{"id":40969,"date":"2015-09-17T11:25:58","date_gmt":"2015-09-17T16:25:58","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/contracts\/uncategorized\/credit-agreement-healthsouth-rehabilitation-corp-and.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"credit-agreement-healthsouth-rehabilitation-corp-and","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/finance\/credit-agreement-healthsouth-rehabilitation-corp-and.html","title":{"rendered":"Credit Agreement &#8211; HealthSouth Rehabilitation Corp. and NationsBank of North Carolina NA"},"content":{"rendered":"<pre>\n                             AMENDED AND RESTATED\n                                CREDIT AGREEMENT\n\n                                     among\n\n                     HEALTHSOUTH REHABILITATION CORPORATION\n\n                                      and\n\n              NATIONSBANK OF NORTH CAROLINA, NATIONAL ASSOCIATION,\n                                    as Agent\n\n                                      and\n\n                         LENDERS AS SIGNATORIES HERETO,\n\n                                    --------\n\n\n              $550,000,000 Revolving Credit and Term Loan Facility\n\n\n                            Dated as of June 7, 1994\n\n                               TABLE OF CONTENTS\n\n                                   ARTICLE I\n\n                                  DEFINITIONS\n\n                                   ARTICLE II\n\n               REVOLVING FACILITY TERMS, TERM LOAN AND COLLATERAL\n\nSECTION 2.1   Syndicated Loans............................................. 24\nSECTION 2.2   Advances of Syndicated Loans................................. 25\nSECTION 2.3   Competitive Bid Loans........................................ 26\nSECTION 2.4   Term Loan.................................................... 30\nSECTION 2.5   Payments..................................................... 31\nSECTION 2.6   Joint and Several Obligations................................ 31\nSECTION 2.7   Pledge Agreement............................................. 32\nSECTION 2.8   Prepayment................................................... 33\nSECTION 2.9   Notes........................................................ 33\nSECTION 2.10  Reduction in Revolving Facility.............................. 34\nSECTION 2.11  Unused Fee................................................... 34\nSECTION 2.12  Lending Offices.............................................. 34\nSECTION 2.13  Letter of Credit Borrowings.................................. 34\nSECTION 2.14  Pro Rata Payments............................................ 38\nSECTION 2.15  Deficiency Advances.......................................... 38\nSECTION 2.16  Adjustments by Agent......................................... 39\n\n                                  ARTICLE III\n\n                          INTEREST ON SYNDICATED LOANS\n\nSECTION 3.1   Applicable Interest Rates.................................... 40\nSECTION 3.2   Procedure for Exercising Interest Rate Options............... 40\nSECTION 3.3   Base Rate.................................................... 40\nSECTION 3.4   Fixed Rate................................................... 41\nSECTION 3.5   Changes in Syndicated Margin.  .............................. 41\n\n                                   ARTICLE IV\n\n              TERMINATION OF LIBOR-BASED RATE AND YIELD PROTECTION\n\nSECTION 4.1   Suspension of Loans.......................................... 42\nSECTION 4.2   Compensation................................................. 43\nSECTION 4.3   Taxes........................................................ 43\n\n                                   ARTICLE V\n\n                         REPRESENTATIONS AND WARRANTIES\n\nSECTION 5.1   Organization, Powers, Existence, etc......................... 46\nSECTION 5.2   Authorization of Borrowing, etc.............................. 46\nSECTION 5.3   Liabilities.................................................. 46\nSECTION 5.4   Taxes........................................................ 47\nSECTION 5.5   Litigation................................................... 47\nSECTION 5.6   Agreements................................................... 47\nSECTION 5.7   Use of Proceeds.............................................. 47\nSECTION 5.8   ERISA Requirement............................................ 47\nSECTION 5.9   Subsidiaries................................................. 47\nSECTION 5.10  Principal Place of Business.................................. 48\nSECTION 5.11  Environmental Laws........................................... 48\nSECTION 5.12  Disclosure................................................... 48\nSECTION 5.13  Licenses..................................................... 48\nSECTION 5.14  Title to Properties.......................................... 48\n\n                                   ARTICLE VI\n\n                         GENERAL CONDITIONS OF LENDING\n\nSECTION 6.1   Representations and Warranties............................... 50\nSECTION 6.2   No Default................................................... 50\nSECTION 6.3   Supporting Documents......................................... 50\n\n                                  ARTICLE VII\n\n                       GENERAL COVENANTS OF THE BORROWER\n\nSECTION 7.1   Existence, Properties, etc................................... 52\nSECTION 7.2   Payment of Indebtedness, Taxes, etc.......................... 52\nSECTION 7.3   Financial Statements, Reports, etc........................... 52\nSECTION 7.4   Litigation Notice............................................ 54\nSECTION 7.5   Default Notice............................................... 55\nSECTION 7.6   Further Assurances........................................... 55\nSECTION 7.7   Insurance.................................................... 55\nSECTION 7.8   Covenants Regarding Financial Condition...................... 55\nSECTION 7.9   Continuation of Current Business............................. 61\nSECTION 7.10  Management Contracts......................................... 61\nSECTION 7.11  Cooperation; Inspection of Properties........................ 61\nSECTION 7.12  Use of Proceeds.............................................. 61\nSECTION 7.13  Limit on Investment in HEALTHSOUTH of\n              Birmingham, Inc.............................................. 62\nSECTION 7.14  Additional Consolidated Entities............................. 62\nSECTION 7.15  ERISA.  ..................................................... 62\n\n                                  ARTICLE VIII\n\n                         EVENTS OF DEFAULT AND REMEDIES\n\nSECTION 8.1   Events of Default............................................ 64\nSECTION 8.2   Agent to Act................................................. 67\nSECTION 8.3   Cumulative Rights............................................ 67\nSECTION 8.4   No Waiver.................................................... 67\nSECTION 8.5   Default...................................................... 67\nSECTION 8.6   Allocation of Proceeds....................................... 68\n\n                                   ARTICLE IX\n\n                                   THE AGENT\n\nSECTION 9.1   Appointment.................................................. 69\nSECTION 9.2   Attorneys-in-fact............................................ 69\nSECTION 9.3   Limitation on Liability...................................... 69\nSECTION 9.4   Reliance..................................................... 69\nSECTION 9.5   Notice of Default............................................ 70\nSECTION 9.6   No Representations........................................... 70\nSECTION 9.7   Indemnification.............................................. 71\nSECTION 9.8   Lender....................................................... 71\nSECTION 9.9   Resignation.................................................. 71\nSECTION 9.10  Sharing of Payments, etc..................................... 72\nSECTION 9.11  Fees......................................................... 72\nSECTION 9.12  Independent Agreements....................................... 72\n\n                                   ARTICLE X\n\n                                 MISCELLANEOUS\n\nSECTION 10.1   Assignments and Participations.............................. 73\nSECTION 10.2   Notices..................................................... 75\nSECTION 10.3   No Waiver................................................... 76\nSECTION 10.4   Setoff...................................................... 76\nSECTION 10.5   Survival.................................................... 76\nSECTION 10.6   Expenses.................................................... 77\nSECTION 10.7   Amendments.................................................. 78\nSECTION 10.8   Counterparts................................................ 78\nSECTION 10.9   Waivers by Borrower......................................... 79\nSECTION 10.10  Termination................................................. 79\nSECTION 10.11  Governing Law............................................... 80\nSECTION 10.12  Indemnification............................................. 80\nSECTION 10.13  Agreement Controls.......................................... 81\nSECTION 10.14  Integration................................................. 81\nSECTION 10.15  Successors and Assigns...................................... 81\nSECTION 10.16  Severability................................................ 81\n\n\nExhibit A   -   Applicable Commitment Percentage\nExhibit B   -   Form of Assignment and Acceptance\nExhibit C-1 -   Form of Partnership Guaranty Agreement\nExhibit C-2 -   Form of Subsidiary Guaranty Agreement\nExhibit D   -   Form of Request for Advance or Interest Rate\n                Election\nExhibit E   -   Form of Competitive Bid Quote Requests\nExhibit F   -   Form of Competitive Bid Quote\nExhibit G   -   Subsidiaries and Controlled Partnerships\nExhibit H-1 -   Form of Syndicated Note\nExhibit H-2 -   Form of Competitive Bid Note\nExhibit H-3 -   Form of Term Note\nExhibit I   -   Form of Compliance Certificate and Schedules\n                Thereto\nExhibit J   -   Summary of Insurance\nExhibit K   -   Outstanding Letters of Credit\nExhibit L   -   Investments or Equity Interest\nExhibit M   -   Subsidiaries and Controlled Partnerships\nExhibit N   -   Existing Liens\nExhibit O   -   Disposal Properties\n\n                     AMENDED AND RESTATED CREDIT AGREEMENT\n\n\n         THIS AMENDED AND  RESTATED  CREDIT  AGREEMENT  dated as of June 7, 1994\n(this  \"Agreement\")  is  entered  into by and among  HEALTHSOUTH  REHABILITATION\nCORPORATION, a Delaware corporation (the \"Borrower\"), the Lenders as signatories\nhereto (the \"Lenders\") and NATIONSBANK OF NORTH CAROLINA,  NATIONAL ASSOCIATION,\na national banking association (the \"Agent\").\n\n                                    RECITAL:\n\n         Pursuant to a Credit Agreement dated as of November 20, 1992 as amended\nby Amendments No. 1 and No. 2 (the \"Prior Agreement\"), the lenders party thereto\n(the \"Prior  Lenders\")  have agreed to make loans and cause to be issued letters\nof credit all in an aggregate  outstanding amount of not to exceed $390,000,000.\nPursuant to the terms of the Prior Agreement all Participating  Subsidiaries and\nParticipating Partnerships (each defined in the Prior Agreement) have guaranteed\npayment of all  Credit  Obligations  (as  defined  in the Prior  Agreement).  In\naddition,  the  Borrower,  and certain of the  Participating  Subsidiaries  have\nexecuted  and  delivered to the Agent,  for the benefit of the  Lenders,  Pledge\nAgreements  conveying the property  described therein as security for the Credit\nObligations.  The Borrower has requested that the Prior Agreement be amended and\nrestated in its entirety in order to increase the amount of the credit facility,\nto change certain of the provisions contained therein and to increase the number\nof lenders participating therein. Accordingly, the Borrower, the Lenders and the\nAgent  agree that the Prior  Agreement  is hereby  amended  and  restated in its\nentirety as follows:\n\n\n                                   ARTICLE I\n\n                                  DEFINITIONS\n\n         SECTION 1.1 For the  purposes of this  Agreement,  except as  otherwise\nexpressly provided or unless the context otherwise requires:\n\n                    All accounting  terms not otherwise  defined herein have the\n         meanings  assigned to them, and all  computations  herein  provided for\n         shall  be  made,  in  accordance  with  generally  accepted  accounting\n         principles  applied on a consistent  basis.  All  references  herein to\n         \"GAAP\"  refer  to  such  principles  as  they  exist  at  the  date  of\n         application thereof.\n\n                    All references in this instrument to designated  \"Articles\",\n         \"Sections\"  and  other  subdivisions  are to the  designated  Articles,\n         Sections and subdivisions of this instrument as originally executed.\n\n                    The terms \"herein\", \"hereof\" and \"hereunder\" and other words\n         of similar  import  refer to this  Agreement  as a whole and not to any\n         particular Article, Section or other subdivision.\n\n                    The terms \"include,\"  \"including\" and similar terms shall be\n         construed as if followed by the phrase \"without being limited to.\"\n\n                    All  Article  and  Section  captions  herein  are  used  for\n         reference  only and in no way limit or describe the scope or intent of,\n         or in any way affect, this Agreement.\n\n                    Words  importing the singular  number shall mean and include\n         the plural number and visa versa.\n\n                    All  recitals  set  forth  in  this   Agreement  are  hereby\n         incorporated in the operative provisions of this Agreement.\n\n                    No  inference  in favor of or against  either party shall be\n         drawn  from the fact that such party or its  counsel  has  drafted  any\n         portion hereof.\n\n                    The term  \"person\"  shall include  individual,  corporation,\n         partnership,   joint  venture,   association,   trust,   unincorporated\n         organization and any government or any agency or political  subdivision\n         thereof.\n\n                    Absolute  Rate shall have the meaning  assigned to such term\n         in Section 2.3(c)(ii)(D) hereof.\n\n                    Absolute   Rate  Auction  shall  mean  a   solicitation   of\n         Competitive Bid Quotes setting forth Absolute Rates pursuant\n         to Section 2.3 hereof.\n\n                    Absolute Rate Loans shall mean the Competitive Bid Loans the\n         interest  rates on which are  determined on the basis of Absolute Rates\n         set at Absolute Rate Auctions.\n\n                    Acquisition  means  the  acquisition,   whether  with  cash,\n         property,  stock or  promise  to pay all or a portion  of a person or a\n         Facility or Facilities of a person,  permitted under Sections 7.8(a)(8)\n         and 7.8(a)(17) hereof; provided (i) such Person or Facilities is in the\n         same  line of  business  engaged  in by  Borrower  or its  Consolidated\n         Entities,  (ii) the person or Facility  to be acquired  does not oppose\n         the  acquisition,  and  (iii)  at the  time of  giving  effect  to such\n         Acquisition such person or Facility is a Consolidated Entity.\n\n                    Actual\/360  Basis shall mean a method of computing  interest\n         or other charges  hereunder on the basis of an assumed year of 360 days\n         for actual  number of days  elapsed,  meaning  that  interest  or other\n         charges  accrued for each day will be computed by multiplying  the rate\n         applicable  on that  day by the  unpaid  principal  balance  (or  other\n         relevant sum) on that day and dividing the result by 360.\n\n                    Advance  means a  borrowing  under  the  Revolving  Facility\n         consisting of the aggregate  principal amount of a Syndicated Loan or a\n         Competitive Bid Loan.\n\n                    Affiliate  of any  specified  person  shall  mean any  other\n         person  directly or  indirectly  controlling  or controlled by or under\n         direct or indirect  common  control  with such  specified  person.  For\n         purposes of this  definition  \"control\"  when used with  respect to any\n         specified  person means the power to direct the management and policies\n         of such person,  directly or indirectly,  whether through the ownership\n         of  voting  securities,   by  contract  or  otherwise;  and  the  terms\n         \"controlling\"  and  \"controlled\"  have  meanings   correlative  to  the\n         foregoing.\n\n                    Applicable  Commitment  Percentage means, for each Lender, a\n         fraction,  the  numerator  of which  shall be the then  amount  of such\n         Lender's Commitment and the denominator of which shall be the Revolving\n         Facility,  which Applicable Commitment Percentage for each Lender as of\n         the  Closing  Date is as set forth in  Exhibit A  attached  hereto  and\n         incorporated   herein  by  reference;   provided  that  the  Applicable\n         Commitment Percentage of each Lender shall be increased or decreased to\n         reflect any  assignments  to or by such Lender  effected in  accordance\n         with Section 10.1 hereof.\n\n                    Applicable  Lending  Office shall mean,  for each Lender and\n         for each Type of Loan,  the  \"Lending  Office\" of such Lender (or of an\n         Affiliate  of such  Lender)  designated  for  such  Type of Loan on the\n         signature  pages  hereof or such other  office of such Lender (or of an\n         Affiliate  of such Lender) as such Lender may from time to time specify\n         to the Agent and the  Borrower as the office by which its Loans of such\n         Type are to be made and maintained.\n\n                    Application  shall mean the  Application  and  Agreement for\n         Letter  of Credit  pursuant  to which  the  Borrower  may apply for the\n         issuance  of a Letter of Credit by  NationsBank  as provided in Section\n         2.13 hereof.\n\n                    Asset Sale for any person means the sale,  lease  conveyance\n         or other  disposition  (including,  without  limitation,  by  merger or\n         consolidation,  and whether by operation of law or otherwise) of any of\n         that person's assets (including,  without limitation, the sale or other\n         disposition of Capital Stock of any Subsidiary of such person,  whether\n         by such  person or by such  Subsidiary),  whether  owned on the date of\n         initial  issuance  of the  Senior  Subordinated  Notes or  subsequently\n         acquired,  in one transaction or a series of related  transactions,  in\n         which  such  person  and or its  Subsidiaries  sell,  lease,  convey or\n         otherwise  dispose of (i) all or substantially all of the Capital Stock\n         of any of such  person's  Subsidiaries,  (ii) assets  which  constitute\n         substantially  all of an  operating  unit or business of such person or\n         any of its Subsidiaries,  or (iii) any health care facility;  provided,\n         however,  that the following  shall not constitute  Asset Sales:  (i) a\n         transaction or series of related  transactions that results in a Change\n         of Control  (as such term is defined in the  Indenture  dated March 24,\n         1994 relating to the Senior Subordinated  Notes), and (ii) transactions\n         between the Borrower and any of its Wholly Owned  Subsidiaries (as such\n         term is defined in the  Indenture  dated March 24, 1994 relating to the\n         Senior Subordinated Notes) or among such Wholly Owned Subsidiaries.\n\n                    Assignment  and  Acceptance  shall  mean an  Assignment  and\n         Acceptance in the form of Exhibit B (with blanks  appropriately  filled\n         in)  delivered in  connection  with an  assignment  of a portion of the\n         Lender's interest under this Agreement pursuant to Section 10.1.\n\n                    Attributable Indebtedness when used with respect to any Sale\n         and  Leaseback  Transaction  or an  operating  lease with  respect to a\n         healthcare facility means, as at the time of determination, the present\n         value (discounted at a rate equivalent to the interest rate implicit in\n         the lease,  compounded on a semiannual  basis) of the total obligations\n         of the lessee for rental payments, after excluding all amounts required\n         to be paid on account of  maintenance  and repairs,  insurance,  taxes,\n         utilities and other similar  expenses payable by the lessee pursuant to\n         the terms of the lease, during the remaining term of the lease included\n         in any such Sale and Leaseback  Transaction or such operating  lease or\n         until the earliest  date on which the lessee may  terminate  such lease\n         without  penalty or upon payment of a penalty (in which case the rental\n         payments shall include such penalty);  provided,  that the Attributable\n         Indebtedness with respect to a Sale and Leaseback  Transaction shall be\n         no less than the fair market value of the property subject to such Sale\n         and Leaseback Transaction.\n\n                    Base Rate  shall  mean the  higher of the (i) Prime  Rate or\n         (ii) the Federal Funds Effective Rate plus 1\/2% per annum.\n\n                    Base  Rate  Loans  shall  mean  Syndicated  Loans  that bear\n         interest at rates based upon the Base Rate.\n\n                    Business  Day  shall  mean (a) any day on  which  commercial\n         banks are not  authorized  or  required  to close in  Charlotte,  North\n         Carolina and New York City and (b) if such day relates to the giving of\n         notices or quotes in connection  with a LIBOR Auction or to a borrowing\n         of,  a  payment  or  prepayment  of  principal  of or  interest  on,  a\n         Conversion  of or into,  or an  Interest  Period for, a LIBOR Loan or a\n         LIBOR Market Loan or a notice by the Borrower  with respect to any such\n         borrowing, payment, prepayment,  Conversion or Interest Period, any day\n         on which  dealings  in Dollar  deposits  are  carried out in the London\n         interbank market.\n\n                    Capital  Expenditure shall mean any expenditure or liability\n         that is properly charged to a capital account or otherwise  capitalized\n         on the consolidated balance sheet in accordance with GAAP.\n\n                    Capital Stock of any person means any and all shares, rights\n         to   purchase,   warrants  or  options   (whether   or  not   currently\n         exercisable);  participation  or other  equivalents  of or  interest in\n         (however  designated) the equity (including  without  limitation common\n         stock,  preferred stock and partnership and joint venture interests) of\n         such Person  (excluding any debt securities that are convertible  into,\n         or exchangeable for, such equity).\n\n                    Capitalized  Lease  Obligations  of  any  person  means  the\n         obligation  of such person to pay rent or other  amounts  under a lease\n         that is required to be capitalized for financial  reporting purposes in\n         accordance  with GAAP, and the amount of such  obligation  shall be the\n         capitalized amount thereof determined in accordance with GAAP.\n\n                    Cash Available for Capital Expenditures means the sum of (i)\n         Consolidated Net Income,  (ii)  Consolidated  Depreciation  Expense and\n         (iii)  Consolidated  Amortization  Expense minus  Consolidated  Current\n         Maturities.\n\n                    Class  shall  have  the  meaning  assigned  to such  term in\n         Section 1.2 hereof.\n\n                    Closing Date shall mean the date of this Agreement.\n\n                    Collateral  shall  mean all  property  covered by the Pledge\n         Agreements  or that  otherwise  at any time  secures  any of the Credit\n         Obligations.\n\n                    Commitment shall mean, as to each Lender,  the obligation of\n         such Lender to make Syndicated  Loans pursuant to Section 2.1 hereof in\n         an aggregate amount at any one time outstanding up to but not exceeding\n         the amount set  opposite  such  Lender's  name on the  signature  pages\n         hereof  under the caption  \"Commitment\"  (as the same may be reduced at\n         any  time  or from  time to time  pursuant  to  Section  2.10  hereof);\n         provided  that the  Commitment  of each Lender  shall be  increased  or\n         decreased to reflect any  assignments to or by such Lender  effected in\n         accordance with Section 10.1 hereof.\n\n                    Competitive Bid Borrowing shall have the meaning assigned to\n         such term in Section 2.3(b) hereof.\n\n                    Competitive  Bid Loans shall mean the Loans  provided for by\n         Section 2.3 hereof.\n\n                    Competitive  Bid  Notes  shall  mean  the  promissory  notes\n         provided  for  by  Section  2.9(b)  hereof  and  all  promissory  notes\n         delivered in  substitution  or exchange  therefor,  in each case as the\n         same shall be  modified  and  supplemented  and in effect  from time to\n         time.\n\n                    Competitive Bid Quote shall mean an offer in accordance with\n         Section  2.3(c) hereof by a Lender to make a Competitive  Bid Loan with\n         one single specified interest rate.\n\n                    Competitive   Bid  Quote  Request  shall  have  the  meaning\n         assigned to such term in Section 2.3(b) hereof.\n\n                    Compliance  Certificate shall have the meaning attributed to\n         that term in Section 7.3(3) below.\n\n                    Consolidated  Adjusted  Interest Expense means  Consolidated\n         Interest Expense plus (to the extent not otherwise  included within the\n         definition of Interest  Expense as imputed  interest)  one-third of the\n         rental  expense on  Attributable  Indebtedness  of the Borrower and its\n         Consolidated  Entities  for such period  determined  on a  consolidated\n         basis.\n\n                    Consolidated  Amortization  Expense of the  Borrower for any\n         period  means  the  amortization   expense  of  the  Borrower  and  its\n         Consolidated  Entities  for such period (to the extent  included in the\n         computation of Consolidated  Net Income),  determined on a consolidated\n         basis in accordance with GAAP.\n\n                    Consolidated   Cash  Flow  means,   for   Borrower  and  its\n         Consolidated  Entities for any  Four-Quarter  Period,  Consolidated Net\n         Income,   plus   amounts  that  have  been   deducted  in   determining\n         Consolidated Net Income for such period for (i) Consolidated Income Tax\n         Expense,  (ii)  Consolidated   Interest  Expense,   (iii)  Consolidated\n         Depreciation  Expense,  (iv) Consolidated  Amortization Expense and (v)\n         the  minority  interests  of any  person  or  persons  in  Consolidated\n         Entities.\n\n                    Consolidated  Current Assets means cash and all other assets\n         or resources of the Borrower and its  Consolidated  Entities  which are\n         expected  to be  realized  in  cash,  sold in the  ordinary  course  of\n         business,  or consumed  within one year,  determined on a  consolidated\n         basis in accordance with GAAP.\n\n                    Consolidated  Current  Liabilities  means the  amount of all\n         liabilities  of the Borrower  and its  Consolidated  Entities  which by\n         their terms are payable  within one year  (including  all  Indebtedness\n         payable on demand or  maturing  not more than one year from the date of\n         computation) and the current portion of Indebtedness  having a maturity\n         date in excess  of one  year,  determined  on a  consolidated  basis in\n         accordance with GAAP.\n\n                    Consolidated  Current Maturities means Principal  Maturities\n         of the Borrower and its Consolidated Entities.\n\n                    Consolidated  Depreciation Expense of the Borrower means the\n         depreciation expense of the Borrower and its Consolidated  Entities for\n         such period (to the extent  included in the computation of Consolidated\n         Net Income of the  Borrower),  determined  on a  consolidated  basis in\n         accordance with GAAP.\n\n                    Consolidated  EBITDA of the Borrower means,  with respect to\n         any Four-Quarter  Period,  Consolidated Net Income before extraordinary\n         losses and losses realized in connection with sale of assets,  plus (i)\n         Consolidated  Income Tax Expense,  plus (ii) Consolidated  Depreciation\n         Expense,  plus  (iii)  Consolidated  Amortization  Expense,  plus  (iv)\n         Consolidated  Adjusted  Interest  Expense,  plus (v) all other non-cash\n         items  reducing  Consolidated  Net  Income  of  the  Borrower  and  its\n         Consolidated Entities, determined on a consolidated basis in accordance\n         with GAAP, plus (vi) without duplication,  for calculation of an EBITDA\n         Coverage  Ratio for periods  ending on or before  December 31, 1994 the\n         sum of  $31,500,000  (representing  expenses  related to the Borrower's\n         acquisition  of certain  rehabilitation  facilities  and related assets\n         from National Medical  Enterprises,  Inc.  effective December 31, 1993,\n         net of Federal income tax effect), plus (vii) without duplication,  any\n         amount,  net of  Federal  income  tax  effects,  representing  expenses\n         relating  to an  Acquisition,  up to a maximum  of 10% of the  purchase\n         price thereof,  determined on a consolidated  basis in accordance  with\n         GAAP, and less all non-cash items  increasing  Consolidated Net Income,\n         determined on a consolidated basis in accordance with GAAP.\n\n                    Consolidated  Entity shall mean any person  whose  financial\n         statements are appropriately consolidated with the Borrower's financial\n         statements under GAAP.\n\n                    Consolidated  Income  Tax  Expense of the  Borrower  for any\n         period means the provision for taxes based on income and profits of the\n         Borrower  and its  Consolidated  Entities  to the extent such income or\n         profits  were  included in computing  Consolidated  Net Income for such\n         period.\n\n                    Consolidated Interest Expense of the Borrower for any period\n         means  the  Interest  Expense  of the  Borrower  and  its  Consolidated\n         Entities  for  such  period,  determined  on a  consolidated  basis  in\n         accordance with GAAP.\n\n                    Consolidated  Lease  Expense  means for any period all Lease\n         Payments  paid or accrued  during such period  under  operating  leases\n         (whether or not  constituting  rental  expense) by the Borrower and its\n         Consolidated  Entities determined on a consolidated basis in accordance\n         with GAAP.\n\n                    Consolidated Net Income of the Borrower for any period means\n         the net income (or loss) of the Borrower and its Consolidated  Entities\n         for such period  determined on a consolidated  basis in accordance with\n         GAAP,  without  giving  effect to  dividends on any series of preferred\n         stock of any Consolidated Entity, whether or not in cash, to the extent\n         such  consolidated net income was reduced thereby;  provided that there\n         shall be excluded  from such net income (for all  purposes,  other than\n         compliance with Section 7.8(a)(1)(A),  to the extent otherwise included\n         therein), without duplication;  (i) the net income of any person (other\n         than a Consolidated  Entity) to the extent that any such income has not\n         actually been received by the Borrower or a Consolidated  Entity in the\n         form of dividends  or similar  distributions  during such period;  (ii)\n         except to the extent  includable in the  consolidated net income of the\n         Borrower or a Consolidated Entity pursuant to the foregoing clause (i),\n         the net income of any person  that  accrued  prior to the date that (a)\n         such  Person  becomes  a  Consolidated  Entity  or is  merged  into  or\n         consolidated  with a  Consolidated  Entity  or (b) the  assets  of such\n         person are acquired by the Borrower or a Consolidated Entity; (iii) the\n         net  income  of  any  Consolidated   Entity  to  the  extent  that  the\n         declaration  or payment of dividends or similar  distributions  by such\n         Subsidiary of that income is not permitted by operation of the terms of\n         its charter or any  agreement,  instrument,  judgment,  decree,  order,\n         statute, rule or governmental  regulation applicable to that Subsidiary\n         during such period; (iv) any gain (or loss),  together with any related\n         provisions for taxes on any such gain,  realized  during such period by\n         the Borrower or its  Consolidated  Entities upon (a) the acquisition of\n         any  securities,  or the  extinguishment  of any  Indebtedness,  of the\n         Borrower  or its  Consolidated  Entities  or (b) any asset  sale by the\n         referent person or any of its Subsidiaries;  (v) any extraordinary gain\n         (or extraordinary loss),  together with any related provision for taxes\n         or tax  benefit  resulting  from any such  extraordinary  gain or loss,\n         realized  by the  Borrower  or its  Consolidated  Entities  during such\n         period;  and  (vi)  in the  case  of a  successor  to  such  person  by\n         consolidation,  merger or transfer of its assets,  any  earnings of the\n         successor prior to such merger, consolidation or transfer of assets.\n\n                    Consolidated  Net Worth of the Borrower as of any date means\n         the Consolidated  Stockholders'  Equity  (including any preferred stock\n         that is classified as equity under GAAP, other than Disqualified Stock)\n         of such person and its  Subsidiaries  (excluding any equity  adjustment\n         for  foreign  currency  translation  for any period  subsequent  to the\n         Closing Date on a  consolidated  basis at such date,  as  determined in\n         accordance with GAAP, less all write-ups subsequent to the Closing Date\n         in the book  value of any asset  owned by such  Borrower  or any of its\n         Consolidated  Entities;  provided,  however,  that in  calculating  the\n         Consolidated  Net  Worth  of  the  Borrower  immediately  prior  to  an\n         Acquisition  by  the  Borrower  of  another  person,   there  shall  be\n         subtracted from the Borrower's Consolidated Net Worth immediately prior\n         to such  Acquisition  the  lesser of (a) such  amount,  net of  Federal\n         income  tax  effects,   as   represents   expenses   relating  to  such\n         Acquisition,  or (b) 10% of the purchase  price or fair market value of\n         the  consideration  paid  by  the  Borrower  in  connection  with  such\n         Acquisition.\n\n                    Consolidated  Stockholders' Equity shall mean at any time as\n         at  which  the  amount  thereof  is to be  determined,  the  sum of the\n         following  amounts  in  respect of the  Borrower  and the  Consolidated\n         Entities  (i) the par or  stated  value  of all  Capital  Stock  of the\n         Borrower,  (ii) retained  earnings,  (iii)  additional paid in capital,\n         (iv) capital surplus and (v) earned surplus minus treasury stock.\n\n                    Consolidated  Total  Capital  shall  mean  the  sum  of  (i)\n         Consolidated Stockholders' Equity and (ii) Indebtedness of the Borrower\n         and its Consolidated Entities.\n\n                    Controlled  Partnership shall mean a general  partnership of\n         which  the  Borrower  or a  Subsidiary  is a general  partner  (but not\n         including  Alabama  World  Football),  or a limited  partnership  whose\n         general  partners  include  the  Borrower  or  a  Subsidiary  (but  not\n         including Vanderbilt),  which partnership,  whether general or limited,\n         has assets  with a value in excess of  $2,000.00,  and with  respect to\n         which  partnership  the Borrower or a Subsidiary is entitled to receive\n         not less than 50% of any  distributions  of cash  made to the  partners\n         thereof,  other  than  any  preferred  cash  distribution   arrangement\n         approved by the Required Lenders in writing.\n\n                    Convert,   Conversion   and  Converted   shall  refer  to  a\n         conversion  pursuant  to Section  3.2 hereof of one Type of  Syndicated\n         Loan into another Type of Syndicated  Loan, which may be accompanied by\n         the  transfer by a Lender (at its sole  discretion)  of a Loan from one\n         Applicable Lending Office to another.\n\n                    Conversion  Date means June 1, 1997,  the date the Revolving\n         Facility shall convert to a Term Loan pursuant to Section 2.4 hereof.\n\n                    Convertible Subordinated Debentures means the 5% Convertible\n         Subordinated  Debentures due 2001 of the Borrower dated as of March 24,\n         1994 in the aggregate original principal amount of $115,000,000.\n\n                    Credit   Obligations  shall  mean  the  Revolving   Facility\n         Obligations,  the Letter of Credit  Obligations,  the Term Loan and all\n         other obligations and debts owing to the Lenders, and arising under the\n         terms of this Agreement, the Notes, the Applications and the other Loan\n         Documents,  whether  now or  hereafter  incurred,  existing or arising,\n         including  the principal  amount of all Advances,  all Letter of Credit\n         Borrowings,  Reimbursement  Obligations  and the Term Loan with respect\n         thereto,  any sums  expended by the Agent or the Lenders in  exercising\n         the rights and remedies  described in Section 8.1, all accrued interest\n         on Advances,  Letter of Credit  Reimbursement  Obligations and the Term\n         Loan, and all costs, fees, charges and expenses incurred and payable in\n         connection therewith,  including fees payable under the terms of, or in\n         connection  with, this Agreement,  and all other  obligations and debts\n         owing to the Agent or the Lenders arising in connection with, ancillary\n         to, or in support of Advances, Letter of Credit Borrowings and the Term\n         Loan, and all  extensions,  alterations,  modifications,  revisions and\n         renewals of any of the foregoing.\n\n                    Debt Service  Coverage Ratio with respect to any FourQuarter\n         Period means the ratio of (A) Consolidated Net Income plus amounts that\n         have been  deducted  in  determining  Consolidated  Net Income for such\n         period for (i) Consolidated  Depreciation  Expense,  (ii)  Consolidated\n         Interest  Expense,   (iii)  Consolidated   Amortization  Expense,  (iv)\n         Consolidated  Lease  Expense,  and (v) the  minority  interests  of any\n         person or persons to (B) the sum of (i) Consolidated  Interest Expense,\n         (ii)  Consolidated  Lease  Expense  and  (iii)   Consolidated   Current\n         Maturities.\n\n                    Default shall mean an Event of Default or an event that with\n         notice or lapse of time or both would become an Event of Default.\n\n                    Disqualified  Stock  means any Capital  Stock  that,  by its\n         terms (or by the terms of any security into which it is  convertible or\n         for which it is  exchangeable),  or upon the  happening  of any  event,\n         matures  or is  mandatorily  redeemable,  pursuant  to a  sinking  fund\n         obligation or  otherwise,  or is redeemable at the option of the holder\n         thereof, in whole or in part, on or prior to the Maturity Date.\n\n                    Dollars  and the  symbol $ shall mean  dollars  constituting\n         legal tender for the payment of public and private  debts in the United\n         States of America.\n\n                    EBITDA  Coverage  Ratio with respect to any period means the\n         ratio of (i)  Consolidated  EBITDA  to (ii)  the  aggregate  amount  of\n         Consolidated  Adjusted  Interest  Expense  for such  period;  provided,\n         however,  that if any calculation of the EBITDA Coverage Ratio requires\n         the use of any  quarter  prior to the date of initial  issuance  of the\n         Senior  Subordinated  Notes,  such  calculation  shall be made on a pro\n         forma basis,  giving effect to the issuance of the Senior  Subordinated\n         Notes  and the use of the net  proceeds  therefrom  as if the  same had\n         occurred at the beginning of the Four-Quarter  Period used to make such\n         calculation; and provided further that if any such calculation requires\n         the use of any  quarter  prior to the  date  that  any  Asset  Sale was\n         consummated,  or that  any  Indebtedness  was  incurred,  or  that  any\n         acquisition  of a hospital or other  healthcare  facility or any assets\n         purchased outside the ordinary course of business was effected,  by the\n         Borrower or any of its Subsidiaries,  such calculation shall be made on\n         a pro forma basis, giving effect to each such Asset Sale, incurrence of\n         Indebtedness  or  acquisition,  as the case may be,  and the use of any\n         proceeds therefrom, as if the same had occurred at the beginning of the\n         Four-Quarter Period used to make such calculation.\n\n                    ERISA shall mean the Employee Retirement Income Security Act\n         of 1974, as amended.\n\n                    Event of Default  shall have the  meaning  assigned  to such\n         term in Article VIII hereof.\n\n                    Facility   shall   mean   an   in-patient   or   out-patient\n         rehabilitation   facility,  a  certified   out-patient   rehabilitation\n         facility, skilled nursing facility, specialty medical center, specialty\n         orthopedic  hospital  or  acute  care  hospital,  sub-acute  in-patient\n         facility,   transitional   living  center,   medical  office  building,\n         outpatient  surgery  center and outpatient  diagnostic  center with all\n         buildings  and  improvements  associated  therewith,  that is  owned or\n         leased,  in whole or  part,  by the  Borrower  or a  Subsidiary  or any\n         partnership controlled directly or indirectly by the Borrower.\n\n                    Federal Funds  Effective  Rate shall mean,  for any day, the\n         rate per annum (rounded upwards, if necessary,  to the nearest 1\/100 of\n         1%) equal to the  weighted  average of the rates on  overnight  Federal\n         funds  transactions with members of the Federal Reserve System arranged\n         by Federal  funds  brokers on such day,  as  published  by the  Federal\n         Reserve Bank of New York on the Business Day next  succeeding such day,\n         provided that (a) if the day for which such rate is to be determined is\n         not a Business Day, the Federal Funds Effective Rate for such day shall\n         be such rate on such transactions on the next preceding Business Day as\n         so  published  for any  Business  Day,  and (b) if such  rate is not so\n         published for any Business Day, the Federal  Funds  Effective  Rate for\n         such  Business  Day shall be the average  rate  charged to the Agent on\n         such Business Day on such transactions as determined by the Agent.\n\n                    Fiscal Year means the twelve  month  period of the  Borrower\n         commencing on January 1 of each calendar year and ending December 31 of\n         each calendar year.\n\n                    Fixed Rate shall mean the  Absolute  Rate or the  LIBORBased\n         Rate.\n\n                    Fixed  Rate  Segment  shall  mean a Segment to which a Fixed\n         Rate is (or is proposed to be) applicable.\n\n                    Four-Quarter  Period means a period of four full consecutive\n         fiscal  quarter  periods,  taken  together  as one  accounting  period;\n         provided,  however,  for purposes of Sections 7.8(a)(5),  7.8(a)(6) and\n         7.8(a)(7) the results of operations  for the three,  six and nine month\n         periods  of  the  Fiscal  Year  ending   December  31,  1994  shall  be\n         annualized.\n\n                    GAAP means  generally  accepted  accounting  principles  set\n         forth in the opinions and  pronouncements of the Accounting  Principles\n         Board of the American  Institute of Certified  Public  Accountants  and\n         statements and  pronouncements  of the Financial  Accounting  Standards\n         Board  or in such  other  statements  by such  other  entity  as may be\n         approved by a significant  segment of the accounting  profession of the\n         United States, as from time to time in effect.\n\n                    Governmental Authority shall mean any federal, state, county\n         or municipal agency, authority,  department,  commission, bureau, board\n         or court.\n\n                    Governmental   Requirements  shall  mean  all  laws,  rules,\n         regulations,  requirements,  ordinances,  judgments, decrees, codes and\n         orders of any Governmental  Authority  applicable to the Borrower,  any\n         Consolidated Entity or any Facility.\n\n                    Guaranteed   Obligations   of  any  person  shall  mean  all\n         guaranties  (including  guaranties  of  guaranties  and  guaranties  of\n         dividends and other monetary obligations), endorsement, assumptions and\n         other  contingent  obligations  with  respect  to, or to purchase or to\n         otherwise pay or acquire,  Indebtedness of others;  provided,  however,\n         that such term shall not  include  obligations  under  leases and other\n         contracts   initially   incurred   directly   by  another   person  and\n         subsequently directly assumed by the person in question,  but such term\n         shall include obligations that, if the same had been initially incurred\n         directly by the person in question,  would have constituted  Guaranteed\n         Obligations.\n\n                    Guaranty  Agreements  shall have the meaning  attributed  to\n         that term in Section 2.6(a).\n\n                    Hedging  Obligations of any person means the  obligations of\n         such  person  pursuant to any  interest  rate swap  agreement,  foreign\n         currency exchange agreement,  interest rate collar agreement, option or\n         futures contract or other similar agreement or arrangement  relating to\n         interest rates or foreign exchange rates.\n\n                    Indebtedness  of any  person  at  any  date  means,  without\n         duplication:  (i) all  indebtedness  of such person for borrowed  money\n         (whether  or not the  recourse  of the  lender  is to the  whole of the\n         assets  of  such  person  or  only  to a  portion  thereof);  (ii)  all\n         obligations  of such person  evidenced by bonds,  debentures,  notes or\n         other  similar  instruments;  (iii) all  obligations  of such person in\n         respect  of  letters  of  credit  or  other  similar   instruments  (or\n         reimbursement  obligations with respect thereto);  (iv) all obligations\n         of such person with  respect to Hedging  Obligations  (other than those\n         that fix the  interest  rate on variable  rate  indebtedness  otherwise\n         permitted   hereunder   or  that   protect  the  Borrower  and  or  its\n         Consolidated  Entities against changes in foreign exchange rates);  (v)\n         obligations  of such  person to pay the  deferred  and unpaid  purchase\n         price of  property  or  services,  except  trade  payables  and accrued\n         expenses  incurred  in  the  ordinary  course  of  business;  (vi)  all\n         Capitalized Lease Obligations of such person; (vii) all indebtedness of\n         others  secured by a Lien on any assets of such person,  whether or not\n         such indebtedness is assumed by such person;  and (viii) all Guaranteed\n         Obligations. The amount of Indebtedness of any person at any date shall\n         be  the  outstanding   balance  at  such  date  of  all   unconditional\n         obligations as described  above,  the maximum  liability of such person\n         for any such  contingent  obligations  at such date and, in the case of\n         clause (vii), the amount of the Indebtedness secured.\n\n                    Interest  Expense of any  person  for any  period  means the\n         aggregate  amount of interest which, in accordance with GAAP,  would be\n         set opposite the caption  \"interest  expense\" or any like caption on an\n         income  statement  for such person  (including,  without  limitation or\n         duplication,   imputed   interest   included   in   Capitalized   Lease\n         Obligations, all commissions, discounts and other fees and charges owed\n         with  respect to letters of credit and bankers'  acceptance  financing,\n         the net costs  associated  with Hedging  Obligations,  amortization  of\n         financing  fees and  expenses,  the  interest  portion of any  deferred\n         payment  obligation,  amortization  of discount and all other  non-cash\n         interest  expense other than interest  amortized to cost of sales) plus\n         the  aggregate  amount,  if any,  by which such  interest  expense  was\n         reduced as a result of the amortization of deferred debt  restructuring\n         credits for such period.\n\n                    Interest Period shall mean:\n\n                    (a) with respect to any LIBOR Loan,  each period  commencing\n         on the date such LIBOR Loan is made or Converted from a Loan of another\n         Type or the last day of the next  preceding  Interest  Period  for such\n         Loan and  ending on the  numerically  corresponding  day in the  first,\n         second or third calendar month  thereafter,  as the Borrower may select\n         as provided in Section 3.2  hereof,  except that each  Interest  Period\n         that  commences on the last Business Day of a calendar month (or on any\n         day  for  which  there  is no  numerically  corresponding  day  in  the\n         appropriate  subsequent  calendar month) shall end on the last Business\n         Day of the appropriate subsequent calendar month;\n\n                    (b) with  respect  to any  Absolute  Rate  Loan,  the period\n         commencing  on the date such  Absolute  Rate Loan is made and ending on\n         any Business Day up to 180 days thereafter,  as the Borrower may select\n         as provided in Section 2.3(b) hereof; and\n\n                    (c) with  respect  to any  LIBOR  Market  Loan,  the  period\n         commencing on the date such LIBOR Market Loan is made and ending on the\n         numerically  corresponding  day in the  first,  second,  third or sixth\n         calendar  month  thereafter,  as the Borrower may select as provided in\n         Section 2.3(b) hereof,  except that each Interest Period that commences\n         on the last  Business  Day of a  calendar  month  (or any day for which\n         there is no numerically corresponding day in the appropriate subsequent\n         calendar  month) shall end on the last Business Day of the  appropriate\n         subsequent calendar month.\n\n         Notwithstanding  the  foregoing:  (i) if any  Interest  Period  for any\n         Competitive  Bid Loan would  otherwise end after the  Conversion  Date,\n         such  Interest  Period shall end on the  Conversion  Date;  (ii) if any\n         Interest  Period  for any  LIBOR  Loan  would  otherwise  end after the\n         Maturity  Date,  such Interest  Period shall end on the Maturity  Date;\n         (iii) each Interest  Period that would  otherwise end on a day which is\n         not a Business Day shall end on the next  succeeding  Business Day (or,\n         in the case of an  Interest  Period for a LIBOR Loan or a LIBOR  Market\n         Loan, if such next succeeding Business Day falls in the next succeeding\n         calendar  month,  on  the  next  preceding   Business  Day);  and  (iv)\n         notwithstanding  clauses (i), (ii) and (iii) above,  no Interest Period\n         for any Loan (other  than an Absolute  Rate Loan) shall have a duration\n         of less than one month (in the case of a LIBOR  Loan or a LIBOR  Market\n         Loan) and, if the  Interest  Period for any LIBOR Loan or LIBOR  Market\n         Loan  would  otherwise  be a shorter  period,  such  Loan  shall not be\n         available hereunder for such period.\n\n                    LC Account  Agreement  shall  mean the LC Account  Agreement\n         dated as of the date hereof  between  the  Borrower  and the Agent,  as\n         amended or modified from time to time.\n\n                    Lease  Payments  shall mean all  amounts  payable  under any\n         lease  agreement  other than  obligations  under lease  agreements that\n         constitute Indebtedness.\n\n                    Letter of Credit  Borrowings  shall  mean as of any date the\n         maximum  aggregate amount that the Agent could be required to pay under\n         drafts that could properly be drawn in compliance with the terms of all\n         Letters of Credit outstanding on such date, other than drafts that have\n         been drawn and paid.\n\n                    Letter  of Credit  Commitment  shall  mean an amount  not to\n         exceed $40,000,000.\n\n                    Letter of Credit  Obligations  shall  mean (a) the Letter of\n         Credit  Borrowings  and (b) the  Reimbursement  Obligations  and  other\n         obligations  under this Agreement and the Applications  with respect to\n         drawings made on Letters of Credit,  including obligations with respect\n         to all principal, interest, fees and other charges related thereto.\n\n                    Letters of Credit  shall  mean and  include  all  letters of\n         credit heretofore or hereafter issued by NationsBank for the account of\n         the Borrower pursuant to this Agreement.\n\n                    Liabilities  of any person shall mean  obligations  that are\n         properly classified as liabilities under GAAP.\n\n                    LIBOR Auction shall mean a solicitation  of Competitive  Bid\n         Quotes  setting  forth  LIBOR  Margins  based  on the  LIBORBased  Rate\n         pursuant to Section 2.3 hereof.\n\n                    LIBOR-Based Rate shall mean the rate of interest  determined\n         by the Agent at  approximately  11:00 A.M. London time two (2) Business\n         Days prior to the commencement of the Interest Period,  based upon such\n         factors as the Agent deems  relevant,  as the Agent's best  estimate of\n         the cost of funds  available  to the  Agent  from the  purchase  on the\n         London  interbank  market  of  funds in the  form of time  deposits  in\n         Dollars  in the  approximate  amount  of the  Segment  that  is to bear\n         interest at the LIBOR-Based Rate,  having a maturity  comparable to the\n         Interest Period during which the  LIBOR-Based  Rate is to be in effect,\n         it being  expressly  understood  that (i) the  Agent  may not  actually\n         purchase  any  such  time  deposits  and  obtain  such  funds  (ii) the\n         LIBOR-Based  Rate will be an  estimate,  and for a variety of  reasons,\n         including changing market  conditions,  the actual cost of funds to the\n         Agent  (if the  Agent  elects  to  purchase  funds  in the form of time\n         deposits on such date) might vary from the Agent's estimate.\n\n                    LIBOR Loans shall mean  Syndicated  Loans  interest rates on\n         which  are  determined  on the  basis  of  LIBOR-Based  Rates  plus the\n         Syndicated Margin.\n\n                    LIBOR Margin shall have the meaning assigned to such term in\n         Section 2.3(c)(ii)(C) hereof.\n\n                    LIBOR Market Loans shall mean Competitive Bid Loans interest\n         rates on which are determined on the basis of LIBORBased Rates pursuant\n         to a LIBOR Auction.\n\n                    LIBOR  Reserve   Requirement   shall  mean  the   percentage\n         (expressed  as a decimal)  prescribed  by the Board of Governors of the\n         Federal  Reserve  System (or any  successor),  on the date on which the\n         LIBOR-Based   Rate  is   determined,   for   determining   the  reserve\n         requirements   of  the  Agent   (including  any  marginal,   emergency,\n         supplemental,  special or other  reserves)  with respect to liabilities\n         relating to time  deposits  purchased  in the London  interbank  market\n         having a maturity equal to the period during which the LIBOR-Based Rate\n         will be in  effect  and in an  amount  equal to the  Segment  involved,\n         without any benefit or credit for any proration,  exemptions or offsets\n         under any now or hereafter applicable regulations.\n\n                    Lien shall mean any mortgage,  pledge,  assignment,  charge,\n         encumbrance, lien, security interest or financing lease.\n\n                    Loan Documents  shall mean this  Agreement,  the Notes,  the\n         Applications,   the  Subsidiary   Guaranty  Agreements  and  amendments\n         thereto,  the Partnership  Guaranty  Agreements and amendments thereto,\n         the  Pledge  Agreements,   the  LC  Account  Agreement  and  all  other\n         agreements, instruments and documents executed or delivered at any time\n         in connection with the Credit Obligations, or to evidence or secure any\n         of the Credit Obligations.\n\n                    Loans  shall  mean the  Syndicated  Loans,  Competitive  Bid\n         Loans,  Term  Loans,  Letter of  Credit  Borrowings  and  Reimbursement\n         Obligations and all extensions and renewals thereof.\n\n                    Margin Stock shall have the meaning  attributed to that term\n         in Regulation U of the Federal Reserve Board, as amended.\n\n                    Material Group shall mean, at any time,  any group,  whether\n         one or more, or combination of Consolidated  Entities (a) whose assets,\n         in the  aggregate,  constitute 5% or more of the assets of the Borrower\n         and the Consolidated  Entities on a consolidated basis or (b) whose net\n         revenues,  in the aggregate,  constitute 5% or more of the net revenues\n         of the Borrower and the Consolidated Entities on a consolidated basis.\n\n                    Maturity Date means November 30, 2000.\n\n                    Multi-employer  Plan means an employee  pension benefit plan\n         covered by Title IV of ERISA and in respect  of which the  Borrower  or\n         any  Consolidated  Entity is an  \"employer\"  as  described  in  Section\n         4001(b)  of ERISA,  which is also a  multi-employer  plan as defined in\n         Section 4001(a)(3) of ERISA;\n\n                    NationsBank  means  NationsBank of North Carolina,  National\n         Association,  as a  Lender  and as  issuer  of the  Letters  of  Credit\n         pursuant to Section 2.13 hereof and any successor thereof.\n\n                    Notes shall mean the Syndicated  Notes,  the Competitive Bid\n         Notes and the Term Notes.\n\n                    Opinion of Counsel shall mean a favorable written opinion of\n         an attorney or firm of attorneys  duly  licensed to practice law in the\n         jurisdiction  the laws of which are  applicable to the legal matters in\n         question  and who is not an employee of the Borrower or of an Affiliate\n         of the Borrower.\n\n                    Partnership   Liability   shall  mean,  with  respect  to  a\n         Participating  Partnership,  that part, if any, of an Advance (together\n         with interest thereon and fees,  prepayment  premiums and other charges\n         properly attributable thereto) that is to be received by and used by or\n         for the benefit of such Participating Partnership,  as certified to the\n         Agent by the  Borrower,  under  Section  2.6,  in  connection  with the\n         Borrowers' request for such Advance, and Partnership  Liabilities shall\n         mean the aggregate  amount of all such parts of Advances that are to be\n         received  by and  used by or for  the  benefit  of  such  Participating\n         Partnership.\n\n                    Partnership   Guaranty   Agreement  shall  mean  a  guaranty\n         agreement of a  Participating  Partnership in the form attached  hereto\n         and marked Exhibit C-1, as amended and supplemented from time to time.\n\n                    Participating    Partnership   shall   mean   a   Controlled\n         Partnership  that has executed and delivered to the Agent a Partnership\n         Guaranty  Agreement and all other  documents  necessary to assume joint\n         and several liability as to the Credit Obligations to the extent of its\n         Partnership Liabilities.\n\n                    Participating  Subsidiary  shall mean a Subsidiary  that has\n         executed and delivered to the Agent a Subsidiary Guaranty Agreement and\n         all other documents  necessary to assume joint and several liability as\n         to the Credit  Obligations  (in the maximum amount provided for in such\n         Subsidiary Guaranty Agreement).\n\n                    Participation  shall mean, with respect to any Lender (other\n         than   NationsBank),   the  extension  of  credit  represented  by  the\n         participation  of such Lender hereunder in the liability of NationsBank\n         in respect of a Letter of Credit  issued by  NationsBank  in accordance\n         with the terms hereof.\n\n                    Permitted Encumbrances shall mean:\n\n                    (1) taxes,  assessments and other governmental  charges that\n                    are not delinquent or that are being contested in good faith\n                    by appropriate proceedings duly pursued;\n\n                    (2) mechanics',  materialmen's,  contractor's, landlord's or\n                    other  similar  liens  arising  in the  ordinary  course  of\n                    business,  securing  obligations  that are not delinquent or\n                    that  are  being  contested  in good  faith  by  appropriate\n                    proceedings duly pursued;\n\n                    (3)  restrictions,   exception,   reservations,   easements,\n                    conditions,  limitations  and other  matters of record other\n                    than Liens that do not adversely affect the value or utility\n                    of the property;\n\n                    (4) Liens on  equipment  used in a Facility  (a) that secure\n                    Indebtedness  that already  existed when such  equipment was\n                    purchased  or  acquired,  or (b) that were created to secure\n                    loans,  the proceeds of which were used in their entirety to\n                    pay the purchase price of such equipment, provided that such\n                    Liens attach only to the equipment so purchased;\n\n                    (5)  Liens in  favor of the  Agent  for the  benefit  of the\n                    Lenders under this Agreement;\n\n                    (6) Liens and  other  matters  approved  in  writing  by the\n                    Required Lenders; and\n\n                    (7) Liens in favor of landlords, the amount secured by which\n                    landlords'  Liens,  in the  aggregate,  would not materially\n                    adversely affect the Borrower or a Material Group.\n\n                    Permitted Investments shall mean:\n\n                    (1) direct  obligations  of, or  obligations  the payment of\n                    which is  guaranteed  by, the United States of America or an\n                    interest  in any trust or fund that  invests  solely in such\n                    obligations or repurchase agreements, properly secured, with\n                    respect to such obligations.\n\n                    (2) direct obligations of agencies or  instrumentalities  of\n                    the United States of America  having a rating of A or higher\n                    by Standard &amp; Poor's  Corporation or A2 or higher by Moody's\n                    Investors Service, Inc.;\n\n                    (3)  a   certificate   of   deposit   issued  by,  or  other\n                    interest-bearing  deposits with, a bank having its principal\n                    place of business in the United States of America and having\n                    equity capital of not less than $250,000,000;\n\n                    (4) a certificate  of deposit by, or other  interest-bearing\n                    deposits with,  any other bank  organized  under the laws of\n                    the United States of America or any state thereof,  provided\n                    that such  deposit  is either  (i)  insured  by the  Federal\n                    Deposit  Insurance  Corporation or (ii) properly  secured by\n                    such  bank by  pledging  direct  obligations  of the  United\n                    States of  America  having a market  value not less than the\n                    face amount of such deposits;\n\n                    (5) the capital stock of and  partnership  interests in, and\n                    loans made by the Borrower to,  Controlled  Partnerships and\n                    Subsidiaries;\n\n                    (6) prime  commercial  paper maturing within 270 days of the\n                    acquisition thereof and, at the time of acquisition,  having\n                    a rating of A-1 or higher by Standard &amp; Poor's  Corporation,\n                    or P-1 or higher by Moody's Investors Service, Inc.;\n\n                    (7) eligible banker's acceptances, repurchase agreements and\n                    tax-exempt  municipal  bonds  having a maturity of less than\n                    one year, in each case having a rating,  or that is the full\n                    recourse  obligation of a person whose senior debt is rated,\n                    A or higher by Standard &amp; Poor's Corporation or A2 or higher\n                    by Moody's Investors Service, Inc.;\n\n                    (8) loans made by the Borrower or a  Consolidated  Entity in\n                    an aggregate  amount of  $2,000,000  or less to employees of\n                    the Borrower or of a Consolidated Entity;\n\n                    (9) loans made by the Borrower or a  Controlled  Partnership\n                    in an  aggregate  amount of  $1,000,000  or less to  limited\n                    partners  (or  potential  limited  partners)  of  Controlled\n                    Partnerships  for  the  purpose  of  enabling  such  limited\n                    partners  to  acquire  limited   partnership   interests  in\n                    Controlled  Partnerships,  to operate their  practices or to\n                    restructure partnership interests;\n\n                    (10)  loans in the amount of up to  $20,000,000  made by the\n                    Borrower to the HEALTHSOUTH Employee Stock Ownership Plan;\n\n                    (11) scholarship  loans made by the Borrower in an aggregate\n                    amount  not  exceeding  $500,000  to  individuals  who  meet\n                    certain  eligibility  requirements  as  established  by  the\n                    Borrower from time to time;\n\n                    (12)  up to 100%  of the  outstanding  shares  of  stock  of\n                    Caretenders  Healthcorp  (formerly known as Senior Services,\n                    Inc.)  provided that  aggregate  costs  incurred to purchase\n                    such shares shall not exceed $12,000,000;\n\n                    (13)  other  investments  of  less  than  $5,000,000  in the\n                    aggregate  expressly  approved  in  writing by the Agent and\n                    investments of $5,000,000 or greater  expressly  approved in\n                    writing by the Required Lenders;\n\n                    (14) any other investment  having a rating of A or higher or\n                    A-1 or  higher by  Standard  &amp; Poor's  Corporation  or A2 or\n                    higher or P-1 or higher by Moody's Investors Service, Inc.;\n\n                    (15) loans to health care  practitioners  and other  persons\n                    not to exceed in the aggregate $5,000,000; and\n\n                    (16) investments in Wellmark,  HEALTHSMART,  MedPartners and\n                    Austin Medical Office Building which in the aggregate do not\n                    exceed $3,500,000.\n\n                    Pledge  Agreement shall have the meaning  attributed to that\n         term in Section 2.7.\n\n                    Prime Rate shall mean that rate of  interest  designated  by\n         the Agent from time to time as its  \"prime  rate\",  it being  expressly\n         understood  and agreed that its prime rate is merely an index rate used\n         by the Agent to  establish  lending  rates and is not  necessarily  the\n         Agent's most  favorable  lending rate,  and that changes in the Agent's\n         prime rate are  discretionary  with the Agent.  Any change in the Prime\n         Rate shall be effective as of the date of such change.\n\n                    Principal Maturities shall mean principal maturing or coming\n         due on Indebtedness  during the next  succeeding  period of 12 calendar\n         months.\n\n                    Principal  Office  shall  mean the  principal  office of the\n         Agent located at NationsBank Corporate Center, 100 North Tryon\n         Street, Charlotte, North Carolina 28255.\n\n                    Reimbursement   Obligation  shall  mean  at  any  time,  the\n         obligation  of the  Borrower  with  respect  to any Letter of Credit to\n         reimburse NationsBank and the Lenders to the extent of their respective\n         Participations  (including by the receipt by NationsBank of proceeds of\n         Loans pursuant to Section 2.1(b) hereof) for amounts  theretofore  paid\n         by NationsBank pursuant to a drawing under such Letter of Credit.\n\n                    Request  for  Advance or  Interest  Election  shall have the\n         meaning attributed to that term in Section 2.2.\n\n                    Required Lenders shall mean Lenders having at least 66- 2\/3%\n         of the aggregate amount of the Commitments or, if the Commitments shall\n         have  terminated,  Lenders  holding at least  66-2\/3% of the  aggregate\n         unpaid principal amount of the Loans, provided that if any Lender shall\n         have  failed to fund its  portion of any  Syndicated  Loan  pursuant to\n         Section  2.1 and the  Agent or  NationsBank  has made such Loan on such\n         Lender's behalf, NationsBank shall be deemed the holder of such portion\n         of such Lender's Commitment for purposes of this definition.\n\n                    Revolving  Facility  shall  mean the  credit  facility  made\n         available to the Borrower by the Lenders  under the terms of Article II\n         in an  aggregate  amount of up to  $550,000,000  as reduced by Borrower\n         pursuant to Section 2.10 hereof.\n\n                    Revolving  Facility  Obligations  shall mean the outstanding\n         principal amount of all Advances,  all interest  accrued  thereon,  all\n         costs, charges, fees and expenses payable in connection therewith,  and\n         all extensions and renewals thereof.\n\n                    Sale and Leaseback  Transaction  means,  with respect to any\n         person, an arrangement with any bank, insurance company or other lender\n         or investor  or to which such lender or investor is a party,  providing\n         for  the  leasing  by such  person  or any of its  Subsidiaries  of any\n         property or asset of such person or any of its  Subsidiaries  which has\n         been or is being sold or transferred by such person or such  Subsidiary\n         to such  lender or investor or to any person to whom funds have been or\n         are to be advanced  by such lender or investor on the  security of such\n         property or asset.\n\n                    Segment  shall  mean a  portion  of  the  Advances  (or  all\n         thereof)  with  respect to which a particular  interest  rate is (or is\n         proposed to be) applicable.\n\n                    Senior  Indebtedness  means the Credit  Obligations and that\n         Indebtedness permitted to be incurred pursuant to Section 7.8(a)(9)(B),\n         (D), (E) and (F) hereof.\n\n                    Senior Subordinated Notes means the 9.5% Senior Subordinated\n         Notes due 2001 of the  Borrower  in the  aggregate  original  principal\n         amount of $250,000,000.\n\n                    Single Employer Plan means any employee pension benefit plan\n         covered by Title IV of ERISA and in respect  of which the  Borrower  or\n         any  Consolidated  Entity is an  \"employer\"  as  described  in  Section\n         4001(b) of ERISA, which is not a Multiemployer Plan;\n\n                    Subordinated  Indebtedness  means  the  Senior  Subordinated\n         Notes,   the   Convertible   Subordinated   Debentures  and  any  other\n         Indebtedness  incurred  pursuant  to  Section  7.8(a)(9)(G)  hereof  to\n         refinance the Senior Subordinated Notes or the Convertible Subordinated\n         Debentures.\n\n                    Subsidiary shall mean any corporation,  more than 50% of the\n         shares of stock of which having  general  voting  power under  ordinary\n         circumstances to elect the board of directors,  managers or trustees of\n         such  corporation,  irrespective of whether or not at the time stock of\n         any other  class or classes  shall have or might have  voting  power by\n         reason  of  the  happening  of  any  contingency,  which  is  owned  or\n         controlled  directly or indirectly by the Borrower and which has either\n         assets  with a value  exceeding  $2,000 or  positive  annual  operating\n         income.\n\n                    Subsidiary   Guaranty   Agreement   shall  mean  a  guaranty\n         agreement of a Participating Subsidiary in the form attached hereto and\n         marked Exhibit C-2, as amended and supplemented from time to time.\n\n                    Syndicated  Loans  shall  mean  the  loans  provided  for by\n         Section  2.1 or  Section  2.4  hereof,  which may be Base Rate Loans or\n         LIBOR Loans.\n\n                    Syndicated  Margin  means that  percent  per annum set forth\n         below  in  the  case  of a  LIBOR  Loan,  which  percent  shall  be the\n         Syndicated  Margin  effective on the date of delivery to the Agent of a\n         Compliance  Certificate  pursuant  to  Section  7.3(3)  for the  fiscal\n         quarter period as at the end of which the ratio of  Indebtedness of the\n         Borrower and its  Consolidated  Entities to  Consolidated  Cash Flow is\n         greater  than or equal to or less  than,  as the case may be, the ratio\n         set forth opposite such Syndicated Margin:\n\n                                                     Syndicated Margin\n                                               -----------------------------\n                                                Prior to        On or After\n                                               Conversion       Conversion\n                    Ratio                        Date              Date \n                   -------                     -----------      ------------\n         (a)  Greater than or equal to           1 5\/8%            2 1\/8%\n              5.00 to 1.00\n\n         (b)  Less than 5.00 to 1.00 but         1 3\/8%            1 7\/8%\n              equal to or greater than\n              4.50 to 1.00\n\n         (c)  Less than 4.50 to 1.00 but         1 1\/8%            1 5\/8%\n              equal to or greater than\n              3.75 to 1.00\n\n         (d)  Less than 3.75 to 1.00 but           7\/8%            1 3\/8%\n              equal to or greater than\n              3.00 to 1.00\n\n         (e)  Less than 3.00 to 1.00               5\/8%            1 1\/8%\n\n         Notwithstanding the foregoing,  during the period from the Closing Date\n         through  the  date of  delivery  of a  Compliance  Certificate  for the\n         quarter period ended September 30, 1994 the Syndicated  Margin shall be\n         1 3\/8%\n\n                    Syndicated  Notes shall mean the  promissory  notes provided\n         for by  Section  2.9  hereof  and all  promissory  notes  delivered  in\n         substitution  or  exchange  thereof,  in each case as the same shall be\n         modified and supplemented and in effect from time to time.\n\n                    Term Loan means the Loan or Loans made by the Lenders on the\n         Conversion Date to the Borrower pursuant to Section 2.4 hereof.\n\n                    Term Loan  Commitment  means the undertaking of the Lenders,\n         subject to the terms and conditions of this Agreement, to make the Term\n         Loan to the Borrower hereunder on the Conversion Date.\n\n                    Term Note and Term Notes means the promissory notes provided\n         for by  Section  2.9  hereof  and all  promissory  notes  delivered  in\n         substitution  or  exchange  thereof,  in each case as the same shall be\n         modified and supplemented and in effect from time to time.\n\n                    Type shall have the meaning assigned to such term in Section\n         1.2 hereof.\n\n                    Unused  Amount shall mean with  respect to each Lender,  (a)\n         the  Commitment of such Lender less (b) such Lender's pro rata share of\n         outstanding  Syndicated Loans and Letter of Credit Obligations less (c)\n         the outstanding principal amount of all Competitive Bid Loans then held\n         by such Lender.\n\n                    Unused  Margin means that percent per annum set forth below,\n         which  percent shall be the Unused  Margin  effective  upon the date of\n         delivery to the Agent of a Compliance  Certificate  pursuant to Section\n         7.7(3)  for the  fiscal  quarter  as at the end of which  the  ratio of\n         Indebtedness  of  the  Borrower  and  its   Consolidated   Entities  to\n         Consolidated Cash Flow is greater than or equal to or less than, as the\n         case may be, the ratio set forth opposite such Unused Margin.\n\n                    Ratio                                      Unused Margin\n                   -------                                     --------------\n         (a)  Greater than or equal to                              1\/2%\n              5.00 to 1.00\n\n         (b)  Less than 5.00 to 1.00 but                            3\/8%\n              equal to or greater than\n              4.50 to 1.00\n\n         (c)  Less than 4.50 to 1.00 but                            3\/8%\n              equal to or greater than\n              3.75 to 1.00\n\n         (d)  Less than 3.75 to 1.00                                1\/4%\n\n         Notwithstanding the foregoing,  during the period from the Closing Date\n         through  the  date of  delivery  of a  Compliance  Certificate  for the\n         quarter ended September 30, 1994 the Unused Margin shall be 3\/8%.\n\n                    Vanderbilt    shall   mean   The    Vanderbilt    Stallworth\n         Rehabilitation  Hospital, L.P., the partners of which are the Borrower,\n         Vanderbilt University and Vanderbilt Health Services.\n\n         SECTION  1.2  Classes  and  Types  of  Loans.   Loans   hereunder   are\ndistinguished by \"Class\" and by \"Type\".  The \"Class\" of a Loan refers to whether\nsuch  Loan  is a  Competitive  Bid  Loan or a  Syndicated  Loan,  each of  which\nconstitutes a Class.  The \"Type\" of a Loan refers to whether such Loan is a Base\nRate Loan, a LIBOR Loan, an Absolute Loan or a LIBOR Market Loan,  each of which\nconstitutes a Type. Loans may be identified by both Class and Type.\n\n                                   ARTICLE II\n\n               REVOLVING FACILITY TERMS, TERM LOAN AND COLLATERAL\n\n         SECTION 2.1 Syndicated Loans.\n\n                    (a) From and after the  Closing  Date to and  including  the\nConversion  Date, on the terms and subject to the  conditions  set forth in this\nAgreement, each Lender severally agrees to lend to the Borrower and the Borrower\nmay  borrow,  repay and  reborrow,  an amount  not  exceeding  the amount of the\nCommitment  of such Lender in effect from time to time,  less the amount of such\nLender's Syndicated Loans and the Reimbursement  Obligation and Letter of Credit\nBorrowings applicable to such Lender; provided, however, that no more than eight\n(8) different  Interest  Periods for both  Syndicated  Loans and Competitive Bid\nLoans may be  outstanding at the same time (for which purpose  Interest  Periods\ndescribed in different  lettered clauses of the definition of the term \"Interest\nPeriod\"  shall be  deemed  to be  different  Interest  Periods  even if they are\ncoterminous).  All  Advances  made by the  Lenders  to the  Borrower  under this\nAgreement  with  respect  to the  Revolving  Facility  shall be  evidenced  by a\npromissory note for each Lender each dated the date of this Agreement payable to\nthe order of each Lender,  duly executed by the  Borrower,  and in the aggregate\nmaximum  principal amount of $550,000,000 all as provided in Section 2.9 hereof.\nThe Advances  shall bear  interest as provided in Article III below.  The unpaid\nprincipal amount of all Loans hereunder shall not exceed the Revolving  Facility\nand each  Syndicated  Loan made  hereunder  shall be  allocated  pro rata  among\nLenders based upon their Applicable  Commitment Percentage regardless of amounts\noutstanding under Competitive Bid Loans.\n\n                    (b) If a  drawing  is made  under  any  Letter  of Credit in\naccordance with the terms thereof prior to the Conversion Date the drawing shall\nbe paid by the Agent  without the  requirement  of notice from the Borrower from\nimmediately  available  funds which  shall be advanced by the Lenders  under the\nRevolving  Facility.  If a drawing  is  presented  under any Letter of Credit in\naccordance  with the terms  thereof  notice of such  drawing  shall be  provided\npromptly by  NationsBank to the Agent and the Agent shall provide notice to each\nLender by telephone or telecopy. If notice to the Lenders of a drawing under any\nLetter of Credit is given by the Agent at or before 12:00 noon Charlotte,  North\nCarolina time on any Business Day, each Lender shall, pursuant to the conditions\nof this  Agreement,  make a Base  Rate  Loan  in the  amount  of  such  Lender's\nApplicable  Commitment  Percentage  of such drawing and shall pay such amount to\nthe Agent for the account of NationsBank at the Principal  Office in Dollars and\nin immediately  available funds before 2:00 P.M. Charlotte,  North Carolina time\non the same  Business  Day. If notice to the Lenders of a drawing under a Letter\nof Credit is given by the Agent after 12:00 noon Charlotte,  North Carolina time\non any Business Day, each Lender shall, pursuant to the terms and subject to the\nconditions  of this  Agreement,  make a Base  Rate  Loan in the  amount  of such\nLender's  Applicable  Commitment  Percentage  of such drawing and shall pay such\namount to the Agent for the account of  NationsBank  at the Principal  Office in\nDollars and in immediately  available funds before 12:00 noon  Charlotte,  North\nCarolina time on the next  following  Business Day. Such Base Rate Loan shall be\ndeemed made for a period  ending on the following  Business Day,  which shall be\nextended  automatically to the next succeeding Business Day unless and until the\nBorrower  converts such Base Rate Loan in  accordance  with the terms of Section\n3.2 hereof.\n\n         SECTION 2.2 Advances of Syndicated Loans.  Advances of Syndicated Loans\nshall be made no more frequently than three (3) times in each week. Each Advance\nshall be in an  amount no less  than  $5,000,000  and  multiples  of  $1,000,000\nthereafter.  Each  request  for an Advance  must be in writing  (which may be by\nfacsimile  transmission)  and must be received by the Agent not later than 10:00\na.m., Charlotte, North Carolina, time, (x) at least three Business Days prior to\nthe date of any LIBOR Loan and (y) on the day which the Advance is to be made in\nthe case of a Base Rate Loan.  Each request for an Advance  shall be in the form\nattached  hereto as Exhibit D (\"Request for Advance or Interest Rate  Election\")\nand shall specify the amount of the Advance  requested,  the day as of which the\nAdvance is to be made and the part or parts,  if any, of the Advance that are to\nbe used by or for the benefit of Participating Partnerships, specifying the part\nallocable to each Participating Partnership, and shall provide the interest rate\ninformation  called for in Section 3.2. The Agent shall promptly (not later than\n1:00 P.M.  Charlotte,  North  Carolina  time)  furnish  each  Lender by telecopy\ntransmission a copy of each Request for Advance or Interest Rate  Election.  Not\nlater than 2:00 P.M.  Charlotte,  North  Carolina time on the date specified for\neach  Advance  hereunder,  each Lender  shall make  available  the amount of the\nSyndicated  Loan or  Loans  to be made by it on such  date to the  Agent  at the\nPrincipal Office, in Dollars and in immediately  available funds, and the amount\nreceived by the Agent shall be made  available to the Borrower by depositing the\nproceeds  thereof  into an account  with the Agent in the name of the  Borrower.\nSubject  to  Section  2.4,  the  Lenders'  obligation  to  make  Advances  shall\nterminate,  if  not  sooner  terminated  pursuant  to  the  provisions  of  this\nAgreement,  on the  Conversion  Date.  Each Request for Advance or Interest Rate\nElection,  whether  submitted  under  this  Section  2.2  in  connection  with a\nrequested  Advance or under  Section 3.2 in  connection  with an  interest  rate\nelection,  and each  Application  shall be signed by an officer of the  Borrower\ndesignated as authorized to sign and submit Request for Advance or Interest Rate\nElection forms and Applications in the documents submitted to the Agent pursuant\nto Section 6.3(a) below.  The Borrower may, from time to time, by written notice\nto the  Agent,  terminate  the  authority  of any person to submit  Request  for\nAdvance or Interest Rate Election  forms and  Applications  and designate new or\nadditional  persons to so act by delivering  to the Agent a  certificate  of the\nSecretary of the Borrower  certifying the  incumbency and specimen  signature of\neach such  person.  The Agent shall be entitled  to rely  conclusively  upon the\nauthority of any person so designated by the Borrower.\n\n         SECTION 2.3  Competitive Bid Loans.\n\n                    (a) In addition to borrowings of  Syndicated  Loans,  at any\ntime prior to the Conversion  Date and so long as the ratio of  Indebtedness  of\nthe Borrower and its Consolidated Entities to Consolidated Cash Flow is equal to\nor less than 4.50 to 1.00 the  Borrower  may, as set forth in this  Section 2.3,\nrequest the Lenders to make offers to make Competitive Bid Loans to the Borrower\nin Dollars.  The Lenders may, but shall have no obligation  to, make such offers\nand the Borrower may, but shall have no obligation to, accept any such offers in\nthe manner set forth in this  Section  2.3.  Competitive  Bid Loans may be LIBOR\nMarket  Loans or Absolute  Rate Loans (each a \"Type\" of  Competitive  Bid Loan),\nprovided that:\n\n                        (i) the aggregate amount of outstanding  Competitive Bid\n                    Loans  of all  Lenders  shall  not  exceed  one  half of the\n                    Revolving Facility;\n\n                        (ii)  there  may be no more  than  eight  (8)  different\n                    Interest  Periods for both Syndicated  Loans and Competitive\n                    Bid Loans  outstanding  at the same time (for which  purpose\n                    Interest Periods described in different  lettered clauses of\n                    the definition of the term \"Interest Period\" shall be deemed\n                    to  be   different   Interest   Periods  even  if  they  are\n                    coterminous);\n\n                        (iii) the aggregate  amount of  outstanding  Competitive\n                    Bid Loans of a Lender shall not exceed at any time an amount\n                    equal to such Lender's Commitment;\n\n                        (iv) the aggregate  principal  amount of all Competitive\n                    Bid  Loans,  together  with  the  sum of (i)  the  aggregate\n                    principal amount of all outstanding  Syndicated  Loans, (ii)\n                    then  outstanding  Letter  of  Credit  Borrowings  and (iii)\n                    Reimbursement  Obligations  shall not exceed  the  aggregate\n                    amount of the Commitments at such time; and\n\n                             (v) no  Competitive  Bid Loan shall have a maturity\n                    date subsequent to the Conversion Date.\n\n                    (b) When the  Borrower  wishes  to  request  offers  to make\nCompetitive  Bid Loans, it shall give the Agent (which shall promptly notify the\nLenders) notice (a \"Competitive Bid Quote Request\") to be received no later than\n11:00 a.m.  Charlotte,  North Carolina time on (x) the fourth Business Day prior\nto the date of borrowing proposed therein, in the case of a LIBOR Auction or (y)\nthe Business Day next preceding the date of borrowing  proposed therein,  in the\ncase of an Absolute Rate Auction (or, in any such case, such other time and date\nas the Borrower and the Agent,  with the consent of the  Required  Lenders,  may\nagree).  The Borrower may request offers to make Competitive Bid Loans for up to\ntwo (2)  different  Interest  Periods  in a single  notice  (for  which  purpose\nInterest  Periods in different  lettered  clauses of the  definition of the term\n\"Interest Period\" shall be deemed to be different  Interest Periods even if they\nare  coterminous);  provided that the request for each separate  Interest Period\nshall be deemed to be a separate  Competitive  Bid Quote  Request for a separate\nborrowing (a \"Competitive  Bid Borrowing\") and there shall not be outstanding at\nany  one  time  more  than  four  (4)  Competitive  Bid  Borrowings.  Each  such\nCompetitive  Bid Quote Request shall be  substantially  in the form of Exhibit E\nhereto and shall specify as to each Competitive Bid Borrowing:\n\n                        (i) the proposed date of such borrowing,  which shall be\n                    a Business Day;\n\n                        (ii)  the  aggregate  amount  of  such  Competitive  Bid\n                    Borrowing,  which shall be at least $10,000,000 (or a larger\n                    multiple  of  $1,000,000)  but shall  not  cause the  limits\n                    specified in Section 2.3(a) hereof to be violated;\n\n                        (iii) the  duration of the  Interest  Period  applicable\n                    thereto;\n\n                        (iv) whether the Competitive Bid Quotes  requested for a\n                    particular  Interest  Period  are  seeking  quotes for LIBOR\n                    Market Loans or Absolute Rate Loans; and\n\n                        (v) if the Competitive Bid Quotes  requested are seeking\n                    quotes  for  Absolute  Rate  Loans,  the date on  which  the\n                    Competitive  Bid Quotes are to be  submitted if it is before\n                    the  proposed  date of  borrowing  (the  date on which  such\n                    Competitive  Bid  Quotes are to be  submitted  is called the\n                    \"Quotation Date\").\n\nExcept as otherwise  provided in this Section  2.3(b),  no Competitive Bid Quote\nRequest  shall be given within five (5)  Business  Days (or such other number of\ndays as the  Borrower and the Agent,  with the consent of the Required  Lenders,\nmay agree) of any other Competitive Bid Quote Request.\n\n                    (c) (i) Each Lender may submit one or more  Competitive  Bid\nQuotes,  each  containing an offer to make a Competitive Bid Loan in response to\nany  Competitive  Bid Quote Request;  provided  that, if the Borrower's  request\nunder Section 2.3(b) hereof specified more than one Interest Period, such Lender\nmay make a single  submission  containing one or more Competitive Bid Quotes for\neach such Interest  Period.  Each Competitive Bid Quote must be submitted to the\nAgent not later than (x) 2:00 p.m. Charlotte,  North Carolina time on the fourth\nBusiness Day prior to the  proposed  date of  borrowing,  in the case of a LIBOR\nAuction or (y) 10:00 a.m. Charlotte,  North Carolina time on the Quotation Date,\nin the case of an Absolute  Rate Auction (or, in any such case,  such other time\nand date as the  Borrower  and the  Agent,  with  the  consent  of the  Required\nLenders, may agree); provided that any Competitive Bid Quote may be submitted by\nNationsBank  (or its Applicable  Lending  Office) only if  NationsBank  (or such\nApplicable  Lending  Office)  notifies  the  Borrower  of the terms of the offer\ncontained therein not later than (x) 1:00 p.m. Charlotte, North Carolina time on\nthe fourth Business Day prior to the proposed date of borrowing,  in the case of\na LIBOR Auction or (y) 9:45 a.m. Charlotte, North Carolina time on the Quotation\nDate, in the case of an Absolute Rate Auction.  Subject to Sections 4.2, 4.3 and\nArticle VI and IX hereof, any Competitive Bid Quote so made shall be irrevocable\nexcept with the consent of the Agent given on the instructions of the Borrower.\n\n                        (ii) Each  Competitive Bid Quote shall be  substantially\nin the form of Exhibit F hereto and shall specify:\n\n                        (A) the  proposed  date of  borrowing  and the  Interest\n                    Period therefor;\n\n                        (B) the principal amount of the Competitive Bid Loan for\n                    which each such order is being made,  which principal amount\n                    shall  be at  least  $2,000,000  (or a  larger  multiple  of\n                    $1,000,000); provided that the aggregate principal amount of\n                    all  Competitive  Bid  Loans  for  which  a  Lender  submits\n                    Competitive  Bid Quotes (x) may not exceed the Commitment of\n                    such Lender and (y) may not exceed the  principal  amount of\n                    the  Competitive  Bid  Borrowing  for a particular  Interest\n                    Period for which offers were requested;\n\n                        (C) in the case of a LIBOR Auction,  the margin above or\n                    below the applicable  LIBOR-Based  Rate (the \"LIBOR Margin\")\n                    offered for each such  Competitive Bid Loan,  expressed as a\n                    percentage  (rounded upwards,  if necessary,  to the nearest\n                    1\/10,000th  of 1%) to be  added  to or  subtracted  from the\n                    applicable LIBOR-Based Rate;\n\n                        (D) in the case of an Absolute Rate Auction, the rate of\n                    interest per annum (rounded  upwards,  if necessary,  to the\n                    nearest  1\/10,000th of 1%) offered for each such Competitive\n                    Bid Loan (the \"Absolute Rate\"); and\n\n                        (E) the identity of the quoting Lender.\n\nUnless otherwise agreed by the Agent and the Borrower,  no Competitive Bid Quote\nshall contain qualifying, conditional or similar language or propose terms other\nthan or in addition to those set forth in the applicable  Competitive  Bid Quote\nRequest and, in  particular,  no Competitive  Bid Quote may be conditioned  upon\nacceptance by the Borrower of all (or some  specified  minimum) of the principal\namount of the Competitive Bid Loan for which such Competitive Bid Quote is being\nmade.\n\n                    (d) The Agent shall (x) in the case of a LIBOR  Auction,  by\n4:00 p.m.  Charlotte,  North Carolina time on the day a Competitive Bid Quote is\nsubmitted  or (y) in the  case of an  Absolute  Rate  Auction,  as  promptly  as\npracticable  after the  Competitive Bid Quote is submitted (but in any event not\nlater than 10:30 a.m.  Charlotte,  North  Carolina time on the Quotation  Date),\nnotify the Borrower of the terms (i) of any Competitive Bid Quote submitted by a\nLender  that  is in  accordance  with  Section  2.3(c)  hereof  and  (ii) of any\nCompetitive Bid Quote that amends,  modifies or is otherwise inconsistent with a\nprevious Competitive Bid Quote submitted by such Lender with respect to the same\nCompetitive Bid Quote Request.  Any such subsequent  Competitive Bid Quote shall\nbe  disregarded  by the Agent unless such  subsequent  Competitive  Bid Quote is\nsubmitted  solely to correct a manifest  error in such  former  Competitive  Bid\nQuote.  The Agent's  notice to the  Borrower  shall  specify  (A) the  aggregate\nprincipal  amount of the  Competitive  Bid  Borrowing for which orders have been\nreceived and (B) the respective  principal amounts and LIBOR Margins or Absolute\nRates,  as the case may be, so offered by each  Lender  (identifying  the Lender\nthat made each Competitive Bid Quote).\n\n                    (e) Not later than 11:00 a.m. Charlotte, North Carolina time\non (x) the third  Business Day prior to the proposed date of  borrowing,  in the\ncase of a LIBOR  Auction or (y) the  Quotation  Date, in the case of an Absolute\nRate Auction (or, in any such case, such other time and date as the Borrower and\nthe Agent,  with the consent of the Required Lenders,  may agree),  the Borrower\nshall  notify  the Agent of its  acceptance  or  nonacceptance  of the offers so\nnotified  to it  pursuant  to  Section  2.3(d)  hereof  (and the  failure of the\nBorrower to give such notice by such time shall  constitute  nonacceptance)  and\nthe Agent shall promptly notify each affected Lender. In the case of acceptance,\nsuch notice  shall  specify the  aggregate  principal  amount of offers for each\nInterest  Period that are accepted.  The Borrower may accept any Competitive Bid\nQuote in whole or in part (provided that any  Competitive  Bid Quote accepted in\npart shall be at least $2,000,000 or a larger multiple of $1,000,000);  provided\nthat:\n\n                        (i) the aggregate  principal  amount of each Competitive\n                    Bid Borrowing may not exceed the applicable amount set forth\n                    in the related Competitive Bid Quote Request;\n\n                        (ii) the aggregate  principal amount of each Competitive\n                    Bid  Borrowing  shall be at least  $10,000,000  (or a larger\n                    multiple  of  $1,000,000)  but shall  not  cause the  limits\n                    specified in Section 2.3(a) hereof to be violated;\n\n                        (iii) acceptance of offers may be made only in ascending\n                    order of LIBOR  Margins or Absolute  Rates,  as the case may\n                    be, in each case  beginning with the lowest rate so offered;\n                    provided,   however,   that  the   Borrower,   in  its  sole\n                    discretion,  may accept  other  than the  lowest  rate where\n                    acceptance  of the  lowest  rate  will  result  in  (x)  the\n                    outstanding Loans of a Lender or Lenders offering the lowest\n                    rate exceeding such Lender's  Commitment and (y) an increase\n                    in the Unused Fee payable by  Borrower  under  Section  2.11\n                    hereof; and\n\n                        (iv) the  Borrower  may not accept  any offer  where the\n                    Agent has  correctly  advised the  Borrower  that such offer\n                    fails to comply with Section  2.3(c)(ii) hereof or otherwise\n                    fails to  comply  with the  requirements  of this  Agreement\n                    (including, without limitation, Section 2.3(a) hereof).\n\nIf  offers  are  made by two or more  Lenders  with the same  LIBOR  Margins  or\nAbsolute Rates,  as the case may be, for a greater  aggregate  principal  amount\nthan the amount in respect of which offers are accepted for the related Interest\nPeriod after the acceptance of all offers, if any, of all lower LIBOR Margins or\nAbsolute  Rates,  as the case may be,  offered by any  Lender  for such  related\nInterest  Period,  the principal  amount of Competitive  Bid Loans in respect of\nwhich such offers are accepted  shall be  allocated  by the Borrower  among such\nLenders  as nearly as  possible  (in  amounts of at least  $2,000,000  or larger\nmultiples of $1,000,000) in proportion to the aggregate principal amount of such\noffers.  Determinations  by the Borrower of the amounts of Competitive Bid Loans\nand the lowest bid after adjustment as provided in Section  2.3(e)(iii) shall be\nconclusive in the absence of manifest error.\n\n                    (f) Any Lender whose offer to make any  Competitive Bid Loan\nhas been accepted shall, not later than 1:00 p.m. Charlotte, North Carolina time\non the date specified for the making of such Loan,  make the amount of such Loan\navailable  to the Agent at the  Principal  Office in Dollars and in  immediately\navailable  funds,  for  account of the  Borrower.  The amount so received by the\nAgent shall,  subject to the terms and  conditions  of this  Agreement,  be made\navailable to the Borrower on such date by depositing the same, in Dollars and in\nimmediately  available  funds,  in an account of the Borrower  maintained at the\nPrincipal Office.\n\n         SECTION 2.4 Term Loan.  (a) On the  Conversion  Date,  on the terms and\nsubject to the conditions  set forth in this  Agreement,  each Lender  severally\nagrees to convert all or such  portion of its  Commitment  as the  Borrower  may\nrequest by written  notice to the Agent not later  than 10:00  A.M.,  Charlotte,\nNorth Carolina time, on the third Business Day preceding the Conversion  Date to\na Term  Loan.  Each  Lender's  portion  of the  Term  Loan  Commitment  shall be\nevidenced by a promissory note of the Borrower dated the Conversion Date payable\nto the order of such Lender,  duly executed by the Borrower,  all as provided in\nSection  2.9 hereof and shall be equal to such  Lender's  Applicable  Commitment\nPercentage of the total of all outstanding Advances on the Conversion Date which\nBorrower has  requested  be  continued as a Term Loan.  The Term Loan shall bear\ninterest as provided in Article III below.\n\n                    (b)  The  Borrower  shall  make  fourteen  (14)  consecutive\nquarterly payments of principal on the Term Loans, each payment to be due on the\nlast day of March, June,  September and December  commencing June 30, 1997, each\nof which shall be in an amount  equal to 6.666% of the Term Loan.  The  Borrower\nshall make a fifteenth payment on November 30, 2000 which payment shall be in an\namount  sufficient to repay in full the remaining  principal  amount of the Term\nLoan  together with accrued  interest and unpaid fees,  if any.  Interest on the\nTerm Loan will be payable as set forth in Section 2.5 and Article III.\n\n                    (c) The  Borrower  shall pay to the Agent for the benefit of\nthe Lenders on the Conversion Date a fee of 1\/4% of each Lender's portion of the\nTerm Loan.\n\n         SECTION 2.5 Payments. All interest accrued on Loans subject to the Base\nRate shall be payable on the last day of each successive March, June,  September\nand  December,  commencing  on June 30,  1994 and upon  payment  in full of such\nLoans, and all interest accrued on each Fixed Rate Loan, shall be payable at the\nearlier of (i) the end of the applicable  Interest Period then in effect or (ii)\nthe end of each ninety (90) day period in the case of an Absolute  Rate and each\nthree (3) month period in the case of a LIBOR Market Rate. The principal  amount\nof the Advances  shall be due on the  Conversion  Date unless such  Advances are\nconverted  to a Term Loan  pursuant  to  Section  2.4.  All  payments  of Credit\nObligations  shall be  payable to the Agent on or before  11:00 A.M.  Charlotte,\nNorth Carolina time on the date when due, at the Principal Office in Dollars and\nin  immediately  available  funds  free and clear of all  rights of  set-off  or\ncounterclaim.\n\n         SECTION 2.6 Joint and Several Obligations.\n\n                    (a) Each of the  Subsidiaries  and  Controlled  Partnerships\nnamed in Exhibit G attached  hereto and made a part  hereof  shall  execute  and\ndeliver  to the Agent as of the  Closing  Date  either an Amended  and  Restated\nSubsidiary  Guaranty  Agreement  or Amended and  Restated  Partnership  Guaranty\nAgreement or a Subsidiary Guaranty Agreement or Partnership  Guaranty Agreement,\nand each other Subsidiary and Controlled Partnership that is to become after the\nClosing Date a Participating  Subsidiary or  Participating  Partnership,  as the\ncase may be, shall,  at the time it is to become a  Participating  Subsidiary or\nParticipating  Partnership,  execute  and  deliver  to the  Agent  a  Subsidiary\nGuaranty Agreement or Partnership Guaranty Agreement,  as the case may be in the\nform attached hereto as Exhibit C-2 and Exhibit C-1, respectively (\"collectively\nthe \"Guaranty Agreements\").\n\n                    (b) Although Advances shall be and heretofore have been made\nonly  to the  Borrower,  all or  portions  of such  Advances  may be used by the\nBorrower  for the  benefit  of or  loaned  by the  Borrower  to a  Participating\nSubsidiary or Participating Partnership.  As a condition to the use of Loans for\nthe benefit of Participating  Subsidiaries and Participating  Partnerships,  the\nLenders have  required that the  Participating  Subsidiaries  and  Participating\nPartnerships  guaranty the payment of the Credit Obligations of Borrower arising\nunder this Agreement and the other Loan Documents to the extent set forth in the\nrespective  Guaranty  Agreements  to  which  they  are  a  party.  Each  of  the\nParticipating   Subsidiaries  and  Participating   Partnerships  separately  and\nseverally,  hereby  appoints  and  designates  the Borrower as each such party's\nagent and  attorney-in-fact to act on behalf of each such party for all purposes\nof the Loan  Documents  relating to the Credit  Obligations.  The Borrower shall\nhave  authority  to  exercise  on behalf of each  Participating  Subsidiary  and\nParticipating  Partnership  all  rights  and  powers  that  the  Borrower  deems\nnecessary,  incidental  or  convenient  in  connection  with the Loan  Documents\nrelating  to the Credit  Obligations,  including  the  authority  to execute and\n\ndeliver certificates, documents, agreements and other instruments referred to in\nor  contemplated by such Loan Documents,  request  Advances  hereunder for their\nbenefit,  request  for the  issuance  of Letters  of Credit  for their  benefit,\nreceive all  proceeds of  Advances,  give all  notices,  approvals  and consents\nrequired  or  requested  from time to time by the Agent or Lenders  and take any\nother  actions  and steps that a  Participating  Subsidiary  or a  Participating\nPartnership could take for its own account in connection with the Loan Documents\nfrom time to time, it being the intent of the Participating Subsidiaries and the\nParticipating  Partnerships  to grant to the  Borrower  plenary  power to act on\nbehalf of the Participating  Subsidiaries and the Participating  Partnerships in\nconnection  with and pursuant to such Loan  Documents.  The  appointment  of the\nBorrower as agent and  attorney-in-fact  for the Participating  Subsidiaries and\nthe Participating  Partnerships  hereunder shall be coupled with an interest and\nbe irrevocable so long as any Loan Document  relating to the Credit  Obligations\nshall remain in effect.  The Agent or Lenders need not obtain any  Participating\nSubsidiary's  or  Participating  Partnership's  consent or approval  for any act\ntaken by the  Borrower  pursuant to any Loan  Document,  and all such acts shall\nbind  and  obligate  the  Borrower,  the  Participating   Subsidiaries  and  the\nParticipating Partnerships, jointly and severally. Each Participating Subsidiary\nand Participating Partnership forever waives and releases any claim (whether now\nor hereafter  arising) against the Agent or Lenders based on the Borrower's lack\nof authority to act on behalf of any  Participating  Subsidiary or Participating\nPartnership  in  connection  with the Loan  Documents  relating to the Revolving\nFacility.\n\n         SECTION 2.7 Pledge Agreement.  As security for the Credit  Obligations,\nthe Borrower and certain of the Participating Subsidiaries have, pursuant to the\nPrior Agreement,  executed and delivered a pledge and security  agreement to the\nAgent and shall  execute and deliver to the Agent  amended and  restated  pledge\nagreements  on the  Closing  Date and from time to time after the  Closing  Date\npursuant  to the terms of  Section  7.14  hereof or upon  request  by the Agent,\npledge and security  agreements in form  acceptable to the Agent and its counsel\n(all being collectively called the \"Pledge Agreements\")  granting to the Agent a\nfirst priority  security  interest in and lien on (i) all shares of stock of all\nSubsidiaries owned directly or indirectly by the Borrower, (ii) all right, title\nand  interest  in  and  to  both  the  ownership  interest  of  Borrower  in any\npartnership and all distributions payable to the Borrower or any Subsidiary as a\npartner of any partnership (including Controlled  Partnerships but not including\nVanderbilt), (iii) all notes payable to Borrower by any Subsidiary or Controlled\nPartnership  evidencing  any  loan or  advance  made by  Borrower,  and (iv) all\naccounts receivable due to Borrower by any Subsidiary or Controlled  Partnership\narising by reason of any loan or advance  made by  Borrower,  together  with all\nfinancing  statements,   stock  certificates  and  duly  executed  stock  powers\nnecessary to perfect the Agent's security interest therein, in each case whether\nnow owned or hereafter acquired.\n\n\n         SECTION 2.8  Prepayment.  (a) The Borrower may at any time prior to the\nConversion  Date  prepay  all or any part of the  Advances,  without  premium or\npenalty  (except  as set forth  below);  provided,  however,  that no Fixed Rate\nSegment may be prepaid  during an Interest  Period unless the Borrower shall pay\nto the Agent the amounts required by Section 4.2 hereof.  The Borrower shall pay\nall  interest  accrued  to the  date of  prepayment  on any  amount  prepaid  as\npermitted  under the  terms of the next  preceding  sentence  on or prior to the\nConversion  Date in  connection  with  the  prepayment  in  full  of the  Credit\nObligations and the concurrent termination of this Agreement. The Borrower shall\ngive the  Agent  notice of its  intent to pay any Base Rate Loan not later  than\n11:00 a.m. on the date of payment.  Failure to give such notice  shall result in\npayment of interest  through the next  succeeding  Business Day on the amount so\npaid.\n\n                    (b) The Borrower from time to time after the Conversion Date\n(but not more frequently than quarterly),  upon not less than three (3) Business\nDays prior written notice to the Agent,  may prepay the Term Loan in whole or in\npart. The Agent shall give each Lender,  within one (1) Business Day thereafter,\ntelephonic  notice  (confirmed  in  writing)  of  such  prepayment.   Each  such\nprepayment  shall be in the  aggregate  amount of  $10,000,000  or such  greater\namount which is an integral  multiple of $1,000,000 or the unpaid balance of all\nCredit Obligations.  No such prepayment shall result in the payment of a portion\nof the Term Loan bearing  interest at a Fixed Rate other than on the last day of\nthe Interest Period of such Loan.\n\n         SECTION 2.9  Notes.\n\n                    (a) Prior to the Conversion  Date, the Syndicated Loans made\nby each Lender shall be evidenced  by a single  promissory  note of the Borrower\nsubstantially in the form of Exhibit H-1 hereto, dated the date hereof,  payable\nto such Lender in a principal  amount equal to the amount of its  Commitment  as\noriginally in effect and otherwise duly completed.\n\n                    (b) The  Competitive  Bid Loans made by any Lender  shall be\nevidenced by a single promissory note of the Borrower  substantially in the form\nof  Exhibit  H-2  hereto,  dated the date  hereof,  payable  to such  Lender and\notherwise duly completed.\n\n                    (c) The Term Loan made by each Lender on the Conversion Date\nshall be evidenced by a single promissory note of the Borrower  substantially in\nthe form of Exhibit  H-3  hereto,  dated the  Conversion  Date,  payable to such\nLender in a principal  amount equal to the amount of its  Applicable  Commitment\nPercentage of the Term Loan Commitment and otherwise duly completed.\n\n                    (d) The date,  amount,  Type,  interest rate and duration of\nInterest  Period (if  applicable) of each Loan of each Class made by each Lender\nto the  Borrower,  and each  payment made on account of the  principal  thereof,\nshall be recorded by such Lender on its books and,  prior to any transfer of the\nNote  evidencing the Loans of such Class held by it,  endorsed by such Lender on\nthe schedule  attached to such Note or any continuation  thereof;  provided that\n\nthe  failure  of such  Lender to make,  or any error by the Lender in making any\nsuch  recordation  or  endorsement,  shall not  affect  the  obligations  of the\nBorrower to make a payment when due of any amount owing  hereunder or under such\nNote in respect of the Loans to be evidenced by such Note.\n\n                    (e)  No  Lender   shall  be   entitled  to  have  its  Notes\nsubdivided,  by  exchange  for  promissory  notes  of  lesser  denominations  or\notherwise,  except  in  connection  with a  permitted  assignment  of all or any\nportion of such Lender's  Commitment,  Loans and Notes  pursuant to Section 10.1\nhereof.\n\n                    (f) Each  Lender  that is a Prior  Lender  under  the  Prior\nAgreement shall  surrender to the Borrower the promissory  notes delivered to it\npursuant to the Prior  Agreement in exchange for the Notes  described in Section\n2.9(a) and (b).\n\n         SECTION 2.10 Reduction in Revolving  Facility.  The Borrower shall have\nthe right  from  time to time (but not more  frequently  than once  during  each\nquarterly period), but upon not less than three (3) Business Days written notice\nto the Agent to reduce the amount of the  Revolving  Facility.  The Agent  shall\ngive each  Lender,  within one (1) Business Day  thereafter,  telephonic  notice\n(confirmed in writing) of such  reduction.  Each such reduction  shall be in the\naggregate  principal  amount of  $10,000,000  or such greater amount which is an\nintegral multiple of $1,000,000,  and shall permanently reduce the Commitment of\neach Lender on a pro rata basis.  No such reduction shall result in payment of a\nFixed Rate Loan other than on the last day of the Interest  Period of such Loan.\nEach reduction of the Revolving  Facility shall be accompanied by payment of the\nLoans to the extent that the Credit  Obligations  exceed the Revolving  Facility\nafter giving effect to such reductions together with accrued and unpaid interest\non the amounts prepaid.\n\n         SECTION 2.11 Unused Fee.  The  Borrower  shall pay to the Agent for the\nbenefit of each Lender a fee (the \"Unused Fee\")  computed at a per annum rate of\nthe then applicable  Unused Margin times the daily average Unused Amount of such\nLender.  The  Unused  Fee  shall be  payable  quarterly  on the last day of each\nsuccessive March, June,  September and December in each year for the immediately\npreceding quarterly period, commencing on June 30, 1994, and upon the Conversion\nDate. The Unused Fee shall be computed on an Actual\/360 Basis.\n\n         SECTION  2.12  Lending  Offices.  The  Loans of each  Type made by each\nLender shall be made and maintained at such Lender's  Applicable  Lending Office\nfor Loans of such Type.\n\n         SECTION 2.13 Letter of Credit Borrowings.\n\n                    (a)  NationsBank  may issue from time to time in  accordance\nwith  Section  6.1,  in its sole  discretion,  for the  account of the  Borrower\nLetters of Credit in an  aggregate  outstanding  stated  amount up to but not to\nexceed the Letter of Credit Commitment. All Letters of Credit issued pursuant to\n\nthis  Agreement,  shall  expire on or before the fifth (5th)  Business  Day next\npreceding the Conversion Date. The aggregate Letter of Credit  Obligations shall\nat no time  exceed  the  Letter of  Credit  Commitment.  In the  event  that the\nBorrower shall pay in full all amounts  outstanding under the Revolving Facility\nand permanently  reduce the Revolving  Facility to zero as permitted pursuant to\nSection  2.10  hereof,  it  shall   simultaneously   cause  all  obligations  of\nNationsBank  under the Letters of Credit and all obligations of the Lenders with\nrespect  to  Participations  to be  discharged  in full,  whether  by  providing\nreplacement  letters  of  credit  therefor  or  payment  in full  of the  amount\noutstanding with respect to the Letter of Credit.\n                    (b) The  Borrower  hereby  unconditionally  agrees to pay to\nNationsBank  on demand at the Principal  Office (i) all amounts  required to pay\nall  drafts  drawn in  accordance  with the  terms of the  Letter  of  Credit or\npurporting  to be drawn  under the Letters of Credit and (ii) the face amount of\neach draft  complying  with the Letter of Credit  accepted by NationsBank on the\nmaturity  date of such draft,  or in the event of a Default or Event of Default,\nand any and all  reasonable  expenses of every kind incurred by  NationsBank  in\nconnection  with the  Letters of Credit and in any event and  without  demand to\nplace in  possession of  NationsBank  (which shall  include  Advances  under the\nRevolving  Facility if permitted by Section 2.1 hereof)  sufficient funds to pay\nall debts and  liabilities  arising  under any Letter of Credit.  Subject to the\nterms hereof,  the Borrower's  obligations to pay NationsBank under this Section\n2.13, and the right of  NationsBank  to receive the same,  shall be absolute and\nunconditional  and  shall  not  be  affected  by  any  circumstance  whatsoever.\nNationsBank may charge any account the Borrower may have with it for any and all\namounts NationsBank pays under a Letter of Credit, plus commissions, charges and\nexpenses  as from  time to  time  agreed  to by  NationsBank  and the  Borrower;\nprovided that to the extent  permitted by Section 2.1(b),  amounts shall be paid\npursuant to Advances  under the  Revolving  Facility.  The Borrower  agrees that\nNationsBank  may, in its sole  discretion,  accept or pay, as complying with the\nterms of any Letter of Credit, any drafts or other documents  otherwise in order\nwhich  may be  signed  or  issued  by an  administrator,  executor,  trustee  in\nbankruptcy,  debtor  in  possession,  assignee  for the  benefit  of  creditors,\nliquidator,  receiver, attorney in fact or other legal representative of a party\nwho is  authorized  under  such  Letter of Credit to draw or issue any drafts or\nother documents.  The Borrower agrees to pay NationsBank interest on any amounts\nnot paid when due  hereunder  at the Base Rate plus two  percent  (2%),  or such\nlower rate as may be required by law.\n\n                    (c) In  accordance  with the  provisions  of Section  2.1(b)\nhereof,  NationsBank shall notify the Agent (and shall also notify the Borrower)\nof any drawing  under any Letter of Credit issued for account of the Borrower as\npromptly as practicable following the receipt by NationsBank of such drawing.\n\n                    (d) Each Lender (other than NationsBank) shall automatically\nacquire on the date of issuance  thereof,  a  Participation  in the liability of\nNationsBank  in  respect  of each  Letter of  Credit in an amount  equal to such\n\nLender's Applicable Commitment  Percentage of such liability,  and to the extent\nthat the Borrower is obligated to pay NationsBank  under Section  2.13(a),  each\nLender (other than NationsBank)  thereby shall absolutely,  unconditionally  and\nirrevocably assume, and shall be unconditionally obligated to pay to NationsBank\nas hereinafter described,  its Applicable Commitment Percentage of the liability\nof NationsBank  under such Letter of Credit.  On the fifth Business Day prior to\nthe Conversion  Date,  each Lender  (including  NationsBank in its capacity as a\nLender)  shall make a Base Rate Loan to the  Borrower by paying to the Agent for\nthe account of NationsBank at the Principal Office in Dollars and in immediately\navailable funds, an amount equal to its Applicable  Commitment Percentage of any\ndrawing  under a Letter of Credit,  all as  described  and  pursuant  to Section\n2.1(b).  With  respect to  drawings  under any of the  Letters  of Credit,  each\nLender,  upon  receipt  from the  Agent of notice  of a  drawing  in the  manner\ndescribed in Section 2.1(b),  shall promptly pay to the Agent for the account of\nNationsBank,  prior to the  applicable  time set forth in  Section  2.1(b),  its\nApplicable Commitment Percentage of such drawing. Simultaneously with the making\nof  each  such  payment  by  a  Lender  or   NationsBank,   such  Lender  shall,\nautomatically  and without any further action on the part of NationsBank or such\nLender,  acquire a Participation  in an amount equal to such payment  (excluding\nthe  portion  thereof  constituting   interest)  in  the  related  Reimbursement\nObligation of the Borrower. The Reimbursement  Obligations of the Borrower shall\nbe  immediately  due and payable  whether by Advances  made in  accordance  with\nSection  2.1(b) or otherwise.  Each  Lender's  obligation to make payment to the\nAgent for the account of NationsBank  pursuant to this Section 2.13(d),  and the\nright of NationsBank to receive the same,  shall be absolute and  unconditional,\nshall not be affected by any  circumstance  whatsoever and shall be made without\nany offset,  abatement,  withholding or reduction  whatsoever.  If any Lender is\nobligated  to pay but does not pay  amounts  to the  Agent  for the  account  of\nNationsBank in full upon receipt of such notice of a drawing as required by this\nSection 2.13(d),  such Lender shall, on demand, pay to the Agent for the account\nof  NationsBank  interest  on the  unpaid  amount for each day during the period\ncommencing on the date of notice given to such Lender pursuant to Section 2.1(b)\nuntil such Lender  pays such amount to the Agent for the account of  NationsBank\nin full at the interest  rate per annum for overnight  borrowing by  NationsBank\nfrom the Federal Reserve Bank.\n\n                    (e) Promptly  following  the end of each  calendar  quarter,\nNationsBank  shall  deliver to the Agent,  and the Agent  shall  deliver to each\nLender,  a notice  describing the aggregate  undrawn amount of Letters of Credit\nand aggregate face amount of all drafts  accepted and  outstanding at the end of\nsuch  quarter.  Upon the  request of any Lender  from time to time,  NationsBank\nshall  deliver to the Agent,  and the Agent shall  deliver to such  Lender,  any\nother information reasonably requested by such Lender with respect to the Letter\nof Credit then outstanding.\n\n                    (f) The  issuance  by  NationsBank  of any  Letter of Credit\nshall be subject to the  conditions  that such Letter of Credit be insuch  form,\n\ncontain  such terms and support such  transactions  or  obligations  as shall be\nreasonably   satisfactory  to  NationsBank  consistent  with  its  then  current\npractices and procedures with respect to similar letters of credit.  All Letters\nof Credit  shall be issued  pursuant to and  subject to the Uniform  Customs and\nPractice for  Documentary  Creditors,  1993 revision,  International  Chamber of\nCommerce  Publication  No.  500  and all  subsequent  amendments  and  revisions\nthereto.  The Borrower shall have executed and delivered such other  instruments\nand  agreements  relating  to such  Letter of Credit as  NationsBank  shall have\nreasonably requested consistent with such practices and procedures.\n                    (g)  Without   duplication  of  Section  10.12  hereof,  the\nBorrower hereby  indemnifies and holds harmless  NationsBank,  each other Lender\nand the  Agent  from  and  against  any  and all  claims  and  damages,  losses,\nliabilities, costs or expenses which NationsBank, such other Lender or the Agent\nmay reasonably  incur (or which may be claimed against  NationsBank,  such other\nLender or the  Agent) by any  person  by  reason  of or in  connection  with the\nissuance or transfer of or payment or failure to pay under any Letter of Credit;\nprovided that the Borrower shall not be required to indemnify  NationsBank,  any\nother Lender or the Agent for any claims, damages, losses, liabilities, costs or\nexpenses  to the  extent,  but only to the  extent,  (i)  caused by the  willful\nmisconduct  or  negligence  of the party to be  indemnified,  (ii) caused by the\nfailure of NationsBank to pay under any Letter of Credit after the  presentation\nto it of a request  strictly  complying  with the terms and  conditions  of such\nLetter of Credit,  unless such  payment is  prohibited  by any law,  regulation,\ncourt order or decree, or (iii) paid or payable by any Lender under Section 2.15\nor Section 9.10 hereof and provided,  further, Borrower shall not be required to\nindemnify any Lender who has failed to perform its obligations hereunder.\n\n                    (h)  Without  limiting  Borrower's  rights  as set  forth in\nSection 2.13(g) above, the obligation of Borrower to immediately reimburse Agent\nfor  drawings  made  under the  Letter of  Credit in  accordance  with the terms\nthereof shall be absolute, unconditional and irrevocable, and shall be performed\nstrictly in  accordance  with the terms of this  Agreement  and such  Letters of\nCredit, under all circumstances whatsoever.\n\n                    (i) The Borrower  agrees to pay to the Agent for the benefit\nof the  Lenders  a per  annum  Letter  of  Credit  fee  equal to the  applicable\nSyndicated  Margin  in  effect at the time of  issuance  of each such  Letter of\nCredit times the amount of outstanding Letter of Credit Borrowings. In addition,\nthe  Borrower  agrees to pay to the Agent for its own  account an  issuance  fee\nequal to  one-eighth  of one  percent  (1\/8%)  per  annum  times  the  amount of\noutstanding Letter of Credit Borrowings. Such fees shall be payable quarterly in\narrears on the last day of each March, June, September and December,  beginning,\nhowever, on the first such day to occur following the Closing Date.\n\n                    (j) The Borrower  acknowledges that NationsBank as issuer of\nthe Letter of Credit will be required by applicable rules and regulations of the\n\nFederal Reserve Board to maintain reserves for its liability to honor draws made\npursuant to a Letter of Credit notwithstanding the obligation of the Lenders for\na  Participation  in such liability.  The Borrower agrees to promptly  reimburse\nNationsBank  for all  additional  costs which it may  hereafter  incur solely by\nreason of its acting as issuer of the Letter of Credit and its being required to\nreserve for such  liability,  it being  understood  by the  Borrower  that other\ninterest and fees payable under this  Agreement do not include  compensation  of\nNationsBank for such reserves.  NationsBank shall furnish to the Borrower at the\ntime of its demand for payment of such additional costs, the computation of such\nadditional cost which shall be conclusive  absent manifest error,  provided that\nsuch computations are made on a reasonable basis.\n                    (k) The Borrower shall pay to NationsBank administrative and\nother fees, if any, in connection with the Letters of Credit in such amounts and\nat such times as NationsBank and the Borrower shall agree from time to time.\n\n         SECTION 2.14 Pro Rata Payments.  Except as otherwise  provided  herein,\n(a) each payment on account of the  principal of and interest on the  Syndicated\nLoans and fees (other than the Agent's fees payable  under  Section 9.11 hereof,\nwhich  shall be  retained  by the  Agent  and the fees  payable  to  NationsBank\npursuant to Section  2.13(i)  and (k) which  shall be  retained by  NationsBank)\ndescribed  in this  Agreement  shall be made to the Agent for the account of the\nLenders  pro rata based on their  Applicable  Commitment  Percentages,  (b) each\npayment on account of principal of and interest on a Competitive  Bid Loan shall\nbe made to the Agent for the account of the Lender making such  Competitive  Bid\nLoan,  and the principal  amount of  Competitive  Bid Loans shall be paid on the\nlast day of the Interest Period for such  Competitive Bid Loan, (c) all payments\nto be made by the  Borrower for the account of each of the Lenders on account of\nprincipal, interest and fees, shall be made without set-off or counterclaim, and\n(d) the Agent will promptly (to the extent  received by the Agent by 12:00 noon,\nCharlotte,  North Carolina time within the same Business Day, otherwise the next\nBusiness Day if received after 12:00 noon) distribute  payments  received to the\nLenders.\n\n         SECTION 2.15  Deficiency  Advances.  No Lender shall be responsible for\nany default of any other Lender in respect to such other Lender's  obligation to\nmake any Loan  hereunder  nor shall the  Commitment  of any Lender  hereunder be\nincreased as a result of such default of any other Lender.  Without limiting the\ngenerality of the foregoing,  in the event any Lender (a \"failing Lender\") shall\nfail to advance funds to the Borrower as herein  provided,  the Agent may in its\ndiscretion,  but shall not be obligated  to,  advance under the Note or Notes in\nits  favor  as a Lender  all or any  portion  of such  amount  (the  \"deficiency\nadvance\")  and shall  thereafter  be entitled to  payments of  principal  of and\ninterest on such deficiency  advance in the same manner and at the same interest\nrate or rates to which such  failing  Lender  would have been  entitled had such\nfailing Lender made such Advance under its Note or Notes;  provided  that,  upon\npayment to the Agent from such failing Lender of the entire  outstanding  amount\n\nof such deficiency advance, together with interest thereon, from the most recent\ndate or dates  interest  was  paid to the  Agent by the  Borrower  on each  Loan\ncomprising the  deficiency  advance at the interest rate per annum for overnight\nborrowing by the Agent from the Federal Reserve Bank, then such payment shall be\ncredited  against  the  Note or  Notes  of the  Agent  in full  payment  of such\ndeficiency  advance and the Borrower shall be deemed to have borrowed the amount\nof such  deficiency  advance from such failing Lender as of the most recent date\nor dates,  as the case may be, upon which any payments of interest  were made by\nthe Borrower  thereon.  Acceptance by the Borrower of a deficiency  advance from\nthe Agent  shall in no way limit the  rights of the  Borrower  against a failing\nLender.\n         SECTION 2.16 Adjustments by Agent.  Notwithstanding the construction of\n\"pro  rata\"  to mean  based  on the  Applicable  Commitment  Percentage  and any\nprovisions  contained  herein for the  advancement of funds or  distribution  of\npayments on a pro rata basis, the Agent may, in its discretion, but shall not be\nobligated  to,  adjust  downward or upward (but not in excess of any  applicable\nCommitment)  the  principal  amount of any Loan to be made by any  Lender to the\nnearest amount which is evenly divisible by $100, and make  appropriate  related\nadjustment  in the  distribution  of payments of  principal  and interest on the\nLoans.\n\n\n                                  ARTICLE III\n\n                          INTEREST ON SYNDICATED LOANS\n\n         SECTION 3.1  Applicable  Interest  Rates.  The Borrower  shall have the\noption to elect to have any  Syndicated  Loan Segment bear  interest at the Base\nRate or the  LIBOR-Based  Rate plus the applicable  Syndicated  Margin.  For any\nperiod of time and for any Segment with  respect to which the Borrower  does not\nelect another  interest rate, such Segment shall bear interest at the Base Rate.\nThe  Borrower's  right to elect a  LIBOR-Based  Rate  shall  be  subject  to the\nfollowing requirements:  (a) each Syndicated Loan Segment shall be in the amount\nof  $5,000,000 or more and in an integral  multiple of  $1,000,000  and (b) each\nLIBOR-Based Rate Segment shall have a maturity  selected by the Borrower of one,\ntwo or three months;  provided,  however, that no LIBOR-Based Rate Segment shall\nhave a maturity date later than the Conversion Date.\n\n         SECTION  3.2  Procedure  for  Exercising  Interest  Rate  Options.  The\nBorrower  may elect to have a particular  interest  rate apply to a Segment of a\nSyndicated  Loan by  notifying  the Agent in writing  (which may be by facsimile\ntransmission) not later than 10:00 a.m.,  Charlotte,  North Carolina time, three\n(3) Business Days prior to the effective date any LIBOR-Based  Rate is to become\napplicable  or on the same  day on  which a  requested  Base  Rate is to  become\napplicable.  Any notice of interest rate election hereunder shall be irrevocable\nand shall be in the form  attached  hereto as  Exhibit D and shall set forth the\nfollowing:  (a) the amount of the Segment to which the  requested  interest rate\nwill  apply,  (b) the date on which  the  selected  interest  rate  will  become\napplicable,  (c)  whether  the  interest  rate  selected  is the Base  Rate or a\nLIBORBased  Rate,  and (d) if the interest rate selected is a LIBOR-Based  Rate,\nthe  maturity  selected  for the  Interest  Period.  On the second  Business Day\npreceding  the  Business  Day  that a  requested  LIBORBased  Rate is to  become\napplicable,  the Agent  shall use its best  efforts  to notify the  Borrower  by\ntelephone of the Agent's  estimate of the applicable  LIBOR-Based  Rate by 10:00\na.m.,  Charlotte,  North  Carolina  time,  or as  early  on  that  day as may be\npractical  in the  circumstances.  The Agent shall not be required to provide an\nestimate  of the  LIBOR-Based  Rate on any day on which  dealings in deposits in\nDollars are not transacted in the London interbank  market. If the Borrower does\nnot immediately accept a LIBOR-Based Rate quoted by the Agent, the Agent may, in\nview of changing market  conditions,  revise the quoted  LIBOR-Based Rate at any\ntime. No LIBOR-Based  Rate shall be effective  until mutually agreed upon by the\nBorrower  and the  Agent.  If the Agent and the  Borrower  attempt to agree on a\nLIBOR-Based  Rate but fail so to  agree,  or if there is any  uncertainty  as to\nwhether or not the Agent and the Borrower have agreed upon a  LIBOR-Based  Rate,\ninterest  shall  accrue on the  Segment  for which a  LIBOR-Based  Rate has been\nselected at the then applicable Base Rate.\n\n         SECTION 3.3 Base Rate. Each Segment subject to the Base Rate shall bear\ninterest from the date the Base Rate becomes applicable thereto until payment in\nfull,  or until a  LIBOR-Based  Rate is  selected  by the  Borrower  and becomes\napplicable  thereto,  on the  unpaid  principal  balance  of such  Segment on an\n\nActual\/360 Basis. Any change in the Base Rate shall take effect on the effective\ndate of such change in the Base Rate designated by the Agent,  without notice to\nthe Borrower and without any further action by the Agent.\n\n         SECTION  3.4 Fixed  Rate.  Each  LIBOR-Based  Rate  Segment  shall bear\ninterest from the date the LIBOR-Based Rate becomes applicable thereto until the\nend of the applicable  Interest Period on the unpaid  principal  balance of such\nLIBOR-Based Rate Segment at the LIBOR-Based Rate on an Actual\/360 Basis plus the\napplicable Syndicated Margin.\n\n         SECTION 3.5  Changes in  Syndicated  Margin.  Any change in the rate of\ninterest  payable  with  respect  to LIBOR  Loans  because  of a  change  in the\nSyndicated  Margin shall become  effective as of the day of receipt by the Agent\nof the financial statement furnished to the Agent pursuant to Section 7.3(1) and\n(2)  hereof  and the  Compliance  Certificate  required  by  Section  7.3(3)  to\naccompany such financial  statement and the  determination  by the Agent,  based\nupon such Compliance  Certificate,  that as a result of a change in the ratio of\nIndebtedness of the Borrower and its Consolidated  Entities to Consolidated Cash\nFlow there has been a change in the Syndicated Margin.\n\n                                   ARTICLE IV\n\n              TERMINATION OF LIBOR-BASED RATE AND YIELD PROTECTION\n\n         SECTION 4.1 Suspension of Loans.\n\n                    (a) If at any  time the  Agent  shall  reasonably  determine\n(which determination, if reasonable, shall be final, conclusive and binding upon\nall parties) that:\n\n                             (i) by  reason  of any  changes  arising  after the\n                  Closing  Date  affecting  the  London   interbank   market  or\n                  affecting  the  position  of any  Lender  or the Agent in such\n                  markets, adequate and fair means do not exist for ascertaining\n                  the  LIBOR-Based  Rate with  respect  to a LIBOR Loan or LIBOR\n                  Market Loan; or\n\n                            (ii) the  continuation  by any  Lender  of any LIBOR\n                  Loans or LIBOR  Market  Loans or the  funding  thereof  in the\n                  London  interbank  market  would be  unlawful by reason of any\n                  law, governmental rule, regulation, guidelines or order; or\n\n                           (iii)  the  continuation  by any  Lender of any LIBOR\n                  Loans or LIBOR  Market  Loans or the  funding  thereof  in the\n                  London  interbank market would be impracticable as a result of\n                  a contingency  occurring after the date of this Agreement that\n                  materially and adversely affects the London interbank market;\n\nthen,  and in any such  event,  the Agent  shall on such date  give  notice  (by\ntelephone and confirmed in writing) to the Borrower of such  determination.  The\nobligation of any Lender to make or maintain  Fixed Rate Segments so affected or\nto permit  interest  to be  computed  thereon at the  LIBOR-Based  Rate shall be\nterminated, and interest shall thereafter be computed on the affected Segment or\nSegments at the then applicable Base Rate.\n\n                  (b) It is the  intention  of the parties  that the Fixed Rates\nshall  accurately  reflect the cost to the Lender of maintaining  any Fixed Rate\nSegment  during any period in which  interest  accrues  thereon at a Fixed Rate.\nAccordingly:\n\n                             (i) if by  reason  of any  change  after  the  date\n                  hereof in any applicable law or governmental rule,  regulation\n                  or order (or any  interpretation  thereof  and  including  the\n                  introduction of any new law or governmental  rule,  regulation\n                  or  order),   including   any  change  in  the  LIBOR  Reserve\n                  Requirement,  the cost to the Lender of maintaining  any Fixed\n                  Rate  Segment  or  funding  the  same  by  means  of a  London\n                  interbank  market time deposit shall increase,  the Fixed Rate\n                  applicable  to such Fixed Rate  Segment  shall be  adjusted as\n                  necessary  to  reflect  such  change  in cost  to the  Lender,\n                  effective  as  of  the  date  on  which  such  change  in  any\n                  applicable law, governmental rule, regulation or order becomes\n                  effective.\n\n\n                            (ii) If any Lender  shall have  determined  that the\n                  adoption  after the date of this  Agreement of any law,  rule,\n                  regulation or guideline  regarding  capital  adequacy,  or any\n                  change in any of the  foregoing  or in the  interpretation  or\n                  administration  of any of the  foregoing  by any  Governmental\n                  Authority,  central bank or comparable agency charged with the\n                  interpretation or administration thereof, or compliance by any\n                  Lender (or any lending  office of any Lender) or such Lender's\n                  holding  company  with  any  request  or  directive  regarding\n                  capital  adequacy  (whether or not having the force of law) of\n                  any such authority,  central bank or comparable agency, has or\n                  would have the effect of  reducing  the rate of return on such\n                  Lender's  capital or on the capital of such  Lender's  holding\n                  company,  as a consequence of the Lender's  obligations  under\n                  this  Agreement or the Advances  made by such Lender  pursuant\n                  hereto to a level  below that  which  such  Lender or any such\n                  Lender's  holding  company  could have  achieved  but for such\n                  adoption,  change or compliance (taking into consideration the\n                  Lender's  guidelines  with respect to capital  adequacy) by an\n                  amount deemed by such Lender to be material, then from time to\n                  time the  Borrower  shall pay to the  Lender  such  additional\n                  amount  or  amounts  as  will  compensate  the  Lender  or the\n                  Lender's holding company for any such reduction suffered.\n\n         SECTION 4.2 Compensation.  The Borrower shall compensate any Lender for\nall reasonable losses,  expenses and liabilities (including any interest by such\nLender to lenders on funds  borrowed  by such  Lender to make or carry any Fixed\nRate  Segment  and any loss  sustained  by the  Lender  in  connection  with the\nre-employment  of such  funds),  that such  Lender may  sustain:  (a) if for any\nreason  (other than a default by such Lender)  following  agreement  between the\nBorrower and such Lender as to the Fixed Rate applicable to a Fixed Rate Segment\nthe Borrower  fails to accept such Fixed Rate Segment,  (b) as a consequence  of\nany unauthorized action taken or default by the Borrower in the repayment of any\nFixed Rate  Segment  when  required by the terms of this  Agreement  or (c) with\nrespect  to any loss of income  incurred  by the  Lenders  (as  determined  in a\nreasonable  manner by the Agent)  associated with the payment of principal other\nthan the last day of an Interest  Period with  respect to any Fixed Rate Loan. A\ncertificate  as to the amount of any  additional  amounts  payable  pursuant  to\nSection 4.2 (setting forth in reasonable  detail the basis for  requesting  such\namounts)  submitted by such Lender to the Borrower shall be  conclusive,  in the\nabsence of  manifest  error.  The  Borrower  shall pay to such Lender the amount\nshown as due on any such  certificate  delivered  by such Lender  within 30 days\nafter the Borrower's receipt of the same.\n\n         SECTION 4.3 Taxes.  All payments by the  Borrower of principal  of, and\ninterest on, the Loans and all other  amounts  payable  hereunder  shall be made\nfree and clear of and without deduction for any present or future excise,  stamp\nor franchise taxes or other taxes,  whatsoever  imposed by any taxing authority,\nbut excluding  franchise taxes and  taxes imposed on or measured by any Lender's\n\n                                                     \n\nnet income or receipts (such  non-excluded  items being called \"Taxes\").  In the\nevent  that any  withholding  or  deduction  from any  payment to be made by the\nBorrower  hereunder  is  required  in  respect  of  any  Taxes  pursuant  to any\napplicable law, rule or regulation, then the Borrower will\n\n                  (a) pay  directly to the  relevant  authority  the full amount\n         required to be so withheld or deducted;\n\n                  (b) promptly forward to the Agent an official receipt or other\n         documentation satisfactory to the Agent evidencing such payment to such\n         authority; and\n\n                  (c)  pay to the  Agent  for the  account  of the  Lender  such\n         additional  amount or amounts as is  necessary  to ensure  that the net\n         amount actually received by each Lender will equal the full amount such\n         Lender would have received had no such  withholding  or deduction  been\n         required.\n\nMoreover,  if any Taxes are  directly  asserted  against the Agent or any Lender\nwith respect to any payment received by the Agent or such Lender hereunder,  the\nAgent or such Lender may pay such Taxes and the Borrower  will promptly pay such\nadditional  amounts  (including  any  penalties,  interest  or  expenses)  as is\nnecessary  in order that the net  amount  received  by the Agent or such  Lender\nafter the payment of such Taxes (including any Taxes on such additional  amount)\nshall equal the amount the Agent or such Lender would have  received had no such\nTaxes been asserted.  Upon the request of the Borrower or the Agent, each Lender\nand each  participant  that is organized under the laws of a jurisdiction  other\nthan the United  States shall,  prior to the due date or any payments  under the\nNotes,  execute and deliver to the Borrower and the Agent, on or about the first\nscheduled  payment date in each Fiscal Year, one or more (as the Borrower or the\nAgent may reasonably  request) United States Internal Revenue Service Forms 4224\nor  Forms  1001  or such  other  forms  or  documents  (or  successor  forms  or\ndocuments),  appropriately  completed,  as may be  applicable  (if  any  are) to\nestablish the extent,  if any, to which a payment to such Lender or  participant\nis exempt from withholding or deduction of Taxes.\n\n         If the  Borrower  fails to pay any  Taxes  when due to the  appropriate\ntaxing  authority  or  fails  to  remit to the  Agent,  for the  account  of the\nrespective Lender, the required amounts,  receipts or other required documentary\nevidence,  the Borrower shall indemnify the Lenders for any  incremental  Taxes,\ninterest or penalties  that may become  payable by the Lender as a result of any\nsuch failure. For purposes of this Section 4.3, a distribution  hereunder by the\nAgent or any  Lender  to or for the  account  of any  Lenders  shall be deemed a\npayment by the Borrower.\n\n         If Taxes are  incorrectly  or illegally  paid or  assessed,  and if any\nLender or the Agent  contests the  assessment of such Taxes,  such Lender or the\nAgent  shall  refund,  to the  extent of any refund  made to such  Lender or the\nAgent,  any amounts paid by the  Borrower  under this Section in respect of such\nTaxes.\n\n\n\n         Without  prejudice  to the  survival  of any  other  agreements  of the\nBorrower  hereunder or any other Loan  Document,  the agreements of the Borrower\ncontained  in this Section  shall  survive the payment in full of all its Credit\nObligations and the termination of all Commitments.\n\n         To the extent any Lender  shall  become  liable for the  payment of any\nTaxes hereunder and shall seek  reimbursement  therefor pursuant to this Section\n4.3,  the  Borrower  shall be entitled,  upon the giving of five  Business  Days\nnotice to the Agent,  (i) to replace such Lender with a substitute  lender,  and\n(ii) in  connection  with  such  substitution,  prepay  in full the  outstanding\nCommitment of the Lender  requesting  reimbursement  without  penalty or payment\nunder Section 4.2 hereof.\n\n\n                                   ARTICLE V\n\n                         REPRESENTATIONS AND WARRANTIES\n\n         The  Borrower  and  each  Participating  Subsidiary  and  Participating\nPartnership  jointly and  severally  represent  and warrant to the Agent and the\nLenders as follows:\n\n         SECTION 5.1 Organization,  Powers, Existence, etc. (a) The Borrower and\neach  Consolidated  Entity is duly organized or formed,  validly existing and in\ngood standing under the laws of the state in which it is incorporated or formed,\n(b) the Borrower and each Consolidated Entity has the power and authority to own\nits properties  and assets and to carry on its business as now being  conducted,\n(c) the Borrower and each Consolidated Entity has the power to execute,  deliver\nand perform the Loan Documents to which it is a party,  and (d) the Borrower and\neach Consolidated Entity is duly qualified to do business in each state in which\nit is required to be so qualified.\n\n         SECTION 5.2  Authorization of Borrowing,  etc. The execution,  delivery\nand  performance  of the Loan  Documents  (a) have been duly  authorized  by all\nrequisite  action and (b) will not violate  any  Governmental  Requirement,  the\ncertificate of incorporation, bylaws or partnership agreement of the Borrower or\nany  Consolidated  Entity,  or any indenture,  agreement or other  instrument to\nwhich  the  Borrower  or any  Consolidated  Entity  is a party,  or by which the\nBorrower or any Consolidated  Entity or any of their properties are bound, or be\nin conflict with,  result in a breach of or constitute (with due notice or lapse\nof time or  both) a  default  under,  any  such  indenture,  agreement  or other\ninstrument,  or result in the creation or imposition of any Lien upon any of the\nproperties  or assets of the  Borrower  or any  Consolidated  Entity,  except as\nrequired by the terms of this Agreement.\n\n         SECTION 5.3  Liabilities.  The Borrower has  furnished to the Agent and\nthe Lenders a copy of the audited consolidated balance sheet of the Borrower and\nthe  Consolidated  Entities  dated as of December  31,  1993 and a statement  of\nchanges in  shareholders'  equity and the related  statements of income and cash\nflow as of the end of Fiscal Year 1993 and the  unaudited  consolidated  balance\nsheet of the Borrower and the Consolidated  Entities dated as of March 31, 1994,\nand the related  statements  of income and cash flow for the fiscal  period then\nended.  Such  financial   statements  were  prepared  in  conformity  with  GAAP\nconsistently applied throughout the period involved,  are in accordance with the\nbooks and records of the Borrower and the Consolidated Entities, are correct and\ncomplete  and present  fairly the  financial  condition  of the Borrower and the\nConsolidated  Entities as of the date of such financial  statements,  and, since\nthe  date of such  financial  statements,  no  material  adverse  change  in the\nfinancial  condition,  business  or  operations  of the  Borrower  or any of the\nConsolidated  Entities has occurred.  Neither the Borrower nor any  Consolidated\nEntity has any  Liabilities,  Guaranteed  Obligations  or other  obligations  or\nliabilities,  direct or contingent, in an aggregate amount in excess of $300,000\nother than (a) the  Liabilities  reflected in such  balance  sheet and the notes\nthereto or (b) Liabilities incurred in the ordinary course of business.\n\n         SECTION 5.4 Taxes. The Borrower and each Consolidated  Entity has filed\nor caused to be filed all federal, state and local tax returns that are required\nto be  filed,  and has  paid  all  taxes  as  shown  on said  returns  or on any\nassessment  received by the  Borrower or any  Consolidated  Entity to the extent\nthat such taxes have become due.\n\n         SECTION  5.5  Litigation.  There are no actions,  suits or  proceedings\npending  or,  to the best  knowledge  of the  Borrower,  threatened  against  or\naffecting the Borrower,  any Consolidated  Entity or any Facility,  by or before\nany Governmental Authority that involve any of the transactions  contemplated in\nthis  Agreement or the  possibility of any judgment or liability that may result\nin a material  adverse  change in the  operations or financial  condition of the\nBorrower and the Consolidated Entities, on a consolidated basis; and neither the\nBorrower nor any Consolidated  Entity is in default with respect to any material\nGovernmental Requirement.\n\n         SECTION 5.6  Agreements.  Neither  the  Borrower  nor any  Consolidated\nEntity is in default in the performance, observance or fulfillment of any of the\nobligations  contained in any  agreement or  instrument  to which it is a party,\nwhich  default  could have a material  adverse  effect  upon the  operations  or\nfinancial  condition  of  the  Borrower  and  the  Consolidated  Entities  on  a\nconsolidated basis.\n\n         SECTION 5.7 Use of Proceeds. Neither the Borrower nor any Participating\nSubsidiary or Participating  Partnership intends to use any part of the proceeds\nof Advances or proceeds of drawings  under  Letters of Credit for the purpose of\npurchasing  or  carrying  any Margin  Stock or  retiring  any debt  incurred  to\npurchase  or  carry  any  Margin  Stock  or for any  other  purpose  that is not\nexpressly authorized by this Agreement.\n\n         SECTION 5.8 ERISA  Requirement.  (i) The  execution and delivery of the\nLoan Documents will not involve any prohibited transaction within the meaning of\nERISA,  (ii) the  Borrower  and  each  Consolidated  Entity  has  fulfilled  its\nobligations  under the minimum funding standards imposed by ERISA and each is in\ncompliance in all material respects with the applicable provisions of ERISA, and\n(iii) no \"Reportable Event,\" as defined in Section 4043(b) of Title IV of ERISA,\nhas occurred  with respect to any plan  maintained by the Borrower or any of its\nConsolidated Entities.\n\n         SECTION 5.9 Subsidiaries. The Borrower has no direct or indirect equity\nownership in any person other than (a) Controlled Partnerships, Subsidiaries and\nConsolidated  Entities and (b) those  ownership  interests  listed in Exhibit L.\nNone of the  Subsidiaries or Controlled  Partnerships has any direct or indirect\nequity ownership in any other person except other  Consolidated  Entities except\nas set forth in  subparagraph  (b) in the  preceding  sentence.  The  Borrower's\nownership  interest in each  Subsidiary and  Controlled  Partnership is free and\nclear of all Liens, warrants, options, rights to purchase and other interests of\n\nany  person  except for rights of first  refusal  that apply to certain  limited\npartnership  interests whose value is not material in amount and rights of first\nrefusal given to certain limited partners of HEALTHSOUTH  Rehabilitation  Center\nof Charlotte Limited  Partnership and HEALTHSOUTH  Rehabilitation  Center of San\nFrancisco  Limited  Partnership  covering  the  Borrower's  general  partnership\ninterests  therein.  All  capital  stock  of  the  Subsidiaries  has  been  duly\nauthorized and validly issued and is fully paid and  non-assessable.  There have\nbeen  delivered  and  pledged to the Lender all  certificates  representing  all\ncapital stock in all Subsidiaries.  All now-existing Subsidiaries and Controlled\nPartnerships are listed in Exhibit M hereto.\n\n         SECTION  5.10  Principal  Place of  Business.  The  principal  place of\nbusiness and chief  executive  office of the Borrower is at its address shown in\nSection  10.2 and will not be changed from such  address  unless,  prior to such\nchange,  the Borrower shall have notified the Agent of the proposed change,  and\nin no event will the Borrower's  principal  place of business or chief executive\noffice be located outside the State of Alabama.\n\n         SECTION 5.11  Environmental  Laws.  The Borrower and each  Consolidated\nEntity are in material compliance with all applicable  federal,  state and local\nlaws and  regulations  relating  to air,  water,  soil and  other  environmental\nquality and all material laws relating to the handling and disposal of hazardous\nwaste materials.\n\n         SECTION 5.12 Disclosure. No financial statement,  document, certificate\nor other  written  communication  furnished to the Agent or the Lenders by or on\nbehalf  of the  Borrower  or any  Consolidated  Entity  or to the  extent  not a\nConsolidated Entity any Participating Subsidiary or Participating Partnership in\nconnection  with any Loan Document  contains any untrue  statement of a material\nfact or  omits  to  state a  material  fact  necessary  to make  the  statements\ncontained  herein  or  therein  not  misleading.  There is no fact  known to the\nBorrower  that  materially  adversely  affects the  business or condition of the\nBorrower or any  Material  Group that has not been  disclosed  herein or in such\nfinancial statements.\n\n         SECTION 5.13 Licenses.  All material  certificates  of need,  licenses,\npermits,  accreditations and approvals required by all Governmental  Authorities\nnecessary in order for each  Facility to be operated  for its  intended  purpose\nhave been obtained and are in full force and effect.\n\n         SECTION 5.14 Title to Properties.  The Borrower has good and marketable\ntitle to all its properties  and assets  reflected on the balance sheet referred\nto in Section  5.3  except for those  matters  shown on such  balance  sheet and\nexcept for such properties and assets as have been disposed of since the date of\nsaid balance sheet as no longer used or useful in the conduct of its business or\nas have been disposed of in the ordinary  course of the business and except that\nthe property of HEALTHSOUTH  Doctors' Hospital,  Inc. is held subject to a right\nof first refusal  benefitting  the Dr. John T.  Macdonald  Foundation.  All such\nproperties  and  assets  are free and clear of all  Liens,  except as  otherwise\npermitted or required by the provisions of the Loan Documents.\n\n\n                                   ARTICLE VI\n\n                         GENERAL CONDITIONS OF LENDING\n\n         The Lenders'  obligation  to make each Advance  hereunder is subject to\nthe following conditions precedent:\n\n         SECTION 6.1 Representations and Warranties. On the date of each Advance\nhereunder  and on the date the  Borrower  presents  to the Agent a  Request  for\nAdvance or Interest  Rate  Election  form or  Competitive  Bid Quote  Request or\nApplication,  and on the Conversion Date the  representations and warranties set\nforth  in this  Agreement  and in all  other  Loan  Documents  shall be true and\ncorrect  on  and  as  of  such  date  with  the  same   effect  as  though  such\nrepresentations  and  warranties  had been made on the date of the Advance or on\nthe date the  Borrower  presents  to the Agent a Request for Advance or Interest\nRate Election form or  Competitive  Bid Quote Request or  Application  or on the\nConversion Date, as the case may be. Each such warranty and representation shall\nbe  deemed to be  continuing  in effect  so long as this  Agreement  remains  in\neffect. The presentation by the Borrower of each Request for Advance or Interest\nRate Election,  Competitive  Bid Quote  Request,  Application or Term Note shall\nconstitute a  representation  and warranty by the Borrower to the Lender that no\nmaterial  adverse  change in the  financial  condition  of the  Borrower and the\nConsolidated  Entities,  on a consolidated  basis, as reflected in the financial\nstatements  delivered  to the Agent and  Lenders  pursuant  to  Section  5.3 has\noccurred since the date of such financial statements.\n\n         SECTION 6.2 No Default.  On the date of each  Advance and issuance of a\nLetter of Credit  hereunder  and on the  Conversion  Date,  the Borrower and all\nMaterial  Groups shall be in compliance  with all the terms and  conditions  set\nforth in this Agreement on its or their part to be observed or performed, and no\nEvent of  Default,  nor event  that upon  notice or lapse of time or both  would\nconstitute an Event of Default, shall have occurred and be continuing.\n\n         SECTION 6.3 Supporting Documents.\n\n                  (a) The  Agent,  on behalf  of the  Lenders,  shall  have also\nreceived on the date of execution of this Agreement (i) a copy of resolutions of\nthe Board of Directors of the Borrower, certified as in full force and effect on\nsuch date by the Secretary of the Borrower,  authorizing the execution, delivery\nand performance of the Loan Documents and authorizing designated officers of the\nBorrower to execute and deliver the Loan Documents on behalf of the Borrower and\nto execute  and  deliver to the Agent  Request  for  Advance  or  Interest  Rate\nElection  or  Competitive  Bid  Quote  Request  forms and  Applications;  (ii) a\ncertificate of the Secretary of the Borrower,  dated such date,  certifying that\n(A) an  attached  copy of the  Certificate  of  Incorporation  and bylaws of the\nBorrower  is true and  correct  as of such  date,  (B) that the  Certificate  of\nIncorporation and Bylaws of the Borrower have not been amended since the date of\nthe  last  amendment  attached  thereto  and (C)  the  incumbency  and  specimen\nsignatures of the designated  officers referred to in clause (i) above; (iii) an\nOpinion of Counsel to the Borrower in the form required by the Agent;  (iv) duly\nexecuted Pledge Agreements by the Borrower,  the Participating  Subsidiaries and\nthe Participating Partnerships to the extent applicable, together with all stock\npowers,  stock certificates and financing  statements related thereto;  (v) such\nadditional  supporting  documents as the Agent may reasonably request;  and (vi)\nall fees payable to the Agent and the Lenders.\n\n                  (b) The  Agent,  on behalf  of the  Lenders,  shall  also have\nreceived  on or before the date on which a  Subsidiary  becomes a  Participating\nSubsidiary (on or before the Closing Date in the case of each Subsidiary  listed\nin Exhibit G hereto) (i) a copy of  resolutions  of the Board of  Directors  and\nshareholders  of such  Subsidiary (if necessary)  certified as in full force and\neffect on the date thereof by the Secretary of such Subsidiary, authorizing such\nSubsidiary's  execution,  delivery and  performance  of, and the  assumption  of\nliability  under,  the Loan Documents and all other  agreements and  instruments\nthat this Agreement  contemplates  will be executed,  delivered and performed by\nsuch Subsidiary;  (ii) a copy of the Certificate of Incorporation or Articles of\nIncorporation,  as the case may be, and Bylaws of such Subsidiary,  certified as\ntrue and correct on and as of the date on which Loan  Documents are executed and\ndelivered by the Borrower  and such  Subsidiary;  (iii) an Opinion of Counsel to\nsuch  Subsidiary  in a form  acceptable  to the  Agent as to the  execution  and\ndelivery by such  Subsidiary of the Loan  Documents  and other  matters  related\nthereto;  (iv) fully  executed  copies of all Loan Documents that this Agreement\ncontemplates  will be  executed  or  delivered  (or  both)  by  such  Subsidiary\n(including  a fully  executed  Subsidiary  Guaranty  Agreement);  and  (v)  such\nadditional  supporting  documents  as the Agent or its  counsel  may  reasonably\nrequest.\n\n                  (c) The  Agent,  on behalf  of the  Lenders,  shall  also have\nreceived  on or  before  the date on which a  Controlled  Partnership  becomes a\nParticipating  Partnership  (on or before the  Closing  Date in the case of each\nControlled Partnership listed in Exhibit G hereto) (i) a copy of the partnership\nagreement under which such Controlled Partnership was formed,  certified as true\nand  correct  on and as of the date of which Loan  Documents  are  executed  and\ndelivered by the Borrower and such  Controlled  Partnership;  (ii) an Opinion of\nCounsel to such  Controlled  Partnership in a form acceptable to the Agent as to\nthe execution and delivery by such Controlled  Partnership of the Loan Documents\nand other  matters  related  thereto;  (iii) fully  executed  copies of all Loan\nDocuments  that this  Agreement  contemplates  will be executed or delivered (or\nboth) by such  Controlled  Partnership  (including a fully executed  Partnership\nGuaranty Agreement);  and (iv) such additional supporting documents as the Agent\nor its counsel may reasonably request.\n\n\n                                  ARTICLE VII\n\n                       GENERAL COVENANTS OF THE BORROWER\n\n         From the date on which this  Agreement  is delivered  until  payment in\nfull of the Credit  Obligations  and the  termination in writing of the Lenders'\nobligation  to  extend  credit  under  this  Agreement,  the  Borrower  and each\nParticipating Subsidiary and Participating  Partnership,  jointly and severally,\ncovenant and agree that:\n\n         SECTION 7.1 Existence,  Properties,  etc. The Borrower shall, and shall\ncause  each  Consolidated  Entity  to,  (a) do or cause  to be done  all  things\nnecessary  to preserve and keep in full force and effect its  existence,  rights\nand franchises and comply with all  Governmental  Requirements  applicable to it\nand (b) at all times  maintain,  preserve and protect all  franchises  and trade\nnames and  preserve  all of its  property  used or useful in the  conduct of its\nbusiness and keep the same in good repair, working order and condition, and from\ntime to time make,  or cause to be made,  all  needful  and proper  repairs  and\nimprovements thereto (normal wear and tear excepted).\n\n         SECTION 7.2 Payment of  Indebtedness,  Taxes,  etc. The Borrower shall,\nand shall  cause  each  Consolidated  Entity to,  (a) pay its  indebtedness  and\nobligations  in accordance  with normal terms and (b) pay and discharge or cause\nto be paid and discharged  promptly all taxes,  assessments and other charges or\nlevies  of  Governmental  Authorities  imposed  upon it or upon its  income  and\nprofits or upon any of its  properties  before the same shall become in default;\nprovided,  however, that the Borrower and the Consolidated Entities shall not be\nrequired  to pay and  discharge  or  cause to be paid  and  discharged  any such\nindebtedness,  obligation, tax, assessment, charge, levy or claim so long as the\nvalidity  thereof  shall  be  duly  pursued  and  contested  in  good  faith  by\nappropriate  proceedings  and the Borrower and the  Consolidated  Entities shall\nmaintain   adequate   reserves  for  such  taxes,   indebtedness,   obligations,\nassessments, charges, levies or claims during such proceedings.\n\n         SECTION 7.3  Financial  Statements,  Reports,  etc. It shall deliver or\ncause to be delivered to the Agent and each Lender:\n\n                  (1) Not  later  than 50 days  after  the end of each  calendar\n         quarter,  a balance  sheet and a statement  of revenues and expenses of\n         the Borrower and its  Consolidated  Entities on a consolidated and on a\n         consolidating  basis  (provided  Borrower  may  report  the  results of\n         operations  of its  outpatient  centers  on an  aggregate  basis) and a\n         statement of cash flow of the Borrower and its Consolidated Entities on\n         a  consolidated  basis for such  calendar  quarter  and for the  period\n         beginning  on the first day of the  fiscal  year and ending on the last\n         day of such  calendar  quarter (in  sufficient  detail to indicate  the\n         Borrower's and each Consolidated Entity's compliance with the financial\n         covenants set forth in this Article VII),  together with  statements in\n         comparative form for the corresponding  periods in the preceding fiscal\n\n         year together with  calculations  supporting the same store performance\n         as summarized in the Borrower's Form 10-Q for the corresponding period,\n         and  certified  by the  president  or chief  financial  officer  of the\n         Borrower.\n\n                  (2) Not later than 100 days after the end of each fiscal year,\n         financial  statements  (including  a  balance  sheet,  a  statement  of\n         revenues and expenses,  a statement of changes in shareholders'  equity\n         and a  statement  of cash flow) of the  Borrower  and its  Consolidated\n         Entities  on a  consolidated  and on a  consolidating  basis  (provided\n         Borrower may report the results of operations of its outpatient centers\n         on an aggregate  basis) for such fiscal year (in  sufficient  detail to\n         indicate the Borrower's and each Consolidated  Entity's compliance with\n         the financial  covenants set forth in this Article VII),  together with\n         statements in comparative  form for the preceding  fiscal year together\n         with  calculations  supporting the same store performance as summarized\n         in  the  Borrower's  Form  10-K  for  the  corresponding   period,  and\n         accompanied by an opinion of certified public accountants acceptable to\n         the Agent,  which  opinion  shall state in effect  that such  financial\n         statements  (A)  were  audited  using   generally   accepted   auditing\n         standards,  (B) were prepared in  accordance  with  generally  accepted\n         accounting  principles  applied on a consistent  basis, and (C) present\n         fairly  the  financial  condition  and  results  of  operations  of the\n         Borrower and its Consolidated Entities for the periods covered.\n\n                  (3)  Together  with  the  financial   statements  required  by\n         paragraphs (1) and (2) above a compliance  certificate duly executed by\n         the chief executive officer or the president or chief financial officer\n         of the Borrower in the form of Exhibit I attached  hereto  (\"Compliance\n         Certificate\"),  accompanied  by  a  contribution  report  in  the  form\n         attached as Schedule I-3 to Exhibit I and an accounts  receivable aging\n         report in the form attached as Schedule I-4 to Exhibit I.\n\n                  (4)  Promptly  upon  receipt  thereof,  copies of all reports,\n         management letters and other documents submitted to the Borrower or any\n         Consolidated  Entity by independent  accountants in connection with any\n         annual  or  interim   audit  of  the  books  of  the  Borrower  or  any\n         Consolidated Entity made by such accountants.\n\n                  (5)  Contemporaneously  with the  distribution  thereof to the\n         Borrower's or any Consolidated Entity's stockholders or partners or the\n         filing thereof with the Securities and Exchange Commission, as the case\n         may  be,  copies  of  all  statements,  reports,  notices  and  filings\n         distributed  by  the  Borrower  or  any  Consolidated   Entity  to  its\n         stockholders  or partners  or filed with the  Securities  and  Exchange\n         Commission (including reports on SEC Forms 10-K, 10-Q and 8-K).\n\n                  (6) Promptly after the Borrower knows or has reason to know of\n         the  occurrence of any  \"reportable  event\" under Section 4043 of ERISA\n         applicable to the Borrower or any Consolidated Entity, a certificate of\n         the president or chief financial  officer of the Borrower setting forth\n         the  details as to such  \"reportable  event\"  and the  action  that the\n\n         Borrower or the Consolidated Entity has taken or will take with respect\n         thereto, and promptly after the filing or receiving thereof,  copies of\n         all reports and notices that the Borrower and each Consolidated  Entity\n         files  under  ERISA with the  Internal  Revenue  Service or the Pension\n         Benefit Guaranty Corporation or the United States Department of Labor.\n\n                  (7)  Promptly  after the  Borrower or any of its  Consolidated\n         Entities  becomes  aware of the  commencement  thereof,  notice  of any\n         investigation,  action,  suit or  proceeding  before  any  Governmental\n         Authority  involving  the  condemnation  or  taking  under the power of\n         eminent  domain of any of its property or the  revocation or suspension\n         of any  permit,  license,  certificate  of need or  other  Governmental\n         Requirement applicable to any Facility.\n\n                  (8) Within 10 days of the  receipt by the  Borrower  or any of\n         its Consolidated  Entities,  copies of all material deficiency notices,\n         compliance  orders  or  adverse  reports  issued  by  any  Governmental\n         Authority  or  accreditation   commission   having   jurisdiction  over\n         licensing,   accreditation  or  operation  of  a  Facility  or  by  any\n         Governmental  Authority  or private  insurance  company  pursuant  to a\n         provider  agreement,  which,  if not promptly  complied  with or cured,\n         could  result  in  the   suspension   or  forfeiture  of  any  license,\n         certification or  accreditation  necessary in order for the Facility to\n         carry on its  business  as then  conducted  or the  termination  of any\n         material insurance or reimbursement program available to the Facility.\n\n                  (9) No less  frequently than once in each calendar year and at\n         any time the  Agent  reasonably  requests,  a  certificate  of the risk\n         management director of the Borrower describing all insurance maintained\n         by the Borrower and its Consolidated Entities, and certifying that such\n         insurance   complies  with  the  requirements  of  this  Agreement  and\n         attaching  thereto the certificates of insurance issued by the insurers\n         for all insurance described in such certificate; provided, however, the\n         Borrower shall promptly  notify the Agent of any material change in the\n         insurance  coverages  required  by this  Agreement  or any  other  Loan\n         Document.\n\n                  (10) Such other  information  regarding  any  Facility  or the\n         financial  condition or operations of the Borrower or its  Consolidated\n         Entities as the Agent shall reasonably  request from time to time or at\n         any time.\n\n         SECTION 7.4 Litigation Notice.  The Borrower shall,  promptly after the\nsame shall have become known to any officer of the Borrower, notify the Agent in\nwriting of any action,  suit or  proceeding  at law or in equity or by or before\nany  Governmental  Authority  that,  if adversely  determined,  might impair the\nability of the Borrower or any Material Group to perform its  obligations  under\n\nthis  Agreement or any other Loan  Document or might  materially  and  adversely\naffect the business or  condition,  financial  or other,  of the Borrower or any\nMaterial Group.\n\n         SECTION 7.5 Default Notice.  The Borrower shall promptly give notice in\nwriting to the Agent of the occurrence of any Default or Event of Default.\n\n         SECTION  7.6 Further  Assurances.  The  Borrower  shall at its cost and\nexpense, upon the request of the Agent, duly execute and deliver, or cause to be\nduly executed and delivered,  to the Agent such further  instruments  and do and\ncause to be done such further acts as may be  reasonably  necessary or proper in\nthe  opinion  of the  Agent or its  counsel  to carry out more  effectively  the\nprovisions and purposes of the Loan Documents.\n\n         SECTION 7.7 Insurance.  The Borrower and each Consolidated Entity shall\nat all times  maintain  in force,  and pay all  premiums  and costs  related to,\ninsurance  coverages  comparable to the coverages reviewed by the Agent prior to\nthe  Closing  Date a summary of which  coverage is set forth in Exhibit J hereto\nand any other coverages required under applicable Governmental Requirements. The\nBorrower shall deliver to the Agent annually on or before the  anniversary  date\nof this Agreement, and at such other time or times as the Agent may request (but\nnot more often than monthly),  a certificate of the president or chief financial\nofficer of the Borrower  setting out in such detail as the Agent may  reasonably\nrequire a description of all insurance coverages  maintained by the Borrower and\neach  Consolidated  Entity.  The  Agent  shall  have no  obligation  to give the\nBorrower or any Consolidated  Entity notice of any notification  received by the\nAgent with  respect to any  insurance  policies or take any steps to protect the\nBorrower's or any Consolidated Entity's interests under such policies.\n\n         SECTION 7.8  Covenants Regarding Financial Condition.\n\n                  (a)      The Borrower covenants and agrees that:\n\n                           (1) Minimum Net Worth.  Consolidated  Net Worth shall\n                  not be less than $300,000,000 plus (A) 75% of Consolidated Net\n                  Income (if positive and including for purposes of this Section\n                  7.8(a)(1) only any  extraordinary  gain),  on an ongoing basis\n                  for each  fiscal  quarter  beginning  with the fiscal  quarter\n                  ending June 30,  1994,  plus (B) the  aggregate  amount of all\n                  increases,  if any, in its capital accounts resulting from the\n                  issuance of Capital  Stock or  conversion of debt into Capital\n                  Stock or other  securities  properly  classified  as equity in\n                  accordance with generally accepted accounting  principles,  or\n                  from the sale or other  disposition of treasury  shares,  from\n                  the date of this Agreement through the date of determination.\n\n                           (2) Working Capital Ratio.  The ratio of Consolidated\n                  Current Assets to Consolidated  Current  Liabilities shall not\n                  at any time be less than 2.00 to 1.00.\n\n\n                           (3)   Consolidated   Leverage  Ratio.  The  ratio  of\n                  Indebtedness  of  Borrower  and its  Consolidated  Entities to\n                  Consolidated  Total Capital shall during the periods set forth\n                  below be equal to or less than the  ratio  set forth  opposite\n                  such period:\n\n                                                         Ratio of\n                                                                  Consolidated\n                       Period                  Indebtedness   to  Total Capital\n\n                  Closing Date through            .75                 1.00\n                    September 30, 1994\n                  October 1, 1994 through         .725                1.00\n                    December 31, 1995\n                  January 1, 1996 through         .675                1.00\n                    December 31, 1996\n                  January 1, 1997 through         .65                 1.00\n                    the Conversion Date\n                  Thereafter                      .55                 1.00\n\n                           (4)  Senior   Indebtedness  to   Consolidated   Total\n                  Capital.  The ratio of  Senior  Indebtedness  to  Consolidated\n                  Total  Capital shall at all times be equal to or less than .45\n                  to 1.00.\n\n                           (5) Indebtedness to Consolidated Cash Flow. The ratio\n                  of Indebtedness of the Borrower and its Consolidated  Entities\n                  to  Consolidated  Cash  Flow  shall at all  times  during  the\n                  periods set forth below be equal to or less than the ratio set\n                  forth opposite such period:\n\n                                                          Ratio of\n                                                                  Consolidated\n                        Period               Indebtedness    to     Cash Flow\n\n                  Closing Date through            5.50                  1.00\n                    September 30, 1994\n                  October 1, 1994 through         5.00                  1.00\n                    December 31, 1994\n                  January 1, 1995 through         4.75                  1.00\n                    June 30, 1995\n                  July 1, 1995 through            4.25                  1.00\n                    December 31, 1995\n                  January 1, 1996 through         3.75                  1.00\n                    December 31, 1996\n                  January 1, 1997 and             3.50                  1.00\n                    Thereafter\n\n                           (6) Debt  Service  Coverage  Ratio.  The Debt Service\n                  Coverage  Ratio  shall  not at any time be less  than  1.75 to\n                  1.00.\n\n                           (7) EBITDA Coverage Ratio. The EBITDA Coverage Ratio\n                  shall not at any time be less than 2.25 to 1.00.\n\n                           (8)  Capital  Expenditures.   The  Borrower  and  the\n                  Consolidated  Entities  on a  consolidated  basis will not (i)\n                  make  Capital  Expenditures  on a  non-cumulative  basis in an\n                  amount in excess of (a) in Fiscal Year 1994  $135,000,000 plus\n                  up to  $40,000,000  to be  utilized  solely for the purpose of\n                  acquiring    Diagnostic   Health   Corporation   and   capital\n                  expenditures   relating  to  Diagnostic   Health   Corporation\n                  subsequent  to its  acquisition,  but in no event  shall total\n                  Capital  Expenditures exceed $170,000,000 in Fiscal Year 1994,\n                  and  (b)  in  any  Fiscal  Year   thereafter   the  lesser  of\n                  $150,000,000  or 100%  of  Cash  Flow  Available  for  Capital\n                  Expenditures  (including  Capital  Expenditures  not to exceed\n                  $20,000,000 related to Diagnostic Health Corporation) and (ii)\n                  make  Capital   Expenditures   exceeding   in  the   aggregate\n                  $20,000,000  during  any Fiscal  Year with  respect to any one\n                  particular Facility.  There shall not be included as a Capital\n                  Expenditure   the  portion  of  the  purchase   price  of  any\n                  Acquisition  which  is paid  for  with  Capital  Stock  of the\n                  Borrower;  provided,  however,  that the total of (x)  Capital\n                  Expenditures  and (y)  Acquisitions  in which Capital Stock is\n                  used to pay all or a  portion  of the  purchase  price may not\n                  exceed  $250,000,000  in any Fiscal Year. For purposes of this\n                  Section  7.8(a)(8)  the value of a share of  Capital  Stock of\n                  Borrower  shall be the closing  price of such Capital Stock on\n                  the New York  Stock  Exchange  on the  effective  date of such\n                  Acquisition. In addition, the portion of the purchase price of\n                  any Acquisition  which  represents the acquisition of accounts\n                  receivable shall not be included as a Capital  Expenditure for\n                  purposes of determining compliance with this Section 7.8(a)(8)\n                  if (i) such accounts receivable are less than 151 days old and\n                  (ii) the portion of the purchase price represented by accounts\n                  receivable  does not exceed 30% of the  purchase  price of the\n                  Acquisition  (any  amount  by which  the  accounts  receivable\n                  exceed  30% of the  purchase  price of the  Acquisition  to be\n                  treated as a Capital  Expenditure).  All  accounts  receivable\n                  shall be valued at the lesser of the net amount  owed  thereon\n                  or their book value.\n\n                           (9)  Indebtedness.   The  Borrower  and  Consolidated\n                  Entities on a consolidated  basis will not incur, or otherwise\n                  become liable with respect to, any Indebtedness other than (A)\n                  the Credit Obligations;  (B) Indebtedness  arising under those\n                  Letters  of Credit  set forth on  Exhibit K which  Letters  of\n                  Credit  shall  not be  modified  or  amended;  (C) the  Senior\n                  Subordinated   Notes   and   the   Convertible    Subordinated\n                  Debentures; (D) up to an aggregate of $10,000,000 of unsecured\n                  Indebtedness  incurred  prior  to the  Maturity  Date,  but no\n                  extension,   renewal  or  replacement   thereof;   (E)  up  to\n                  $10,000,000  of  Indebtedness  incurred to purchase  property,\n                  plant or equipment; (F) Guaranteed Obligations permitted under\n                  Section 7.8(a)(10);  and (G) Subordinated  Indebtedness of the\n                  Borrower, the proceeds of which are used to permanently reduce\n                  the principal portion of the Senior  Subordinated Notes or the\n                  Convertible   Subordinated   Debentures   so   long   as  such\n                  Subordinated   Indebtedness  is  (i)  unsecured,   (ii)  bears\n                  interest  at a rate of 12% or less per annum,  (iii)  contains\n                  covenants, restrictions, terms of subordination and redemption\n                  provisions  no  less  favorable  to  the  Lenders  than  those\n                  contained   in   Indentures   pursuant  to  which  the  Senior\n                  Subordinated Notes or Convertible Subordinated Debentures,  as\n                  the case may be, were issued,  as such Indentures exist on the\n                  Closing Date, (iv) prohibits  payment of principal  whether by\n                  its terms or by  prepayment  prior to 100 days next  following\n                  the Maturity  Date,  and (v) does not result in an increase in\n                  the amount of outstanding Indebtedness.\n                          \n\n                          (10)   Guarantees.   Borrower  and  the  Consolidated\n                  Entities on a consolidated basis will not incur any Guaranteed\n                  Obligations (whether by directly  guaranteeing  obligations of\n                  another person or by agreement to purchase the indebtedness of\n                  any  other  person,  or  entering  into an  agreement  for the\n                  furnishing  of funds to any other person  through the purchase\n                  of goods,  supplies or  services or by way of stock  purchase,\n                  contribution,  advance  or loan for the  purpose  of paying or\n                  discharging   the   indebtedness   of  any  other   person  or\n                  otherwise),  in an aggregate  amount in excess of $30,000,000,\n                  except for (A) the  endorsement  of negotiable  instruments in\n                  the   ordinary   course  of  business  for   collection;   (B)\n                  obligations  arising by reason of the  Borrower's  status as a\n                  general partner of a Controlled  Partnership;  (C) obligations\n                  to advance funds to Subsidiaries and Controlled  Partnerships,\n                  but only so long as the note or notes or  accounts  receivable\n                  evidencing  the advance of such funds is assigned to the Agent\n                  as security  for the Credit  Obligations;  (D) the  guarantees\n                  arising under the Guaranty Agreements; (E) the guarantee of up\n                  to  $22,000,000  of  Indebtedness   of  Vanderbilt,   and  (F)\n                  guarantees  of  Indebtedness  incurred  to pay  the  principal\n                  amount of the Credit Obligations,  provided that, concurrently\n                  with  the  incurrence  of  such  Guaranteed  Obligation,   the\n                  Borrower  and the Agent  agree in writing to reduce the credit\n                  available  to the Borrower  under this  Agreement by an amount\n                  equal to the  amount of such  Guaranteed  Obligations  and the\n                  Borrower pays any fee required to be paid in  connection  with\n                  such reduction.\n\n                           (11) Lease Payments.  Borrower will not, and will not\n                  permit any  Consolidated  Entity to, incur the  obligation  to\n                  make  Lease  Payments  in an  aggregate  amount  in  excess of\n                  $3,500,000  in any  Fiscal  Year;  and  the  Borrower  and its\n                  Consolidated  Entities on a consolidated  basis will not incur\n                  the obligation to make Lease  Payments in an aggregate  amount\n                  in excess of (i) $60,000,000 in the Fiscal Year ended December\n                  31, 1994,  (ii)  $65,000,000 in the Fiscal Year ended December\n                  31, 1995, (iii)  $70,000,000 in the Fiscal Year ended December\n                  31, 1996, and (iv) $75,000,000 in any Fiscal Year thereafter.\n                  \n\n                           (12)   Investment   and  Loans.   Borrower  and  the\n                  Consolidated  Entities  on  a  consolidated  basis  will  not,\n                  directly  or  indirectly,  purchase or  otherwise  acquire any\n                  stock,  security,  obligation or evidence of indebtedness  of,\n                  make any capital  contribution to, own any equity interest in,\n                  or make any loan or advance  to, any other  person;  provided,\n                  however, that it may continue to hold (A) all stock of and own\n                  partnership   interests   in  the  persons   that   constitute\n                  Consolidated  Entities  on the  Closing  Date;  (B)  stock of,\n                  partnership  interests  in, and  assets  of, new  Consolidated\n                  Entities  acquired   subsequent  to  the  Closing  Date  (such\n                  purchases to be included as a Capital Expenditure for purposes\n                  of determining  compliance with Section 7.8(a)(8) hereof); (C)\n                  Permitted  Investments;  and (D)  investments  in an aggregate\n                  amount not exceeding $20,000,000 in corporations, partnerships\n                  or joint ventures who do not constitute  Consolidated Entities\n                  (such investments not to be included as a Capital  Expenditure\n                  for purposes of determining  compliance with Section 7.8(a)(8)\n                  hereof),   provided   if   any   single   investment   exceeds\n                  $15,000,000,  Borrower  shall  provide  to the Agent  prior to\n                  making such investment, a Compliance Certificate demonstrating\n                  that on a pro forma  historical  basis  giving  effect to such\n                  investment as at the beginning of the most recent Four-Quarter\n                  Period  covered by such  Compliance  Certificate no Default or\n                  Event of Default would exist.\n\n                           (13)   Disposition   of  Assets.   Borrower  and  the\n                  Consolidated Entities on a consolidated basis will not without\n                  the consent of the Required  Lenders  (which consent shall not\n                  be unreasonably withheld),  sell, lease, transfer or otherwise\n                  dispose  of in  excess  of 5% of their  total  properties  and\n                  assets  over  the  term  of  this  Agreement;  except  (A) the\n                  Borrower  may  lease its  existing  skilled  nursing  facility\n                  located in New  Orleans,  Louisiana  to a third party on terms\n                  fairly  reflecting  current  market  conditions at the time of\n                  lease,  and (B) the  Borrower  may sell  physician  or medical\n                  office buildings or other non-revenue producing properties and\n                  out-patient  buildings  listed  in  Exhibit  O,  other  than a\n                  Facility,  at a price  not less  than  the book  value of such\n                  property at the time of sale.\n\n                           (14)  Consolidation  or  Merger.   Borrower  and  its\n                  Consolidated  Entities may merge or  consolidate  with another\n                  person only if (i) in the case of a merger or consolidation of\n                  the  Borrower,  the  Borrower is the  continuing  or surviving\n                  entity,  (ii)  in  the  case  of  a  merger  or  consolidation\n                  involving a Consolidated  Entity,  the continuing or surviving\n                  entity is  majority-owned  by the Borrower (with such majority\n                  ownership  constituting  a  controlling  interest),  and (iii)\n                  before  and  after  giving  effect to the  proposed  merger or\n                  consolidation,  no  Default or Event of  Default  shall  exist\n                  under  this  Agreement;  provided  that  in  the  case  of any\n                  consolidation   or  merger  with  a  person  which  is  not  a\n                  Consolidated Entity and the total assets of such person exceed\n                  $15,000,000  the Borrower  shall provide to the Agent prior to\n                  such  merger  or   consolidation   a  Compliance   Certificate\n                  demonstrating  that on a pro  forma  historical  basis  giving\n                  effect to such merger or  consolidation as at the beginning of\n                  the most recent Four-Quarter Period covered by such Compliance\n                  Certificate no Default or Event of Default would exist.\n\n                           (15) Liens.  Borrower  will not,  and will not permit\n                  any Consolidated Entity to, incur, create, assume or permit to\n                  exist any Lien upon any of its accounts  receivable,  contract\n                  rights,  chattel  paper,  inventory,  equipment,  instruments,\n                  general  intangibles or other personal or real property of any\n                  character, whether now owned or hereafter acquired, other than\n                  (i) Liens that constitute Permitted  Encumbrances,  (ii) Liens\n                  existing  as of the date  hereof  and  described  on Exhibit N\n                  hereof and (iii) Liens  securing  Indebtedness  incurred under\n                  Section  7.8(a)(9)(E)  so long as the Lien extends only to the\n                  asset acquired with such Indebtedness.\n\n                           (16) Dividends and  Distributions.  Borrower will not\n                  permit any Consolidated  Entity to be or become subject to any\n                  restrictions on the ability of such Consolidated Entity to pay\n                  dividends or to make partnership distributions.\n\n                           (17)   Acquisitions.   Prior  to  entering  into  any\n                  agreement  to acquire  any person or  Facility,  the  Borrower\n                  shall  provide to the Agent  evidence,  (i) that the person or\n                  Facility  to be  acquired  is in the  same  line  of  business\n                  presently  engaged  in by the  Borrower  or  its  Consolidated\n                  Entities, (ii) that the person or Facility to be acquired does\n                  not  oppose  the  Acquisition,  and  (iii)  if the cost of the\n                  Acquisition exceeds $15,000,000, prior to consummation of such\n                  Acquisition  deliver  to the  Agent a  Compliance  Certificate\n                  demonstrating  on a pro  forma  basis,  giving  effect to such\n                  Acquisition,  that no Default  or Event of Default  will exist\n                  under this Agreement.\n\n                           (18) Restricted  Payments.  Borrower will not declare\n                  or pay  dividends  (other  than stock  dividends)  or make any\n                  other  stockholder  distributions  to the  shareholders of the\n                  Borrower or  redemptions  or purchases of the Capital Stock of\n                  Borrower,  or make any  principal  payments  with  respect  of\n                  Subordinated Indebtedness (collectively \"Restricted Payments\")\n                  except  Borrower  may make  Restricted  Payments in any Fiscal\n                  Year  so  long  as  such   payments   are  less  than  25%  of\n                  Consolidated  Net Income  for such  Fiscal  Year and  Borrower\n                  shall deliver to the Agent prior to making any such Restricted\n                  Payment a Compliance  Certificate  demonstrating that on a pro\n                  forma basis after giving  effect to such payment no Default or\n                  Event of Default exists.\n                    \n\n                           (b) Except as  otherwise expressly  provided in this\n         Section 7.8, (i) the Borrower  shall also cause and require each of its\n         Consolidated  Entities to observe and perform each of the covenants and\n         agreements  of  this  section  to be  observed  and  performed  by  the\n         Borrower,   whether  or  not  a  specific  reference  is  made  to  the\n         Consolidated  Entities in each such covenant  (other than the financial\n         covenants  set forth in paragraphs  (1) through (7) of  subsection  (a)\n         above,  which apply to the Borrower and the Consolidated  Entities on a\n         consolidated  basis), and (ii) all computations  required in connection\n         with  such  financial  covenants  and  the  limitations  set  forth  in\n         paragraphs  (8) through (18) of subsection  (a) above shall be made for\n         the   Borrower  and  its   Consolidated   Entities  on  a  combined  or\n         consolidated  basis, in accordance with generally  accepted  accounting\n         principles, after elimination of intercompany items.\n\n         SECTION 7.9 Continuation of Current Business.  Neither the Borrower nor\nany Consolidated  Entity will (i) engage in any business other than the business\nnow being  conducted by it and other  businesses  directly  related to providing\nrehabilitation  services (including outpatient surgery,  diagnostic services and\nmanagement  of physician  practices) or  orthopedic  surgery  related acute care\nsimilar  in  operation  (but not in scope)  to the  HEALTHSOUTH  Medical  Center\nFacility or (ii) acquire or attempt to acquire any person who is opposed to such\nacquisition.\n\n         SECTION  7.10  Management  Contracts.  Neither  the  Borrower  nor  any\nConsolidated  Entity  will  enter into any  agreement  whereby  the  management,\nsupervision  or control of its business or any Facility shall be delegated to or\nplaced in any persons other than its governing  body and officers,  the Borrower\nor a  Consolidated  Entity,  except that  management  of the  Facility  owned by\nVanderbilt  Stallworth  Rehabilitation  Hospital,  L.P.  is  vested in part in a\nGovernance Committee and in part in a Subsidiary of the Borrower pursuant to the\napplicable limited partnership agreement and a management agreement.\n\n         SECTION 7.11 Cooperation; Inspection of Properties. The Borrower shall,\nand shall  cause the  Consolidated  Entities  to,  permit the  Lenders and their\nrepresentatives  to  inspect  the  Borrower's  and  the  Consolidated  Entities'\nproperties and assets,  and to inspect,  review and audit the Borrower's and the\nConsolidated Entities' books and records from time to time and at any time.\n\n         SECTION  7.12 Use of Proceeds.  The Borrower  shall use the proceeds of\nAdvances  exclusively to provide  funding for the acquisition and development of\nFacilities and to provide  working  capital to the Borrower,  the  Participating\nSubsidiaries and the Participating Partnerships.\n  \n         SECTION 7.13 Limit on Investment in HEALTHSOUTH of Birmingham, Inc. The\nBorrower will not cause or permit its aggregate direct and indirect  investment,\nwhether by stock purchase,  capital  contribution,  advance,  loan, guarantee or\notherwise, in HEALTHSOUTH of Birmingham, Inc. to exceed at any time $500,000.\n\n         SECTION 7.14 Additional  Consolidated Entities. On the last day of each\nfiscal  quarter of the  Borrower (or such earlier time as the Agent may request)\nthe Borrower will cause each Consolidated  Entity that is hereafter  acquired or\ncreated to become a  Participating  Subsidiary or  Participating  Partnership by\nexecution of a Guaranty Agreement and all other documents  necessary to cause it\nto become jointly and severally  liable for the Credit  Obligations  (subject to\nthe  limitations  provided in the  Guaranty  Agreement)  and the Borrower or the\nParticipating Subsidiary or the Participating Partnership, if applicable,  shall\nexecute a Pledge Agreement as more particularly  described in Section 2.7 herein\nand shall  deliver or cause to be  delivered  all  financing  statements,  stock\ncertificates  and duly  executed  stock powers  necessary to perfect the Agent's\nsecurity interest granted under such Pledge Agreement.\n\n         SECTION 7.15 ERISA.  With respect to all employee pension benefit plans\nmaintained by the Borrower or any Subsidiary:\n\n             (i) terminate any of such employee  pension  benefit plans so as to\n         incur  any  liability  to  the  Pension  Benefit  Guaranty  Corporation\n         established pursuant to ERISA;\n\n             (ii) allow or suffer to exist any prohibited  transaction involving\n         any of  such  employee  pension  benefit  plans  or any  trust  created\n         thereunder which would subject the Borrower or a Subsidiary to a tax or\n         penalty or other  liability on  prohibited  transactions  imposed under\n         Internal Revenue Code Section 4975 or ERISA;\n\n             (iii) fail to pay to any such  employee  pension  benefit  plan any\n         contribution which it is obligated to pay under the terms of such plan;\n\n             (iv) allow or suffer to exist any accumulated  funding  deficiency,\n         whether  or not  waived,  with  respect  to any such  employee  pension\n         benefit plan;\n\n             (v) allow or suffer to exist any  occurrence of a reportable  event\n         or any other  event or  condition,  which  presents a material  risk of\n         termination  by the Pension  Benefit  Guaranty  Corporation of any such\n         employee  pension  benefit plan that is a Single  Employer Plan,  which\n         termination  could  result  in any  liability  to the  Pension  Benefit\n         Guaranty Corporation; or\n\n             (vi)  incur  any   withdrawal   liability   with   respect  to  any\n         Multi-employer Plan.\n\n\n\n                                  ARTICLE VIII\n\n                         EVENTS OF DEFAULT AND REMEDIES\n\n         SECTION 8.1 Events of Default. The following shall constitute Events of\nDefault under this Agreement:\n\n                  (a)  the  Borrower  or  any  Participating  Subsidiary  or any\nParticipating  Partnership  shall fail to pay within (i) one Business Day of the\ndate when due any  principal  payable  under the terms of any Note or (ii) three\nBusiness  Days of the date when due any interest or fees payable under the terms\nof any Note or any amount payable under this Agreement,  any Guaranty  Agreement\nor any other of the Credit  Obligations or any other amount owed to the Agent or\nLenders under or in connection with the Loan Documents; or\n\n                  (b) The  Borrower or any Material  Group shall  default in the\nperformance or observance of any other  provision of this Agreement  (other than\nthe  provisions  of Article VII hereof),  except as covered by clause (a) above,\nand shall not cure such default  within  thirty days after the first to occur of\n(i) the date the Agent or  Lenders  gives  written or  telephonic  notice of the\ndefault  to the  Borrower  or (ii) the date the  Borrower  otherwise  has notice\nthereof; or\n\n                  (c)  the  Borrower  or  any  Participating  Subsidiary  or any\nParticipating  Partnership or any Material Group shall default in the observance\nor performance of any provision in Article VII hereof; or\n\n                  (d)  the   Agent   shall   determine   that   any   statement,\ncertification,  representation  or warranty  contained  herein, or in any of the\nother Loan Documents or in any report, financial statement, certificate or other\ninstrument  delivered to the Agent or any Lender by or on behalf of the Borrower\nor any Participating Subsidiary or any Participating  Partnership was misleading\nor untrue in any material respect at the time it was made; or\n\n                  (e)  default   shall  be  made  (i)  in  the  payment  of  any\nIndebtedness  (other  than  the  Credit  Obligations)  of  the  Borrower  or any\nConsolidated  Entity  when  due  or  (ii)  in  the  performance,  observance  or\nfulfillment  of any term or covenant  contained in any  agreement or  instrument\nunder or pursuant to which any such Indebtedness may have been issued,  created,\nassumed,  guaranteed or secured by Borrower or any Consolidated  Entity,  if the\neffect of such default is to accelerate the maturity of such  Indebtedness or to\npermit the holder thereof to cause such  Indebtedness to become due prior to its\nstated  maturity,  and such default  shall not be cured within 10 days after the\noccurrence of such default, and the amount of the Indebtedness  involved exceeds\n$3,000,000; or\n\n                  (f) the Borrower or any  Material  Group shall fail to pay its\nor their debts generally as they come due, or a receiver, trustee, liquidator or\nother custodian shall be appointed for the Borrower or any Material Group or for\nany of the  property  of the  Borrower  or any  Material  Group or a petition in\nbankruptcy,  or under  any  insolvency  law,  shall be filed by or  against  the\nBorrower or any Material Group or the Borrower or any Material Group shall apply\nfor the benefit  of, or take  advantage  of, any law for relief of  debtors,  or\nenter into an  arrangement  or  composition  with, or make an assignment for the\nbenefit of, creditors; or\n\n                  (g) final judgment  for the payment of money in excess of any\naggregate of $50,000 shall be rendered against the Borrower or any participating\nSubsidiary or any Participating  Partnership or any Material Group, and the same\nshall remain  undischarged  for a period of 30 days during which execution shall\nnot be effectively stayed; or\n\n                  (h) an event of default, as therein defined, shall occur under\nany other Loan Document; or\n\n                  (i)  if  any  of  the  Guaranty   Agreements,   Notes,  Pledge\nAgreements or LC Agreement shall be deemed unenforceable by a court of competent\njurisdiction or shall no longer be effective; or\n\n                  (j) if any person or group of persons acting  together who are\nnot as at the Closing Date owners of Capital Stock of the Borrower having voting\nrights shall own directly or  indirectly  fifteen  percent  (15%) or more of the\nCapital Stock of the Borrower having voting rights; or\n\n                  (k) if (i)  the  Borrower  or any  Consolidated  Entity  shall\nengage in any prohibited  transaction (as described in Section 7.15(ii) hereof),\nwhich is not subject to a statutory or administrative  exemption,  involving any\nemployee pension benefit plan of the Borrower or any Consolidated  Entity,  (ii)\nany accumulated  funding deficiency (as referred to in Section 7.15(iv) hereof),\nwhether or not waived,  shall exist with  respect to any Single  Employer  Plan,\n(iii) a reportable  event (as referred to in Section 7.15(v) hereof) (other than\na reportable  event for which the statutory  notice  requirement  to the Pension\nBenefit  Guaranty  Corporation  has been waived by regulation)  shall occur with\nrespect to, or  proceedings  shall  commence to have a trustee  appointed,  or a\ntrustee shall be appointed to administer  or to terminate,  any Single  Employer\nPlan, which reportable event or institution or proceedings is, in the reasonable\nopinion of the Required  Lenders,  likely to result in the  termination  of such\nSingle Employer Plan for purposes of Title IV of ERISA,  and in the case of such\na reportable event, the continuance of such reportable event shall be unremedied\nfor sixty (60) days after notice of such  reportable  event  pursuant to Section\n4043(a),  (c) or (d) of ERISA is  given,  as the  case may be,  (iv) any  Single\nEmployer  Plan  shall  terminate  for  purposes  of Title IV of ERISA,  and such\ntermination  results in a material liability of the Borrower or any Consolidated\nEntity to such Single Employer Plan or the Pension Benefit Guaranty Corporation,\n(v) the Borrower or any Subsidiary shall withdraw from a Multi-employer Plan for\npurposes  of Title IV of ERISA,  and,  as a result of any such  withdrawal,  the\nBorrower or any  Consolidated  Entity shall incur  withdrawal  liability to such\nMulti-employer  Plan, or (vi) any other event or condition shall occur or exist;\nand in each case in clauses (i) through (vi) of this Section 8.1(k),  such event\nor condition,  together with all other such events or conditions,  if any, could\nsubject the  Borrower or any  Consolidated  Entity to any tax,  penalty or other\nliabilities in excess of $100,000,  and in each such case the event or condition\nis not remedied to the  satisfaction of the Required  Lenders within ninety (90)\ndays after the  earlier of (i) receipt of notice of such event or  condition  by\nthe Authorized  Representative from the Agent or (ii) the Borrower becomes aware\nof such  event  or  condition;  then,  and in any  such  event  and at any  time\nthereafter, if such Event of Default shall then be continuing,\n\n                           (A) either or both of the  following  actions  may be\n                  taken: (i) the Agent may, and at the direction of the Required\n                  Lenders  shall,  declare any obligation of the Lenders to make\n                  further Loans or issue Letters of Credit terminated, whereupon\n                  the  obligation  of each  Lender  to  make  further  Loans  or\n                  NationsBank  to  issue  Letters  of  Credit,  hereunder  shall\n                  terminate  immediately,  and  (ii)  the  Agent  shall  at  the\n                  direction of the Required Lenders, at their option, declare by\n                  notice to the Borrower any or all of the Credit Obligations to\n                  be immediately  due and payable,  and the same,  including all\n                  interest  accrued  thereon  and all other  obligations  of the\n                  Borrower to the Lenders,  shall forthwith  become  immediately\n                  due and payable without presentment,  demand,  protest, notice\n                  or  other  formality  of any  kind,  all of which  are  hereby\n                  expressly  waived,   anything   contained  herein  or  in  any\n                  instrument  evidencing the Credit  Obligations to the contrary\n                  notwithstanding;  provided,  however, that notwithstanding the\n                  above,  if there shall occur an Event of Default  under clause\n                  (f)  above,  then  the  obligation  of  the  Lenders  to  lend\n                  hereunder shall automatically terminate and any and all of the\n                  Credit  Obligations  shall  be  immediately  due  and  payable\n                  without  the  necessity  of any  action  by the  Agent  or the\n                  Required Lenders or notice to the Agent or the Lenders;\n\n                           (B) Borrower shall, upon demand of Agent deposit cash\n                  with the Agent in an amount equal to the amount of any Letters\n                  of Credit remaining undrawn or unpaid, as collateral  security\n                  for the  repayment  of any future  drawings or payments  under\n                  such Letters of Credit,  and Borrower shall forthwith  deposit\n                  and pay such amounts and such  amounts  shall be held by Agent\n                  pursuant to the terms of the LC Account Agreement; and\n\n                           (C) the Agent,  on behalf of the Lenders,  shall have\n                  all of the following rights and remedies in addition to all of\n                  the rights and  remedies of a secured  party under the Uniform\n                  Commercial  Code in respect of the Collateral and otherwise be\n                  available  under the Loan  Documents  or under any  applicable\n                  law: the Agent may at any time and from time to time,  with or\n                  without  judicial  process or the aid and assistance of others\n                  and without incurring any liability to the Borrower,  upon ten\n                  (10) days' notice to the Borrower sell or otherwise dispose of\n                  any  Collateral,  at public or private sale or  proceedings or\n                  otherwise,  by one or more contracts,  in one or more parcels,\n                  at the same or  different  times,  with or without  having the\n                  Collateral at the place of sale or other disposition, for cash\n                  and\/or  credit,  and  upon any  terms,  at such  place(s)  and\n                  time(s) and to such  person(s) as the Agent deems best; if any\n                  Collateral  is sold by the Agent  upon  credit  or for  future\n                  delivery, the Agent shall not be liable for the failure of the\n                  purchaser  to pay for same and in such  event  the  Agent  may\n                  resell  such  Collateral  in  accordance  with the  provisions\n                  hereof  provided  the  Borrower  shall  be  given  credit  for\n                  proceeds  received  by reason of such  sale;  the Agent or any\n                  Lender  may buy any  Collateral  at any public  sale and,  the\n                  Agent or any Lender may buy such Collateral at private sale so\n                  long as such sale is made in a commercially  reasonable manner\n                  and in each  case  may make  payment  therefor  by any  means.\n                  Except to the  extent  the  Agent  shall  have  failed to take\n                  action  required  under this  Agreement,  no Lenders  shall be\n                  entitled to enforce the  provisions of this  subsection (C) of\n                  Section 8.1 independently.\n\n         SECTION  8.2 Agent to Act.  In case any one or more  Events of  Default\nshall  occur and be  continuing,  the Agent  may,  and at the  direction  of the\nRequired Lenders shall,  proceed to protect and enforce their rights or remedies\neither by suit in equity or by action at law, or both,  whether for the specific\nperformance of any covenant, agreement or other provision contained herein or in\nany other Loan  Document,  or to enforce the payment of the  Obligations  or any\nother legal or equitable right or remedy.\n\n         SECTION 8.3 Cumulative Rights. No right or remedy herein conferred upon\nthe Lenders, the Agent and the Borrower is intended to be exclusive of any other\nrights or remedies  contained  herein or in any other Loan  Document,  and every\nsuch right or remedy shall be cumulative and shall be in addition to every other\nsuch right or remedy contained  herein and therein or now or hereafter  existing\nat law or in equity or by statute, or otherwise.\n\n         SECTION 8.4 No Waiver.  No course of dealing  between the  Borrower and\nany Lender or the Agent or any failure or delay on the part of any  Lender,  the\nAgent or the  Borrower  in  exercising  any rights or remedies  hereunder  shall\noperate as a waiver of any rights or remedies hereunder and no single or partial\nexercise  of any  rights or  remedies  hereunder  shall  operate  as a waiver or\npreclude the  exercise of any other rights or remedies  hereunder or of the same\nright or remedy on a future occasion.\n\n         SECTION 8.5 Default.  The Agent and the Lenders  shall have no right to\naccelerate  any of the Loans  upon,  or to  institute  any action or  proceeding\nbefore any court to realize upon  Collateral  as a result of, the  occurrence of\nany Default  which  shall not also  constitute  an Event of  Default;  provided,\nhowever,  nothing  contained  in this  sentence  shall in any respect  impair or\nadversely affect the right, power and authority of the Agent and the Lenders (i)\nto take any action  expressly  required or  permitted to be taken under the Loan\nDocuments  upon the  occurrence  of any  Default  (and  including  any action or\nproceeding  which the Agent may  determine  to be necessary  or  appropriate  in\nfurtherance of any such expressly authorized action) and (ii) to take any action\nprovided under the Loan Documents or otherwise  available by statute,  at law or\nin equity upon the occurrence of any Default.\n\n         SECTION 8.6 Allocation of Proceeds. If an Event of Default has occurred\nand is continuing,  and the maturity of the Notes has been accelerated  pursuant\nto this Article VIII, all payments received by the Agent hereunder in respect of\nany  principal  of or interest on the Credit  Obligations  or any other  amounts\npayable by the Borrower hereunder shall be applied by the Agent in the following\norder:\n\n                    (i)  amounts due to the  Lenders  pursuant to Sections  2.11\n          hereof;\n\n                    (ii)  amounts due to the Agent and  NationsBank  pursuant to\n          Section 9.11 and Section 2.13(i) and (k) hereof;\n\n                    (iii) payments of interest, to be applied in accordance with\n          Section 2.14 hereof;\n\n                    (iv) payments of principal, to be applied in accordance with\n          Section 2.14 hereof;\n\n                    (v) payment of cash amounts to the Agent pursuant to Section\n          8.1(B) hereof; and\n\n                    (vi) payments of all other amounts due under this Agreement,\n          if any, to be applied in accordance  with each Lender's pro rata share\n          of all principal due to the Lenders.\n\n\n                                   ARTICLE IX\n\n                                   THE AGENT\n\n         SECTION 9.1  Appointment.  Each Lender  (including  NationsBank  in its\ncapacity as issuer of the Letters of Credit) hereby  irrevocably  designates and\nappoints NationsBank as the Agent of the Lenders under this Agreement,  and each\nof the Lenders hereby irrevocably  authorizes  NationsBank as the Agent for such\nLender, to take such action on its behalf under the provisions of this Agreement\nand the other  Loan  Documents  and to  exercise  such  powers as are  expressly\ndelegated to the Agent by the terms of this Agreement,  together with such other\npowers as are reasonably incidental thereto. The Agent shall not have any duties\nor  responsibilities,  except those expressly set forth herein, or any fiduciary\nrelationship  with any of the  Lenders,  and no  implied  covenants,  functions,\nresponsibilities,  duties,  obligations or  liabilities  shall be read into this\nAgreement or otherwise exist against the Agent.\n\n         SECTION 9.2 Attorneys-in-fact.  The Agent may execute any of its duties\nunder this  Agreement  by or through  agents or  attorneys-in-fact  and shall be\nentitled to advice of counsel  concerning all matters pertaining to such duties.\nThe  Agent  shall  not be  responsible  for  the  gross  negligence  or  willful\nmisconduct  of any agents or  attorneys-in-fact  selected by it with  reasonable\ncare.\n\n         SECTION 9.3  Limitation on Liability.  Neither the Agent nor any of its\nofficers,  directors,  employees, agents or attorneys-in-fact shall be liable to\nthe Lenders for any action  lawfully  taken or omitted to be taken by it or them\nunder or in  connection  with this  Agreement  except for its or their own gross\nnegligence or willful  misconduct.  Neither the Agent nor any of its  affiliates\nshall be  responsible  in any  manner to any of the  Lenders  for any  recitals,\nstatements,  representations  or  warranties  made by the  Borrower,  any of its\nControlled  Entities  or  Controlled  Partnerships,  or any  officer  or partner\nthereof contained in this Agreement or in any of the other Loan Documents, or in\nany certificate, report, statement or other document referred to or provided for\nin or received by the Agent under or in  connection  with this  Agreement or for\nthe value, validity, effectiveness,  genuineness,  enforceability or sufficiency\nof this Agreement or any of the other Loan Documents,  or for any failure of the\nBorrower to perform its obligations thereunder. The Agent shall not be under any\nobligation to any of the Lenders to ascertain or to inquire as to the observance\nor performance of any of the terms, covenants or conditions of this Agreement or\nany of the other Loan  Documents  on the part of the  Borrower or to inspect the\nproperties,  books or records of the  Borrower  or its  Controlled  Entities  or\nControlled Partnerships.\n\n         SECTION 9.4 Reliance. The Agent shall be entitled to rely, and shall be\nfully protected in relying, upon any Note, writing, resolution,  notice, consent\ncertificate,  affidavit, letter, cablegram, telegram, telecopy or telex message,\nstatement,  order or other document or conversation believed by it to be genuine\nand  correct  and to have  been  signed,  sent or made by the  proper  person or\nPersons and upon advice and  statements  of legal  counsel  (including,  without\nlimitation, counsel to the Borrower),  independent accountants and other experts\nselected by the Agent. The Agent may deem and treat the payee of any Note as the\nowner thereof for all purposes  unless an Assignment and  Acceptance  shall have\nbeen filed with and accepted by the Agent. The Agent shall be fully justified in\nfailing or  refusing  to take any action  under this  Agreement  unless it shall\nfirst receive advice or  concurrence  of the Lenders or the Required  Lenders as\nprovided in this Agreement or it shall first be indemnified to its  satisfaction\nby the Lenders  against any and all  liability and expense which may be incurred\nby it by reason of taking or continuing to take any such action. The Agent shall\nin all cases be fully protected in acting,  or in refraining from acting,  under\nthis Agreement in accordance  with a request of the Required  Lenders,  and such\nrequest and any action taken or failure to act pursuant thereto shall be binding\nupon all the Lenders and all present and future holders of the Notes.\n\n         SECTION  9.5 Notice of  Default.  The Agent shall not be deemed to have\nknowledge  or  notice  of the  occurrence  of any  Default  or Event of  Default\nhereunder unless the Agent has received notice from a Lender, or the Borrower or\nany of the Subsidiaries referring to this Agreement,  describing such Default or\nEvent of Default and stating that such notice is a \"notice of  default\".  In the\nevent that the Agent  receives  such a notice,  the Agent  shall  promptly  give\nnotice thereof to the Lenders.  The Agent shall take such action with respect to\nsuch Default or Event of Default as shall be reasonably directed by the Required\nLenders;  provided  that,  unless and until the Agent shall have  received  such\ndirections,  the Agent may (but shall not be obligated to) take such action,  or\nrefrain  from taking such  action,  with  respect to such Event of Default as it\nshall deem advisable in the best interests of the Lenders.\n\n         SECTION 9.6 No Representations. Each Lender expressly acknowledges that\nneither  the Agent nor any of its  affiliates  has made any  representations  or\nwarranties  to it and that no act by the Agent  hereafter  taken,  including any\nreview of the affairs of the Borrower or any of its Consolidated Entities, shall\nbe deemed to  constitute  any  representation  or  warranty  by the Agent to any\nLender.  Each  Lender  represents  to the Agent that it has,  independently  and\nwithout reliance upon the Agent or any other Lender, and based on such documents\nand  information  as it has deemed  appropriate,  made its own  appraisal of and\ninvestigation into the financial condition,  creditworthiness,  affairs,  status\nand nature of the Borrower and Controlled Partnerships and made its own decision\nto  enter  into  this  Agreement.  Each  Lender  also  represents  that it will,\nindependently and without reliance upon the Agent or any other Lender, and based\non such  documents and  information  as it shall deem  appropriate  at the time,\ncontinue to make its own credit analysis,  appraisals and decisions in taking or\nnot taking  action under this  Agreement  and to make such  investigation  as it\ndeems  necessary  to inform  itself as to the status and  affairs,  financial or\notherwise,  of  the  Borrower  and  its  Consolidated  Entities  and  Controlled\nPartnerships. Except for notices, reports and other documents expressly required\nto be furnished to the Lenders by the Agent hereunder,  the Agent shall not have\nany duty or  responsibility  to  provide  any  Lender  with any  credit or other\ninformation  concerning  the  affairs,  financial  condition  or business of the\nBorrower or any of its Consolidated  Entities and Controlled  Partnerships which\nmay come into the possession of the Agent or any of its affiliates.\n\n         SECTION 9.7  Indemnification.  The Lenders agree to indemnify the Agent\nin its capacity as such (to the extent not  reimbursed by the Borrower or any of\nits  Consolidated  Entities and without limiting any obligations of the Borrower\nor any  of  its  Consolidated  Entities  so to  do),  ratably  according  to the\nrespective  principal  amount  of the Notes  held by them  (or,  if no Notes are\noutstanding,  ratably in accordance with their respective  Applicable Commitment\nPercentages  as  then in  effect)  from  and  against  any and all  liabilities,\nobligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,\nexpenses or disbursements of any kind or nature whatsoever which may at any time\n(including  without limitation at any time following the payment of the Note) be\nimposed on, incurred by or asserted  against the Agent in any way relating to or\narising out of this Agreement or any other document  contemplated by or referred\nto herein or the transactions contemplated hereby or any action taken or omitted\nby the Agent under or in connection with any of the foregoing;  provided that no\nLender  shall be liable  for the  payment of any  portion  of such  liabilities,\nobligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,\nexpenses or disbursements resulting from the Agent's gross negligence or willful\nmisconduct.  The agreements in this subsection  shall survive the payment of the\nObligations and the termination of this Agreement.\n\n         SECTION 9.8  Lender.  The Agent and its  affiliates  may make loans to,\naccept  deposits  from and  generally  engage in any kind of  business  with the\nBorrower and its Consolidated Entities and Controlled  Partnerships as though it\nwere not the Agent  hereunder.  With  respect to its Loans made or renewed by it\nand any Note issued to it, the Agent shall have the same rights and powers under\nthis Agreement as any Lender and may exercise the same as though it were not the\nAgent, and the terms \"Lender\" and \"Lenders\" shall,  unless the context otherwise\nindicates, include the Agent in its individual capacity.\n\n         SECTION 9.9 Resignation.  If the Agent shall resign as Agent under this\nAgreement,  then the  Required  Lenders may  appoint a  successor  Agent for the\nLenders, which successor shall be approved by the Borrower, which approval shall\nnot be unreasonably  withheld,  which shall be a commercial bank organized under\nthe laws of the United States or any state  thereof,  having a combined  surplus\nand capital of not less than $500,000,000,  whereupon such successor Agent shall\nsucceed to the rights, powers and duties of the former Agent and the obligations\nof the former  Agent  shall be  terminated  and  canceled,  without any other or\nfurther  act or deed on the part of such  former  Agent or any of the parties to\nthis Agreement; provided, however, that the former Agent's resignation shall not\nbecome effective until such successor Agent has been appointed and has succeeded\nof  record  to all  right,  title  and  interest  of  the  former  Agent  in the\nCollateral;  provided,  further,  if the Required  Lenders  cannot agree as to a\nsuccessor Agent within ninety (90) days after such resignation,  the Agent shall\nappoint a  successor  Agent and the  parties  hereto  agree to execute  whatever\ndocuments are necessary to effect such action under this  Agreement or any other\ndocument  executed pursuant to this Agreement;  provided,  however in such event\nall  provisions of this Agreement and the Loan  Documents,  shall remain in full\nforce and effect. After any retiring Agent's resignation hereunder as Agent, the\nprovisions of this Article IX shall inure to its benefit as to any actions taken\nor omitted to be taken by it while it was Agent under this Agreement.\n\n         SECTION 9.10 Sharing of Payments,  etc.  Each Lender  agrees that if it\nshall,  through the exercise of a right of banker's lien, set-off,  counterclaim\nor otherwise,  obtain payment with respect to its Credit Obligations (other than\nany payment pursuant to Article IV) which results in its receiving more than its\npro rata  share of the  aggregate  payments  with  respect  to all of the Credit\nObligations  (other than any  payment  pursuant  to Article  IV),  then (A) such\nLender shall be deemed to have simultaneously purchased from the other Lenders a\nshare in their Credit  Obligations so that the amount of the Credit  Obligations\nheld by each of the  Lenders  shall be pro rata and (B) such  other  adjustments\nshall be made from time to time as shall be equitable to insure that the Lenders\nshare such  payments  ratably;  provided,  however,  that for  purposes  of this\nSection  9.10 the term \"pro rata\" shall be  determined  with respect to both the\nCommitment of each Lender and to the Revolving  Facility  after  subtraction  in\neach case of amounts,  if any, by which any such Lender has not funded its share\nof the outstanding Loans and Reimbursement Obligations. If all or any portion of\nany such excess  payment is thereafter  recovered from the Lender which received\nthe same,  the purchase  provided in this Section 9.10 shall be rescinded to the\nextent of such recovery,  without interest.  The Borrower  expressly consents to\nthe foregoing  arrangements  and agrees that each Lender so purchasing a portion\nof the other Lenders' Obligations may exercise all rights of payment (including,\nwithout limitation,  all rights of set-off,  banker's lien or counterclaim) with\nrespect to such  portion as fully as if such  Lender  were the direct  holder of\nsuch portion.\n\n         SECTION  9.11 Fees.  The Borrower  agrees to pay to the Agent,  for its\nindividual  account,  in advance a quarterly Agent's fee in such amount as shall\nbe agreed to from time to time.\n\n         SECTION  9.12  Independent  Agreements.  The  provisions  contained  in\nSections  9.1 through  9.8 and 9.10 of this  Article IX  constitute  independent\nobligations  and  agreements of the Agent and the Lenders and the Borrower shall\nnot be deemed a party thereto nor bound thereby.  Borrower does  acknowledge the\nrights of Lenders and Agent under Sections 9.9 and 9.11 hereof.\n\n                                   ARTICLE X\n\n                                 MISCELLANEOUS\n\n         SECTION 10.1 Assignments and Participations.\n\n                  (a) At any time after the Closing  Date each Lender may,  with\nthe prior  consent of the Agent and the  Borrower,  which  consent  shall not be\nunreasonably withheld, assign to one or more banks or financial institutions all\nor a portion of its  rights and  obligations  under this  Agreement  (including,\nwithout  limitation,  all or a  portion  of the  Notes  payable  to its  order);\nprovided,  that (i) each  such  assignment  shall  be of a  constant,  and not a\nvarying,  percentage of all of the  assigning  Lender's  rights and  obligations\n(including  Loans  and  Participations)  under  this  Agreement  (ii)  for  each\nassignment  involving the issuance and transfer of Notes,  the assigning  Lender\nshall execute an Assignment and Acceptance and the Borrower  hereby  consents to\nexecute  replacement  Notes to give effect to the assignment,  (iii) the minimum\nCommitment  which  shall be  assigned is  $10,000,000  (together  with which the\nassigning Lender's applicable portion of Participations and the Letter of Credit\nCommitment  shall also be assigned) and (iv) such assignee  shall have an office\nlocated  in the United  States.  Upon such  execution,  delivery,  approval  and\nacceptance,  from and after the effective date specified in each  Assignment and\nAcceptance,  (x) the  assignee  thereunder  shall be a party  hereto and, to the\nextent  that  rights  and  obligations  hereunder  or under such Notes have been\nassigned or negotiated to it pursuant to such Assignment and Acceptance have the\nrights  and  obligations  of a Lender  hereunder  (including,  in respect of the\nCollateral,  all the rights  and  obligations  of a Lender,  as fully as if such\nassignee  had been  named as a Lender  in this  Agreement)  and a holder of such\nNotes and (y) the  assignor  thereunder  shall,  to the extent  that  rights and\nobligations hereunder or under such Notes have been assigned or negotiated by it\npursuant  to such  Assignment  and  Acceptance,  relinquish  its  rights  and be\nreleased from its future  obligations  under this  Agreement.  No assignee shall\nhave the right to further  assign its rights and  obligations  pursuant  to this\nSection  10.1.  Any  Lender  who  makes an  assignment  shall pay to the Agent a\none-time  administrative  fee of $2,500.00  which fee shall not be reimbursed by\nBorrower.\n\n                  (b) By executing and delivering an Assignment and  Acceptance,\nthe Lender assignor  thereunder and the assignee thereunder confirm to and agree\nwith each other and the other parties hereto as follows: (i) the assignment made\nunder  such  Assignment  and  Acceptance  is  made  under  such  Assignment  and\nAcceptance without recourse;  (ii) such assigning Lender makes no representation\nor  warranty  and  assumes  no  responsibility  with  respect  to the  financial\ncondition of the Borrower or any Controlled Entity or Controlled  Partnership or\nthe  performance  or  observance  by the  Borrower or any  Controlled  Entity or\nControlled  Partnership of any of its obligations under any Loan Document or any\nother  instrument or document  furnished  pursuant  hereto;  (iii) such assignee\nconfirms that it has received a copy of this Agreement,  together with copies of\nthe financial  statements  delivered pursuant to Section 7.3 and such other Loan\nDocuments and other  documents and  information as it has deemed  appropriate to\nmake its own credit  analysis  and  decision to enter into such  Assignment  and\nAcceptance; (iv) such assignee will, independently and without reliance upon the\nAgent, such assigning Lender or any other Lender and based on such documents and\ninformation as it shall deem  appropriate at the time,  continue to make its own\ncredit  decisions in taking or not taking action under this Agreement;  (v) such\nassignee  appoints and  authorizes the Agent to take such action as agent on its\nbehalf and to exercise such powers under this Agreement,  the Note and the other\nLoan  Documents  as are  delegated to the Agent by the terms hereof and thereof,\ntogether with such powers as are reasonably  incidental  thereto;  and (vi) such\nassignee  agrees that it will perform in accordance  with their terms all of the\nobligations which by the terms of this Agreement are required to be performed by\nit as a Lender and a holder of such Note.\n\n                  (c) The Agent shall maintain at its address referred to herein\na copy of each Assignment and Acceptance delivered to and accepted by it.\n\n                  (d) Upon its receipt of an Assignment and Acceptance  executed\nby an assigning Lender, the Agent shall give prompt notice thereof to Borrower.\n\n                  (e) Each Lender may sell  participations  to one or more banks\nor other  entities  as to all or a portion of its rights and  obligations  under\nthis  Agreement;  provided,  that  (i)  such  Lender's  obligations  under  this\nAgreement  shall  remain  unchanged,   (ii)  such  Lender  shall  remain  solely\nresponsible to the other parties hereto for the performance of such obligations,\n(iii) such  Lender  shall  remain  the holder of any Notes  issued to it for the\npurpose of this Agreement, (iv) such participations shall be in a minimum amount\nof  $10,000,000  and  shall  include  an  allocable  portion  of  such  Lender's\nParticipation,  and (v) Borrower, the Agent and the other Lenders shall continue\nto deal solely and directly  with such Lender in  connection  with such Lender's\nrights and  obligations  under  this  Agreement  and with  regard to any and all\npayments  to be made  under this  Agreement;  provided,  that the  participation\nagreement  between a Lender and its  participants  may provide  that such Lender\nwill obtain the approval of such participant  prior to such Lender's agreeing to\nany  amendment or waiver of any  provisions  of this  Agreement  which would (A)\nextend the maturity of the Notes,  (B) reduce the interest rate  hereunder,  (C)\nincrease the Commitment of the Lender granting the  participation or (D) release\nall or any substantial  part of the Collateral other than in accordance with the\nterms of the Loan Documents,  and (vi) the sale of any such participations which\nrequire  Borrower  to file a  registration  statement  with  the  United  States\nSecurities and Exchange  Commission or under the securities  regulations or laws\nof any state shall not be permitted.\n\n                  (f) Notwithstanding the provisions of this Section 10.1 to the\ncontrary,  any Lender may assign all or any portion of its  interest in Loans to\nits  Affiliates  without  approval of the Agent or Borrower  upon payment of the\nadministrative fee described in Section 10.1(a) above, and all or any portion of\nits interest in Loans to the Federal Reserve Bank without  approval of the Agent\nor Borrower and without payment of any fees.\n\n         SECTION 10.2 Notices.  Any notice shall be conclusively  deemed to have\nbeen received by any party hereto and be effective on the day on which delivered\nto such party (against receipt  therefor) at the address set forth below or such\nother  address as such party shall  specify to the other parties in writing (or,\nin the case of telephonic notice or notice by telecopy, telegram or telex (where\nthe  receipt of such  message is  verified  by return)  expressly  provided  for\nhereunder, when received at such telephone, telecopy or telex number as may from\ntime to time be  specified  in  written  or verbal  notice to the other  parties\nhereto or otherwise  received),  or if sent  prepaid by certified or  registered\nmail return  receipt  requested on the third Business Day after the day on which\nmailed, addressed to such party at said address:\n\n                  (a)      if to  the  Borrower or a  Participating  Partnership\nor a Participating Subsidiary at:\n\n                           Two Perimeter Park South\n                           Suite 224W\n                           Birmingham, Alabama 35243\n                           Attention:  Richard M. Scrushy\n\n                           with a copy to:\n\n                           Chief Financial Officer\n                           HealthSouth Rehabilitation Corporation\n                           Suite 224W\n                           Two Perimeter Park South\n                           Birmingham, Alabama 35243\n\n                           and with a copy to:\n\n                           Treasurer\n                           HealthSouth Rehabilitation Corporation\n                           Suite 224W\n                           Two Perimeter Park South\n                           Birmingham, Alabama 35243\n\n                           and with a copy to:\n\n                           J. Brooke Johnston, Jr.\n                           Haskell Slaughter Young\n                           1200 AmSouth-Harbert Plaza\n                           1901 6th Avenue North\n                           Birmingham, Alabama 35203\n\n                  (b)      if to the Agent at:\n\n                           NationsBank Corporate Center\n                           100 South Tryon Street\n                           Charlotte, North Carolina 28255\n                           Attention:  Agency Services\n\n                           With a copy to:\n\n                           600 Peachtree Street, N.E.\n                           21st Floor\n                           Atlanta, Georgia 30308-2212\n                           Attention:  Corporate Banking\n\n                  (c)     if  to NationsBank  in its capacity  as issuer of  the\nLetters of Credit:\n\n                           NationsBank of North Carolina, N.A.\n                           NationsBank Plaza\n                           Charlotte, North Carolina 28255\n                           Attention:  Letter of Credit Department\n\n                  (d)      if to the Lenders:\n\n                           At the  addresses  set forth on the  signature  pages\n                           hereof or on the  signature  page of each  Assignment\n                           and Acceptance.\n\n         SECTION  10.3 No Waiver.  No failure or delay on the part of the Agent,\nany Lender or the  Borrower  in the  exercise of any right,  power or  privilege\nhereunder  shall  operate as a waiver of any such right,  power or privilege nor\nshall any such failure or delay preclude any other or further exercise  thereof.\nThe rights and remedies  herein provided are cumulative and not exclusive of any\nrights or remedies provided by law.\n\n         SECTION 10.4 Setoff. The Borrower agrees that the Agent and each Lender\nshall  have a lien  for all the  Credit  Obligations  of the  Borrower  upon all\ndeposits or deposit  accounts,  of any kind,  or any interest in any deposits or\ndeposit accounts thereof,  now or hereafter pledged,  mortgaged,  transferred or\nassigned to the Agent or such Lender or otherwise in the  possession  or control\nof the Agent or such Lender (other than for safekeeping) for any purpose for the\naccount or benefit of the  Borrower  and  including  any  balance of any deposit\naccount or of any credit of the Borrower with the Agent or such Lender,  whether\nnow existing or hereafter  established,  hereby  authorizing  the Agent and each\nLender at any time or times from and after the  occurrence of a Default or Event\nof Default  with or without  prior  notice to apply  such  balances  or any part\nthereof to such of the Credit  Obligations  of the  Borrower to the Lenders then\npast  due  and in such  amounts  as  they  may  elect,  and  whether  or not the\ncollateral or the  responsibility  of other persons  primarily,  secondarily  or\notherwise liable may be deemed adequate. For the purposes of this paragraph, all\nremittances and property shall be deemed to be in the possession of the Agent or\nsuch  Lender as soon as the same may be put in  transit to it by mail or carrier\nor by other bailee.\n\n         SECTION 10.5 Survival. All covenants,  agreements,  representations and\nwarranties  made herein shall survive the making by the Lenders of the Loans and\nthe  expiration  of the Letters of Credit and the  execution and delivery to the\nLenders of this  Agreement  and the Notes and shall  continue  in full force and\neffect so long as any of the Credit Obligations remain outstanding or any Lender\nhas any Commitment  hereunder.  Whenever in this  Agreement,  any of the parties\nhereto is referred to, such reference  shall be deemed to include the successors\nand permitted assigns of such party and all covenants, provisions and agreements\nby or on behalf of the Borrower  which are  contained in this  Agreement and the\nNotes shall inure to the benefit of the successors and permitted  assigns of the\nLenders or any of them and any rights of the Borrower  hereunder  shall inure to\nthe benefit of  successors  and  assigns of  Borrower to the extent  Lenders may\nconsent to succession or assignment.\n\n         SECTION 10.6 Expenses.  The Borrower agrees (a) to pay or reimburse the\nAgent for all its  reasonable  and  customary  out-of-pocket  costs and expenses\nincurred in connection with the  preparation,  negotiation and execution of, and\nany amendment, supplement or modification to, this Agreement or any of the other\nLoan Documents, and the consummation of the transactions contemplated hereby and\nthereby,  including,  without limitation,  the reasonable and customary fees and\ndisbursements of counsel to the Agent, (b) to pay or reimburse the Agent for all\nits reasonable costs and expenses incurred in connection with the enforcement or\npreservation of any rights under this Agreement,  including without  limitation,\nthe reasonable fees and  disbursements of their counsel,  (c) to pay,  indemnify\nand hold the Agent  harmless  from any and all recording and filing fees and any\nand all  liabilities  with respect to, or resulting from any failure of Borrower\nto pay or delay of Borrower in paying,  documentary,  stamp, excise, withholding\nand other  similar  taxes,  if any,  which may be  payable or  determined  to be\npayable in connection with the execution and delivery of, or consummation of any\namendment,  supplement or modification  of, or any waiver or consent under or in\nrespect of, this  Agreement,  and (d) from and after the occurrence of any Event\nof Default to pay,  indemnify,  and hold the Agent harmless from and against any\nand all other liabilities,  obligations,  losses, damages,  penalties,  actions,\njudgments,  suits,  costs,  expenses  or  disbursements  of any  kind or  nature\nwhatsoever with respect to the execution, delivery, enforcement, performance and\nadministration  of this Agreement or in any respect relating to the transactions\ncontemplated  hereby  or  thereby,   (all  the  foregoing,   collectively,   the\n\"indemnified  liabilities\");  provided, however, that the Borrower shall have no\nobligation  hereunder with respect to indemnified  liabilities  arising from (i)\nthe willful misconduct or negligence of the party seeking indemnification,  (ii)\nlegal  proceedings  commenced  against  the Agent or any Lender by any  security\nholder or creditor  thereof  arising out of and based upon rights  afforded  any\nsuch security holder or creditor solely in its capacity as such, (iii) any taxes\nimposed upon the Agent or any Lender other than the documentary,  stamp, excise,\nwithholding and similar taxes described in clause (c) above or any tax resulting\nfrom any change  described in Section 4.1, which tax would be payable to Lenders\nby Borrower  pursuant to Article IV hereof,  (iv) taxes imposed as a result of a\ntransfer or assignment of any Note,  participation or assignment of a portion of\nits rights, (v) any taxes imposed upon any transferee of any Note, or (vi) or by\nreason  of the  failure  of the  Agent or any  Lender  to  perform  its or their\nobligations  under this  Agreement.  The  agreements  in this  subsection  shall\nsurvive repayment of the Notes and all other Credit Obligations hereunder.\n\n         SECTION 10.7  Amendments.  No amendment,  modification or waiver of any\nprovision of this  Agreement or any of the Loan  Documents and no consent by the\nLenders to any  departure  therefrom by the Borrower  shall be effective  unless\nsuch  amendment,  modification  or waiver  shall be in writing and signed by the\nAgent and the Borrower, but only upon having received the written consent of the\nRequired  Lenders,  and the same shall then be effective only for the period and\non the conditions and for the specific  instances and purposes specified in such\nwriting; provided, however, that, no such amendment, modification or waiver\n\n                  (i) which changes,  extends or waives any provision of Section\n         2.4(c),  Section 2.11,  Section  2.13(i),  Section 9.10 or this Section\n         10.7, the amount of or the due date of any scheduled  installment of or\n         the rate of  interest  payable on any Credit  Obligation,  changes  the\n         definition  of  Required  Lenders,   which  increases  or  extends  the\n         Commitment of any Lender or which  increases or extends the  Conversion\n         Date or Maturity  Date or which  waives any  condition to the making of\n         any Loan shall be effective unless in writing and signed by each of the\n         Lenders;  provided,  however,  the  Required  Lenders may in their sole\n         discretion  waive any Default or Event of Default (other than any Event\n         of Default  under  Section  8.1(a) as to which only the Lender which is\n         the  payee  of a Note  may  waive  the  failure  to make a  payment  of\n         principal or interest due on such Note);\n\n                  (ii) which  permits that  Acquisition  described in Borrower's\n         confidential letter to the Agent dated the date of this Agreement shall\n         be permitted without the consent of each Lender;\n\n                  (iii) which releases  Collateral or any Guarantor  (other than\n         in accordance with the terms of the Loan Documents)  shall be effective\n         unless with the written consent of each of the Lenders; or\n\n                  (iv) which  affects  the  rights,  privileges,  immunities  or\n         indemnities  of the Agent,  shall be  effective  unless in writing  and\n         signed by the Agent.\n\nNotwithstanding  any provision of the other Loan  Documents to the contrary,  as\nbetween the Agent and the  Lenders,  execution  by the Agent shall not be deemed\nconclusive  evidence  that the Agent has  obtained  the  written  consent of the\nRequired  Lenders;  however,  the  Borrower  shall  be  entitled  to rely on the\nsignature  of the Agent as evidence  of  consent.  No notice to or demand on the\nBorrower in any case shall  entitle the Borrower to any other or further  notice\nor demand in similar or other  circumstances,  except as  provided  by law or as\notherwise  expressly provided herein. No delay or omission on any Lender's,  the\nAgent's or the Borrower's  part in exercising any right,  remedy or option shall\noperate  as a waiver  of such or any  other  right,  remedy  or option or of any\nDefault or Event of Default.\n\n         SECTION 10.8 Counterparts. This Agreement may be executed in any number\nof counterparts, each of which when so executed and delivered shall be deemed an\noriginal,  and it shall not be necessary  in making  proof of this  Agreement to\nproduce or account for more than one such fully-executed counterpart.\n\n         SECTION 10.9 Waivers by Borrower.  In any  litigation in any court with\nrespect to, in connection with, or arising out of this Agreement, the Loans, any\nof the  Notes,  any of the other  Loan  Documents,  the  Collateral,  the Credit\nObligations, or any instrument or document delivered pursuant to this Agreement,\nor the validity, protection, interpretation,  collection or enforcement thereof,\nor any other claim or dispute  howsoever  arising  between the  Borrower and the\nLenders or the Agent,  the Borrower and each Lender and the Agent hereby  waive,\nto the  extent  permitted  by law,  trial  by jury in  connection  with any such\nlitigation.\n\n         The Borrower,  the Agent and the Lenders believe that, inasmuch as this\nAgreement and the  transactions  contemplated  hereby have been entered into and\nconsummated  outside  the  State  of  Alabama,   such  transactions   constitute\ntransactions  in interstate  commerce,  so that neither the Agent nor any of the\nLenders is required, solely by entering into this Agreement and consummating the\ntransactions  contemplated  hereby,  to  qualify  to do  business  as a  foreign\ncorporation within the State of Alabama. Notwithstanding the foregoing, however,\nthe Borrower hereby  irrevocably waives all rights that it may have to raise, in\nany action  brought by any of the  Lenders or the Agent to enforce the rights of\nthe Lenders and the Agent hereunder or under any of the other Loan Documents, or\nthe  obligations of the Borrower  hereunder or thereunder,  any defense which is\nbased  upon the  failure  of any of the  Lenders  or the Agent to  qualify to do\nbusiness as a foreign  corporation in the State of Alabama,  including,  but not\nlimited to, any defenses based upon ss. 232 of the Alabama Constitution of 1901,\nss.  10-2A-247  of the Code of  Alabama  (1975)  or ss.  40-14-4  of the Code of\nAlabama (1975), or any successor provision to any thereof.  The foregoing waiver\nis made knowingly and voluntarily and is a material inducement for the Agent and\nthe Lenders to enter into the transactions contemplated by this Agreement or any\nof the other Loan Documents.\n\n         SECTION 10.10 Termination.  The termination of this Agreement shall not\naffect any rights of the Borrower, the Lenders or the Agent or any obligation of\nthe Borrower,  the Lenders or the Agent,  arising prior to the effective date of\nsuch termination, and the provisions hereof shall continue to be fully operative\nuntil all  transactions  entered into or rights created or obligations  incurred\nprior to such  termination  have been fully disposed of, concluded or liquidated\nand the Credit Obligations  arising prior to or after such termination have been\nirrevocably  paid in full. The security  interests,  liens and rights granted to\nthe Agent for the  benefit  of the  Lenders  hereunder  and under the other Loan\nDocuments  shall  continue  in  full  force  and  effect,   notwithstanding  the\ntermination of this  Agreement,  until all of the Credit  Obligations  have been\npaid in full after the  termination  hereof or the  Borrower has  furnished  the\n\nLenders and the Agent with an indemnification satisfactory to the Agent and each\nLender with respect thereto. All representations, warranties, covenants, waivers\nand agreements  contained herein shall survive  termination hereof until payment\nin  full  of  the  Credit   Obligations   unless   otherwise   provided  herein.\nNotwithstanding  the  foregoing,  if after  receipt of any payment of all or any\npart of the  Obligations,  any Lender is for any reason  compelled  to surrender\nsuch  payment to any Person  because such  payment is  determined  to be void or\nvoidable as a preference,  impermissible  setoff,  a diversion of trust funds or\nfor any other  reason,  this  Agreement  shall  continue  in full  force and the\nBorrower shall be liable to, and shall  indemnify and hold such Lender  harmless\nfor,  the amount of such payment  surrendered  until such Lender shall have been\nfinally and irrevocably  paid in full. The provisions of the foregoing  sentence\nshall be and remain effective notwithstanding any contrary action which may have\nbeen taken by the Lenders in reliance upon such  payment,  and any such contrary\naction so taken shall be without  prejudice  to the  Lenders'  rights under this\nAgreement and shall be deemed to have been  conditioned upon such payment having\nbecome final and irrevocable.\n\n         SECTION 10.11  Governing  Law. All documents  executed  pursuant to the\ntransactions contemplated herein, including,  without limitation, this Agreement\nand each of the Loan Documents  shall be deemed to be contracts made under,  and\nfor all purposes  shall be construed in accordance  with,  the internal laws and\njudicial  decisions of the State of North  Carolina;  provided that this Section\n10.11 shall not affect the applicability of, and  interpretation or construction\nof appropriate  terms and provisions  under the Uniform  Commercial  Code of any\njurisdiction which govern the security  interests in any of the Collateral.  The\nBorrower hereby submits to the  jurisdiction  and venue of the state and federal\ncourts of North  Carolina for the purposes of  resolving  disputes  hereunder or\narising  out of the  transaction  contemplated  hereby  or for the  purposes  of\ncollection.\n\n         SECTION 10.12  Indemnification.  In  consideration of the execution and\ndelivery of this Agreement by the Agent and each Lender and the extension of the\nCommitments,  and  so  long  as the  Agent  and  Lenders  have  fulfilled  their\nobligations hereunder, the Borrower hereby indemnifies, exonerates and holds the\nAgent  and  each  Lender  and  each of  their  respective  officers,  directors,\nemployees and agents (collectively, the \"Indemnified Parties\") free and harmless\nfrom and against any and all actions,  causes of action,  claims, suits, losses,\ncosts,  liabilities and damages,  and expenses incurred in connection  therewith\n(irrespective of whether any such Indemnified Party is a party to the action for\nwhich indemnification hereunder is sought), including reasonable attorneys' fees\nand disbursements (collectively, the \"Indemnified Liabilities\"), incurred by the\nIndemnified  Parties  or any of them as a  result  of,  or  arising  out of,  or\nrelating to any of the following:\n\n                  (a) any transaction  financed or to be financed in whole or in\n         part,  directly  or  indirectly,  with  the  proceeds  of any  Loan  or\n         supported by any Letter of Credit;\n\n                  (b) the entering into and  performance  of this  Agreement and\n         any other Loan Document by any of the Indemnified Parties;\n\n                  (c)  provided  Lenders  have  no  ownership  interest  in real\n         property of  Borrower,  any  investigation,  litigation  or  proceeding\n         related to any environmental cleanup, audit, compliance or other matter\n         relating to the  protection  of the  environment  or the release by the\n         Borrower  or any of its  Participating  Subsidiaries  or  Participating\n         Partnerships of any hazardous waste material; or\n\n                  (d)  provided  Lenders  have  no  ownership  interest  in real\n         property of Borrower, the presence on or under, or the escape, seepage,\n         leakage, spillage, discharge,  emission,  discharging or releases from,\n         any real property  owned or operated by the Borrower or any  Subsidiary\n         or  Controlled  Partnership  thereof of any  hazardous  waste  material\n         (including any losses, liabilities,  damages, injuries, costs, expenses\n         or claims asserted or arising under any environmental laws), regardless\n         of whether  caused by, or within the control  of, the  Borrower or such\n         Participating Subsidiary or Participating Partnerships,\n\nexcept  for any  such  Indemnified  Liabilities  arising  for the  account  of a\nparticular  Indemnified  Party by reason  of the  relevant  Indemnified  Party's\nnegligence  or willful  misconduct,  and if and to the extent that the foregoing\nundertaking may be unenforceable  for any reason,  the Borrower hereby agrees to\nmake the maximum  contribution  to the payment and  satisfaction  of each of the\nIndemnified Liabilities which is permissible under applicable law.\n\n         SECTION 10.13 Agreement Controls.  In the event that any term of any of\nthe Loan  Documents  other than this  Agreement  conflicts with any term of this\nAgreement, the terms and provisions of this Agreement shall control.\n\n         SECTION  10.14  Integration.  This  Agreement  and the  Loan  Documents\nrepresent the final agreement between the parties and may not be contradicted by\nevidence  of  prior,  contemporaneous,  or  subsequent  oral  agreements  of the\nparties. There are no unwritten oral agreements between the parties.\n\n         SECTION 10.15  Successors and Assigns.  This Agreement shall be binding\nupon and shall inure to the benefit of the parties  hereto and their  respective\nsuccessors and assigns;  provided,  however, that the Borrower may not assign or\ntransfer its rights or obligations  hereunder  without the prior written consent\nof the Agent and all  Lenders.  The Agent and the Lenders may assign or transfer\ntheir interest hereunder but only as provided herein.\n\n         SECTION 10.16  Severability.  If any provision of this agreement or the\nother Loan  Documents  shall be determined to be illegal or invalid as to one or\nmore of the parties  hereto,  then such  provision  shall  remain in effect with\nrespect to all parties, if any, as to whom such provision is neither illegal nor\ninvalid, and in any event all other provisions hereof shall remain effective and\nbinding on the parties hereto.\n\n         IN WITNESS  WHEREOF,  the parties hereto have caused this instrument to\nbe made,  executed and delivered by their duly authorized officers as of the day\nand year first above written.\n\n                                         HEALTHSOUTH REHABILITATION\n                                         CORPORATION\n\nATTEST:\n\n\nBy: \/s\/ Stacy H. Pulliam              By: \/s\/ C. Drew Demaray\n   ____________________                  _______________________________\n   Stacy H. Pulliam                         C. Drew Demaray\n   Assistant Secretary                      Vice President\n\n                                         NATIONSBANK OF NORTH CAROLINA,\n                                         NATIONAL ASSOCIATION, as Agent\n                                         for the Lenders\n\n\n                                         By:  \/s\/ Douglas E. Coltharp\n                                            ________________________________\n                                         Name:  Douglas E. Coltharp\n                                         Title: Senior Vice President\n\n\nCOMMITMENT:                              NATIONSBANK OF NORTH CAROLINA,\n$75,000,000                              NATIONAL ASSOCIATION\n\n\n                                         By:  \/s\/ Douglas E. Coltharp\n                                            ________________________________\n                                         Name:  Douglas E. Coltharp\n                                         Title: Senior Vice President\n \n                                           Lending Office:\n                                             100 South Tryon Street\n                                             Charlotte, North Carolina 28255\n\n                                           Wire Transfer Instructions:\n                                             NationsBank of North Carolina,\n                                               National Association\n                                             Charlotte, North Carolina\n                                             ABA #053000196\n                                             Reference: HEALTHSOUTH\n                                               Rehabilitation Corporation\n                                             Attention: Agency Services\n                                                        Margaret Lydon\n\n\n\nCOMMITMENT:                              THE BANK OF NOVA SCOTIA\n$50,000,000\n\n                                         By:________________________________\n                                         Title:  Representative\n\n                                           Lending Office:\n                                           The Bank of Nova Scotia\n                                           Atlanta Agency\n                                           600 Peachtree Street, N.E.\n                                           Suite 2700\n                                           Atlanta, Georgia  30308\n\n                                           Wire Transfer Instructions:\n                                             The Bank of Nova Scotia\n                                             The Bank of Nova Scotia,\n                                               New York Agency\n                                             ABA # 026002532\n                                             For Further Credit to Account\n                                               0606634 Atlanta Agency\n                                             Attention:  HEALTHSOUTH\n\nCOMMITMENT:                              AMSOUTH BANK, N.A.\n$15,000,000\n\n                                         By:________________________________\n                                         Title:  Senior Vice President\n\n                                           Lending Office:\n                                           AmSouth Bank, N.A.\n                                           1900 5th Avenue\n                                           Birmingham, Alabama\n\n                                           Wire Transfer Instructions:\n                                             AmSouth Bank, N.A.\n                                             Birmingham, Alabama\n                                             ABA #062000019\n                                             Reference: Acct # 50214327\n                                                        HEALTHSOUTH\n                                             Attention: Lisa Mann\n\n                                               \n\nCOMMITMENT:                              NATIONAL CITY BANK, KENTUCKY\n$40,000,000\n\n                                         By:________________________________\n                                         Title: Senior Vice President\n\n                                           Lending Office:\n                                           101 S. Fifth Street, 8th Floor\n                                           Louisville, Kentucky  40202\n\n                                           Wire Transfer Instructions:\n                                             National City Bank, Kentucky\n                                             Louisville, Kentucky\n                                             ABA # 0830-0005-6\n                                             Reference:  HEALTHSOUTH\n                                             Attention:  Sandy Walker\n\nCOMMITMENT:                              FIRST UNION NATIONAL BANK OF\n$50,000,000                              NORTH CAROLINA\n\n\n                                         By:________________________________\n                                         Title: Vice President\n\n                                           Lending Office:\n                                           One First Union Plaza\n                                           Charlotte, North Carolina 28288-0735\n\n                                           Wire Transfer Instructions:\n                                             First National Union Bank of\n                                             North Carolina\n                                             Charlotte, North Carolina\n                                             ABA # 053000219\n                                             Acct # 465906 0001802\n                                             Reference:  HEALTHSOUTH\n                                             Attention:  Sue Patterson\n\n\n\nCOMMITMENT:                              WACHOVIA BANK OF GEORGIA, N.A.\n$45,000,000\n\n                                         By:________________________________\n                                         Title:  Vice President\n\n                                           Lending Office:\n                                           Wachovia Bank of Georgia\n                                           Atlanta, Georgia\n\n                                           Wire Transfer Instructions:\n                                             Wachovia Bank of Georgia, N.A.\n                                             Atlanta, Georgia\n                                             ABA #061000010\n                                             Acct # 18-800-621\n                                             Reference: HealthSouth\n                                             Attention: Claudia Lamie\n\nCOMMITMENT:                              PNC BANK, KENTUCKY, INC.\n$40,000,000\n\n                                         By:________________________________\n                                         Title:_____________________________\n\n                                           Lending Office:\n                                           PNC Bank, Kentucky, Inc.\n                                           Louisville, Kentucky\n\n                                           Wire Transfer Instructions:\n                                             PNC Bank, Kentucky, Inc.\n                                             Louisville, Kentucky\n                                             ABA #083-000-108\n                                             Reference: HEALTHSOUTH\n                                             Attention: Patricia Jarvis\n\n  \n\nCOMMITMENT:                              THE DAIWA BANK, LIMITED\n$20,000,000\n\n                                         By:________________________________\n                                         Title:_____________________________\n\n\n                                         By:________________________________\n                                         Title:_____________________________\n                                           Lending Office:\n                                           Daiwa Bank, Chicago Branch\n                                           Chicago, Illinois\n\n                                           Wire Transfer Instructions:\n                                             The Daiwa Bank, Limited\n                                             Chicago Branch\n                                             Chicago, Illinois\n                                             ABA #071006075\n                                             Reference: HealthSouth\n                                             Attention: Maria Martinez\n\nCOMMITMENT:                              THE BANK OF TOKYO, LTD.,\n$20,000,000                              Atlanta Agency\n\n\n                                         By:________________________________\n                                         Title:_____________________________\n\n                                           Lending Office:\n                                           The Bank of Tokyo, Ltd.\n                                           New York, New York\n\n                                           Wire Transfer Instructions:\n                                             The Bank of Tokyo, Ltd.\n                                             New York, New York\n                                             ABA #0260-0963-2\n                                             Reference: Payment for\n                                               HEALTHSOUTH\n                                             Attention:  Jan Gilbreath\/\n                                                         Glynnis Slaten\n\n\n\nCOMMITMENT:                              MELLON BANK, N.A.\n$45,000,000\n\n                                         By:________________________________\n                                         Title:_____________________________\n\n                                           Lending Office:\n                                           Mellon Bank\n                                           Pittsburgh, Pennsylvania 15259\n\n                                           Wire Transfer Instructions:\n                                             Mellon Bank, N.A.\n                                             Pittsburgh, Pennsylvania 15259\n                                             ABA #0430 00261-990873800\n                                             Acct # 990873800\n                                             Reference:  HEALTHSOUTH\n                                             Attention:  Elaine Washburn\n\nCOMMITMENT:                              HIBERNIA NATIONAL BANK\n$20,000,000\n\n                                         By:________________________________\n                                         Title:_____________________________\n\n                                           Lending Office:\n                                           New Orleans, Louisiana\n\n                                           Wire Transfer Instructions:\n                                             Hibernia National Bank\n                                             New Orleans, Louisiana\n                                             ABA # 065000090\n                                             Acct # 0520-36615\n                                                    National Accounts\n                                             Reference: HEALTHSOUTH\n                                             Attention: Hal Hopson\n\n\n\nCOMMITMENT:                              THE BANK OF CALIFORNIA, N.A.\n$20,000,000\n\n                                         By:________________________________\n                                         Title:_____________________________\n\n                                           Lending Office:\n                                           Los Angeles, California 90071\n\n                                           Wire Transfer Instructions:\n                                             The Bank of California, N.A.\n                                             San Francisco, California\n                                             ABA # 121000015\n                                             Acct # 001-060-235\n                                             Reference: HEALTHSOUTH\n                                             Attention: Hisako Sakamoto\n\nCOMMITMENT:                              COOPERATIVE CENTRALE RAIFFEISEN-\n$35,000,000                              BOERENLEENBANK, B.A.\n                                         \"RaboBank Nederland, New York Branch\"\n\n\n                                         By:________________________________\n                                         Title:_____________________________\n\n                                           Lending Office:\n                                           New York, New York 10167\n\n                                           Wire Transfer Instructions:\n                                             Bank of New York\n                                             New York, New York\n                                             ABA # 021000018\n                                             For the Account of RaboBank\n                                             Acct # 8026002533\n                                             Reference: HEALTHSOUTH\n                                             Attention: Corporate Services\n\n\n\nCOMMITMENT:                              SHAWMUT BANK CONNECTICUT, N.A.\n$20,000,000\n\n                                         By:________________________________\n                                         Title:_____________________________\n\n                                           Lending Office:\n                                           Hartford, Connecticut\n\n                                           Wire Transfer Instructions:\n                                             Shawmut Bank Connecticut, N.A.\n                                             Hartford, Connecticut\n                                             ABA # 011900445\n                                             Acct # 00-6612-7761\n                                             Reference: HEALTHSOUTH\n                                             Attention: Sandy Sousa\n\nCOMMITMENT:                              THIRD NATIONAL BANK\n$15,000,000\n                                         By:______________________________\n                                         Title:___________________________\n\n                                           Lending Office:\n                                           201 4th Avenue N.\n                                           Nashville, Tennessee\n\n                                           Wire Transfer Instructions:\n                                             ABA # 064000046\n                                             Acct # 680040009990348\n                                             Reference: HEALTHSOUTH\n                                             Attention: Leigh Ann Gregory\n\n\n\nCOMMITMENT:                              TORONTO DOMINION BANK\n$40,000,000\n                                         By:______________________________\n                                         Title:___________________________\n\n                                           Lending Office:\n                                           31 West 52nd Street\n                                           New York, New York\n\n                                         Wire Transfer Instructions:\n                                           Morgan Guaranty Trust Co.\n                                           New York, New York\n                                           ABA # 021000238\n                                           Credit: Toronto Dominion Bank,\n                                                   New York Branch\n                                                   Acct # 630-00-271\n                                                   Favor: TD Houston\n                                                   Acct # 2159251\n                                           Reference: HEALTHSOUTH\n                                           Attention: Jano Mott\n\n                             Amended and Restated\n                                Credit Agreement\n                                     Among\n                     HEALTHSOUTH Rehabilitation Corporation\n                                      and\n                         Nationsbank of North Carolina\n                              National Association\n\n\nA.        Lenders and Commitment Percentages\nB.        Form of Assignment and Acceptance\nC-1.      Partnership Guaranty Agreement\nC-2.      Subsidiary Guaranty Agreement\nD.        Form of Request for Advance on Interest Rate Election\nE.        Form of Competitive Bid Quete Request\nF.        Form of Competitive Bid Quete\nG.        Participating Subsidiaries and Participating Partnership\nH-1.      Form of Syndicated Note\nH-2.      Form of Competitive Bid Note\nI.        Form of Compliance Certificate\nJ.        Summary of Insurance\nK.        Outstanding Letters of Credit\nL.        Permitted Investors\nM.        Subsidiaries\nN.        Existing Liens\nO.        Disposal Properties\n\n<\/pre>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[6694,6846,7751,7772,8182,8287,8542,9279],"corporate_contracts_industries":[9415,9438],"corporate_contracts_types":[9561,9560],"class_list":["post-40969","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-amsouth-bancorporation","corporate_contracts_companies-bank-of-america-corp","corporate_contracts_companies-healthsouth-corp","corporate_contracts_companies-hibernia-corp","corporate_contracts_companies-mellon-financial-corp","corporate_contracts_companies-national-city-corp","corporate_contracts_companies-pnc-financial-services-group-inc","corporate_contracts_companies-wachovia-corp","corporate_contracts_industries-financial__banks","corporate_contracts_industries-health__misc","corporate_contracts_types-finance__credit","corporate_contracts_types-finance"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/40969","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=40969"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=40969"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=40969"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=40969"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}