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Published: 2008-03-26

Registration Rights Agreement - HealthSouth Corp.



                             HEALTHSOUTH CORPORATION

                       $250,000,000 6.875% Notes due 2005
                        $250,000,000 7.0% Notes due 2008

                          REGISTRATION RIGHTS AGREEMENT


                                                              New York, New York
                                                                   June 22, 1998

Salomon Brothers Inc
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
Merrill Lynch, Pierce, Fenner & Smith
 Incorporated
Morgan Stanley & Co. Incorporated
NationsBanc Montgomery Securities LLC
Bear, Stearns & Co. Inc.
Credit Suisse First Boston Corporation
Deutsche Bank Securities Inc.
PaineWebber Incorporated
Scotia Capital Markets (USA) Inc.

c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048

Dear Sirs:

         HEALTHSOUTH  Corporation,   a  Delaware  corporation  (the  'Company'),
proposes to issue and sell to certain  purchasers (the  'Purchasers'),  upon the
terms set forth in a purchase  agreement of even date  herewith  (the  'Purchase
Agreement'),   $250,000,000   of  the  Company's   6.875%  Notes  due  2005  and
$250,000,000  of  the  Company's  7.0%  Notes  due  2008  (each,  a  'Series  of
Securities' and, collectively,  the 'Securities') (the 'Initial Placement').  As
an  inducement  to the  Purchasers  to enter into the Purchase  Agreement and in
satisfaction of a condition to your obligations  thereunder,  the Company agrees
with you (i) for your benefit and the benefit of the other  Purchasers  and (ii)
for the benefit of the holders  from time to time of the  Securities  (including
you and the other Purchasers) (each of the foregoing a 'Holder' and together the
'Holders'), as follows:

         1. Definitions.  Capitalized terms used herein without definition shall
have their respective meanings set forth in the Purchase  Agreement.  As used in
this Agreement, the following capitalized defined terms shall have the following
meanings:







         'Act' means the Securities  Act of 1933, as amended,  and the rules and
regulations of the Commission promulgated thereunder.

         'Affiliate'  of any  specified  person  means any other  person  which,
directly or  indirectly,  is in control of, is controlled by, or is under common
control with, such specified person. For purposes of this definition, control of
a person means the power,  direct or indirect,  to direct or cause the direction
of the  management and policies of such person whether by contract or otherwise;
and the terms  'controlling' and 'controlled'  have meanings  correlative to the
foregoing.

         'Closing Date' has the meaning set forth in the Purchase Agreement.

         'Commission' means the Securities and Exchange Commission.

         'Exchange Act' means the  Securities  Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.

         'Exchange Offer Registration Period' means the 180-day period following
the  consummation  of the  Registered  Exchange  Offer,  exclusive of any period
during which any stop order shall be in effect  suspending the  effectiveness of
the Exchange Offer Registration Statement.

         'Exchange Offer Registration  Statement' means a registration statement
of the  Company  on an  appropriate  form  under  the Act  with  respect  to the
Registered  Exchange Offer, all amendments and supplements to such  registration
statement,  including  post-effective  amendments,  in each case  including  the
Prospectus contained therein, all exhibits thereto and all material incorporated
by reference therein.

         'Exchanging Dealer' means any Holder (which may include the Purchasers)
which is a broker-dealer,  electing to exchange  Securities acquired for its own
account as a result of marketmaking activities or other trading activities,  for
New Securities.

         'Final Memorandum' has the meaning set forth in the Purchase Agreement.

         'Holder' has the meaning set forth in the preamble hereto.

         'Indenture'  means  the  Indenture  dated  as  of  June  22,  1998,  as
supplemented by that certain Officers' Certificate dated June 22, 1998, relating
to the Securities,  between the Company and PNC Bank, National  Association,  as
trustee, as the same may be amended or further supplemented from time to time in
accordance with the terms thereof.

         'Initial Placement' has the meaning set forth in the preamble hereto.



                                      -2-





         'Liquidated Damages' has the meaning set forth in Section 7(a) hereof.

         'Majority  Holders'  means the Holders of a majority  of the  aggregate
principal amount of securities registered under a Registration Statement.

         'Managing  Underwriters'  means the  investment  banker  or  investment
bankers and manager or managers that shall administer an underwritten offering.

         'New Securities'  means debt securities of the Company identical in all
material respects to the Securities to be issued under the Indenture.

         'Prospectus'   means  the  prospectus   included  in  any  Registration
Statement   (including,   without   limitation,   a  prospectus  that  discloses
information  previously  omitted from a prospectus filed as part of an effective
registration  statement in reliance upon Rule 430A under the Act), as amended or
supplemented  by any  prospectus  supplement,  with  respect to the terms of the
offering of any portion of the Securities or the New Securities, covered by such
Registration  Statement,  and all amendments and  supplements to the Prospectus,
including post-effective amendments.

         'Registered  Exchange Offer' means the proposed offer to the Holders to
issue and deliver to such Holders, with respect to each Series of Securities,  a
like principal amount of the corresponding series of New Securities.

         'Registration   Statement'   means  any  Exchange  Offer   Registration
Statement or Shelf  Registration  Statement that covers any of the Securities or
the New Securities pursuant to the provisions of this Agreement,  amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus  contained  therein,  all exhibits thereto
and all material incorporated by reference therein.

         'Securities' has the meaning set forth in the preamble hereto.

         'Series  of  Securities'  has the  meaning  set  forth in the  preamble
hereto.

         'Shelf Registration' means a registration  effected pursuant to Section
3 hereof.

         'Shelf  Registration  Period' has the meaning set forth in Section 3(b)
hereof.

         'Shelf Registration  Statement' means a 'shelf' registration  statement
of the Company  pursuant to the provisions of Section 3 hereof which covers some
or all of the Securities or New  Securities,  as  applicable,  on an appropriate
form under Rule 415



                                      -3-




under the Act,  or any  similar  rule  that may be  adopted  by the  Commission,
amendments  and   supplements   to  such   registration   statement,   including
post-effective  amendments,  in each case  including  the  Prospectus  contained
therein, all exhibits thereto and al material incorporated by reference therein.

         'Trustee'  means the trustee with respect to the  Securities  under the
Indenture.

         'underwriter' means any underwriter of Securities in connection with an
offering thereof under a Shelf Registration Statement.

         2. Registered  Exchange Offer;  Resales of New Securities by Exchanging
Dealers'  Private  Exchange.  (a) The  Company  shall  prepare and file with the
Commission  the  Exchange  Offer  Registration  Statement  with  respect  to the
Registered Exchange Offer not later than 60 days following the Closing Date. The
Company  shall use its  reasonable  best  efforts  to cause the  Exchange  Offer
Registration  Statement to become effective under the Act within 150 days of the
Closing                                                                    Date.

         (b)  Upon  the   effectiveness  of  the  Exchange  Offer   Registration
Statement, the Company shall promptly commence the Registered Exchange Offer, it
being the  objective  of such  Registered  Exchange  Offer to enable each Holder
electing to exchange Securities for New Securities (assuming that such Holder is
not an Affiliate of the Company within the meaning of the Act,  acquires the New
Securities  in  the  ordinary  course  of  such  Holder's  business  and  has no
arrangements  with any person to  participate  i the  distribution  (within  the
meaning of the Act) of the New  Securities) to transfer such New Securities from
and after their receipt without any  limitations or  restrictions  under the Act
and without  material  restrictions  under the securities  laws of a substantial
proportion of the several states of the United States.

         (c)  In connection  with the  Registered  Exchange  Offer,  the Company
shall:

              (i) mail to each Holder a copy of the  Prospectus  forming part of
         the Exchange Offer Registration Statement, together with an appropriate
         letter of transmittal and related documents;

              (ii) keep the Registered  Exchange Offer open for not less than 30
         calendar  days and not more than 45 calendar days after the date notice
         thereof is mailed to the Holders  (or longer if required by  applicable
         law);

              (iii)  utilize the  services of a  depositary  for the  Registered
         Exchange Offer with an address in the Borough of Manhattan, The City of
         New York; and

              (iv) comply in all respects with all applicable


                                      -4-



         laws.

         (d) As soon as practicable  after the close of the Registered  Exchange
Offer, the Company shall:

              (i) accept for  exchange all  Securities  tendered and not validly
         withdrawn pursuant to the Registered Exchange Offer;

              (ii) deliver to the Trustee for  cancellation  all  Securities  so
         accepted for exchange; and

              (iii) cause the Trustee  promptly to  authenticate  and deliver to
         each Holder of  Securities  New  Securities of the  appropriate  series
         equal in principal  amount to the Securities of such Holder so accepted
         for exchange.

         (e) The  Purchasers  and the  Company  acknowledge  that,  pursuant  to
interpretations  by the  Commission's  staff of Section 5 of the Act, and in the
absence of an applicable exemption therefrom, each Exchanging Dealer is required
to deliver a Prospectus in connection with a sale of any New Securities received
by such Exchanging Dealer pursuant to the Registered  Exchange Offer in exchange
for  Securities  acquired  for its own  account  as a  result  of  market-making
activities or other trading activities. Accordingly, the Company shall:

              (i)  include  the  information  set forth in Annex A hereto on the
         cover of the Exchange Offer Registration  Statement,  in Annex B hereto
         in the  forepart of the  Exchange  Offer  Registration  Statement  in a
         section setting forth details of the Registered  Exchange Offer, and in
         Annex C hereto in the  underwriting or plan of distribution  section of
         the  Prospectus  forming  a part  of the  Exchange  Offer  Registration
         Statement,  and include the  information set forth in Annex D hereto in
         the Letter of Transmittal delivered pursuant to the Registered Exchange
         Offer; and

              (ii) use its  reasonable  best efforts to keep the Exchange  Offer
         Registration  Statement continuously effective under the Act during the
         Exchange  Offer  Registration  Period for  delivery  of the  Prospectus
         forming a part thereof by Exchanging  Dealers in connection  with sales
         of New Securities  received pursuant to the Registered  Exchange Offer,
         as contemplated by Section 4(h) below.

         (f) In the event that any Purchaser  determines that it is not eligible
to participate in the Registered  Exchange Offer with respect to the exchange of
Securities  constituting any portion of an unsold  allotment,  at the request of
such  Purchaser,  the Company  shall issue and deliver to such  Purchaser or the
party purchasing New Securities registered under a Shelf Registration  Statement
as contemplated  by Section 3 hereof from such  Purchaser,  in exchange for such
Securities, a like principal



                                      -5-





amount of New  Securities.  The  Company  shall seek to cause the CUSIP  Service
Bureau to issue the same  CUSIP  number(s)  for such New  Securities  as for the
corresponding  series  of New  Securities  issued  pursuant  to  the  Registered
Exchange Offer.

         3.  Shelf  Registration.  If  (i)  because  of  any  change  in  law or
applicable  interpretations  thereof  by the  Commission's  staff,  the  Company
determines  upon advice of its counsel  that it is not  permitted  to effect the
Registered  Exchange Offer as contemplated  by section 2 hereof,  or (ii) if for
any other reason the  Registered  Exchange Offer is not  consummated  within 180
days of the Closing Date, or (iii) if any Holder is not eligible to  participate
in the  Registered  Exchange  Offer  or  (iv)  in th  case  of any  Holder  that
participates  in the  Registered  Exchange  Offer  or  acquires  New  Securities
pursuant to Section 2(f) hereof,  such Holder does not receive  freely  tradable
New Securities in exchange for Securities  constituting any portion of an unsold
allotment  (it being  understood  that,  for purposes of this Section 3, (x) the
requirement  that a Purchaser  deliver a Prospectus  containing the  information
required by items 507 and/or 508 of  Regulation  S-K under the Act in connection
with sales of New  Securities  acquired in exchange  for such  Securities  shall
result  in  such  New  Securities  being  not  'freely  tradable'  but  (y)  the
requirement  that an Exchanging  Dealer deliver a Prospectus in connection  with
sales of New Securities  acquired in the  Registered  Exchange Offer in exchange
for Securities acquired as a result of market-making activities or other trading
activities shall not result in such New Securities being not 'freely tradable'),
the following provisions shall apply:

         (a) The Company shall, as promptly as practicable (but in no event more
than 30 days after so required or  requested  pursuant to this  Section 3), file
with the  Commission and  thereafter  shall use its  reasonable  best efforts to
cause to be  declared  effective  under the Act a Shelf  Registration  Statement
relating  to the  offer and sale of the  Securities  or the New  Securities,  as
applicable,  by the Holders from time to time in accordance  with the methods of
distribution  elected by such  Holders and set forth in such Shelf  Registration
Statement; provided, that with respect to New Securities received by a Purchaser
in exchange for Securities constituting any portion of an unsold allotment,  the
Company may, if permitted by current  interpretations by the Commission's staff,
file a  post-effective  amendment to the Exchange Offer  Registration  Statement
containing the  information  required by Regulation S-K Items 507 and/or 508, as
applicable,  in satisfaction  of its  obligations  under this paragraph (a) with
respect  thereto,  and any such Exchange  Offer  Registration  Statement,  as so
amended,  shall be referred to herein as, and governed by the provisions  herein
applicable to, a Shelf Registration Statement.

         (b) The Company shall use its reasonable best efforts to keep the Shelf
Registration  Statement continuously effective in order to permit the Prospectus
forming  part thereof to be usable by Holders for a period of two years from the
date the Shelf Registration Statement is declared effective by the Commission or


                                      -6-




such  shorter  period  that  will  terminate  when  all  the  Securities  or New
Securities, as applicable, covered by the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement (in any such case, such period
being called the 'Shelf Registration  Period').  The Company shall be deemed not
to have  used  its  reasonable  best  efforts  to keep  the  Shelf  Registration
Statement  effective  during the requisite  period if it  voluntarily  takes any
action that would result in Holders of Securities covered thereby not being able
to offer and sell such Securities during that period,  unless (i) such action is
required by applicable  law, or (ii) such action is taken by the Company in good
faith and for valid business  reasons (not including  avoidance of the Company's
obligations  hereunder),  including the acquisition or divestiture of assets, so
long as the  Company  promptly  thereafter  complies  with the  requirements  of
Section 4(k) hereof, if applicable.

         4. Registration  Procedures.  In connection with any Shelf Registration
Statement  and,  to the  extent  applicable,  any  Exchange  Offer  Registration
Statement, the following provisions shall apply:

         (a) The Company shall furnish to you,  prior to the filing thereof with
the  Commission,  a copy of any Shelf  Registration  Statement  and any Exchange
Offer Registration  Statement,  and each amendment thereof and each amendment or
supplement,  if any, to the Prospectus  included  therein and shall use its best
efforts  to reflect in each such  document,  when so filed with the  Commission,
such comments as you reasonably may propose.

         (b) The Company  shall ensure that (i) any  Registration  Statement and
any  amendment  thereto  and  any  Prospectus  forming  a part  thereof  and any
amendment or supplement  thereto complies in material  respects with the Act and
the rules and regulations  thereunder,  (ii) any Registration  Statement and any
amendment  thereto  does  not,  when it  becomes  effective,  contain  an untrue
statement  of a material  fact or omit to state a material  fact  required to be
stated  therein or necessary to make the  statements  therein not misleading and
(iii)  any  Prospectus  forming  part  of any  Registration  Statement,  and any
amendment or supplement to such Prospectus, does not include an untrue statement
of a material fact or omit to state a material  fact  necessary in order to make
the statements,  in the light of the  circumstances  under which they were made,
not misleading.

         (c)  (1) The Company  shall  advise  you  and,  in the  case of a Shelf
Registration  Statement,  the Holders of  Securities  covered  thereby,  and, if
requested by you or any such Holder, confirm such advice in writing:

              (i) when a  Registration  Statement and any amendment  thereto has
         been filed with the Commission and when the  Registration  Statement or
         any post-effective amendment thereto has become effective; and

              (ii)  of any request by the Commission for


                                      -7-




         amendments  or  supplements  to  the  Registration   Statement  or  the
         Prospectus included therein or for additional information.

         (2)  The  Company  shall  advise  you  and,  in  the  case  of a  Shelf
Registration  Statement,  the Holders of Securities covered thereby, and, in the
case of an Exchange Offer  Registration  Statement,  any Exchanging Dealer which
has  provided  in writing to the  Company a telephone  or  facsimile  number and
address for notices,  and, if requested by you or any such Holder or  Exchanging
Dealer, confirm such advice in writing:

              (i) of the issuance by the Commission of any stop order suspending
         the  effectiveness of the  Registration  Statement or the initiation of
         any proceedings for that purpose;

              (ii)  of the  receipt  by the  Company  of any  notification  with
         respect  to the  suspension  of  the  qualification  of the  Securities
         included  therein for sale in any  jurisdiction  or the  initiation  or
         threatening of any proceeding for such purpose; and

              (iii) of the  happening  of any event that  requires the making of
         any changes in the Registration Statement or the Prospectus so that, as
         of such date, the statements therein are not misleading and do not omit
         to state a material fact required to be stated  therein or necessary to
         make the statements therein (in the case of the Prospectus, in light of
         the  circumstances  under which they were made) not  misleading  (which
         advice shall be  accompanied by an instruction to suspend the us of the
         Prospectus until the requisite changes have been made).

         (d) The Company  shall use its best  efforts to prevent the issuance or
obtain  the  withdrawal  of  any  order  suspending  the  effectiveness  of  any
Registration Statement at the earliest possible time.

         (e) The Company  shall  furnish to each Holder of  Securities  included
within the coverage of any Shelf  Registration  Statement,  without  charge,  at
least  one copy of such  Shelf  Registration  Statement  and any  post-effective
amendment thereto,  including  financial  statements and schedules,  and, if the
Holder so requests in writing,  all exhibits  (including  those  incorporated by
reference).

         (f) The Company shall, during the Shelf Registration Period, deliver to
each Holder of Securities included within the coverage of any Shelf Registration
Statement,  without  charge,  as many copies of the Prospectus  (including  each
preliminary  Prospectus)  included in such Shelf Registration  Statement and any
amendment or supplement thereto as such Holder may reasonably  request;  and the
Company  consents to the use of the  Prospectus  or any  amendment or supplement
thereto by each of the selling


                                      -8-






Holder of Securities in connection  with the offering and sale of the Securities
covered by the Prospectus or any amendment or supplement thereto.

         (g) The  Company  shall  furnish  to each  Exchanging  Dealer  which so
requests,  without charge, at least one copy of the Exchange Offer  Registration
Statement  and  any  post-effective   amendment  thereto,   including  financial
statements and schedules,  any documents incorporated by reference therein, and,
if the Exchanging Dealer so requests in writing,  all exhibits  (including those
incorporated by reference).

         (h) The Company shall,  during the Exchange Offer Registration  Period,
promptly deliver to each Exchanging  Dealer,  without charge,  as many copies of
the Prospectus  included in such Exchange Offer  Registration  Statement and any
amendment or supplement thereto as such Exchanging Dealer may reasonably request
for  delivery  by  such  Exchanging  Dealer  in  connection  with a sale  of New
Securities  received by it pursuant to the Registered  Exchange  Offer;  and the
Company  consents to the use of the  Prospectu or any  amendment  or  supplement
thereto by any such Exchanging Dealer, as aforesaid.

         (i) Prior to the  Registered  Exchange  Offer or any other  offering of
Securities pursuant to any Registration Statement, the Company shall register or
qualify or cooperate with the Holders of Securities  included  therein and their
respective  counsel in connection with the registration or qualification of such
Securities  for offer and sale  under  the  securities  or blue sky laws of such
jurisdictions as any such Holders  reasonably  request in writing and do any and
all other acts or things  necessary or advisable to enable the offer and sale in
such  jurisdictions of the Securities  covered by such  Registration  Statement;
provided, however, that the Company will not be required to qualify generally to
do business in any jurisdiction where it is not then so qualified or to take any
action  which would  subject it to general  service of process or to taxation in
any such jurisdiction where it is not then so subject.

         (j) Unless the applicable  Securities shall be in book-entry only form,
the Company shall  cooperate  with the Holders of  Securities to facilitate  the
timely  preparation and delivery of certificates  representing  Securities to be
sold pursuant to any Registration  Statement free of any restrictive legends and
in such  denominations and registered in such names as Holders may request prior
to sales of Securities pursuant to such Registration Statement.

         (k)  Upon  the  occurrence  of any  event  contemplated  by  paragraphs
(c)(1)(ii),  (c)(2)(i) or  (c)(2)(iii)  above,  the Company agrees to notify the
Purchasers,  and in the case of a Shelf Registration  Statement,  the Holders of
Securities  covered  thereby,  to suspend use of the  Prospectus and the Company
shall promptly prepare a post-effective  amendment to any Registration Statement
or an  amendment  or  supplement  to the  related  Prospectus  or file any other
required document so that, as thereafter


                                      -9-






delivered to purchasers of the Securities included therein,  the Prospectus will
not include an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.

         (l)  The  Company  shall  use  its  reasonable  efforts  to  cause  The
Depository  Trust  Company  ('DTC')  on the first  business  day  following  the
effective  date of any  Shelf  Registration  Statement  hereunder  or as soon as
possible thereafter to remove (i) from any existing CUSIP number assigned to any
Series of  Securities,  any  designation  indicating  that such  Securities  are
'restricted securities,' which efforts shall include delivery to DTC of a letter
executed by the Company substantially in the form of Annex E hereto and (ii) any
other stop or  restriction on DTC's system with respect to such  Securities.  In
the event the  Company is unable to cause DTC to take the actions  described  in
the  immediately  preceding  sentence,  the Company  shall take such  actions as
Salomon Brothers may reasonably  request to provide,  as soon as practicable,  a
CUSIP number for each Series of Securities  registered  under such  Registration
Statement and to cause such CUSIP numbers to be assigned to such  Securities (or
to the  maximum  aggregate  principal  amount of such  Securities  to which such
number(s) may be assigned).  Upon compliance with the foregoing  requirements of
this  Section  4(1),   the  Company  shall  provide  the  Trustee  with  printed
certificates for each Series of Securities,  in a form eligible for deposit with
DTC.

         (m) The Company  shall use its  reasonable  best efforts to comply with
all applicable  rules and regulations of the Commission and shall make generally
available to its security  holders as soon as  practicable  after the  effective
date of the applicable  Registration  Statement an earnings statement satisfying
the provisions of Section 11(a) of the Act.

         (n) The Company  shall cause the  Indenture to be  qualified  under the
Trust Indenture Act in a timely manner.

         (o) The  Company  may  require  each  Holder of  Securities  to be sold
pursuant to any Shelf  Registration  Statement  to furnish to the  Company  such
information  regarding the Holder and the distribution of such Securities as the
Company  may  from  time  to  time  reasonably  require  for  inclusion  in such
Registration Statement.

         (p)  The  Company  shall,  if  requested,  promptly  incorporate  in  a
Prospectus  supplement  or  post-effective  amendment  to a  Shelf  Registration
Statement,  such  information as the Managing  Underwriters and Majority Holders
reasonably  agree should be included therein and shall make all required filings
of such Prospectus supplement or post-effective amendment as soon as notified of
the matters to be incorporated in such Prospectus  supplement or  post-effective
amendment.

         (q) In the case of any Shelf Registration Statement,  the Company shall
enter into such agreements (including underwriting


                                      -10-






agreements)  and take all other  appropriate  actions  in order to  expedite  or
facilitate  the  registration  or  the  disposition  of the  Securities,  and in
connection  therewith,  if an underwriting  agreement is entered into, cause the
same to contain indemnification provisions and procedures no less favorable than
those set forth in Section 6 (or such other provisions and procedures acceptable
to the Majority Holders and the Managing  Underwriters,  if any) with respect to
all parties to be indemnified pursuant to Section 6.

         (r) In the case of any Shelf Registration Statement,  the Company shall
(i) make reasonably  available for inspection by the Holders of Securities to be
registered thereunder, any underwriter participating in any disposition pursuant
to such  Registration  Statement,  and any  attorney,  accountant or other agent
retained by the Holders or any such underwriter all relevant financial and other
records,  pertinent  corporate  documents and  properties of the Company and its
subsidiaries;  (ii) cause the  Company's  officers,  directors  and employees to
supply all relevant information  reasonably requested by the Holders or any such
underwriter,   attorney,  accountant  or  agent  in  connection  with  any  such
Registration  Statement as is customary for similar due diligence  examinations;
provided,  however,  that any  information  that is designated in writing by the
Company,  in  good  faith,  as  confidential  at the  time of  delivery  of such
information  shall be kept  confidential by the Holders or any such underwriter,
attorney, accountant or agent, unless such disclosure is made in connection with
a court proceeding or required by law, or such information  becomes available to
the public generally or through a third party without an accompanying obligation
of  confidentiality;  (iii)  make such  representations  and  warranties  to the
Holders of Securities  registered  thereunder and the  underwriters,  if any, in
form,  substance and scope as are customarily made by issuers to underwriters in
primary underwritten  offerings and covering matters including,  but not limited
to, those set forth in the Purchase  Agreement;  (iv) obtain opinions of counsel
to the Company and updates  thereof (which counsel and opinions (in form,  scope
and substance) shall be reasonably satisfactory to the Managing Underwriters, if
any) addressed to each selling  Holder and the  underwriters,  if any,  covering
such matters as are  customarily  covered in opinions  requested in underwritten
offerings and such other matters as may be reasonably  requested by such Holders
and underwriters; (v) obtain 'cold comfort' letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary,  any
other independent  certified public accountants of any subsidiary of the Company
or of any business  acquired by the Company for which  financial  statements and
financial  data  are,  or are  required  to  be,  included  in the  Registration
Statement), addressed to each selling Holder of Securities registered thereunder
and the underwriters, if any, in customary form and covering matters of the type
customarily  covered  in 'cold  comfort'  letters  in  connection  with  primary
underwritten offerings;  and (vi) deliver such documents and certificates as may
be reasonably  requested by the Majority Holders and the Managing  Underwriters,
if any, including those to


                                      -11-






evidence  compliance  with  Section  4(k)  and  with  any  customary  conditions
contained in the underwriting  agreement or other agreement  entered into by the
Company. The foregoing actions set forth in clauses (iii), (iv), (v) and (vi) of
this  Section  4(r)  shall  be  performed  at  (A)  the  effectiveness  of  such
Registration  Statement and each  post-effective  amendment thereto and (B) each
closing  under  any  underwriting  or  similar  agreement  as and to the  extent
required thereunder.

         (s) In the  case of any  Exchange  Offer  Registration  Statement,  the
Company shall (i) make  reasonably  available for inspection by each  Purchaser,
and any attorney,  accountant  or other agent  retained by such  Purchaser,  all
relevant  financial  and  other  records,   pertinent  corporate  documents  and
properties  of the  Company  and its  subsidiaries;  (ii)  cause  the  Company's
officers,  directors and employees to supply all relevant information reasonably
requested  by such  Purchaser  or any  such  attorney,  accountant  or  agent in
connection with any such Registration  Statement as is customary for similar due
diligence   examinations;   provided,   however,that  any  information  that  is
designated in writing by the Company, in good faith, as confidential at the time
of delivery of such information  shall be kept confidential by such Purchaser or
any such  attorney,  accountant  or agent,  unless  such  disclosure  is made in
connection  with a court  proceeding  or required  by law,  or such  information
becomes  available to the public  generally or through a third party  without an
accompanying obligation of confidentiality;  (iii) make such representations and
warranties to such  Purchaser,  in form,  substance and scope as are customarily
made by issuers to underwriters in primary  underwritten  offerings and covering
matters  including,  but  not  limited  to,  those  set  forth  in the  Purchase
Agreement;  (iv) obtain  opinions of counsel to the Company and updates  thereof
(which counsel and opinions (in form,  scope and substance)  shall be reasonably
satisfactory  to such  Purchaser and its counsel)  addressed to such  Purchaser,
covering  such  matters as are  customarily  covered in  opinions  requested  in
underwritten  offerings and such other matters as may be reasonably requested by
such  Purchaser or its counsel;  (v) obtain 'cold  comfort'  letters and updates
thereof from the independent  certified public  accountants of the Company (and,
if  necessary,  any  other  independent  certified  public  accountants  of  any
subsidiary  of the Company or of any business  acquired by the Company for which
financial  statements and financial data are, or are required to be, included in
the Registration Statement),  addressed to such Purchaser, in customary form and
covering  matters of the type  customarily  covered in 'cold comfort' letters in
connection with primary underwritten  offerings;  and (v) deliver such documents
and  certificates  as may be  reasonably  requested  by  such  Purchaser  or its
counsel,  including  those to evidence  compliance  with  Section  4(k) and with
conditions  customarily  contained in  underwriting  agreements.  The  foregoing
actions set forth in clauses  (iii),  (iv),  (v),  and (vi) of this Section 4(s)
shall  be  performed  at the  close of the  Registered  Exchange  Offer  and the
effective   date  of  any   post-effective   amendment  to  the  Exchange  Offer
Registration Statement.



                                      -12-






         5. Registration  Expenses. The Company shall bear all expenses incurred
in connection with the performance of its obligations  under Sections 2, 3 and 4
hereof and, in the event of any Shelf Registration Statement, will reimburse the
Holders  for the  reasonable  fees  and  disbursements  of one  firm of  counsel
designated  by the  Majority  Holders  to act as  counsel  for  the  Holders  in
connection  therewith,  and,  in the  case of any  Exchange  Offer  Registration
Statement,   will  reimburse  the   Purchasers  fo  the   reasonable   fees  and
disbursements of counsel acting in connection therewith.

         6.  Indemnification  and  Contribution.   (a)  The  Company  agrees  to
indemnify and hold harmless each Holder of Securities  (including each Purchaser
and, with respect to any  Prospectus  delivery as  contemplated  in Section 4(h)
hereof, each Exchanging Dealer), the directors,  officers,  employees and agents
of each such Holder and each  person who  controls  any such  Holder  within the
meaning  of either  the Act or the  Exchange  Act  against  any and all  losses,
claims,  damages or liabilities,  joint or several, to which they or any of them
may become  subject  under the Act, the  Exchange Act or other  Federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims,  damages or liabilities (or actions in respect  thereof) arise out of or
are based upon any untrue  statement or alleged  untrue  statement of a material
fact  contained  in the  Registration  Statement as  originally  filed or in any
amendment  thereof,  or in any preliminary  Prospectus or Prospectus;  or in any
amendment thereof or supplement  thereto,  or arise out of or are based upon the
omission or alleged  omission to state  therein a material  fact  required to be
stated therein or necessary to make the statements  therein not misleading,  and
agrees to reimburse each such indemnified  party, as incurred,  for any legal or
other expenses  reasonably  incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,  however,
that the Company will not be liable i any case to the extent that any such loss,
claim,  damage  or  liability  arises  out of or is based  upon any such  untrue
statement  or alleged  untrue  statement  or omission or alleged  omission  made
therein in reliance upon and in conformity with written information furnished to
the  Company  by or on  behalf of any such  Holder  specifically  for  inclusion
therein. This indemnity agreement will be in addition to any liability which the
Company may otherwise have.

         The Company  also agrees to indemnify  or  contribute  to Losses of, as
provided in Section 6(d),  any  underwriters  of Securities  registered  under a
Shelf Registration  Statement,  their officers and directors and each person who
controls  such  underwriters  on  substantially  the  same  basis as that of the
indemnification  of the  Purchaser  and the  selling  Holders  provided  in this
Section 6(a) and shall,  if requested by any Holder,  enter into an underwriting
agreement reflecting such agreement, as provided in Section 4(q) hereof.

         (b) Each  Holder of  Securities  covered  by a  Registration  Statement
(including each Purchaser and, with respect to any





                                      -13-




Prospectus  delivery as  contemplated  in Section 4(h) hereof,  each  Exchanging
Dealer)  severally  agrees to indemnify and hold harmless (i) the Company,  (ii)
each of its  directors,  (iii)  each of its  officers  and (iv) each  person who
controls the Company within the meaning of either the Act or the Exchange Act to
the same extent as the foregoing indemnity from the Company to each such Holder,
but only with reference to written information relating to such Holder furnished
to the Company by or on behalf of such Holder  specifically for inclusion in the
documents referred to in the foregoing indemnity.  This indemnity agreement will
be in addition to any liability which any such Holder may otherwise have.

         (c) Promptly after receipt by an indemnified party under this Section 6
of notice of the commencement of any action,  such indemnified  party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 6, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability  under  paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying  party of substantial rights and defenses and (ii) will not, in any
event,  relieve the  indemnifying  party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above.  The  indemnifying  party  shall be  entitled  to appoint  counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified  party in any action for which  indemnification  is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate  counsel  retained by the indemnified  party or parties
except as set forth  below);  provided,  however,  that  such  counsel  shall be
satisfactory to the indemnified party.  Notwithstanding the indemnifying party's
election to appoint counsel to represent the indemnified party in an action, the
indemnified  party shall have the right to employ  separate  counsel  (including
local counsel),  an the indemnifying party shall bear the reasonable fees, costs
and  expenses of such  separate  counsel  (and local  counsel) if (i) the use of
counsel  chosen by the  indemnifying  party to represent the  indemnified  party
would  present  such  counsel  with a conflict of  interest,  (ii) the actual or
potential  defendants  in, or  targets  of,  any such  action  include  both the
indemnified  party and the  indemnifying  party and the indemnified  party shall
have  reasonably  concluded  that there may be legal  defenses  available  to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, (iii) the indemnifying party shall not have
employed  counsel  satisfactory  to  the  indemnified  party  to  represent  the
indemnified  party within a reasonable  time after notice of the  institution of
such action or (iv) the indemnifying party shall authorize the indemnified party
to  employ  separate  counsel  at the  expense  of the  indemnifying  party.  An
indemnifying   party  will  not,  without  the  prior  written  consent  of  the
indemnified  parties,  settle  or  compromise  or  consent  to the  entry of any
judgment with respect to any pending or threatened claim, action,


                                      -14-






suit or proceeding in respect of which  indemnification  or contribution  may be
sought hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such  settlement,  compromise or consent
includes an unconditional  release of each indemnified  party from all liability
arising out of such claim action, suit or proceeding.

         (d) In the event that the indemnity provided in paragraph (a) or (b) of
this Section 6 is unavailable to or insufficient to hold harmless an indemnified
party  for any  reason,  then each  applicable  indemnifying  party,  in lieu of
indemnifying such indemnified  party,  shall have a joint and several obligation
to  contribute  to  the  aggregate  losses,   claims,  damages  and  liabilities
(including  legal or other  expenses  reasonably  incurred  in  connection  with
investigating  or  defending  same)   (collectively   'Losses')  to  which  such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying  party, on the one hand, and
such  indemnified  party, on the other hand, from the Initial  Placement and the
Registration Statement which resulted in such Losses; provided, however, that in
no case shall any  Purchaser  or any  subsequent  Holder of any  Security or New
Security  be  responsible,  in the  aggregate,  for any  amount in excess of the
purchase discount or commission applicable to such Security, or in the case of a
New Security,  applicable to the Security which was  exchangeable  into such New
Security, as set forth on the cover page of the Final Memorandum,  nor shall any
underwriter be responsible for any amount in excess of the underwriting discount
or commission  applicable to the Securities  purchased by such underwriter under
the  Registration  Statement  which  resulted in such Losses.  If the allocation
provided by the  immediately  preceding  sentence is unavailable for any reason,
the  indemnifying  party and the  indemnified  party  shall  contribute  in such
proportion as is appropriate to reflect not only such relative benefits but also
the  relative  fault  of such  indemnifying  party,  on the one  hand,  and such
indemnified  party,  on the other hand,  in  connection  with the  statements or
omissions which resulted in such Losses as well as any other relevant  equitable
considerations.  Benefits received by the Company shall be deemed to be equal to
the sum of (x) the  total  net  proceeds  from  the  Initial  Placement  (before
deducting  expenses) as set forth on the cover page of the Final  Memorandum and
(y) the total amount of additional  interest  which the Company was not required
to pay as a result of  registering  the Securities  covered by the  Registration
Statement  which  resulted in such Losses.  Benefits  received by the Purchasers
shall be deemed to be equal to the total purchase  discounts and  commissions as
set forth on the cover page of the Final  Memorandum,  and benefits  received by
any  other  Holders  shall  be  deemed  to be equal  to the  value of  receiving
Securities or New Securities, as applicable,  registered under the Act. Benefits
received  by  any  underwriter  shall  be  deemed  to  be  equal  to  the  total
underwriting  discounts and  commissions,  as set forth on the cover page of the
Prospectus  forming a part of the Registration  Statement which resulted in such
Losses.  Relative  fault shall be determined by reference to whether any alleged
untrue statement or omission relates to





                                      -15-




information  provided  by the  indemnifying  party,  on the one hand,  or by the
indemnified  party,  on the other hand. The Holders'  respective  obligations to
contribute  pursuant  to  this  paragraph  are  several  in  proportion  to  the
respective  number  of  Securities  they have sold  pursuant  to a  Registration
Statement,  and not  joint.  The  parties  agree  that it would  not be just and
equitable if  contribution  were  determined by pro rata allocation or any other
method of allocation which does not tak account of the equitable  considerations
referred to above.  Notwithstanding  the  provisions of this  paragraph  (d), no
person  guilty of  fraudulent  misrepresentation  (within the meaning of Section
11(f) of the Act) shall be entitled to contribution  from any person who was not
guilty of such  fraudulent  misrepresentation.  For  purposes of this Section 6,
each  person who  controls a Holder  within the meaning of either the Act or the
Exchange Act and each director, officer, employee and agent of such Holder shall
have the same  rights  to  contribution  as such  Holder,  and each  person  who
controls the Company  within the meaning of either the Act or the Exchange  Act,
each officer of the Company who shall have signed the Registration Statement and
each director of the Company shall have the same rights to  contribution  as the
Company,  subject in each case to the  applicable  terms and  conditions of this
paragraph (d).

         (e) The  provisions  of this  Section 6 will  remain in full  force and
effect,  regardless of any  investigation  made by or on behalf of any Holder or
the Company or any of the officers, directors or controlling persons referred to
in Section 6 hereof, and will survive the sale by a Holder of Securities.

         7.  Liquidated  Damages Under  Certain  Circumstances.  (a)  Liquidated
damages ('Liquidated Damages') shall become payable in respect of the Securities
as follows if any of the following  events occur (each such event in clauses (i)
through (iv) below, a 'Registration Default'):

              (i)  the  Company  is  permitted   under  the  law  and  currently
         prevailing  interpretations  of the  Commission's  staff to effect  the
         Registered Exchange Offer and the Exchange Offer Registration Statement
         is not filed with the  Commission on or prior to the 60th day following
         the Closing Date;

              (ii)  the  Company  is  permitted  under  the  law  and  currently
         prevailing  interpretations  of the  Commission's  staff to effect  the
         Registered Exchange Offer and the Exchange Offer Registration Statement
         is not declared  effective on or prior to the 150th day  following  the
         Closing Date;

              (iii) the  Registered  Exchange Offer is not  consummated  and the
         applicable Shelf Registration Statement is not declared effective on or
         prior to the 180th day following the Closing Date; or

              (iv) after a Shelf Registration Statement is declared





                                      -16-




         effective, (A) such Shelf Registration Statement ceases to be effective
         prior to the end of the Shelf  Registration  Period;  or (B) such Shelf
         Registration  Statement or the related  Prospectus ceases to be useable
         in connection with resales of Securities or New Securities, as the case
         may be, covered by such Shelf  Registration  Statement prior to the end
         of the Shelf  Registration  Period  because (1) the Company  determines
         that an event  occurs  as a  result  of which  the  related  Prospectus
         forming part of such Shelf  Registration  Statement  would  include any
         untrue  statement of a material fact or omit to state any material fact
         necessary  to  make  the  statements   therein  in  the  light  of  the
         circumstances  under  which  they  were  made not  misleading,  (2) the
         Company  determines  that it shall be  necessary  to amend  such  Shelf
         Registration Statement, or supplement the related Prospectus, to comply
         with the Act or the  Exchange Act or the rules  thereunder,  or (3) the
         Company  determines  that  it  is  advisable  to  suspend  use  of  the
         Prospectus  for a  discrete  period  of time  due to  pending  material
         corporate  developments  or similar  material  events that have not yet
         been  publicly  disclosed and as to which the Company  believes  public
         disclosure will be prejudicial to the Company.

         Liquidated  Damages  shall accrue on the  applicable  Securities or the
applicable New Securities,  as the case may be, over and above the interest rate
set  forth in the  title to the  applicable  Securities  or the  applicable  New
Securities,  as the case may be,  following the occurrence of each  Registration
Default set forth in clauses (i),  (ii) and (iii) above from and  including  the
next day following each such Registration  Default, in each case at a rate equal
to  0.25%  per  annum;  provided,  however,  that  in any  case,  if one or more
Registration  Defaults  referred to in Section 7(a)(iv) occurs and continues for
more than 60 days (whether or not  consecutive)  in any twelve month period (the
61st day being referred to as the 'Default Day') then from the Default Day until
the earlier of (i) the date such Shelf  Registration  Statement  is again deemed
effective  or is useable,  (ii) the date that is the second  anniversary  of the
Closing  Date (or,  if Rule  144(k) of the Act is  amended  to  provide a shorte
restrictive  period,  such  shorter  period)  or (iii) the date on which all the
Securities are sold pursuant to such Shelf  Registration  Statement,  Liquidated
Damages shall accrue at a rate of 0.25% per annum;  provided,  further, that the
aggregate  amount of Liquidated  Damages payable pursuant to this Section 7 will
in no event exceed 0.25% per annum. The Liquidated Damages  attributable to each
Registration  Default  shall  cease to accrue  from the date  such  Registration
Default is cured.

         (b) Any amounts of  Liquidated  Damages due  pursuant to the  foregoing
paragraphs  will be payable in cash on June 15 and  December  15 of each year to
the holders of record on the preceding June 1 and December 1, respectively.





                                      -17-






         8. Miscellaneous.

         (a) No  Inconsistent  Agreements.  The  Company has not, as of the date
hereof, entered into, nor shall it, on or after the date hereof, enter into, any
agreement with respect to its securities  that is  inconsistent  with the rights
granted to the Holders herein or otherwise conflicts with the provisions hereof.

         (b) Amendments and Waivers. The provisions of this Agreement, including
the  provisions of this  sentence,  may not be amended,  qualified,  modified or
supplemented,  and waivers or consents to departures from the provisions  hereof
may not be given,  unless the Company has  obtained  the written  consent of the
Holders  of at least a  majority  of the then  outstanding  aggregate  principal
amount of each Series of Securities (or, after the  consummation of any Exchange
Offer in accordance  with Section 2 hereof,  of each Series of New  Securities);
provided  that,  with respect to any matter that directly or indirectly  affects
the rights of any  Purchaser  hereunder,  the Company  shall  obtain the written
consent of each such  Purchaser  against  which such  amendment,  qualification,
supplement, waiver or consent is to be effective.  Notwithstanding the foregoing
(except  the  foregoing  proviso),  a waiver or  consent to  departure  from the
provisions  hereof with  respect to a matter  that  relates  exclusively  to the
rights of Holders whose  Securities  are being sold  pursuant to a  Registration
Statement  and that does not directly or  indirectly  affect the rights of other
Holders  may be  given  by the  Majority  Holders,  determined  on the  basis of
Securities being sold rather than registered under such Registration Statement.

         (c)  Notices.  All notices  and other  communications  provided  for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or air courier guaranteeing overnight delivery:

              (1) if to a  Holder,  at the most  current  address  given by such
         holder to the Company in accordance with the provisions of this Section
         8(c),  which  address  initially  is, with respect to each Holder,  the
         address of such Holder maintained by the Registrar under the Indenture,
         with a copy in like manner to Salomon Brothers Inc;

              (2) if to you, initially at the respective  addresses set forth in
         the Purchase Agreement; and

              (3) if to the  Company,  initially at its address set forth in the
         Purchase Agreement.

         All such notices and  communications  shall be deemed to have been duly
given when received.

         The  Purchasers  or the  Company  by notice to the other may  designate
additional or different addresses for subsequent notices or communications.





                                      -18-




         (d) Successors and Assigns.  This Agreement  shall inure to the benefit
of and be  binding  upon the  successors  and  assigns  of each of the  parties,
including,  without  the need for an express  assignment  or any  consent by the
Company thereto,  subsequent  Holders of Securities  and/or New Securities.  The
Company  hereby agrees to extend the benefits of this Agreement to any Holder of
Securities  and/or New Securities and any such Holder may  specifically  enforce
the provisions of this Agreement as if an original party hereto.

         (e)  Counterparts.  This  Agreement  may be  executed  in any number of
counterparts and by the parties hereto in separate  counterparts,  each of which
when so  executed  shall be  deemed  to be an  original  and all of which  taken
together shall constitute one and the same agreement.

         (f) Headings.  The headings in this  agreement are for  convenience  of
reference only and shall not limit or otherwise affect the meaning hereof.

         (g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE  WITH  THE  INTERNAL  LAWS OF THE  STATE OF NEW  YORK  APPLICABLE  TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.

         (h)  Severability.  In the event that any one or more of the provisions
contained  herein,  or the  application  thereof in any  circumstances,  is held
invalid,  illegal or unenforceable in any respect for any reason,  the validity,
legality and  enforceability of any such provision in every other respect and of
the  remaining  provisions  hereof  shall not be in any way impaired or affected
thereby,  it being intended that all of the rights and privileges of the parties
shall be enforceable to the fullest extent permitted by law.

         (i)  Securities  Held by the  Company,  etc.  Whenever  the  consent or
approval of Holders of a specified  percentage of principal amount of Securities
or New  Securities  is required  hereunder,  Securities  or New  Securities,  as
applicable, held by the Company or its Affiliates (other than subsequent Holders
of Securities  or New  Securities  if such  subsequent  Holders are deemed to be
Affiliates  solely  by  reason  of  their  holdings  of such  Securities  or New
Securities) shall not be counted in determining whether such consent or approval
was given by the Holders of such required percentage.





                                      -19-




         Please  confirm that the foregoing  correctly  sets forth the agreement
between the Company and you.

                                               Very truly yours,

                                               HEALTHSOUTH CORPORATION



                                               By  /s/ MICHAEL D. MARTIN
                                                  ------------------------------
                                                    Michael D. Martin
                                                    Executive Vice President, 
                                                    Chief Financial Officer and 
                                                    Treasurer

Accepted in New York, New York
June 22, 1998

SALOMON BROTHERS INC
GOLDMAN, SACHS & CO.
J.P. MORGAN SECURITIES INC.
MERRILL LYNCH, PIERCE, FENNER & SMITH
 INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
NATIONSBANC MONTGOMERY SECURITIES LLC
BEAR, STEARNS & CO. INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
DEUTSCHE BANK SECURITIES INC.
PAINEWEBBER INCORPORATED
SCOTIA CAPITAL MARKETS (USA) INC.

By: SALOMON BROTHERS INC

By:  /s/ BENJAMIN D. LORELLO
     ------------------------------------
       Name:
       Title:



                                      -20-




                                     Annex A
                                     -------

         Each  broker-dealer  that receives New  Securities  for its own account
pursuant  to the  Exchange  Offer  must  acknowledge  that  it  will  deliver  a
prospectus in connection with any resale of such New Securities.  Each Letter of
Transmittal  states that by so acknowledging  and by delivering a prospectus,  a
broker-dealer will not be deemed to admit that it is an 'underwriter' within the
meaning  of the  Securities  Act.  This  Prospectus,  as it may  be  amended  or
supplemented  from time to time,  may be used by a  broker-dealer  in connection
with resales of New Securities  received in exchange for  Securities  where such
Securities  were  acquired by such  broker-dealer  as a result of  market-making
activities or other trading  activities.  The Company has agreed that, ending on
the close of business on the 180th day following the Expiration Date (as defined
herein), it will make this Prospectus  available to any broker-dealer for use in
connection with any such resale. See 'Plan of Distribution.'







                                     Annex B

         Each  broker-dealer that receives New Securities for its own account in
exchange  for   Securities,   where  such   Securities  were  acquired  by  such
broker-dealer  as  a  result  of  market-making   activities  or  other  trading
activities,  must  acknowledge  that it will deliver a prospectus  in connection
with any resale of such New Securities. See 'Plan of Distribution.'













                                     Annex C
                                     -------

                              PLAN OF DISTRIBUTION
                              --------------------

         Each  broker-dealer  that receives New  Securities  for its own account
pursuant  to the  Exchange  Offer  must  acknowledge  that  it  will  deliver  a
prospectus  in  connection  with  any  resale  of  such  New  Securities.   This
Prospectus,  as it may be amended or supplemented from time to time, may be used
by a  broker-dealer  in connection  with resales of New  Securities  received in
exchange  for  Securities  where such  Securities  were  acquired as a result of
market-making  activities  or other trading  activities.  The Company has agreed
that, starting on the Expiration Date and ending on the close of business on the
180th day  following  such  Expiration  Date, it will make this  Prospectus,  as
amended or supplemented,  available to any  broker-dealer  for use in connection
with any such resale.

         The  Company  will  not  receive  any  proceeds  from  any  sale of New
Securities by  broker-dealers.  New Securities  received by  broker-dealers  for
their own account  pursuant to the Exchange  Offer may be sold from time to time
in one or  more  transactions  in the  over-the-counter  market,  in  negotiated
transactions,  through  the  writing  of  options  on the  New  Securities  or a
combination of such methods of resale,  at market prices  prevailing at the time
of resale,  at prices related to such prevailing  market prices or at negotiated
prices.  Any such  resale may be made  directly to  purchasers  or to or through
brokers or dealers who may receive  compensation  in the form of  commissions or
concessions  from any such  broker-dealer  and/or the purchasers of any such New
Securities.  Any broker-dealer that resells New Securities that were received by
it for its own account  pursuant to the Exchange  Offer and any broker or dealer
that  participates  in a distribution of such New Securities may be deemed to be
an 'underwriter'  within the meaning of the Securities Act and any profit of any
such resale of New Securities and any commissions or concessions received by any
such persons may be deemed to be underwriting  compensation under the Securities
Act.  Each  Letter of  Transmittal  states  that by  acknowledging  that it will
deliver and by delivering a prospectus,  a  broker-dealer  will not be deemed to
admit that it is an 'underwriter' within the meaning of the Securities Act.

         For a period of 180 days after the  Expiration  Date,  the Company will
promptly  send  additional  copies  of  this  Prospectus  and any  amendment  or
supplement to this Prospectus to any broker-dealer  that requests such documents
in the  applicable  Letter of  Transmittal.  The  Company  has agreed to pay all
expenses  incident to the Exchange Offer  (including the expenses of one counsel
for the holders of the Securities)  other than commissions or concessions of any
brokers or dealers and will indemnify the holders of the  Securities  (including
any broker-dealers) against certain liabilities, including liabilities under the
Securities Act.






         [If applicable,  add  information  required by Regulation S-K Items 507
and/or 508.]













                                     Annex D
                                     -------

                                     Rider A
                                     -------

                    CHECK HERE IF YOU ARE A BROKER-DEALER AND
                    WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE
                    PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
                    PROSPECTUS THERETO.

                  Name:
                         -------------------------------------------------------
                  Address:
                            ----------------------------------------------------
                            ----------------------------------------------------


                                     Rider B
                                     -------

         If the undersigned is not a broker-dealer,  the undersigned  represents
that it is not engaged in, and does not intend to engage in, a  distribution  of
New  Securities.  If the  undersigned is a  broker-dealer  that will receive New
Securities for its own account in exchange for  Securities,  it represents  that
the  Securities  to be exchanged  for New  Securities  were  acquired by it as a
result of market-making  activities or other trading activities and acknowledges
that it will  deliver a  prospectus  in  connection  with any resale of such New
Securities;  however,  by so acknowledging  and by delivering a prospectus,  the
undersigned will not be deemed to admit that it is an  'underwriter'  within the
meaning of the Securities Act.








                                     Annex E
                                     -------

                   FORM OF LETTER TO BE PROVIDED BY ISSUER TO
                          THE DEPOSITORY TRUST COMPANY

                             HEALTHSOUTH Corporation
                             One HealthSouth Parkway

                              Birmingham, AL 35243

                            __________________, 1998



The Depository Trust Company
55 Water Street, 49th Floor
New York, NY 10041
Attn: General Counsel's Office

Ladies and Gentlemen:

         We refer to the Letter of  Representations,  dated  June __,  1998 (the
'Letter of  Representations'),  from HEALTHSOUTH  Corporation (the 'Issuer') and
PNC Bank,  National  Association,  as trustee (the  'Trustee') to the Depository
Trust Company  ('DTC')  regarding the Issuer's __% Senior Notes due 2005 and __%
Senior  Notes due 2008  (the 'Old  Securities').  The CUSIP  numbers  of the Old
Securities   are  __________  and   __________,   respectively,   for  qualified
institutional buyers,  __________ and __________,  respectively,  for buyers who
were sold Old  Securities in compliance  with  Regulation S under the Securities
Act of 1933,  as amended,  and  __________  and  __________,  respectively,  for
institutional  accredited investors. The Issuer and the Trustee hereby agree and
notify  DTC  that  as of  __________  __,  1998,  the  Securities  and  Exchange
Commission declared effective a Registration  Statement (File No. ) with respect
to an offering of the  Issuer's  __%  Exchange  Notes due 2005 and __%  Exchange
Notes due 2008 (the 'New  Securities')  (CUSIP Nos.  __________ and  __________,
respectively) in exchange for the Old Securities.  Following the consummation of
the exchange offer and the  cancellation of the global  securities  representing
the Old Securities, the Issuer and the Trustee agree that, with the exception of
the  Representations  for Rule 144A Securities  attached thereto,  the Letter of
Representations and any applicable riders thereto shall remain in full force and
effect with respect to the New Securities.

                                             Very truly yours,

                                             HEALTHSOUTH CORPORATION

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

                                             PNC BANK, NATIONAL ASSOCIATION




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

Received and Accepted:
THE DEPOSITORY TRUST COMPANY

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