Credit Agreement - HealthSouth Rehabilitation Corp. and NationsBank of North Carolina NA


                             AMENDED AND RESTATED
                                CREDIT AGREEMENT

                                     among

                     HEALTHSOUTH REHABILITATION CORPORATION

                                      and

              NATIONSBANK OF NORTH CAROLINA, NATIONAL ASSOCIATION,
                                    as Agent

                                      and

                         LENDERS AS SIGNATORIES HERETO,

                                    --------


              $550,000,000 Revolving Credit and Term Loan Facility


                            Dated as of June 7, 1994

                               TABLE OF CONTENTS

                                   ARTICLE I

                                  DEFINITIONS

                                   ARTICLE II

               REVOLVING FACILITY TERMS, TERM LOAN AND COLLATERAL

SECTION 2.1   Syndicated Loans............................................. 24
SECTION 2.2   Advances of Syndicated Loans................................. 25
SECTION 2.3   Competitive Bid Loans........................................ 26
SECTION 2.4   Term Loan.................................................... 30
SECTION 2.5   Payments..................................................... 31
SECTION 2.6   Joint and Several Obligations................................ 31
SECTION 2.7   Pledge Agreement............................................. 32
SECTION 2.8   Prepayment................................................... 33
SECTION 2.9   Notes........................................................ 33
SECTION 2.10  Reduction in Revolving Facility.............................. 34
SECTION 2.11  Unused Fee................................................... 34
SECTION 2.12  Lending Offices.............................................. 34
SECTION 2.13  Letter of Credit Borrowings.................................. 34
SECTION 2.14  Pro Rata Payments............................................ 38
SECTION 2.15  Deficiency Advances.......................................... 38
SECTION 2.16  Adjustments by Agent......................................... 39

                                  ARTICLE III

                          INTEREST ON SYNDICATED LOANS

SECTION 3.1   Applicable Interest Rates.................................... 40
SECTION 3.2   Procedure for Exercising Interest Rate Options............... 40
SECTION 3.3   Base Rate.................................................... 40
SECTION 3.4   Fixed Rate................................................... 41
SECTION 3.5   Changes in Syndicated Margin.  .............................. 41

                                   ARTICLE IV

              TERMINATION OF LIBOR-BASED RATE AND YIELD PROTECTION

SECTION 4.1   Suspension of Loans.......................................... 42
SECTION 4.2   Compensation................................................. 43
SECTION 4.3   Taxes........................................................ 43

                                   ARTICLE V

                         REPRESENTATIONS AND WARRANTIES

SECTION 5.1   Organization, Powers, Existence, etc......................... 46
SECTION 5.2   Authorization of Borrowing, etc.............................. 46
SECTION 5.3   Liabilities.................................................. 46
SECTION 5.4   Taxes........................................................ 47
SECTION 5.5   Litigation................................................... 47
SECTION 5.6   Agreements................................................... 47
SECTION 5.7   Use of Proceeds.............................................. 47
SECTION 5.8   ERISA Requirement............................................ 47
SECTION 5.9   Subsidiaries................................................. 47
SECTION 5.10  Principal Place of Business.................................. 48
SECTION 5.11  Environmental Laws........................................... 48
SECTION 5.12  Disclosure................................................... 48
SECTION 5.13  Licenses..................................................... 48
SECTION 5.14  Title to Properties.......................................... 48

                                   ARTICLE VI

                         GENERAL CONDITIONS OF LENDING

SECTION 6.1   Representations and Warranties............................... 50
SECTION 6.2   No Default................................................... 50
SECTION 6.3   Supporting Documents......................................... 50

                                  ARTICLE VII

                       GENERAL COVENANTS OF THE BORROWER

SECTION 7.1   Existence, Properties, etc................................... 52
SECTION 7.2   Payment of Indebtedness, Taxes, etc.......................... 52
SECTION 7.3   Financial Statements, Reports, etc........................... 52
SECTION 7.4   Litigation Notice............................................ 54
SECTION 7.5   Default Notice............................................... 55
SECTION 7.6   Further Assurances........................................... 55
SECTION 7.7   Insurance.................................................... 55
SECTION 7.8   Covenants Regarding Financial Condition...................... 55
SECTION 7.9   Continuation of Current Business............................. 61
SECTION 7.10  Management Contracts......................................... 61
SECTION 7.11  Cooperation; Inspection of Properties........................ 61
SECTION 7.12  Use of Proceeds.............................................. 61
SECTION 7.13  Limit on Investment in HEALTHSOUTH of
              Birmingham, Inc.............................................. 62
SECTION 7.14  Additional Consolidated Entities............................. 62
SECTION 7.15  ERISA.  ..................................................... 62

                                  ARTICLE VIII

                         EVENTS OF DEFAULT AND REMEDIES

SECTION 8.1   Events of Default............................................ 64
SECTION 8.2   Agent to Act................................................. 67
SECTION 8.3   Cumulative Rights............................................ 67
SECTION 8.4   No Waiver.................................................... 67
SECTION 8.5   Default...................................................... 67
SECTION 8.6   Allocation of Proceeds....................................... 68

                                   ARTICLE IX

                                   THE AGENT

SECTION 9.1   Appointment.................................................. 69
SECTION 9.2   Attorneys-in-fact............................................ 69
SECTION 9.3   Limitation on Liability...................................... 69
SECTION 9.4   Reliance..................................................... 69
SECTION 9.5   Notice of Default............................................ 70
SECTION 9.6   No Representations........................................... 70
SECTION 9.7   Indemnification.............................................. 71
SECTION 9.8   Lender....................................................... 71
SECTION 9.9   Resignation.................................................. 71
SECTION 9.10  Sharing of Payments, etc..................................... 72
SECTION 9.11  Fees......................................................... 72
SECTION 9.12  Independent Agreements....................................... 72

                                   ARTICLE X

                                 MISCELLANEOUS

SECTION 10.1   Assignments and Participations.............................. 73
SECTION 10.2   Notices..................................................... 75
SECTION 10.3   No Waiver................................................... 76
SECTION 10.4   Setoff...................................................... 76
SECTION 10.5   Survival.................................................... 76
SECTION 10.6   Expenses.................................................... 77
SECTION 10.7   Amendments.................................................. 78
SECTION 10.8   Counterparts................................................ 78
SECTION 10.9   Waivers by Borrower......................................... 79
SECTION 10.10  Termination................................................. 79
SECTION 10.11  Governing Law............................................... 80
SECTION 10.12  Indemnification............................................. 80
SECTION 10.13  Agreement Controls.......................................... 81
SECTION 10.14  Integration................................................. 81
SECTION 10.15  Successors and Assigns...................................... 81
SECTION 10.16  Severability................................................ 81


Exhibit A   -   Applicable Commitment Percentage
Exhibit B   -   Form of Assignment and Acceptance
Exhibit C-1 -   Form of Partnership Guaranty Agreement
Exhibit C-2 -   Form of Subsidiary Guaranty Agreement
Exhibit D   -   Form of Request for Advance or Interest Rate
                Election
Exhibit E   -   Form of Competitive Bid Quote Requests
Exhibit F   -   Form of Competitive Bid Quote
Exhibit G   -   Subsidiaries and Controlled Partnerships
Exhibit H-1 -   Form of Syndicated Note
Exhibit H-2 -   Form of Competitive Bid Note
Exhibit H-3 -   Form of Term Note
Exhibit I   -   Form of Compliance Certificate and Schedules
                Thereto
Exhibit J   -   Summary of Insurance
Exhibit K   -   Outstanding Letters of Credit
Exhibit L   -   Investments or Equity Interest
Exhibit M   -   Subsidiaries and Controlled Partnerships
Exhibit N   -   Existing Liens
Exhibit O   -   Disposal Properties

                     AMENDED AND RESTATED CREDIT AGREEMENT


         THIS AMENDED AND  RESTATED  CREDIT  AGREEMENT  dated as of June 7, 1994
(this  "Agreement")  is  entered  into by and among  HEALTHSOUTH  REHABILITATION
CORPORATION, a Delaware corporation (the "Borrower"), the Lenders as signatories
hereto (the "Lenders") and NATIONSBANK OF NORTH CAROLINA,  NATIONAL ASSOCIATION,
a national banking association (the "Agent").

                                    RECITAL:

         Pursuant to a Credit Agreement dated as of November 20, 1992 as amended
by Amendments No. 1 and No. 2 (the "Prior Agreement"), the lenders party thereto
(the "Prior  Lenders")  have agreed to make loans and cause to be issued letters
of credit all in an aggregate  outstanding amount of not to exceed $390,000,000.
Pursuant to the terms of the Prior Agreement all Participating  Subsidiaries and
Participating Partnerships (each defined in the Prior Agreement) have guaranteed
payment of all  Credit  Obligations  (as  defined  in the Prior  Agreement).  In
addition,  the  Borrower,  and certain of the  Participating  Subsidiaries  have
executed  and  delivered to the Agent,  for the benefit of the  Lenders,  Pledge
Agreements  conveying the property  described therein as security for the Credit
Obligations.  The Borrower has requested that the Prior Agreement be amended and
restated in its entirety in order to increase the amount of the credit facility,
to change certain of the provisions contained therein and to increase the number
of lenders participating therein. Accordingly, the Borrower, the Lenders and the
Agent  agree that the Prior  Agreement  is hereby  amended  and  restated in its
entirety as follows:


                                   ARTICLE I

                                  DEFINITIONS

         SECTION 1.1 For the  purposes of this  Agreement,  except as  otherwise
expressly provided or unless the context otherwise requires:

                    All accounting  terms not otherwise  defined herein have the
         meanings  assigned to them, and all  computations  herein  provided for
         shall  be  made,  in  accordance  with  generally  accepted  accounting
         principles  applied on a consistent  basis.  All  references  herein to
         "GAAP"  refer  to  such  principles  as  they  exist  at  the  date  of
         application thereof.

                    All references in this instrument to designated  "Articles",
         "Sections"  and  other  subdivisions  are to the  designated  Articles,
         Sections and subdivisions of this instrument as originally executed.

                    The terms "herein", "hereof" and "hereunder" and other words
         of similar  import  refer to this  Agreement  as a whole and not to any
         particular Article, Section or other subdivision.

                    The terms "include,"  "including" and similar terms shall be
         construed as if followed by the phrase "without being limited to."

                    All  Article  and  Section  captions  herein  are  used  for
         reference  only and in no way limit or describe the scope or intent of,
         or in any way affect, this Agreement.

                    Words  importing the singular  number shall mean and include
         the plural number and visa versa.

                    All  recitals  set  forth  in  this   Agreement  are  hereby
         incorporated in the operative provisions of this Agreement.

                    No  inference  in favor of or against  either party shall be
         drawn  from the fact that such party or its  counsel  has  drafted  any
         portion hereof.

                    The term  "person"  shall include  individual,  corporation,
         partnership,   joint  venture,   association,   trust,   unincorporated
         organization and any government or any agency or political  subdivision
         thereof.

                    Absolute  Rate shall have the meaning  assigned to such term
         in Section 2.3(c)(ii)(D) hereof.

                    Absolute   Rate  Auction  shall  mean  a   solicitation   of
         Competitive Bid Quotes setting forth Absolute Rates pursuant
         to Section 2.3 hereof.

                    Absolute Rate Loans shall mean the Competitive Bid Loans the
         interest  rates on which are  determined on the basis of Absolute Rates
         set at Absolute Rate Auctions.

                    Acquisition  means  the  acquisition,   whether  with  cash,
         property,  stock or  promise  to pay all or a portion  of a person or a
         Facility or Facilities of a person,  permitted under Sections 7.8(a)(8)
         and 7.8(a)(17) hereof; provided (i) such Person or Facilities is in the
         same  line of  business  engaged  in by  Borrower  or its  Consolidated
         Entities,  (ii) the person or Facility  to be acquired  does not oppose
         the  acquisition,  and  (iii)  at the  time of  giving  effect  to such
         Acquisition such person or Facility is a Consolidated Entity.

                    Actual/360  Basis shall mean a method of computing  interest
         or other charges  hereunder on the basis of an assumed year of 360 days
         for actual  number of days  elapsed,  meaning  that  interest  or other
         charges  accrued for each day will be computed by multiplying  the rate
         applicable  on that  day by the  unpaid  principal  balance  (or  other
         relevant sum) on that day and dividing the result by 360.

                    Advance  means a  borrowing  under  the  Revolving  Facility
         consisting of the aggregate  principal amount of a Syndicated Loan or a
         Competitive Bid Loan.

                    Affiliate  of any  specified  person  shall  mean any  other
         person  directly or  indirectly  controlling  or controlled by or under
         direct or indirect  common  control  with such  specified  person.  For
         purposes of this  definition  "control"  when used with  respect to any
         specified  person means the power to direct the management and policies
         of such person,  directly or indirectly,  whether through the ownership
         of  voting  securities,   by  contract  or  otherwise;  and  the  terms
         "controlling"  and  "controlled"  have  meanings   correlative  to  the
         foregoing.

                    Applicable  Commitment  Percentage means, for each Lender, a
         fraction,  the  numerator  of which  shall be the then  amount  of such
         Lender's Commitment and the denominator of which shall be the Revolving
         Facility,  which Applicable Commitment Percentage for each Lender as of
         the  Closing  Date is as set forth in  Exhibit A  attached  hereto  and
         incorporated   herein  by  reference;   provided  that  the  Applicable
         Commitment Percentage of each Lender shall be increased or decreased to
         reflect any  assignments  to or by such Lender  effected in  accordance
         with Section 10.1 hereof.

                    Applicable  Lending  Office shall mean,  for each Lender and
         for each Type of Loan,  the  "Lending  Office" of such Lender (or of an
         Affiliate  of such  Lender)  designated  for  such  Type of Loan on the
         signature  pages  hereof or such other  office of such Lender (or of an
         Affiliate  of such Lender) as such Lender may from time to time specify
         to the Agent and the  Borrower as the office by which its Loans of such
         Type are to be made and maintained.

                    Application  shall mean the  Application  and  Agreement for
         Letter  of Credit  pursuant  to which  the  Borrower  may apply for the
         issuance  of a Letter of Credit by  NationsBank  as provided in Section
         2.13 hereof.

                    Asset Sale for any person means the sale,  lease  conveyance
         or other  disposition  (including,  without  limitation,  by  merger or
         consolidation,  and whether by operation of law or otherwise) of any of
         that person's assets (including,  without limitation, the sale or other
         disposition of Capital Stock of any Subsidiary of such person,  whether
         by such  person or by such  Subsidiary),  whether  owned on the date of
         initial  issuance  of the  Senior  Subordinated  Notes or  subsequently
         acquired,  in one transaction or a series of related  transactions,  in
         which  such  person  and or its  Subsidiaries  sell,  lease,  convey or
         otherwise  dispose of (i) all or substantially all of the Capital Stock
         of any of such  person's  Subsidiaries,  (ii) assets  which  constitute
         substantially  all of an  operating  unit or business of such person or
         any of its Subsidiaries,  or (iii) any health care facility;  provided,
         however,  that the following  shall not constitute  Asset Sales:  (i) a
         transaction or series of related  transactions that results in a Change
         of Control  (as such term is defined in the  Indenture  dated March 24,
         1994 relating to the Senior Subordinated  Notes), and (ii) transactions
         between the Borrower and any of its Wholly Owned  Subsidiaries (as such
         term is defined in the  Indenture  dated March 24, 1994 relating to the
         Senior Subordinated Notes) or among such Wholly Owned Subsidiaries.

                    Assignment  and  Acceptance  shall  mean an  Assignment  and
         Acceptance in the form of Exhibit B (with blanks  appropriately  filled
         in)  delivered in  connection  with an  assignment  of a portion of the
         Lender's interest under this Agreement pursuant to Section 10.1.

                    Attributable Indebtedness when used with respect to any Sale
         and  Leaseback  Transaction  or an  operating  lease with  respect to a
         healthcare facility means, as at the time of determination, the present
         value (discounted at a rate equivalent to the interest rate implicit in
         the lease,  compounded on a semiannual  basis) of the total obligations
         of the lessee for rental payments, after excluding all amounts required
         to be paid on account of  maintenance  and repairs,  insurance,  taxes,
         utilities and other similar  expenses payable by the lessee pursuant to
         the terms of the lease, during the remaining term of the lease included
         in any such Sale and Leaseback  Transaction or such operating  lease or
         until the earliest  date on which the lessee may  terminate  such lease
         without  penalty or upon payment of a penalty (in which case the rental
         payments shall include such penalty);  provided,  that the Attributable
         Indebtedness with respect to a Sale and Leaseback  Transaction shall be
         no less than the fair market value of the property subject to such Sale
         and Leaseback Transaction.

                    Base Rate  shall  mean the  higher of the (i) Prime  Rate or
         (ii) the Federal Funds Effective Rate plus 1/2% per annum.

                    Base  Rate  Loans  shall  mean  Syndicated  Loans  that bear
         interest at rates based upon the Base Rate.

                    Business  Day  shall  mean (a) any day on  which  commercial
         banks are not  authorized  or  required  to close in  Charlotte,  North
         Carolina and New York City and (b) if such day relates to the giving of
         notices or quotes in connection  with a LIBOR Auction or to a borrowing
         of,  a  payment  or  prepayment  of  principal  of or  interest  on,  a
         Conversion  of or into,  or an  Interest  Period for, a LIBOR Loan or a
         LIBOR Market Loan or a notice by the Borrower  with respect to any such
         borrowing, payment, prepayment,  Conversion or Interest Period, any day
         on which  dealings  in Dollar  deposits  are  carried out in the London
         interbank market.

                    Capital  Expenditure shall mean any expenditure or liability
         that is properly charged to a capital account or otherwise  capitalized
         on the consolidated balance sheet in accordance with GAAP.

                    Capital Stock of any person means any and all shares, rights
         to   purchase,   warrants  or  options   (whether   or  not   currently
         exercisable);  participation  or other  equivalents  of or  interest in
         (however  designated) the equity (including  without  limitation common
         stock,  preferred stock and partnership and joint venture interests) of
         such Person  (excluding any debt securities that are convertible  into,
         or exchangeable for, such equity).

                    Capitalized  Lease  Obligations  of  any  person  means  the
         obligation  of such person to pay rent or other  amounts  under a lease
         that is required to be capitalized for financial  reporting purposes in
         accordance  with GAAP, and the amount of such  obligation  shall be the
         capitalized amount thereof determined in accordance with GAAP.

                    Cash Available for Capital Expenditures means the sum of (i)
         Consolidated Net Income,  (ii)  Consolidated  Depreciation  Expense and
         (iii)  Consolidated  Amortization  Expense minus  Consolidated  Current
         Maturities.

                    Class  shall  have  the  meaning  assigned  to such  term in
         Section 1.2 hereof.

                    Closing Date shall mean the date of this Agreement.

                    Collateral  shall  mean all  property  covered by the Pledge
         Agreements  or that  otherwise  at any time  secures  any of the Credit
         Obligations.

                    Commitment shall mean, as to each Lender,  the obligation of
         such Lender to make Syndicated  Loans pursuant to Section 2.1 hereof in
         an aggregate amount at any one time outstanding up to but not exceeding
         the amount set  opposite  such  Lender's  name on the  signature  pages
         hereof  under the caption  "Commitment"  (as the same may be reduced at
         any  time  or from  time to time  pursuant  to  Section  2.10  hereof);
         provided  that the  Commitment  of each Lender  shall be  increased  or
         decreased to reflect any  assignments to or by such Lender  effected in
         accordance with Section 10.1 hereof.

                    Competitive Bid Borrowing shall have the meaning assigned to
         such term in Section 2.3(b) hereof.

                    Competitive  Bid Loans shall mean the Loans  provided for by
         Section 2.3 hereof.

                    Competitive  Bid  Notes  shall  mean  the  promissory  notes
         provided  for  by  Section  2.9(b)  hereof  and  all  promissory  notes
         delivered in  substitution  or exchange  therefor,  in each case as the
         same shall be  modified  and  supplemented  and in effect  from time to
         time.

                    Competitive Bid Quote shall mean an offer in accordance with
         Section  2.3(c) hereof by a Lender to make a Competitive  Bid Loan with
         one single specified interest rate.

                    Competitive   Bid  Quote  Request  shall  have  the  meaning
         assigned to such term in Section 2.3(b) hereof.

                    Compliance  Certificate shall have the meaning attributed to
         that term in Section 7.3(3) below.

                    Consolidated  Adjusted  Interest Expense means  Consolidated
         Interest Expense plus (to the extent not otherwise  included within the
         definition of Interest  Expense as imputed  interest)  one-third of the
         rental  expense on  Attributable  Indebtedness  of the Borrower and its
         Consolidated  Entities  for such period  determined  on a  consolidated
         basis.

                    Consolidated  Amortization  Expense of the  Borrower for any
         period  means  the  amortization   expense  of  the  Borrower  and  its
         Consolidated  Entities  for such period (to the extent  included in the
         computation of Consolidated  Net Income),  determined on a consolidated
         basis in accordance with GAAP.

                    Consolidated   Cash  Flow  means,   for   Borrower  and  its
         Consolidated  Entities for any  Four-Quarter  Period,  Consolidated Net
         Income,   plus   amounts  that  have  been   deducted  in   determining
         Consolidated Net Income for such period for (i) Consolidated Income Tax
         Expense,  (ii)  Consolidated   Interest  Expense,   (iii)  Consolidated
         Depreciation  Expense,  (iv) Consolidated  Amortization Expense and (v)
         the  minority  interests  of any  person  or  persons  in  Consolidated
         Entities.

                    Consolidated  Current Assets means cash and all other assets
         or resources of the Borrower and its  Consolidated  Entities  which are
         expected  to be  realized  in  cash,  sold in the  ordinary  course  of
         business,  or consumed  within one year,  determined on a  consolidated
         basis in accordance with GAAP.

                    Consolidated  Current  Liabilities  means the  amount of all
         liabilities  of the Borrower  and its  Consolidated  Entities  which by
         their terms are payable  within one year  (including  all  Indebtedness
         payable on demand or  maturing  not more than one year from the date of
         computation) and the current portion of Indebtedness  having a maturity
         date in excess  of one  year,  determined  on a  consolidated  basis in
         accordance with GAAP.

                    Consolidated  Current Maturities means Principal  Maturities
         of the Borrower and its Consolidated Entities.

                    Consolidated  Depreciation Expense of the Borrower means the
         depreciation expense of the Borrower and its Consolidated  Entities for
         such period (to the extent  included in the computation of Consolidated
         Net Income of the  Borrower),  determined  on a  consolidated  basis in
         accordance with GAAP.

                    Consolidated  EBITDA of the Borrower means,  with respect to
         any Four-Quarter  Period,  Consolidated Net Income before extraordinary
         losses and losses realized in connection with sale of assets,  plus (i)
         Consolidated  Income Tax Expense,  plus (ii) Consolidated  Depreciation
         Expense,  plus  (iii)  Consolidated  Amortization  Expense,  plus  (iv)
         Consolidated  Adjusted  Interest  Expense,  plus (v) all other non-cash
         items  reducing  Consolidated  Net  Income  of  the  Borrower  and  its
         Consolidated Entities, determined on a consolidated basis in accordance
         with GAAP, plus (vi) without duplication,  for calculation of an EBITDA
         Coverage  Ratio for periods  ending on or before  December 31, 1994 the
         sum of  $31,500,000  (representing  expenses  related to the Borrower's
         acquisition  of certain  rehabilitation  facilities  and related assets
         from National Medical  Enterprises,  Inc.  effective December 31, 1993,
         net of Federal income tax effect), plus (vii) without duplication,  any
         amount,  net of  Federal  income  tax  effects,  representing  expenses
         relating  to an  Acquisition,  up to a maximum  of 10% of the  purchase
         price thereof,  determined on a consolidated  basis in accordance  with
         GAAP, and less all non-cash items  increasing  Consolidated Net Income,
         determined on a consolidated basis in accordance with GAAP.

                    Consolidated  Entity shall mean any person  whose  financial
         statements are appropriately consolidated with the Borrower's financial
         statements under GAAP.

                    Consolidated  Income  Tax  Expense of the  Borrower  for any
         period means the provision for taxes based on income and profits of the
         Borrower  and its  Consolidated  Entities  to the extent such income or
         profits  were  included in computing  Consolidated  Net Income for such
         period.

                    Consolidated Interest Expense of the Borrower for any period
         means  the  Interest  Expense  of the  Borrower  and  its  Consolidated
         Entities  for  such  period,  determined  on a  consolidated  basis  in
         accordance with GAAP.

                    Consolidated  Lease  Expense  means for any period all Lease
         Payments  paid or accrued  during such period  under  operating  leases
         (whether or not  constituting  rental  expense) by the Borrower and its
         Consolidated  Entities determined on a consolidated basis in accordance
         with GAAP.

                    Consolidated Net Income of the Borrower for any period means
         the net income (or loss) of the Borrower and its Consolidated  Entities
         for such period  determined on a consolidated  basis in accordance with
         GAAP,  without  giving  effect to  dividends on any series of preferred
         stock of any Consolidated Entity, whether or not in cash, to the extent
         such  consolidated net income was reduced thereby;  provided that there
         shall be excluded  from such net income (for all  purposes,  other than
         compliance with Section 7.8(a)(1)(A),  to the extent otherwise included
         therein), without duplication;  (i) the net income of any person (other
         than a Consolidated  Entity) to the extent that any such income has not
         actually been received by the Borrower or a Consolidated  Entity in the
         form of dividends  or similar  distributions  during such period;  (ii)
         except to the extent  includable in the  consolidated net income of the
         Borrower or a Consolidated Entity pursuant to the foregoing clause (i),
         the net income of any person  that  accrued  prior to the date that (a)
         such  Person  becomes  a  Consolidated  Entity  or is  merged  into  or
         consolidated  with a  Consolidated  Entity  or (b) the  assets  of such
         person are acquired by the Borrower or a Consolidated Entity; (iii) the
         net  income  of  any  Consolidated   Entity  to  the  extent  that  the
         declaration  or payment of dividends or similar  distributions  by such
         Subsidiary of that income is not permitted by operation of the terms of
         its charter or any  agreement,  instrument,  judgment,  decree,  order,
         statute, rule or governmental  regulation applicable to that Subsidiary
         during such period; (iv) any gain (or loss),  together with any related
         provisions for taxes on any such gain,  realized  during such period by
         the Borrower or its  Consolidated  Entities upon (a) the acquisition of
         any  securities,  or the  extinguishment  of any  Indebtedness,  of the
         Borrower  or its  Consolidated  Entities  or (b) any asset  sale by the
         referent person or any of its Subsidiaries;  (v) any extraordinary gain
         (or extraordinary loss),  together with any related provision for taxes
         or tax  benefit  resulting  from any such  extraordinary  gain or loss,
         realized  by the  Borrower  or its  Consolidated  Entities  during such
         period;  and  (vi)  in the  case  of a  successor  to  such  person  by
         consolidation,  merger or transfer of its assets,  any  earnings of the
         successor prior to such merger, consolidation or transfer of assets.

                    Consolidated  Net Worth of the Borrower as of any date means
         the Consolidated  Stockholders'  Equity  (including any preferred stock
         that is classified as equity under GAAP, other than Disqualified Stock)
         of such person and its  Subsidiaries  (excluding any equity  adjustment
         for  foreign  currency  translation  for any period  subsequent  to the
         Closing Date on a  consolidated  basis at such date,  as  determined in
         accordance with GAAP, less all write-ups subsequent to the Closing Date
         in the book  value of any asset  owned by such  Borrower  or any of its
         Consolidated  Entities;  provided,  however,  that in  calculating  the
         Consolidated  Net  Worth  of  the  Borrower  immediately  prior  to  an
         Acquisition  by  the  Borrower  of  another  person,   there  shall  be
         subtracted from the Borrower's Consolidated Net Worth immediately prior
         to such  Acquisition  the  lesser of (a) such  amount,  net of  Federal
         income  tax  effects,   as   represents   expenses   relating  to  such
         Acquisition,  or (b) 10% of the purchase  price or fair market value of
         the  consideration  paid  by  the  Borrower  in  connection  with  such
         Acquisition.

                    Consolidated  Stockholders' Equity shall mean at any time as
         at  which  the  amount  thereof  is to be  determined,  the  sum of the
         following  amounts  in  respect of the  Borrower  and the  Consolidated
         Entities  (i) the par or  stated  value  of all  Capital  Stock  of the
         Borrower,  (ii) retained  earnings,  (iii)  additional paid in capital,
         (iv) capital surplus and (v) earned surplus minus treasury stock.

                    Consolidated  Total  Capital  shall  mean  the  sum  of  (i)
         Consolidated Stockholders' Equity and (ii) Indebtedness of the Borrower
         and its Consolidated Entities.

                    Controlled  Partnership shall mean a general  partnership of
         which  the  Borrower  or a  Subsidiary  is a general  partner  (but not
         including  Alabama  World  Football),  or a limited  partnership  whose
         general  partners  include  the  Borrower  or  a  Subsidiary  (but  not
         including Vanderbilt),  which partnership,  whether general or limited,
         has assets  with a value in excess of  $2,000.00,  and with  respect to
         which  partnership  the Borrower or a Subsidiary is entitled to receive
         not less than 50% of any  distributions  of cash  made to the  partners
         thereof,  other  than  any  preferred  cash  distribution   arrangement
         approved by the Required Lenders in writing.

                    Convert,   Conversion   and  Converted   shall  refer  to  a
         conversion  pursuant  to Section  3.2 hereof of one Type of  Syndicated
         Loan into another Type of Syndicated  Loan, which may be accompanied by
         the  transfer by a Lender (at its sole  discretion)  of a Loan from one
         Applicable Lending Office to another.

                    Conversion  Date means June 1, 1997,  the date the Revolving
         Facility shall convert to a Term Loan pursuant to Section 2.4 hereof.

                    Convertible Subordinated Debentures means the 5% Convertible
         Subordinated  Debentures due 2001 of the Borrower dated as of March 24,
         1994 in the aggregate original principal amount of $115,000,000.

                    Credit   Obligations  shall  mean  the  Revolving   Facility
         Obligations,  the Letter of Credit  Obligations,  the Term Loan and all
         other obligations and debts owing to the Lenders, and arising under the
         terms of this Agreement, the Notes, the Applications and the other Loan
         Documents,  whether  now or  hereafter  incurred,  existing or arising,
         including  the principal  amount of all Advances,  all Letter of Credit
         Borrowings,  Reimbursement  Obligations  and the Term Loan with respect
         thereto,  any sums  expended by the Agent or the Lenders in  exercising
         the rights and remedies  described in Section 8.1, all accrued interest
         on Advances,  Letter of Credit  Reimbursement  Obligations and the Term
         Loan, and all costs, fees, charges and expenses incurred and payable in
         connection therewith,  including fees payable under the terms of, or in
         connection  with, this Agreement,  and all other  obligations and debts
         owing to the Agent or the Lenders arising in connection with, ancillary
         to, or in support of Advances, Letter of Credit Borrowings and the Term
         Loan, and all  extensions,  alterations,  modifications,  revisions and
         renewals of any of the foregoing.

                    Debt Service  Coverage Ratio with respect to any FourQuarter
         Period means the ratio of (A) Consolidated Net Income plus amounts that
         have been  deducted  in  determining  Consolidated  Net Income for such
         period for (i) Consolidated  Depreciation  Expense,  (ii)  Consolidated
         Interest  Expense,   (iii)  Consolidated   Amortization  Expense,  (iv)
         Consolidated  Lease  Expense,  and (v) the  minority  interests  of any
         person or persons to (B) the sum of (i) Consolidated  Interest Expense,
         (ii)  Consolidated  Lease  Expense  and  (iii)   Consolidated   Current
         Maturities.

                    Default shall mean an Event of Default or an event that with
         notice or lapse of time or both would become an Event of Default.

                    Disqualified  Stock  means any Capital  Stock  that,  by its
         terms (or by the terms of any security into which it is  convertible or
         for which it is  exchangeable),  or upon the  happening  of any  event,
         matures  or is  mandatorily  redeemable,  pursuant  to a  sinking  fund
         obligation or  otherwise,  or is redeemable at the option of the holder
         thereof, in whole or in part, on or prior to the Maturity Date.

                    Dollars  and the  symbol $ shall mean  dollars  constituting
         legal tender for the payment of public and private  debts in the United
         States of America.

                    EBITDA  Coverage  Ratio with respect to any period means the
         ratio of (i)  Consolidated  EBITDA  to (ii)  the  aggregate  amount  of
         Consolidated  Adjusted  Interest  Expense  for such  period;  provided,
         however,  that if any calculation of the EBITDA Coverage Ratio requires
         the use of any  quarter  prior to the date of initial  issuance  of the
         Senior  Subordinated  Notes,  such  calculation  shall be made on a pro
         forma basis,  giving effect to the issuance of the Senior  Subordinated
         Notes  and the use of the net  proceeds  therefrom  as if the  same had
         occurred at the beginning of the Four-Quarter  Period used to make such
         calculation; and provided further that if any such calculation requires
         the use of any  quarter  prior to the  date  that  any  Asset  Sale was
         consummated,  or that  any  Indebtedness  was  incurred,  or  that  any
         acquisition  of a hospital or other  healthcare  facility or any assets
         purchased outside the ordinary course of business was effected,  by the
         Borrower or any of its Subsidiaries,  such calculation shall be made on
         a pro forma basis, giving effect to each such Asset Sale, incurrence of
         Indebtedness  or  acquisition,  as the case may be,  and the use of any
         proceeds therefrom, as if the same had occurred at the beginning of the
         Four-Quarter Period used to make such calculation.

                    ERISA shall mean the Employee Retirement Income Security Act
         of 1974, as amended.

                    Event of Default  shall have the  meaning  assigned  to such
         term in Article VIII hereof.

                    Facility   shall   mean   an   in-patient   or   out-patient
         rehabilitation   facility,  a  certified   out-patient   rehabilitation
         facility, skilled nursing facility, specialty medical center, specialty
         orthopedic  hospital  or  acute  care  hospital,  sub-acute  in-patient
         facility,   transitional   living  center,   medical  office  building,
         outpatient  surgery  center and outpatient  diagnostic  center with all
         buildings  and  improvements  associated  therewith,  that is  owned or
         leased,  in whole or  part,  by the  Borrower  or a  Subsidiary  or any
         partnership controlled directly or indirectly by the Borrower.

                    Federal Funds  Effective  Rate shall mean,  for any day, the
         rate per annum (rounded upwards, if necessary,  to the nearest 1/100 of
         1%) equal to the  weighted  average of the rates on  overnight  Federal
         funds  transactions with members of the Federal Reserve System arranged
         by Federal  funds  brokers on such day,  as  published  by the  Federal
         Reserve Bank of New York on the Business Day next  succeeding such day,
         provided that (a) if the day for which such rate is to be determined is
         not a Business Day, the Federal Funds Effective Rate for such day shall
         be such rate on such transactions on the next preceding Business Day as
         so  published  for any  Business  Day,  and (b) if such  rate is not so
         published for any Business Day, the Federal  Funds  Effective  Rate for
         such  Business  Day shall be the average  rate  charged to the Agent on
         such Business Day on such transactions as determined by the Agent.

                    Fiscal Year means the twelve  month  period of the  Borrower
         commencing on January 1 of each calendar year and ending December 31 of
         each calendar year.

                    Fixed Rate shall mean the  Absolute  Rate or the  LIBORBased
         Rate.

                    Fixed  Rate  Segment  shall  mean a Segment to which a Fixed
         Rate is (or is proposed to be) applicable.

                    Four-Quarter  Period means a period of four full consecutive
         fiscal  quarter  periods,  taken  together  as one  accounting  period;
         provided,  however,  for purposes of Sections 7.8(a)(5),  7.8(a)(6) and
         7.8(a)(7) the results of operations  for the three,  six and nine month
         periods  of  the  Fiscal  Year  ending   December  31,  1994  shall  be
         annualized.

                    GAAP means  generally  accepted  accounting  principles  set
         forth in the opinions and  pronouncements of the Accounting  Principles
         Board of the American  Institute of Certified  Public  Accountants  and
         statements and  pronouncements  of the Financial  Accounting  Standards
         Board  or in such  other  statements  by such  other  entity  as may be
         approved by a significant  segment of the accounting  profession of the
         United States, as from time to time in effect.

                    Governmental Authority shall mean any federal, state, county
         or municipal agency, authority,  department,  commission, bureau, board
         or court.

                    Governmental   Requirements  shall  mean  all  laws,  rules,
         regulations,  requirements,  ordinances,  judgments, decrees, codes and
         orders of any Governmental  Authority  applicable to the Borrower,  any
         Consolidated Entity or any Facility.

                    Guaranteed   Obligations   of  any  person  shall  mean  all
         guaranties  (including  guaranties  of  guaranties  and  guaranties  of
         dividends and other monetary obligations), endorsement, assumptions and
         other  contingent  obligations  with  respect  to, or to purchase or to
         otherwise pay or acquire,  Indebtedness of others;  provided,  however,
         that such term shall not  include  obligations  under  leases and other
         contracts   initially   incurred   directly   by  another   person  and
         subsequently directly assumed by the person in question,  but such term
         shall include obligations that, if the same had been initially incurred
         directly by the person in question,  would have constituted  Guaranteed
         Obligations.

                    Guaranty  Agreements  shall have the meaning  attributed  to
         that term in Section 2.6(a).

                    Hedging  Obligations of any person means the  obligations of
         such  person  pursuant to any  interest  rate swap  agreement,  foreign
         currency exchange agreement,  interest rate collar agreement, option or
         futures contract or other similar agreement or arrangement  relating to
         interest rates or foreign exchange rates.

                    Indebtedness  of any  person  at  any  date  means,  without
         duplication:  (i) all  indebtedness  of such person for borrowed  money
         (whether  or not the  recourse  of the  lender  is to the  whole of the
         assets  of  such  person  or  only  to a  portion  thereof);  (ii)  all
         obligations  of such person  evidenced by bonds,  debentures,  notes or
         other  similar  instruments;  (iii) all  obligations  of such person in
         respect  of  letters  of  credit  or  other  similar   instruments  (or
         reimbursement  obligations with respect thereto);  (iv) all obligations
         of such person with  respect to Hedging  Obligations  (other than those
         that fix the  interest  rate on variable  rate  indebtedness  otherwise
         permitted   hereunder   or  that   protect  the  Borrower  and  or  its
         Consolidated  Entities against changes in foreign exchange rates);  (v)
         obligations  of such  person to pay the  deferred  and unpaid  purchase
         price of  property  or  services,  except  trade  payables  and accrued
         expenses  incurred  in  the  ordinary  course  of  business;  (vi)  all
         Capitalized Lease Obligations of such person; (vii) all indebtedness of
         others  secured by a Lien on any assets of such person,  whether or not
         such indebtedness is assumed by such person;  and (viii) all Guaranteed
         Obligations. The amount of Indebtedness of any person at any date shall
         be  the  outstanding   balance  at  such  date  of  all   unconditional
         obligations as described  above,  the maximum  liability of such person
         for any such  contingent  obligations  at such date and, in the case of
         clause (vii), the amount of the Indebtedness secured.

                    Interest  Expense of any  person  for any  period  means the
         aggregate  amount of interest which, in accordance with GAAP,  would be
         set opposite the caption  "interest  expense" or any like caption on an
         income  statement  for such person  (including,  without  limitation or
         duplication,   imputed   interest   included   in   Capitalized   Lease
         Obligations, all commissions, discounts and other fees and charges owed
         with  respect to letters of credit and bankers'  acceptance  financing,
         the net costs  associated  with Hedging  Obligations,  amortization  of
         financing  fees and  expenses,  the  interest  portion of any  deferred
         payment  obligation,  amortization  of discount and all other  non-cash
         interest  expense other than interest  amortized to cost of sales) plus
         the  aggregate  amount,  if any,  by which such  interest  expense  was
         reduced as a result of the amortization of deferred debt  restructuring
         credits for such period.

                    Interest Period shall mean:

                    (a) with respect to any LIBOR Loan,  each period  commencing
         on the date such LIBOR Loan is made or Converted from a Loan of another
         Type or the last day of the next  preceding  Interest  Period  for such
         Loan and  ending on the  numerically  corresponding  day in the  first,
         second or third calendar month  thereafter,  as the Borrower may select
         as provided in Section 3.2  hereof,  except that each  Interest  Period
         that  commences on the last Business Day of a calendar month (or on any
         day  for  which  there  is no  numerically  corresponding  day  in  the
         appropriate  subsequent  calendar month) shall end on the last Business
         Day of the appropriate subsequent calendar month;

                    (b) with  respect  to any  Absolute  Rate  Loan,  the period
         commencing  on the date such  Absolute  Rate Loan is made and ending on
         any Business Day up to 180 days thereafter,  as the Borrower may select
         as provided in Section 2.3(b) hereof; and

                    (c) with  respect  to any  LIBOR  Market  Loan,  the  period
         commencing on the date such LIBOR Market Loan is made and ending on the
         numerically  corresponding  day in the  first,  second,  third or sixth
         calendar  month  thereafter,  as the Borrower may select as provided in
         Section 2.3(b) hereof,  except that each Interest Period that commences
         on the last  Business  Day of a  calendar  month  (or any day for which
         there is no numerically corresponding day in the appropriate subsequent
         calendar  month) shall end on the last Business Day of the  appropriate
         subsequent calendar month.

         Notwithstanding  the  foregoing:  (i) if any  Interest  Period  for any
         Competitive  Bid Loan would  otherwise end after the  Conversion  Date,
         such  Interest  Period shall end on the  Conversion  Date;  (ii) if any
         Interest  Period  for any  LIBOR  Loan  would  otherwise  end after the
         Maturity  Date,  such Interest  Period shall end on the Maturity  Date;
         (iii) each Interest  Period that would  otherwise end on a day which is
         not a Business Day shall end on the next  succeeding  Business Day (or,
         in the case of an  Interest  Period for a LIBOR Loan or a LIBOR  Market
         Loan, if such next succeeding Business Day falls in the next succeeding
         calendar  month,  on  the  next  preceding   Business  Day);  and  (iv)
         notwithstanding  clauses (i), (ii) and (iii) above,  no Interest Period
         for any Loan (other  than an Absolute  Rate Loan) shall have a duration
         of less than one month (in the case of a LIBOR  Loan or a LIBOR  Market
         Loan) and, if the  Interest  Period for any LIBOR Loan or LIBOR  Market
         Loan  would  otherwise  be a shorter  period,  such  Loan  shall not be
         available hereunder for such period.

                    LC Account  Agreement  shall  mean the LC Account  Agreement
         dated as of the date hereof  between  the  Borrower  and the Agent,  as
         amended or modified from time to time.

                    Lease  Payments  shall mean all  amounts  payable  under any
         lease  agreement  other than  obligations  under lease  agreements that
         constitute Indebtedness.

                    Letter of Credit  Borrowings  shall  mean as of any date the
         maximum  aggregate amount that the Agent could be required to pay under
         drafts that could properly be drawn in compliance with the terms of all
         Letters of Credit outstanding on such date, other than drafts that have
         been drawn and paid.

                    Letter  of Credit  Commitment  shall  mean an amount  not to
         exceed $40,000,000.

                    Letter of Credit  Obligations  shall  mean (a) the Letter of
         Credit  Borrowings  and (b) the  Reimbursement  Obligations  and  other
         obligations  under this Agreement and the Applications  with respect to
         drawings made on Letters of Credit,  including obligations with respect
         to all principal, interest, fees and other charges related thereto.

                    Letters of Credit  shall  mean and  include  all  letters of
         credit heretofore or hereafter issued by NationsBank for the account of
         the Borrower pursuant to this Agreement.

                    Liabilities  of any person shall mean  obligations  that are
         properly classified as liabilities under GAAP.

                    LIBOR Auction shall mean a solicitation  of Competitive  Bid
         Quotes  setting  forth  LIBOR  Margins  based  on the  LIBORBased  Rate
         pursuant to Section 2.3 hereof.

                    LIBOR-Based Rate shall mean the rate of interest  determined
         by the Agent at  approximately  11:00 A.M. London time two (2) Business
         Days prior to the commencement of the Interest Period,  based upon such
         factors as the Agent deems  relevant,  as the Agent's best  estimate of
         the cost of funds  available  to the  Agent  from the  purchase  on the
         London  interbank  market  of  funds in the  form of time  deposits  in
         Dollars  in the  approximate  amount  of the  Segment  that  is to bear
         interest at the LIBOR-Based Rate,  having a maturity  comparable to the
         Interest Period during which the  LIBOR-Based  Rate is to be in effect,
         it being  expressly  understood  that (i) the  Agent  may not  actually
         purchase  any  such  time  deposits  and  obtain  such  funds  (ii) the
         LIBOR-Based  Rate will be an  estimate,  and for a variety of  reasons,
         including changing market  conditions,  the actual cost of funds to the
         Agent  (if the  Agent  elects  to  purchase  funds  in the form of time
         deposits on such date) might vary from the Agent's estimate.

                    LIBOR Loans shall mean  Syndicated  Loans  interest rates on
         which  are  determined  on the  basis  of  LIBOR-Based  Rates  plus the
         Syndicated Margin.

                    LIBOR Margin shall have the meaning assigned to such term in
         Section 2.3(c)(ii)(C) hereof.

                    LIBOR Market Loans shall mean Competitive Bid Loans interest
         rates on which are determined on the basis of LIBORBased Rates pursuant
         to a LIBOR Auction.

                    LIBOR  Reserve   Requirement   shall  mean  the   percentage
         (expressed  as a decimal)  prescribed  by the Board of Governors of the
         Federal  Reserve  System (or any  successor),  on the date on which the
         LIBOR-Based   Rate  is   determined,   for   determining   the  reserve
         requirements   of  the  Agent   (including  any  marginal,   emergency,
         supplemental,  special or other  reserves)  with respect to liabilities
         relating to time  deposits  purchased  in the London  interbank  market
         having a maturity equal to the period during which the LIBOR-Based Rate
         will be in  effect  and in an  amount  equal to the  Segment  involved,
         without any benefit or credit for any proration,  exemptions or offsets
         under any now or hereafter applicable regulations.

                    Lien shall mean any mortgage,  pledge,  assignment,  charge,
         encumbrance, lien, security interest or financing lease.

                    Loan Documents  shall mean this  Agreement,  the Notes,  the
         Applications,   the  Subsidiary   Guaranty  Agreements  and  amendments
         thereto,  the Partnership  Guaranty  Agreements and amendments thereto,
         the  Pledge  Agreements,   the  LC  Account  Agreement  and  all  other
         agreements, instruments and documents executed or delivered at any time
         in connection with the Credit Obligations, or to evidence or secure any
         of the Credit Obligations.

                    Loans  shall  mean the  Syndicated  Loans,  Competitive  Bid
         Loans,  Term  Loans,  Letter of  Credit  Borrowings  and  Reimbursement
         Obligations and all extensions and renewals thereof.

                    Margin Stock shall have the meaning  attributed to that term
         in Regulation U of the Federal Reserve Board, as amended.

                    Material Group shall mean, at any time,  any group,  whether
         one or more, or combination of Consolidated  Entities (a) whose assets,
         in the  aggregate,  constitute 5% or more of the assets of the Borrower
         and the Consolidated  Entities on a consolidated basis or (b) whose net
         revenues,  in the aggregate,  constitute 5% or more of the net revenues
         of the Borrower and the Consolidated Entities on a consolidated basis.

                    Maturity Date means November 30, 2000.

                    Multi-employer  Plan means an employee  pension benefit plan
         covered by Title IV of ERISA and in respect  of which the  Borrower  or
         any  Consolidated  Entity is an  "employer"  as  described  in  Section
         4001(b)  of ERISA,  which is also a  multi-employer  plan as defined in
         Section 4001(a)(3) of ERISA;

                    NationsBank  means  NationsBank of North Carolina,  National
         Association,  as a  Lender  and as  issuer  of the  Letters  of  Credit
         pursuant to Section 2.13 hereof and any successor thereof.

                    Notes shall mean the Syndicated  Notes,  the Competitive Bid
         Notes and the Term Notes.

                    Opinion of Counsel shall mean a favorable written opinion of
         an attorney or firm of attorneys  duly  licensed to practice law in the
         jurisdiction  the laws of which are  applicable to the legal matters in
         question  and who is not an employee of the Borrower or of an Affiliate
         of the Borrower.

                    Partnership   Liability   shall  mean,  with  respect  to  a
         Participating  Partnership,  that part, if any, of an Advance (together
         with interest thereon and fees,  prepayment  premiums and other charges
         properly attributable thereto) that is to be received by and used by or
         for the benefit of such Participating Partnership,  as certified to the
         Agent by the  Borrower,  under  Section  2.6,  in  connection  with the
         Borrowers' request for such Advance, and Partnership  Liabilities shall
         mean the aggregate  amount of all such parts of Advances that are to be
         received  by and  used by or for  the  benefit  of  such  Participating
         Partnership.

                    Partnership   Guaranty   Agreement  shall  mean  a  guaranty
         agreement of a  Participating  Partnership in the form attached  hereto
         and marked Exhibit C-1, as amended and supplemented from time to time.

                    Participating    Partnership   shall   mean   a   Controlled
         Partnership  that has executed and delivered to the Agent a Partnership
         Guaranty  Agreement and all other  documents  necessary to assume joint
         and several liability as to the Credit Obligations to the extent of its
         Partnership Liabilities.

                    Participating  Subsidiary  shall mean a Subsidiary  that has
         executed and delivered to the Agent a Subsidiary Guaranty Agreement and
         all other documents  necessary to assume joint and several liability as
         to the Credit  Obligations  (in the maximum amount provided for in such
         Subsidiary Guaranty Agreement).

                    Participation  shall mean, with respect to any Lender (other
         than   NationsBank),   the  extension  of  credit  represented  by  the
         participation  of such Lender hereunder in the liability of NationsBank
         in respect of a Letter of Credit  issued by  NationsBank  in accordance
         with the terms hereof.

                    Permitted Encumbrances shall mean:

                    (1) taxes,  assessments and other governmental  charges that
                    are not delinquent or that are being contested in good faith
                    by appropriate proceedings duly pursued;

                    (2) mechanics',  materialmen's,  contractor's, landlord's or
                    other  similar  liens  arising  in the  ordinary  course  of
                    business,  securing  obligations  that are not delinquent or
                    that  are  being  contested  in good  faith  by  appropriate
                    proceedings duly pursued;

                    (3)  restrictions,   exception,   reservations,   easements,
                    conditions,  limitations  and other  matters of record other
                    than Liens that do not adversely affect the value or utility
                    of the property;

                    (4) Liens on  equipment  used in a Facility  (a) that secure
                    Indebtedness  that already  existed when such  equipment was
                    purchased  or  acquired,  or (b) that were created to secure
                    loans,  the proceeds of which were used in their entirety to
                    pay the purchase price of such equipment, provided that such
                    Liens attach only to the equipment so purchased;

                    (5)  Liens in  favor of the  Agent  for the  benefit  of the
                    Lenders under this Agreement;

                    (6) Liens and  other  matters  approved  in  writing  by the
                    Required Lenders; and

                    (7) Liens in favor of landlords, the amount secured by which
                    landlords'  Liens,  in the  aggregate,  would not materially
                    adversely affect the Borrower or a Material Group.

                    Permitted Investments shall mean:

                    (1) direct  obligations  of, or  obligations  the payment of
                    which is  guaranteed  by, the United States of America or an
                    interest  in any trust or fund that  invests  solely in such
                    obligations or repurchase agreements, properly secured, with
                    respect to such obligations.

                    (2) direct obligations of agencies or  instrumentalities  of
                    the United States of America  having a rating of A or higher
                    by Standard & Poor's  Corporation or A2 or higher by Moody's
                    Investors Service, Inc.;

                    (3)  a   certificate   of   deposit   issued  by,  or  other
                    interest-bearing  deposits with, a bank having its principal
                    place of business in the United States of America and having
                    equity capital of not less than $250,000,000;

                    (4) a certificate  of deposit by, or other  interest-bearing
                    deposits with,  any other bank  organized  under the laws of
                    the United States of America or any state thereof,  provided
                    that such  deposit  is either  (i)  insured  by the  Federal
                    Deposit  Insurance  Corporation or (ii) properly  secured by
                    such  bank by  pledging  direct  obligations  of the  United
                    States of  America  having a market  value not less than the
                    face amount of such deposits;

                    (5) the capital stock of and  partnership  interests in, and
                    loans made by the Borrower to,  Controlled  Partnerships and
                    Subsidiaries;

                    (6) prime  commercial  paper maturing within 270 days of the
                    acquisition thereof and, at the time of acquisition,  having
                    a rating of A-1 or higher by Standard & Poor's  Corporation,
                    or P-1 or higher by Moody's Investors Service, Inc.;

                    (7) eligible banker's acceptances, repurchase agreements and
                    tax-exempt  municipal  bonds  having a maturity of less than
                    one year, in each case having a rating,  or that is the full
                    recourse  obligation of a person whose senior debt is rated,
                    A or higher by Standard & Poor's Corporation or A2 or higher
                    by Moody's Investors Service, Inc.;

                    (8) loans made by the Borrower or a  Consolidated  Entity in
                    an aggregate  amount of  $2,000,000  or less to employees of
                    the Borrower or of a Consolidated Entity;

                    (9) loans made by the Borrower or a  Controlled  Partnership
                    in an  aggregate  amount of  $1,000,000  or less to  limited
                    partners  (or  potential  limited  partners)  of  Controlled
                    Partnerships  for  the  purpose  of  enabling  such  limited
                    partners  to  acquire  limited   partnership   interests  in
                    Controlled  Partnerships,  to operate their  practices or to
                    restructure partnership interests;

                    (10)  loans in the amount of up to  $20,000,000  made by the
                    Borrower to the HEALTHSOUTH Employee Stock Ownership Plan;

                    (11) scholarship  loans made by the Borrower in an aggregate
                    amount  not  exceeding  $500,000  to  individuals  who  meet
                    certain  eligibility  requirements  as  established  by  the
                    Borrower from time to time;

                    (12)  up to 100%  of the  outstanding  shares  of  stock  of
                    Caretenders  Healthcorp  (formerly known as Senior Services,
                    Inc.)  provided that  aggregate  costs  incurred to purchase
                    such shares shall not exceed $12,000,000;

                    (13)  other  investments  of  less  than  $5,000,000  in the
                    aggregate  expressly  approved  in  writing by the Agent and
                    investments of $5,000,000 or greater  expressly  approved in
                    writing by the Required Lenders;

                    (14) any other investment  having a rating of A or higher or
                    A-1 or  higher by  Standard  & Poor's  Corporation  or A2 or
                    higher or P-1 or higher by Moody's Investors Service, Inc.;

                    (15) loans to health care  practitioners  and other  persons
                    not to exceed in the aggregate $5,000,000; and

                    (16) investments in Wellmark,  HEALTHSMART,  MedPartners and
                    Austin Medical Office Building which in the aggregate do not
                    exceed $3,500,000.

                    Pledge  Agreement shall have the meaning  attributed to that
         term in Section 2.7.

                    Prime Rate shall mean that rate of  interest  designated  by
         the Agent from time to time as its  "prime  rate",  it being  expressly
         understood  and agreed that its prime rate is merely an index rate used
         by the Agent to  establish  lending  rates and is not  necessarily  the
         Agent's most  favorable  lending rate,  and that changes in the Agent's
         prime rate are  discretionary  with the Agent.  Any change in the Prime
         Rate shall be effective as of the date of such change.

                    Principal Maturities shall mean principal maturing or coming
         due on Indebtedness  during the next  succeeding  period of 12 calendar
         months.

                    Principal  Office  shall  mean the  principal  office of the
         Agent located at NationsBank Corporate Center, 100 North Tryon
         Street, Charlotte, North Carolina 28255.

                    Reimbursement   Obligation  shall  mean  at  any  time,  the
         obligation  of the  Borrower  with  respect  to any Letter of Credit to
         reimburse NationsBank and the Lenders to the extent of their respective
         Participations  (including by the receipt by NationsBank of proceeds of
         Loans pursuant to Section 2.1(b) hereof) for amounts  theretofore  paid
         by NationsBank pursuant to a drawing under such Letter of Credit.

                    Request  for  Advance or  Interest  Election  shall have the
         meaning attributed to that term in Section 2.2.

                    Required Lenders shall mean Lenders having at least 66- 2/3%
         of the aggregate amount of the Commitments or, if the Commitments shall
         have  terminated,  Lenders  holding at least  66-2/3% of the  aggregate
         unpaid principal amount of the Loans, provided that if any Lender shall
         have  failed to fund its  portion of any  Syndicated  Loan  pursuant to
         Section  2.1 and the  Agent or  NationsBank  has made such Loan on such
         Lender's behalf, NationsBank shall be deemed the holder of such portion
         of such Lender's Commitment for purposes of this definition.

                    Revolving  Facility  shall  mean the  credit  facility  made
         available to the Borrower by the Lenders  under the terms of Article II
         in an  aggregate  amount of up to  $550,000,000  as reduced by Borrower
         pursuant to Section 2.10 hereof.

                    Revolving  Facility  Obligations  shall mean the outstanding
         principal amount of all Advances,  all interest  accrued  thereon,  all
         costs, charges, fees and expenses payable in connection therewith,  and
         all extensions and renewals thereof.

                    Sale and Leaseback  Transaction  means,  with respect to any
         person, an arrangement with any bank, insurance company or other lender
         or investor  or to which such lender or investor is a party,  providing
         for  the  leasing  by such  person  or any of its  Subsidiaries  of any
         property or asset of such person or any of its  Subsidiaries  which has
         been or is being sold or transferred by such person or such  Subsidiary
         to such  lender or investor or to any person to whom funds have been or
         are to be advanced  by such lender or investor on the  security of such
         property or asset.

                    Segment  shall  mean a  portion  of  the  Advances  (or  all
         thereof)  with  respect to which a particular  interest  rate is (or is
         proposed to be) applicable.

                    Senior  Indebtedness  means the Credit  Obligations and that
         Indebtedness permitted to be incurred pursuant to Section 7.8(a)(9)(B),
         (D), (E) and (F) hereof.

                    Senior Subordinated Notes means the 9.5% Senior Subordinated
         Notes due 2001 of the  Borrower  in the  aggregate  original  principal
         amount of $250,000,000.

                    Single Employer Plan means any employee pension benefit plan
         covered by Title IV of ERISA and in respect  of which the  Borrower  or
         any  Consolidated  Entity is an  "employer"  as  described  in  Section
         4001(b) of ERISA, which is not a Multiemployer Plan;

                    Subordinated  Indebtedness  means  the  Senior  Subordinated
         Notes,   the   Convertible   Subordinated   Debentures  and  any  other
         Indebtedness  incurred  pursuant  to  Section  7.8(a)(9)(G)  hereof  to
         refinance the Senior Subordinated Notes or the Convertible Subordinated
         Debentures.

                    Subsidiary shall mean any corporation,  more than 50% of the
         shares of stock of which having  general  voting  power under  ordinary
         circumstances to elect the board of directors,  managers or trustees of
         such  corporation,  irrespective of whether or not at the time stock of
         any other  class or classes  shall have or might have  voting  power by
         reason  of  the  happening  of  any  contingency,  which  is  owned  or
         controlled  directly or indirectly by the Borrower and which has either
         assets  with a value  exceeding  $2,000 or  positive  annual  operating
         income.

                    Subsidiary   Guaranty   Agreement   shall  mean  a  guaranty
         agreement of a Participating Subsidiary in the form attached hereto and
         marked Exhibit C-2, as amended and supplemented from time to time.

                    Syndicated  Loans  shall  mean  the  loans  provided  for by
         Section  2.1 or  Section  2.4  hereof,  which may be Base Rate Loans or
         LIBOR Loans.

                    Syndicated  Margin  means that  percent  per annum set forth
         below  in  the  case  of a  LIBOR  Loan,  which  percent  shall  be the
         Syndicated  Margin  effective on the date of delivery to the Agent of a
         Compliance  Certificate  pursuant  to  Section  7.3(3)  for the  fiscal
         quarter period as at the end of which the ratio of  Indebtedness of the
         Borrower and its  Consolidated  Entities to  Consolidated  Cash Flow is
         greater  than or equal to or less  than,  as the case may be, the ratio
         set forth opposite such Syndicated Margin:

                                                     Syndicated Margin
                                               -----------------------------
                                                Prior to        On or After
                                               Conversion       Conversion
                    Ratio                        Date              Date 
                   -------                     -----------      ------------
         (a)  Greater than or equal to           1 5/8%            2 1/8%
              5.00 to 1.00

         (b)  Less than 5.00 to 1.00 but         1 3/8%            1 7/8%
              equal to or greater than
              4.50 to 1.00

         (c)  Less than 4.50 to 1.00 but         1 1/8%            1 5/8%
              equal to or greater than
              3.75 to 1.00

         (d)  Less than 3.75 to 1.00 but           7/8%            1 3/8%
              equal to or greater than
              3.00 to 1.00

         (e)  Less than 3.00 to 1.00               5/8%            1 1/8%

         Notwithstanding the foregoing,  during the period from the Closing Date
         through  the  date of  delivery  of a  Compliance  Certificate  for the
         quarter period ended September 30, 1994 the Syndicated  Margin shall be
         1 3/8%

                    Syndicated  Notes shall mean the  promissory  notes provided
         for by  Section  2.9  hereof  and all  promissory  notes  delivered  in
         substitution  or  exchange  thereof,  in each case as the same shall be
         modified and supplemented and in effect from time to time.

                    Term Loan means the Loan or Loans made by the Lenders on the
         Conversion Date to the Borrower pursuant to Section 2.4 hereof.

                    Term Loan  Commitment  means the undertaking of the Lenders,
         subject to the terms and conditions of this Agreement, to make the Term
         Loan to the Borrower hereunder on the Conversion Date.

                    Term Note and Term Notes means the promissory notes provided
         for by  Section  2.9  hereof  and all  promissory  notes  delivered  in
         substitution  or  exchange  thereof,  in each case as the same shall be
         modified and supplemented and in effect from time to time.

                    Type shall have the meaning assigned to such term in Section
         1.2 hereof.

                    Unused  Amount shall mean with  respect to each Lender,  (a)
         the  Commitment of such Lender less (b) such Lender's pro rata share of
         outstanding  Syndicated Loans and Letter of Credit Obligations less (c)
         the outstanding principal amount of all Competitive Bid Loans then held
         by such Lender.

                    Unused  Margin means that percent per annum set forth below,
         which  percent shall be the Unused  Margin  effective  upon the date of
         delivery to the Agent of a Compliance  Certificate  pursuant to Section
         7.7(3)  for the  fiscal  quarter  as at the end of which  the  ratio of
         Indebtedness  of  the  Borrower  and  its   Consolidated   Entities  to
         Consolidated Cash Flow is greater than or equal to or less than, as the
         case may be, the ratio set forth opposite such Unused Margin.

                    Ratio                                      Unused Margin
                   -------                                     --------------
         (a)  Greater than or equal to                              1/2%
              5.00 to 1.00

         (b)  Less than 5.00 to 1.00 but                            3/8%
              equal to or greater than
              4.50 to 1.00

         (c)  Less than 4.50 to 1.00 but                            3/8%
              equal to or greater than
              3.75 to 1.00

         (d)  Less than 3.75 to 1.00                                1/4%

         Notwithstanding the foregoing,  during the period from the Closing Date
         through  the  date of  delivery  of a  Compliance  Certificate  for the
         quarter ended September 30, 1994 the Unused Margin shall be 3/8%.

                    Vanderbilt    shall   mean   The    Vanderbilt    Stallworth
         Rehabilitation  Hospital, L.P., the partners of which are the Borrower,
         Vanderbilt University and Vanderbilt Health Services.

         SECTION  1.2  Classes  and  Types  of  Loans.   Loans   hereunder   are
distinguished by "Class" and by "Type".  The "Class" of a Loan refers to whether
such  Loan  is a  Competitive  Bid  Loan or a  Syndicated  Loan,  each of  which
constitutes a Class.  The "Type" of a Loan refers to whether such Loan is a Base
Rate Loan, a LIBOR Loan, an Absolute Loan or a LIBOR Market Loan,  each of which
constitutes a Type. Loans may be identified by both Class and Type.

                                   ARTICLE II

               REVOLVING FACILITY TERMS, TERM LOAN AND COLLATERAL

         SECTION 2.1 Syndicated Loans.

                    (a) From and after the  Closing  Date to and  including  the
Conversion  Date, on the terms and subject to the  conditions  set forth in this
Agreement, each Lender severally agrees to lend to the Borrower and the Borrower
may  borrow,  repay and  reborrow,  an amount  not  exceeding  the amount of the
Commitment  of such Lender in effect from time to time,  less the amount of such
Lender's Syndicated Loans and the Reimbursement  Obligation and Letter of Credit
Borrowings applicable to such Lender; provided, however, that no more than eight
(8) different  Interest  Periods for both  Syndicated  Loans and Competitive Bid
Loans may be  outstanding at the same time (for which purpose  Interest  Periods
described in different  lettered clauses of the definition of the term "Interest
Period"  shall be  deemed  to be  different  Interest  Periods  even if they are
coterminous).  All  Advances  made by the  Lenders  to the  Borrower  under this
Agreement  with  respect  to the  Revolving  Facility  shall be  evidenced  by a
promissory note for each Lender each dated the date of this Agreement payable to
the order of each Lender,  duly executed by the  Borrower,  and in the aggregate
maximum  principal amount of $550,000,000 all as provided in Section 2.9 hereof.
The Advances  shall bear  interest as provided in Article III below.  The unpaid
principal amount of all Loans hereunder shall not exceed the Revolving  Facility
and each  Syndicated  Loan made  hereunder  shall be  allocated  pro rata  among
Lenders based upon their Applicable  Commitment Percentage regardless of amounts
outstanding under Competitive Bid Loans.

                    (b) If a  drawing  is made  under  any  Letter  of Credit in
accordance with the terms thereof prior to the Conversion Date the drawing shall
be paid by the Agent  without the  requirement  of notice from the Borrower from
immediately  available  funds which  shall be advanced by the Lenders  under the
Revolving  Facility.  If a drawing  is  presented  under any Letter of Credit in
accordance  with the terms  thereof  notice of such  drawing  shall be  provided
promptly by  NationsBank to the Agent and the Agent shall provide notice to each
Lender by telephone or telecopy. If notice to the Lenders of a drawing under any
Letter of Credit is given by the Agent at or before 12:00 noon Charlotte,  North
Carolina time on any Business Day, each Lender shall, pursuant to the conditions
of this  Agreement,  make a Base  Rate  Loan  in the  amount  of  such  Lender's
Applicable  Commitment  Percentage  of such drawing and shall pay such amount to
the Agent for the account of NationsBank at the Principal  Office in Dollars and
in immediately  available funds before 2:00 P.M. Charlotte,  North Carolina time
on the same  Business  Day. If notice to the Lenders of a drawing under a Letter
of Credit is given by the Agent after 12:00 noon Charlotte,  North Carolina time
on any Business Day, each Lender shall, pursuant to the terms and subject to the
conditions  of this  Agreement,  make a Base  Rate  Loan in the  amount  of such
Lender's  Applicable  Commitment  Percentage  of such drawing and shall pay such
amount to the Agent for the account of  NationsBank  at the Principal  Office in
Dollars and in immediately  available funds before 12:00 noon  Charlotte,  North
Carolina time on the next  following  Business Day. Such Base Rate Loan shall be
deemed made for a period  ending on the following  Business Day,  which shall be
extended  automatically to the next succeeding Business Day unless and until the
Borrower  converts such Base Rate Loan in  accordance  with the terms of Section
3.2 hereof.

         SECTION 2.2 Advances of Syndicated Loans.  Advances of Syndicated Loans
shall be made no more frequently than three (3) times in each week. Each Advance
shall be in an  amount no less  than  $5,000,000  and  multiples  of  $1,000,000
thereafter.  Each  request  for an Advance  must be in writing  (which may be by
facsimile  transmission)  and must be received by the Agent not later than 10:00
a.m., Charlotte, North Carolina, time, (x) at least three Business Days prior to
the date of any LIBOR Loan and (y) on the day which the Advance is to be made in
the case of a Base Rate Loan.  Each request for an Advance  shall be in the form
attached  hereto as Exhibit D ("Request for Advance or Interest Rate  Election")
and shall specify the amount of the Advance  requested,  the day as of which the
Advance is to be made and the part or parts,  if any, of the Advance that are to
be used by or for the benefit of Participating Partnerships, specifying the part
allocable to each Participating Partnership, and shall provide the interest rate
information  called for in Section 3.2. The Agent shall promptly (not later than
1:00 P.M.  Charlotte,  North  Carolina  time)  furnish  each  Lender by telecopy
transmission a copy of each Request for Advance or Interest Rate  Election.  Not
later than 2:00 P.M.  Charlotte,  North  Carolina time on the date specified for
each  Advance  hereunder,  each Lender  shall make  available  the amount of the
Syndicated  Loan or  Loans  to be made by it on such  date to the  Agent  at the
Principal Office, in Dollars and in immediately  available funds, and the amount
received by the Agent shall be made  available to the Borrower by depositing the
proceeds  thereof  into an account  with the Agent in the name of the  Borrower.
Subject  to  Section  2.4,  the  Lenders'  obligation  to  make  Advances  shall
terminate,  if  not  sooner  terminated  pursuant  to  the  provisions  of  this
Agreement,  on the  Conversion  Date.  Each Request for Advance or Interest Rate
Election,  whether  submitted  under  this  Section  2.2  in  connection  with a
requested  Advance or under  Section 3.2 in  connection  with an  interest  rate
election,  and each  Application  shall be signed by an officer of the  Borrower
designated as authorized to sign and submit Request for Advance or Interest Rate
Election forms and Applications in the documents submitted to the Agent pursuant
to Section 6.3(a) below.  The Borrower may, from time to time, by written notice
to the  Agent,  terminate  the  authority  of any person to submit  Request  for
Advance or Interest Rate Election  forms and  Applications  and designate new or
additional  persons to so act by delivering  to the Agent a  certificate  of the
Secretary of the Borrower  certifying the  incumbency and specimen  signature of
each such  person.  The Agent shall be entitled  to rely  conclusively  upon the
authority of any person so designated by the Borrower.

         SECTION 2.3  Competitive Bid Loans.

                    (a) In addition to borrowings of  Syndicated  Loans,  at any
time prior to the Conversion  Date and so long as the ratio of  Indebtedness  of
the Borrower and its Consolidated Entities to Consolidated Cash Flow is equal to
or less than 4.50 to 1.00 the  Borrower  may, as set forth in this  Section 2.3,
request the Lenders to make offers to make Competitive Bid Loans to the Borrower
in Dollars.  The Lenders may, but shall have no obligation  to, make such offers
and the Borrower may, but shall have no obligation to, accept any such offers in
the manner set forth in this  Section  2.3.  Competitive  Bid Loans may be LIBOR
Market  Loans or Absolute  Rate Loans (each a "Type" of  Competitive  Bid Loan),
provided that:

                        (i) the aggregate amount of outstanding  Competitive Bid
                    Loans  of all  Lenders  shall  not  exceed  one  half of the
                    Revolving Facility;

                        (ii)  there  may be no more  than  eight  (8)  different
                    Interest  Periods for both Syndicated  Loans and Competitive
                    Bid Loans  outstanding  at the same time (for which  purpose
                    Interest Periods described in different  lettered clauses of
                    the definition of the term "Interest Period" shall be deemed
                    to  be   different   Interest   Periods  even  if  they  are
                    coterminous);

                        (iii) the aggregate  amount of  outstanding  Competitive
                    Bid Loans of a Lender shall not exceed at any time an amount
                    equal to such Lender's Commitment;

                        (iv) the aggregate  principal  amount of all Competitive
                    Bid  Loans,  together  with  the  sum of (i)  the  aggregate
                    principal amount of all outstanding  Syndicated  Loans, (ii)
                    then  outstanding  Letter  of  Credit  Borrowings  and (iii)
                    Reimbursement  Obligations  shall not exceed  the  aggregate
                    amount of the Commitments at such time; and

                             (v) no  Competitive  Bid Loan shall have a maturity
                    date subsequent to the Conversion Date.

                    (b) When the  Borrower  wishes  to  request  offers  to make
Competitive  Bid Loans, it shall give the Agent (which shall promptly notify the
Lenders) notice (a "Competitive Bid Quote Request") to be received no later than
11:00 a.m.  Charlotte,  North Carolina time on (x) the fourth Business Day prior
to the date of borrowing proposed therein, in the case of a LIBOR Auction or (y)
the Business Day next preceding the date of borrowing  proposed therein,  in the
case of an Absolute Rate Auction (or, in any such case, such other time and date
as the Borrower and the Agent,  with the consent of the  Required  Lenders,  may
agree).  The Borrower may request offers to make Competitive Bid Loans for up to
two (2)  different  Interest  Periods  in a single  notice  (for  which  purpose
Interest  Periods in different  lettered  clauses of the  definition of the term
"Interest Period" shall be deemed to be different  Interest Periods even if they
are  coterminous);  provided that the request for each separate  Interest Period
shall be deemed to be a separate  Competitive  Bid Quote  Request for a separate
borrowing (a "Competitive  Bid Borrowing") and there shall not be outstanding at
any  one  time  more  than  four  (4)  Competitive  Bid  Borrowings.  Each  such
Competitive  Bid Quote Request shall be  substantially  in the form of Exhibit E
hereto and shall specify as to each Competitive Bid Borrowing:

                        (i) the proposed date of such borrowing,  which shall be
                    a Business Day;

                        (ii)  the  aggregate  amount  of  such  Competitive  Bid
                    Borrowing,  which shall be at least $10,000,000 (or a larger
                    multiple  of  $1,000,000)  but shall  not  cause the  limits
                    specified in Section 2.3(a) hereof to be violated;

                        (iii) the  duration of the  Interest  Period  applicable
                    thereto;

                        (iv) whether the Competitive Bid Quotes  requested for a
                    particular  Interest  Period  are  seeking  quotes for LIBOR
                    Market Loans or Absolute Rate Loans; and

                        (v) if the Competitive Bid Quotes  requested are seeking
                    quotes  for  Absolute  Rate  Loans,  the date on  which  the
                    Competitive  Bid Quotes are to be  submitted if it is before
                    the  proposed  date of  borrowing  (the  date on which  such
                    Competitive  Bid  Quotes are to be  submitted  is called the
                    "Quotation Date").

Except as otherwise  provided in this Section  2.3(b),  no Competitive Bid Quote
Request  shall be given within five (5)  Business  Days (or such other number of
days as the  Borrower and the Agent,  with the consent of the Required  Lenders,
may agree) of any other Competitive Bid Quote Request.

                    (c) (i) Each Lender may submit one or more  Competitive  Bid
Quotes,  each  containing an offer to make a Competitive Bid Loan in response to
any  Competitive  Bid Quote Request;  provided  that, if the Borrower's  request
under Section 2.3(b) hereof specified more than one Interest Period, such Lender
may make a single  submission  containing one or more Competitive Bid Quotes for
each such Interest  Period.  Each Competitive Bid Quote must be submitted to the
Agent not later than (x) 2:00 p.m. Charlotte,  North Carolina time on the fourth
Business Day prior to the  proposed  date of  borrowing,  in the case of a LIBOR
Auction or (y) 10:00 a.m. Charlotte,  North Carolina time on the Quotation Date,
in the case of an Absolute  Rate Auction (or, in any such case,  such other time
and date as the  Borrower  and the  Agent,  with  the  consent  of the  Required
Lenders, may agree); provided that any Competitive Bid Quote may be submitted by
NationsBank  (or its Applicable  Lending  Office) only if  NationsBank  (or such
Applicable  Lending  Office)  notifies  the  Borrower  of the terms of the offer
contained therein not later than (x) 1:00 p.m. Charlotte, North Carolina time on
the fourth Business Day prior to the proposed date of borrowing,  in the case of
a LIBOR Auction or (y) 9:45 a.m. Charlotte, North Carolina time on the Quotation
Date, in the case of an Absolute Rate Auction.  Subject to Sections 4.2, 4.3 and
Article VI and IX hereof, any Competitive Bid Quote so made shall be irrevocable
except with the consent of the Agent given on the instructions of the Borrower.

                        (ii) Each  Competitive Bid Quote shall be  substantially
in the form of Exhibit F hereto and shall specify:

                        (A) the  proposed  date of  borrowing  and the  Interest
                    Period therefor;

                        (B) the principal amount of the Competitive Bid Loan for
                    which each such order is being made,  which principal amount
                    shall  be at  least  $2,000,000  (or a  larger  multiple  of
                    $1,000,000); provided that the aggregate principal amount of
                    all  Competitive  Bid  Loans  for  which  a  Lender  submits
                    Competitive  Bid Quotes (x) may not exceed the Commitment of
                    such Lender and (y) may not exceed the  principal  amount of
                    the  Competitive  Bid  Borrowing  for a particular  Interest
                    Period for which offers were requested;

                        (C) in the case of a LIBOR Auction,  the margin above or
                    below the applicable  LIBOR-Based  Rate (the "LIBOR Margin")
                    offered for each such  Competitive Bid Loan,  expressed as a
                    percentage  (rounded upwards,  if necessary,  to the nearest
                    1/10,000th  of 1%) to be  added  to or  subtracted  from the
                    applicable LIBOR-Based Rate;

                        (D) in the case of an Absolute Rate Auction, the rate of
                    interest per annum (rounded  upwards,  if necessary,  to the
                    nearest  1/10,000th of 1%) offered for each such Competitive
                    Bid Loan (the "Absolute Rate"); and

                        (E) the identity of the quoting Lender.

Unless otherwise agreed by the Agent and the Borrower,  no Competitive Bid Quote
shall contain qualifying, conditional or similar language or propose terms other
than or in addition to those set forth in the applicable  Competitive  Bid Quote
Request and, in  particular,  no Competitive  Bid Quote may be conditioned  upon
acceptance by the Borrower of all (or some  specified  minimum) of the principal
amount of the Competitive Bid Loan for which such Competitive Bid Quote is being
made.

                    (d) The Agent shall (x) in the case of a LIBOR  Auction,  by
4:00 p.m.  Charlotte,  North Carolina time on the day a Competitive Bid Quote is
submitted  or (y) in the  case of an  Absolute  Rate  Auction,  as  promptly  as
practicable  after the  Competitive Bid Quote is submitted (but in any event not
later than 10:30 a.m.  Charlotte,  North  Carolina time on the Quotation  Date),
notify the Borrower of the terms (i) of any Competitive Bid Quote submitted by a
Lender  that  is in  accordance  with  Section  2.3(c)  hereof  and  (ii) of any
Competitive Bid Quote that amends,  modifies or is otherwise inconsistent with a
previous Competitive Bid Quote submitted by such Lender with respect to the same
Competitive Bid Quote Request.  Any such subsequent  Competitive Bid Quote shall
be  disregarded  by the Agent unless such  subsequent  Competitive  Bid Quote is
submitted  solely to correct a manifest  error in such  former  Competitive  Bid
Quote.  The Agent's  notice to the  Borrower  shall  specify  (A) the  aggregate
principal  amount of the  Competitive  Bid  Borrowing for which orders have been
received and (B) the respective  principal amounts and LIBOR Margins or Absolute
Rates,  as the case may be, so offered by each  Lender  (identifying  the Lender
that made each Competitive Bid Quote).

                    (e) Not later than 11:00 a.m. Charlotte, North Carolina time
on (x) the third  Business Day prior to the proposed date of  borrowing,  in the
case of a LIBOR  Auction or (y) the  Quotation  Date, in the case of an Absolute
Rate Auction (or, in any such case, such other time and date as the Borrower and
the Agent,  with the consent of the Required Lenders,  may agree),  the Borrower
shall  notify  the Agent of its  acceptance  or  nonacceptance  of the offers so
notified  to it  pursuant  to  Section  2.3(d)  hereof  (and the  failure of the
Borrower to give such notice by such time shall  constitute  nonacceptance)  and
the Agent shall promptly notify each affected Lender. In the case of acceptance,
such notice  shall  specify the  aggregate  principal  amount of offers for each
Interest  Period that are accepted.  The Borrower may accept any Competitive Bid
Quote in whole or in part (provided that any  Competitive  Bid Quote accepted in
part shall be at least $2,000,000 or a larger multiple of $1,000,000);  provided
that:

                        (i) the aggregate  principal  amount of each Competitive
                    Bid Borrowing may not exceed the applicable amount set forth
                    in the related Competitive Bid Quote Request;

                        (ii) the aggregate  principal amount of each Competitive
                    Bid  Borrowing  shall be at least  $10,000,000  (or a larger
                    multiple  of  $1,000,000)  but shall  not  cause the  limits
                    specified in Section 2.3(a) hereof to be violated;

                        (iii) acceptance of offers may be made only in ascending
                    order of LIBOR  Margins or Absolute  Rates,  as the case may
                    be, in each case  beginning with the lowest rate so offered;
                    provided,   however,   that  the   Borrower,   in  its  sole
                    discretion,  may accept  other  than the  lowest  rate where
                    acceptance  of the  lowest  rate  will  result  in  (x)  the
                    outstanding Loans of a Lender or Lenders offering the lowest
                    rate exceeding such Lender's  Commitment and (y) an increase
                    in the Unused Fee payable by  Borrower  under  Section  2.11
                    hereof; and

                        (iv) the  Borrower  may not accept  any offer  where the
                    Agent has  correctly  advised the  Borrower  that such offer
                    fails to comply with Section  2.3(c)(ii) hereof or otherwise
                    fails to  comply  with the  requirements  of this  Agreement
                    (including, without limitation, Section 2.3(a) hereof).

If  offers  are  made by two or more  Lenders  with the same  LIBOR  Margins  or
Absolute Rates,  as the case may be, for a greater  aggregate  principal  amount
than the amount in respect of which offers are accepted for the related Interest
Period after the acceptance of all offers, if any, of all lower LIBOR Margins or
Absolute  Rates,  as the case may be,  offered by any  Lender  for such  related
Interest  Period,  the principal  amount of Competitive  Bid Loans in respect of
which such offers are accepted  shall be  allocated  by the Borrower  among such
Lenders  as nearly as  possible  (in  amounts of at least  $2,000,000  or larger
multiples of $1,000,000) in proportion to the aggregate principal amount of such
offers.  Determinations  by the Borrower of the amounts of Competitive Bid Loans
and the lowest bid after adjustment as provided in Section  2.3(e)(iii) shall be
conclusive in the absence of manifest error.

                    (f) Any Lender whose offer to make any  Competitive Bid Loan
has been accepted shall, not later than 1:00 p.m. Charlotte, North Carolina time
on the date specified for the making of such Loan,  make the amount of such Loan
available  to the Agent at the  Principal  Office in Dollars and in  immediately
available  funds,  for  account of the  Borrower.  The amount so received by the
Agent shall,  subject to the terms and  conditions  of this  Agreement,  be made
available to the Borrower on such date by depositing the same, in Dollars and in
immediately  available  funds,  in an account of the Borrower  maintained at the
Principal Office.

         SECTION 2.4 Term Loan.  (a) On the  Conversion  Date,  on the terms and
subject to the conditions  set forth in this  Agreement,  each Lender  severally
agrees to convert all or such  portion of its  Commitment  as the  Borrower  may
request by written  notice to the Agent not later  than 10:00  A.M.,  Charlotte,
North Carolina time, on the third Business Day preceding the Conversion  Date to
a Term  Loan.  Each  Lender's  portion  of the  Term  Loan  Commitment  shall be
evidenced by a promissory note of the Borrower dated the Conversion Date payable
to the order of such Lender,  duly executed by the Borrower,  all as provided in
Section  2.9 hereof and shall be equal to such  Lender's  Applicable  Commitment
Percentage of the total of all outstanding Advances on the Conversion Date which
Borrower has  requested  be  continued as a Term Loan.  The Term Loan shall bear
interest as provided in Article III below.

                    (b)  The  Borrower  shall  make  fourteen  (14)  consecutive
quarterly payments of principal on the Term Loans, each payment to be due on the
last day of March, June,  September and December  commencing June 30, 1997, each
of which shall be in an amount  equal to 6.666% of the Term Loan.  The  Borrower
shall make a fifteenth payment on November 30, 2000 which payment shall be in an
amount  sufficient to repay in full the remaining  principal  amount of the Term
Loan  together with accrued  interest and unpaid fees,  if any.  Interest on the
Term Loan will be payable as set forth in Section 2.5 and Article III.

                    (c) The  Borrower  shall pay to the Agent for the benefit of
the Lenders on the Conversion Date a fee of 1/4% of each Lender's portion of the
Term Loan.

         SECTION 2.5 Payments. All interest accrued on Loans subject to the Base
Rate shall be payable on the last day of each successive March, June,  September
and  December,  commencing  on June 30,  1994 and upon  payment  in full of such
Loans, and all interest accrued on each Fixed Rate Loan, shall be payable at the
earlier of (i) the end of the applicable  Interest Period then in effect or (ii)
the end of each ninety (90) day period in the case of an Absolute  Rate and each
three (3) month period in the case of a LIBOR Market Rate. The principal  amount
of the Advances  shall be due on the  Conversion  Date unless such  Advances are
converted  to a Term Loan  pursuant  to  Section  2.4.  All  payments  of Credit
Obligations  shall be  payable to the Agent on or before  11:00 A.M.  Charlotte,
North Carolina time on the date when due, at the Principal Office in Dollars and
in  immediately  available  funds  free and clear of all  rights of  set-off  or
counterclaim.

         SECTION 2.6 Joint and Several Obligations.

                    (a) Each of the  Subsidiaries  and  Controlled  Partnerships
named in Exhibit G attached  hereto and made a part  hereof  shall  execute  and
deliver  to the Agent as of the  Closing  Date  either an Amended  and  Restated
Subsidiary  Guaranty  Agreement  or Amended and  Restated  Partnership  Guaranty
Agreement or a Subsidiary Guaranty Agreement or Partnership  Guaranty Agreement,
and each other Subsidiary and Controlled Partnership that is to become after the
Closing Date a Participating  Subsidiary or  Participating  Partnership,  as the
case may be, shall,  at the time it is to become a  Participating  Subsidiary or
Participating  Partnership,  execute  and  deliver  to the  Agent  a  Subsidiary
Guaranty Agreement or Partnership Guaranty Agreement,  as the case may be in the
form attached hereto as Exhibit C-2 and Exhibit C-1, respectively ("collectively
the "Guaranty Agreements").

                    (b) Although Advances shall be and heretofore have been made
only  to the  Borrower,  all or  portions  of such  Advances  may be used by the
Borrower  for the  benefit  of or  loaned  by the  Borrower  to a  Participating
Subsidiary or Participating Partnership.  As a condition to the use of Loans for
the benefit of Participating  Subsidiaries and Participating  Partnerships,  the
Lenders have  required that the  Participating  Subsidiaries  and  Participating
Partnerships  guaranty the payment of the Credit Obligations of Borrower arising
under this Agreement and the other Loan Documents to the extent set forth in the
respective  Guaranty  Agreements  to  which  they  are  a  party.  Each  of  the
Participating   Subsidiaries  and  Participating   Partnerships  separately  and
severally,  hereby  appoints  and  designates  the Borrower as each such party's
agent and  attorney-in-fact to act on behalf of each such party for all purposes
of the Loan  Documents  relating to the Credit  Obligations.  The Borrower shall
have  authority  to  exercise  on behalf of each  Participating  Subsidiary  and
Participating  Partnership  all  rights  and  powers  that  the  Borrower  deems
necessary,  incidental  or  convenient  in  connection  with the Loan  Documents
relating  to the Credit  Obligations,  including  the  authority  to execute and

deliver certificates, documents, agreements and other instruments referred to in
or  contemplated by such Loan Documents,  request  Advances  hereunder for their
benefit,  request  for the  issuance  of Letters  of Credit  for their  benefit,
receive all  proceeds of  Advances,  give all  notices,  approvals  and consents
required  or  requested  from time to time by the Agent or Lenders  and take any
other  actions  and steps that a  Participating  Subsidiary  or a  Participating
Partnership could take for its own account in connection with the Loan Documents
from time to time, it being the intent of the Participating Subsidiaries and the
Participating  Partnerships  to grant to the  Borrower  plenary  power to act on
behalf of the Participating  Subsidiaries and the Participating  Partnerships in
connection  with and pursuant to such Loan  Documents.  The  appointment  of the
Borrower as agent and  attorney-in-fact  for the Participating  Subsidiaries and
the Participating  Partnerships  hereunder shall be coupled with an interest and
be irrevocable so long as any Loan Document  relating to the Credit  Obligations
shall remain in effect.  The Agent or Lenders need not obtain any  Participating
Subsidiary's  or  Participating  Partnership's  consent or approval  for any act
taken by the  Borrower  pursuant to any Loan  Document,  and all such acts shall
bind  and  obligate  the  Borrower,  the  Participating   Subsidiaries  and  the
Participating Partnerships, jointly and severally. Each Participating Subsidiary
and Participating Partnership forever waives and releases any claim (whether now
or hereafter  arising) against the Agent or Lenders based on the Borrower's lack
of authority to act on behalf of any  Participating  Subsidiary or Participating
Partnership  in  connection  with the Loan  Documents  relating to the Revolving
Facility.

         SECTION 2.7 Pledge Agreement.  As security for the Credit  Obligations,
the Borrower and certain of the Participating Subsidiaries have, pursuant to the
Prior Agreement,  executed and delivered a pledge and security  agreement to the
Agent and shall  execute and deliver to the Agent  amended and  restated  pledge
agreements  on the  Closing  Date and from time to time after the  Closing  Date
pursuant  to the terms of  Section  7.14  hereof or upon  request  by the Agent,
pledge and security  agreements in form  acceptable to the Agent and its counsel
(all being collectively called the "Pledge Agreements")  granting to the Agent a
first priority  security  interest in and lien on (i) all shares of stock of all
Subsidiaries owned directly or indirectly by the Borrower, (ii) all right, title
and  interest  in  and  to  both  the  ownership  interest  of  Borrower  in any
partnership and all distributions payable to the Borrower or any Subsidiary as a
partner of any partnership (including Controlled  Partnerships but not including
Vanderbilt), (iii) all notes payable to Borrower by any Subsidiary or Controlled
Partnership  evidencing  any  loan or  advance  made by  Borrower,  and (iv) all
accounts receivable due to Borrower by any Subsidiary or Controlled  Partnership
arising by reason of any loan or advance  made by  Borrower,  together  with all
financing  statements,   stock  certificates  and  duly  executed  stock  powers
necessary to perfect the Agent's security interest therein, in each case whether
now owned or hereafter acquired.


         SECTION 2.8  Prepayment.  (a) The Borrower may at any time prior to the
Conversion  Date  prepay  all or any part of the  Advances,  without  premium or
penalty  (except  as set forth  below);  provided,  however,  that no Fixed Rate
Segment may be prepaid  during an Interest  Period unless the Borrower shall pay
to the Agent the amounts required by Section 4.2 hereof.  The Borrower shall pay
all  interest  accrued  to the  date of  prepayment  on any  amount  prepaid  as
permitted  under the  terms of the next  preceding  sentence  on or prior to the
Conversion  Date in  connection  with  the  prepayment  in  full  of the  Credit
Obligations and the concurrent termination of this Agreement. The Borrower shall
give the  Agent  notice of its  intent to pay any Base Rate Loan not later  than
11:00 a.m. on the date of payment.  Failure to give such notice  shall result in
payment of interest  through the next  succeeding  Business Day on the amount so
paid.

                    (b) The Borrower from time to time after the Conversion Date
(but not more frequently than quarterly),  upon not less than three (3) Business
Days prior written notice to the Agent,  may prepay the Term Loan in whole or in
part. The Agent shall give each Lender,  within one (1) Business Day thereafter,
telephonic  notice  (confirmed  in  writing)  of  such  prepayment.   Each  such
prepayment  shall be in the  aggregate  amount of  $10,000,000  or such  greater
amount which is an integral  multiple of $1,000,000 or the unpaid balance of all
Credit Obligations.  No such prepayment shall result in the payment of a portion
of the Term Loan bearing  interest at a Fixed Rate other than on the last day of
the Interest Period of such Loan.

         SECTION 2.9  Notes.

                    (a) Prior to the Conversion  Date, the Syndicated Loans made
by each Lender shall be evidenced  by a single  promissory  note of the Borrower
substantially in the form of Exhibit H-1 hereto, dated the date hereof,  payable
to such Lender in a principal  amount equal to the amount of its  Commitment  as
originally in effect and otherwise duly completed.

                    (b) The  Competitive  Bid Loans made by any Lender  shall be
evidenced by a single promissory note of the Borrower  substantially in the form
of  Exhibit  H-2  hereto,  dated the date  hereof,  payable  to such  Lender and
otherwise duly completed.

                    (c) The Term Loan made by each Lender on the Conversion Date
shall be evidenced by a single promissory note of the Borrower  substantially in
the form of Exhibit  H-3  hereto,  dated the  Conversion  Date,  payable to such
Lender in a principal  amount equal to the amount of its  Applicable  Commitment
Percentage of the Term Loan Commitment and otherwise duly completed.

                    (d) The date,  amount,  Type,  interest rate and duration of
Interest  Period (if  applicable) of each Loan of each Class made by each Lender
to the  Borrower,  and each  payment made on account of the  principal  thereof,
shall be recorded by such Lender on its books and,  prior to any transfer of the
Note  evidencing the Loans of such Class held by it,  endorsed by such Lender on
the schedule  attached to such Note or any continuation  thereof;  provided that

the  failure  of such  Lender to make,  or any error by the Lender in making any
such  recordation  or  endorsement,  shall not  affect  the  obligations  of the
Borrower to make a payment when due of any amount owing  hereunder or under such
Note in respect of the Loans to be evidenced by such Note.

                    (e)  No  Lender   shall  be   entitled  to  have  its  Notes
subdivided,  by  exchange  for  promissory  notes  of  lesser  denominations  or
otherwise,  except  in  connection  with a  permitted  assignment  of all or any
portion of such Lender's  Commitment,  Loans and Notes  pursuant to Section 10.1
hereof.

                    (f) Each  Lender  that is a Prior  Lender  under  the  Prior
Agreement shall  surrender to the Borrower the promissory  notes delivered to it
pursuant to the Prior  Agreement in exchange for the Notes  described in Section
2.9(a) and (b).

         SECTION 2.10 Reduction in Revolving  Facility.  The Borrower shall have
the right  from  time to time (but not more  frequently  than once  during  each
quarterly period), but upon not less than three (3) Business Days written notice
to the Agent to reduce the amount of the  Revolving  Facility.  The Agent  shall
give each  Lender,  within one (1) Business Day  thereafter,  telephonic  notice
(confirmed in writing) of such  reduction.  Each such reduction  shall be in the
aggregate  principal  amount of  $10,000,000  or such greater amount which is an
integral multiple of $1,000,000,  and shall permanently reduce the Commitment of
each Lender on a pro rata basis.  No such reduction shall result in payment of a
Fixed Rate Loan other than on the last day of the Interest  Period of such Loan.
Each reduction of the Revolving  Facility shall be accompanied by payment of the
Loans to the extent that the Credit  Obligations  exceed the Revolving  Facility
after giving effect to such reductions together with accrued and unpaid interest
on the amounts prepaid.

         SECTION 2.11 Unused Fee.  The  Borrower  shall pay to the Agent for the
benefit of each Lender a fee (the "Unused Fee")  computed at a per annum rate of
the then applicable  Unused Margin times the daily average Unused Amount of such
Lender.  The  Unused  Fee  shall be  payable  quarterly  on the last day of each
successive March, June,  September and December in each year for the immediately
preceding quarterly period, commencing on June 30, 1994, and upon the Conversion
Date. The Unused Fee shall be computed on an Actual/360 Basis.

         SECTION  2.12  Lending  Offices.  The  Loans of each  Type made by each
Lender shall be made and maintained at such Lender's  Applicable  Lending Office
for Loans of such Type.

         SECTION 2.13 Letter of Credit Borrowings.

                    (a)  NationsBank  may issue from time to time in  accordance
with  Section  6.1,  in its sole  discretion,  for the  account of the  Borrower
Letters of Credit in an  aggregate  outstanding  stated  amount up to but not to
exceed the Letter of Credit Commitment. All Letters of Credit issued pursuant to

this  Agreement,  shall  expire on or before the fifth (5th)  Business  Day next
preceding the Conversion Date. The aggregate Letter of Credit  Obligations shall
at no time  exceed  the  Letter of  Credit  Commitment.  In the  event  that the
Borrower shall pay in full all amounts  outstanding under the Revolving Facility
and permanently  reduce the Revolving  Facility to zero as permitted pursuant to
Section  2.10  hereof,  it  shall   simultaneously   cause  all  obligations  of
NationsBank  under the Letters of Credit and all obligations of the Lenders with
respect  to  Participations  to be  discharged  in full,  whether  by  providing
replacement  letters  of  credit  therefor  or  payment  in full  of the  amount
outstanding with respect to the Letter of Credit.
                    (b) The  Borrower  hereby  unconditionally  agrees to pay to
NationsBank  on demand at the Principal  Office (i) all amounts  required to pay
all  drafts  drawn in  accordance  with the  terms of the  Letter  of  Credit or
purporting  to be drawn  under the Letters of Credit and (ii) the face amount of
each draft  complying  with the Letter of Credit  accepted by NationsBank on the
maturity  date of such draft,  or in the event of a Default or Event of Default,
and any and all  reasonable  expenses of every kind incurred by  NationsBank  in
connection  with the  Letters of Credit and in any event and  without  demand to
place in  possession of  NationsBank  (which shall  include  Advances  under the
Revolving  Facility if permitted by Section 2.1 hereof)  sufficient funds to pay
all debts and  liabilities  arising  under any Letter of Credit.  Subject to the
terms hereof,  the Borrower's  obligations to pay NationsBank under this Section
2.13, and the right of  NationsBank  to receive the same,  shall be absolute and
unconditional  and  shall  not  be  affected  by  any  circumstance  whatsoever.
NationsBank may charge any account the Borrower may have with it for any and all
amounts NationsBank pays under a Letter of Credit, plus commissions, charges and
expenses  as from  time to  time  agreed  to by  NationsBank  and the  Borrower;
provided that to the extent  permitted by Section 2.1(b),  amounts shall be paid
pursuant to Advances  under the  Revolving  Facility.  The Borrower  agrees that
NationsBank  may, in its sole  discretion,  accept or pay, as complying with the
terms of any Letter of Credit, any drafts or other documents  otherwise in order
which  may be  signed  or  issued  by an  administrator,  executor,  trustee  in
bankruptcy,  debtor  in  possession,  assignee  for the  benefit  of  creditors,
liquidator,  receiver, attorney in fact or other legal representative of a party
who is  authorized  under  such  Letter of Credit to draw or issue any drafts or
other documents.  The Borrower agrees to pay NationsBank interest on any amounts
not paid when due  hereunder  at the Base Rate plus two  percent  (2%),  or such
lower rate as may be required by law.

                    (c) In  accordance  with the  provisions  of Section  2.1(b)
hereof,  NationsBank shall notify the Agent (and shall also notify the Borrower)
of any drawing  under any Letter of Credit issued for account of the Borrower as
promptly as practicable following the receipt by NationsBank of such drawing.

                    (d) Each Lender (other than NationsBank) shall automatically
acquire on the date of issuance  thereof,  a  Participation  in the liability of
NationsBank  in  respect  of each  Letter of  Credit in an amount  equal to such

Lender's Applicable Commitment  Percentage of such liability,  and to the extent
that the Borrower is obligated to pay NationsBank  under Section  2.13(a),  each
Lender (other than NationsBank)  thereby shall absolutely,  unconditionally  and
irrevocably assume, and shall be unconditionally obligated to pay to NationsBank
as hereinafter described,  its Applicable Commitment Percentage of the liability
of NationsBank  under such Letter of Credit.  On the fifth Business Day prior to
the Conversion  Date,  each Lender  (including  NationsBank in its capacity as a
Lender)  shall make a Base Rate Loan to the  Borrower by paying to the Agent for
the account of NationsBank at the Principal Office in Dollars and in immediately
available funds, an amount equal to its Applicable  Commitment Percentage of any
drawing  under a Letter of Credit,  all as  described  and  pursuant  to Section
2.1(b).  With  respect to  drawings  under any of the  Letters  of Credit,  each
Lender,  upon  receipt  from the  Agent of notice  of a  drawing  in the  manner
described in Section 2.1(b),  shall promptly pay to the Agent for the account of
NationsBank,  prior to the  applicable  time set forth in  Section  2.1(b),  its
Applicable Commitment Percentage of such drawing. Simultaneously with the making
of  each  such  payment  by  a  Lender  or   NationsBank,   such  Lender  shall,
automatically  and without any further action on the part of NationsBank or such
Lender,  acquire a Participation  in an amount equal to such payment  (excluding
the  portion  thereof  constituting   interest)  in  the  related  Reimbursement
Obligation of the Borrower. The Reimbursement  Obligations of the Borrower shall
be  immediately  due and payable  whether by Advances  made in  accordance  with
Section  2.1(b) or otherwise.  Each  Lender's  obligation to make payment to the
Agent for the account of NationsBank  pursuant to this Section 2.13(d),  and the
right of NationsBank to receive the same,  shall be absolute and  unconditional,
shall not be affected by any  circumstance  whatsoever and shall be made without
any offset,  abatement,  withholding or reduction  whatsoever.  If any Lender is
obligated  to pay but does not pay  amounts  to the  Agent  for the  account  of
NationsBank in full upon receipt of such notice of a drawing as required by this
Section 2.13(d),  such Lender shall, on demand, pay to the Agent for the account
of  NationsBank  interest  on the  unpaid  amount for each day during the period
commencing on the date of notice given to such Lender pursuant to Section 2.1(b)
until such Lender  pays such amount to the Agent for the account of  NationsBank
in full at the interest  rate per annum for overnight  borrowing by  NationsBank
from the Federal Reserve Bank.

                    (e) Promptly  following  the end of each  calendar  quarter,
NationsBank  shall  deliver to the Agent,  and the Agent  shall  deliver to each
Lender,  a notice  describing the aggregate  undrawn amount of Letters of Credit
and aggregate face amount of all drafts  accepted and  outstanding at the end of
such  quarter.  Upon the  request of any Lender  from time to time,  NationsBank
shall  deliver to the Agent,  and the Agent shall  deliver to such  Lender,  any
other information reasonably requested by such Lender with respect to the Letter
of Credit then outstanding.

                    (f) The  issuance  by  NationsBank  of any  Letter of Credit
shall be subject to the  conditions  that such Letter of Credit be insuch  form,

contain  such terms and support such  transactions  or  obligations  as shall be
reasonably   satisfactory  to  NationsBank  consistent  with  its  then  current
practices and procedures with respect to similar letters of credit.  All Letters
of Credit  shall be issued  pursuant to and  subject to the Uniform  Customs and
Practice for  Documentary  Creditors,  1993 revision,  International  Chamber of
Commerce  Publication  No.  500  and all  subsequent  amendments  and  revisions
thereto.  The Borrower shall have executed and delivered such other  instruments
and  agreements  relating  to such  Letter of Credit as  NationsBank  shall have
reasonably requested consistent with such practices and procedures.
                    (g)  Without   duplication  of  Section  10.12  hereof,  the
Borrower hereby  indemnifies and holds harmless  NationsBank,  each other Lender
and the  Agent  from  and  against  any  and all  claims  and  damages,  losses,
liabilities, costs or expenses which NationsBank, such other Lender or the Agent
may reasonably  incur (or which may be claimed against  NationsBank,  such other
Lender or the  Agent) by any  person  by  reason  of or in  connection  with the
issuance or transfer of or payment or failure to pay under any Letter of Credit;
provided that the Borrower shall not be required to indemnify  NationsBank,  any
other Lender or the Agent for any claims, damages, losses, liabilities, costs or
expenses  to the  extent,  but only to the  extent,  (i)  caused by the  willful
misconduct  or  negligence  of the party to be  indemnified,  (ii) caused by the
failure of NationsBank to pay under any Letter of Credit after the  presentation
to it of a request  strictly  complying  with the terms and  conditions  of such
Letter of Credit,  unless such  payment is  prohibited  by any law,  regulation,
court order or decree, or (iii) paid or payable by any Lender under Section 2.15
or Section 9.10 hereof and provided,  further, Borrower shall not be required to
indemnify any Lender who has failed to perform its obligations hereunder.

                    (h)  Without  limiting  Borrower's  rights  as set  forth in
Section 2.13(g) above, the obligation of Borrower to immediately reimburse Agent
for  drawings  made  under the  Letter of  Credit in  accordance  with the terms
thereof shall be absolute, unconditional and irrevocable, and shall be performed
strictly in  accordance  with the terms of this  Agreement  and such  Letters of
Credit, under all circumstances whatsoever.

                    (i) The Borrower  agrees to pay to the Agent for the benefit
of the  Lenders  a per  annum  Letter  of  Credit  fee  equal to the  applicable
Syndicated  Margin  in  effect at the time of  issuance  of each such  Letter of
Credit times the amount of outstanding Letter of Credit Borrowings. In addition,
the  Borrower  agrees to pay to the Agent for its own  account an  issuance  fee
equal to  one-eighth  of one  percent  (1/8%)  per  annum  times  the  amount of
outstanding Letter of Credit Borrowings. Such fees shall be payable quarterly in
arrears on the last day of each March, June, September and December,  beginning,
however, on the first such day to occur following the Closing Date.

                    (j) The Borrower  acknowledges that NationsBank as issuer of
the Letter of Credit will be required by applicable rules and regulations of the

Federal Reserve Board to maintain reserves for its liability to honor draws made
pursuant to a Letter of Credit notwithstanding the obligation of the Lenders for
a  Participation  in such liability.  The Borrower agrees to promptly  reimburse
NationsBank  for all  additional  costs which it may  hereafter  incur solely by
reason of its acting as issuer of the Letter of Credit and its being required to
reserve for such  liability,  it being  understood  by the  Borrower  that other
interest and fees payable under this  Agreement do not include  compensation  of
NationsBank for such reserves.  NationsBank shall furnish to the Borrower at the
time of its demand for payment of such additional costs, the computation of such
additional cost which shall be conclusive  absent manifest error,  provided that
such computations are made on a reasonable basis.
                    (k) The Borrower shall pay to NationsBank administrative and
other fees, if any, in connection with the Letters of Credit in such amounts and
at such times as NationsBank and the Borrower shall agree from time to time.

         SECTION 2.14 Pro Rata Payments.  Except as otherwise  provided  herein,
(a) each payment on account of the  principal of and interest on the  Syndicated
Loans and fees (other than the Agent's fees payable  under  Section 9.11 hereof,
which  shall be  retained  by the  Agent  and the fees  payable  to  NationsBank
pursuant to Section  2.13(i)  and (k) which  shall be  retained by  NationsBank)
described  in this  Agreement  shall be made to the Agent for the account of the
Lenders  pro rata based on their  Applicable  Commitment  Percentages,  (b) each
payment on account of principal of and interest on a Competitive  Bid Loan shall
be made to the Agent for the account of the Lender making such  Competitive  Bid
Loan,  and the principal  amount of  Competitive  Bid Loans shall be paid on the
last day of the Interest Period for such  Competitive Bid Loan, (c) all payments
to be made by the  Borrower for the account of each of the Lenders on account of
principal, interest and fees, shall be made without set-off or counterclaim, and
(d) the Agent will promptly (to the extent  received by the Agent by 12:00 noon,
Charlotte,  North Carolina time within the same Business Day, otherwise the next
Business Day if received after 12:00 noon) distribute  payments  received to the
Lenders.

         SECTION 2.15  Deficiency  Advances.  No Lender shall be responsible for
any default of any other Lender in respect to such other Lender's  obligation to
make any Loan  hereunder  nor shall the  Commitment  of any Lender  hereunder be
increased as a result of such default of any other Lender.  Without limiting the
generality of the foregoing,  in the event any Lender (a "failing Lender") shall
fail to advance funds to the Borrower as herein  provided,  the Agent may in its
discretion,  but shall not be obligated  to,  advance under the Note or Notes in
its  favor  as a Lender  all or any  portion  of such  amount  (the  "deficiency
advance")  and shall  thereafter  be entitled to  payments of  principal  of and
interest on such deficiency  advance in the same manner and at the same interest
rate or rates to which such  failing  Lender  would have been  entitled had such
failing Lender made such Advance under its Note or Notes;  provided  that,  upon
payment to the Agent from such failing Lender of the entire  outstanding  amount

of such deficiency advance, together with interest thereon, from the most recent
date or dates  interest  was  paid to the  Agent by the  Borrower  on each  Loan
comprising the  deficiency  advance at the interest rate per annum for overnight
borrowing by the Agent from the Federal Reserve Bank, then such payment shall be
credited  against  the  Note or  Notes  of the  Agent  in full  payment  of such
deficiency  advance and the Borrower shall be deemed to have borrowed the amount
of such  deficiency  advance from such failing Lender as of the most recent date
or dates,  as the case may be, upon which any payments of interest  were made by
the Borrower  thereon.  Acceptance by the Borrower of a deficiency  advance from
the Agent  shall in no way limit the  rights of the  Borrower  against a failing
Lender.
         SECTION 2.16 Adjustments by Agent.  Notwithstanding the construction of
"pro  rata"  to mean  based  on the  Applicable  Commitment  Percentage  and any
provisions  contained  herein for the  advancement of funds or  distribution  of
payments on a pro rata basis, the Agent may, in its discretion, but shall not be
obligated  to,  adjust  downward or upward (but not in excess of any  applicable
Commitment)  the  principal  amount of any Loan to be made by any  Lender to the
nearest amount which is evenly divisible by $100, and make  appropriate  related
adjustment  in the  distribution  of payments of  principal  and interest on the
Loans.


                                  ARTICLE III

                          INTEREST ON SYNDICATED LOANS

         SECTION 3.1  Applicable  Interest  Rates.  The Borrower  shall have the
option to elect to have any  Syndicated  Loan Segment bear  interest at the Base
Rate or the  LIBOR-Based  Rate plus the applicable  Syndicated  Margin.  For any
period of time and for any Segment with  respect to which the Borrower  does not
elect another  interest rate, such Segment shall bear interest at the Base Rate.
The  Borrower's  right to elect a  LIBOR-Based  Rate  shall  be  subject  to the
following requirements:  (a) each Syndicated Loan Segment shall be in the amount
of  $5,000,000 or more and in an integral  multiple of  $1,000,000  and (b) each
LIBOR-Based Rate Segment shall have a maturity  selected by the Borrower of one,
two or three months;  provided,  however, that no LIBOR-Based Rate Segment shall
have a maturity date later than the Conversion Date.

         SECTION  3.2  Procedure  for  Exercising  Interest  Rate  Options.  The
Borrower  may elect to have a particular  interest  rate apply to a Segment of a
Syndicated  Loan by  notifying  the Agent in writing  (which may be by facsimile
transmission) not later than 10:00 a.m.,  Charlotte,  North Carolina time, three
(3) Business Days prior to the effective date any LIBOR-Based  Rate is to become
applicable  or on the same  day on  which a  requested  Base  Rate is to  become
applicable.  Any notice of interest rate election hereunder shall be irrevocable
and shall be in the form  attached  hereto as  Exhibit D and shall set forth the
following:  (a) the amount of the Segment to which the  requested  interest rate
will  apply,  (b) the date on which  the  selected  interest  rate  will  become
applicable,  (c)  whether  the  interest  rate  selected  is the Base  Rate or a
LIBORBased  Rate,  and (d) if the interest rate selected is a LIBOR-Based  Rate,
the  maturity  selected  for the  Interest  Period.  On the second  Business Day
preceding  the  Business  Day  that a  requested  LIBORBased  Rate is to  become
applicable,  the Agent  shall use its best  efforts  to notify the  Borrower  by
telephone of the Agent's  estimate of the applicable  LIBOR-Based  Rate by 10:00
a.m.,  Charlotte,  North  Carolina  time,  or as  early  on  that  day as may be
practical  in the  circumstances.  The Agent shall not be required to provide an
estimate  of the  LIBOR-Based  Rate on any day on which  dealings in deposits in
Dollars are not transacted in the London interbank  market. If the Borrower does
not immediately accept a LIBOR-Based Rate quoted by the Agent, the Agent may, in
view of changing market  conditions,  revise the quoted  LIBOR-Based Rate at any
time. No LIBOR-Based  Rate shall be effective  until mutually agreed upon by the
Borrower  and the  Agent.  If the Agent and the  Borrower  attempt to agree on a
LIBOR-Based  Rate but fail so to  agree,  or if there is any  uncertainty  as to
whether or not the Agent and the Borrower have agreed upon a  LIBOR-Based  Rate,
interest  shall  accrue on the  Segment  for which a  LIBOR-Based  Rate has been
selected at the then applicable Base Rate.

         SECTION 3.3 Base Rate. Each Segment subject to the Base Rate shall bear
interest from the date the Base Rate becomes applicable thereto until payment in
full,  or until a  LIBOR-Based  Rate is  selected  by the  Borrower  and becomes
applicable  thereto,  on the  unpaid  principal  balance  of such  Segment on an

Actual/360 Basis. Any change in the Base Rate shall take effect on the effective
date of such change in the Base Rate designated by the Agent,  without notice to
the Borrower and without any further action by the Agent.

         SECTION  3.4 Fixed  Rate.  Each  LIBOR-Based  Rate  Segment  shall bear
interest from the date the LIBOR-Based Rate becomes applicable thereto until the
end of the applicable  Interest Period on the unpaid  principal  balance of such
LIBOR-Based Rate Segment at the LIBOR-Based Rate on an Actual/360 Basis plus the
applicable Syndicated Margin.

         SECTION 3.5  Changes in  Syndicated  Margin.  Any change in the rate of
interest  payable  with  respect  to LIBOR  Loans  because  of a  change  in the
Syndicated  Margin shall become  effective as of the day of receipt by the Agent
of the financial statement furnished to the Agent pursuant to Section 7.3(1) and
(2)  hereof  and the  Compliance  Certificate  required  by  Section  7.3(3)  to
accompany such financial  statement and the  determination  by the Agent,  based
upon such Compliance  Certificate,  that as a result of a change in the ratio of
Indebtedness of the Borrower and its Consolidated  Entities to Consolidated Cash
Flow there has been a change in the Syndicated Margin.

                                   ARTICLE IV

              TERMINATION OF LIBOR-BASED RATE AND YIELD PROTECTION

         SECTION 4.1 Suspension of Loans.

                    (a) If at any  time the  Agent  shall  reasonably  determine
(which determination, if reasonable, shall be final, conclusive and binding upon
all parties) that:

                             (i) by  reason  of any  changes  arising  after the
                  Closing  Date  affecting  the  London   interbank   market  or
                  affecting  the  position  of any  Lender  or the Agent in such
                  markets, adequate and fair means do not exist for ascertaining
                  the  LIBOR-Based  Rate with  respect  to a LIBOR Loan or LIBOR
                  Market Loan; or

                            (ii) the  continuation  by any  Lender  of any LIBOR
                  Loans or LIBOR  Market  Loans or the  funding  thereof  in the
                  London  interbank  market  would be  unlawful by reason of any
                  law, governmental rule, regulation, guidelines or order; or

                           (iii)  the  continuation  by any  Lender of any LIBOR
                  Loans or LIBOR  Market  Loans or the  funding  thereof  in the
                  London  interbank market would be impracticable as a result of
                  a contingency  occurring after the date of this Agreement that
                  materially and adversely affects the London interbank market;

then,  and in any such  event,  the Agent  shall on such date  give  notice  (by
telephone and confirmed in writing) to the Borrower of such  determination.  The
obligation of any Lender to make or maintain  Fixed Rate Segments so affected or
to permit  interest  to be  computed  thereon at the  LIBOR-Based  Rate shall be
terminated, and interest shall thereafter be computed on the affected Segment or
Segments at the then applicable Base Rate.

                  (b) It is the  intention  of the parties  that the Fixed Rates
shall  accurately  reflect the cost to the Lender of maintaining  any Fixed Rate
Segment  during any period in which  interest  accrues  thereon at a Fixed Rate.
Accordingly:

                             (i) if by  reason  of any  change  after  the  date
                  hereof in any applicable law or governmental rule,  regulation
                  or order (or any  interpretation  thereof  and  including  the
                  introduction of any new law or governmental  rule,  regulation
                  or  order),   including   any  change  in  the  LIBOR  Reserve
                  Requirement,  the cost to the Lender of maintaining  any Fixed
                  Rate  Segment  or  funding  the  same  by  means  of a  London
                  interbank  market time deposit shall increase,  the Fixed Rate
                  applicable  to such Fixed Rate  Segment  shall be  adjusted as
                  necessary  to  reflect  such  change  in cost  to the  Lender,
                  effective  as  of  the  date  on  which  such  change  in  any
                  applicable law, governmental rule, regulation or order becomes
                  effective.


                            (ii) If any Lender  shall have  determined  that the
                  adoption  after the date of this  Agreement of any law,  rule,
                  regulation or guideline  regarding  capital  adequacy,  or any
                  change in any of the  foregoing  or in the  interpretation  or
                  administration  of any of the  foregoing  by any  Governmental
                  Authority,  central bank or comparable agency charged with the
                  interpretation or administration thereof, or compliance by any
                  Lender (or any lending  office of any Lender) or such Lender's
                  holding  company  with  any  request  or  directive  regarding
                  capital  adequacy  (whether or not having the force of law) of
                  any such authority,  central bank or comparable agency, has or
                  would have the effect of  reducing  the rate of return on such
                  Lender's  capital or on the capital of such  Lender's  holding
                  company,  as a consequence of the Lender's  obligations  under
                  this  Agreement or the Advances  made by such Lender  pursuant
                  hereto to a level  below that  which  such  Lender or any such
                  Lender's  holding  company  could have  achieved  but for such
                  adoption,  change or compliance (taking into consideration the
                  Lender's  guidelines  with respect to capital  adequacy) by an
                  amount deemed by such Lender to be material, then from time to
                  time the  Borrower  shall pay to the  Lender  such  additional
                  amount  or  amounts  as  will  compensate  the  Lender  or the
                  Lender's holding company for any such reduction suffered.

         SECTION 4.2 Compensation.  The Borrower shall compensate any Lender for
all reasonable losses,  expenses and liabilities (including any interest by such
Lender to lenders on funds  borrowed  by such  Lender to make or carry any Fixed
Rate  Segment  and any loss  sustained  by the  Lender  in  connection  with the
re-employment  of such  funds),  that such  Lender may  sustain:  (a) if for any
reason  (other than a default by such Lender)  following  agreement  between the
Borrower and such Lender as to the Fixed Rate applicable to a Fixed Rate Segment
the Borrower  fails to accept such Fixed Rate Segment,  (b) as a consequence  of
any unauthorized action taken or default by the Borrower in the repayment of any
Fixed Rate  Segment  when  required by the terms of this  Agreement  or (c) with
respect  to any loss of income  incurred  by the  Lenders  (as  determined  in a
reasonable  manner by the Agent)  associated with the payment of principal other
than the last day of an Interest  Period with  respect to any Fixed Rate Loan. A
certificate  as to the amount of any  additional  amounts  payable  pursuant  to
Section 4.2 (setting forth in reasonable  detail the basis for  requesting  such
amounts)  submitted by such Lender to the Borrower shall be  conclusive,  in the
absence of  manifest  error.  The  Borrower  shall pay to such Lender the amount
shown as due on any such  certificate  delivered  by such Lender  within 30 days
after the Borrower's receipt of the same.

         SECTION 4.3 Taxes.  All payments by the  Borrower of principal  of, and
interest on, the Loans and all other  amounts  payable  hereunder  shall be made
free and clear of and without deduction for any present or future excise,  stamp
or franchise taxes or other taxes,  whatsoever  imposed by any taxing authority,
but excluding  franchise taxes and  taxes imposed on or measured by any Lender's

                                                     

net income or receipts (such  non-excluded  items being called "Taxes").  In the
event  that any  withholding  or  deduction  from any  payment to be made by the
Borrower  hereunder  is  required  in  respect  of  any  Taxes  pursuant  to any
applicable law, rule or regulation, then the Borrower will

                  (a) pay  directly to the  relevant  authority  the full amount
         required to be so withheld or deducted;

                  (b) promptly forward to the Agent an official receipt or other
         documentation satisfactory to the Agent evidencing such payment to such
         authority; and

                  (c)  pay to the  Agent  for the  account  of the  Lender  such
         additional  amount or amounts as is  necessary  to ensure  that the net
         amount actually received by each Lender will equal the full amount such
         Lender would have received had no such  withholding  or deduction  been
         required.

Moreover,  if any Taxes are  directly  asserted  against the Agent or any Lender
with respect to any payment received by the Agent or such Lender hereunder,  the
Agent or such Lender may pay such Taxes and the Borrower  will promptly pay such
additional  amounts  (including  any  penalties,  interest  or  expenses)  as is
necessary  in order that the net  amount  received  by the Agent or such  Lender
after the payment of such Taxes (including any Taxes on such additional  amount)
shall equal the amount the Agent or such Lender would have  received had no such
Taxes been asserted.  Upon the request of the Borrower or the Agent, each Lender
and each  participant  that is organized under the laws of a jurisdiction  other
than the United  States shall,  prior to the due date or any payments  under the
Notes,  execute and deliver to the Borrower and the Agent, on or about the first
scheduled  payment date in each Fiscal Year, one or more (as the Borrower or the
Agent may reasonably  request) United States Internal Revenue Service Forms 4224
or  Forms  1001  or such  other  forms  or  documents  (or  successor  forms  or
documents),  appropriately  completed,  as may be  applicable  (if  any  are) to
establish the extent,  if any, to which a payment to such Lender or  participant
is exempt from withholding or deduction of Taxes.

         If the  Borrower  fails to pay any  Taxes  when due to the  appropriate
taxing  authority  or  fails  to  remit to the  Agent,  for the  account  of the
respective Lender, the required amounts,  receipts or other required documentary
evidence,  the Borrower shall indemnify the Lenders for any  incremental  Taxes,
interest or penalties  that may become  payable by the Lender as a result of any
such failure. For purposes of this Section 4.3, a distribution  hereunder by the
Agent or any  Lender  to or for the  account  of any  Lenders  shall be deemed a
payment by the Borrower.

         If Taxes are  incorrectly  or illegally  paid or  assessed,  and if any
Lender or the Agent  contests the  assessment of such Taxes,  such Lender or the
Agent  shall  refund,  to the  extent of any refund  made to such  Lender or the
Agent,  any amounts paid by the  Borrower  under this Section in respect of such
Taxes.



         Without  prejudice  to the  survival  of any  other  agreements  of the
Borrower  hereunder or any other Loan  Document,  the agreements of the Borrower
contained  in this Section  shall  survive the payment in full of all its Credit
Obligations and the termination of all Commitments.

         To the extent any Lender  shall  become  liable for the  payment of any
Taxes hereunder and shall seek  reimbursement  therefor pursuant to this Section
4.3,  the  Borrower  shall be entitled,  upon the giving of five  Business  Days
notice to the Agent,  (i) to replace such Lender with a substitute  lender,  and
(ii) in  connection  with  such  substitution,  prepay  in full the  outstanding
Commitment of the Lender  requesting  reimbursement  without  penalty or payment
under Section 4.2 hereof.


                                   ARTICLE V

                         REPRESENTATIONS AND WARRANTIES

         The  Borrower  and  each  Participating  Subsidiary  and  Participating
Partnership  jointly and  severally  represent  and warrant to the Agent and the
Lenders as follows:

         SECTION 5.1 Organization,  Powers, Existence, etc. (a) The Borrower and
each  Consolidated  Entity is duly organized or formed,  validly existing and in
good standing under the laws of the state in which it is incorporated or formed,
(b) the Borrower and each Consolidated Entity has the power and authority to own
its properties  and assets and to carry on its business as now being  conducted,
(c) the Borrower and each Consolidated Entity has the power to execute,  deliver
and perform the Loan Documents to which it is a party,  and (d) the Borrower and
each Consolidated Entity is duly qualified to do business in each state in which
it is required to be so qualified.

         SECTION 5.2  Authorization of Borrowing,  etc. The execution,  delivery
and  performance  of the Loan  Documents  (a) have been duly  authorized  by all
requisite  action and (b) will not violate  any  Governmental  Requirement,  the
certificate of incorporation, bylaws or partnership agreement of the Borrower or
any  Consolidated  Entity,  or any indenture,  agreement or other  instrument to
which  the  Borrower  or any  Consolidated  Entity  is a party,  or by which the
Borrower or any Consolidated  Entity or any of their properties are bound, or be
in conflict with,  result in a breach of or constitute (with due notice or lapse
of time or  both) a  default  under,  any  such  indenture,  agreement  or other
instrument,  or result in the creation or imposition of any Lien upon any of the
properties  or assets of the  Borrower  or any  Consolidated  Entity,  except as
required by the terms of this Agreement.

         SECTION 5.3  Liabilities.  The Borrower has  furnished to the Agent and
the Lenders a copy of the audited consolidated balance sheet of the Borrower and
the  Consolidated  Entities  dated as of December  31,  1993 and a statement  of
changes in  shareholders'  equity and the related  statements of income and cash
flow as of the end of Fiscal Year 1993 and the  unaudited  consolidated  balance
sheet of the Borrower and the Consolidated  Entities dated as of March 31, 1994,
and the related  statements  of income and cash flow for the fiscal  period then
ended.  Such  financial   statements  were  prepared  in  conformity  with  GAAP
consistently applied throughout the period involved,  are in accordance with the
books and records of the Borrower and the Consolidated Entities, are correct and
complete  and present  fairly the  financial  condition  of the Borrower and the
Consolidated  Entities as of the date of such financial  statements,  and, since
the  date of such  financial  statements,  no  material  adverse  change  in the
financial  condition,  business  or  operations  of the  Borrower  or any of the
Consolidated  Entities has occurred.  Neither the Borrower nor any  Consolidated
Entity has any  Liabilities,  Guaranteed  Obligations  or other  obligations  or
liabilities,  direct or contingent, in an aggregate amount in excess of $300,000
other than (a) the  Liabilities  reflected in such  balance  sheet and the notes
thereto or (b) Liabilities incurred in the ordinary course of business.

         SECTION 5.4 Taxes. The Borrower and each Consolidated  Entity has filed
or caused to be filed all federal, state and local tax returns that are required
to be  filed,  and has  paid  all  taxes  as  shown  on said  returns  or on any
assessment  received by the  Borrower or any  Consolidated  Entity to the extent
that such taxes have become due.

         SECTION  5.5  Litigation.  There are no actions,  suits or  proceedings
pending  or,  to the best  knowledge  of the  Borrower,  threatened  against  or
affecting the Borrower,  any Consolidated  Entity or any Facility,  by or before
any Governmental Authority that involve any of the transactions  contemplated in
this  Agreement or the  possibility of any judgment or liability that may result
in a material  adverse  change in the  operations or financial  condition of the
Borrower and the Consolidated Entities, on a consolidated basis; and neither the
Borrower nor any Consolidated  Entity is in default with respect to any material
Governmental Requirement.

         SECTION 5.6  Agreements.  Neither  the  Borrower  nor any  Consolidated
Entity is in default in the performance, observance or fulfillment of any of the
obligations  contained in any  agreement or  instrument  to which it is a party,
which  default  could have a material  adverse  effect  upon the  operations  or
financial  condition  of  the  Borrower  and  the  Consolidated  Entities  on  a
consolidated basis.

         SECTION 5.7 Use of Proceeds. Neither the Borrower nor any Participating
Subsidiary or Participating  Partnership intends to use any part of the proceeds
of Advances or proceeds of drawings  under  Letters of Credit for the purpose of
purchasing  or  carrying  any Margin  Stock or  retiring  any debt  incurred  to
purchase  or  carry  any  Margin  Stock  or for any  other  purpose  that is not
expressly authorized by this Agreement.

         SECTION 5.8 ERISA  Requirement.  (i) The  execution and delivery of the
Loan Documents will not involve any prohibited transaction within the meaning of
ERISA,  (ii) the  Borrower  and  each  Consolidated  Entity  has  fulfilled  its
obligations  under the minimum funding standards imposed by ERISA and each is in
compliance in all material respects with the applicable provisions of ERISA, and
(iii) no "Reportable Event," as defined in Section 4043(b) of Title IV of ERISA,
has occurred  with respect to any plan  maintained by the Borrower or any of its
Consolidated Entities.

         SECTION 5.9 Subsidiaries. The Borrower has no direct or indirect equity
ownership in any person other than (a) Controlled Partnerships, Subsidiaries and
Consolidated  Entities and (b) those  ownership  interests  listed in Exhibit L.
None of the  Subsidiaries or Controlled  Partnerships has any direct or indirect
equity ownership in any other person except other  Consolidated  Entities except
as set forth in  subparagraph  (b) in the  preceding  sentence.  The  Borrower's
ownership  interest in each  Subsidiary and  Controlled  Partnership is free and
clear of all Liens, warrants, options, rights to purchase and other interests of

any  person  except for rights of first  refusal  that apply to certain  limited
partnership  interests whose value is not material in amount and rights of first
refusal given to certain limited partners of HEALTHSOUTH  Rehabilitation  Center
of Charlotte Limited  Partnership and HEALTHSOUTH  Rehabilitation  Center of San
Francisco  Limited  Partnership  covering  the  Borrower's  general  partnership
interests  therein.  All  capital  stock  of  the  Subsidiaries  has  been  duly
authorized and validly issued and is fully paid and  non-assessable.  There have
been  delivered  and  pledged to the Lender all  certificates  representing  all
capital stock in all Subsidiaries.  All now-existing Subsidiaries and Controlled
Partnerships are listed in Exhibit M hereto.

         SECTION  5.10  Principal  Place of  Business.  The  principal  place of
business and chief  executive  office of the Borrower is at its address shown in
Section  10.2 and will not be changed from such  address  unless,  prior to such
change,  the Borrower shall have notified the Agent of the proposed change,  and
in no event will the Borrower's  principal  place of business or chief executive
office be located outside the State of Alabama.

         SECTION 5.11  Environmental  Laws.  The Borrower and each  Consolidated
Entity are in material compliance with all applicable  federal,  state and local
laws and  regulations  relating  to air,  water,  soil and  other  environmental
quality and all material laws relating to the handling and disposal of hazardous
waste materials.

         SECTION 5.12 Disclosure. No financial statement,  document, certificate
or other  written  communication  furnished to the Agent or the Lenders by or on
behalf  of the  Borrower  or any  Consolidated  Entity  or to the  extent  not a
Consolidated Entity any Participating Subsidiary or Participating Partnership in
connection  with any Loan Document  contains any untrue  statement of a material
fact or  omits  to  state a  material  fact  necessary  to make  the  statements
contained  herein  or  therein  not  misleading.  There is no fact  known to the
Borrower  that  materially  adversely  affects the  business or condition of the
Borrower or any  Material  Group that has not been  disclosed  herein or in such
financial statements.

         SECTION 5.13 Licenses.  All material  certificates  of need,  licenses,
permits,  accreditations and approvals required by all Governmental  Authorities
necessary in order for each  Facility to be operated  for its  intended  purpose
have been obtained and are in full force and effect.

         SECTION 5.14 Title to Properties.  The Borrower has good and marketable
title to all its properties  and assets  reflected on the balance sheet referred
to in Section  5.3  except for those  matters  shown on such  balance  sheet and
except for such properties and assets as have been disposed of since the date of
said balance sheet as no longer used or useful in the conduct of its business or
as have been disposed of in the ordinary  course of the business and except that
the property of HEALTHSOUTH  Doctors' Hospital,  Inc. is held subject to a right
of first refusal  benefitting  the Dr. John T.  Macdonald  Foundation.  All such
properties  and  assets  are free and clear of all  Liens,  except as  otherwise
permitted or required by the provisions of the Loan Documents.


                                   ARTICLE VI

                         GENERAL CONDITIONS OF LENDING

         The Lenders'  obligation  to make each Advance  hereunder is subject to
the following conditions precedent:

         SECTION 6.1 Representations and Warranties. On the date of each Advance
hereunder  and on the date the  Borrower  presents  to the Agent a  Request  for
Advance or Interest  Rate  Election  form or  Competitive  Bid Quote  Request or
Application,  and on the Conversion Date the  representations and warranties set
forth  in this  Agreement  and in all  other  Loan  Documents  shall be true and
correct  on  and  as  of  such  date  with  the  same   effect  as  though  such
representations  and  warranties  had been made on the date of the Advance or on
the date the  Borrower  presents  to the Agent a Request for Advance or Interest
Rate Election form or  Competitive  Bid Quote Request or  Application  or on the
Conversion Date, as the case may be. Each such warranty and representation shall
be  deemed to be  continuing  in effect  so long as this  Agreement  remains  in
effect. The presentation by the Borrower of each Request for Advance or Interest
Rate Election,  Competitive  Bid Quote  Request,  Application or Term Note shall
constitute a  representation  and warranty by the Borrower to the Lender that no
material  adverse  change in the  financial  condition  of the  Borrower and the
Consolidated  Entities,  on a consolidated  basis, as reflected in the financial
statements  delivered  to the Agent and  Lenders  pursuant  to  Section  5.3 has
occurred since the date of such financial statements.

         SECTION 6.2 No Default.  On the date of each  Advance and issuance of a
Letter of Credit  hereunder  and on the  Conversion  Date,  the Borrower and all
Material  Groups shall be in compliance  with all the terms and  conditions  set
forth in this Agreement on its or their part to be observed or performed, and no
Event of  Default,  nor event  that upon  notice or lapse of time or both  would
constitute an Event of Default, shall have occurred and be continuing.

         SECTION 6.3 Supporting Documents.

                  (a) The  Agent,  on behalf  of the  Lenders,  shall  have also
received on the date of execution of this Agreement (i) a copy of resolutions of
the Board of Directors of the Borrower, certified as in full force and effect on
such date by the Secretary of the Borrower,  authorizing the execution, delivery
and performance of the Loan Documents and authorizing designated officers of the
Borrower to execute and deliver the Loan Documents on behalf of the Borrower and
to execute  and  deliver to the Agent  Request  for  Advance  or  Interest  Rate
Election  or  Competitive  Bid  Quote  Request  forms and  Applications;  (ii) a
certificate of the Secretary of the Borrower,  dated such date,  certifying that
(A) an  attached  copy of the  Certificate  of  Incorporation  and bylaws of the
Borrower  is true and  correct  as of such  date,  (B) that the  Certificate  of
Incorporation and Bylaws of the Borrower have not been amended since the date of
the  last  amendment  attached  thereto  and (C)  the  incumbency  and  specimen
signatures of the designated  officers referred to in clause (i) above; (iii) an
Opinion of Counsel to the Borrower in the form required by the Agent;  (iv) duly
executed Pledge Agreements by the Borrower,  the Participating  Subsidiaries and
the Participating Partnerships to the extent applicable, together with all stock
powers,  stock certificates and financing  statements related thereto;  (v) such
additional  supporting  documents as the Agent may reasonably request;  and (vi)
all fees payable to the Agent and the Lenders.

                  (b) The  Agent,  on behalf  of the  Lenders,  shall  also have
received  on or before the date on which a  Subsidiary  becomes a  Participating
Subsidiary (on or before the Closing Date in the case of each Subsidiary  listed
in Exhibit G hereto) (i) a copy of  resolutions  of the Board of  Directors  and
shareholders  of such  Subsidiary (if necessary)  certified as in full force and
effect on the date thereof by the Secretary of such Subsidiary, authorizing such
Subsidiary's  execution,  delivery and  performance  of, and the  assumption  of
liability  under,  the Loan Documents and all other  agreements and  instruments
that this Agreement  contemplates  will be executed,  delivered and performed by
such Subsidiary;  (ii) a copy of the Certificate of Incorporation or Articles of
Incorporation,  as the case may be, and Bylaws of such Subsidiary,  certified as
true and correct on and as of the date on which Loan  Documents are executed and
delivered by the Borrower  and such  Subsidiary;  (iii) an Opinion of Counsel to
such  Subsidiary  in a form  acceptable  to the  Agent as to the  execution  and
delivery by such  Subsidiary of the Loan  Documents  and other  matters  related
thereto;  (iv) fully  executed  copies of all Loan Documents that this Agreement
contemplates  will be  executed  or  delivered  (or  both)  by  such  Subsidiary
(including  a fully  executed  Subsidiary  Guaranty  Agreement);  and  (v)  such
additional  supporting  documents  as the Agent or its  counsel  may  reasonably
request.

                  (c) The  Agent,  on behalf  of the  Lenders,  shall  also have
received  on or  before  the date on which a  Controlled  Partnership  becomes a
Participating  Partnership  (on or before the  Closing  Date in the case of each
Controlled Partnership listed in Exhibit G hereto) (i) a copy of the partnership
agreement under which such Controlled Partnership was formed,  certified as true
and  correct  on and as of the date of which Loan  Documents  are  executed  and
delivered by the Borrower and such  Controlled  Partnership;  (ii) an Opinion of
Counsel to such  Controlled  Partnership in a form acceptable to the Agent as to
the execution and delivery by such Controlled  Partnership of the Loan Documents
and other  matters  related  thereto;  (iii) fully  executed  copies of all Loan
Documents  that this  Agreement  contemplates  will be executed or delivered (or
both) by such  Controlled  Partnership  (including a fully executed  Partnership
Guaranty Agreement);  and (iv) such additional supporting documents as the Agent
or its counsel may reasonably request.


                                  ARTICLE VII

                       GENERAL COVENANTS OF THE BORROWER

         From the date on which this  Agreement  is delivered  until  payment in
full of the Credit  Obligations  and the  termination in writing of the Lenders'
obligation  to  extend  credit  under  this  Agreement,  the  Borrower  and each
Participating Subsidiary and Participating  Partnership,  jointly and severally,
covenant and agree that:

         SECTION 7.1 Existence,  Properties,  etc. The Borrower shall, and shall
cause  each  Consolidated  Entity  to,  (a) do or cause  to be done  all  things
necessary  to preserve and keep in full force and effect its  existence,  rights
and franchises and comply with all  Governmental  Requirements  applicable to it
and (b) at all times  maintain,  preserve and protect all  franchises  and trade
names and  preserve  all of its  property  used or useful in the  conduct of its
business and keep the same in good repair, working order and condition, and from
time to time make,  or cause to be made,  all  needful  and proper  repairs  and
improvements thereto (normal wear and tear excepted).

         SECTION 7.2 Payment of  Indebtedness,  Taxes,  etc. The Borrower shall,
and shall  cause  each  Consolidated  Entity to,  (a) pay its  indebtedness  and
obligations  in accordance  with normal terms and (b) pay and discharge or cause
to be paid and discharged  promptly all taxes,  assessments and other charges or
levies  of  Governmental  Authorities  imposed  upon it or upon its  income  and
profits or upon any of its  properties  before the same shall become in default;
provided,  however, that the Borrower and the Consolidated Entities shall not be
required  to pay and  discharge  or  cause to be paid  and  discharged  any such
indebtedness,  obligation, tax, assessment, charge, levy or claim so long as the
validity  thereof  shall  be  duly  pursued  and  contested  in  good  faith  by
appropriate  proceedings  and the Borrower and the  Consolidated  Entities shall
maintain   adequate   reserves  for  such  taxes,   indebtedness,   obligations,
assessments, charges, levies or claims during such proceedings.

         SECTION 7.3  Financial  Statements,  Reports,  etc. It shall deliver or
cause to be delivered to the Agent and each Lender:

                  (1) Not  later  than 50 days  after  the end of each  calendar
         quarter,  a balance  sheet and a statement  of revenues and expenses of
         the Borrower and its  Consolidated  Entities on a consolidated and on a
         consolidating  basis  (provided  Borrower  may  report  the  results of
         operations  of its  outpatient  centers  on an  aggregate  basis) and a
         statement of cash flow of the Borrower and its Consolidated Entities on
         a  consolidated  basis for such  calendar  quarter  and for the  period
         beginning  on the first day of the  fiscal  year and ending on the last
         day of such  calendar  quarter (in  sufficient  detail to indicate  the
         Borrower's and each Consolidated Entity's compliance with the financial
         covenants set forth in this Article VII),  together with  statements in
         comparative form for the corresponding  periods in the preceding fiscal

         year together with  calculations  supporting the same store performance
         as summarized in the Borrower's Form 10-Q for the corresponding period,
         and  certified  by the  president  or chief  financial  officer  of the
         Borrower.

                  (2) Not later than 100 days after the end of each fiscal year,
         financial  statements  (including  a  balance  sheet,  a  statement  of
         revenues and expenses,  a statement of changes in shareholders'  equity
         and a  statement  of cash flow) of the  Borrower  and its  Consolidated
         Entities  on a  consolidated  and on a  consolidating  basis  (provided
         Borrower may report the results of operations of its outpatient centers
         on an aggregate  basis) for such fiscal year (in  sufficient  detail to
         indicate the Borrower's and each Consolidated  Entity's compliance with
         the financial  covenants set forth in this Article VII),  together with
         statements in comparative  form for the preceding  fiscal year together
         with  calculations  supporting the same store performance as summarized
         in  the  Borrower's  Form  10-K  for  the  corresponding   period,  and
         accompanied by an opinion of certified public accountants acceptable to
         the Agent,  which  opinion  shall state in effect  that such  financial
         statements  (A)  were  audited  using   generally   accepted   auditing
         standards,  (B) were prepared in  accordance  with  generally  accepted
         accounting  principles  applied on a consistent  basis, and (C) present
         fairly  the  financial  condition  and  results  of  operations  of the
         Borrower and its Consolidated Entities for the periods covered.

                  (3)  Together  with  the  financial   statements  required  by
         paragraphs (1) and (2) above a compliance  certificate duly executed by
         the chief executive officer or the president or chief financial officer
         of the Borrower in the form of Exhibit I attached  hereto  ("Compliance
         Certificate"),  accompanied  by  a  contribution  report  in  the  form
         attached as Schedule I-3 to Exhibit I and an accounts  receivable aging
         report in the form attached as Schedule I-4 to Exhibit I.

                  (4)  Promptly  upon  receipt  thereof,  copies of all reports,
         management letters and other documents submitted to the Borrower or any
         Consolidated  Entity by independent  accountants in connection with any
         annual  or  interim   audit  of  the  books  of  the  Borrower  or  any
         Consolidated Entity made by such accountants.

                  (5)  Contemporaneously  with the  distribution  thereof to the
         Borrower's or any Consolidated Entity's stockholders or partners or the
         filing thereof with the Securities and Exchange Commission, as the case
         may  be,  copies  of  all  statements,  reports,  notices  and  filings
         distributed  by  the  Borrower  or  any  Consolidated   Entity  to  its
         stockholders  or partners  or filed with the  Securities  and  Exchange
         Commission (including reports on SEC Forms 10-K, 10-Q and 8-K).

                  (6) Promptly after the Borrower knows or has reason to know of
         the  occurrence of any  "reportable  event" under Section 4043 of ERISA
         applicable to the Borrower or any Consolidated Entity, a certificate of
         the president or chief financial  officer of the Borrower setting forth
         the  details as to such  "reportable  event"  and the  action  that the

         Borrower or the Consolidated Entity has taken or will take with respect
         thereto, and promptly after the filing or receiving thereof,  copies of
         all reports and notices that the Borrower and each Consolidated  Entity
         files  under  ERISA with the  Internal  Revenue  Service or the Pension
         Benefit Guaranty Corporation or the United States Department of Labor.

                  (7)  Promptly  after the  Borrower or any of its  Consolidated
         Entities  becomes  aware of the  commencement  thereof,  notice  of any
         investigation,  action,  suit or  proceeding  before  any  Governmental
         Authority  involving  the  condemnation  or  taking  under the power of
         eminent  domain of any of its property or the  revocation or suspension
         of any  permit,  license,  certificate  of need or  other  Governmental
         Requirement applicable to any Facility.

                  (8) Within 10 days of the  receipt by the  Borrower  or any of
         its Consolidated  Entities,  copies of all material deficiency notices,
         compliance  orders  or  adverse  reports  issued  by  any  Governmental
         Authority  or  accreditation   commission   having   jurisdiction  over
         licensing,   accreditation  or  operation  of  a  Facility  or  by  any
         Governmental  Authority  or private  insurance  company  pursuant  to a
         provider  agreement,  which,  if not promptly  complied  with or cured,
         could  result  in  the   suspension   or  forfeiture  of  any  license,
         certification or  accreditation  necessary in order for the Facility to
         carry on its  business  as then  conducted  or the  termination  of any
         material insurance or reimbursement program available to the Facility.

                  (9) No less  frequently than once in each calendar year and at
         any time the  Agent  reasonably  requests,  a  certificate  of the risk
         management director of the Borrower describing all insurance maintained
         by the Borrower and its Consolidated Entities, and certifying that such
         insurance   complies  with  the  requirements  of  this  Agreement  and
         attaching  thereto the certificates of insurance issued by the insurers
         for all insurance described in such certificate; provided, however, the
         Borrower shall promptly  notify the Agent of any material change in the
         insurance  coverages  required  by this  Agreement  or any  other  Loan
         Document.

                  (10) Such other  information  regarding  any  Facility  or the
         financial  condition or operations of the Borrower or its  Consolidated
         Entities as the Agent shall reasonably  request from time to time or at
         any time.

         SECTION 7.4 Litigation Notice.  The Borrower shall,  promptly after the
same shall have become known to any officer of the Borrower, notify the Agent in
writing of any action,  suit or  proceeding  at law or in equity or by or before
any  Governmental  Authority  that,  if adversely  determined,  might impair the
ability of the Borrower or any Material Group to perform its  obligations  under

this  Agreement or any other Loan  Document or might  materially  and  adversely
affect the business or  condition,  financial  or other,  of the Borrower or any
Material Group.

         SECTION 7.5 Default Notice.  The Borrower shall promptly give notice in
writing to the Agent of the occurrence of any Default or Event of Default.

         SECTION  7.6 Further  Assurances.  The  Borrower  shall at its cost and
expense, upon the request of the Agent, duly execute and deliver, or cause to be
duly executed and delivered,  to the Agent such further  instruments  and do and
cause to be done such further acts as may be  reasonably  necessary or proper in
the  opinion  of the  Agent or its  counsel  to carry out more  effectively  the
provisions and purposes of the Loan Documents.

         SECTION 7.7 Insurance.  The Borrower and each Consolidated Entity shall
at all times  maintain  in force,  and pay all  premiums  and costs  related to,
insurance  coverages  comparable to the coverages reviewed by the Agent prior to
the  Closing  Date a summary of which  coverage is set forth in Exhibit J hereto
and any other coverages required under applicable Governmental Requirements. The
Borrower shall deliver to the Agent annually on or before the  anniversary  date
of this Agreement, and at such other time or times as the Agent may request (but
not more often than monthly),  a certificate of the president or chief financial
officer of the Borrower  setting out in such detail as the Agent may  reasonably
require a description of all insurance coverages  maintained by the Borrower and
each  Consolidated  Entity.  The  Agent  shall  have no  obligation  to give the
Borrower or any Consolidated  Entity notice of any notification  received by the
Agent with  respect to any  insurance  policies or take any steps to protect the
Borrower's or any Consolidated Entity's interests under such policies.

         SECTION 7.8  Covenants Regarding Financial Condition.

                  (a)      The Borrower covenants and agrees that:

                           (1) Minimum Net Worth.  Consolidated  Net Worth shall
                  not be less than $300,000,000 plus (A) 75% of Consolidated Net
                  Income (if positive and including for purposes of this Section
                  7.8(a)(1) only any  extraordinary  gain),  on an ongoing basis
                  for each  fiscal  quarter  beginning  with the fiscal  quarter
                  ending June 30,  1994,  plus (B) the  aggregate  amount of all
                  increases,  if any, in its capital accounts resulting from the
                  issuance of Capital  Stock or  conversion of debt into Capital
                  Stock or other  securities  properly  classified  as equity in
                  accordance with generally accepted accounting  principles,  or
                  from the sale or other  disposition of treasury  shares,  from
                  the date of this Agreement through the date of determination.

                           (2) Working Capital Ratio.  The ratio of Consolidated
                  Current Assets to Consolidated  Current  Liabilities shall not
                  at any time be less than 2.00 to 1.00.


                           (3)   Consolidated   Leverage  Ratio.  The  ratio  of
                  Indebtedness  of  Borrower  and its  Consolidated  Entities to
                  Consolidated  Total Capital shall during the periods set forth
                  below be equal to or less than the  ratio  set forth  opposite
                  such period:

                                                         Ratio of
                                                                  Consolidated
                       Period                  Indebtedness   to  Total Capital

                  Closing Date through            .75                 1.00
                    September 30, 1994
                  October 1, 1994 through         .725                1.00
                    December 31, 1995
                  January 1, 1996 through         .675                1.00
                    December 31, 1996
                  January 1, 1997 through         .65                 1.00
                    the Conversion Date
                  Thereafter                      .55                 1.00

                           (4)  Senior   Indebtedness  to   Consolidated   Total
                  Capital.  The ratio of  Senior  Indebtedness  to  Consolidated
                  Total  Capital shall at all times be equal to or less than .45
                  to 1.00.

                           (5) Indebtedness to Consolidated Cash Flow. The ratio
                  of Indebtedness of the Borrower and its Consolidated  Entities
                  to  Consolidated  Cash  Flow  shall at all  times  during  the
                  periods set forth below be equal to or less than the ratio set
                  forth opposite such period:

                                                          Ratio of
                                                                  Consolidated
                        Period               Indebtedness    to     Cash Flow

                  Closing Date through            5.50                  1.00
                    September 30, 1994
                  October 1, 1994 through         5.00                  1.00
                    December 31, 1994
                  January 1, 1995 through         4.75                  1.00
                    June 30, 1995
                  July 1, 1995 through            4.25                  1.00
                    December 31, 1995
                  January 1, 1996 through         3.75                  1.00
                    December 31, 1996
                  January 1, 1997 and             3.50                  1.00
                    Thereafter

                           (6) Debt  Service  Coverage  Ratio.  The Debt Service
                  Coverage  Ratio  shall  not at any time be less  than  1.75 to
                  1.00.

                           (7) EBITDA Coverage Ratio. The EBITDA Coverage Ratio
                  shall not at any time be less than 2.25 to 1.00.

                           (8)  Capital  Expenditures.   The  Borrower  and  the
                  Consolidated  Entities  on a  consolidated  basis will not (i)
                  make  Capital  Expenditures  on a  non-cumulative  basis in an
                  amount in excess of (a) in Fiscal Year 1994  $135,000,000 plus
                  up to  $40,000,000  to be  utilized  solely for the purpose of
                  acquiring    Diagnostic   Health   Corporation   and   capital
                  expenditures   relating  to  Diagnostic   Health   Corporation
                  subsequent  to its  acquisition,  but in no event  shall total
                  Capital  Expenditures exceed $170,000,000 in Fiscal Year 1994,
                  and  (b)  in  any  Fiscal  Year   thereafter   the  lesser  of
                  $150,000,000  or 100%  of  Cash  Flow  Available  for  Capital
                  Expenditures  (including  Capital  Expenditures  not to exceed
                  $20,000,000 related to Diagnostic Health Corporation) and (ii)
                  make  Capital   Expenditures   exceeding   in  the   aggregate
                  $20,000,000  during  any Fiscal  Year with  respect to any one
                  particular Facility.  There shall not be included as a Capital
                  Expenditure   the  portion  of  the  purchase   price  of  any
                  Acquisition  which  is paid  for  with  Capital  Stock  of the
                  Borrower;  provided,  however,  that the total of (x)  Capital
                  Expenditures  and (y)  Acquisitions  in which Capital Stock is
                  used to pay all or a  portion  of the  purchase  price may not
                  exceed  $250,000,000  in any Fiscal Year. For purposes of this
                  Section  7.8(a)(8)  the value of a share of  Capital  Stock of
                  Borrower  shall be the closing  price of such Capital Stock on
                  the New York  Stock  Exchange  on the  effective  date of such
                  Acquisition. In addition, the portion of the purchase price of
                  any Acquisition  which  represents the acquisition of accounts
                  receivable shall not be included as a Capital  Expenditure for
                  purposes of determining compliance with this Section 7.8(a)(8)
                  if (i) such accounts receivable are less than 151 days old and
                  (ii) the portion of the purchase price represented by accounts
                  receivable  does not exceed 30% of the  purchase  price of the
                  Acquisition  (any  amount  by which  the  accounts  receivable
                  exceed  30% of the  purchase  price of the  Acquisition  to be
                  treated as a Capital  Expenditure).  All  accounts  receivable
                  shall be valued at the lesser of the net amount  owed  thereon
                  or their book value.

                           (9)  Indebtedness.   The  Borrower  and  Consolidated
                  Entities on a consolidated  basis will not incur, or otherwise
                  become liable with respect to, any Indebtedness other than (A)
                  the Credit Obligations;  (B) Indebtedness  arising under those
                  Letters  of Credit  set forth on  Exhibit K which  Letters  of
                  Credit  shall  not be  modified  or  amended;  (C) the  Senior
                  Subordinated   Notes   and   the   Convertible    Subordinated
                  Debentures; (D) up to an aggregate of $10,000,000 of unsecured
                  Indebtedness  incurred  prior  to the  Maturity  Date,  but no
                  extension,   renewal  or  replacement   thereof;   (E)  up  to
                  $10,000,000  of  Indebtedness  incurred to purchase  property,
                  plant or equipment; (F) Guaranteed Obligations permitted under
                  Section 7.8(a)(10);  and (G) Subordinated  Indebtedness of the
                  Borrower, the proceeds of which are used to permanently reduce
                  the principal portion of the Senior  Subordinated Notes or the
                  Convertible   Subordinated   Debentures   so   long   as  such
                  Subordinated   Indebtedness  is  (i)  unsecured,   (ii)  bears
                  interest  at a rate of 12% or less per annum,  (iii)  contains
                  covenants, restrictions, terms of subordination and redemption
                  provisions  no  less  favorable  to  the  Lenders  than  those
                  contained   in   Indentures   pursuant  to  which  the  Senior
                  Subordinated Notes or Convertible Subordinated Debentures,  as
                  the case may be, were issued,  as such Indentures exist on the
                  Closing Date, (iv) prohibits  payment of principal  whether by
                  its terms or by  prepayment  prior to 100 days next  following
                  the Maturity  Date,  and (v) does not result in an increase in
                  the amount of outstanding Indebtedness.
                          

                          (10)   Guarantees.   Borrower  and  the  Consolidated
                  Entities on a consolidated basis will not incur any Guaranteed
                  Obligations (whether by directly  guaranteeing  obligations of
                  another person or by agreement to purchase the indebtedness of
                  any  other  person,  or  entering  into an  agreement  for the
                  furnishing  of funds to any other person  through the purchase
                  of goods,  supplies or  services or by way of stock  purchase,
                  contribution,  advance  or loan for the  purpose  of paying or
                  discharging   the   indebtedness   of  any  other   person  or
                  otherwise),  in an aggregate  amount in excess of $30,000,000,
                  except for (A) the  endorsement  of negotiable  instruments in
                  the   ordinary   course  of  business  for   collection;   (B)
                  obligations  arising by reason of the  Borrower's  status as a
                  general partner of a Controlled  Partnership;  (C) obligations
                  to advance funds to Subsidiaries and Controlled  Partnerships,
                  but only so long as the note or notes or  accounts  receivable
                  evidencing  the advance of such funds is assigned to the Agent
                  as security  for the Credit  Obligations;  (D) the  guarantees
                  arising under the Guaranty Agreements; (E) the guarantee of up
                  to  $22,000,000  of  Indebtedness   of  Vanderbilt,   and  (F)
                  guarantees  of  Indebtedness  incurred  to pay  the  principal
                  amount of the Credit Obligations,  provided that, concurrently
                  with  the  incurrence  of  such  Guaranteed  Obligation,   the
                  Borrower  and the Agent  agree in writing to reduce the credit
                  available  to the Borrower  under this  Agreement by an amount
                  equal to the  amount of such  Guaranteed  Obligations  and the
                  Borrower pays any fee required to be paid in  connection  with
                  such reduction.

                           (11) Lease Payments.  Borrower will not, and will not
                  permit any  Consolidated  Entity to, incur the  obligation  to
                  make  Lease  Payments  in an  aggregate  amount  in  excess of
                  $3,500,000  in any  Fiscal  Year;  and  the  Borrower  and its
                  Consolidated  Entities on a consolidated  basis will not incur
                  the obligation to make Lease  Payments in an aggregate  amount
                  in excess of (i) $60,000,000 in the Fiscal Year ended December
                  31, 1994,  (ii)  $65,000,000 in the Fiscal Year ended December
                  31, 1995, (iii)  $70,000,000 in the Fiscal Year ended December
                  31, 1996, and (iv) $75,000,000 in any Fiscal Year thereafter.
                  

                           (12)   Investment   and  Loans.   Borrower  and  the
                  Consolidated  Entities  on  a  consolidated  basis  will  not,
                  directly  or  indirectly,  purchase or  otherwise  acquire any
                  stock,  security,  obligation or evidence of indebtedness  of,
                  make any capital  contribution to, own any equity interest in,
                  or make any loan or advance  to, any other  person;  provided,
                  however, that it may continue to hold (A) all stock of and own
                  partnership   interests   in  the  persons   that   constitute
                  Consolidated  Entities  on the  Closing  Date;  (B)  stock of,
                  partnership  interests  in, and  assets  of, new  Consolidated
                  Entities  acquired   subsequent  to  the  Closing  Date  (such
                  purchases to be included as a Capital Expenditure for purposes
                  of determining  compliance with Section 7.8(a)(8) hereof); (C)
                  Permitted  Investments;  and (D)  investments  in an aggregate
                  amount not exceeding $20,000,000 in corporations, partnerships
                  or joint ventures who do not constitute  Consolidated Entities
                  (such investments not to be included as a Capital  Expenditure
                  for purposes of determining  compliance with Section 7.8(a)(8)
                  hereof),   provided   if   any   single   investment   exceeds
                  $15,000,000,  Borrower  shall  provide  to the Agent  prior to
                  making such investment, a Compliance Certificate demonstrating
                  that on a pro forma  historical  basis  giving  effect to such
                  investment as at the beginning of the most recent Four-Quarter
                  Period  covered by such  Compliance  Certificate no Default or
                  Event of Default would exist.

                           (13)   Disposition   of  Assets.   Borrower  and  the
                  Consolidated Entities on a consolidated basis will not without
                  the consent of the Required  Lenders  (which consent shall not
                  be unreasonably withheld),  sell, lease, transfer or otherwise
                  dispose  of in  excess  of 5% of their  total  properties  and
                  assets  over  the  term  of  this  Agreement;  except  (A) the
                  Borrower  may  lease its  existing  skilled  nursing  facility
                  located in New  Orleans,  Louisiana  to a third party on terms
                  fairly  reflecting  current  market  conditions at the time of
                  lease,  and (B) the  Borrower  may sell  physician  or medical
                  office buildings or other non-revenue producing properties and
                  out-patient  buildings  listed  in  Exhibit  O,  other  than a
                  Facility,  at a price  not less  than  the book  value of such
                  property at the time of sale.

                           (14)  Consolidation  or  Merger.   Borrower  and  its
                  Consolidated  Entities may merge or  consolidate  with another
                  person only if (i) in the case of a merger or consolidation of
                  the  Borrower,  the  Borrower is the  continuing  or surviving
                  entity,  (ii)  in  the  case  of  a  merger  or  consolidation
                  involving a Consolidated  Entity,  the continuing or surviving
                  entity is  majority-owned  by the Borrower (with such majority
                  ownership  constituting  a  controlling  interest),  and (iii)
                  before  and  after  giving  effect to the  proposed  merger or
                  consolidation,  no  Default or Event of  Default  shall  exist
                  under  this  Agreement;  provided  that  in  the  case  of any
                  consolidation   or  merger  with  a  person  which  is  not  a
                  Consolidated Entity and the total assets of such person exceed
                  $15,000,000  the Borrower  shall provide to the Agent prior to
                  such  merger  or   consolidation   a  Compliance   Certificate
                  demonstrating  that on a pro  forma  historical  basis  giving
                  effect to such merger or  consolidation as at the beginning of
                  the most recent Four-Quarter Period covered by such Compliance
                  Certificate no Default or Event of Default would exist.

                           (15) Liens.  Borrower  will not,  and will not permit
                  any Consolidated Entity to, incur, create, assume or permit to
                  exist any Lien upon any of its accounts  receivable,  contract
                  rights,  chattel  paper,  inventory,  equipment,  instruments,
                  general  intangibles or other personal or real property of any
                  character, whether now owned or hereafter acquired, other than
                  (i) Liens that constitute Permitted  Encumbrances,  (ii) Liens
                  existing  as of the date  hereof  and  described  on Exhibit N
                  hereof and (iii) Liens  securing  Indebtedness  incurred under
                  Section  7.8(a)(9)(E)  so long as the Lien extends only to the
                  asset acquired with such Indebtedness.

                           (16) Dividends and  Distributions.  Borrower will not
                  permit any Consolidated  Entity to be or become subject to any
                  restrictions on the ability of such Consolidated Entity to pay
                  dividends or to make partnership distributions.

                           (17)   Acquisitions.   Prior  to  entering  into  any
                  agreement  to acquire  any person or  Facility,  the  Borrower
                  shall  provide to the Agent  evidence,  (i) that the person or
                  Facility  to be  acquired  is in the  same  line  of  business
                  presently  engaged  in by the  Borrower  or  its  Consolidated
                  Entities, (ii) that the person or Facility to be acquired does
                  not  oppose  the  Acquisition,  and  (iii)  if the cost of the
                  Acquisition exceeds $15,000,000, prior to consummation of such
                  Acquisition  deliver  to the  Agent a  Compliance  Certificate
                  demonstrating  on a pro  forma  basis,  giving  effect to such
                  Acquisition,  that no Default  or Event of Default  will exist
                  under this Agreement.

                           (18) Restricted  Payments.  Borrower will not declare
                  or pay  dividends  (other  than stock  dividends)  or make any
                  other  stockholder  distributions  to the  shareholders of the
                  Borrower or  redemptions  or purchases of the Capital Stock of
                  Borrower,  or make any  principal  payments  with  respect  of
                  Subordinated Indebtedness (collectively "Restricted Payments")
                  except  Borrower  may make  Restricted  Payments in any Fiscal
                  Year  so  long  as  such   payments   are  less  than  25%  of
                  Consolidated  Net Income  for such  Fiscal  Year and  Borrower
                  shall deliver to the Agent prior to making any such Restricted
                  Payment a Compliance  Certificate  demonstrating that on a pro
                  forma basis after giving  effect to such payment no Default or
                  Event of Default exists.
                    

                           (b) Except as  otherwise expressly  provided in this
         Section 7.8, (i) the Borrower  shall also cause and require each of its
         Consolidated  Entities to observe and perform each of the covenants and
         agreements  of  this  section  to be  observed  and  performed  by  the
         Borrower,   whether  or  not  a  specific  reference  is  made  to  the
         Consolidated  Entities in each such covenant  (other than the financial
         covenants  set forth in paragraphs  (1) through (7) of  subsection  (a)
         above,  which apply to the Borrower and the Consolidated  Entities on a
         consolidated  basis), and (ii) all computations  required in connection
         with  such  financial  covenants  and  the  limitations  set  forth  in
         paragraphs  (8) through (18) of subsection  (a) above shall be made for
         the   Borrower  and  its   Consolidated   Entities  on  a  combined  or
         consolidated  basis, in accordance with generally  accepted  accounting
         principles, after elimination of intercompany items.

         SECTION 7.9 Continuation of Current Business.  Neither the Borrower nor
any Consolidated  Entity will (i) engage in any business other than the business
now being  conducted by it and other  businesses  directly  related to providing
rehabilitation  services (including outpatient surgery,  diagnostic services and
management  of physician  practices) or  orthopedic  surgery  related acute care
similar  in  operation  (but not in scope)  to the  HEALTHSOUTH  Medical  Center
Facility or (ii) acquire or attempt to acquire any person who is opposed to such
acquisition.

         SECTION  7.10  Management  Contracts.  Neither  the  Borrower  nor  any
Consolidated  Entity  will  enter into any  agreement  whereby  the  management,
supervision  or control of its business or any Facility shall be delegated to or
placed in any persons other than its governing  body and officers,  the Borrower
or a  Consolidated  Entity,  except that  management  of the  Facility  owned by
Vanderbilt  Stallworth  Rehabilitation  Hospital,  L.P.  is  vested in part in a
Governance Committee and in part in a Subsidiary of the Borrower pursuant to the
applicable limited partnership agreement and a management agreement.

         SECTION 7.11 Cooperation; Inspection of Properties. The Borrower shall,
and shall  cause the  Consolidated  Entities  to,  permit the  Lenders and their
representatives  to  inspect  the  Borrower's  and  the  Consolidated  Entities'
properties and assets,  and to inspect,  review and audit the Borrower's and the
Consolidated Entities' books and records from time to time and at any time.

         SECTION  7.12 Use of Proceeds.  The Borrower  shall use the proceeds of
Advances  exclusively to provide  funding for the acquisition and development of
Facilities and to provide  working  capital to the Borrower,  the  Participating
Subsidiaries and the Participating Partnerships.
  
         SECTION 7.13 Limit on Investment in HEALTHSOUTH of Birmingham, Inc. The
Borrower will not cause or permit its aggregate direct and indirect  investment,
whether by stock purchase,  capital  contribution,  advance,  loan, guarantee or
otherwise, in HEALTHSOUTH of Birmingham, Inc. to exceed at any time $500,000.

         SECTION 7.14 Additional  Consolidated Entities. On the last day of each
fiscal  quarter of the  Borrower (or such earlier time as the Agent may request)
the Borrower will cause each Consolidated  Entity that is hereafter  acquired or
created to become a  Participating  Subsidiary or  Participating  Partnership by
execution of a Guaranty Agreement and all other documents  necessary to cause it
to become jointly and severally  liable for the Credit  Obligations  (subject to
the  limitations  provided in the  Guaranty  Agreement)  and the Borrower or the
Participating Subsidiary or the Participating Partnership, if applicable,  shall
execute a Pledge Agreement as more particularly  described in Section 2.7 herein
and shall  deliver or cause to be  delivered  all  financing  statements,  stock
certificates  and duly  executed  stock powers  necessary to perfect the Agent's
security interest granted under such Pledge Agreement.

         SECTION 7.15 ERISA.  With respect to all employee pension benefit plans
maintained by the Borrower or any Subsidiary:

             (i) terminate any of such employee  pension  benefit plans so as to
         incur  any  liability  to  the  Pension  Benefit  Guaranty  Corporation
         established pursuant to ERISA;

             (ii) allow or suffer to exist any prohibited  transaction involving
         any of  such  employee  pension  benefit  plans  or any  trust  created
         thereunder which would subject the Borrower or a Subsidiary to a tax or
         penalty or other  liability on  prohibited  transactions  imposed under
         Internal Revenue Code Section 4975 or ERISA;

             (iii) fail to pay to any such  employee  pension  benefit  plan any
         contribution which it is obligated to pay under the terms of such plan;

             (iv) allow or suffer to exist any accumulated  funding  deficiency,
         whether  or not  waived,  with  respect  to any such  employee  pension
         benefit plan;

             (v) allow or suffer to exist any  occurrence of a reportable  event
         or any other  event or  condition,  which  presents a material  risk of
         termination  by the Pension  Benefit  Guaranty  Corporation of any such
         employee  pension  benefit plan that is a Single  Employer Plan,  which
         termination  could  result  in any  liability  to the  Pension  Benefit
         Guaranty Corporation; or

             (vi)  incur  any   withdrawal   liability   with   respect  to  any
         Multi-employer Plan.



                                  ARTICLE VIII

                         EVENTS OF DEFAULT AND REMEDIES

         SECTION 8.1 Events of Default. The following shall constitute Events of
Default under this Agreement:

                  (a)  the  Borrower  or  any  Participating  Subsidiary  or any
Participating  Partnership  shall fail to pay within (i) one Business Day of the
date when due any  principal  payable  under the terms of any Note or (ii) three
Business  Days of the date when due any interest or fees payable under the terms
of any Note or any amount payable under this Agreement,  any Guaranty  Agreement
or any other of the Credit  Obligations or any other amount owed to the Agent or
Lenders under or in connection with the Loan Documents; or

                  (b) The  Borrower or any Material  Group shall  default in the
performance or observance of any other  provision of this Agreement  (other than
the  provisions  of Article VII hereof),  except as covered by clause (a) above,
and shall not cure such default  within  thirty days after the first to occur of
(i) the date the Agent or  Lenders  gives  written or  telephonic  notice of the
default  to the  Borrower  or (ii) the date the  Borrower  otherwise  has notice
thereof; or

                  (c)  the  Borrower  or  any  Participating  Subsidiary  or any
Participating  Partnership or any Material Group shall default in the observance
or performance of any provision in Article VII hereof; or

                  (d)  the   Agent   shall   determine   that   any   statement,
certification,  representation  or warranty  contained  herein, or in any of the
other Loan Documents or in any report, financial statement, certificate or other
instrument  delivered to the Agent or any Lender by or on behalf of the Borrower
or any Participating Subsidiary or any Participating  Partnership was misleading
or untrue in any material respect at the time it was made; or

                  (e)  default   shall  be  made  (i)  in  the  payment  of  any
Indebtedness  (other  than  the  Credit  Obligations)  of  the  Borrower  or any
Consolidated  Entity  when  due  or  (ii)  in  the  performance,  observance  or
fulfillment  of any term or covenant  contained in any  agreement or  instrument
under or pursuant to which any such Indebtedness may have been issued,  created,
assumed,  guaranteed or secured by Borrower or any Consolidated  Entity,  if the
effect of such default is to accelerate the maturity of such  Indebtedness or to
permit the holder thereof to cause such  Indebtedness to become due prior to its
stated  maturity,  and such default  shall not be cured within 10 days after the
occurrence of such default, and the amount of the Indebtedness  involved exceeds
$3,000,000; or

                  (f) the Borrower or any  Material  Group shall fail to pay its
or their debts generally as they come due, or a receiver, trustee, liquidator or
other custodian shall be appointed for the Borrower or any Material Group or for
any of the  property  of the  Borrower  or any  Material  Group or a petition in
bankruptcy,  or under  any  insolvency  law,  shall be filed by or  against  the
Borrower or any Material Group or the Borrower or any Material Group shall apply
for the benefit  of, or take  advantage  of, any law for relief of  debtors,  or
enter into an  arrangement  or  composition  with, or make an assignment for the
benefit of, creditors; or

                  (g) final judgment  for the payment of money in excess of any
aggregate of $50,000 shall be rendered against the Borrower or any participating
Subsidiary or any Participating  Partnership or any Material Group, and the same
shall remain  undischarged  for a period of 30 days during which execution shall
not be effectively stayed; or

                  (h) an event of default, as therein defined, shall occur under
any other Loan Document; or

                  (i)  if  any  of  the  Guaranty   Agreements,   Notes,  Pledge
Agreements or LC Agreement shall be deemed unenforceable by a court of competent
jurisdiction or shall no longer be effective; or

                  (j) if any person or group of persons acting  together who are
not as at the Closing Date owners of Capital Stock of the Borrower having voting
rights shall own directly or  indirectly  fifteen  percent  (15%) or more of the
Capital Stock of the Borrower having voting rights; or

                  (k) if (i)  the  Borrower  or any  Consolidated  Entity  shall
engage in any prohibited  transaction (as described in Section 7.15(ii) hereof),
which is not subject to a statutory or administrative  exemption,  involving any
employee pension benefit plan of the Borrower or any Consolidated  Entity,  (ii)
any accumulated  funding deficiency (as referred to in Section 7.15(iv) hereof),
whether or not waived,  shall exist with  respect to any Single  Employer  Plan,
(iii) a reportable  event (as referred to in Section 7.15(v) hereof) (other than
a reportable  event for which the statutory  notice  requirement  to the Pension
Benefit  Guaranty  Corporation  has been waived by regulation)  shall occur with
respect to, or  proceedings  shall  commence to have a trustee  appointed,  or a
trustee shall be appointed to administer  or to terminate,  any Single  Employer
Plan, which reportable event or institution or proceedings is, in the reasonable
opinion of the Required  Lenders,  likely to result in the  termination  of such
Single Employer Plan for purposes of Title IV of ERISA,  and in the case of such
a reportable event, the continuance of such reportable event shall be unremedied
for sixty (60) days after notice of such  reportable  event  pursuant to Section
4043(a),  (c) or (d) of ERISA is  given,  as the  case may be,  (iv) any  Single
Employer  Plan  shall  terminate  for  purposes  of Title IV of ERISA,  and such
termination  results in a material liability of the Borrower or any Consolidated
Entity to such Single Employer Plan or the Pension Benefit Guaranty Corporation,
(v) the Borrower or any Subsidiary shall withdraw from a Multi-employer Plan for
purposes  of Title IV of ERISA,  and,  as a result of any such  withdrawal,  the
Borrower or any  Consolidated  Entity shall incur  withdrawal  liability to such
Multi-employer  Plan, or (vi) any other event or condition shall occur or exist;
and in each case in clauses (i) through (vi) of this Section 8.1(k),  such event
or condition,  together with all other such events or conditions,  if any, could
subject the  Borrower or any  Consolidated  Entity to any tax,  penalty or other
liabilities in excess of $100,000,  and in each such case the event or condition
is not remedied to the  satisfaction of the Required  Lenders within ninety (90)
days after the  earlier of (i) receipt of notice of such event or  condition  by
the Authorized  Representative from the Agent or (ii) the Borrower becomes aware
of such  event  or  condition;  then,  and in any  such  event  and at any  time
thereafter, if such Event of Default shall then be continuing,

                           (A) either or both of the  following  actions  may be
                  taken: (i) the Agent may, and at the direction of the Required
                  Lenders  shall,  declare any obligation of the Lenders to make
                  further Loans or issue Letters of Credit terminated, whereupon
                  the  obligation  of each  Lender  to  make  further  Loans  or
                  NationsBank  to  issue  Letters  of  Credit,  hereunder  shall
                  terminate  immediately,  and  (ii)  the  Agent  shall  at  the
                  direction of the Required Lenders, at their option, declare by
                  notice to the Borrower any or all of the Credit Obligations to
                  be immediately  due and payable,  and the same,  including all
                  interest  accrued  thereon  and all other  obligations  of the
                  Borrower to the Lenders,  shall forthwith  become  immediately
                  due and payable without presentment,  demand,  protest, notice
                  or  other  formality  of any  kind,  all of which  are  hereby
                  expressly  waived,   anything   contained  herein  or  in  any
                  instrument  evidencing the Credit  Obligations to the contrary
                  notwithstanding;  provided,  however, that notwithstanding the
                  above,  if there shall occur an Event of Default  under clause
                  (f)  above,  then  the  obligation  of  the  Lenders  to  lend
                  hereunder shall automatically terminate and any and all of the
                  Credit  Obligations  shall  be  immediately  due  and  payable
                  without  the  necessity  of any  action  by the  Agent  or the
                  Required Lenders or notice to the Agent or the Lenders;

                           (B) Borrower shall, upon demand of Agent deposit cash
                  with the Agent in an amount equal to the amount of any Letters
                  of Credit remaining undrawn or unpaid, as collateral  security
                  for the  repayment  of any future  drawings or payments  under
                  such Letters of Credit,  and Borrower shall forthwith  deposit
                  and pay such amounts and such  amounts  shall be held by Agent
                  pursuant to the terms of the LC Account Agreement; and

                           (C) the Agent,  on behalf of the Lenders,  shall have
                  all of the following rights and remedies in addition to all of
                  the rights and  remedies of a secured  party under the Uniform
                  Commercial  Code in respect of the Collateral and otherwise be
                  available  under the Loan  Documents  or under any  applicable
                  law: the Agent may at any time and from time to time,  with or
                  without  judicial  process or the aid and assistance of others
                  and without incurring any liability to the Borrower,  upon ten
                  (10) days' notice to the Borrower sell or otherwise dispose of
                  any  Collateral,  at public or private sale or  proceedings or
                  otherwise,  by one or more contracts,  in one or more parcels,
                  at the same or  different  times,  with or without  having the
                  Collateral at the place of sale or other disposition, for cash
                  and/or  credit,  and  upon any  terms,  at such  place(s)  and
                  time(s) and to such  person(s) as the Agent deems best; if any
                  Collateral  is sold by the Agent  upon  credit  or for  future
                  delivery, the Agent shall not be liable for the failure of the
                  purchaser  to pay for same and in such  event  the  Agent  may
                  resell  such  Collateral  in  accordance  with the  provisions
                  hereof  provided  the  Borrower  shall  be  given  credit  for
                  proceeds  received  by reason of such  sale;  the Agent or any
                  Lender  may buy any  Collateral  at any public  sale and,  the
                  Agent or any Lender may buy such Collateral at private sale so
                  long as such sale is made in a commercially  reasonable manner
                  and in each  case  may make  payment  therefor  by any  means.
                  Except to the  extent  the  Agent  shall  have  failed to take
                  action  required  under this  Agreement,  no Lenders  shall be
                  entitled to enforce the  provisions of this  subsection (C) of
                  Section 8.1 independently.

         SECTION  8.2 Agent to Act.  In case any one or more  Events of  Default
shall  occur and be  continuing,  the Agent  may,  and at the  direction  of the
Required Lenders shall,  proceed to protect and enforce their rights or remedies
either by suit in equity or by action at law, or both,  whether for the specific
performance of any covenant, agreement or other provision contained herein or in
any other Loan  Document,  or to enforce the payment of the  Obligations  or any
other legal or equitable right or remedy.

         SECTION 8.3 Cumulative Rights. No right or remedy herein conferred upon
the Lenders, the Agent and the Borrower is intended to be exclusive of any other
rights or remedies  contained  herein or in any other Loan  Document,  and every
such right or remedy shall be cumulative and shall be in addition to every other
such right or remedy contained  herein and therein or now or hereafter  existing
at law or in equity or by statute, or otherwise.

         SECTION 8.4 No Waiver.  No course of dealing  between the  Borrower and
any Lender or the Agent or any failure or delay on the part of any  Lender,  the
Agent or the  Borrower  in  exercising  any rights or remedies  hereunder  shall
operate as a waiver of any rights or remedies hereunder and no single or partial
exercise  of any  rights or  remedies  hereunder  shall  operate  as a waiver or
preclude the  exercise of any other rights or remedies  hereunder or of the same
right or remedy on a future occasion.

         SECTION 8.5 Default.  The Agent and the Lenders  shall have no right to
accelerate  any of the Loans  upon,  or to  institute  any action or  proceeding
before any court to realize upon  Collateral  as a result of, the  occurrence of
any Default  which  shall not also  constitute  an Event of  Default;  provided,
however,  nothing  contained  in this  sentence  shall in any respect  impair or
adversely affect the right, power and authority of the Agent and the Lenders (i)
to take any action  expressly  required or  permitted to be taken under the Loan
Documents  upon the  occurrence  of any  Default  (and  including  any action or
proceeding  which the Agent may  determine  to be necessary  or  appropriate  in
furtherance of any such expressly authorized action) and (ii) to take any action
provided under the Loan Documents or otherwise  available by statute,  at law or
in equity upon the occurrence of any Default.

         SECTION 8.6 Allocation of Proceeds. If an Event of Default has occurred
and is continuing,  and the maturity of the Notes has been accelerated  pursuant
to this Article VIII, all payments received by the Agent hereunder in respect of
any  principal  of or interest on the Credit  Obligations  or any other  amounts
payable by the Borrower hereunder shall be applied by the Agent in the following
order:

                    (i)  amounts due to the  Lenders  pursuant to Sections  2.11
          hereof;

                    (ii)  amounts due to the Agent and  NationsBank  pursuant to
          Section 9.11 and Section 2.13(i) and (k) hereof;

                    (iii) payments of interest, to be applied in accordance with
          Section 2.14 hereof;

                    (iv) payments of principal, to be applied in accordance with
          Section 2.14 hereof;

                    (v) payment of cash amounts to the Agent pursuant to Section
          8.1(B) hereof; and

                    (vi) payments of all other amounts due under this Agreement,
          if any, to be applied in accordance  with each Lender's pro rata share
          of all principal due to the Lenders.


                                   ARTICLE IX

                                   THE AGENT

         SECTION 9.1  Appointment.  Each Lender  (including  NationsBank  in its
capacity as issuer of the Letters of Credit) hereby  irrevocably  designates and
appoints NationsBank as the Agent of the Lenders under this Agreement,  and each
of the Lenders hereby irrevocably  authorizes  NationsBank as the Agent for such
Lender, to take such action on its behalf under the provisions of this Agreement
and the other  Loan  Documents  and to  exercise  such  powers as are  expressly
delegated to the Agent by the terms of this Agreement,  together with such other
powers as are reasonably incidental thereto. The Agent shall not have any duties
or  responsibilities,  except those expressly set forth herein, or any fiduciary
relationship  with any of the  Lenders,  and no  implied  covenants,  functions,
responsibilities,  duties,  obligations or  liabilities  shall be read into this
Agreement or otherwise exist against the Agent.

         SECTION 9.2 Attorneys-in-fact.  The Agent may execute any of its duties
under this  Agreement  by or through  agents or  attorneys-in-fact  and shall be
entitled to advice of counsel  concerning all matters pertaining to such duties.
The  Agent  shall  not be  responsible  for  the  gross  negligence  or  willful
misconduct  of any agents or  attorneys-in-fact  selected by it with  reasonable
care.

         SECTION 9.3  Limitation on Liability.  Neither the Agent nor any of its
officers,  directors,  employees, agents or attorneys-in-fact shall be liable to
the Lenders for any action  lawfully  taken or omitted to be taken by it or them
under or in  connection  with this  Agreement  except for its or their own gross
negligence or willful  misconduct.  Neither the Agent nor any of its  affiliates
shall be  responsible  in any  manner to any of the  Lenders  for any  recitals,
statements,  representations  or  warranties  made by the  Borrower,  any of its
Controlled  Entities  or  Controlled  Partnerships,  or any  officer  or partner
thereof contained in this Agreement or in any of the other Loan Documents, or in
any certificate, report, statement or other document referred to or provided for
in or received by the Agent under or in  connection  with this  Agreement or for
the value, validity, effectiveness,  genuineness,  enforceability or sufficiency
of this Agreement or any of the other Loan Documents,  or for any failure of the
Borrower to perform its obligations thereunder. The Agent shall not be under any
obligation to any of the Lenders to ascertain or to inquire as to the observance
or performance of any of the terms, covenants or conditions of this Agreement or
any of the other Loan  Documents  on the part of the  Borrower or to inspect the
properties,  books or records of the  Borrower  or its  Controlled  Entities  or
Controlled Partnerships.

         SECTION 9.4 Reliance. The Agent shall be entitled to rely, and shall be
fully protected in relying, upon any Note, writing, resolution,  notice, consent
certificate,  affidavit, letter, cablegram, telegram, telecopy or telex message,
statement,  order or other document or conversation believed by it to be genuine
and  correct  and to have  been  signed,  sent or made by the  proper  person or
Persons and upon advice and  statements  of legal  counsel  (including,  without
limitation, counsel to the Borrower),  independent accountants and other experts
selected by the Agent. The Agent may deem and treat the payee of any Note as the
owner thereof for all purposes  unless an Assignment and  Acceptance  shall have
been filed with and accepted by the Agent. The Agent shall be fully justified in
failing or  refusing  to take any action  under this  Agreement  unless it shall
first receive advice or  concurrence  of the Lenders or the Required  Lenders as
provided in this Agreement or it shall first be indemnified to its  satisfaction
by the Lenders  against any and all  liability and expense which may be incurred
by it by reason of taking or continuing to take any such action. The Agent shall
in all cases be fully protected in acting,  or in refraining from acting,  under
this Agreement in accordance  with a request of the Required  Lenders,  and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all the Lenders and all present and future holders of the Notes.

         SECTION  9.5 Notice of  Default.  The Agent shall not be deemed to have
knowledge  or  notice  of the  occurrence  of any  Default  or Event of  Default
hereunder unless the Agent has received notice from a Lender, or the Borrower or
any of the Subsidiaries referring to this Agreement,  describing such Default or
Event of Default and stating that such notice is a "notice of  default".  In the
event that the Agent  receives  such a notice,  the Agent  shall  promptly  give
notice thereof to the Lenders.  The Agent shall take such action with respect to
such Default or Event of Default as shall be reasonably directed by the Required
Lenders;  provided  that,  unless and until the Agent shall have  received  such
directions,  the Agent may (but shall not be obligated to) take such action,  or
refrain  from taking such  action,  with  respect to such Event of Default as it
shall deem advisable in the best interests of the Lenders.

         SECTION 9.6 No Representations. Each Lender expressly acknowledges that
neither  the Agent nor any of its  affiliates  has made any  representations  or
warranties  to it and that no act by the Agent  hereafter  taken,  including any
review of the affairs of the Borrower or any of its Consolidated Entities, shall
be deemed to  constitute  any  representation  or  warranty  by the Agent to any
Lender.  Each  Lender  represents  to the Agent that it has,  independently  and
without reliance upon the Agent or any other Lender, and based on such documents
and  information  as it has deemed  appropriate,  made its own  appraisal of and
investigation into the financial condition,  creditworthiness,  affairs,  status
and nature of the Borrower and Controlled Partnerships and made its own decision
to  enter  into  this  Agreement.  Each  Lender  also  represents  that it will,
independently and without reliance upon the Agent or any other Lender, and based
on such  documents and  information  as it shall deem  appropriate  at the time,
continue to make its own credit analysis,  appraisals and decisions in taking or
not taking  action under this  Agreement  and to make such  investigation  as it
deems  necessary  to inform  itself as to the status and  affairs,  financial or
otherwise,  of  the  Borrower  and  its  Consolidated  Entities  and  Controlled
Partnerships. Except for notices, reports and other documents expressly required
to be furnished to the Lenders by the Agent hereunder,  the Agent shall not have
any duty or  responsibility  to  provide  any  Lender  with any  credit or other
information  concerning  the  affairs,  financial  condition  or business of the
Borrower or any of its Consolidated  Entities and Controlled  Partnerships which
may come into the possession of the Agent or any of its affiliates.

         SECTION 9.7  Indemnification.  The Lenders agree to indemnify the Agent
in its capacity as such (to the extent not  reimbursed by the Borrower or any of
its  Consolidated  Entities and without limiting any obligations of the Borrower
or any  of  its  Consolidated  Entities  so to  do),  ratably  according  to the
respective  principal  amount  of the Notes  held by them  (or,  if no Notes are
outstanding,  ratably in accordance with their respective  Applicable Commitment
Percentages  as  then in  effect)  from  and  against  any and all  liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
expenses or disbursements of any kind or nature whatsoever which may at any time
(including  without limitation at any time following the payment of the Note) be
imposed on, incurred by or asserted  against the Agent in any way relating to or
arising out of this Agreement or any other document  contemplated by or referred
to herein or the transactions contemplated hereby or any action taken or omitted
by the Agent under or in connection with any of the foregoing;  provided that no
Lender  shall be liable  for the  payment of any  portion  of such  liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
expenses or disbursements resulting from the Agent's gross negligence or willful
misconduct.  The agreements in this subsection  shall survive the payment of the
Obligations and the termination of this Agreement.

         SECTION 9.8  Lender.  The Agent and its  affiliates  may make loans to,
accept  deposits  from and  generally  engage in any kind of  business  with the
Borrower and its Consolidated Entities and Controlled  Partnerships as though it
were not the Agent  hereunder.  With  respect to its Loans made or renewed by it
and any Note issued to it, the Agent shall have the same rights and powers under
this Agreement as any Lender and may exercise the same as though it were not the
Agent, and the terms "Lender" and "Lenders" shall,  unless the context otherwise
indicates, include the Agent in its individual capacity.

         SECTION 9.9 Resignation.  If the Agent shall resign as Agent under this
Agreement,  then the  Required  Lenders may  appoint a  successor  Agent for the
Lenders, which successor shall be approved by the Borrower, which approval shall
not be unreasonably  withheld,  which shall be a commercial bank organized under
the laws of the United States or any state  thereof,  having a combined  surplus
and capital of not less than $500,000,000,  whereupon such successor Agent shall
succeed to the rights, powers and duties of the former Agent and the obligations
of the former  Agent  shall be  terminated  and  canceled,  without any other or
further  act or deed on the part of such  former  Agent or any of the parties to
this Agreement; provided, however, that the former Agent's resignation shall not
become effective until such successor Agent has been appointed and has succeeded
of  record  to all  right,  title  and  interest  of  the  former  Agent  in the
Collateral;  provided,  further,  if the Required  Lenders  cannot agree as to a
successor Agent within ninety (90) days after such resignation,  the Agent shall
appoint a  successor  Agent and the  parties  hereto  agree to execute  whatever
documents are necessary to effect such action under this  Agreement or any other
document  executed pursuant to this Agreement;  provided,  however in such event
all  provisions of this Agreement and the Loan  Documents,  shall remain in full
force and effect. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Article IX shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under this Agreement.

         SECTION 9.10 Sharing of Payments,  etc.  Each Lender  agrees that if it
shall,  through the exercise of a right of banker's lien, set-off,  counterclaim
or otherwise,  obtain payment with respect to its Credit Obligations (other than
any payment pursuant to Article IV) which results in its receiving more than its
pro rata  share of the  aggregate  payments  with  respect  to all of the Credit
Obligations  (other than any  payment  pursuant  to Article  IV),  then (A) such
Lender shall be deemed to have simultaneously purchased from the other Lenders a
share in their Credit  Obligations so that the amount of the Credit  Obligations
held by each of the  Lenders  shall be pro rata and (B) such  other  adjustments
shall be made from time to time as shall be equitable to insure that the Lenders
share such  payments  ratably;  provided,  however,  that for  purposes  of this
Section  9.10 the term "pro rata" shall be  determined  with respect to both the
Commitment of each Lender and to the Revolving  Facility  after  subtraction  in
each case of amounts,  if any, by which any such Lender has not funded its share
of the outstanding Loans and Reimbursement Obligations. If all or any portion of
any such excess  payment is thereafter  recovered from the Lender which received
the same,  the purchase  provided in this Section 9.10 shall be rescinded to the
extent of such recovery,  without interest.  The Borrower  expressly consents to
the foregoing  arrangements  and agrees that each Lender so purchasing a portion
of the other Lenders' Obligations may exercise all rights of payment (including,
without limitation,  all rights of set-off,  banker's lien or counterclaim) with
respect to such  portion as fully as if such  Lender  were the direct  holder of
such portion.

         SECTION  9.11 Fees.  The Borrower  agrees to pay to the Agent,  for its
individual  account,  in advance a quarterly Agent's fee in such amount as shall
be agreed to from time to time.

         SECTION  9.12  Independent  Agreements.  The  provisions  contained  in
Sections  9.1 through  9.8 and 9.10 of this  Article IX  constitute  independent
obligations  and  agreements of the Agent and the Lenders and the Borrower shall
not be deemed a party thereto nor bound thereby.  Borrower does  acknowledge the
rights of Lenders and Agent under Sections 9.9 and 9.11 hereof.

                                   ARTICLE X

                                 MISCELLANEOUS

         SECTION 10.1 Assignments and Participations.

                  (a) At any time after the Closing  Date each Lender may,  with
the prior  consent of the Agent and the  Borrower,  which  consent  shall not be
unreasonably withheld, assign to one or more banks or financial institutions all
or a portion of its  rights and  obligations  under this  Agreement  (including,
without  limitation,  all or a  portion  of the  Notes  payable  to its  order);
provided,  that (i) each  such  assignment  shall  be of a  constant,  and not a
varying,  percentage of all of the  assigning  Lender's  rights and  obligations
(including  Loans  and  Participations)  under  this  Agreement  (ii)  for  each
assignment  involving the issuance and transfer of Notes,  the assigning  Lender
shall execute an Assignment and Acceptance and the Borrower  hereby  consents to
execute  replacement  Notes to give effect to the assignment,  (iii) the minimum
Commitment  which  shall be  assigned is  $10,000,000  (together  with which the
assigning Lender's applicable portion of Participations and the Letter of Credit
Commitment  shall also be assigned) and (iv) such assignee  shall have an office
located  in the United  States.  Upon such  execution,  delivery,  approval  and
acceptance,  from and after the effective date specified in each  Assignment and
Acceptance,  (x) the  assignee  thereunder  shall be a party  hereto and, to the
extent  that  rights  and  obligations  hereunder  or under such Notes have been
assigned or negotiated to it pursuant to such Assignment and Acceptance have the
rights  and  obligations  of a Lender  hereunder  (including,  in respect of the
Collateral,  all the rights  and  obligations  of a Lender,  as fully as if such
assignee  had been  named as a Lender  in this  Agreement)  and a holder of such
Notes and (y) the  assignor  thereunder  shall,  to the extent  that  rights and
obligations hereunder or under such Notes have been assigned or negotiated by it
pursuant  to such  Assignment  and  Acceptance,  relinquish  its  rights  and be
released from its future  obligations  under this  Agreement.  No assignee shall
have the right to further  assign its rights and  obligations  pursuant  to this
Section  10.1.  Any  Lender  who  makes an  assignment  shall pay to the Agent a
one-time  administrative  fee of $2,500.00  which fee shall not be reimbursed by
Borrower.

                  (b) By executing and delivering an Assignment and  Acceptance,
the Lender assignor  thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) the assignment made
under  such  Assignment  and  Acceptance  is  made  under  such  Assignment  and
Acceptance without recourse;  (ii) such assigning Lender makes no representation
or  warranty  and  assumes  no  responsibility  with  respect  to the  financial
condition of the Borrower or any Controlled Entity or Controlled  Partnership or
the  performance  or  observance  by the  Borrower or any  Controlled  Entity or
Controlled  Partnership of any of its obligations under any Loan Document or any
other  instrument or document  furnished  pursuant  hereto;  (iii) such assignee
confirms that it has received a copy of this Agreement,  together with copies of
the financial  statements  delivered pursuant to Section 7.3 and such other Loan
Documents and other  documents and  information as it has deemed  appropriate to
make its own credit  analysis  and  decision to enter into such  Assignment  and
Acceptance; (iv) such assignee will, independently and without reliance upon the
Agent, such assigning Lender or any other Lender and based on such documents and
information as it shall deem  appropriate at the time,  continue to make its own
credit  decisions in taking or not taking action under this Agreement;  (v) such
assignee  appoints and  authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement,  the Note and the other
Loan  Documents  as are  delegated to the Agent by the terms hereof and thereof,
together with such powers as are reasonably  incidental  thereto;  and (vi) such
assignee  agrees that it will perform in accordance  with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender and a holder of such Note.

                  (c) The Agent shall maintain at its address referred to herein
a copy of each Assignment and Acceptance delivered to and accepted by it.

                  (d) Upon its receipt of an Assignment and Acceptance  executed
by an assigning Lender, the Agent shall give prompt notice thereof to Borrower.

                  (e) Each Lender may sell  participations  to one or more banks
or other  entities  as to all or a portion of its rights and  obligations  under
this  Agreement;  provided,  that  (i)  such  Lender's  obligations  under  this
Agreement  shall  remain  unchanged,   (ii)  such  Lender  shall  remain  solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such  Lender  shall  remain  the holder of any Notes  issued to it for the
purpose of this Agreement, (iv) such participations shall be in a minimum amount
of  $10,000,000  and  shall  include  an  allocable  portion  of  such  Lender's
Participation,  and (v) Borrower, the Agent and the other Lenders shall continue
to deal solely and directly  with such Lender in  connection  with such Lender's
rights and  obligations  under  this  Agreement  and with  regard to any and all
payments  to be made  under this  Agreement;  provided,  that the  participation
agreement  between a Lender and its  participants  may provide  that such Lender
will obtain the approval of such participant  prior to such Lender's agreeing to
any  amendment or waiver of any  provisions  of this  Agreement  which would (A)
extend the maturity of the Notes,  (B) reduce the interest rate  hereunder,  (C)
increase the Commitment of the Lender granting the  participation or (D) release
all or any substantial  part of the Collateral other than in accordance with the
terms of the Loan Documents,  and (vi) the sale of any such participations which
require  Borrower  to file a  registration  statement  with  the  United  States
Securities and Exchange  Commission or under the securities  regulations or laws
of any state shall not be permitted.

                  (f) Notwithstanding the provisions of this Section 10.1 to the
contrary,  any Lender may assign all or any portion of its  interest in Loans to
its  Affiliates  without  approval of the Agent or Borrower  upon payment of the
administrative fee described in Section 10.1(a) above, and all or any portion of
its interest in Loans to the Federal Reserve Bank without  approval of the Agent
or Borrower and without payment of any fees.

         SECTION 10.2 Notices.  Any notice shall be conclusively  deemed to have
been received by any party hereto and be effective on the day on which delivered
to such party (against receipt  therefor) at the address set forth below or such
other  address as such party shall  specify to the other parties in writing (or,
in the case of telephonic notice or notice by telecopy, telegram or telex (where
the  receipt of such  message is  verified  by return)  expressly  provided  for
hereunder, when received at such telephone, telecopy or telex number as may from
time to time be  specified  in  written  or verbal  notice to the other  parties
hereto or otherwise  received),  or if sent  prepaid by certified or  registered
mail return  receipt  requested on the third Business Day after the day on which
mailed, addressed to such party at said address:

                  (a)      if to  the  Borrower or a  Participating  Partnership
or a Participating Subsidiary at:

                           Two Perimeter Park South
                           Suite 224W
                           Birmingham, Alabama 35243
                           Attention:  Richard M. Scrushy

                           with a copy to:

                           Chief Financial Officer
                           HealthSouth Rehabilitation Corporation
                           Suite 224W
                           Two Perimeter Park South
                           Birmingham, Alabama 35243

                           and with a copy to:

                           Treasurer
                           HealthSouth Rehabilitation Corporation
                           Suite 224W
                           Two Perimeter Park South
                           Birmingham, Alabama 35243

                           and with a copy to:

                           J. Brooke Johnston, Jr.
                           Haskell Slaughter Young
                           1200 AmSouth-Harbert Plaza
                           1901 6th Avenue North
                           Birmingham, Alabama 35203

                  (b)      if to the Agent at:

                           NationsBank Corporate Center
                           100 South Tryon Street
                           Charlotte, North Carolina 28255
                           Attention:  Agency Services

                           With a copy to:

                           600 Peachtree Street, N.E.
                           21st Floor
                           Atlanta, Georgia 30308-2212
                           Attention:  Corporate Banking

                  (c)     if  to NationsBank  in its capacity  as issuer of  the
Letters of Credit:

                           NationsBank of North Carolina, N.A.
                           NationsBank Plaza
                           Charlotte, North Carolina 28255
                           Attention:  Letter of Credit Department

                  (d)      if to the Lenders:

                           At the  addresses  set forth on the  signature  pages
                           hereof or on the  signature  page of each  Assignment
                           and Acceptance.

         SECTION  10.3 No Waiver.  No failure or delay on the part of the Agent,
any Lender or the  Borrower  in the  exercise of any right,  power or  privilege
hereunder  shall  operate as a waiver of any such right,  power or privilege nor
shall any such failure or delay preclude any other or further exercise  thereof.
The rights and remedies  herein provided are cumulative and not exclusive of any
rights or remedies provided by law.

         SECTION 10.4 Setoff. The Borrower agrees that the Agent and each Lender
shall  have a lien  for all the  Credit  Obligations  of the  Borrower  upon all
deposits or deposit  accounts,  of any kind,  or any interest in any deposits or
deposit accounts thereof,  now or hereafter pledged,  mortgaged,  transferred or
assigned to the Agent or such Lender or otherwise in the  possession  or control
of the Agent or such Lender (other than for safekeeping) for any purpose for the
account or benefit of the  Borrower  and  including  any  balance of any deposit
account or of any credit of the Borrower with the Agent or such Lender,  whether
now existing or hereafter  established,  hereby  authorizing  the Agent and each
Lender at any time or times from and after the  occurrence of a Default or Event
of Default  with or without  prior  notice to apply  such  balances  or any part
thereof to such of the Credit  Obligations  of the  Borrower to the Lenders then
past  due  and in such  amounts  as  they  may  elect,  and  whether  or not the
collateral or the  responsibility  of other persons  primarily,  secondarily  or
otherwise liable may be deemed adequate. For the purposes of this paragraph, all
remittances and property shall be deemed to be in the possession of the Agent or
such  Lender as soon as the same may be put in  transit to it by mail or carrier
or by other bailee.

         SECTION 10.5 Survival. All covenants,  agreements,  representations and
warranties  made herein shall survive the making by the Lenders of the Loans and
the  expiration  of the Letters of Credit and the  execution and delivery to the
Lenders of this  Agreement  and the Notes and shall  continue  in full force and
effect so long as any of the Credit Obligations remain outstanding or any Lender
has any Commitment  hereunder.  Whenever in this  Agreement,  any of the parties
hereto is referred to, such reference  shall be deemed to include the successors
and permitted assigns of such party and all covenants, provisions and agreements
by or on behalf of the Borrower  which are  contained in this  Agreement and the
Notes shall inure to the benefit of the successors and permitted  assigns of the
Lenders or any of them and any rights of the Borrower  hereunder  shall inure to
the benefit of  successors  and  assigns of  Borrower to the extent  Lenders may
consent to succession or assignment.

         SECTION 10.6 Expenses.  The Borrower agrees (a) to pay or reimburse the
Agent for all its  reasonable  and  customary  out-of-pocket  costs and expenses
incurred in connection with the  preparation,  negotiation and execution of, and
any amendment, supplement or modification to, this Agreement or any of the other
Loan Documents, and the consummation of the transactions contemplated hereby and
thereby,  including,  without limitation,  the reasonable and customary fees and
disbursements of counsel to the Agent, (b) to pay or reimburse the Agent for all
its reasonable costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement,  including without  limitation,
the reasonable fees and  disbursements of their counsel,  (c) to pay,  indemnify
and hold the Agent  harmless  from any and all recording and filing fees and any
and all  liabilities  with respect to, or resulting from any failure of Borrower
to pay or delay of Borrower in paying,  documentary,  stamp, excise, withholding
and other  similar  taxes,  if any,  which may be  payable or  determined  to be
payable in connection with the execution and delivery of, or consummation of any
amendment,  supplement or modification  of, or any waiver or consent under or in
respect of, this  Agreement,  and (d) from and after the occurrence of any Event
of Default to pay,  indemnify,  and hold the Agent harmless from and against any
and all other liabilities,  obligations,  losses, damages,  penalties,  actions,
judgments,  suits,  costs,  expenses  or  disbursements  of any  kind or  nature
whatsoever with respect to the execution, delivery, enforcement, performance and
administration  of this Agreement or in any respect relating to the transactions
contemplated  hereby  or  thereby,   (all  the  foregoing,   collectively,   the
"indemnified  liabilities");  provided, however, that the Borrower shall have no
obligation  hereunder with respect to indemnified  liabilities  arising from (i)
the willful misconduct or negligence of the party seeking indemnification,  (ii)
legal  proceedings  commenced  against  the Agent or any Lender by any  security
holder or creditor  thereof  arising out of and based upon rights  afforded  any
such security holder or creditor solely in its capacity as such, (iii) any taxes
imposed upon the Agent or any Lender other than the documentary,  stamp, excise,
withholding and similar taxes described in clause (c) above or any tax resulting
from any change  described in Section 4.1, which tax would be payable to Lenders
by Borrower  pursuant to Article IV hereof,  (iv) taxes imposed as a result of a
transfer or assignment of any Note,  participation or assignment of a portion of
its rights, (v) any taxes imposed upon any transferee of any Note, or (vi) or by
reason  of the  failure  of the  Agent or any  Lender  to  perform  its or their
obligations  under this  Agreement.  The  agreements  in this  subsection  shall
survive repayment of the Notes and all other Credit Obligations hereunder.

         SECTION 10.7  Amendments.  No amendment,  modification or waiver of any
provision of this  Agreement or any of the Loan  Documents and no consent by the
Lenders to any  departure  therefrom by the Borrower  shall be effective  unless
such  amendment,  modification  or waiver  shall be in writing and signed by the
Agent and the Borrower, but only upon having received the written consent of the
Required  Lenders,  and the same shall then be effective only for the period and
on the conditions and for the specific  instances and purposes specified in such
writing; provided, however, that, no such amendment, modification or waiver

                  (i) which changes,  extends or waives any provision of Section
         2.4(c),  Section 2.11,  Section  2.13(i),  Section 9.10 or this Section
         10.7, the amount of or the due date of any scheduled  installment of or
         the rate of  interest  payable on any Credit  Obligation,  changes  the
         definition  of  Required  Lenders,   which  increases  or  extends  the
         Commitment of any Lender or which  increases or extends the  Conversion
         Date or Maturity  Date or which  waives any  condition to the making of
         any Loan shall be effective unless in writing and signed by each of the
         Lenders;  provided,  however,  the  Required  Lenders may in their sole
         discretion  waive any Default or Event of Default (other than any Event
         of Default  under  Section  8.1(a) as to which only the Lender which is
         the  payee  of a Note  may  waive  the  failure  to make a  payment  of
         principal or interest due on such Note);

                  (ii) which  permits that  Acquisition  described in Borrower's
         confidential letter to the Agent dated the date of this Agreement shall
         be permitted without the consent of each Lender;

                  (iii) which releases  Collateral or any Guarantor  (other than
         in accordance with the terms of the Loan Documents)  shall be effective
         unless with the written consent of each of the Lenders; or

                  (iv) which  affects  the  rights,  privileges,  immunities  or
         indemnities  of the Agent,  shall be  effective  unless in writing  and
         signed by the Agent.

Notwithstanding  any provision of the other Loan  Documents to the contrary,  as
between the Agent and the  Lenders,  execution  by the Agent shall not be deemed
conclusive  evidence  that the Agent has  obtained  the  written  consent of the
Required  Lenders;  however,  the  Borrower  shall  be  entitled  to rely on the
signature  of the Agent as evidence  of  consent.  No notice to or demand on the
Borrower in any case shall  entitle the Borrower to any other or further  notice
or demand in similar or other  circumstances,  except as  provided  by law or as
otherwise  expressly provided herein. No delay or omission on any Lender's,  the
Agent's or the Borrower's  part in exercising any right,  remedy or option shall
operate  as a waiver  of such or any  other  right,  remedy  or option or of any
Default or Event of Default.

         SECTION 10.8 Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be deemed an
original,  and it shall not be necessary  in making  proof of this  Agreement to
produce or account for more than one such fully-executed counterpart.

         SECTION 10.9 Waivers by Borrower.  In any  litigation in any court with
respect to, in connection with, or arising out of this Agreement, the Loans, any
of the  Notes,  any of the other  Loan  Documents,  the  Collateral,  the Credit
Obligations, or any instrument or document delivered pursuant to this Agreement,
or the validity, protection, interpretation,  collection or enforcement thereof,
or any other claim or dispute  howsoever  arising  between the  Borrower and the
Lenders or the Agent,  the Borrower and each Lender and the Agent hereby  waive,
to the  extent  permitted  by law,  trial  by jury in  connection  with any such
litigation.

         The Borrower,  the Agent and the Lenders believe that, inasmuch as this
Agreement and the  transactions  contemplated  hereby have been entered into and
consummated  outside  the  State  of  Alabama,   such  transactions   constitute
transactions  in interstate  commerce,  so that neither the Agent nor any of the
Lenders is required, solely by entering into this Agreement and consummating the
transactions  contemplated  hereby,  to  qualify  to do  business  as a  foreign
corporation within the State of Alabama. Notwithstanding the foregoing, however,
the Borrower hereby  irrevocably waives all rights that it may have to raise, in
any action  brought by any of the  Lenders or the Agent to enforce the rights of
the Lenders and the Agent hereunder or under any of the other Loan Documents, or
the  obligations of the Borrower  hereunder or thereunder,  any defense which is
based  upon the  failure  of any of the  Lenders  or the Agent to  qualify to do
business as a foreign  corporation in the State of Alabama,  including,  but not
limited to, any defenses based upon ss. 232 of the Alabama Constitution of 1901,
ss.  10-2A-247  of the Code of  Alabama  (1975)  or ss.  40-14-4  of the Code of
Alabama (1975), or any successor provision to any thereof.  The foregoing waiver
is made knowingly and voluntarily and is a material inducement for the Agent and
the Lenders to enter into the transactions contemplated by this Agreement or any
of the other Loan Documents.

         SECTION 10.10 Termination.  The termination of this Agreement shall not
affect any rights of the Borrower, the Lenders or the Agent or any obligation of
the Borrower,  the Lenders or the Agent,  arising prior to the effective date of
such termination, and the provisions hereof shall continue to be fully operative
until all  transactions  entered into or rights created or obligations  incurred
prior to such  termination  have been fully disposed of, concluded or liquidated
and the Credit Obligations  arising prior to or after such termination have been
irrevocably  paid in full. The security  interests,  liens and rights granted to
the Agent for the  benefit  of the  Lenders  hereunder  and under the other Loan
Documents  shall  continue  in  full  force  and  effect,   notwithstanding  the
termination of this  Agreement,  until all of the Credit  Obligations  have been
paid in full after the  termination  hereof or the  Borrower has  furnished  the

Lenders and the Agent with an indemnification satisfactory to the Agent and each
Lender with respect thereto. All representations, warranties, covenants, waivers
and agreements  contained herein shall survive  termination hereof until payment
in  full  of  the  Credit   Obligations   unless   otherwise   provided  herein.
Notwithstanding  the  foregoing,  if after  receipt of any payment of all or any
part of the  Obligations,  any Lender is for any reason  compelled  to surrender
such  payment to any Person  because such  payment is  determined  to be void or
voidable as a preference,  impermissible  setoff,  a diversion of trust funds or
for any other  reason,  this  Agreement  shall  continue  in full  force and the
Borrower shall be liable to, and shall  indemnify and hold such Lender  harmless
for,  the amount of such payment  surrendered  until such Lender shall have been
finally and irrevocably  paid in full. The provisions of the foregoing  sentence
shall be and remain effective notwithstanding any contrary action which may have
been taken by the Lenders in reliance upon such  payment,  and any such contrary
action so taken shall be without  prejudice  to the  Lenders'  rights under this
Agreement and shall be deemed to have been  conditioned upon such payment having
become final and irrevocable.

         SECTION 10.11  Governing  Law. All documents  executed  pursuant to the
transactions contemplated herein, including,  without limitation, this Agreement
and each of the Loan Documents  shall be deemed to be contracts made under,  and
for all purposes  shall be construed in accordance  with,  the internal laws and
judicial  decisions of the State of North  Carolina;  provided that this Section
10.11 shall not affect the applicability of, and  interpretation or construction
of appropriate  terms and provisions  under the Uniform  Commercial  Code of any
jurisdiction which govern the security  interests in any of the Collateral.  The
Borrower hereby submits to the  jurisdiction  and venue of the state and federal
courts of North  Carolina for the purposes of  resolving  disputes  hereunder or
arising  out of the  transaction  contemplated  hereby  or for the  purposes  of
collection.

         SECTION 10.12  Indemnification.  In  consideration of the execution and
delivery of this Agreement by the Agent and each Lender and the extension of the
Commitments,  and  so  long  as the  Agent  and  Lenders  have  fulfilled  their
obligations hereunder, the Borrower hereby indemnifies, exonerates and holds the
Agent  and  each  Lender  and  each of  their  respective  officers,  directors,
employees and agents (collectively, the "Indemnified Parties") free and harmless
from and against any and all actions,  causes of action,  claims, suits, losses,
costs,  liabilities and damages,  and expenses incurred in connection  therewith
(irrespective of whether any such Indemnified Party is a party to the action for
which indemnification hereunder is sought), including reasonable attorneys' fees
and disbursements (collectively, the "Indemnified Liabilities"), incurred by the
Indemnified  Parties  or any of them as a  result  of,  or  arising  out of,  or
relating to any of the following:

                  (a) any transaction  financed or to be financed in whole or in
         part,  directly  or  indirectly,  with  the  proceeds  of any  Loan  or
         supported by any Letter of Credit;

                  (b) the entering into and  performance  of this  Agreement and
         any other Loan Document by any of the Indemnified Parties;

                  (c)  provided  Lenders  have  no  ownership  interest  in real
         property of  Borrower,  any  investigation,  litigation  or  proceeding
         related to any environmental cleanup, audit, compliance or other matter
         relating to the  protection  of the  environment  or the release by the
         Borrower  or any of its  Participating  Subsidiaries  or  Participating
         Partnerships of any hazardous waste material; or

                  (d)  provided  Lenders  have  no  ownership  interest  in real
         property of Borrower, the presence on or under, or the escape, seepage,
         leakage, spillage, discharge,  emission,  discharging or releases from,
         any real property  owned or operated by the Borrower or any  Subsidiary
         or  Controlled  Partnership  thereof of any  hazardous  waste  material
         (including any losses, liabilities,  damages, injuries, costs, expenses
         or claims asserted or arising under any environmental laws), regardless
         of whether  caused by, or within the control  of, the  Borrower or such
         Participating Subsidiary or Participating Partnerships,

except  for any  such  Indemnified  Liabilities  arising  for the  account  of a
particular  Indemnified  Party by reason  of the  relevant  Indemnified  Party's
negligence  or willful  misconduct,  and if and to the extent that the foregoing
undertaking may be unenforceable  for any reason,  the Borrower hereby agrees to
make the maximum  contribution  to the payment and  satisfaction  of each of the
Indemnified Liabilities which is permissible under applicable law.

         SECTION 10.13 Agreement Controls.  In the event that any term of any of
the Loan  Documents  other than this  Agreement  conflicts with any term of this
Agreement, the terms and provisions of this Agreement shall control.

         SECTION  10.14  Integration.  This  Agreement  and the  Loan  Documents
represent the final agreement between the parties and may not be contradicted by
evidence  of  prior,  contemporaneous,  or  subsequent  oral  agreements  of the
parties. There are no unwritten oral agreements between the parties.

         SECTION 10.15  Successors and Assigns.  This Agreement shall be binding
upon and shall inure to the benefit of the parties  hereto and their  respective
successors and assigns;  provided,  however, that the Borrower may not assign or
transfer its rights or obligations  hereunder  without the prior written consent
of the Agent and all  Lenders.  The Agent and the Lenders may assign or transfer
their interest hereunder but only as provided herein.

         SECTION 10.16  Severability.  If any provision of this agreement or the
other Loan  Documents  shall be determined to be illegal or invalid as to one or
more of the parties  hereto,  then such  provision  shall  remain in effect with
respect to all parties, if any, as to whom such provision is neither illegal nor
invalid, and in any event all other provisions hereof shall remain effective and
binding on the parties hereto.

         IN WITNESS  WHEREOF,  the parties hereto have caused this instrument to
be made,  executed and delivered by their duly authorized officers as of the day
and year first above written.

                                         HEALTHSOUTH REHABILITATION
                                         CORPORATION

ATTEST:


By: /s/ Stacy H. Pulliam              By: /s/ C. Drew Demaray
   ____________________                  _______________________________
   Stacy H. Pulliam                         C. Drew Demaray
   Assistant Secretary                      Vice President

                                         NATIONSBANK OF NORTH CAROLINA,
                                         NATIONAL ASSOCIATION, as Agent
                                         for the Lenders


                                         By:  /s/ Douglas E. Coltharp
                                            ________________________________
                                         Name:  Douglas E. Coltharp
                                         Title: Senior Vice President


COMMITMENT:                              NATIONSBANK OF NORTH CAROLINA,
$75,000,000                              NATIONAL ASSOCIATION


                                         By:  /s/ Douglas E. Coltharp
                                            ________________________________
                                         Name:  Douglas E. Coltharp
                                         Title: Senior Vice President
 
                                           Lending Office:
                                             100 South Tryon Street
                                             Charlotte, North Carolina 28255

                                           Wire Transfer Instructions:
                                             NationsBank of North Carolina,
                                               National Association
                                             Charlotte, North Carolina
                                             ABA #053000196
                                             Reference: HEALTHSOUTH
                                               Rehabilitation Corporation
                                             Attention: Agency Services
                                                        Margaret Lydon



COMMITMENT:                              THE BANK OF NOVA SCOTIA
$50,000,000

                                         By:________________________________
                                         Title:  Representative

                                           Lending Office:
                                           The Bank of Nova Scotia
                                           Atlanta Agency
                                           600 Peachtree Street, N.E.
                                           Suite 2700
                                           Atlanta, Georgia  30308

                                           Wire Transfer Instructions:
                                             The Bank of Nova Scotia
                                             The Bank of Nova Scotia,
                                               New York Agency
                                             ABA # 026002532
                                             For Further Credit to Account
                                               0606634 Atlanta Agency
                                             Attention:  HEALTHSOUTH

COMMITMENT:                              AMSOUTH BANK, N.A.
$15,000,000

                                         By:________________________________
                                         Title:  Senior Vice President

                                           Lending Office:
                                           AmSouth Bank, N.A.
                                           1900 5th Avenue
                                           Birmingham, Alabama

                                           Wire Transfer Instructions:
                                             AmSouth Bank, N.A.
                                             Birmingham, Alabama
                                             ABA #062000019
                                             Reference: Acct # 50214327
                                                        HEALTHSOUTH
                                             Attention: Lisa Mann

                                               

COMMITMENT:                              NATIONAL CITY BANK, KENTUCKY
$40,000,000

                                         By:________________________________
                                         Title: Senior Vice President

                                           Lending Office:
                                           101 S. Fifth Street, 8th Floor
                                           Louisville, Kentucky  40202

                                           Wire Transfer Instructions:
                                             National City Bank, Kentucky
                                             Louisville, Kentucky
                                             ABA # 0830-0005-6
                                             Reference:  HEALTHSOUTH
                                             Attention:  Sandy Walker

COMMITMENT:                              FIRST UNION NATIONAL BANK OF
$50,000,000                              NORTH CAROLINA


                                         By:________________________________
                                         Title: Vice President

                                           Lending Office:
                                           One First Union Plaza
                                           Charlotte, North Carolina 28288-0735

                                           Wire Transfer Instructions:
                                             First National Union Bank of
                                             North Carolina
                                             Charlotte, North Carolina
                                             ABA # 053000219
                                             Acct # 465906 0001802
                                             Reference:  HEALTHSOUTH
                                             Attention:  Sue Patterson



COMMITMENT:                              WACHOVIA BANK OF GEORGIA, N.A.
$45,000,000

                                         By:________________________________
                                         Title:  Vice President

                                           Lending Office:
                                           Wachovia Bank of Georgia
                                           Atlanta, Georgia

                                           Wire Transfer Instructions:
                                             Wachovia Bank of Georgia, N.A.
                                             Atlanta, Georgia
                                             ABA #061000010
                                             Acct # 18-800-621
                                             Reference: HealthSouth
                                             Attention: Claudia Lamie

COMMITMENT:                              PNC BANK, KENTUCKY, INC.
$40,000,000

                                         By:________________________________
                                         Title:_____________________________

                                           Lending Office:
                                           PNC Bank, Kentucky, Inc.
                                           Louisville, Kentucky

                                           Wire Transfer Instructions:
                                             PNC Bank, Kentucky, Inc.
                                             Louisville, Kentucky
                                             ABA #083-000-108
                                             Reference: HEALTHSOUTH
                                             Attention: Patricia Jarvis

  

COMMITMENT:                              THE DAIWA BANK, LIMITED
$20,000,000

                                         By:________________________________
                                         Title:_____________________________


                                         By:________________________________
                                         Title:_____________________________
                                           Lending Office:
                                           Daiwa Bank, Chicago Branch
                                           Chicago, Illinois

                                           Wire Transfer Instructions:
                                             The Daiwa Bank, Limited
                                             Chicago Branch
                                             Chicago, Illinois
                                             ABA #071006075
                                             Reference: HealthSouth
                                             Attention: Maria Martinez

COMMITMENT:                              THE BANK OF TOKYO, LTD.,
$20,000,000                              Atlanta Agency


                                         By:________________________________
                                         Title:_____________________________

                                           Lending Office:
                                           The Bank of Tokyo, Ltd.
                                           New York, New York

                                           Wire Transfer Instructions:
                                             The Bank of Tokyo, Ltd.
                                             New York, New York
                                             ABA #0260-0963-2
                                             Reference: Payment for
                                               HEALTHSOUTH
                                             Attention:  Jan Gilbreath/
                                                         Glynnis Slaten



COMMITMENT:                              MELLON BANK, N.A.
$45,000,000

                                         By:________________________________
                                         Title:_____________________________

                                           Lending Office:
                                           Mellon Bank
                                           Pittsburgh, Pennsylvania 15259

                                           Wire Transfer Instructions:
                                             Mellon Bank, N.A.
                                             Pittsburgh, Pennsylvania 15259
                                             ABA #0430 00261-990873800
                                             Acct # 990873800
                                             Reference:  HEALTHSOUTH
                                             Attention:  Elaine Washburn

COMMITMENT:                              HIBERNIA NATIONAL BANK
$20,000,000

                                         By:________________________________
                                         Title:_____________________________

                                           Lending Office:
                                           New Orleans, Louisiana

                                           Wire Transfer Instructions:
                                             Hibernia National Bank
                                             New Orleans, Louisiana
                                             ABA # 065000090
                                             Acct # 0520-36615
                                                    National Accounts
                                             Reference: HEALTHSOUTH
                                             Attention: Hal Hopson



COMMITMENT:                              THE BANK OF CALIFORNIA, N.A.
$20,000,000

                                         By:________________________________
                                         Title:_____________________________

                                           Lending Office:
                                           Los Angeles, California 90071

                                           Wire Transfer Instructions:
                                             The Bank of California, N.A.
                                             San Francisco, California
                                             ABA # 121000015
                                             Acct # 001-060-235
                                             Reference: HEALTHSOUTH
                                             Attention: Hisako Sakamoto

COMMITMENT:                              COOPERATIVE CENTRALE RAIFFEISEN-
$35,000,000                              BOERENLEENBANK, B.A.
                                         "RaboBank Nederland, New York Branch"


                                         By:________________________________
                                         Title:_____________________________

                                           Lending Office:
                                           New York, New York 10167

                                           Wire Transfer Instructions:
                                             Bank of New York
                                             New York, New York
                                             ABA # 021000018
                                             For the Account of RaboBank
                                             Acct # 8026002533
                                             Reference: HEALTHSOUTH
                                             Attention: Corporate Services



COMMITMENT:                              SHAWMUT BANK CONNECTICUT, N.A.
$20,000,000

                                         By:________________________________
                                         Title:_____________________________

                                           Lending Office:
                                           Hartford, Connecticut

                                           Wire Transfer Instructions:
                                             Shawmut Bank Connecticut, N.A.
                                             Hartford, Connecticut
                                             ABA # 011900445
                                             Acct # 00-6612-7761
                                             Reference: HEALTHSOUTH
                                             Attention: Sandy Sousa

COMMITMENT:                              THIRD NATIONAL BANK
$15,000,000
                                         By:______________________________
                                         Title:___________________________

                                           Lending Office:
                                           201 4th Avenue N.
                                           Nashville, Tennessee

                                           Wire Transfer Instructions:
                                             ABA # 064000046
                                             Acct # 680040009990348
                                             Reference: HEALTHSOUTH
                                             Attention: Leigh Ann Gregory



COMMITMENT:                              TORONTO DOMINION BANK
$40,000,000
                                         By:______________________________
                                         Title:___________________________

                                           Lending Office:
                                           31 West 52nd Street
                                           New York, New York

                                         Wire Transfer Instructions:
                                           Morgan Guaranty Trust Co.
                                           New York, New York
                                           ABA # 021000238
                                           Credit: Toronto Dominion Bank,
                                                   New York Branch
                                                   Acct # 630-00-271
                                                   Favor: TD Houston
                                                   Acct # 2159251
                                           Reference: HEALTHSOUTH
                                           Attention: Jano Mott

                             Amended and Restated
                                Credit Agreement
                                     Among
                     HEALTHSOUTH Rehabilitation Corporation
                                      and
                         Nationsbank of North Carolina
                              National Association


A.        Lenders and Commitment Percentages
B.        Form of Assignment and Acceptance
C-1.      Partnership Guaranty Agreement
C-2.      Subsidiary Guaranty Agreement
D.        Form of Request for Advance on Interest Rate Election
E.        Form of Competitive Bid Quete Request
F.        Form of Competitive Bid Quete
G.        Participating Subsidiaries and Participating Partnership
H-1.      Form of Syndicated Note
H-2.      Form of Competitive Bid Note
I.        Form of Compliance Certificate
J.        Summary of Insurance
K.        Outstanding Letters of Credit
L.        Permitted Investors
M.        Subsidiaries
N.        Existing Liens
O.        Disposal Properties