Plan and Agreement of Merger - HealthSouth Corp. and Sutter Surgery Centers Inc.


                               FIRST AMENDMENT TO
                          PLAN AND AGREEMENT OF MERGER
                                  BY AND AMONG
                            HEALTHSOUTH CORPORATION,
                        SSCI ACQUISITION CORPORATION AND
                          SUTTER SURGERY CENTERS, INC.

         This  Amendment No. 1 to the Plan and Agreement of Merger (the 'Plan of
Merger')  dated as of the 23rd day of August,  1995, is made and entered into as
of the 26th day  of  October,  1995,  by and among  HEALTHSOUTH  CORPORATION,  a
Delaware  corporation  ('Buyer');  SSCI  ACQUISITION  CORPORATION,   a  Delaware
corporation and a wholly owned  subsidiary of Buyer ('Sub');  and SUTTER SURGERY
CENTERS,  INC., a Delaware  corporation  (the  'Company' or 'SSCI').  (Terms not
otherwise defined herein shall have the same meanings as in the Plan of Merger).

                                R E C I T A L S:

         WHEREAS,  Buyer, Sub and SSCI have heretofore  entered into the Plan of
Merger  providing  for the merger  (the  'Merger')  of Sub with and into SSCI in
accordance with the Delaware  General  Corporation law (the 'Delaware Law') upon
the terms and conditions set forth in the Plan of Merger; and

         WHEREAS,  the  Plan of  Merger  provides  for the  exchange  of  SSCI's
existing shares of common stock for shares of HEALTHSOUTH's  common stock,  with
such  HEALTHSOUTH  common to be registered  at the Effective  Time of the Merger
pursuant to an effective  registration statement to be filed with the Securities
and Exchange Commission ('SEC'); and

         WHEREAS, the SEC, by letter dated October 13, 1995, has objected to the
filing by HEALTHSOUTH of a registration  statement on Form S-4 which would cover
the HEALTHSOUTH  common stock to be issued to the  shareholders of SSCI pursuant
to the Merger; and

         WHEREAS,  HEALTHSOUTH  has  agreed to amend  its  filing on Form S-4 to
convert it to a filing on Form S-3 pursuant to Rule 415 under the Securities Act
of 1933;

         NOW,  THEREFORE,  in  consideration  of  the  mutual  covenants  herein
contained, the parties hereby agree as follows:

         1. The second  sentence of Section 5.5 'Buyer  Common  Stock' is hereby
deleted in its entirety and the following is substituted in its place:

                                        1






                  'The Buyer Common  Stock to be issued  pursuant to the Plan of
                  Merger  will,  when so  delivered,  be (i)  duly  and  validly
                  issued,  fully  paid  and  non-assessable;  (ii) be able to be
                  publicly resold by the stockholders of SSCI upon effectiveness
                  of a  registration  statement to be filed with the  Securities
                  and  Exchange  Commission  within 30 days after the  Effective
                  Time  by  Buyer  on  Form  S-3 and  pursuant  to  Rule  415 as
                  promulgated under the Securities Act of 1933 (the 'Act'),  and
                  (iii) after the  registration  statement  provided for in (ii)
                  shall have been  declared  effective by the SEC, be authorized
                  for listing on the Exchange upon official notice of issuance.'

         In all other respects, the language of Section 5.5 is unchanged.

         2. In the second and third  lines of Section  7.6(a)  delete the phrase
'as soon as reasonably  practicable'  and insert 'within thirty (30) days of the
Effective Time'.

         3. In the third  line of Section  7.6(a)  there is  inserted  after the
words 'a registration Statement' the following:

                  'on Form S-3 and pursuant to Rule 415 under the Securities Act
                  of 1933'

         In all other  respects,  other than as set forth in Paragraph 2 hereof,
the language of Section 7.6(a) is unchanged.

         4. In Section  7.6(b)  delete the words 'Prior to the Closing  Date' at
the beginning of Section  7.6(b) and  substitute  therefore  'Within thirty (30)
days of the Effective Time'. In all other respects Section 7.6(b) is unchanged.

         5. In Section  7.6(c)  delete the words 'prior to the Closing  Date' at
the beginning of the subparagraph and again at the end of the subparagraph, and,
in each case, substitute therefore: 'within thirty (30) days after the Effective
Time'.  In all other  respects  the  provisions  of 7.6(c) are  reconfirmed  and
restated.

         6. Section 8.8 'Registration Statement' is deleted in its entirety.

         7.  Section  9.7  'Registration  Statement'  is hereby  deleted  in its
entirety.

                                        2





         8. Except as set forth above,  in all other  respect the Plan of Merger
is hereby reaffirmed and acknowledged and the parties have caused this Amendment
No.  1 to the  Plan of  Merger  to be  executed  and  delivered  by  their  duly
authorized officers as of the date first above written.

                                   SUTTER SURGERY CENTERS, INC.,
                                     a Delaware corporation


                                    By       /s/ AUGUST A. SAIBENI
                                      -----------------------------------------
                                    Name         August A. Saibeni
                                      -----------------------------------------
                                    Title  President and Chief Operating Officer
                                      -----------------------------------------


                                    HEALTHSOUTH Corporation,
                                      a Delaware corporation


                                    By      /s/ WILLIAM W. HORTON
                                      -----------------------------------------
                                    Name        William W. Horton
                                      -----------------------------------------
                                    Title      Group Vice President
                                      -----------------------------------------


                                    SSCI ACQUISITION CORPORATION,
                                      a Delaware corporation


                                    By      /s/ WILLIAM W. HORTON
                                      -----------------------------------------
                                    Name        William W. Horton
                                      -----------------------------------------
                                    Title        Vice President
                                      -----------------------------------------

                                        3