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Purchase and Sale Agreement - HealthSouth Corp., Horizon/CMS Healthcare Corp. and Integrated Health Services Inc.


     THIS  AMENDMENT (the  'Amendment'),  dated as of December 31, 1997, to that
certain  Purchase  and Sale  Agreement,  made and entered into on the 3rd day of
November,  1997 (the 'Agreement'),  by and between  HEALTHSOUTH  CORPORATION,  a
Delaware  corporation  ('Seller'),  and  INTEGRATED  HEALTH  SERVICES,  INC.,  a
Delaware corporation ('Buyer'), with reference to the following facts:

     A. The  parties  desire to amend the  Agreement  to the extent set forth in
this Amendment and to enter into certain  agreements  ancillary to the Agreement
in connection with such amendments.

     NOW,  THEREFORE,  in  consideration  of  the  foregoing  recitals  and  the
agreements contained herein, and for other good and valuable consideration,  the
receipt and  sufficiency of which are hereby  acknowledged,  the parties hereto,
intend to be legally bound, do hereby agree as follows:

                                    ARTICLE 1


     For  purposes  of  this  Amendment,  all  capitalized  terms  used  in this
Amendment  that are not  defined  in this  Amendment  shall  have  the  meanings
assigned to them in the Agreement.

                                    ARTICLE 2


     Section 2.1 Amendment of Certain Schedules.  The Schedules to the Agreement
are hereby amended as follows:

          (a)  Schedule A-2 is amended to:

               (i) delete the asterisks  shown next to Facilities 216, 304, 188,
               306 and 168 and to add Facility 218 (Medical Specialty Overhead),
               reflecting  that Buyer has agreed to accept  such  facilities  as
               Transferred Assets and to assume the related Assumed Liabilities;

               (ii) delete all  references  to  Facilities  51, 60, 292 and 273,
               reflecting  that  Seller  has  agreed to retain  all  assets  and
               liabilities  relating  thereto as  Excluded  Assets and  Excluded


          (b)  Schedule  2.1(a) is amended to add to the list of Assigned  Stock
and Transferred  Subsidiaries  Midwest Regional  Rehabilitation  Center, Inc., a
Subsidiary of Seller which shall be a Transferred Subsidiary.

          (c) The  first  sentence  of  Schedule  2.1(b) is  amended  to read as
follows:  'Horizon/CMS  Healthcare Corporation or a Subsidiary or a wholly owned
partnership  owns in fee  simple  the  real  property  on which  all  facilities
identified on the attached 'Chart of Owned Facilities' are located.

          (d)  Schedule 2.1(c) is amended to:

               (i) delete the  asterisks  with respect to Leases 100,  101, 102,
               103,  105,  106, 203, 204, 205, 501, 502, 503, 504, 506, 127, 188
               and 169,  reflecting  that Buyer has agreed to accept such leases
               as  Transferred   Assets  and  to  assume  the  related   Assumed

               (ii) add  references  to leases  relating  to  Advanced  Clinical
               Technology,  Inc.'s  locations in Plantation,  Florida and Niles,
               Ohio,  reflecting  that Buyer has agreed to accept such leases as
               Transferred Assets and to assume the related Assumed Liabilities;

               (iii) delete all  references  to leases 65, 115,  130,  157, 187,
               235, 202 and 206, reflecting that Seller has agreed to retain all
               assets and  liabilities  relating  thereto as Excluded Assets and
               Excluded Liabilities.

          (e)  Schedule  2.1(d) is hereby  amended to delete the  references  to
interests in InHouse Rehab  Associates  and  RehabWorks of Utah,  L.L.C.,  which
shall be Excluded Assets and Excluded Liabilities.

          (f)  Schedule  7.5 is amended  to delete  therefrom  all items  except
letters of credit numbers L150065,  L150066, L150067 and L906140, which shall be
the only  letters  of  credit  and bonds  required  to be  provided  by Buyer to
substitute for letters of credit and bonds  heretofore  maintained by Seller and
its Affiliates.

     Section  2.2  Deliveries  at Closing.  At the  Closing,  the parties  shall
execute and deliver such  instruments  of conveyance,  transfer and  assumption,
consistent  with the terms of the  Agreement,  as are  necessary  to effect  the
foregoing amendments to the Schedules.

                                    ARTICLE 3

                         OTHER AGREEMENTS OF THE PARTIES

     Section 3.1  Assumption  of ACT 401(k) Plan.  Prior to the Closing,  Seller
shall assume the 401(k) plan maintained by Advanced  Clinical  Technology,  Inc.
('ACT') and,  from and after the Closing,  shall be solely  responsible  for the
administration  and  termination  of such plan and for the  satisfaction  of all
obligations  and liabilities of any kind whatsoever with respect to such plan or
the operation, assumption or termination thereof, including, but not limited to,
obligations and liabilities to plan participants and


obligations  and  liabilities  resulting from any adverse  determination  by any
governmental  entity with  respect to such plan,  all of which  obligations  and
liabilities  shall be deemed  to be  Excluded  Liabilities  and  subject  to the
indemnification provisions of Sections 11.3, 11.5 and 11.6 of the Agreement.

     Section3.2 Ortenzio  Litigation.  HEALTHSOUTH,  Seller and Buyer agree that
all rights and liabilities of Seller or any Affiliate of Seller,  whether or not
such Affiliate is a Transferred  Subsidiary,  with respect to litigation brought
by Seller or any Affiliate of Seller against Rocco Ortenzio, Robert Ortenzio and
their Affiliates  (collectively,  the 'Ortenzios'),  or by the Ortenzios against
Seller or any Affiliate of Seller, shall constitute Excluded Assets and Excluded
Liabilities,  and Buyer and its  Affiliates  shall have no rights or obligations
with  respect  to  any  amounts  receivable  or  payable  with  respect  to  the
prosecution  and defense of such  litigation or any judgments,  awards,  amounts
paid  in  settlement  or  other  costs  or  proceeds  of  such  litigation.  Any
liabilities  which may be asserted  against Buyer or its Affiliates  (including,
after the Closing, any Transferred Subsidiaries) with respect to such litigation
shall be subject to the  indemnification  provisions of Sections 11.3,  11.5 and
11.6 of the Agreement.  Buyer  acknowledges that neither  HEALTHSOUTH nor Seller
has made any  representation  to Buyer  concerning the value of such litigation.
Buyer  shall cause the  Transferred  Subsidiaries  to  cooperate  as  reasonably
requested by  HEALTHSOUTH  or Seller,  at the expense of  HEALTHSOUTH or Seller,
with respect to such litigation.

     Section 3.3 Other Agreements to be Executed and Delivered.  At the Closing,
HEALTHSOUTH  and Buyer  shall  execute  and  deliver a Service  Agreement  and a
Transition Services Agreement, satisfactory to HEALTHSOUTH and Buyer in form and
substance, with respect to the provision of certain leased employees to Buyer or
its  Affiliates  and with  respect to  certain  information  systems  transition
matters, respectively.

     Section 3.4 Bank  Accounts and Cash  Reconciliation.  On the Closing  Date,
Seller and its Affiliates shall assign to Buyer or designated Buyer Subsidiaries
all rights of Seller and its Affiliates in depository  accounts  relating to the
Transferred   Assets  and  disbursing   accounts  relating  to  the  Transferred
Subsidiaries, subject, however, to the following provisions:

          (a) On the Closing  Date,  HEALTHSOUTH  shall  withdraw all  collected
funds from the depository accounts and all funds in excess of outstanding checks
from the transferred disbursing accounts.

          (b) On January 6, 1998,  HEALTHSOUTH shall wire to accounts designated
by Buyer an amount equal to $10,000,000 less (i) the uncollected balances in the
depository  accounts  at the  Closing  Date  (ii)  amounts  deposited  into  the
depository  accounts  on December  31, 1997 and (iii) cash and cash  equivalents
otherwise  inaccessible on December 31, 1997, which shall satisfy  HEALTHSOUTH's
obligation to transfer cash and cash  equivalents  in the amount of  $10,000,000
pursuant to Section 2.1(m) of the Agreement.

          (c) In the event that (i) HEALTHSOUTH and Seller remove funds from the
transferred  disbursing accounts so that funds in such accounts are insufficient
to cover checks  outstanding  at December  31,  1997,  or (ii) after the payment
described in paragraph (b) above, the cash and cash  equivalents  deemed to have
been  transferred  to Buyer as of  December  31, 1997  exceed  $10,000,000,  the
parties  shall pay to each  other on demand  such  amounts as are  necessary  to
reconcile such discrepancies.

     Section 3.5 Amounts  Expended to Obtain Consents and Releases.  HEALTHSOUTH
shall,  by check on the Closing  Date,  pay to Buyer the sum of  $11,000,000  in
respect of liabilities  incurred by Buyer in connection with obtaining all third
party  consents  and releases of  HEALTHSOUTH  and Seller  obtained  through the
Closing Date, including,  but not limited to, liabilities in favor of Health and
Retirement  Properties Trust,  Connecticut Subacute Corporation II. With respect
to amounts expended as  consideration  for all third party consents and releases
after the Closing Date,  HEALTHSOUTH and Seller


shall  reimburse  Buyer for 50% of such  amounts  in excess of  $500,000.  Buyer
represents  that it has agreed to accept the terms  required  for consent by LTC
Properties,  Inc.  specified in Buyer's agreement of even date herewith with LTC
Properties, Inc. (provided that guaranties for the Citation properties shall not
exceed 20% of the underlying mortgage amount) and the terms for consent required
by Zev Karkomi/Karell Capital Ventures,  Inc. in Karell's letters dated December
20 and December 30, 1997.

     Section 3.6 Certain  Employees.  The parties agree that those  employees of
Seller  identified  on  Schedule  3.6  attached  hereto  shall  not be  Retained
Employees or Hired Employees, and HEALTHSOUTH and Seller shall retain all rights
and obligations with respect to such employees other than those assumed by Buyer
pursuant to Section 2.3(n) of the Agreement.

     Section 3.7 Amendment of Section 2.3(n). Section 2.3(n) of the Agreement is
hereby amended to be and read in its entirety as follows:

                  (n)  Liabilities or obligations of Seller or the  Subsidiaries
         arising under the  employment,  change-of-control,  retention bonus and
         pay-to-stay agreements described on Schedule 2.3(n); provided, however,
         that if HEALTHSOUTH or Seller shall have paid any amounts in respect of
         such liabilities or obligations prior to the Closing Date, or shall pay
         any amounts in respect of such  liabilities  or  obligations  after the
         Closing  Date,  Buyer  shall  reimburse  HEALTHSOUTH  or Seller for the
         amounts  so paid upon  demand on or after the  Closing  Date (but in no
         event  earlier  than the date on which such  amounts are paid,  if paid
         after the Closing Date);

     Section 3.8 B&G Note.  With respect to the Note from B&G  Partners  Limited
Partnership  described in Section  2.1(g) of the  Agreement,  HEALTHSOUTH  shall
indemnify  Buyer  against any failure of Buyer to receive  payment of  principal
valued at at least  $5,000,000  by paying to Buyer,  upon demand,  the shortfall
between  $5,000,000  and the value of the  consideration  received as payment of
principal;  provided, however, that HEALTHSOUTH shall not be responsible for any
shortfall  resulting from the surrender of securities issued by Buyer as payment
of principal on such note.

     Section 3.9 Certain Development Projects. The parties agree that all right,
title and  interest of Seller or any  Affiliate in and to the  facilities  under
development in Reno, Las Vegas and Carson City,  Nevada, and all liabilities and
obligations   with  respect   thereto,   are  Transferred   Assets  and  Assumed

                                    ARTICLE 4


     Section 4.1  Affirmation  of  Agreement.  The parties  hereby affirm to one
another their  respective  obligations  pursuant to the Agreement and affirm the
Agreement,  amended as set forth above. The parties hereby represent and warrant
to one another that none of them is in default in the  performance of any of its
obligations to the other as of the date of this Amendment.

     Section 4.2  Representations  and  Warranties.  The parties  represent  and
warrant to one  another  that this  Amendment  has been duly  authorized  by all
corporate  action required to be taken on each of their parts,  that it has been
duly executed and delivered,  that it constitutes  the legal,  valid and binding
obligations of each of them, except as enforcement may be subject to bankruptcy,
moratorium and similar laws and except as the availability of equitable remedies
may be subject to customary limitations.


     Section 4.3 Further  Assurances.  Each party  hereby  agrees to perform any
further acts and to execute and deliver any  documents  which may be  reasonably
necessary to carry out the provisions of this Amendment.

     IN WITNESS  WHEREOF,  the parties have duly executed this  Amendment on the
date first above written.

                                             HEALTHSOUTH CORPORATION

                                             By /s/WILLIAM W. HORTON

                                                Its     Senior Vice President

                                             HORIZON/CMS HEALTHCARE CORPORATION

                                             By /s/WILLIAM W. HORTON

                                                Its     Vice President

                                             INTEGRATED HEALTH SERVICES, INC.

                                             By /s/TAYLOR PICKETT

                                                Its     Executive Vice President


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