehensive general liability, personal
and  professional   liability,   comprehensive  general  casualty  and  extended
coverage,   automobile,  boiler  and  machinery,  fire  and  lightning,  marine,
endowment, life, and worker's compensation) ("Insurance Policies") are listed in
Schedule  2.6(c),  together  with a listing  of the type of  policy,  the policy
number,  the  limits of  coverage,  the  carrier,  the  annual  premium  and the
expiration  date),  and true and  complete  copies  of such  policies  have been
provided or made available to the Acquiror.

            (d)    Status.  Except as disclosed on Schedule 2.6(d):  (i) none of
Team,  Moore Co. or Moore P.C.  has  assigned  any of its  respective  rights or
obligations under (and, to the best of Team's, Moore Co.'s, Moore P.C.'s and the
Selling Shareholders' knowledge, is not otherwise restricted for any reason from
enjoying  the full  benefits  under) any  Intellectual  Property  License,  Debt
Instrument,  Contract or Insurance Policy; (ii) none of Team, Moore Co. or Moore
P.C.  nor,  to the best of Team's,  Moore  Co.'s,  Moore  P.C.'s and the Selling
Shareholders'  knowledge,  any other party is in default in connection  with any
Intellectual Property License, Debt


                                       16

<PAGE> 55



Instrument,  Contract or Insurance  Policy;  (iii) to the best of Team's,  Moore
Co.'s, Moore P.C.'s and the Selling Shareholders' knowledge, no act or event has
occurred which, with notice or lapse of time or both, would constitute a default
under any Intellectual Property License, Debt Instrument,  Contract or Insurance
Policy;  (iv) to the best of Team,  Moore Co. and Moore  P.C.'s and the  Selling
Shareholders'  knowledge,  there is no basis for any claim of default  under any
Intellectual  Property License,  Debt Instrument,  Contract or Insurance Policy;
(v) there is no outstanding  notice of cancellation  or termination  received by
Team,  Moore Co. or Moore P.C.  in  connection  with any  Intellectual  Property
License,  Debt Instrument,  Contract or Insurance Policy; (vi) each Intellectual
Property  License,  Debt Instrument,  Contract and Insurance Policy is the valid
and binding  agreement of the parties  thereto which is in full force and effect
and is enforceable in accordance  with its terms,  except,  with respect to such
other  party,  to the extent  that such  enforceability  may be  limited  by, or
subject  to:  (A)  the  effect  of  any   applicable   bankruptcy,   insolvency,
reorganization,   fraudulent  conveyance,   moratorium  or  other  similar  laws
affecting  the   enforceability  of  creditors'   rights   generally,   (B)  the
availability of specific  performance or injunctive relief, which may be subject
to the discretion of the court before which any proceeding for such remedies may
be brought,  and (C) the exercise by any court of equitable judicial  discretion
before  which any  proceeding  may be brought;  (vii) no  Intellectual  Property
License, Debt Instrument,  Contract or Insurance Policy will require the consent
of or  payment  to any  other  party to avoid an event of  default,  an event of
termination or other adverse effect with respect to such  Intellectual  Property
License,  Debt  Instrument,  Contract or  Insurance  Policy  (assuming  that any
required  notice of default or  termination  has been given and any  periods for
cure have expired) by reason of the transactions contemplated by this Agreement;
and (viii) none of Team, Moore Co. or Moore P.C. has received any  communication
proposing  any  termination,  amendment or change to any  Intellectual  Property
License, Debt Instrument, Contract or Insurance Policy.

      2.7      Officers and Directors; Employment Relationships.  Each of Team,
Moore Co. and Moore P.C. has  delivered to the Acquiror a true and complete list
of all of the officers, senior managers and directors of each of Team, Moore Co.
and Moore P.C.,  specifying their office and annual rate of compensation,  and a
true and complete list of the respective  employees of Team, Moore Co. and Moore
P.C. as of December 31, 1996,  setting forth each such  employee's  compensation
and date of hire.  Except as disclosed in Schedule 2.7, none of Team,  Moore Co.
or Moore  P.C.  has any  obligations,  contingent  or  otherwise:  (i) under any
employment contract, agreement, commitment,  undertaking,  understanding,  plan,
program,  policy or  arrangement;  (ii) under any bonus,  incentive  or deferred
compensation contract, agreement, commitment, undertaking,  understanding, plan,
program,  policy or  arrangement  (including one for severance or other payments
conditioned  upon a change of control of any of Team,  Moore Co. or Moore P.C.);
(iii) under any pension, profit-sharing,  stock purchase or any other such plan,
program or arrangement; or (iv) under any arrangement that has resulted or could
result in the  payment of any "excess  parachute  payment" as defined in Section
280G of the Code (without regard to subsection (b)(4) thereof.

    2.8      Employee and Fringe Benefit Plans.  Except as set forth in Schedule
2.8, each of Team,  Moore Co. and Moore P.C. does not maintain,  is not required
to contribute to and does not  otherwise  participate  in (and has not since its
inception maintained,  contributed to or otherwise  participated in) either: (i)
any employee pension benefit plan ("Pension/Profit  Sharing Plan"), any employee
welfare   benefit   plan   ("Welfare   Plan")   or   any   multi-employer   plan
("Multi-Employer  Plan") (as such terms are defined in the  Employee  Retirement
Income  Security  Act of 1974,  as amended  ("ERISA")),  including  any pension,
profit sharing, retirement, thrift, stock purchase or stock option plan: or (ii)
any other  compensation,  welfare,  fringe benefit or retirement plan,  program,
policy, understanding or arrangement of any kind whatsoever, whether

                                       17

<PAGE> 56



     formal or informal, providing for benefits for or the welfare of any or all
of the current or former  respective  employees or agents of Team,  Moore Co. or
Moore P.C. or their beneficiaries or dependents.

    2.9      Labor Relations.  Except as described in Schedule 2.9:  (a) each of
Team,  Moore Co. and Moore P.C. is (and,  since  December 31, 1996, has been) in
material  compliance  with all federal,  state,  local and other  applicable law
respecting  employment  and  employment  practices,   terms  and  conditions  of
employment and wages and hours;  (b) there is (and, since December 31, 1996, has
been) no unfair labor  practice,  complaint,  charge or other matter  against or
involving  Team,  Moore Co. or Moore  P.C.  pending  or  threatened  before  any
Governmental  Authority;  (c) there is no (and,  since December 31, 1996 has not
been) labor strike,  dispute,  organizing effort,  slow down,  stoppage or other
labor  difficulty  pending,  involving  or, to the best of Team's,  Moore Co.'s,
Moore P.C.'s and the Selling  Shareholders'  knowledge,  threatened,  against or
affecting any of Team, Moore Co. or Moore P.C.; (d) no  representation  question
exists,  or has existed since December 31, 1996,  with respect to the respective
employees of any of Team,  Moore Co. or Moore P.C.; (e) no grievance which might
have an adverse effect on any of Team, Moore Co. or Moore P.C. or on the conduct
of their respective businesses nor any arbitration  proceeding arising out of or
under collective bargaining agreements is pending, and no claim therefor exists;
and (f)  there is  (and,  since  December  31,  1996,  has  been) no  collective
bargaining agreement which is binding on any of Team, Moore Co. or Moore P.C.

     2.10     Litigation.  Except as disclosed in Schedule 2.10, none of Team,
Moore Co. or Moore P.C.  is, (and,  since  December  31,  1996,  has been),  (i)
engaged  in, a party to,  subject  to or  threatened  with any  claim,  legal or
equitable  action,  or other  proceeding  (whether as  plaintiff,  defendant  or
otherwise and regardless of the forum or the nature of the opposing party) which
seeks damages,  an injunction or other relief against any of Team,  Moore Co. or
Moore P.C., which action,  individually or collectively with such other actions,
would have a material  adverse  effect on Team,  Moore Co. and Moore P.C.  taken
together in the aggregate;  (ii) subject to any unasserted  claim, the assertion
of which is likely and which, if asserted,  will seek damages,  an injunction or
other  relief  against  any of  Team,  Moore  Co.  or  Moore  P.C.  which  claim
individually or  collectively  with such other  unasserted  claims if made would
have a material adverse effect on Team, Moore Co. and Moore P.C., taken together
in the  aggregate;  or (iii) a party to or  subject  to any  judgment,  order or
decree against it or its assets.  There has been no reservation of rights by any
insurance carrier, and, to the best of Team's, Moore Co.'s, Moore P.C.'s and the
Selling Shareholders'  knowledge, no such reservation is threatened,  concerning
the coverage of any of Team,  Moore Co. or Moore P.C. with respect to any matter
required to be disclosed pursuant to this Section 2.10.

         2.11     Compliance with Laws.  Except as set forth in Schedule 2.11:

     (a)  Generally.  Each of Team,  Moore Co. and Moore P.C. is (and during the
preceding five years has been) in compliance  with all applicable law (including
those involving antitrust, unfair competition, trade regulation,  antipollution,
environmental,  employment,  safety, health and food and drug matters).  Without
limiting the  foregoing,  none of Team,  Moore Co. or Moore P.C. has at any time
made any illegal  payments for  political  contributions,  any bribes or illegal
kickback payments,  or any practice or procedure which results or will result in
the illegal payment by or on behalf of any of Team, Moore Co. or Moore P.C. to a
person in connection with a referral to any of Team,  Moore Co. or Moore P.C. by
such person.



                                       18

<PAGE> 57



      (b)    Charges or Violations.  None of Team, Moore Co. or Moore P.C.
is (and during the  preceding  five years has not been) either  charged with, in
receipt of any notice or warning of, or under investigation with respect to, any
failure or alleged  failure  to  materially  comply  with any  provision  of any
applicable law.

     (c)    Permits.  Without limiting the foregoing:  (i) each of Team,
Moore Co. and Moore  P.C.  has all  material  occupancy  certificates  and other
licenses,  permits and certificates  ("Permits") required in connection with its
ownership,  possession,  use,  occupancy or  operation of any of the  Properties
owned,  leased  or used by it;  (ii) all of the  Permits  are in full  force and
effect;  (iii)  each of Team,  Moore  Co.  and Moore  P.C.  is (and has been) in
material  compliance  with the  Permits;  and (iv) none of the  Permits  will be
affected by, or require the consent of any party by reason of, the  transactions
contemplated  by this  Agreement  where such  effect or  failure to obtain  such
consent  would  materially  restrict or hamper the  operation  of any  operating
facility  owned,  leased  or used by Team,  Moore  Co.  or Moore  P.C.  or would
otherwise have a materially  adverse  effect on Team,  Moore Co. and Moore P.C.,
taken together in the aggregate.

      (d)    Environmental.

              (i)         No person or party (including, but not limited to, any
                  Governmental Authority) has asserted any claim or, to the best
                  of  Team's,   Moore  Co.'s,   Moore  P.C.'s  and  the  Selling
                  Shareholders'  knowledge,  has any  basis  for any  action  or
                  proceeding  against Team, Moore Co. or Moore P.C.  relating to
                  any Environmental  Matter (as defined below),  relating to any
                  existing or prior act, omission,  condition or state of facts.
                  None of Team,  Moore Co. or Moore P.C.  has  received  oral or
                  written  notice of, nor do Team,  Moore Co. or Moore P.C. have
                  reason to believe there is, any existing or pending violation,
                  citation,  claim or complaint  relating to the business of any
                  of Team,  Moore  Co.  or Moore  P.C.  or any  facility  now or
                  previously  owned or operated by Team, Moore Co. or Moore P.C.
                  arising under the Resource  Conservation and Recovery Act, the
                  Comprehensive    Environmental   Response   Compensation   and
                  Liability Act, the Superfund  Amendments  and  Reauthorization
                  Act, the Toxic Substances Control Act, the Safe Drinking Water
                  Act,  the federal  Water  Pollution  Control Act (Clean  Water
                  Act), the Clean Air Act, the  Powerplant  and Industrial  Fuel
                  Use  Act  of  1978,  the  National  Environmental  Policy  Act
                  (Environmental  Impact  Statement)  and  antipollution,  waste
                  control and disposal and environmental "cleanup" provisions of
                  similar  statutes  of  any  Governmental  Authority,  and  all
                  regulations  and standards  enacted  pursuant  thereto and all
                  permits  and  authorizations  issued in  connection  therewith
                  (collectively,  "Environmental Matters").  Schedule 2.11(d)(i)
                  sets forth all Environmental  Matters and all such violations,
                  citations, claims and complaints.

                (ii)        No underground tanks are now or have been located
                  at any facility now or  previously  owned or operated by Team,
                  Moore Co. or Moore P.C., and no toxic or hazardous  substances
                  have been generated, transported, treated, stored, disposed of
                  on or from  or  otherwise  deposited  in or on or  allowed  to
                  emanate from any such facility  (irrespective  of whether such
                  substances  remain at the facility or were  transferred  to or
                  otherwise disposed of off-site),  including the surface waters
                  and subsurface  waters  thereof,  which may support a claim or
                  cause  of   action   under   any   federal,   state  or  local
                  environmental statutes, ordinances, regulations or guidelines.
                  To the best of Team's, Moore Co.'s, Moore

                                       19

<PAGE> 58



                  P.C.'s and the Selling Shareholders'  knowledge,  there are no
                  underground  tanks at any facility now or previously  owned or
                  operated by any of Team, Moore Co. or Moore P.C.

    2.12     Bank Accounts.  Schedule 2.12 lists all bank, money market, savings
and similar accounts and safe deposit boxes of each of Team, Moore Co. and Moore
P.C.,  specifying the account numbers and the authorized  signatories or persons
having access to them.

     2.13 Transactions with Affiliates. Except as disclosed in Schedule 2.13, no
shareholder of any of Team, Moore Co. or Moore P.C. nor any person controlled by
some  combination  of them, no officer or director of any of Team,  Moore Co. or
Moore P.C., nor any "affiliate" or "associate" (as such terms are defined in the
rules and  regulations  of the  Securities  and  Exchange  Commission  under the
Securities Act of 1933, as amended (the "1933 Act")) of any of the foregoing:

     (a)  has  been  a  party  to  any  lease,  sublease,  contract,  agreement,
commitment, understanding or other arrangement of any kind whatsoever, involving
any such person and any of Team,  Moore Co. or Moore P.C. which is not disclosed
in Schedule 2.13;

     (b) owns directly or indirectly, in whole or in part, any property that any
of Team, Moore Co. or Moore P.C. uses or otherwise has rights in respect of; or

     (c) has any cause of action or other claim whatsoever  against, or owes any
amount to, any of Team,  Moore Co. or Moore P.C. other than (i) for compensation
(including  fringe  benefits) to officers and  employees  disclosed  pursuant to
Section 2.7 and for reimbursement of ordinary and necessary expenses incurred in
connection with  employment by any of Team,  Moore Co. or Moore P.C. and (ii) as
otherwise disclosed pursuant to this Agreement.

 2.14     Commissions.  Except for fees to be paid to Richard Kelly, the Selling
Shareholders'  financial advisor,  no person, firm or corporation is entitled to
any commission or broker's or finder's fee in connection  with the  transactions
contemplated  by this Agreement by reason of any act or omission of Team,  Moore
Co. or Moore P.C. or the Selling Shareholders.

  2.15     Generally.  No representation or warranty by Team, Moore Co. or
Moore P.C. or the Selling  Shareholders  in this  Agreement  or in any  Exhibit,
Schedule or closing  certificate  furnished  or to be  furnished to the Acquiror
pursuant to this Agreement or in connection with the  transactions  contemplated
by this  Agreement  contains or will contain any untrue  statement of a material
fact,  or omits or will omit to state a  material  fact,  necessary  to make the
statements herein or therein not misleading.

  2.16     Salary Equivalency Conversion.  The salary equivalency revenue
conversion  information  provided by Moore Co. and  attached  as  Schedule  2.16
accurately  represents  the  effect  on the  1996  revenues  of Moore  Co.  of a
conversion  in  reimbursement  for  occupational  therapy and speech  therapy to
salary equivalency  consistent with current methodology for physical therapy and
restating the average hourly rate at $45.00.  All the assumptions and other data
used in connection with such information  reflects in all material  respects the
actual  operations of Moore Co. for the periods set forth therein.  The Acquiror
acknowledges that such conversion is not a projection for future revenue.



                                       20

<PAGE> 59



                                    ARTICLE 3

                 REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR

     The Acquiror hereby represents and warrants to the Selling Shareholders on
the date of this Agreement and again on and as of the Closing Date as follows:

        3.1      Existence.  The Acquiror is a corporation duly incorporated,
organized,  entitled to conduct  business and validly  existing in good standing
under the laws of the State of Delaware.

        3.2      Authorization.

           (a)    The Acquiror has the right, power and authority to enter into
this Agreement and the related agreements referred to herein, including, but not
limited to, the Note,  the  Registration  Rights  Agreement  and the  Employment
Agreement, and to consummate the transactions  contemplated by, and otherwise to
comply with and to perform  under,  this  Agreement  and the related  agreements
referred to herein,  including,  but not limited to, the Note, the  Registration
Rights Agreement and the Employment Agreement;

           (b)    The execution and delivery by the Acquiror of this Agreement
and the related agreements  referred to herein,  including,  but not limited to,
the Note, the Registration  Rights Agreement and the Employment  Agreement,  and
the consummation by the Acquiror of the transactions  contemplated by, and other
compliance  with or performance  under,  them,  have been duly authorized by all
necessary  corporate  action  on the part of the  Acquiror  in  compliance  with
governing or applicable agreements,  instruments or other documents to which the
Acquiror is a party (including the certificate of incorporation  and By-laws (as
amended)) and applicable law; and

           (c)    This Agreement and the related agreements referred to herein,
including,  but not limited to, the Note, the Registration  Rights Agreement and
the Employment  Agreement,  constitute  the valid and binding  agreements of the
Acquiror  that are  enforceable  against the Acquiror in  accordance  with their
terms.

    3.3      Absence of Violations or Conflicts.  The execution and delivery by
the Acquiror of this  Agreement and the related  agreements  referred to herein,
including,  but not limited to, the Note, the Registration  Rights Agreement and
the  Employment  Agreement,   and  the  consummation  by  the  Acquiror  of  the
transactions  contemplated by, and other  compliance with or performance  under,
them,  do not (and will not with the  passage of time or the giving of notice or
both)  constitute a violation  of, be in conflict  with, or constitute a default
under (a) any term or provision of the certificate of  incorporation  or By-laws
(as  amended)  of  the  Acquiror,  (b)  any  contract,  agreement,   commitment,
undertaking or  understanding to which the Acquiror is a party or by which it or
any of its properties are subject or bound, (c) any judgment, decree or order of
any  governmental  authority to which the Acquiror or any of its  properties are
subject or bound, or (d) any applicable law.

     3.4      No Governmental Consents Required.  No consent, approval, order
or  authorization   of,  or  registration,   declaration  or  filing  with,  any
governmental  authority  on the part of the  Acquiror is required in  connection
with its execution or delivery of, or its performance  under,  this Agreement or
its consummation of the transactions contemplated by this Agreement.


                                       21

<PAGE> 60



No  notification  or  other  filing  is  required  pursuant  to the  HSR  Act in
connection with the transactions contemplated by this Agreement.

   3.5      Commissions.  No person, firm or corporation is entitled to any
commission  or broker's  or finder's  fee in  connection  with the  transactions
contemplated by this Agreement by reason of any act or omission of the Acquiror.

   3.6      Financial Statements of the Acquiror.  Attached as Schedule 3.6 are
copies of: (i) the consolidated  financial  statements of the Acquiror as of the
last day of  February  of 1996 and 1995 and for the fiscal  years ended the last
day of  February,  1996,  1995 and 1994,  all of which have been audited by KPMG
Peat Marwick LLP; and (ii) the unaudited  consolidated  financial  statements of
the  Acquiror  as of August 31,  1996 and 1995 and for the six months then ended
(all of  which,  including  in each  case the notes  thereto,  are  collectively
referred to in this Agreement as the "the Acquiror Financial  Statements").  The
Acquiror  Financial  Statements  are prepared in  accordance  with the books and
records of the  Acquiror,  are complete  and accurate in all material  respects,
fairly  present the financial  condition of the Acquiror as of their  respective
dates and the results of operations of the Acquiror for the  respective  periods
then  ended,  and have  been  prepared  in  accordance  with GAAP  applied  on a
consistent basis throughout the periods covered by such statements.

   3.7      SEC Filings Complete.  The Acquiror's most recent Form 10-K, all
intervening  Form 8-Ks and Form 10-Qs, the Acquiror's most recent annual meeting
proxy statement and most recent registration statement filed under the 1933 Act,
all as filed with the Securities and Exchange Commission ("SEC"), do not contain
a misstatement  of a material fact or an omission of a material fact required to
be stated therein or necessary to make the statements  therein not misleading as
of the time such  document  was filed or (if  filed  under the 1933 Act)  became
effective.  Since the filing of the most recent Form 10-K, no other document has
been required to be filed by the Acquiror with the SEC which has not been filed.

   3.8      Litigation.  Except as disclosed in Schedule 3.8 or in the Acquiror
Financial Statements, there is no litigation pending or, to the knowledge of the
Acquiror,  threatened  against the Acquiror which would have a material  adverse
affect on its  properties,  assets or business or which would  prevent or hinder
the  consummation  of the  transactions  contemplated  by this  Agreement or its
obligations thereunder.

  3.9      Shares Validly Issued.  All of the Shares to be issued to the Selling
Shareholders  pursuant to the terms of this  Agreement,  when issued pursuant to
the terms of this Agreement,  shall be duly and validly  issued,  fully paid and
non-assessable,  without  violation of any  preemptive or dissenters' or similar
rights and in full compliance with all applicable securities laws.


                                       22

<PAGE> 61




 3.10     Certain Indebtedness.  No action or event has occurred which, with
notice or lapse of time, or both,  would constitute a material default under the
Acquiror's  senior bank  indebtedness  or any other material  obligations of the
Acquiror for borrowed money.

                                      ARTICLE 4

       COVENANTS OF THE COMPANIES, MOORE P.C. AND THE SELLING SHAREHOLDERS

  4.1      Conduct of Business by the Companies and Moore P.C.  From
December  31,  1996 to the  Closing  Date,  except  for  the  Moore  P.C.  Asset
Assignment  and  transactions  which are  expressly  approved  in writing by the
Acquiror, which the Acquiror agrees will not be unreasonably withheld or delayed
more than five days  after the  Acquiror's  receipt of notice  thereof,  each of
Team,  Moore Co. and Moore P.C. shall refrain from and the Selling  Shareholders
shall use their  respective best efforts to ensure that each of Team,  Moore Co.
and Moore P.C. refrain from:

     (a)    subjecting any of Team's, Moore Co.'s or Moore P.C.'s
respective  assets  and  properties,   tangible  or  intangible,  to  any  lien,
encumbrance  or other claim of any kind,  exclusive of liens arising as a matter
of law in the ordinary course of business as to which there is no known default;

     (b) except  for sales of  inventory  in the  ordinary  course of  business,
selling, assigning,  transferring or otherwise disposing of any of Team's, Moore
Co.'s or Moore P.C.'s respective assets or properties;

     (c)    modifying, amending, altering or terminating (whether by
written or oral agreement,  or any manner of action or inaction) any of the Debt
Instruments,   Leases,  Intellectual  Property  Licenses,  Contracts  (including
employment contracts) or Insurance Policies;

     (d)    declaring, setting aside or paying any dividends or other
distributions, directly or indirectly, to the Selling Shareholders;

     (e)    increasing in any amount the benefits or compensation of the
Selling Shareholders or paying or agreeing to pay any bonus or commission to the
Selling Shareholders;  provided, however, that the annual salary payable by Team
to Marilyn A. Moore may be increased to $120,000 from $80,000; and

    (f)    taking or permitting any other action that, if taken or permitted
immediately prior to the execution of this Agreement,  would constitute a breach
of or an exception  to the  representations  and  warranties  in Section  2.2(d)
hereof.

     4.2 Affirmative  Covenants  Relating to the Companies,  Moore, P.C. and the
Selling  Shareholders.  From  December  31,1996 to the Closing  Date,  except as
required to complete the Moore P.C. Asset Assignment each of Team, Moore Co. and
Moore P.C. and the Selling  Shareholders  shall use its or their respective best
efforts to assure that each of Team, Moore Co. and Moore P.C. shall:

     (a) maintain each of Team's, Moore Co.'s and Moore P.C.'s

                                       23

<PAGE> 62



respective  property and professional  insurance in amounts and with coverage at
least  as  great as the  amounts  and  coverage  in  effect  on the date of this
Agreement;

      (b)    maintain, consistent with past practice, each of Team's, Moore
Co.'s  and  Moore  P.C.'s  respective  properties  in  good  repair,  order  and
condition,  reasonable  wear and tear excepted,  and use their  respective  best
efforts to preserve  the  Team's,  Moore Co.'s or Moore  P.C.'s  possession  and
control of all of its assets and properties;

     (c) use their  respective  best  efforts to keep in each of  Team's,  Moore
Co.'s and Moore P.C.'s employ the present officers and key employees,  including
the  professional  staff, of each of Team,  Moore Co. and Moore P.C. to preserve
the goodwill of those having  business  relations with Team,  Moore Co. or Moore
P.C.;

     (d) maintain the books, accounts and records of each of Team, Moore Co. and
Moore P.C. in a manner consistent with past practice;

     (e) allow,  upon prior notice to Team, Moore Co. or Moore P.C., as the case
may be, the Acquiror's  employees,  attorneys,  auditors,  accountants and other
authorized  representatives,  free and full access during Team's, Moore Co.'s or
Moore P.C.'s normal business hours to the facilities, plants, properties, books,
records, documents and correspondence of each of Team, Moore Co. and Moore P.C.,
including,  but not limited to, historical financial information with respect to
each of Team's, Moore Co.'s and Moore P.C.'s major contracts,  in order that the
Acquiror may have full  opportunity to make such  investigation  as the Acquiror
may desire of the  respective  businesses  of each of Team,  Moore Co. and Moore
P.C.; provided,  however, that such access shall not unreasonably interfere with
the  operations  of  Team,   Moore  Co.  or  Moore  P.C.,  and  any  contractual
confidentiality  requirements  between the Acquiror and Team,  Moore Co.,  Moore
P.C. or the Selling  Shareholders  existing prior to this Agreement shall remain
in full force and effect, as supplemented  hereby,  except as otherwise required
by law (including any required disclosure of the execution of this Agreement);

     (f) materially  comply with all applicable law relating to Team,  Moore Co.
or Moore  P.C.,  as the  case  may be,  or to the  conduct  of their  respective
businesses,  and conduct such respective  businesses in such a manner so that on
the Closing Date the representations and warranties  contained in this Agreement
shall be materially true as though such representations and warranties were made
on and as of such date,  except for changes  permitted  or  contemplated  by the
terms of this Agreement;

     (g) provide the Acquiror with prompt  written  notice of any adverse change
in  the  assets,  operations,   liabilities,  earnings,  business  or  condition
(financial or otherwise) of any of Team, Moore Co. or Moore P.C.;

     (h)  maintain in inventory  quantities  of goods,  supplies  and  materials
sufficient  to allow  each of Team,  Moore Co.  and Moore P.C.  to  continue  to
operate after the Closing Date free of any shortage of such items; and

     (i) operate their  respective  businesses  only in the ordinary course with
the  objective  of  preserving  each of  Team's,  Moore  Co.'s and Moore  P.C.'s
business organizations intact,  including using their respective best efforts to
retain the  services  of each of Team's,  Moore Co.'s and Moore  P.C.'s  present
officers and the goodwill of its suppliers, customers and others having business
relations with each of Team, Moore Co. and Moore P.C.

                                       24

<PAGE> 63



     4.3 Consents and Closing Conditions. Each of Team, Moore Co. and Moore P.C.
and the Selling  Shareholders  shall use their  respective  best  efforts (a) to
obtain such  consents  from third  parties  and to take other  actions as may be
appropriate in order to fulfill the closing conditions  contained in Section 7.4
hereof, and (b) to cause the  representations and warranties of the Companies in
Article 2 to be true and correct on and as of the Closing Date.

     4.4  Cooperation.  Each of Team,  Moore Co. and Moore P.C.  and the Selling
Shareholders  shall  furnish to the  Acquiror  such  information  regarding  the
Companies and the Selling Shareholders as the Acquiror may reasonably request.

     4.5 Waiver of "Parachute" Payments.  Each of Team, Moore Co. and Moore P.C.
and the Selling  Shareholders  shall deliver to the Acquiror  written waivers of
each bonus, incentive or deferred compensation contract, agreement,  commitment,
undertaking,  understanding,  plan,  program,  policy or  arrangement  regarding
senior  management  of each of Team,  Moore Co. and Moore P.C. for  severance or
other payments  conditioned upon a change of control of Team, Moore Co. or Moore
P.C., as the case may be.

     4.6 Repayment of  Indebtedness.  On or prior to the Closing  Date,  each of
Team,  Moore Co. and Moore P.C.  shall repay to the Selling  Shareholders  or to
persons or entities owned or controlled by the Selling  Shareholders  or convert
to  equity   securities  all  amounts  of  indebtedness   owed  to  the  Selling
Shareholders  or to persons  or  entities  owned or  controlled  by the  Selling
Shareholders.

     4.7 Moore P.C. Asset Assignment.  Prior to the Closing Date, Moore P.C. and
Moore Co. shall have completed the assignment of all of the assets of Moore P.C.
to Moore Co.

                                    ARTICLE 5

                         COVENANTS REGARDING TAX MATTERS

     5.1 Returns and  Payment of Taxes.  Each of Team,  Moore Co. and Moore P.C.
shall prepare and timely file all Returns and amendments  thereto required to be
filed  (except for such Returns for which  extensions  shall be timely filed) by
Team,  Moore Co. or Moore  P.C.,  as the case may be, on or before  the  Closing
Date;  such Returns and  amendments  shall be true,  correct and complete in all
material  respects.  Each of Team,  Moore Co.  and  Moore  P.C.  timely  pay and
discharge  on or before  the  Closing  Date and  before  the same  shall  become
delinquent and before  penalties  accrue thereon,  (i) all Taxes shown to be due
from Team,  Moore Co. or Moore  P.C.,  as the case may be, on such  Returns  and
amendments thereto, and (ii) any other Taxes payable by Team, Moore Co. or Moore
P.C., as the case may be, that become due before the Closing Date.

     5.2 Elections  and  Settlements.  Without the prior written  consent of the
Acquiror,  none of Team,  Moore  Co. or Moore  P.C.  shall  make or  change  any
election,  change an  annual  tax  accounting  period,  adopt or change  any tax
accounting  method,  file any amended Return,  enter into any closing agreement,
settle  any Tax claim or  assessment,  surrender  any right to claim a refund of
Taxes, consent to any extension or waiver of the limitation period applicable to
any Tax  claim or  assessment,  or take  any  other  action  or omit to take any
action,  if  any  such  election,   adoption,   change,  amendment,   agreement,
settlement,  surrender,  consent or other action or omission may have the effect
of increasing the Tax liability or decreasing any Tax Asset

                                       25

<PAGE> 64



of Team, Moore Co., Moore P.C., the Acquiror, or any affiliate of the Acquiror.

     5.3  Cooperation  and Records  Retention.  The Selling  Shareholders  shall
provide, and shall cause their accountants and other representatives to provide,
to the Acquiror on a timely basis, the information (including but not limited to
all work  papers and records  relating  to Team,  Moore Co. and Moore P.C.) that
they or their accountants or other representatives have within their control and
that may be reasonably  necessary in connection  with the preparation of any and
all Returns required to be filed by the Acquiror,  Team, Moore Co. or Moore P.C.
or any other  examination by any taxing authority or  administrative  proceeding
relating to Taxes. The Selling  Shareholders agree that they will cooperate with
the   Acquiror,   Team,   Moore  Co.  and  Moore  P.C.   and  their   respective
representatives,  in  a  prompt  and  timely  manner,  in  connection  with  the
preparation  and  filing  of any and all  Returns  required  to be  filed by the
Acquiror,  Team, Moore Co. or Moore P.C. or any other  examination by any taxing
authority or administrative proceeding relating to Taxes.

     5.4 Post-Closing Audits and Other Proceedings.  Each of Team, Moore Co. and
Moore P.C., the Selling  Shareholders  and the Acquiror shall give prompt notice
to one  another of any audits of Taxes of Team,  Moore  Co.,  Moore P.C.  or the
Selling  Shareholders in respect of such Taxes of Team, Moore Co. and Moore P.C.
for periods that end prior to the Closing Date or that include the Closing Date.
The Selling Shareholders shall cooperate with the Acquiror in the conduct of any
audit or other proceeding which relates to any actual or potential  liability of
Acquiror,  Team,  Moore  Co. or Moore  P.C.,  and may  participate  at their own
expense,  provided that the Selling Shareholders shall have the right to control
the conduct of any such audit or proceeding  for which the Selling  Shareholders
(a) agree that any  resulting Tax is covered by the indemnity in Section 10.1 of
this  Agreement,  and (b) demonstrate to the Acquiror their ability to make such
indemnity payment. Notwithstanding the foregoing, the Selling Shareholders shall
not settle or otherwise resolve any such claim,  suit or proceeding  without the
consent of the Acquiror, which shall not be unreasonably withheld.

     5.5 Clearance  Certificates.  On or prior to the Closing Date,  the Selling
Shareholders  shall,  at their sole cost and  expense,  deliver to the  Acquiror
clearance  certificates or similar document(s) that may be required by any state
taxing  authority  in order to relieve the  Acquiror of any duty to withhold any
portion of the consideration payable pursuant to this Agreement.

     5.6 Section 338(h)(10) Elections;  Purchase Price Allocations. The Acquiror
and the Selling  Shareholders  shall in a timely manner take any and all actions
necessary to make an election with respect to each of Team,  Moore Co. and Moore
P.C. under Code section  338(h)(10)  (and the Treasury  Regulations  promulgated
thereunder)  and any  comparable  provisions of state,  local or foreign Tax law
(the  "338(h)(10)  Election").  The allocation of the "modified  adjusted deemed
sale price" (within the meaning of Income Tax  Regulation  ss.1.338(h)(10)-1(f))
among the assets of Team,  Moore Co. or Moore P.C., as the case may be, shall be
made in accordance with the fair market values of such assets as shall be agreed
to by the  Acquiror  and the  Selling  Shareholders  no later than  thirty  days
following the Closing Date in a manner  consistent with section 338 of the Code.
The Acquiror and the Selling  Shareholders  acknowledge that such allocation has
been arrived at by arm's length negotiation.  None of the Selling  Shareholders,
Team,  Moore Co., Moore P.C. or the Acquiror shall take a position in any Return
or examination or other  administrative  or judicial  proceeding  (including any
ruling request)  relating to any Tax that is inconsistent  with such allocation.
The Acquiror shall be responsible  for and control the preparation and filing of
the 338(h)(10) Election. The Selling Shareholders shall

                                       26

<PAGE> 65



prepare,  execute and deliver to the Acquiror such documents or forms (including
Section 338 Forms,  as defined  below) as the Acquiror  shall  request or as are
required by applicable law for an effective  338(h)(10)  Election.  "Section 338
Forms" shall mean all returns, documents,  statements, schedules and other forms
that are  required to be  submitted in  connection  with a 338(h)(10)  Election,
including,  without limitation,  U. S. Treasury Department Form 8023-A (together
with any schedules or attachments thereto). Any Taxes imposed on Team, Moore Co.
or Moore P.C. or the Selling  Shareholders as a result of the deemed transfer of
the assets of the Companies  pursuant to the 338(h)(10)  Election shall be borne
solely by the Selling Shareholders.  It is understood that the Companies and the
Selling  Shareholders are making no representations to the Acquiror with respect
to the effects of the  338(h)(10)  Election for Tax  purposes,  and neither this
Section  nor any  provision  of  Article  10  hereof  shall be  construed  as an
undertaking  by Team,  Moore Co. or Moore P.C.  or the Selling  Shareholders  to
indemnify  the  Acquiror  for any  failure of the  Acquiror  to receive  any Tax
benefits which it anticipates  receiving as a result of the 338(h)(10) Election.
Nothing in the immediately  preceding sentence,  however,  shall modify or limit
the obligation of the Selling  Shareholders  for any failure to take the actions
described in the first sentence of this Section 5.6.

                                    ARTICLE 6

                            COVENANTS OF THE ACQUIROR

     6.1  Confidentiality of Information.  Prior to the Closing Date (and if the
Closing does not occur, indefinitely),  the Acquiror and its employees,  agents,
auditors,  attorneys and other authorized representatives shall not, without the
Selling  Shareholders'  prior  written  consent,  communicate  or divulge to any
person  or  entity  or  use  for  their  benefit  any  information,  other  than
information which is otherwise available to the Acquiror or which becomes public
other than as a result of their action, concerning either Team's, Moore Co.'s or
Moore P.C.'s  financial  conditions  or business,  or  concerning  any marketing
information,   equipment,  methods,  research,  clients,  contracts,  suppliers,
customers,  contracts  or other data of or  related to Team,  Moore Co. or Moore
P.C. or other confidential  matters possessed,  owned or used by Team, Moore Co.
or Moore P.C. that may be  communicated  to, acquired by or learned by them. All
correspondence, records, files, tax returns, financial statements and other data
relating to Team,  Moore Co. or Moore P.C.  which shall come into the possession
of the  Acquiror  shall  remain and be deemed to be the sole  property  of Team,
Moore  Co.  or  Moore  P.C.,  as the  case  may be,  until  consummation  of the
transactions  contemplated  hereby. If the transactions  contemplated hereby are
not  consummated  for any reason,  then the Acquiror shall return any and all of
the  foregoing  material to Team,  Moore Co. or Moore P.C.,  as the case may be,
together with any and all copies thereof made. The confidentiality provisions of
this  Agreement   shall   supplement,   and  not  supersede,   any   contractual
confidentiality requirements between the Acquiror, Team, Moore Co. or Moore P.C.
or the  Selling  Shareholders  and  such  existing  contractual  confidentiality
requirements  shall  remain in full force and effect,  as  supplemented  hereby,
except as otherwise  required by law (including  any required  disclosure of the
execution of this Agreement).

     6.2  Receipt  of  Consents  and  Satisfaction  of Closing  Conditions.  The
Acquiror  shall use its best  efforts  (a) to obtain  such  consents  from third
parties  and to take other  actions as may be  required  in order to fulfill the
closing  condition  contained  in  Section  7.4  hereof  and  (b) to  cause  the
representations  and  warranties  of the  Acquiror  in  Article 3 to be true and
correct on and as of the Closing Date.

     6.3 Approval of Future Business Opportunities; EBIT Credit or Adjustment


                                       27

<PAGE> 66



in Certain Instances.

     (a) From the Closing Date until December 31, 2000, the Acquiror shall allow
Team and Moore Co. to continue to conduct the  operations  of Team and Moore Co.
as such  operations are currently  being conducted as of the Closing Date in all
material  respects.  Any new business  opportunities that the Acquiror wishes to
have  Marilyn  A. Moore  manage  within  the  operations  of Team and Moore Co.,
including  but not limited to  acquisitions  and new lines of business,  will be
subject to the approval of the Selling  Shareholders,  on the one hand,  and the
Board  of  Directors  and the  President  and  Chief  Executive  Officer  of the
Acquiror, on the other hand.

     (b) To the extent that the Acquiror and the Selling Shareholders agree that
Marilyn A. Moore will manage an entity or  business  to be  acquired  within the
operations  of Team and Moore Co.,  the  Acquiror  and the Selling  Shareholders
shall  negotiate  in good faith to  determine  the  appropriate  incentives  for
Marilyn A. Moore and/or the Selling Shareholders, including, but not limited to,
(i) bonuses, (ii) inclusion of all or a portion of the earnings of such acquired
entity,  less the costs of capital and the  amortization  of goodwill  and other
intangible assets related to the acquisition, in the Cumulative EBIT (as defined
and determined pursuant to Schedule 1.5 hereof) of the Companies for the purpose
of  calculating  the amount of  Contingent  Consideration  to which the  Selling
Shareholders  are  entitled  with  respect to the fiscal  year(s)  during  which
Marilyn A. Moore  manages  such  acquired  entity,  or (iii)  adjustment  of the
computation of Cumulative  EBIT (as defined and determined  pursuant to Schedule
1.5 hereof).

     (c) Notwithstanding  any of the foregoing  subsections of this Section 6.3,
in the event of the  consummation  by the  Companies of the proposed  outpatient
therapy clinic arrangement with Premier South, and/or the potential  acquisition
identified  by Marilyn A. Moore to the  Acquiror of a contract  therapy  company
based in Jefferson  City,  Missouri,  all of the earnings of such  operations or
acquired  entities,  less the costs of capital and the  amortization of goodwill
and other intangible assets related to the acquisition, shall be included in the
Cumulative  EBIT (as defined and determined  pursuant to Schedule 1.5 hereof) of
the  Companies  for  the  purpose  of  calculating   the  amount  of  Contingent
Consideration to which the Selling Shareholders are entitled with respect to the
fiscal year(s) during which Marilyn A. Moore manages such acquired entity.

     (d) If,  subsequent to the Closing Date,  the Acquiror (i) (A)  consummates
the  acquisition of an entity that provides  physical,  occupational  and speech
therapy  staffing and management  services to nursing homes,  long-term care and
outpatient  facilities  and (B) such entity has a facility or business  location
within a 50-mile  radius of any facility or business  location  being managed by
Marilyn A. Moore,  and (ii) determines  that the competing  facility will not be
managed by Marilyn A. Moore,  then the  Acquiror  and the  Selling  Shareholders
shall determine the appropriate adjustment of the computation of Cumulative EBIT
(as defined and determined pursuant to Schedule 1.5 hereof) to take into account
any negative effect on the revenues and EBIT of the Companies directly resulting
from the  competition  between  the  entity  to be  acquired  and the  Companies
existing facilities.

     6.4 Release from Guarantees. Following the Closing Date, the Acquiror shall
cooperate with the Selling  Shareholders  and use  reasonable  efforts to obtain
release of the guarantees by the Selling Shareholders identified on Schedule 6.4
hereto (the  "Guarantees").  To the extent that  Acquiror is unable to negotiate
the full release of the Selling Shareholders from

                                       28

<PAGE> 67



such  Guarantees  upon terms  satisfactory  to the Acquiror,  the Acquiror shall
indemnify  the  Selling  Shareholders  from  any and  all  liability  for  their
respective obligations under the Guarantees.

                                    ARTICLE 7

                      THE ACQUIROR'S CONDITIONS TO CLOSING

     The obligation of the Acquiror to consummate the transactions  contemplated
by  this  Agreement  shall  be  subject  to the  fulfillment  to the  Acquiror's
reasonable  satisfaction of each of the following  conditions on or prior to the
Closing Date:

     7.1 Continued Truth of Warranties.  The  representations  and warranties of
each of Team,  Moore Co. and Moore P.C. and the Selling  Shareholders  contained
herein shall be true in all material respects on and as of the Closing Date with
the same  force and  effect  as  though  made as of such  date,  except  for any
variations permitted by this Agreement.

     7.2  Performance of Covenants.  Each of Team,  Moore Co. and Moore P.C. and
the Selling  Shareholders  shall have  performed  in all  material  respects all
covenants  and  obligations  and  complied  in all  material  respects  with all
conditions  required by this Agreement to be performed or complied with by it on
or prior to the Closing Date.

     7.3 No Material  Adverse Change.  There shall have been no material adverse
change  to  the  properties,  operations,  liabilities,  earnings,  business  or
condition  (financial  or  otherwise)  of Team,  Moore Co. or Moore  P.C.  since
December 31, 1996.

     7.4  Permits  and  Consents.  The  parties  hereto  shall have  secured all
appropriate orders,  consents,  approvals and clearances,  in form and substance
satisfactory to the Acquiror, by and from all third parties reasonably requested
by the Acquiror,  including but not limited to governmental  authorities,  whose
order,  consent and approval or clearance is required by contract or  applicable
law  for the  consummation  of the  transactions  herein  contemplated,  and the
consent  of the  Acquiror's  senior  lender  with  regard to the  documents  and
transactions contemplated by this Agreement.

     7.5 Closing  Documents.  The Companies and the Selling  Shareholders  shall
have delivered all documents  required to be delivered by it at the Closing,  as
more  specifically  set forth in Article  9, in each case in form and  substance
satisfactory to the Acquiror.

     7.6  Employment  Agreement.  Marilyn A. Moore  shall have  entered  into an
employment  agreement  with the  Acquiror,  Team and Moore Co.  superseding  any
respective current employment agreement with Team and Moore Co. in substantially
the form attached hereto as Exhibit E (the "Employment Agreement").

     7.7 Moore  P.C.  Asset  Assignment.  Moore  P.C.  and Moore Co.  shall have
consummated the Moore P.C. Asset Assignment.


                                       29

<PAGE> 68



     7.8 Release of Moore Co. from Lease. On or prior to the Closing Date, Moore
Co. and the Selling  Shareholders shall obtain the release of Moore Co. from the
automobile  lease set forth on Schedule  2.4(b) to this  Agreement,  without any
continuing liability of the Companies thereunder.

     7.9 Certain  Employees of the  Companies.  On or prior to the Closing Date,
except with respect to Kass Woodliff,  an employee of Team, the Companies  shall
remove from the payroll of the Companies  the employees  listed in Section II(c)
of Schedule 1.4, without any continuing  liability of the Companies with respect
to such employees.

     7.10 Disability  Policy. On or prior to the Closing Date, Moore Co. and the
Selling  Shareholders shall terminate any obligations of the Companies under the
disability  policy  listed  in  Section  II(E)  of  Schedule  1.4,  without  any
continuing liability of the Companies thereunder.

     7.11  Extinguishment of Indebtedness.  On or prior to the Closing Date, the
Companies and the Selling Shareholders shall extinguish all indebtedness owed by
the Companies to the Selling  Shareholders  (as reflected in the Team, Moore Co.
and Moore P.C. Financial Statements).


                                    ARTICLE 8

                 THE SELLING SHAREHOLDERS' CONDITIONS TO CLOSING

     The obligation of the Selling  Shareholders to consummate the  transactions
contemplated  by this  Agreement  shall be  subject  to the  fulfillment  to the
Selling Shareholders'  reasonable satisfaction of the following conditions on or
prior to the Closing Date:

     8.1 Continued Truth of Warranties.  The  representations  and warranties of
the Acquiror herein  contained shall be true in all material  respects on and as
of the  Closing  Date with the same force and  effect as though  made as of such
date, except for any variations permitted by this Agreement.

     8.2  Performance  of Covenants.  The Acquiror  shall have  performed in all
material  respects all  covenants and  obligations  and complied in all material
respects  with all  conditions  required by this  Agreement  to be  performed or
complied with by it on or prior to the Closing Date.

     8.3  Permits  and  Consents.  The  parties  hereto  shall have  secured all
appropriate orders,  consents,  approvals and clearances,  in form and substance
reasonably  satisfactory  to the  Companies,  by and  from  all  third  parties,
including but not limited to  governmental  authorities,  whose order,  consent,
approval  or  clearance  is  required  by  contract  or  applicable  law for the
consummation of the transactions herein contemplated.

     8.4 Closing Documents. The Acquiror shall have delivered the Base Price and
all  documents  required  to  be  delivered  by  it  at  the  Closing,  as  more
specifically set forth in Article 9, in form and substance  satisfactory to each
of Team, Moore Co., Moore P.C. and the Selling Shareholders.



                                       30

<PAGE> 69



     8.5 No Material  Adverse Change.  There shall have been no material adverse
change to the properties, operations,  liabilities, earnings, business condition
(financial or otherwise) of the Acquiror since December 31, 1996.

                                    ARTICLE 9

                      DOCUMENTS TO BE DELIVERED AT CLOSING

     9.1   Documents  to  be  Delivered  by  the   Companies   and  the  Selling
Shareholders. At the Closing, the Companies and the Selling Shareholders shall:

     (a) Deliver to the Acquiror a certificate  of incumbency  and copies of the
resolutions  adopted by the  respective  Boards of Directors of each of Team and
Moore Co.,  authorizing  the  execution  and delivery of this  Agreement and the
consummation of the transactions  contemplated  hereby, duly certified as of the
Closing  Date by the  Secretary  or an  Assistant  Secretary of each of Team and
Moore Co.;

     (b) Deliver to the Acquiror,  a certificate of each of Team,  Moore Co. and
Moore P.C. and the Selling  Shareholders,  dated as of the Closing  Date, to the
effect that the  representations and warranties of the Companies and the Selling
Shareholders as contained in Article 2 of this Agreement are true and correct as
of such Closing  Date,  and that the  covenants  of each of Team,  Moore Co. and
Moore P.C. and the Selling Shareholders as contained in Articles 4 and 5 of this
Agreement  required to be performed or complied  with on or prior to the Closing
Date have been so performed or complied with;

     (c)  Deliver  to the  Acquiror  certificates  of  good  standing  or  their
equivalent, dated not more than thirty days prior to the Closing Date, attesting
to the good  standing of each of Team and Moore Co. as a  corporation  under the
laws of the State of  Missouri  and each other  jurisdiction  listed on Schedule
2.1(e);

     (d) To the extent any  consents or  approvals  shall be necessary to any of
the transactions herein contemplated, deliver to the Acquiror copies of all such
consents or approvals;

     (e) Deliver to the Acquiror (i) the articles of incorporation,  as amended,
of each of Team and Moore Co.,  certified by the Secretary of State of the State
of Missouri as of a date not more than ten days prior to the Closing  Date,  and
(ii) the By-laws, as amended, of each of Team and Moore Co., certified as of the
Closing  Date by the  Secretary  or an  Assistant  Secretary of each of Team and
Moore Co., respectively;

     (f) Deliver to the Acquiror an opinion of Menees, Whitney & Burnet, counsel
for the Selling Shareholders and the Companies and Moore P.C., as to the matters
set forth in Exhibit F;

     (g) Deliver to the Acquiror  the original  corporate  minute  books,  stock
transfer books and corporate seal of each of Team and Moore Co.; and

     (h) Deliver to the  Acquiror  certificate(s)  representing  the Shares with
duly  executed  and valid  stock  powers  attached  in form for  transfer to the
Acquiror and otherwise acceptable in form and substance to the Acquiror; and


                                       31

<PAGE> 70



     (i) Deliver to the Acquiror  documentation  evidencing the  consummation of
the Moore P.C. Asset Assignment,  in form and substance reasonably  satisfactory
to the Acquiror.

     (j) Deliver to the  Acquiror the Team,  Moore Co. and Moore P.C.  Financial
Statements in accordance with Section 2.2(a) of this Agreement.

     (k) Deliver to the  Acquiror  evidence  that all  indebtedness  owed by the
Companies to the Selling  Shareholders  (as reflected in the Team, Moore Co. and
Moore P.C. Financial Statements), has been extinguished or converted to equity.


     9.2 Documents to be Delivered by the Acquiror. At the Closing, the Acquiror
shall:

     (a) Deliver to the Companies and the Selling  Shareholders a certificate of
incumbency  and copies of the  resolutions  adopted by the Board of Directors of
the Acquiror,  authorizing  the execution and delivery of this Agreement and the
consummation of the transactions  contemplated  hereby, duly certified as of the
Closing Date by the Secretary or an Assistant Secretary of the Acquiror;

     (b) Deliver to the Companies and the Selling  Shareholders a certificate of
the   Acquiror,   dated  as  of  the  Closing  Date,  to  the  effect  that  the
representations and warranties of the Acquiror as contained in Article 3 of this
Agreement are true and correct as of such Closing  Date,  and that the covenants
of the Acquiror as contained in Articles 5 and 6 of this  Agreement  required to
be  performed  or  complied  with on or prior to the  Closing  Date have been so
performed or complied with;

     (c) To the extent any  consents or  approvals  shall be necessary to any of
the  transactions  herein  contemplated,  the  Acquiror  shall  deliver  to  the
Companies and the Selling  Shareholders upon request copies of all such consents
or approvals as obtained by the Acquiror;

     (d) Deliver to the  Companies  and the Selling  Shareholders  an opinion of
Thompson  Coburn,  counsel  for the  Acquiror,  as to the  matters  set forth in
Exhibit G;

     (e)  Deliver  to the  Selling  Shareholders  the Base Price as set forth in
Sections 1.2 and 1.3 of this Agreement; and

     (f) Execute and deliver to the Selling  Shareholders a Registration  Rights
Agreement substantially in the form of Exhibit H attached hereto and made a part
hereof (the "Registration Rights Agreement").

 
                                   ARTICLE 10

                                 INDEMNIFICATION

     10.1 Indemnification of the Acquiror.  By execution of this Agreement,  the
Selling  Shareholders  hereby acknowledge that the Acquiror shall be entitled to
full indemnification by the Selling Shareholders of the following:



                                       32

<PAGE> 71



     (a) any  and  all  loss,  liability  or  damage  (including  judgments  and
settlement  payments)  incurred by Team,  Moore Co.,  Moore P.C. or the Acquiror
incident to, arising in connection with or resulting from any misrepresentation,
breach, nonperformance or inaccuracy of any representation, warranty or covenant
(to the extent such covenant, other than any covenant set forth in Section 5, is
to be performed prior to the Closing Date) by the Selling  Shareholders  made or
contained in this  Agreement or in any Exhibit,  Schedule,  certificate or other
document  executed and delivered to the Acquiror by the Selling  Shareholders or
by or on behalf  of Team,  Moore Co. or Moore  P.C.  under or  pursuant  to this
Agreement or the transactions contemplated herein;

     (b) any and all loss, liability or damage relating to Environmental Matters
which  arise  from or relate  to  either  Team's,  Moore  Co.'s or Moore  P.C.'s
operations  prior to, or the condition of facilities  owned or operated by Team,
Moore Co. or Moore P.C. as of, the Closing Date;

     (c) any and all loss,  liability  or damage  relating  to Taxes which arise
from or relate to (i) Team's,  Moore Co.'s or Moore P.C.'s  activities  prior to
the Closing  Date;  (ii) Tax periods  ending on or prior to the Closing Date; or
(iii)  the  transactions  contemplated  by this  Agreement  and  the  338(h)(10)
Election,  in each case  except to the extent that any  specific  amount for any
such Tax was  recorded on Team's,  Moore Co.'s or Moore P.C.'s books and reduced
Team's, Moore Co.'s and Moore P.C.'s Combined Net Book Value or Combined Working
Capital for the purposes of Section 1.4;

     (d) each of Team's,  Moore Co.'s and Moore P.C.'s  obligations with respect
to any of the respective employees of any of Team, Moore Co. or Moore P.C. under
any pension, profit sharing or retirement plan, collective bargaining agreement,
consulting  agreement,  life insurance or other employee welfare benefit plan or
vacation  policy  relating  to any  time  prior  to  the  Closing  Date,  and in
particular,  obligations for medical or life insurance benefits of any former or
retired employees of any of Team, Moore Co. or Moore P.C. or their dependents;

     (e) except to the extent of  payments  actually  received  by the  Acquiror
pursuant to any insurance  policies under which any of Team,  Moore Co. or Moore
P.C. is insured,  any and all loss, liability or damage (including judgments and
settlement payments) incurred by them incident to, arising in connection with or
resulting from any act or failure to act by the Selling  Shareholders  or by any
of Team,  Moore Co.  or Moore  P.C.  or their  respective  employees,  including
professional malpractice liability, prior to the Closing Date; and

     (f) any and all costs,  expenses and all other actual  damages  incurred in
claiming, contesting or remedying any breach, misrepresentation,  nonperformance
or inaccuracy  described above, or in enforcing their rights to  indemnification
hereunder,  including, by way of illustration and not limitation,  all legal and
accounting fees, other professional  expenses and all filing fees and collection
costs  incident  thereto  and all such  fees,  costs and  expenses  incurred  in
defending claims which, if successfully prosecuted, would have resulted in loss,
liability, costs, expense or other damage.

     (g) In the event that the Selling  Shareholders  reimburse the Acquiror for
any Account  Receivable which is  uncollectible,  the Acquiror shall immediately
assign all rights in and to such Account Receivable to the Selling Shareholders.
The  Selling  Shareholders  thereafter  shall  have  the  right  to  pursue  the
collection of such  receivables and to utilize the employees,  resources,  books
and records of Team, Moore Co. or Moore P.C., as the case may


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<PAGE> 72



be, in such collection  process;  provided that such efforts are in the ordinary
course of business.

     (h) In the event that Medicare or Medicaid regulatory  authorities assert a
claim for  adjustment  to the cost  reimbursement  items of Team for a period or
periods prior to the Closing Date, the Selling Shareholders shall determine if a
reasonable basis for the adjustment exists. If the Selling Shareholders believe,
in  their  reasonable  judgment,  that  there  is no  reasonable  basis  for the
adjustment asserted by the Medicare or Medicaid  authorities,  Team shall appeal
such adjustment at the request of the Selling  Shareholders.  To the extent that
Team is  reimbursed  in the  then-current  year for the costs of  appealing  the
disallowance,  Acquiror  shall make no claim pursuant to this Article 10 against
the Selling  Shareholders for  indemnification  of the cost of such appeal.  If,
however,  the Acquiror incurs out-of-pocket costs or other expenses that are not
reimbursable  or if the Acquiror is obligated  to make any  non-reimbursed  cash
payments  while the appeal is pending or if the  Acquiror  is subject to a final
judgment by the Medicare or Medicaid regulatory authorities, the indemnification
obligations as set forth in this Article 10 of the Selling  Shareholders  to the
Acquiror with respect to such costs and expenses  shall remain in full force and
effect.  If the Acquiror is reimbursed for any  out-of-pocket  costs or expenses
after  payment  by the  Selling  Shareholders  pursuant  to the  indemnification
provisions  of this  Article  10,  Acquiror  shall  promptly  pay to the Selling
Shareholders for which the Acquiror has received reimbursement.

     10.2  Indemnification  of the Selling  Shareholders.  By  execution of this
Agreement,  the Acquiror hereby acknowledges that the Selling Shareholders shall
be entitled to full indemnification by the Acquiror of the following:

     (a) any  and  all  loss,  liability  or  damage  (including  judgments  and
settlement payments) incurred by the Selling  Shareholders  incident to, arising
in   connection   with  or  resulting   from  any   misrepresentation,   breach,
nonperformance or inaccuracy of any representation, warranty or covenant (to the
extent  such  covenant  is to be  performed  prior to the  Closing  Date) by the
Acquiror  made or  contained  in this  Agreement  or in any  Exhibit,  Schedule,
certificate or other document executed and delivered to the Selling Shareholders
by the Acquiror; and

     (b) any and all costs,  expenses and all other actual  damages  incurred in
claiming, contesting or remedying any breach, misrepresentation,  nonperformance
or inaccuracy  described  above,  or in enforcing its rights to  indemnification
hereunder,  including, by way of illustration and not limitation,  all legal and
accounting fees, other professional  expenses and all filing fees and collection
costs  incident  thereto  and all such  fees,  costs and  expenses  incurred  in
defending claims which, if successfully prosecuted, would have resulted in loss,
liability, cost, expense or other damages.

     (c) In case a claim shall be made or any action shall be brought in respect
of which recovery  through  indemnity will lie against the Acquiror  pursuant to
any provision of this Agreement,  the Selling Shareholders shall promptly notify
the Acquiror in writing,  and the  Acquiror  shall  promptly  assume the defense
thereof, including, with the consent of the Selling Shareholders,  which consent
shall not be unreasonably  withheld,  the employment of counsel,  the payment of
all expenses and the right to negotiate and consent to  settlement.  The Selling
Shareholders shall have the right to employ separate counsel with respect to any
such claim or in any such action and to participate in the defense thereof,  but
the fees and  expenses  of such  counsel  shall be at the expense of the Selling
Shareholders  unless  the  employment  of such  counsel  has  been  specifically
authorized in writing by the Acquiror or there is a conflict of


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<PAGE> 73



interest   that  would  prevent   counsel  for  the  Acquiror  from   adequately
representing  both Team,  Moore Co. or Moore P.C. and the  Acquiror,  on the one
hand,  and the Selling  Shareholders,  on the other.  The Acquiror  shall not be
liable for any  settlement  of any such  action  effected  without  its  written
consent,  but if settled with the written consent of the Acquiror or if there be
a final  judgment for the plaintiff in any such action for which the Acquiror is
required  hereunder to assume the defense,  the Acquiror agrees to indemnify and
hold harmless the Selling Shareholders from and against any loss or liability by
reason of such settlement or judgment.

     10.3 Notice of and Procedures for Collecting Indemnification.

     (a) Initial Claim Notice. When either the Acquiror, on the one hand, or the
Selling  Shareholders,  on the other hand, become aware of a situation which may
result in  damages  for which it or they  would be  entitled  to be  indemnified
hereunder,  such party (the  "Indemnitee")  shall  submit a written  notice (the
"Initial  Claim  Notice") to the other party from which  indemnification  may be
forthcoming  pursuant to Section 10.1 or 10.2 (the  "Indemnitor") to such effect
with reasonable promptness after it first becomes aware of such matter and shall
furnish the Indemnitor with such  information as it has available  demonstrating
its right or possible  right to receive  indemnity.  If the  potential  claim is
predicated on, or later results in, the filing by a third party of any action at
law or in equity (a "Third  Party  Claim"),  the  Indemnitee  shall  provide the
Indemnitor  with a  supplemental  Initial  Claim  Notice not later than ten (10)
calendar  days prior to the date on which a responsive  pleading  must be filed,
and shall  also  furnish a copy of such  claim (if made in  writing)  and of all
documents  received from the third party in support of such claim.  In addition,
each Initial Claim Notice shall name,  when known,  the person or persons making
the assertions which are the basis for such claim.  Failure by the Indemnitee to
deliver an Initial  Claim Notice or an update  thereof in a timely  manner shall
not relieve the Indemnitor of any of its obligations under this Agreement except
to  the  extent  that  actual  monetary  prejudice  to  the  Indemnitor  can  be
demonstrated.

     (b) Rights of  Indemnitor.  If, prior to the expiration of 30 calendar days
from the mailing of an Initial  Claim Notice (the "Claim  Answer  Period"),  the
Indemnitor  shall request in writing that such claim not be paid, the same shall
not be paid,  and the  Indemnitor  shall settle,  compromise or litigate in good
faith  such  claim,  and  employ  attorneys  of its  choice to do so;  provided,
however,  that Indemnitee shall not be required to refrain from paying any claim
which has matured by court judgment or decree,  unless appeal is taken therefrom
and proper  appeal  bond posted by the  Indemnitor,  nor shall it be required to
refrain from paying any claim where such action would result in the  foreclosure
of a lien  upon any of its  assets  or a  default  in a lease or other  contract
except a lease or  other  contract  which is the  subject  of the  dispute.  The
Indemnitee  shall  cooperate  fully to make  available to the Indemnitor and its
attorneys,  representatives  and agents,  all  pertinent  information  under its
control.  The  Indemnitee  shall have the right to elect to settle or compromise
all other contested  claims with respect to which the Indemnitor has not, within
the Claim Answer Period,  acknowledged  in writing (i) liability  therefor,  and
(ii) its election to assume full responsibility for the settlement,  compromise,
litigation and payment of such claim.

     (c)  Final  Claims  Statement.  At  such  time as  damages  for  which  the
Indemnitor is liable  hereunder  are incurred by  Indemnitee  by actual  payment
thereof or by entry of a final  judgment,  the Indemnitee  shall forward a Final
Claims  Statement to the Indemnitor  setting forth the amount of such damages in
reasonable  detail on an itemized  basis.  The Indemnitee  shall  supplement the
Final Claims Statement with such supporting proof of loss (e.g.


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<PAGE> 74



vouchers,   canceled  checks,   accounting  summaries,   judgments,   settlement
agreement,  etc.) as the  Indemnitor  may  reasonably  request in writing within
thirty  (30)  calendar  days  after  receipt  by  Indemnitor  of a Final  Claims
Statement.  All  amounts  reflected  on Final  Claims  Statements  shall be paid
promptly by the Indemnitor to the  Indemnitee and the Indemnitee  shall have the
right  to  immediate  payment  of  proceeds  from  insurance  policies  paid  to
Indemnitor  in  connection  with the claim for which the  indemnification  right
arose.

     (d) Survival of Indemnification. Any other provision hereof to the contrary
notwithstanding,  the parties agree that the  representations  and warranties of
the parties contained in this Agreement and any certificates  delivered pursuant
to this Agreement  shall survive for a period of  forty-eight  (48) months after
the  Closing  Date  for  purposes  of  this  Article  10,   regardless   of  any
investigation  made by  either  party  prior to the date  hereof or prior to the
Closing Date. The Acquiror,  on the one hand, and the Selling  Shareholders,  on
the other hand, shall only be entitled to indemnification  under this Article 10
for  breaches of  representations  and  warranties  if an Initial  Claim  Notice
describing  the  claim  for  which  indemnification  is  sought  is signed by an
executive  officer of the Acquiror or by the Selling  Shareholders,  as the case
may be, and is submitted to the Acquiror or the Selling Shareholders,  not later
than  forty-eight  (48)  months  following  the  Closing  Date.  Any  claim  for
indemnification  pursuant to this Article 10 for breaches of representations and
warranties  not made prior to the  expiration  of such  forty-eightmonth  period
shall be extinguished,  and all  representations  and warranties with respect to
which no claim is made prior to the expiration of such forty-eight-month  period
shall expire and be of no further force and effect.

     (e) Impact of Insurance  Proceeds.  The gross amount which an Indemnitor is
liable to, for, or on behalf of the Indemnitee  pursuant to this Article 10 (the
"Indemnifiable   Loss")  shall  be  reduced   (including,   without  limitation,
retroactively) by any insurance  proceeds actually  recovered by or on behalf of
such Indemnitee related to the Indemnifiable  Loss, and shall be further reduced
to  take  account  of  any  tax  benefit  to the  Indemnitee  arising  from  the
Indemnifiable Loss. Each Indemnitee hereunder agrees to diligently pursue claims
for insurance  covering an  Indemnifiable  Loss hereunder prior to attempting to
collect for such Indemnifiable Loss from an Indemnitor;  provided, however, that
the foregoing  shall not prevent the  Indemnitee  from  providing the Indemnitor
with an Initial  Claim Notice with  respect to such  Indemnifiable  Loss.  If an
Indemnitee shall have received or shall have had paid on its behalf an indemnity
payment in  respect  of an  Indemnifiable  Loss and shall  subsequently  receive
directly or  indirectly  insurance  proceeds or tax  benefits in respect of such
Indemnifiable Loss, then such Indemnitee shall pay to such Indemnitor the amount
of such  insurance  proceeds and tax  benefits  or, if less,  the amount of such
indemnity  payment.  For purposes of this Section,  tax benefits arising from an
Indemnifiable  Loss  shall be  determined  after  taking  into  account  the tax
detriment,   if  any,  arising  from  the  receipt  of  insurance   proceeds  or
indemnification  payments by or on behalf of the Indemnitee and the tax benefit,
if any, to the Indemnitee arising from any payments to the Indemnitor.

     10.4  Payment of Claims for  Indemnification.  Any  amounts  payable to the
Acquiror pursuant to the provisions of Section 10.1 shall be the  responsibility
of the Selling  Shareholders  in accordance with Section 10.3 of this Agreement.
Such  amounts  shall  first be  payable  by  offsetting  all or a portion of the
payments,  if any,  to be paid to the  Selling  Shareholders  subsequent  to the
Closing Date pursuant to the Note or as Contingent Consideration. Any amounts in
excess of the amount offset pursuant to the Note or as Contingent  Consideration
shall be paid promptly upon notice of the Acquiror to the Selling


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<PAGE> 75



Shareholders.  Any amounts payable to the Selling  Shareholders  pursuant to the
provisions of Section 10.2 of this Agreement shall be the  responsibility of the
Acquiror and shall be paid promptly upon notice of the Selling  Shareholders  to
the Acquiror in accordance with Section 10.3 of this Agreement.

     10.5  Minimum  and Maximum  Dollar  Limit on  Indemnification.  The parties
hereto  agree  that  no  violations  or  breaches  under  any one or more of the
representations  and warranties of the Companies,  the Selling  Shareholders and
the  Acquiror  set forth in this  Agreement  shall  support a claim for  losses,
liabilities,  costs,  expenses or other  damages  unless and until such  losses,
liabilities, costs, expenses or other damages attributable to all violations and
breaches exceed on a cumulative and aggregate basis the sum of Fifteen  Thousand
Dollars ($15,000);  provided, however, that if such losses, liabilities,  costs,
expenses or other damages  exceed the sum of $15,000,  the Selling  Shareholders
shall be obligated to indemnify the party entitled to indemnification under this
Article 10 for cumulative and aggregate losses, liabilities,  costs, expenses or
other  damages in the amount of such  initial sum of $15,000 and  thereafter  in
amounts equal to or in excess of $5,000;  provided  further,  however,  that the
Acquiror  shall be entitled  to  indemnification  hereunder  only to the maximum
aggregate amount of One Million Five Hundred  Thousand Dollars  ($1,500,000.00),
and the Selling Shareholders shall be entitled to indemnification hereunder only
to the  maximum  aggregate  amount  of  $1,500,000.  The  $1,500,000  limitation
provided  for in this  Section  10.5 shall not apply with  respect to claims for
indemnification  by the Acquiror  for losses,  liabilities,  costs,  expenses or
other damages for Taxes pursuant to Section 10.1(c).

     10.6  Dispute  Resolution.  All  disputes  under  this  Article 10 shall be
settled  by  arbitration  in St.  Louis,  Missouri  before a  single  arbitrator
pursuant  to the rules of the  American  Arbitration  Association  (the  "AAA").
Arbitration  may be  commenced at any time by any party  hereto  giving  written
notice to each other party to a dispute that such  dispute has been  referred to
arbitration  under this Section 10.6.  The  arbitrator  shall be selected by the
joint agreement of the Acquiror and the Selling Shareholders, but if they do not
so agree within twenty (20) calendar days after the date of the notice  referred
to above,  the selection  shall be made pursuant to the rules from the panels of
arbitrators maintained by the AAA. Any award rendered by the arbitrator shall be
conclusive and binding upon the parties hereto; provided, however, that any such
award shall be  accompanied by a written  opinion of the  arbitrator  giving the
reasons for the award.  This  provision for  arbitration  shall be  specifically
enforceable  by the parties,  and the decision of the  arbitrator  in accordance
herewith  shall be final  and  binding  and  there  shall be no right of  appeal
therefrom. Each party shall pay its own expenses of arbitration and the expenses
of the  arbitrator  shall be paid  one-half by the  Acquiror and one-half by the
Selling  Shareholders;  provided,  however,  that  if  in  the  opinion  of  the
arbitrator any claim for indemnification or any defense or objection thereto was
unreasonable, the arbitrator may assess, as part of his or her award, all or any
part  of  the  expenses  of  the  arbitrator  against  the  party  raising  such
unreasonable claim, defense or objections.

                                   ARTICLE 11

                        FEDERAL AND OTHER SECURITIES LAWS

     11.1 Investment Representations.

     (a) This Agreement is made with the Selling Shareholders in


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<PAGE> 76



reliance upon the Selling Shareholders representations to the Acquiror, which by
their  execution  hereof  the  Selling  Shareholders  hereby  confirm,  that the
Acquiror  Common Stock issued as the Closing  Stock Payment or as any portion of
any payment of the Contingent  Consideration  or Tail  Contingent  Consideration
(all such  securities are referred to as the  "Securities"  for purposes of this
Article 11) to be received by them will be acquired for investment for their own
accounts,  not as a  nominee  or  agent,  and  not  with a view  to the  sale or
distribution  of any part  thereof,  and that they have no present  intention of
selling,  granting  participation  in, or otherwise  distributing  the same.  By
executing this Agreement,  the Selling  Shareholders further represent that they
do not have any contract, undertaking,  agreement or arrangement with any person
to sell,  transfer,  or grant  participations  to such  person  or to any  third
person, with respect to any of the Securities.

     (b)  The  Selling  Shareholders  understand  that  the  Securities  are not
registered  under the 1933 Act, on the ground that the sale provided for in this
Agreement  and the  issuance  of  Securities  hereunder  should be  exempt  from
registration  under  the  1933  Act and that  the  Acquiror's  reliance  on such
exemption is predicated on the Selling  Shareholders'  representations set forth
herein.  The Selling  Shareholders  realize that the basis for the exemption may
not  be  present  if,   notwithstanding   such   representations,   the  Selling
Shareholders  have  in mind  merely  acquiring  the  Securities  for a fixed  or
determinable  period  in the  future,  or for a  market  rise or for sale if the
market does not rise.  The Selling  Shareholders  confirm that they have no such
intention.

     (c) The Selling Shareholders represent that they are "accredited investors"
within the meaning of Rule 501 under the 1933 Act and that they are  experienced
in evaluating and investing in companies such as the Acquiror,  are able to fend
for themselves in the  transactions  contemplated by this  Agreement,  have such
knowledge and  experience in financial and business  matters as to be capable of
evaluating the merits and risks of their investment and have the ability to bear
the  economic  risks of  their  investment.  The  Selling  Shareholders  further
represent that they have had access,  during the course of the  transaction  and
prior to their  purchase  of the  Securities,  to the  information  filed by the
Acquiror with the  Securities  and Exchange  Commission  and that they have had,
during the course of the  transaction  and prior to her  execution  hereof,  the
opportunity  to ask  questions  of, and to receive  answers  from,  the Acquiror
concerning  the terms and  conditions of the offering of the  Securities  and to
obtain  additional   information   necessary  to  verify  the  accuracy  of  any
information furnished to them or to which they have had access.

     (d) The Selling  Shareholders  understand  that the  Securities  may not be
sold,  transferred or otherwise disposed of without  registration under the 1933
Act  or an  exemption  therefrom,  and  that  in  the  absence  of an  effective
registration  statement  covering the Securities or an available  exemption from
registration  under the 1933 Act, the Securities must be held  indefinitely.  In
particular,  the Selling  Shareholders  are aware that the Securities may not be
sold  pursuant  to Rule 144  promulgated  under the 1933 Act  unless  all of the
conditions of that Rule are met. The Selling Shareholders represent that, in the
absence of an effective  registration  statement  covering the Securities,  they
will sell,  transfer or  otherwise  dispose of the  Securities  only in a manner
consistent  with  their  representations  set  forth  herein  and  then  only in
accordance with the provisions of Section 11.1(e) hereof.

     (e) The  Selling  Shareholders  agree  that in no event  will  they  make a
transfer or disposition of any of the Securities  (other than in accordance with
the  terms of  conversion  thereof  or  pursuant  to an  effective  registration
statement under the 1933 Act), unless


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<PAGE> 77



and until (i) the Selling  Shareholders  shall have notified the Acquiror of the
proposed  disposition  and shall have furnished the Acquiror with a statement of
the  circumstances  surrounding  the disposition and assurance that the proposed
disposition  is in compliance  with all  applicable  laws and (ii) if reasonably
requested by the  Acquiror,  at the expense of the Selling  Shareholders  or the
transferee,  they shall have  furnished  to the  Acquiror an opinion of counsel,
reasonably satisfactory to the Acquiror, to the effect that such transfer may be
made without registration under the 1933 Act.

     11.2 Legends; Stop Transfer.

     (a) All  certificates  for the  Securities  may  bear  the  following  or a
substantially similar legend:

                  THE  SECURITIES  REPRESENTED  BY THIS  CERTIFICATE  MAY NOT BE
                  SOLD,  TRANSFERRED,  HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT
                  PURSUANT  TO  (i) A  REGISTRATION  STATEMENT  RELATING  TO THE
                  SECURITIES  WHICH IS  EFFECTIVE  UNDER THE  SECURITIES  ACT OF
                  1933,  (ii) RULE 144 UNDER  SUCH ACT,  OR (iii) AN  OPINION OF
                  COUNSEL OR OTHER  EVIDENCE  SATISFACTORY  TO REHABCARE  GROUP,
                  INC.,   THAT   ANOTHER   EXEMPTION   FROM   THE   REGISTRATION
                  REQUIREMENTS OF SUCH ACT IS AVAILABLE.

     (b) The  certificates  for the Securities may also bear any legend required
by any applicable state securities or other law.

     (c) In  addition,  the  Companies  shall  make  a  notation  regarding  the
restrictions on transfer of the Securities in their  respective  records and the
Securities shall be transferred on the books of the Acquiror only if transferred
or sold  pursuant  to an  effective  registration  statement  under the 1933 Act
covering  such shares or pursuant to and in  compliance  with the  provisions of
Section 11.1(e) hereof.

                                   ARTICLE 12

                                  MISCELLANEOUS

     12.1  Notices.  Any notices or other  communications  required or permitted
hereunder to any party hereto shall be sufficiently given if delivered in person
or sent by certified or registered mail, postage prepaid, addressed as follows:

     In the case of the Acquiror or the Companies (following the Closing Date):

                    RehabCare  Group,  Inc.  
                    7733  Forsyth  Boulevard,  Suite  1700 
                    St.  Louis, Missouri 63105 
                    Attn: James M. Usdan, President and Chief Executive Officer



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<PAGE> 78



                           With a copy to:

                                    Thompson Coburn
                                    One Mercantile Center, Suite 3400
                                    St. Louis, Missouri  63101
                                    Attn:  Robert M. LaRose, Esq.

  In the case of the Selling Shareholders or the Companies (prior to the Closing
Date):

                                    Team Rehab
                                    141 N. Meramec, Suite 103
                                    Clayton, Missouri  63105
                                    Attn:  Ms. Marilyn Moore, RPT, President

                           With a copy to:

                                    Menees, Whitney & Burnet
                                    8000 Bonhomme, Suite 207
                                    Clayton, Missouri  63105
                                    Attn:  Terry Burnet, Esq.

or such  substituted  address as any party shall have given notice to the others
in writing in the manner set forth in this Section 12.1.

     12.2  Amendment.  This  Agreement may be amended or modified in whole or in
part only by an agreement in writing  executed by all parties  hereto and making
specific reference to this Agreement.

     12.3 Waiver. The parties hereto may, by written  agreement:  (a) extend the
time for the  performance of any of the obligations or other acts of the parties
hereto;  (b) waive any  inaccuracies  in the  representations  contained in this
Agreement;  (c) waive  compliance  with,  or  modify,  any of the  covenants  or
conditions  contained in this Agreement;  and (d) waive or modify performance of
any of the obligations of any of the parties hereto; provided,  however, that no
such waiver or failure to insist upon strict  compliance  with such  obligation,
covenant,  agreement or condition  shall  operate as a waiver of, or an estoppel
with respect to, any subsequent  insistence  upon such strict  compliance  other
than with respect to the matter so waived or modified.

     12.4  Termination.  This  Agreement may be terminated by the parties hereto
prior to Closing as follows:

     (a) by mutual written consent of the Acquiror and the Selling Shareholders;

     (b) upon written  notice from the Acquiror to the Selling  Shareholders  if
any of the conditions  precedent to the Acquiror's  obligations  hereunder shall
have become incapable of fulfillment through no fault of the Acquiror;



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<PAGE> 79



     (c) upon written  notice from the Selling  Shareholders  to the Acquiror if
any  of  the  conditions  precedent  to the  Selling  Shareholders'  obligations
hereunder  shall have become  incapable of  fulfillment  through no fault of the
Selling Shareholders;

     (d) by the Acquiror, on the one hand, or the Selling  Shareholders,  on the
other hand, in the event of a breach by the other party to this Agreement of any
representation,  warranty or  agreement  contained  herein,  which breach is not
cured  within 30 days after  written  notice  thereof is given to the  breaching
party by the  non-breaching  party or is not waived by the  non-breaching  party
during such period; or

     (e) at the  election of the  Acquiror or the  Selling  Shareholders  if the
Closing has not occurred on or prior to February 28, 1997.

     12.5 Indebtedness of Future Acquisitions.  The Acquiror agrees that, in any
subsequent stock purchase,  merger,  consolidation,  asset  acquisition or other
business combination in which the Acquiror is the surviving or acquiring entity,
any  indebtedness  issued by the Acquiror to any  shareholders or owners of such
acquired company or entity, or to such acquired company or entity itself,  shall
not be senior by its terms to the  principal  and  interest  payments  under the
Note.

     12.6  Counterparts.   This  Agreement  may  be  executed  in  one  or  more
counterparts, all of which taken together shall constitute one instrument.

     12.7 Binding on Successors  and Assigns.  This  Agreement  shall be binding
upon,  inure to the  benefit of and be  enforceable  by and  against the parties
hereto and their respective  successors and assigns in accordance with the terms
hereof. No party hereto may assign its interest under this Agreement without the
prior written consent of the other parties hereto.

     12.8  Severability.  In the  event  that any one or more of the  provisions
contained in this Agreement or any application thereof shall be invalid, illegal
or unenforceable in any respect, the validity, legality or enforceability of the
remaining  provisions of this Agreement and any other application  thereof shall
not in any way be affected or impaired thereby;  provided,  however, that to the
extent  permitted by  applicable  law, any invalid,  illegal,  or  unenforceable
provision may be  considered  for the purpose of  determining  the intent of the
parties in connection with the other provisions of this Agreement.

     12.9  Headings.  The  headings  in the  sections  and  subsections  of this
Agreement and in the Schedules are inserted for  convenience  only and in no way
alter,  amend,  modify,  limit or restrict the  contractual  obligations  of the
parties.

     12.10 Expenses of Litigation.  In the event of any litigation  arising from
the  breach  of this  Agreement,  the  Note,  the  Employment  Agreement  or the
Registration Rights Agreement,  the prevailing party in such litigation shall be
entitled to recover reasonable attorneys' fees and costs, including appeals.

     12.11  Press  Releases.  Except as may be required by law or as provided in
this  Section  12.11,  none  of the  Acquiror,  the  Companies  or  the  Selling
Shareholders shall engage in, encourage,  or support any publicity or disclosure
of any kind or form in connection with this


                                       41

<PAGE> 80



Agreement or the  transactions  contemplated  hereby  unless the  Acquiror,  the
Companies and the Selling  Shareholders  mutually  agree in advance on the form,
timing and contents of any such publicity,  announcement or disclosure,  whether
to  the  financial  community,  government  agencies  or the  public  generally.
Notwithstanding the foregoing,  nothing in this Section 12.11 shall prohibit the
Acquiror or the Companies from disclosing the transactions contemplated pursuant
to this Agreement to their  respective  parent or affiliate  companies,  whether
direct or indirect.

     12.12 List of Exhibits and Schedules. As mentioned in this Agreement, there
are attached  hereto or  delivered  herewith  (except for Schedule  2.2(a) which
shall  be  delivered  with  the  Team,  Moore  Co.  and  Moore  P.C.   Financial
Statements), the following Exhibits and Schedules:

                                    EXHIBITS

                                                                    Section
Exhibit                       Document                              Reference

A                             Shareholders' Equity Ownership        Intro.
B                             Subordinated Promissory Note          1.3(b)
C                             Articles of Incorporation             2.1(b)
D                             By-laws                               2.1(b)
E                             Employment Agreement                  7.7
F                             Opinion of Menees, Whitney & Burne    9.1(f)
G                             Opinion of Thompson Coburn            9.2(d)
H                             Registration Rights Agreement         9.2(f)

                                    SCHEDULES

Schedule
  No.                         Schedule Caption

1.5                           Contingent Consideration
2.1(d)                        Capitalization and Shareholders
2.1(e)                        Foreign Qualifications
2.1(g)                        Ownership Interests
2.1(j)                        Violations or Conflicts
2.1(k)                        Government Consents
2.2(a)                        Exceptions to the Team, Moore Co. and Moore P.C.
                                Financial Statement Presentation
2.2(b)                        Undisclosed Liabilities
2.2(c)                        Capital Leases
2.2(d)                        Certain Changes
2.3(b)                        Returns Filed and Taxes Paid Exceptions
2.3(c)                        Miscellaneous Tax Matters
2.3(d)                        Audit History and Other Proceedings
2.4(a)                        Properties and Title Exceptions
2.4(b)                        Leases
2.4(c)                        Condition of Assets
2.5                           Intellectual Property


                                       42

<PAGE> 81



2.6(a)                        Debt Instruments
2.6(b)                        Contracts
2.6(c)                        Insurance
2.6(d)                        Assignments and Defaults
2.7                           Employment Relationships
2.8                           Employee and Fringe Benefit Plans
2.9                           Labor Relations
2.10                          Litigation
2.11                          Compliance With Laws
2.11(d)(i)                    Environmental Matters
2.12                          Bank Accounts
2.13                          Transactions with Affiliates
2.16                          Salary Equivalency Conversion
3.6                           Acquiror Financial Statements
6.4                           Guarantees

Each of the  foregoing  Exhibits and  Schedules is  incorporated  herein by this
reference and expressly made a part hereof.

     12.13 Expenses.  Except to the extent otherwise provided in this Agreement,
each of the parties  hereto shall bear its own expenses  incurred in  connection
with this Agreement and the transactions herein contemplated, including, but not
limited to, legal and accounting fees and expenses.

     12.14 Entire  Agreement.  All prior  negotiations  and agreements among the
parties   hereto  are   superseded   by  this   Agreement,   and  there  are  no
representations,  warranties,  understandings  or  agreements  other  than those
expressly  set forth  herein or in an Exhibit  or  Schedule  delivered  pursuant
hereto,  except as  modified  in writing  concurrently  herewith  or  subsequent
hereto.

     12.15  Governing Law. This Agreement shall be governed by and construed and
interpreted  according to the laws of the State of Missouri,  determined without
reference to conflicts of law principles.


     [the remainder of this page is left intentionally blank]




                                       43

<PAGE> 82



     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed  by their  duly  authorized  representatives  on the day and year first
above written.

                                  The Acquiror:

                                  REHABCARE GROUP, INC.



                                  By /s/ James M. Usdan
                                  James M. Usdan, President and Chief Executive
                                                         Officer


                                  The Companies:

                                  TEAMREHAB, INC.



                                  By /s/ Marilyn A. Moore
                                  Marilyn A. Moore, President


                                  MOORE REHABILITATION SERVICES,
                                         INCORPORATED



                                   By /s/ Marilyn A. Moore
                                   Marilyn A. Moore, President


                                   MOORE REHABILITATION SERVICES,
                                      P.C.


                                   By /s/ Marilyn A. Moore
                                   Marilyn A. Moore, President





                                       44

<PAGE> 83



                                  The Selling Shareholders:


                                  /s/ Marilyn A. Moore
                                  Marilyn A. Moore
                                  THE MARILYN A. MOORE REVOCABLE TRUST U/T/A
                                       FEBRUARY 23, 1990



                                   By/s/ Marilyn A. Moore
                                   Marilyn A. Moore, Trustee



                                   /s/ Marilyn A. Moore
                                   Marilyn A. Moore, as Custodian for
                                     Christopher S.Moore under the Missouri
                                     Transfers to Minors Law


                                   /s/ Marilyn A Moore
                                   Marilyn A. Moore, as Custodian for Preston J.
                                     Moore under the Missouri Transfers to
                                     Minors Law


                                   /s/ Marilyn A. Moore
                                   Marilyn A. Moore, as Custodian for Joan L.
                                     Moore under the Missouri Transfers to 
                                     Minors Law





                                       45

<PAGE> 84



                                  SCHEDULE 1.5

              CONTINGENT CONSIDERATION DEFINITIONS AND CALCULATIONS


Definitions

        "Base EBIT" shall mean the Target Minimum Cumulative EBIT for the fiscal
year ending December 31, 1997.

     "Cumulative EBIT" for a given fiscal year shall mean an amount equal to the
sum of:

                   (a) the combined aggregate net income of the Companies during
such fiscal year,  determined in accordance with GAAP consistently  applied, but
specifically (i) including,  as if they were earnings, the amount of earnings of
any  entity  acquired  by the  Acquiror  as shall have been  agreed  upon by the
Acquiror  and the Selling  Shareholder  pursuant  to Section  6.3  hereof,  (ii)
including,  as if they were  earnings,  any of the  Acquiror's  overhead,  as it
exists prior to the  consummation  of the stock  purchases of the  Companies set
forth in the  Agreement,  that the  Acquiror is able to allocate to the Medicare
portion of the Companies'  operations and that is passed through to and accepted
by Medicare under cost reimbursement, and (iii) excluding, in the event that the
Acquiror and the Companies consolidate certain of administrative functions in an
effort to realize savings to the Acquiror on a consolidated  basis,  any amounts
of administrative overhead costs allocated by the Acquiror to the Companies that
are in excess of the costs  which the  Companies  would  have  incurred  had the
consolidated administrative functions remained distinct; plus

                  (b) the combined aggregate net interest expense (as reduced by
any interest income),  amortization of goodwill  associated with the acquisition
of the  Companies by Acquiror,  and the  combined  aggregate  tax expense of the
Companies for such fiscal year; plus

                  (c) beginning in the fiscal year ended  December 31, 1998, the
Cumulative EBIT of the Companies for the preceding fiscal year.

For purposes of determining  the Target Minimum  Cumulative  EBIT for the fiscal
year ended December 31, 1997 pursuant to this Schedule 1.5 (including the tables
set forth  herein),  the  Cumulative  EBIT of the  Companies for the fiscal year
ended  December  31,  1996 shall be deemed to equal to One  Million  Two Hundred
Seventy  Thousand  Dollars   ($1,270,000.00)  (the  "the  Agreed  1996  Combined
Earnings"),  unless,  based on the  calculation  pursuant  to Section 1.4 of the
attached Agreement, the Recalculated 1996 Combined Earnings of the Companies for
the fiscal year ended  December 31, 1996 are less than the Agreed 1996  Combined
Earnings  of the  Companies  by a factor  of more  than  10%.  In such  case the
Cumulative  EBIT of the  Companies  for the fiscal year ended  December 31, 1996
shall be deemed to equal the Recalculated 1996 Combined Earnings.

        "Excess EBIT  Multiplier"  shall mean the factor for a given fiscal year
as set forth in the Excess EBIT Multiplier  column of the table in this Schedule
1.5 by which the excess of Cumulative  EBIT over the Target  Minimum  Cumulative
EBIT, each determined for such fiscal year, shall be multiplied to determine the
Contingent  Consideration to be paid to the Selling Shareholders for such fiscal
year.


                                        1

<PAGE> 85




        "Maximum  Cumulative  Contingent  Consideration"  shall mean the maximum
amount of aggregate  Contingent  Consideration  that is payable  through a given
fiscal  year as set forth in the  Maximum  Cumulative  Contingent  Consideration
table in this Schedule 1.5 below.

        "Target  Minimum  Cumulative  EBIT"  shall  mean the  minimum  amount of
Cumulative  EBIT that the  Companies  must have  through a given  fiscal year to
require a payment of Contingent Consideration for such fiscal year.

Calculations

        Subsequent to the consummation of the stock acquisitions contemplated in
the attached Agreement,  the fiscal year used to measure Cumulative EBIT (and to
which the EBIT Multiplier, Target Minimum Cumulative EBIT and Maximum Cumulative
Contingent  Consideration  set forth on the table below  relate) will end on the
31st day of December in the year  indicated on the table below.  The  Contingent
Consideration  payable to the Selling  Shareholders for a given fiscal year will
be  determined  pursuant  to the  formula  set  forth in  Section  1.5(c) of the
attached Agreement.


        1. Agreed 1996  Combined  Earnings.  Table 1,  below,  assumes  that the
Recalculated  1996  Combined  Earnings do not vary from the Agreed 1996 Combined
Earnings by a factor of more than 10%. In such case, the Cumulative EBIT for the
fiscal year ending  December  31, 1996 would be deemed to be equal to the Agreed
1996 Combined Earnings of $1,270,000. The Target Minimum Cumulative EBIT for the
fiscal year ending  December 31, 1997,  $1,524,000,  which is also the Base EBIT
for  purposes  of  calculating  the  Target  Minimum  Cumulative  EBIT  for  all
subsequent  years,  would be determined by multiplying  the Agreed 1996 Combined
Earnings,  $1,270,000,  by 1.20.  For all  subsequent  fiscal years,  the Target
Minimum  Cumulative  EBIT for a given year was  determined  by  multiplying  the
immediately  prior fiscal  year's  Target  Minimum  Cumulative  EBIT by 1.20 and
adding to such product the Base EBIT ($1,524,000).

<TABLE>
<CAPTION>
                                     Table 1


                                                                    Target                         Maximum
  Fiscal Year                    Excess                             Minimum                      Cumulative
    Ending                        EBIT                            Cumulative                     Contingent
December 31                    Multiplier                            EBIT                       Consideration
       <S>                       <C>                               <C>                              <C>
       1997                      4.19                              $1,524,000                       $  600,000
       1998                      4.19                               3,352,800                        1,200,000
       1999                      4.19                               5,547,360                        1,800,000
       2000                      4.19                               8,180,832                        2,400,000


</TABLE>

                                        2

<PAGE> 86



         2. Actual 1996 Combined  Earnings In the event that the Cumulative EBIT
for the year ended December 31, 1996 is deemed  pursuant to this Schedule 1.5 to
be equal to the Recalculated  1996 Combined Earnings rather than the Agreed 1996
Combined Earnings, the calculations shown in Table 1 would be adjusted such that
the Target Minimum  Cumulative  EBIT for the fiscal year ended December 31, 1997
(which  would  also be the Base EBIT for  purposes  of  calculating  the  Target
Minimum  Cumulative  EBIT in  subsequent  years)  would  be the  product  of the
Recalculated 1996 Combined Earnings and 1.20. The Target Minimum Cumulative EBIT
for all subsequent years would be recalculated  accordingly  using such adjusted
Base EBIT. Accordingly, the Maximum Cumulative Contingent Consideration for each
fiscal  year  would also be  adjusted  by  multiplying  the  Maximum  Cumulative
Contingent Consideration for each fiscal year shown in Table 1 by the percentage
by which the  Recalculated  1996 Combined  Earnings  varies from the Agreed 1996
Combined Earnings.

Table 2, below,  assumes that the  Recalculated  1996  Combined  Earnings of the
Companies are  $1,117,600,  reflecting a downward  variance from the Agreed 1996
Combined Earnings  ($1,270,000) of $152,400, or 12%, and resulting in the use of
the  Recalculated  1996 Combined  Earnings as the  Cumulative  EBIT for the year
ended December 31, 1996. In such case, the Target  Minimum  Cumulative  EBIT for
the fiscal  year ended  December  31,  1997 (which also serves as the Base EBIT)
would be calculated by  multiplying  the  Recalculated  1996 Combined  Earnings,
$1,117,600,  by 1.20. The adjusted  Target Minimum  Cumulative EBIT for the year
ended  December  31, 1997  ($1,341,120)  would then be used as the Base EBIT for
purposes of calculating the Target Minimum Cumulative EBIT for subsequent years,
and the Maximum Cumulative  Contingent  Consideration for each fiscal year would
be equal to the product of the Maximum Cumulative  Contingent  Consideration for
such fiscal year shown in Table 2 and 0.88.

<TABLE>
<CAPTION>
                                     Table 2

                                                                    Target                         Maximum
Fiscal Year                      Excess                             Minimum                      Cumulative
  Ending                          EBIT                            Cumulative                     Contingent
December 31                    Multiplier                            EBIT                       Consideration
       <S>                       <C>                              <C>                               <C>
       1997                      4.19                             $ 1,341,120                       $  528,000
       1998                      4.19                               2,950,464                        1,056,000
       1999                      4.19                               4,881,677                        1,584,000
       2000                      4.19                               7,199,132                        2,112,000


</TABLE>


                                        3

<PAGE> 87



                                            
                                                              Exhibit 10.20
                                    Exhibit B

                  THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. IT MAY NOT BE SOLD,  OFFERED FOR SALE,  PLEDGED OR  HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE  REGISTRATION  STATEMENT AS TO THE SECURITIES UNDER SAID
ACT OR AN OPINION OF COUNSEL  SATISFACTORY TO REHABCARE  GROUP,  INC., THAT SUCH
REGISTRATION IS NOT REQUIRED.

                                             SUBORDINATED PROMISSORY NOTE


$1,500,000.00                                              January 28, 1997
                                                           St. Louis, Missouri



                  FOR VALUE RECEIVED, the undersigned,  REHABCARE GROUP, INC., a
Delaware  corporation  (hereinafter  "Maker"),  promises  to pay to the order of
MARILYN A. MOORE (hereinafter  "Holder"),  at such place as Holder may from time
to time  designate  in writing,  the  principal  sum of One Million Five Hundred
Thousand and 00/100 Dollars ($1,500,000.00). Interest shall accrue on the unpaid
principal  balance  from the  date  hereof  at the  lower  of the  maximum  rate
permitted by law or eight percent (8%) per annum.

                  Principal  and  interest  payable  under  this  Note  shall be
payable  ratably  commencing May 1, 1997 in sixteen (16)  consecutive  quarterly
installments in the amount of Ninety-Three Thousand, Seven Hundred Fifty Dollars
($93,750.00) each.

                  In the event any payment  falls due on a  Saturday,  Sunday or
legal  holiday,  the payment  shall instead be due on the next business day with
the  same  effect  as if such  payment  had been  paid on the due date  thereof.
Interest  shall be calculated on the basis of the actual days elapsed and a year
of 365 or 366 days, as applicable.

                  Should  default  be  made in  payment  of any  installment  of
principal or interest  when due, the whole sum of unpaid  principal and interest
shall  immediately  become  due and  payable  at the  option of Holder  upon the
expiration of ten (10) days following written demand for payment to Maker or any
third party,  as  appropriate,  unless default is cured within such ten (10) day
period.

                  Maker  waives  presentment,  protest and notice of dishonor or
nonpayment.

                  Maker shall pay to Holder  reasonable  attorneys' fees and all
costs and other expenses  reasonably incurred by Holder in enforcing payment and
in  connection  with  collection  of any amount  due under this Note;  provided,
however,  that Holder must first provide Maker written  notice that it will take
action to enforce payment.

                  This Note is given pursuant to the terms of the Stock Purchase
Agreement, dated as of January 27, 1997 (the "Stock Purchase Agreement"),  among
Maker,  Holder, Team Rehab, Inc., a Missouri  corporation,  Moore Rehabilitation
Services,   Incorporated,   a  Missouri  corporation  and  Moore  Rehabilitation
Services, P.C., an Illinois professional corporation.  The principal sum of this
Note is  subject  to  reduction  upon the terms and in the  manner  set forth in
Article 10 of the Stock Purchase  Agreement,  in which case,  this Note shall be
deemed to evidence a promise to pay such  reduced  principal  amount.  If such a
reduction in the



<PAGE> 88



principal  amount is  effected,  this Note  shall be marked to show the  reduced
principal  amount or shall be exchanged for a new  Subordinated  Promissory Note
reflecting  the  reduced  principal  amount,  but  being  otherwise  in form and
substance substantially identical to this Note.
                  Maker may,  at its option,  at any time on or after  January ,
1998,  redeem this Note at 100% of the then outstanding  principal amount of the
Note) plus accrued interest to the Redemption Date (as defined below).

                  Notice of  redemption at the option of Maker will be mailed at
least 30 days but not more than 60 days before the Redemption  Date to Holder of
this Note to be  redeemed  at his  registered  address  as set forth in the Note
register.  On and after the date set forth in the  notice as the date upon which
Maker will  redeem  this Note  called for  redemption  (the  "Redemption  Date")
interest  shall  cease to accrue on this Note or  portions  thereof  called  for
redemption  by Maker  provided  that there is no  default in the  payment of the
redemption price by Maker on the Redemption Date.

     For the  purposes  of  this  Note,  the  following  terms  shall  have  the
respective meanings ascribed to them:

     "Indebtedness" of Maker as of any determination date shall mean:

                                    (i) any  debt  of  Maker  (A)  for  borrowed
                           money, (B) evidenced by a note,  debenture or similar
                           instrument  (including a purchase  money  obligation)
                           given  in  connection  with  the  acquisition  of any
                           property  or assets  (other  than  inventory,  goods,
                           materials and services or similar  property  acquired
                           in  the  ordinary  course  of  business),   including
                           securities,  (c) representing  payment obligations of
                           Maker  arising out of interest swap  arrangements  of
                           Maker  relating to debt  referenced  in clause (A) or
                           (B) above or  reimbursement  obligations with respect
                           to letters of credit, or (D) for the payment of money
                           relating to the lease of any property  which lease is
                           capitalized   on   the   balance   sheet   of   Maker
                           (consolidated  if Maker shall have any subsidiary) in
                           accordance   with   generally   accepted   accounting
                           principles, consistently applied; and

                                    (ii) any  debt of  others  described  in the
                           preceding  clause (i) which Maker has  guaranteed  or
                           for which it is otherwise  liable or for which assets
                           of  Maker  serve as  collateral  (in  which  case the
                           amount of such debt shall be equal to the fair market
                           value of such  collateral as determined in good faith
                           by the Board of Directors of Maker).

     "Senior  Debt" of Maker as of the date of any  determination  thereof shall
mean all  Indebtedness  of Maker which is not  expressed to be  subordinated  or
junior to any other  Indebtedness  of Maker,  including  without  limitation all
present  and  future  obligations  and  Indebtedness  of Maker to The  Boatmen's
National Bank of St. Louis, whether or not contingent,  consisting of principal,
interest, fees, charges and other obligations and sums.

                  This Note is  subordinate  and junior in right of payment  and
performance,  to the  extent  and in the manner  hereinafter  set forth,  to the
Senior  Debt of Maker.  The Senior  Debt shall  continue  to be Senior  Debt and
entitled to the benefits of these subordination  provisions  irrespective of any
amendment,  modification or waiver of any term of the Senior Debt (including but
not limited to  modifications to interest rates and payment terms) or extension,
renewal or  refinancing  of the Senior  Debt,  or the creation of any new Senior
Debt,  whether or not presently  contemplated by Maker. If any Senior Lender (as
hereinafter  defined)  gives  Maker  and  Holder a written  notice  (a  "Default
Notice")  which (i) states that one or more  Events of Default  (as  hereinafter
defined) has  occurred  and is  continuing,  and (ii)  instructs  Maker to cease
making payments and Holder to cease accepting and receiving payments, of amounts
due under this  Note,  then,  unless and until such Event of Default  shall have
been cured or waived or shall have ceased to exist, Maker will not make and


                                        2

<PAGE> 89



Holder will not ask for, demand, sue for, take or receive from Maker, any direct
or indirect payment (in cash, property or otherwise) on account of the principal
of, or  premium,  if any,  or  interest  on this Note,  during any period  after
written notice of such default shall have been given to Maker by a holder of any
Senior  Debt.  In the event of: (i) any  insolvency,  bankruptcy,  receivership,
liquidation,   reorganization,   readjustment,   composition  or  other  similar
proceeding  relating to Maker, or to its property,  (ii) any proceedings for the
liquidation, dissolution or other winding-up of Maker, voluntary or involuntary,
whether  or not  involving  insolvency  or  bankruptcy  proceedings,  (iii)  any
assignment  by  Maker  for the  benefit  of its  creditors,  or (iv)  any  other
marshalling  of the assets of Maker,  all Senior Debt  (including  any  interest
thereon  accruing  after  the  commencement  of any  such  proceedings  and  any
additional  interest that would have accrued thereon but for the commencement of
such   proceedings)   shall  first  be  paid  in  full  before  any  payment  or
distribution,  whether  in cash or other  property,  shall be made to  Holder on
account of this Note.  Notwithstanding  any provision contained in this Note, so
long as a Senior  Lender has not sent Maker and Holder a Default  Notice,  Maker
shall pay to Holder and  Holder may  receive,  accept and apply,  the  regularly
scheduled  interest and principal  payments  provided for herein on this Note as
and when the same become due. For purposes  hereof,  the term "Event of Default"
shall mean any Event of Default,  as defined in any loan document,  lease, note,
guaranty or any other agreement,  instrument or document under which the same is
now or hereafter  outstanding  (each  hereinafter  referred to as a "Senior Loan
Document," which term shall include any modifications,  amendments,  extensions,
renewals or replacements thereof),  such that the holders thereof accelerate the
maturity  thereof.  The term "Senior Lender" shall mean and include each obligee
or other  holder of any of the  obligations  included  in the meaning of "Senior
Debt," including but not limited to The Boatmen's National Bank of St. Louis and
its successors  and assigns.  If any payment or  distribution,  whether in cash,
securities or other property,  shall be received by Holder in  contravention  of
any of the terms  hereof and before all the Senior  Debt shall have been paid in
full,  and a Default  Notice shall have preceded  such payment or  distribution,
such payment or distribution  shall be received in trust for the benefit of, and
shall be paid over or delivered  and  transferred  to, the holders of the Senior
Debt for application to the payment of all Senior Debt remaining  unpaid, to the
extent  necessary  to pay all such  Senior  Debt in full  and,  thereupon,  such
payment  shall not be deemed to have  been  received  by Holder as a payment  or
payments  under this Note.  In the event of the  failure of Holder to endorse or
assign any such payment or distribution, the holder of the Senior Debt is hereby
irrevocably  authorized  to  endorse  or assign  the same.  No present or future
holder  of the  Senior  Debt  shall  be  prejudiced  in  the  right  to  enforce
subordination of this Note by any act or failure to act on the part of Maker.

                  The foregoing  provisions as to  subordination  are solely for
the purpose of defining the  relative  rights of the holders of the Senior Debt,
on the one hand, and Holder,  on the other hand.  Nothing contained herein shall
impair,  as  between  Maker  and  Holder,  the  obligation  of  Maker,  which is
unconditional  and absolute,  to pay to Holder the principal hereof and interest
hereon as and when the same shall become due and payable in accordance  with the
terms hereof, or prevent Holder from exercising all rights,  powers and remedies
otherwise permitted by applicable law or hereunder upon a default hereunder, all
subject to the rights of the holders of the Senior Debt to receive cash or other
property  otherwise  payable or  deliverable  to Holder.  Holder  will take such
action  (including,  without  limitation,  consent to the filing of a  financing
statement  with respect  thereto) as may, in the opinion of any holder of Senior
Debt at the  time  outstanding,  be  necessary  or  appropriate  to  assure  the
effectiveness of the subordination effected by these provisions.

                  Subject to the foregoing  provisions as to subordination,  the
Maker  agrees  that,  in  any  stock  purchase,  merger,  consolidation,   asset
acquisition  or other  business  combination  consummated by the Maker after the
date  hereof  in which the  Maker is the  surviving  or  acquiring  entity,  any
indebtedness  issued by the Maker to any shareholders or owners of such acquired
company or entity,  or to such acquired  company or entity itself,  shall not be
senior by its terms to the principal and interest payments under this Note.

                  Notwithstanding  anything  herein to the contrary,  Holder may
accelerate this Note and commence  enforcement  actions with respect thereto, or
otherwise  receive and accept  payments under this Note, if a Default Notice has
been given to Maker or Holder by a Senior Lender and (i) within 180 days from

                                        3

<PAGE> 90



the date of such  Default  Notice,  the  Event or Events  of  Default  described
therein  are not  waived  by the  Senior  Lender,  eliminated  as a result of an
amendment or  modification  of the Senior Loan  Documents or cured,  or (ii) the
Senior Lender accelerates its Senior Debt and commences enforcement actions with
respect thereto or the collateral therefor.  In the event that the Senior Lender
has sent  Maker  and  Holder a Default  Notice,  Holder  shall  have no right to
accelerate,  enforce any claim with respect to this Note, or otherwise  take any
action against Maker or Maker's  property  without the prior written  consent of
Senior  Lenders,  until such time as the  Senior  Debt has been paid in full and
Senior Lenders have no obligation to make further advances to Maker.

                  Maker  hereby   covenants   and  agrees  to  send  to  Holder,
immediately upon receipt by Maker, any notice of acceleration or commencement of
enforcement actions received by Maker from the Senior Lender.

                  Each  Default  Notice  shall be deemed to have been given by a
Senior  Lender  to Maker or Holder  when  delivered  in person to such  party at
Holder's address listed in the Stock Purchase Agreement or when deposited in the
United States mail, first class postage prepaid,  or, in the case of telegraphic
notice or overnight  courier  services,  one business day after delivered to the
telegraphic  company or overnight  courier service with payment provided for, or
in the case of telex or telecopy notice, when sent,  verification  received,  in
each case addressed to Maker and Holder at their respective  addresses listed in
the Stock  Purchase  Agreement  or at such  other  address  as either  party may
designate by notice to the other in accordance with this paragraph.

                  This Note and each of the terms  hereof  shall be binding upon
Maker's  successors and assigns.  No failure on the part of Holder  hereunder to
exercise,  and no delay in exercising any right, power or remedy hereunder shall
operate as a waiver  thereof;  nor shall any single or partial  exercise  of any
right,  power or remedy  hereunder shall operate as a waiver thereof;  nor shall
any single or partial exercise of any right,  power or remedy hereunder preclude
any other or further exercise of any other right, power or remedy.

                  Holder  may not assign  this Note  without  the prior  written
consent of Maker,  except that Holder may collaterally assign Holder's interests
in this Note without such written  consent.  Any prohibited  assignment  will be
null and void.

                  This Note may not be changed,  modified or terminated  orally,
but may be  changed,  modified or  terminated  only by an  agreement  in writing
signed by Holder hereof and only with the prior  written  consent of the holders
of Senior Debt or others who are committed to make future advances to Maker that
would constitute Senior Debt if and when the same are made.

                  Principal  and  interest  payable  hereunder  shall be paid in
lawful  money of the United  States.  The terms and  provisions  hereof shall be
governed by the laws of the State of Delaware.

                  Executed  as an  instrument  under  seal as of the date  first
above written.

                                             MAKER:

                                             REHABCARE GROUP, INC.

Witnessed:


                                             By:
                                             James M. Usdan, President and Chief
                                                 Executive Officer


                                        4

<PAGE> 91













                                                    ASSIGNMENT FORM

I/We assign and transfer this Note
(insert name  address and zip code of  assignee)[  ] (insert  assignee's  social
security  number or  taxpayer  identification  number) and  irrevocably  appoint
_____________________________________  as agent  to  transfer  this  Note on the
books and records of Maker. The agent may substitute another to act for it.


Date: _______________




                                                     Signature(s)  of  Holder(s)
                                                     (Sign  exactly as your name
                                                     appears  on the face of the
                                                     Note.   Joint  owners  must
                                                     both sign.)




                                        5

<PAGE> 92
 

                                                               Exhibit 11.1
<TABLE>
                               
                                               REHABCARE GROUP, INC.

                                           Computation of Per Share Earnings

                                 (Amounts in thousands, except per share data)

<CAPTION>
                                                            Ten Months Ended
                                                              December 31,      February 29,      February 28,
                                                                  1996              1996              1995

       Primary Earnings Per Share
<S>                                                              <C>               <C>                <C>
Net earnings                                                     $ 5,768           5,878              4,735
Less dividends on redeemable preferred stock                         --             --                   42
Less accretion of redeemable preferred stock                         --             --                   11
                                                                 $ 5,768           5,878              4,682

Average number of shares of common stock and
       common stock equivalents outstanding                        4,667           4,483              4,409

Dilutive effect of stock options after
       application of treasury stock method                          259             167                 55

Average number of shares of common stock and
       common stock equivalents for computation
       of primary earnings per share                               4,926           4,650              4,464

Primary earnings per share                                        $ 1.17            1.26               1.05

       Fully Diluted Earnings Per Share

Net earnings                                                      $5,768           5,878              4,735
Plus after tax interest on convertible subordinated
       promissory notes                                              184             --                 --
                                                                  $5,952           5,878              4,735
Average number of shares of common stock and
       common stock equivalents outstanding                        4,667           4,483              4,409

Dilutive effect of stock options after
       application of treasury stock method                          394             292                 55

Convertible subordinated promissory notes                            282             --                 --

Convertible redeemable preferred stock                               --              --                  57

Average number of shares of common stock and
       common stock equivalents for computation
       of fully diluted earnings per share                         5,343           4,775              4,521

Fully diluted earnings per share                                  $ 1.11            1.23               1.05


</TABLE>

<PAGE> 93




                                                                  Exhibit 13.1
<TABLE>

                           
                                     SIX - YEAR FINANCIAL SUMMARY

                           (Dollar amounts in thousands, except per share data)
<CAPTION>
------------------------------------------------------------------------------------------------------------

(Year ended the last day of February, unless noted)
                                     1996<F1>       1996          1995         1994          1993       1992
------------------------------------------------------------------------------------------------------------
<S>                                 <C>          <C>           <C>          <C>           <C>        <C>                     
Statement of earnings data:
     Operating revenues             $104,611      $89,377      $83,210      $61,740       $48,419    $44,546  
     Operating earnings               10,698       10,276        8,531        5,533         5,026      3,907
     Net earnings                      5,768        5,878        4,735        3,070         2,948      2,714    
     Net earnings per share (EPS):
         Primary                    $   1.17      $  1.26      $  1.05      $  0.88       $  0.73    $  0.60
         Fully diluted              $   1.11      $  1.23      $  1.05      $  0.88       $  0.73    $  0.60
     Weighted average shares outstanding:
         Primary                   4,926,000    4,650,000    4,464,000    3,050,000     3,912,000  4,553,000
         Fully diluted             5,343,000    4,775,000    4,521,000    3,475,000     4,058,000  4,553,000
------------------------------------------------------------------------------------------------------------

Balance sheet data:
     Working capital                $  9,254      $11,818      $ 5,460      $ 6,271       $ 7,798    $12,566
     Total assets                     80,802       57,066       52,833       45,445        20,124     20,318
     Long-term debt                   14,000        5,032        7,122        7,500         9,500        --
     Redeemable preferred stock          --           --           --         3,568         3,499        --
     Stockholders' equity             49,670       38,897       32,431       24,132          (291)    16,254  
-------------------------------------------------------------------------------------------------------------

Financial statistics:
     Operating margin                  10.2%        11.5%        10.2%         9.0%         10.4%       8.8%    
     Net margin                         5.5%         6.6%         5.7%         5.0%          6.1%       6.1%                        
     Current ratio                     1.6:1        2.0:1        1.4:1        1.6:1         2.1:1      4.1:1   
     Primary EPS growth rate           15.8%        20.0%        19.3%        20.5%         21.7%      (9.1%)
     Return on equity <F2>             13.0%        16.5%        16.7%        25.8%         36.9%      24.6% 
--------------------------------------------------------------------------------------------------------------
Operating statistics:
    Inpatient (acute rehab and subacute)
     Average number of units            91.7         84.7         84.1         64.4          49.3       50.8
     Average occupied beds per unit     12.8         13.2         13.2         13.8          14.5       13.3
     Average admissions per unit         247          279          261          264           266        230
     Average length of stay (billable)  15.8         17.3         18.4         19.0          19.8       21.2
     Patient days (billable)         357,780      408,385      403,784      323,040       260,134    247,534
    Outpatient:
     Average number of locations        19.3         21.2         13.6          7.6           5.1        3.1
     Patient visits                  176,062      278,970      135,064          N/A           N/A        N/A
--------------------------------------------------------------------------------------------------------------
<FN>
<F1> Ten month period ended December 31, 1996 reflects the change to a calendar
 year-end from the last day of February previously.
<F2> Average of beginning and ending equity.
N/A - Not available
</FN>
</TABLE>

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

Stock Data
The Company's  common stock is listed and traded on the NASDAQ  National  Market
System under the symbol "RHBC". The stock prices below are the high and low sale
prices as reported on NASDAQ.
<TABLE>
<CAPTION>

Calendar
Quarter               1st      2nd      3rd     4th
-------------------------------------------------------------------------------------------------------------------
<S>        <C>        <C>      <C>      <C>     <C>
1996:      High       19 3/4   18 3/8   19 5/8   20 5/8
           Low        15       14 3/4   14 3/4   16 3/4
-------------------------------------------------------------------------------------------------------------------

1995:      High       14 1/2   15       15 3/4   20
           Low        11 1/4   11 7/8   13 1/2   12 1/2
</TABLE>

The  Company  has not paid  dividends  on its common  stock  during the two most
recently  completed fiscal periods and has not declared any dividends during the
current fiscal period.  The Company does not anticipate paying cash dividends in
the foreseeable  future.  The number of holders of the Company's common stock as
of March 7, 1997 was  approximately  3,250 including 157  shareholders of record
and an estimated 3,093 persons or entities holding common stock in nominee name.


In our ongoing efforts to control costs,  we have  eliminated  production of our
quarterly  reports,  an action  taken by many  other  publicly  held  companies.
Instead,  shareholders may receive earnings news releases,  which provide timely
financial information, by notifying our investor relations department



<PAGE> 94



Board of  Directors         
                            
William G. Anderson <F1>      
Retired Vice Chairman       
Ernst & Young
St. Louis, Missouri         

Richard E. Ragsdale <F2>
Chairman
Community Health
Systems, Inc.
Brentwood, Tenessee

John H. Short, Ph.D.<F1>
Managing Partner
Phase II Consulting
Salt Lake City, Utah

Richard C. Stoddard
Executive Vice President
RehabCare Group, Inc.
President, Healthcare
Staffing Solutions, Inc.

H. Edwin Trusheim <F2>
Retired Chairman
General American
Life Insurance Company
St. Louis, Missouri

James M. Usdan
President &
Chief Executive Officer
RehabCare Group, Inc.

Theodore M. Wight <F2>
A General Partner of the
General Partners of Walden
Investors & Pacific Northwest
Partners SBIC, L.P.
Bellevue, Washington


<F1> Audit Committee
<F2> Compensation Committee




<PAGE> 95

Corporate Officers
RehabCare Group, Inc.

James M. Usdan
President &
Chief Executive Officer

Keith L. Goding
Executive Vice President & Chief Development Officer

Alan C. Henderson
Executive Vice President,
Chief Financial Officer
& Secretary

Richard C. Stoddard
Executive Vice President

Hickley M. Waguespack
Executive Vice President &
Chief Operating Officer

Maurice Arbelaez
Senior Vice President,
Operations

Robert S. Bianchi
Senior Vice President,
Program Services

Lisa C. Butlak
Senior Vice President,
Marketing &
Network Relations

Katherine J. Corrigan
Sr. Vice President, Operations

Tom E. Davis
Sr. Vice President, Operations

C. Christopher Eaton
Senior Vice President,
Business Development

John R. Finkenkeller
Senior Vice President
& Treasurer

Mary C. Geary
Sr. Vice President, Operations

Keith F. Petti
Senior Vice President,
Business Development

Gerald M. Scrivener
Senior Vice President,
Business Development

Margaret E. Taylor
Senior Vice President,
Business Development

Stephen J. Toth
Senior Vice President,
Human Resources

Michael J. Dixon
Vice President, Operations

Karen L. Doerr
Vice President,
Program Services

Robert B. Duncan
Vice President,
Business Development

Gregory J. Eisenhauer
Vice President, Acquisitions

Kendra P. Grant
Vice President,
Business Development


<PAGE> 96

Deborah D. Keeton
Vice President, Operations

Jerome M. Lengel
Vice President,
Operations

Dominic D. MacCormac
Vice President,
Business Development

Sean E. Maloney
Vice President,
Recruiting

Andrew J. Rosen
Vice President,
Business Development

Brian P. Samberg
Vice President,
Research and
Development

C. Richard Shelton
Vice President,
Operations

James D. Shelton
Vice President,
Business Development

M. Claire Willman
Vice President,
Subacute Services

RehabCare Outpatient
Services, Inc.

Alfred J. Howard
President

Bekki Roe
Vice President,
Operations

Healthcare Staffing
Solutions, Inc.

Richard C. Stoddard
President

Michael A. Cikacz
Vice President &
Chief Operating
Officer

Paul D. Ranelli
Chief Financial
Officer

TeamRehab, Inc./Moore
Rehabilitation
Services, Inc.

Marilyn A. Moore
President
William C. Gielow, Jr.
Vice President,
Program Development

Judith Mange
Vice President,
Operations

Douglas C. Morris
Vice President, Finance

Medical Advisory Board

Donald S. Adams, M.D.
Medical Director,
Rehabilitation
Programs,
East Jefferson General
Hospital
Metairie, Louisiana

John "A" Burkhart, M.D.
Medical Director,
Rehabilitation
Programs,
Columbus Community
Hospital
Columbus, Ohio

Mark A. Kozinn, M.D.
Medical Director,
Rehabilitation
Programs,
South Fulton Med Ctr
East Point, Georgia

Shelly E. Liss, M.D.
Physical Medicine
& Rehabilitation
Houston, Texas

Paul B. Nemrow, M.D.
Medical Director,
Rehabilitation
Programs,
Saint Francis Memorial
Hospital
San Francisco, Ca

Cynthia K. Taylor, D.O.
Medical Director
Rehabilitation
Programs,
Parma Community General
Hospital
Parma, Ohio

Austin R. Tinsley, M.D.
Medical Director,
Rehabilitation
Programs,
Lucy Lee Hospital
Poplar Bluff, Missouri

Shareholder Information

Stock Transfer Agent &
Registrar

Boatmen's Trust Company
St. Louis, Missouri

Accountants

KPMG Peat Marwick LLP
St. Louis, Missouri

Annual Meeting

April 30, 1997, 8:00 A.M.
Pierre Laclede Ctr,
Second Floor
7733 Forsyth Blvd.
St. Louis, MO 63105

<PAGE> 97
                                                                    Exhibit 21.1

                              REHABCARE GROUP, INC.

                           Subsidiaries of Registrant


RehabCare Outpatient Services, Inc.        Incorporated in the State of Florida

Healthcare Staffing Solutions, Inc.        Incorporated in the Commonwealth
  d/b/a Health Tour                             of Massachusetts


TeamRehab, Inc.                            Incorporated in the State of Missouri

Moore Rehabilitation Services, Inc.        Incorporated in the State of Missouri





<PAGE> 98


                                                            Exhibit 24.1











                          Independent Auditors' Consent

The Board of Directors
RehabCare Group, Inc.:

We consent to the incorporation by reference in the registration  statement (No.
33-58490)  on Form  S-3;  registration  statement  (No.  33-82106)  on Form S-8;
registration  statement (No.  33-82048) on Form S-8 and  registration  statement
(No.  333-11311)  on Form S-8 of  RehabCare  Group,  Inc.  of our  report  dated
February 5, 1997, with respect to the  consolidated  balance sheets of RehabCare
Group,  Inc. and subsidiaries as of December 31, 1996 and February 29, 1996, and
the related consolidated  statement of earnings,  stockholders' equity, and cash
flows for the ten months  ended  December  31, 1996 and for each of the years in
the  two-year  period ended  February 29, 1996,  which report is included in the
December 31, 1996 annual report on Form 10-K of RehabCare Group, Inc.




St. Louis, Missouri
March 24, 1997