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                                                                  EXHIBIT 10(k)

                               NCES/NOVACARE, INC.

                           SUPPLEMENTAL BENEFITS PLAN

                  This is the NCES/NOVACARE, INC. SUPPLEMENTAL BENEFITS PLAN
         (formerly known as the NovaCare, Inc. Supplemental Benefits Plan), as
         amended and restated effective July 1, 1997, maintained by NovaCare
         Employee Services, Inc. ("NCES"), NovaCare, Inc., a Delaware
         corporation ("NovaCare"), and certain of their affiliates which have
         adopted the Plan for their eligible senior executives constituting a
         select group of management or highly compensated employees.
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                                TABLE OF CONTENTS


Section                                                                   Page

SECTION 1  DEFINITIONS ..................................................   1

SECTION 2  PARTICIPATION IN THE PLAN ....................................   5

       2.1   Commencement of Participation ..............................   5
       2.2   Procedure For and Effect of Admission ......................   6
       2.3   Cessation of Participation .................................   6
       2.4   Transfer of Employee .......................................   6
       2.5   Cessation of Employer's Affiliate Status ...................   7


SECTION 3  PLAN CONTRIBUTIONS ...........................................   7

       3.1   Deferral Contributions .....................................   7
       3.2   Rules Governing Deferral Contributions .....................   8
       3.3   Fixed Matching Contributions ...............................   8
       3.4   Performance Matching Contributions .........................   8
       3.5   Vesting ....................................................   8

SECTION 4  PARTICIPANT ACCOUNTS .........................................  10

       4.1   Establishment of Accounts ..................................  10
       4.2   Benefit Allocation .........................................  10
       4.3   Irrevocable Allocation .....................................  10
       4.4   Adjustment of Accounts .....................................  10
       4.5   Suballocation Within the Education Account .................  11
       4.6   Investment Obligation of the Employer ......................  11

SECTION 5  BENEFITS .....................................................  11

       5.1   Employer Provided Insurance Benefits .......................  11
       5.2   Retirement Account .........................................  12
       5.3   Education Account ..........................................  14
       5.4   Fixed Period Account .......................................  15
       5.5   Tax Withholding ............................................  15


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SECTION 6  ADMINISTRATION ...............................................  15

       6.1   Appointment of Administrator ...............................  15
       6.2   Administrator's Responsibilities ...........................  15
       6.3   Records and Accounts .......................................  16
       6.4   Administrator's Specific Powers and Duties .................  16
       6.5   Employer's Responsibility to Administrator .................  16
       6.6   Liability ..................................................  16
       6.7   Payment of Expenses ........................................  17
       6.8   Indemnity of Administrator .................................  17

SECTION 7  CLAIMS PROCEDURE .............................................  17

       7.1   Claim ......................................................  17
       7.2   Review Procedure ...........................................  17
       7.3   Final Decision .............................................  18

SECTION 8  AMENDMENT AND TERMINATION ....................................  18

       8.1   Plan Amendment .............................................  18
       8.2   No Premature Distribution ..................................  18
       8.3   Termination of the Plan ....................................  18

SECTION 9  MISCELLANEOUS ................................................  18

       9.1   Supplemental Benefits ......................................  18
       9.2   Governing Law; Jurisdiction ................................  19
       9.3   No Assignment Permitted ....................................  19
       9.4   Binding Terms ..............................................  19
       9.5   Spendthrift Provision ......................................  19
       9.6   Headings ...................................................  19
       9.7   Rule of Interpretation .....................................  19


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                                    SECTION 1

                                   DEFINITIONS

1.1      Account means the recordkeeping source under which Plan benefits are
         calculated. The specific Accounts under the Plan are listed in Section
         4.1.

1.2      Administrator means the individual or committee appointed to administer
         the Plan pursuant to Section 6.

1.3      Agreement means the trust agreement between the Employer and one or
         more trustees establishing a grantor trust to assist the Employer in
         fulfilling its obligations under the Plan.

1.4      Base Pay means an Eligible Employee's base salary, Deferral
         Contributions and any pretax elective deferrals to any
         Employer-sponsored plan that includes either a qualified cash or
         deferred arrangement under section 401(k) of the Code or a cafeteria
         plan under section 125 of the Code.

1.5      Beneficiary means the person, persons, trust or other entity that a
         Participant designates by written revocable designation filed with the
         Administrator to receive Plan benefits in the event of the
         Participant's death before all amounts due him under the Plan have been
         fully paid. A Participant may designate a different Beneficiary with
         respect to each Account established for him.

1.6      Boards means the Boards of Directors of NovaCare and NCES, or any
         person or persons designated by the Boards of Directors.

1.7      Bonus means any cash remuneration paid to an Eligible Employee as an
         incentive award pursuant to the bonus plan applicable to the Eligible
         Employee. Bonus may consist of Annual Bonus and/or Quarterly Bonus
         components. Annual Bonus means an incentive award based on performance
         criteria applicable to an entire fiscal year of the applicable
         Employer. Quarterly Bonus means an incentive award based on performance
         criteria applicable to the first, second, third or fourth quarter, on a
         stand-alone basis, of the fiscal year of the applicable Employer.

1.8      Change in Control means (other than an initial public offering) the
         occurrence of any of the following:

         A.       the acquisition by any party or parties of the beneficial
                  ownership of 20% or more of the outstanding voting shares of
                  the Company;

         B.       the occurrence of a transaction requiring shareholders'
                  approval for the acquisition of the Company through purchase
                  of stock or assets, or by merger or otherwise; or
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         C.       the election during any 24-month period of 20%, or more, of
                  the members of either of the Boards, without the approval of a
                  majority of the members of such Board as constituted at the
                  beginning of the period.

1.9      Code means the Internal Revenue Code of 1986, as amended.

1.10     Company means either NovaCare or NCES as the context requires.

1.11     Deferral Agreement means a written agreement between a Participant and
         the Employer whereby a Participant agrees to defer a portion of his
         Base Pay and/or Bonus and the Employer agrees to provide Plan benefits.

1.12     Deferral Contribution means a Participant's elective deferral
         contribution described in Section 3.1

1.13     Determination Date means March 31 and September 30 of each calendar
         year or such other date as the Administrator shall designate and, for
         each Participant, the date of his death, Retirement, termination of
         employment due to Disability or other termination of employment.

1.14     Disability means an illness or injury that meets the definition and
         provisions described in the Individual Long Term Disability Contract
         covering the Participants.

1.15     Effective Date means September 1, 1991. The effective date of this
         amendment and restatement is July 1, 1997.

1.16     Eligibility Dates.

         A.       Eligibility Date, for making Elective Deferrals, means (i) the
                  first day of the first payroll period of any month that begins
                  at least 30 days, but no more than 120 days, after the date an
                  individual first becomes an Eligible Employee, provided that
                  the Eligible Employee must properly submit all necessary forms
                  at least 15 days before such Eligibility Date and (ii) any
                  other date following an Enrollment Period established by the
                  Administrator;

         B.       Eligibility Date, for receiving Fixed and, if any, Performance
                  Matching Contributions, means the January 1 or July 1
                  following the Eligibility Date upon which the Participant
                  begins to make Elective Deferrals; and


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         C.       Eligibility Date, for coverage for insurance benefits, means
                  the January 1 or July 1 following the later of the initial
                  date of hire of an individual who is an Eligible Employee as
                  of that date, or the date an individual who is an employee of
                  the Employer becomes an Eligible Employee.

1.17     Eligible Dependent means an individual who is a child, stepchild,
         grandchild, niece or nephew, or who otherwise qualifies as a dependent
         of a Participant for purposes of the Code, who is living at any time
         during the Enrollment Period, and who is either (i) younger than age 14
         or (ii) younger than age 18 but for whom a subaccount was initially
         established pursuant to Section 4.5 prior to his reaching age 14.

1.18     Eligible Employee means each employee of the Employer who (i) has a
         Salary Grade of 33 or higher, (ii) is designated by the Administrator
         as an employee who would have a Salary Grade of 33 or higher (an
         "Equivalent Salary Grade") if the employee had a Salary Grade, (iii)
         was demoted during the preceding 12-month period into a lower-graded
         position from a position with a Salary Grade or Equivalent Salary Grade
         of 33 or higher, or (iv) was a Participant on July 1, 1994; provided
         that Eligible Employee shall not include any employee of NCES or any of
         its affiliates who also maintains an employee-employer relationship
         with a co-employer other than NovaCare or any of its affiliates.

1.19     Employer means NovaCare, NCES and each of their respective affiliates
         which have adopted the Plan for their eligible senior executives and
         joined in the Trust.

1.20     Enrollment Period means the election period established by the
         Administrator which ends prior to the first day of a Plan Year.

1.21     EPS Budget means, for any Plan Year up to and including the Plan Year
         beginning July 1, 1995 and ending June 30, 1996, the average of the
         percentages of the EPS Budgets achieved by NovaCare for that year and
         the four immediately preceding Plan Years. For the Plan Year beginning
         July 1, 1996, EPS Budget means the EPS Budget achieved by NovaCare for
         that year. For any Plan Year beginning on or after July 1, 1997, EPS
         Budget means the EPS Budget achieved by the applicable Company for that
         year.

1.22     Fixed Matching Contribution means the Employer contributions described
         in Section 3.3.

1.23     Group I Eligible Employee means each Eligible Employee who has a Salary
         Grade or Equivalent Salary Grade of 35 or higher, or who had such a
         Salary Grade or Equivalent Salary Grade immediately prior to a demotion
         which became effective during the previous 12-month period.


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1.24     Group II Eligible Employee means each Eligible Employee who has a
         Salary Grade or Equivalent Salary Grade of 33 or 34, or who had such a
         Salary Grade or Equivalent Salary Grade immediately prior to a demotion
         which became effective during the previous 12-month period.

1.25     Investment Fund or Fund means the investments referenced in Section 4.4
         that serve as a means to measure value increases or decreases with
         respect to a Participant's Accounts.

1.26     Involuntary Termination means, solely for purposes of the Plan and the
         Agreement, the occurrence of any of the following:

         A.       a termination of the Participant's employment by the Employer
                  other than for serious, willful misconduct in respect of the
                  employee's obligations to the Employer, which misconduct shall
                  include but not be limited to conviction of a felony, or
                  perpetration of a common law fraud which has or is likely to
                  result in material economic damage to the Employer; or

         B.       a termination of the Participant's employment by the
                  Participant following:

                  (1)      a change by the Employer of the Participant's
                           functions, duties or responsibilities which causes
                           the Participant's position with the Employer to
                           become of less dignity, responsibility, importance,
                           scope or Salary Grade;

                  (2)      a reassignment by the Employer of the Participant to
                           another geographic location more than 50 miles from
                           the Participant's current place of residence; or

                  (3)      a reduction in the Participant's Total Compensation
                           other than one occurring through reduction of the
                           Participant's Bonus based on actual financial
                           performance of the Employer.

1.27     NCES means NovaCare Employee Services, Inc., a Delaware corporation.

1.28     NovaCare means NovaCare, Inc., a Delaware Corporation.

1.29     Participant means any Eligible Employee who has elected to participate
         in the Plan and has reached an Eligibility Date.

1.30     Performance Matching Contribution means the Employer contributions
         described in Section 3.4.


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1.31     Plan means the NCES/NovaCare, Inc. Supplemental Benefits Plan as
         described in this instrument, as amended.

1.32     Plan Year means the 12 consecutive month period beginning on each July
         1 and ending on the following June 30.

1.33     Retirement means a severance from service by a Participant for any
         reason (other than death or termination of employment due to
         Disability) after reaching age 65 or after reaching age 55 and
         completing 10 years of service with the Employer. A year of service
         shall mean a Year of Service as defined in the NCES/NovaCare, Inc.
         401(k) Retirement Savings Plan; provided, however, that years of
         service shall include service with a prior employer if so provided in
         the applicable acquisition agreement or in any agreement executed by
         the Participant and the Employer.

1.34     Total Compensation for a Plan Year means the Eligible Employee's Base
         Pay for the current Plan Year plus any Bonus paid for services rendered
         in the Plan Year; provided that, in determining compensation for
         coverage for insurance benefits for any policy period, the Eligible
         Employee's Base Pay shall be determined as of January 15 (or, if later,
         the date an employee becomes an Eligible Employee) and, if actual Bonus
         is unknown as of such date, anticipated bonus, as determined under the
         applicable bonus plan, shall be substituted for actual Bonus.

1.35     Trust means any grantor trust established by the Employer under the
         Agreement.

1.36     Trustee means the trustee or trustees of the Trust appointed by the
         Boards.

1.37     Trust Fund means the fund established under the Agreement, consisting
         of all contributions, together with the income and realized and
         unrealized appreciation and depreciation thereon.


                                    SECTION 2

                            PARTICIPATION IN THE PLAN


2.1      Commencement of Participation. Each Eligible Employee may elect to
         become a Participant and to make Elective Deferrals beginning as of a
         date described in Section 1.16A. He then shall be eligible to receive
         Fixed and, if any, Performance Matching Contributions beginning as of
         the date described in Section 1.16B. Each Eligible Employee shall
         receive coverage for insurance benefits beginning as of the date
         described in Section 1.16C.


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         Notwithstanding the foregoing or any provision in this Plan to the
         contrary:

         A.       An Eligible Employee who does not meet the definition of
                  Eligible Employee set forth in Section 1.18(i), (ii) or (iii)
                  shall not be eligible to make Elective Deferrals or to receive
                  Fixed and Performance Matching Contributions, but shall be
                  considered a Group II Eligible Employee for purposes of
                  Section 5.1; and

         B.       An Eligible Employee who is hired or promoted into a position
                  with a Salary Grade or Equivalent Salary Grade of 33 or higher
                  after June 1, 1997 shall not be eligible to make Elective
                  Deferrals or to receive Fixed and Performance Matching
                  Contributions unless he executes a Confidentiality and
                  Non-Competition Agreement in a form approved by the
                  Administrator, but shall be considered a Group I or Group II
                  Eligible Employee (depending upon his Salary Grade or
                  Equivalent Salary Grade) for purposes of Section 5.1.

2.2      Procedure For and Effect of Admission. Each Eligible Employee who
         desires to participate in the Plan shall complete such forms and
         provide such data as are required by the Administrator.

2.3      Cessation of Participation. A Participant shall cease to be an active
         Participant on the earlier of:

         A.       the date on which an Employer terminates the Plan as to
                  employees of such Employer;

         B.       the date on which the Participant ceases to be an Eligible
                  Employee; or

         C.       the date on which the Participant's Employer ceases to be an
                  affiliate of the Company.

         As long as an Account is maintained for a former active Participant, he
         shall be deemed a Participant for all purposes except that he shall not
         be permitted to make contributions to the Plan, receive Fixed or
         Performance Matching Contributions, or be entitled to Employer-provided
         insurance benefits under Section 5.1; provided, however, that a
         Participant may elect to continue insurance coverage at his own expense
         (or, at the sole discretion of the Administrator, at the Employer's
         expense) when he ceases to be an active Participant.

2.4      Transfer of Employee. If a Participant transfers his employment from
         one Employer to another Employer, the Participant shall not be deemed
         to have ceased being an active


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         Participant under Section 2.3. Any obligations of a former Employer to
         the Participant under the Plan shall become the obligations of the
         Participant's new Employer.

2.5      Cessation of Employer's Affiliate Status. If a Participant ceases to be
         an active Participant pursuant to Section 2.3C, the Administrator shall
         determine in its absolute and unfettered discretion either to: (i)
         fully vest the Participant in all Employer contributions made on his
         behalf, transfer the vested portion of the Participant's Education
         Account and Fixed Period Account, if any, to the Participant's
         Retirement Account and distribute the vested value of the Retirement
         Account to the Participant pursuant to Section 5.2D or (ii) transfer
         the Participant's Accounts to a new trust to be maintained by the
         employer for the benefit of the Participant.


                                    SECTION 3

                               PLAN CONTRIBUTIONS


3.1      Deferral Contributions. Each Participant who is an employee may
         authorize the Employer to reduce his (i) Base Pay and/or (ii) Bonus for
         a Plan Year, and to have a corresponding amount credited to his
         Accounts, in accordance with Section 4.2, by executing and filing a
         Deferral Agreement with the Administrator during his initial Enrollment
         Period or any subsequent Enrollment Period designated by the
         Administrator. A Deferral Agreement specifying deferrals to be made
         from Base Pay and/or Quarterly Bonus (if any) shall be executed and
         filed during the Enrollment Period preceding the Plan Year during which
         such Base Pay or Quarterly Bonus (if any) will be earned. A Deferral
         Agreement specifying deferrals to be made from Annual Bonus shall be
         executed and filed during the Enrollment Period preceding the Plan Year
         during which such Bonus will be finally determined and paid. An
         Eligible Employee who has previously executed and filed a Deferral
         Agreement specifying deferrals to be made from the Bonus to be finally
         determined and paid during the Plan Year beginning July 1, 1997 may
         execute and file a new Deferral Agreement during the Enrollment Period
         preceding the Plan Year beginning July 1, 1997, provided that the new
         Deferral Agreement may increase, but may not decrease, the specified
         Bonus deferrals.

         Such Base Pay and Bonus deferrals shall be based on a fixed percentage.
         Base Pay deferrals shall equal not less than 1% nor more than 25% of
         Base Pay. Bonus deferrals shall equal not less than 1% nor more than
         100% of Annual Bonus and/or Quarterly Bonus, respectively. The deferral
         shall be made from Base Pay, Annual Bonus and/or Quarterly Bonus as the
         Participant shall specify; however, to the extent the deferral is to be
         made from Annual Bonus and/or Quarterly Bonus, but no Annual Bonus
         and/or Quarterly Bonus is paid, the deferral shall be reduced.


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         Notwithstanding the foregoing, a Participant may not make contributions
         to the Plan during any period for which contributions must be suspended
         in accordance with Treas. Reg. Section 1.401(k)-1(d)(2)(iv)(B)(4), as a
         condition of the Participant's receipt of a hardship withdrawal from
         any retirement plan of the Employer that includes a qualified cash or
         deferred arrangement under section 401(k) of the Code.

3.2      Rules Governing Deferral Contributions.

         A.       Each annual election to defer shall be irrevocable.

         B.       The amount that a Participant elects to defer shall be
                  credited to the Participant's Accounts as soon as practicable
                  after the date the amount would otherwise be paid to him as
                  cash compensation.

3.3      Fixed Matching Contributions. Each Employer shall make a fixed matching
         contribution for each Group I Eligible Employee that shall equal 70% of
         the first 5% of his Total Compensation that is contributed to the Plan
         as a Deferral Contribution under Section 3.1. Each Employer shall make
         a fixed matching contribution for each Group II Eligible Employee that
         shall equal 30% of the first 5% of his Total Compensation that is
         contributed to the Plan as a Deferral Contribution under Section 3.1.
         Fixed Matching Contributions shall be credited to Participants'
         Accounts when Deferral Contributions are so credited.

3.4      Performance Matching Contributions. Each Employer shall make a variable
         matching contribution for each contributing Participant who is an
         Eligible Employee as of the last day of the Plan Year for any Plan Year
         in which the applicable Company attains between 90% and 110% of EPS
         Budget. Unless otherwise determined by the Board for any Plan Year, if
         the parameters set forth in the preceding sentence have been met, the
         Performance Matching Contribution for each Group I Eligible Employee
         shall equal the first 5% of his Total Compensation that is contributed
         to the Plan as a Deferral Contribution under Section 3.1 multiplied by
         the percentage of EPS Budget attained by the applicable Company, and
         the Performance Matching Contribution for each Group II Eligible
         Employee shall equal 40% of the first 5% of his Total Compensation that
         is contributed to the Plan as a Deferral Contribution under Section 3.1
         multiplied by the percentage of EPS Budget attained by the applicable
         Company. Performance Matching Contributions shall be credited to
         Participants' Accounts as soon as practicable following the annual
         determination of whether EPS Budget has been attained by the applicable
         Company.

3.5      Vesting. Benefits derived from Deferral Contributions are not subject
         to forfeiture for any reason other than corporate insolvency. Benefits
         derived from Fixed Matching Contributions and Performance Matching
         Contributions shall vest according to a schedule 


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         based on "Years of Participation" in the Plan. The term "A Year of
         Participation" means a full Plan Year during which an employee of the
         Employer is an Eligible Employee as defined in the Plan. For these
         purposes, the first Plan Year, though less than 12 months, shall
         qualify as a full Year of Participation.

         For an Eligible Employee on or before June 1, 1997, benefits derived
         from Fixed Matching Contributions and Performance Matching
         Contributions shall vest at the rate of 20% per completed Year of
         Participation beginning with the sixth (6th) completed Year of
         Participation, unless the Eligible Employee executes a Confidentiality
         and Non-Competition Agreement in a form approved by the Administrator
         before September 1, 1997, or during such other time period as the
         Administrator may thereafter designate. For an Eligible Employee on or
         before June 1, 1997 who timely executes a Confidentiality and
         Non-Competition Agreement in a form approved by the Administrator, or
         for any employee who becomes an Eligible Employee after June 1, 1997,
         benefits derived from Fixed Matching Contributions and Performance
         Matching Contributions shall become 100% vested upon completion of the
         fifth (5th) Year of Participation.

         Notwithstanding the foregoing, benefits derived from Fixed Matching
         Contributions and Performance Matching Contributions shall become 100%
         vested (i) upon a Participant's Retirement; (ii) if a Participant dies
         or suffers a Disability while employed by the Employer; or (iii) upon a
         Participant's Involuntary Termination by the Employer, provided that
         either (a) the Participant has completed at least one Year of
         Participation in the Plan and the combination of the Participant's age
         and Years of Participation at the time of his Involuntary Termination
         totals at least 50, or (b) the Participant's Involuntary Termination
         occurs within 12 months after the applicable Company undergoes a Change
         in Control. In addition, the Administrator may, in the Administrator's
         absolute and unfettered discretion, determine to vest Employer
         contributions made on a Participant's behalf if the Participant's
         termination of employment with the Employer was caused by events beyond
         the Participant's control.

         If a Participant terminates employment before becoming fully vested,
         any nonvested Employer contributions shall be forfeited and shall be
         used to reduce Employer contributions to the Plan. Notwithstanding the
         foregoing, if the distribution of a Participant's Retirement Account is
         deferred under Section 5.2B(5), the Participant shall not forfeit any
         unvested Employer contributions until the Participant's Retirement
         Account is actually distributed. For purposes of determining a
         Participant's vested interest in Employer contributions at the time the
         Participant's Retirement Account is distributed, any nonsuccessive
         Years of Participation in the Plan shall be aggregated to determine his
         vested percentage.


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                                    SECTION 4

                              PARTICIPANT ACCOUNTS


4.1      Establishment of Accounts. The following Accounts shall be established
         with respect to each Participant:

         A.       Retirement Account,

         B.       Education Account, and

         C.       Fixed Period Account.

4.2      Benefit Allocation. Each Participant may submit to the Administrator
         before the close of the Enrollment Period for each Plan Year a written
         statement specifying the Participant's allocation of future
         contributions as to his respective Accounts. If a Participant does not
         submit such a statement, all contributions for the Plan Year following
         the Enrollment Period shall be allocated to the Participant's
         Retirement Account. Matching Contributions shall be allocated in the
         same manner as Deferral Contributions.

4.3      Irrevocable Allocation. A Participant may not modify, alter, amend or
         revoke his allocation for a Plan Year after such Plan Year begins.

4.4      Adjustment of Accounts. A Participant may request in a writing
         delivered to the Administrator that his Accounts be valued as if they
         were hypothetically invested in one or more of the Investment Funds
         listed on the Benefit Account Allocations/Accumulation Options form
         provided by the Administrator. A Participant may request one or more
         Investment Fund(s) in multiples of 25% and may make a separate request
         with respect to each Account. A request shall be effective as of the
         Determination Date next following timely delivery to the Administrator,
         and shall apply to new contributions and previous accumulations as the
         Participant specifies.

         Each Participant's Accounts established under Section 4.1 shall be
         valued no less than monthly based upon the performance of the
         Investment Fund(s) requested by the Participant as determined by the
         Administrator. A Participant shall submit his investment measurement
         request to the Administrator in writing.


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         If any Participant fails to file a request, he shall be deemed to have
         requested the fund which, in the opinion of the Administrator, has the
         least risk of loss of principal. The Administrator shall be under no
         obligation to invest Deferral Contributions in the manner requested by
         the Participant.

4.5      Suballocation Within the Education Account. If a Participant allocates
         a portion of his anticipated contributions to his Education Account,
         the Participant may further allocate among subaccounts on behalf of any
         Eligible Dependent. In the absence of such suballocation, all
         contributions to the Participant's Education Account shall be equally
         allocated to the Participant's Eligible Dependents. A Participant's
         directed adjustment request pursuant to Section 4.4 shall apply
         uniformly to each subaccount.

4.6      Investment Obligation of the Employer. Benefits are payable as they
         become due irrespective of any actual investments the Employer may make
         to meet its obligations.

         Notwithstanding, neither the Employer nor any trustee (in the event the
         Employer elects to use a grantor trust to accumulate funds) shall be
         obligated to purchase or maintain any asset, and any reference to
         investments or Investment Funds is solely for the purpose of computing
         the value of benefits. To the extent a Participant or any person
         acquires a right to receive payments from the Employer under this Plan,
         such right shall be no greater than the right of any unsecured creditor
         of the Employer. Neither this Plan nor any action taken pursuant to the
         terms of this Plan shall be considered to create a fiduciary
         relationship between the Employer and the Participants or any other
         persons, or to establish a trust in which the assets are beyond the
         claims of any unsecured creditor of the Employer.


                                    SECTION 5

                                    BENEFITS


5.1      Employer Provided Insurance Benefits.

         A.       The Employer shall purchase or otherwise provide additional
                  life insurance for all Participants; provided that the
                  Administrator shall have first received all information and
                  executed documents from the Participants as the Administrator
                  has requested. Group I Eligible Employees shall be provided
                  additional life insurance coverage, subject to the terms of
                  available coverage, equal to two times their Total
                  Compensation for a Plan Year. Group II Eligible Employees
                  shall be provided additional life insurance coverage, subject
                  to the terms of available coverage, equal to their Total
                  Compensation for a Plan Year. Notwithstanding the foregoing,
                  the 


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                  Administrator may, in its sole discretion, set a maximum limit
                  on the amount of coverage to be provided to any class of
                  Participants and reduce the amount of benefits available to
                  Participants based on the cost thereof, consistent with
                  applicable law.

         B.       The Employer shall purchase or otherwise provide individual
                  Disability insurance coverage for all Participants at a rate
                  of 70% of Total Compensation, to a maximum of $15,000 per
                  month; provided that the Administrator shall have first
                  received all information and executed documents from the
                  Participants as the Administrator has requested.
                  Notwithstanding the foregoing, the Administrator may, in its
                  sole discretion, limit the amount or time period of Disability
                  insurance coverage consistent with applicable law.

5.2      Retirement Account.

         A.       If a Participant terminates employment for any reason,
                  including death, the Employer shall pay such Participant a
                  benefit in the form determined under Section 5.2B based on the
                  vested value of his Retirement Account. If the Participant is
                  deceased, the benefit shall be paid to his Beneficiary.

         B.       Form of Payment:

                  (1)      If the Participant's termination of employment occurs
                           due to Retirement, payment of the benefit shall begin
                           within 120 days of Retirement.

                           A Participant shall elect one of the following
                           payment options at the time he establishes his
                           Retirement Account, and at such other times as shall
                           be determined by the Administrator, provided that any
                           such subsequent election by the Participant shall
                           apply only to amounts attributable to contributions
                           to the Retirement Account to be made in Plan Years
                           beginning after the Plan Year in which the election
                           is made:

                           (a)      100% joint and survivor annuity;

                           (b)      an annual benefit to be paid for a fixed
                                    period of 10 years, the amount to be paid in
                                    any one year to equal the vested value of
                                    the Retirement Account at the time of
                                    payment multiplied by a fraction, the
                                    numerator of which shall be one and the
                                    denominator of which shall be ten minus the
                                    number of benefit payments previously made
                                    under this option; or


                                      -12-
<PAGE>   16
                           (c)      a lump sum.

                  (2)      If the Participant's termination of employment occurs
                           due to Disability, the benefit described in Section
                           5.2A shall be paid either as a lump sum or annually
                           over a fixed period of 10 years (as calculated in
                           (1)(b) above), as determined by the Administrator.

                  (3)      If a Participant's termination of employment occurs
                           for any reason other than Retirement or Disability,
                           the benefit described in Section 5.2A shall be paid
                           in a lump-sum payment within 120 days from the date
                           of termination.

                  (4)      Notwithstanding any provision to the contrary, if the
                           Participant's Retirement Account has a value less
                           than $20,000 at the time benefits are to commence,
                           then the Participant's benefit may, at the discretion
                           of the Administrator, be paid as a lump sum as soon
                           as administratively feasible following the
                           Participant's termination.

                  (5)      Notwithstanding anything to the contrary, if the
                           Administrator determines at the time of a
                           Participant's termination of employment with the
                           Employer that a reasonable probability exists that
                           the Participant will return to employment with the
                           Employer, the Participant's Retirement Account shall
                           not be distributed to the Participant. The
                           Participant's Retirement Account shall instead be
                           held under the Plan until (i) the Administrator
                           determines that the Participant's return to
                           employment with the Employer is no longer reasonably
                           probable, or (ii) the Participant returns to
                           employment with the Employer, at which point the
                           Participant's Retirement Account shall be subject to
                           distribution in accordance with this Section 5.2.

                           Upon a Participant's reemployment by the Employer,
                           any funds transferred to the Participant's Retirement
                           Account from his Education Account or Fixed Period
                           Account shall be re-transferred to the respective
                           Account or Accounts.

         C.       If benefits are payable in a form of payment under Section
                  5.2B(1)(a), the amount of each payment shall be determined
                  based on the payments that would have been made if the
                  Employer applied the Participant's Retirement Account on the
                  date payments are to begin to purchase an annuity contract
                  providing such payments from an insurance carrier selected by
                  the Administrator.

         D.       Subject to Section 5.2B(5) hereof, if a Participant continues
                  to be employed by an entity that ceases to be an affiliate of
                  either Company and the Administrator 


                                      -13-
<PAGE>   17
                  determines to fully vest and distribute the Participant's
                  Account, the Employer shall, at the direction of the
                  Administrator, pay such Participant a benefit based on the
                  vested value of his Retirement Account. The benefit shall be
                  paid in a lump sum as soon as administratively feasible
                  following the later of the date the applicable entity ceases
                  to be an affiliate of either Company and the date that all
                  determinations have been made hereunder.

5.3      Education Account.

         A.       If a Participant remains continuously employed by the Employer
                  until January 1 of the calendar year in which an Eligible
                  Dependent reaches age 18, the Employer shall pay to the
                  Participant a benefit, as soon after such January 1st and each
                  of the next three anniversaries thereof as administratively
                  practicable, determined as follows:


                                                        Distribution
                                                   Percentage of Eligible
                       January 1st                 Dependent's Subaccount

                           1                                 25%
                           2                                 33-1/3%
                           3                                 50%
                           4                                 100%

         B.       A Participant may establish subaccounts under his Education
                  Account, with separate payments for each. A Participant may
                  have a maximum of five subaccounts at any time.

         C.       If a Participant terminates his employment for any reason with
                  a balance in his Education Account, the vested portion of the
                  balance shall be transferred to his Retirement Account and
                  distributed in accordance with Section 5.2.

         D.       Notwithstanding any provision to the contrary, if on the
                  January 1 of the calendar year in which an Eligible Dependent
                  of a Participant reaches age 18, the Eligible Dependent's
                  subaccount has a balance of less than $10,000, then the
                  Administrator, at its discretion, may direct that the balance
                  be paid to the Participant in one lump sum.

         E.       If any portion of an Education Account is not vested on the
                  date such portion is to be paid, distribution shall be
                  postponed until the January 1 following the date it is vested.


                                      -14-
<PAGE>   18
5.4      Fixed Period Account.

         A.       A benefit equal to the lump sum value of the vested portion of
                  a Participant's Fixed Period Account shall be paid to him as
                  soon as administratively practicable after January 1 of the
                  payment year specified by the Participant. Nonvested amounts
                  will be paid as soon as administratively practicable after
                  January 1 following the year the Participant becomes vested.

         B.       A Participant may establish subaccounts under his Fixed Period
                  Account, with separate payment years for each. A Participant
                  may have a maximum of five subaccounts at any time.

         C.       If a Participant's employment terminates for any reason and
                  the Participant has a balance in his Fixed Period Account, the
                  vested portion of the balance shall be transferred to his
                  Retirement Account and be distributed in accordance with
                  Section 5.2.

5.5      Tax Withholding. To the extent required by law, the Employer shall
         withhold or cause to be withheld taxes from payments made under the
         Plan.

                                    SECTION 6

                                 ADMINISTRATION


6.1      Appointment of Administrator. The Boards shall appoint an individual or
         a committee to serve as Administrator. The Administrator (or any member
         of a committee) may be removed by the Boards at any time; and any
         individual may resign at any time by submitting his resignation in
         writing to the Boards. A new Administrator (or committee member) shall
         be appointed as soon as practicable in the event of a removal or
         resignation.

6.2      Administrator's Responsibilities. The Administrator is responsible for
         the administration of the Plan. The Administrator may appoint other
         persons or entities to perform any of its fiduciary functions. Such
         appointment shall be made and accepted by the appointee in writing. The
         Administrator and any such appointee may employ advisors and other
         persons necessary or convenient to help him carry out his duties,
         including his fiduciary duties. The Administrator shall have the right
         to remove any such appointee from his position. Any person, group of
         persons or entity may serve in more than one fiduciary capacity.


                                      -15-
<PAGE>   19
6.3      Records and Accounts. The Administrator shall maintain or cause to be
         maintained accurate and detailed records and accounts of Participants,
         Employers and their respective rights under the Plan, and of all
         investments, receipts, disbursements and other transactions. Such
         accounts, books and records relating thereto shall be open at all
         reasonable times to inspection and audit by the Employer and by persons
         designated thereby.

6.4      Administrator's Specific Powers and Duties. In addition to any powers,
         rights and duties set forth elsewhere in the Plan, the Administrator
         shall have the following powers and duties:

         A.       to adopt such rules and regulations consistent with the
                  provisions of the Plan;

         B.       to enforce the Plan in accordance with its terms and any rules
                  and regulations it establishes;

         C.       to maintain records concerning the Plan sufficient to prepare
                  reports, returns and other information required by the Plan or
                  by law;

         D.       to construe and interpret the Plan and to resolve all
                  questions arising under the Plan;

         E.       to direct the Employer or the Trustee to pay benefits under
                  the Plan, and to give such other directions and instructions
                  as may be necessary for the proper administration of the Plan;
                  and

         F.       to be responsible for the preparation, filing and disclosure
                  on behalf of the Plan of such documents and reports as are
                  required by any applicable federal or state law.

6.5      Employer's Responsibility to Administrator. The Employer shall furnish
         the Administrator such data and information as it may reasonably
         require. The records of the Employer shall be determinative of each
         Participant's period of employment, termination of employment and the
         reason therefor, leave of absence, reemployment, years of service,
         personal data, and compensation reductions. Participants and their
         Beneficiaries shall furnish to the Administrator such evidence, data or
         information, and execute such documents, as the Administrator requests.

6.6      Liability. Neither the Administrator nor the Employer shall be liable
         to any person for any action taken or omitted in connection with the
         administration of the Plan unless attributable to its own fraud or
         willful misconduct; nor shall the Employer be liable to any person for
         such action unless attributable to fraud or willful misconduct on the
         part of a director, officer or employee of the Employer.


                                      -16-
<PAGE>   20
6.7      Payment of Expenses. All expenses of the Administrator incurred in the
         operation or administration of the Plan shall be paid by the Employer.

6.8      Indemnity of Administrator. The Employer shall indemnify the
         Administrator (or any individual who is a delegate) against any and all
         claims, loss, damage, expense or liability arising from any action or
         failure to act, except when due to gross negligence, willful misconduct
         or breach of fiduciary duty.


                                    SECTION 7

                                CLAIMS PROCEDURE


7.1      Claim. If a Participant or Beneficiary is denied all or a portion of an
         expected Plan benefit for any reason, he must file a written
         notification of his claim with the Administrator. The Administrator
         shall notify the Participant or Beneficiary within 60 days of allowance
         or denial of the claim. If the Administrator fails to notify the
         claimant of his decision to grant or deny the claim within 60 days,
         such claim shall be deemed to have been denied; and the review
         procedure described in Section 7.2 shall become available to the
         claimant.

         The notice provided by the Administrator under this Section shall be in
         writing, sent by mail to the Participant's last known address and, if a
         denial, must contain the following information:

         A.       the specific reasons for the denial;

         B.       the specific reference to the pertinent Plan provision on
                  which the denial is based;

         C.       if applicable, a description of any additional information or
                  material necessary to perfect the claim, and an explanation of
                  why such information or material is necessary; and

         D.       an explanation of the claims review procedure and the time
                  limitations of the review procedure applicable thereto.

7.2      Review Procedure. A Participant or Beneficiary is entitled to request a
         review of any denial of his claim by the Administrator. The request for
         review must be submitted in writing within 60 days of mailing of notice
         of the denial. Absent a request for review within the 60-day period,
         the claim will be deemed to be conclusively denied. The Participant or
         Beneficiary or his representative shall be entitled to review all
         pertinent documents and to 


                                      -17-
<PAGE>   21
         submit issues and comments in writing. The Administrator shall provide
         a full and fair review of the claim and render the final decision.

7.3      Final Decision. Within 60 days of mailing of a request for review, the
         Administrator shall allow or deny the claim, unless special
         circumstances require an extension (such as for a hearing); provided,
         however, that in no event shall the decision be delayed beyond 120 days
         after receipt of the request for review. The decision shall be
         communicated in writing to the Participant or Beneficiary. The decision
         shall recite the facts and reasons for denial, with specific reference
         to the pertinent Plan provisions.


                                    SECTION 8

                            AMENDMENT AND TERMINATION


8.1      Plan Amendment. The Plan may be amended in whole or in part by the
         Boards at any time.

8.2      No Premature Distribution. Subject to Section 8.3, no amendment hereto
         shall permit amounts accumulated prior to the amendment to be paid to a
         Participant or Beneficiary prior to the time he would otherwise be
         entitled thereto.

8.3      Termination of the Plan. The Employer reserves the right to terminate
         the Plan and/or the Deferral Agreement pertaining to any Participant at
         any time prior to the commencement of benefits. In the event of any
         such termination, the Employer shall pay a benefit to the Participant
         or the Beneficiary of any deceased Participant, in addition to other
         insurance benefits hereunder, equal to the vested value of the
         Participant's Accounts.


                                    SECTION 9

                                  MISCELLANEOUS


9.1      Supplemental Benefits. The benefits provided for the Participants under
         the Plan are in addition to benefits provided by any other plan or
         program of the Employer and, except as otherwise expressly provided
         herein, the benefits of the Plan shall supplement and shall not
         supersede any plan or agreement between the Employer and any
         Participant or any provisions contained herein.


                                      -18-
<PAGE>   22
9.2      Governing Law; Jurisdiction. The Plan shall be governed and construed
         under the laws of the Commonwealth of Pennsylvania, and the courts of
         the Commonwealth of Pennsylvania shall have exclusive jurisdiction in
         any or all actions not superseded by federal law.

9.3      No Assignment Permitted. No Participant, Beneficiary or anyone claiming
         through them shall have any right to commute, sell, transfer, assign or
         otherwise convey the right to receive any payment under the terms of
         the Plan. Any such attempted assignment shall be considered null and
         void.

9.4      Binding Terms. The terms of the Plan shall be binding upon and inure to
         the benefit of the parties hereto, their respective heirs, executors,
         administrators and successors.

9.5      Spendthrift Provision. The interest of any Participant or any
         Beneficiary receiving payments hereunder shall not be subject to
         anticipation, nor to voluntary or involuntary alienation, until
         distribution is actually made.

9.6      Headings. All headings preceding the text of the several Sections
         hereof are inserted solely for reference and shall not constitute a
         part of this Plan, nor affect its meaning, construction or effect.

9.7      Rule of Interpretation. Where appropriate, words in the masculine
         gender shall include the feminine and neuter genders.


                                      -19-
<PAGE>   23
         IN WITNESS WHEREOF, to record the adoption of the amendment and
restatement of the Plan, NovaCare and NCES have caused their respective
authorized officers to affix their corporate names and seals as of the day and
year first written above.


[CORPORATE SEAL]                          NOVACARE, INC.


Attest: /s/ Peter D. Bewley               By: /s/ Robert E. Healy, Jr.         
        ----------------------------         ----------------------------------
                                             Name:  Robert E. Healy, Jr.
                                             Title: Sr. VP and CFO

[CORPORATE SEAL]                          NOVACARE EMPLOYEE
                                          SERVICES, INC.


Attest: /s/ Marie L. Martino              By: /s/ Thomas D. Schubert            
        -----------------------------        ----------------------------------
                                             Name:  Thomas D. Schubert
                                             Title: Sr. V.P. and CFO

                                             September 8, 1997


                                      -20-